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VOL. 132 | NO. 244 | Monday, December 11, 2017

Haslam: Devising Different Incentives for Border Areas Like Memphis Difficult

By Bill Dries

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Changing the economic development strategy Tennessee cities use isn’t a new concept. But doing so is easier said than done when bordered by eight states – more than another other state in the union.

In recent years there has been a renewed push among local leaders for recognition by state government that not only is there a difference in the economic development needs of rural versus urban areas – there is a difference from city to city.

Democratic contender for governor Karl Dean and Republican contenders Randy Boyd, Bill Lee and Diane Black have each professed a belief that Memphis and Shelby County should be treated differently by the state when it comes to economic development partnerships. Each has said so early in their campaigns toward the August primaries.

Incoming Greater Memphis Chamber chairman Richard Smith, speaking at the chamber’s annual luncheon Wednesday, Dec. 6, called for an acceleration of economic development strategies even as some bemoan the current payment-in-lieu-of-taxes (PILOT) incentive program as corporate welfare.

Smith urged Memphis business leaders among the crowd of 700 at The Peabody hotel to support only the gubernatorial candidates who have a specific and better honed economic development policy for Memphis and Shelby County.


Tennessee Gov. Bill Haslam, who also spoke at the luncheon, said Smith was leading a “a very focused effort.”

“It’s about making certain you have the right workforce in place,” Haslam said after the luncheon. “And then the right incentives. You can say, 'I wish we didn’t have to do them,' but the reality is you can’t unilaterally disarm. We’re competing with other states.”

Smith, in particular, defended the use of PILOTs, the city’s dominant incentive.

Haslam, like Smith, pushed back against criticism of PILOTs, which always increase tax collections even though some of that total is forgiven for a number of years in exchange for the investment in Memphis.

Haslam specifically praised the city’s consideration of PILOTs through the Economic Development Growth Engine and the Center City Revenue Finance Corp., saying the focus is and should be to “make certain it has the right rate of return for taxpayers.”

A distinctly different set of state incentives for Memphis – taking into account its position on the border of two other states – has been called for in recent years by city leaders. But Haslam said that has proven difficult.

“We have a lot of border areas. … It’s a little hard for us to figure that out,” he said. “Mississippi does the deal where they take the income tax they collect from their employees and they rebate it back to the company. They are borrowing from their employees and giving it back to the companies. Not having an income tax, we like our straight-forward approach better.”

But PILOTs involve a technical transfer of ownership of the property receiving abatements – from the company to the bodies granting the PILOTs – because state law forbids waiving property taxes.

In short, it’s a much more complicated way to do business than in, say, Mississippi.

Haslam thinks the federal tax reform bill House and Senate conferees are working to reconcile in Washington, D.C., could help shift the advantage from states with a state income tax – namely Mississippi – to states like Tennessee, where a state income tax is specifically forbidden by the Tennessee Constitution.

“For me, the good thing about the tax plan is it no longer allows people to deduct their state and local taxes against their federal taxes,” Haslam said. “As a low-tax state, that’s good for us. We can then compete because these states with higher taxes are going to say, ‘If I can write off half of my federal taxes maybe I won’t mind paying them. But if I’m having to pay the whole bill, maybe I’ll move to a better state like Tennessee.’”

PROPERTY SALES 124 481 17,865
MORTGAGES 127 530 20,565
BUILDING PERMITS 195 891 36,836
BANKRUPTCIES 52 262 11,426