EDGE Finds Local Business Gains From PILOT Awards

By Madeline Faber

In a Feb. 2 letter, Councilman Berlin Boyd called for EDGE to put a three-month delay on granting tax breaks and increase transparency about the investment that companies receiving tax breaks have made in the local minority- and women-owned business community.


Half of Boyd’s request was fulfilled at the Feb. 17 board meeting of the Memphis-Shelby County Economic Development Growth Engine, when EDGE CEO Reid Dulberger presented a 2012-2014 PILOT recipient spending report.

“We have only been concerned with if our PILOT applicants are meeting their targets,” Dulberger said. “But recently, questions have arisen from the other perspective in terms of who is getting these contracts. It was never actually something we tabulated.”

According to the data, 177 certified local companies have received a total of $79 million in contracts from the 52 active PILOT recipients.

Under the current diversity program, companies that receive PILOTs, or payment-in-lieu-of-tax incentives, are encouraged to make a “best faith effort” to spend 25 percent of their controlled local spending with local business.

At the end of March, EDGE is expected to enact a local business participation plan that makes contracting with local businesses a hard requirement with penalties.

As a part of its presentation, the EDGE staff presented a video highlighting four minority- and women-owned businesses that have grown because of contracts with PILOT recipients.

“It’s something that has to continually be watched,” said Troy Watson, vice president of operations for ServiceMaster Facilities Maintenance. “Are we adding employees year by year as you grow?”

“A company being able to handle a million-dollar contract with no other contracts that size, with a requirement to hire 45 people, I don’t know that they would have given us that opportunity had that not been in place,” Kim Heathcott, CEO of Clarion Security, said of her company’s contract with Smith & Nephew, adding that Smith & Nephew had to be “pushed maybe a little out their comfort zone to look at what was here and take a chance with some of the local and minority vendors.”

In 2012 and 2013, most of the local spending went toward county-certified, locally-owned small businesses. In 2014, that dynamic shifts when women-owned businesses earned $22 million, or nearly half of the total local spending.

In breaking down the numbers, $23 million was spent across 57 minority-owned businesses with most of those contracts, in dollar amount, going to MIG Construction, Pallet Plus, Inc. and Unistar-Sparco.

Companies receiving tax breaks spent $31 million across 64 women-owned businesses with Fayette Janitorial Service, Memphis Business Interiors and Southern Electric Controls taking the top three spots.

Fifty-six firms certified as locally owned small businesses garnered $24 million, with Bright Construction Co., CLE Wood Products and TKE Inc. being the top firms.

If a business is owned by both a woman and a minority, the business was only counted once, Dulberger said.

After the presentation, Carolyn Hardy, chairman of the Greater Memphis Chamber, told the Memphis Daily News, “I was not impressed with those numbers, but it’s a good start.”

At next month’s EDGE meeting, Hardy and the chamber will present their own diversity plan for increasing contracts with minority- and women-owned businesses.