By Tom Dyer, Special to The Commercial Appeal
A friend who also works as the chief financial officer for a publicly held company in Memphis recently suggested that I should use my vote as a member of the Economic Development Growth Engine board “to stop giving away taxpayers’ money” through the city’s payment-in-lieu-of-taxes program. In his opinion, as well as that of some other residents and civic leaders in Memphis and Shelby County, PILOTs are tantamount to a corporate giveaway program.
Nothing could be further from the truth.
My friend is an astute financial professional and I am certain he, and others, are disappointed that I have voted to award PILOTs to different businesses and will continue to do so when I believe it’s in the best interest of our community. The main argument I have heard against PILOTs is that we are giving tax advantages to corporations to the disadvantage of local taxpayers.
In my two years as an EDGE board member, I have come to realize that Memphis and Shelby County must do what they can to retain jobs and attract new jobs. I also understand that we live in a very competitive world and that every community, including ours, works hard to do the same.
Some of these communities, including some located at our own back door, are aggressive in their attempts to poach businesses that are established here and lure them away, even into DeSoto County, for example. This means that Memphis and Shelby County must be competitive or we will lose jobs, and that will erode
our workforce and our tax base. I know of no other scenario that would have a greater negative impact on Shelby County’s tax base than the loss of businesses and the jobs that go with them.
Electrolux and Mitsubishi are international companies that have made a large financial commitment in our community and are destined to have a positive economic impact here.
I researched the tax numbers related to Mitsubishi. For example, property taxes paid on the vacant land where the Mitsubishi plant was built come in at $43,525 annually. After the Mitsubishi plant is built and operating and the tax incentives are provided, Memphis will receive $94,984 in property taxes each year while Shelby County will receive $298,711 in property taxes. That totals $393,695 annually — a whole lot more than the $43,525 paid for vacant land.
In addition, Memphis will receive personal property tax in the amount of $74,369 while Shelby County will receive $233,878 per year. With those taxes combined, Mitsubishi annually will pay Memphis and Shelby County $701,942 in total property taxes. This means Memphis and Shelby County will collect an additional $658,000 each year on land that was vacant prior to Mitsubishi’s arrival. And at the end of 15 years, when this PILOT expires, Mitsubishi’s tax for this property will be about $3.5 million per year.
Those who argue against PILOTs say that the tax bill would have been much higher had Mitsubishi been required to pay the full tax rate. They are correct. But the question is: Would Mitsubishi have located its plant in Memphis without the PILOT incentives? The transformers that will be produced here are not produced outside of Japan. I am convinced that without incentives such as PILOTs, Mitsubishi would have located somewhere else in North America.
In addition to the tax benefit our community will receive, projections are that the Mitsubishi plant will directly create 281 jobs and indirectly result in creation of another 498 jobs. The projected average annual salary for Mitsubishi employees is $49,790, not to mention that Mitsubishi has made a capital investment on that site of more than $197 million. More than 20 percent of the work on the property was done by local and minority contractors. In fact, the largest minority contract ever issued by the city of Memphis was a $9 million contract for the sewer line location on the Mitsubishi plant site.
Granted, PILOTs are not our only tool for economic growth, but they are an important tool. Granted, none of the economic growth programs is perfect. But the PILOTs we have approved are in the best interest of the growth of Memphis and Shelby County.
Tom Dyer is vice chairman of the Economic Development Growth Engine board and a Memphis attorney with the firm of Wyatt, Tarrant & Combs.