VOL. 9 | NO. 50 | Saturday, December 10, 2016
EMPHASIS: Regional Business
Evolving PILOT Programs in Memphis Look to Restore Competitive Balance
By Patrick Lantrip
When the Memphis-Shelby County Economic Development Growth Engine approved its Fast Track payment-in-lieu-of-taxes (PILOT) program earlier this year, it was with the hopes of bringing back a competitive balance between Memphis and North Mississippi.
Memphis has lost its share of distribution/logistics investments to North Mississippi for many reasons, but its payment-in-lieu-of-taxes programs are becoming more competitive.
(Memphis New Files/Andrew J. Breig)
While the region’s unparalleled access to transportation modes for distribution – runways, rails, roads and river – give it a distinct advantage over competing markets, advances in infrastructure and a streamlined incentive process have given North Mississippi a competitive advantage over Memphis and Shelby County, which used to dominate the region for decades.
“A decade or 15 years ago, if you were a sizable manufacturer or big-box distribution operation, you pretty much had to be in the city of Memphis and if not in Memphis, then certainly in Shelby County,” Reid Dulberger, president and CEO of EDGE, said. “Because those were the only places that you could find the workforce and the physical infrastructure you needed for your facility.”
Dulberger said that’s no longer the case.
“You can avail yourself to the access, amenities and things that make Memphis and Shelby County wonderful, but not necessarily locate your facility here,” he said. “What the Fast Track does is recognize that we live in this competitive world while still maintaining some important vestiges of good public policy.”
Recently, International Distributors USA Inc. became to the first company to receive a Fast Track PILOT. The company, which distributes automotive filters under the brand Premium Guard, outgrew its 165,000-square-foot Olive Branch distribution facility and was looking for land on both sides of the state line.
Because of the Fast Track PILOT program, IDUSA settled on a 510,310-square-foot facility in Hickory Hill that was recently vacated by TBC Corp.
“The commercial real estate community here in Memphis and Shelby County really advocated for that program – they helped create it,” Dulberger said. “They modeled it after the way programs work in northern Mississippi.”
In order to qualify for a Fast Track PILOT, a company must create at least 25 net jobs, with a minimum base pay of $12 per hour, provide at least $1 million in capital investment, have employer-assisted health care insurance, and commit to EDGE’s local business participation policy. That policy states that a company will contract with certified local minority and women-owned business enterprises and locally owned small businesses in an amount equal to or greater than 25 percent of hard construction costs, plus 15 percent of total PILOT savings over the term of the PILOT.
While companies applying for a Fast Track PILOT are still required to commit to contracting with locally owned businesses and minority-owned firms, there are fewer requirements for qualification.
The Memphis-Shelby County Economic Development Growth Engine's Fast Track PILOT could add traffic on the north side of the state line.
(Memphis News File/Andrew J. Breig)
“It is an easier process for them, but in return perhaps a slightly smaller incentive than they might otherwise have qualified for,” Dulberger said. “We’re very pleased with the program and are certainly looking forward to having another arrow in our quiver, so to speak.”
The EDGE board also offers four other PILOTS, including the Destination Retail PILOT for large, unique and important retail operations like Ikea that might be considering a facility in the Mid-South, and the Community Builder PILOT, which is specifically designed to spur redevelopment in inner-city neighborhoods.
Competition between the two sides of the border is healthy, Dulberger said, but the needs of the entire region are ultimately more important.
“Obviously we want firms to locate in Memphis and in Shelby County. If they, for whatever reason, decide that doesn’t work for them, we would much rather have them in an adjacent community than in one of our more far-flung competitors,” Dulberger said. “At the end of the day, Memphians work not only in Memphis and Shelby County but throughout the region, so the more jobs, the more activity we have in our region the better.”
Kurt Nelson, senior vice president and market leader of Hillwood Investment Properties’ Mid-South region, said that is a common theme in most markets.
“I think if you look at any urban area, it’s usually cheaper to build and occupy space the further you get from the core,” Nelson said.
Among its other developments in the Greater Memphis area, Hillwood is developing Legacy Park in Olive Branch, a planned six-building logistics park that will total about 4.4 million square feet of Class A industrial space when completed at Polk Lane and Mississippi Highway 302.
Nelson said that in addition to the incentives, many other factors, including infrastructure and the amount of available land, come into play when companies are comparing the two sides of the state line, but the Fast Track PILOT program is definitely a step in the right direction for Shelby County.
“We like to work on both sides of the state line,” Nelson said. “It’s going to help create more demand on the Shelby County-Memphis side of the line that offsets some of the higher property taxes that you see in Memphis.”