Group envisions industry fast track
Realtors hope to compete with N. Mississippi
A group representing Memphis commercial real estate owners is advocating a new form of PILOT to mirror the local incentives they say have helped draw industrial development, companies and jobs to North Mississippi.
The Commercial Real Estate Owners Alliance contends that a “Fast Track PILOT” would provide Memphis with comparable property tax breaks that have helped lure 19,533 jobs, 23 million square feet of facilities and $4.5 billion of investment to North Mississippi since 2008.
“We’re getting our head handed to us by them,” said Steve Guinn, vice president at Highwood Properties, one of nearly 20 commercial real estate interests ranging from owners of industrial and warehouse properties to retail, office and apartment owners in the alliance.
“We need economic growth in the city of Memphis in the worst way, so we need growth and we need jobs is what this is pretty much about,” Guinn said.
The Fast Track payment-in-lieu-of-tax would reduce city and Shelby County property taxes by 75 percent for a maximum of 10 years. It would require creating a minimum of 15 jobs and capital expenditures of at least $500,000.
Both existing and new buildings would qualify, a diversity program could add a bonus of up to three years and the administrative process would be reduced.
The terms mirror the local incentives offered over the state line in DeSoto County, alliance members say.
“The process in North Mississippi is by what the site selection consultants tell us is probably the most receptive in the country,” said Dexter Muller, a recently retired Greater Memphis Chamber executive who said he remains on retainer at the chamber and staffs the alliance.
The alliance presented its Fast Track PILOT proposal to the board of the Economic Development Growth Engine for Memphis and Shelby County last month.
“It’s undeniable that the competitive advantage that Memphis and Shelby County had at one time for big box distribution and manufacturing projects has eroded, and that more and more projects are locating in our market, but
beyond our borders,” Reid Dulberger, chief executive officer at EDGE, said last week.
The alliance’s proposal is a work in progress with EDGE staff still learning details, asking questions and checking for room to compromise, Dulberger said.
EDGE board member and SunTrust Bank executive Johnny Moore, for example, noted that the proposal has no wage requirements. The current wage standard is $12 an hour plus employer subsidized health care, Dulberger said.
The Fast Track PILOT would expand the manufacturing, distribution and office projects qualifying for tax breaks and is much more aggressive than the jobs-oriented PILOTs that EDGE currently offers, he said.
The 10-year, 15-job PILOT offer could attract companies that would have received fewer years under the current PILOTs, or might have invested with no incentive, Dulberger said. The average length of PILOTs offered now is nine years.
The proposed PILOT may discourage the smallest firms, encourage PILOT shopping among EDGE’s offerings and lead companies to report no more than the minimum job and investment required. That will make collecting data to judge the impact, which could take three to five years, with closing and ramp-up times, to gauge, he said.
EDGE just spent more than a year streamlining its processes and PILOTs to be more competitive. However, that was done based on a community consensus that the community wasn’t looking to give bigger incentives, he said. Evaluating each industrial project and trying to minimize the incentive is the traditional approach.
“Their approach is we may need to give a bigger incentive to win some of these projects,” he said “They may be right. I think it’s something the community may need to vet.”
He suggests that the Memphis City Council and Shelby County Commission economic development committees are the appropriate place to begin that vetting.
“I think those are hard discussions to have but they are important discussions to have and it’s not really the EDGE board’s place to make those decisions or the Commercial Real Estate Owners Alliance or any one organization,” Dulberger said. “It affects a lot of people and at the end of the day the people who represent us all really ought to weigh in on this and at least give direction. Is this the kind of thing they think is necessary?”
The alliance, which has acted on earlier issues such as destructive copper thefts from buildings, was drawn to EDGE last fall by a unique PILOT proposal to support development of a business park on the former site of the Mall of Memphis.
Contending that the proposal would have thrown out the normal rule book and provided an unfair advantage to outof-town developers, the alliance asked for a delay that, granted by the EDGE board, killed the project.
Still, the alliance promised to return with a more acceptable proposal to a key issued raised by the proposed Mall of Memphis project.
Since 2007, no new industrial buildings constructed on faith that companies would come had been built in Memphis. Meanwhile, the square footage in the Mississippi suburbs had grown from less than 20 million to nearly 27 million square feet by 2015, according to Colliers International. Companies and jobs streamed to the developments.
Memphis also competes in the industrial market with Atlanta, Columbus, Cincinnati and, more recently, with Nashville for distribution projects, said Brad Kornegay, president of Colliers Memphis Asset Services.
Mississippi is the one that’s just across the border and aggressively doing what they are supposed to be doing, Kornegay said.
“I always use the term they welcome them with milk and cookies,” he said. “They want the business, they want the industry and they do what it takes to make sure they bring it in.”
Population loss, a poverty rate of nearly 30 percent and the need for jobs require that they make a dramatic move to attract companies and the consultants who have led them to Mississippi and away from Memphis, alliance members say.
The Fast Track PILOT alone won’t reverse trend, they say. Developing the workforce for jobs that companies need filled is a priority.
Providing the buildings and the infrastructure to lure them is another. Alliance members have been in talks with city Mayor Jim Strickland’s administration, for example, about infrastructure in an industrial area in Southeast Memphis that hasn’t been provided for years since annexation.
Ron Belz, chief executive officer of Memphis real estate developer Belz Enterprises, said the alliance is made up of longtime committed Memphians who think they understand what is in the long-term interests of the community. Fierce competitors, they have a common goal of fostering economic development.
Companies like Nike, FedEx and International Paper, which add value and create a product or service that can be sold outside of Memphis, create wealth and represent the type of economic development that the city needs, he said.
“Everything else just is noise,” Belz said.
Dulberger also pointed to workforce development, state incentives, infrastructure as among important parts of the discussion about what makes Memphis competitive. Weighing the Fast Track PILOT won’t be a simple, but the alliance deserves kudos, he said.
“I’m hoping that the Commercial Real Estate Owners Alliance and others for whom this is a really important issue are able to push this to the forefront with us,” Dulberger said.
Their approach is we may need to give a bigger incentive to win some of these projects. They may be right. I think it’s something the community may need to vet.”
Reid Dulberger, chief executive officer at EDGE