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Mayor Strickland's Weekly Update: March 1, 2019
Weekly Update: On PILOTs, Pre-K, and Tom Lee Park
Posted on 03/01/2019

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Tuesday's groundbreaking of the new headquarters of JNJ Express marked another big moment in our city's momentum. Once complete, 610 jobs averaging a $65,000 annual salary will be located at what is now a blighted and vacant former shopping center in Parkway Village.

One of the big reasons this happened is the local tax incentive known by its acronym — the PILOT.

I’m not sure any topic in Memphis is more misunderstood than the PILOT, which stands for "payment in lieu of taxes." PILOTs are granted by boards like the Economic Development Growth Engine of Memphis and Shelby County (EDGE) and the Downtown Memphis Commission (DMC). In a PILOT, we reduce the property tax we charge for a few years to get projects that would have either gone somewhere else or wouldn't have happened at all. In return, a company commits to create or retain jobs, pay good wages, invest in Memphis, and contract with minority and women-owned firms.

Know the facts:

  • Generally, we get more tax revenue from granting a PILOT than not. Take JNJ, for example. Today, the building is vacant and only pays roughly $18,000 a year in City taxes. During the PILOT period, we’ll get $76,000 a year. And once the PILOT expires, we’ll get $245,000 a year.
  • People who tell you that we’re giving cash handouts to companies by granting PILOTs are either mistaken or purposely trying to mislead you. We’re offering them a reduced property tax for a few years. With our high property tax rate compared to other cities and states, that can be critical in attracting or retaining good jobs.
  • PILOTs do have clawback provisions, meaning if the companies don’t meet their jobs or investment goals, we can take action. If they miss their targets by just a little, we can trim their PILOT. If they miss by a lot, we can cancel their savings entirely. This is a painful lesson learned by the 2010 Electrolux situation — lessons that helped forge the policy that created EDGE in 2011.
  • We do not offer incentives for poverty-wage jobs. Just this month, in fact, we increased the wage of incentivized jobs from $12 an hour to $13 an hour — almost $2 an hour more than the local living wage of $11.02 an hour.

Make no mistake: Tax incentives like these bring jobs to our city and investments into places we all agree need them. They’re a big reason why our unemployment rate is near a record low and job growth continues to climb. And the new taxes paid by those PILOT projects help us do things we all want — like rebuilding our police department, investing in our youth, and filling potholes.

Imagine a world in which we ended them and our competitors didn't. Job growth would flatten, investment would plummet, and Downtown’s renaissance would end — all while companies flocked to states and cities that remain in the game (which is, well, all of them). As Greater Memphis Chamber Interim President and former National Civil Rights Museum President Beverly Robertson said in this recent Daily Memphian guest column, “it is fallacy to presume that the momentum we have established over this past year could continue without the same type of deal-making which changed our trajectory in the first place.”

Of course, tax incentives are hardly the only item in our economic development toolbox. A greater attention to workforce development goes hand-in-hand with them, which is why we’re hiring more workforce development capacity at EDGE and I’m in full support of County Mayor Lee Harris’ initiatives surrounding the Workforce Investment Network, which the county administers. It’s also why we’re targeting and prioritizing neighborhood-level investment through Memphis 3.0, and why we’ve launched programs like the 800 Initiative to continue our momentum with minority business growth.

But tax incentives must be in that toolbox, because we must accelerate our momentum.

About Tom Lee Park: You’re probably reading a lot in the news recently about some disagreements over Tom Lee Park.

My advice: Don’t worry about it too much.

This week, our office asked leaders of the Memphis River Parks Partnership and Memphis in May to get together to work through specific issues. They made meaningful progress. Like I’ve been saying for three years now, we can do so much in Memphis when we work together and build consensus behind the scenes.

My goal remains the same: I want a Tom Lee Park that is an asset all 365 days a year, and I want a Memphis in May that continues to thrive. We will accomplish both.

Moving Pre-K forward: About 11 months ago, I worked with the City Council to find a creative path to provide City funding for universal, needs-based Pre-K — a major milestone and advancement for our community, and one I’ve been pushing for years and years.

We shared that same model with our partners in Shelby County government, which also got on board thanks to the leadership of then-Mayor Mark Luttrell and members of the County Commission. And just this week, the County Commission — particularly true leaders like Chairman Van Turner and Commissioner Michael Whaley — and Mayor Harris took yet another procedural step toward universal Pre-K with an ordinance that creates the funding agent for our plan.

So many in Memphis have pushed for so long for universal Pre-K. I’m glad we could work together, both at City Hall and across the street, to make it a reality.

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Each Friday, Mayor Jim Strickland sends his Weekly Update email. It's a recap of events from the week, a celebration of Memphis' successes, and a frank look at our challenges. To receive the Weekly Update in your inbox, sign up here.

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