Critics pan white collar tax breaks
Minority-spending requirement is likely
New white collar tax breaks probably won’t be tested without a minorityspending requirement, based on the “vitriolic reaction” to not having such a requirement, a key proponent said.
Richard W. Smith, Greater Memphis Chamber chairman and president of Fed Ex Trade Networks, said Wednesday that officials are fine-tuning plans for the Memphis Opportunity Package. It’s intended to attract corporate headquarters/back offices and advanced manufacturing facilities that are currently bypassing Memphis.
The plan, unveiled Friday, was to test a program offering 10-year tax breaks with no minority-spending mandates for a narrow range of companies.The companies could earn longer tax freezes by spending more with minority businesses.
“In light of the vitriolic reaction to trying to incentivize MWBE (minorityand women-owned business enterprises) spend instead of mandating it, even narrowly tailored to these spaces where we’ve had no projects at all, we’ll probably keep some hard requirement up front in the plan,” Smith wrote on Wednesday.
“But it will still start with an aggressive PILOT (payment in lieu of taxes) for HQ/back office and advanced manufacturing, with some diversity spend requirement, and then a deepening incentive ladder the more MWBE spend a company does beyond that minimum
requirement,” Smith added.
Leaders in the black business community, including Smith’s predecessor in the chamber chair, weren’t surprised to see the proposal walked back so quickly. They viewed it as a tough political sell in a city in which black businesses account for a woefully small share of business receipts – estimated at less than 1 percent in 2016.
Previous chamber chairwoman Carolyn Hardy said it appeared to reflect “a rising tide lifts all boats” mindset, but without addressing longstanding disparities.
“I agree if we can get the business in the community to rise, it would be good for everyone. At some point there’s too much food in front of you to eat, so you’re willing to share. There might be enough for everyone to eat, but there hasn’t been for the last 100 years,” Hardy said.
“You’re asking me to trust you’re going to put food on the table, but it hasn’t been there yet,” said Hardy, who serves on the chamber board.
Darrell Cobbins, president of Universal Real Estate and also a chamber board member, said, “To a minority business community that a lot of studies have said hasn’t benefited a lot from the local economic environment, I think it sends a message: ‘You’re not a priority to us.’
“I don’t think that was their intent, but that may be ultimately the way it’s received,” Cobbins added.
Recipients of public incentives take on an obligation to the community, Cobbins believes.
“When a company comes to theoretically eat at the public trough, I think there are certain expectations that come with that, and in a community where we are publicly espousing our commitment to an inclusive economy, we don’t exclude people, in my mind, for any reason,” Cobbins said.
Cobbins applauded the idea of doing something new to attract better-paying white collar jobs that have not grown.
“If there are some hurdles that exist, it’s incumbent on the economic development leadership to figure out what those obstacles are and do something about them,” said Cobbins.
Councilman Martavious Jones, the council’s representative on the board of the Economic Development Growth Engine of Memphis and Shelby County, said, “We live in the largest MSA that has the highest poverty rate. When we look at Memphis being a majority black city, it was a no-starter with me that we reduce that requirement.”
The EDGE board administers programs that grant business tax incentives to create or keep jobs in Shelby County.
Jones disputed the notion that current minority-spending provisions for tax breaks (at least 25 percent of construction/site work costs and 15 percent of the project’s tax savings) are discouraging companies from moving here.
“What company out there says we don’t believe in diversity spending? Do we want a company that comes in here and says, ‘We don’t believe in diversity spending?’” Jones asked.
Smith worked on the plan with Shelby County Commission chairwoman Heidi Shafer and City Council chairman Berlin Boyd. It’s now been handed off to the city and county governments and the EDGE board.
Memphis Mayor Jim Strickland’s spokeswoman Ursula Madden said Wednesday, “The administration is evaluating the proposal and its potential impacts but at this time the mayor has not formed an opinion.”
Shafer said before the program is finalized, the chamber will receive results of a study that pinpoints why companies are not choosing Memphis. She cited anecdotal information that companies find the EDGE’s minority business requirements overly complex and burdensome.
Shafer emphasized that the original proposal intended for only a select group of project types to be eligible, as determined by the chamber study, and the goals would still be in place for EDGE’s other incentive programs. “This is only a demonstration project for businesses that we are getting zero of right now,” Shafer said.
“There are people who of course are going to react out of fear. That’s natural. But 50 percent of zero is zero. We’re trying to get smarter, but we’re trying to do it in a focused way,” Shafer added.
Hardy, owner of Chism-Hardy Enterprises and former owner of a southeast Memphis brewery, said there are still a lot of questions to be answered.
“You look at Memphis. What is it going to take to make it competitive? We’ve got education. We need a skilled workforce. We’ve got crime. We’ve got transportation, such a large footprint that we can’t connect people to jobs,” Hardy said. “We just celebrated the 50th anniversary of Dr. King, and I hope we don’t find ourselves in 10, 20, 50 years having the same conversations.”
Reach reporter Wayne Risher at (901) 529-2874 or wayne.risher@commercial appeal.com.