Electrolux land taxes are underpaid
Property values for company’s land, factory were underestimated; assessor’s office will re-evaluate it
Property values for Electrolux’s land and factory in southwest Shelby County were underestimated by about $100 million, County Assessor Melvin Burgess told county Wednesday morning.
The property value, which determined how much the company owed in commissioners taxes, was estimated around $40 million but that number failed to account for the modern factory and the robotics, machinery and raw materials inside it, Burgess said.
That means while Electrolux’s tax burden was already lowered through a payment-in-lieu-of-taxes (PILOT) incentive that saved the company about 90 percent of its city taxes and 75 per-
cent of its county taxes, it paid even less than it owed because of the underestimated property value.
Including the PILOT meant to reduce its taxes for 15 years, Electrolux received more than $188 million in incentives to open the Memphis factory and create 1,240 jobs paying an average of $14.65 per hour.
The company announced last week plans to close the Memphis plant by the end of 2020. All 530 employees have until then to find new jobs. The closure announcement sparked the further scrutiny that revealed the property was undervalued.
Over the next 10 days, the assessor’s office will re-evaluate the exact worth of the building and the land to determine how much Electrolux will need to pay in taxes until it leaves Memphis.
Too few staff members led to underestimated property value
In 2011, before the factory was built, an application for incentives listed the value of the land at $8 million.
The property was set to be reassessed under previous administrations in 2013 and 2017. The assessment was first rescheduled and then, when it was conducted later, the focus was placed on the land and not the building due to staffing issues, said Yvonne Parron, senior director of communications for the Shelby County Assessor of Property.
“An audit revealed that Electrolux’s unique characteristics were not accounted for,” Parron said. “That’s why those numbers were significantly undervalued, and it was technically an oversight due to understaffing. Those 23 vacancies did contribute obviously to that oversight.”
The assessor’s office can go back and reassess the value of the Electrolux property for up to two years. It’s not yet clear if the company will be required to pay back taxes on the new, accurate value, said Javier Bailey, chief administrator for the assessor’s office. The staff will work with the county attorney to determine if that is legal.
“What this whole Electrolux endeavor has shown us is that we’re not sure about the values that have been placed on some of the larger PILOTS,” Bailey said.
He added that in PILOT projects that started out as empty land that a company planned to build up, previous assessors didn’t not visit the land again to perform an in-person evaluation. Instead, they would either estimate the new value based on the size of the building and comparable projects or another nominal value estimation. That’s what happened in the case of Electrolux, he said.
“Electrolux was way off base,” Bailey added.
Other PILOT projects may also be undervalued
Based on the Electrolux example, the assessor’s office believes other projects that received PILOT incentives may also have been undervalued.
“If there are any issues, we plan to include those in our reappraisal in 2021 because right now, we just don’t have the manpower,” Burgess said.
While the 23 positions were open, the county saved nearly $700,000 in salaries. That money will go to create a training program to fill those empty positions to ensure there is enough staff to accurately value property by 2021.
Burgess said it’s too soon to estimate how many of the more than 250 PILOT projects in the county may have been undervalued.
Despite the issues, a PILOT study conducted by the assessor’s office found that PILOTS are not overused and are a valuable tool for attracting businesses to Shelby County, contributing about $1.1 billion in gross value to the economy and creating countless jobs.
Desiree Stennett can be reached at desiree.stennett@commercialappeal. com, 901-529-2738 or on Twitter: @desi_stennett.