Notes on Proposed Changes to EDGE Policies

We received the following notes from someone long involved in our community’s economic development regarding the changes in EDGE policies:

From Economic Development Growth Engine (EDGE) web site [growth-engine.org]

EDGE requests that anyone take a survey of recent recommendations for changing requirements for tax abatement program (PILOT) to incentivize businesses to locate or expand in Memphis and Shelby County.

Consulting firm preparing recommendations –  Younger Associates, a Jackson, TN firm that is used frequently by EDGE. The firm  always supports conclusions desired by EDGE.

Survey shows segments of a 6-page table called “Overview of Proposed Changes to the EDGE PILOT Program” and asks for comments for various segments. The table has 3 columns – Issue, Existing Program, and Proposed Program.

The Issues are elements of the criteria for scoring, processing and tracking applicants for tax abatements. For example: a business can’t even be considered for tax relief unless it will produce:

* at least 15 new jobs @ $12.00 per hour + ½ employer paid health care;
* $1 million investment; and MWBE/LOSB spending.

This is up from $10 per hour for existing criteria. At most the $12 per hour is $24,960 per year if an employee is paid for holidays.  (According to the MIT Living Wage Calculator, that amount is a living wage only for a single adult – not even an adult with a child.)

In order to make reasoned comments, a person would have to be familiar with the nuanced workings of the existing program because the list contains very brief statements of requirements without any reason given and without attributed sources.

The ultimate payoff for a business is number of years for abated taxes – 75% each for Memphis and Shelby County.  That percentage was set by the legislative bodies for city and county.  It is not the result of concern by EDGE for public revenues.  In addition, the Shelby County portion of the abated taxes continues to include money that would otherwise go to schools.

For example, several basic elements recommended are as follows:

-1 pt. for 5 new net jobs (presumably each paying at least $12 per hour plus ½ health benefits.  (As we have written before, distribution companies are sidestepping this health insurance requirement through the manipulation of temp workers.)

-10 pts. for average wage of $38,000 per year (data for average annual wages includes salaried employees who are top executives, managers and professionals). This amount is 75% of Shelby County Average Annual Wage.

-There are other criteria for earning points including capital investment, location in Memphis and New Markets Tax Credit Census Tracts, and spending for minority and women business enterprises and locally owned small businesses

-A total of 10 pts. = 1 year of tax abatement

-A required benefit/cost analysis that earns points is replaced by a “Fiscal Impact analysis” for no points. This, like other elements, is not explained to show what is included and why.

-Not clear about the effect of changes on revitalization of Memphis. New Markets Tax Credits Census Tracts do not represent all of Census Tracts that should be targeted; and a Memphis location does not appear to offer significant benefits over areas outside of Memphis.  Also, EDGE’s new benefits for community development projects are limited to 15 over five years while there is no limit in number or amount for other applicants, and it’s unclear what justification there is for using this incentive outside Memphis in suburban Shelby County.

No targeted businesses and no weight given for most desirable.  In other words, there is no alignment between incentives and the target industries identified in EDGE’s Metro Business Plan announced a few months ago.

Continued emphasis on averages rather than median incomes to calculate incentives.  This allows for the high salaries of management to skew the actual median income for employees.  IKEA’s claim that average employees earn $44,000 have raised many eyebrows.

In the end, we are left with decisions made by a very small group of insiders because the average person will not understand the rationale for what is being proposed.