VOL. 131 | NO. 101 | Friday, May 20, 2016
EDGE OKs Fast Track PILOT Program
By Madeline Faber
The board of the Memphis-Shelby County Economic Development Growth Engine has approved a new tax incentive package designed to give Memphis a more competitive edge against North Mississippi.
EDGE chairman Al Bright, left, shown with EDGE CEO Reid Dulberger, said that the Fast Track program will drive development to Shelby County over the North Mississippi market.
(Daily News File/Andrew J. Breig)
The EDGE board green-lighted the Fast Track PILOT program at its Wednesday, May 18, meeting, making it EDGE’s fifth payment-in-lieu-of-taxes program.
Memphis has not seen any speculative projects, referring to buildings constructed without a set tenant, since 2007. Since that point, developers in DeSoto and Marshall counties in North Mississippi have constructed nearly 25 million square feet of industrial space.
“That number impressed our committee,” said EDGE board member Thomas Dyer, chair of the Fast Track committee, which also includes Brian Collins, chief financial officer for the city of Memphis; Mike Swift, director of administration and finance for Shelby County government; and EDGE board members Jack Moore and Johnny Moore.
“We have to do something to meet the competition. We feel this is the first step in being able to do that,” Dyer said.
The Fast Track PILOT program is a variation on EDGE’s existing Jobs PILOT program. Under the new program, applicants seeking to build new industrial and office space can receive a 75 percent abatement on property taxes for up to 10 years. Speculative projects, along with projects that are underway or have begun construction, are not eligible for the Fast Track program.
The program requires a minimum of 25 net new jobs, with a base of $12 per hour, and a $1 million capital investment. Associated fees are capped at a lower threshold, which is meant to make the process more predictable and streamlined.
“PILOT fees are the biggest change,” Dyer said.
“Our competitors don’t have fees in the ranges that we have, but those fees are what supports EDGE’s programs,” said Dexter Muller with the Commercial Real Estate Owners Alliance.
The CRE Alliance, a group of Memphis-area property owners and brokers, first presented its version of a Fast Track PILOT at EDGE’s March board meeting. The earlier version designed by the group called for 15 jobs and an investment of $500,000.
Discussions of a Fast Track program date back to last September when prospective developers of the former Mall of Memphis site came before EDGE seeking a PILOT for a proposed speculative industrial park.
The CRE Owners Alliance spoke out against the proposed PILOT, stating that granting tax incentives for speculative projects would disrupt the existing market. When the developers pulled out of the project, it kicked off discussions about how Memphis could be more competitive.
“The question we asked then was, ‘OK, if this is not good policy, what do we have to do to get spec buildings built?’ Muller said. “And that’s when we started analyzing how much we were losing and all that.”
Muller said that he hopes the Fast Track PILOT will spur much-needed infrastructure and waterline improvements in Memphis’ submarkets, particularly in the Southeast.
“The program isn’t a silver bullet,” he said. “Holmes Road is a mess.”
Like EDGE’s other programs, the Fast Track PILOT has an associated diversity-spending requirement, which is subject to change.
The Greater Memphis Chamber and the Black Business Directory have differing views on what EDGE’s diversity policy should look like, and both parties are lobbying EDGE to make diversity requirements either more favorable to the business community or the minority community.
EDGE will keep its current diversity policy in place until July, when amendments to the program will be revisited in earnest. The existing program, which is written into the Fast Track PILOT bylaws, requires applicants to spend with local and minority-owned businesses an amount totaling 15 percent of the project’s construction costs, plus 15 percent of the projected PILOT savings for the duration of the property tax freeze.
Doug McGowan, chief operating officer for the city of Memphis, expressed his support for the new program in a May 17 letter.
“Maintaining our competitiveness in attracting new investment in Memphis is an important part of building our tax base,” the letter states. “Adding another tool to the limited number of options that we currently have available to attract jobs and capital is an encouraging start to building the city that our citizens deserve.”