They say the real estate market often comes down to three little words: location, location, location.
Last week, Emdeon, the company formerly known as WebMD, was granted a four-year tax freeze by the Industrial Development Board of Memphis and Shelby County.
As part of the payment-in-lieu-of-taxes (PILOT) program, the company would get a roughly $60,000 tax break in exchange for creating 25 new jobs. Employees’ median salary would be $40,000.
“We need a second redundant data center that would allow us to expand and consolidate,” said Lara Kuhlman, director of real estate and facility management and the company’s representative at last week’s hearing. “We already have one in Nashville that is considered our primary data center.”
The data centers process medical transactions between insurance companies and health providers. Kuhlman said Memphis was always on the company’s short list for the secondary center.
“We looked at cities within a five-hour radius of Nashville,” she said. “We looked at Birmingham, Louisville, and, of course, Atlanta.”
Kuhlman said the area’s location was the deciding factor, but, financially speaking, it would seem Emdeon got to the Bluff City in the nick of time.
Earlier this week, a City Council committee asked chief financial officer Robert Lipscomb to look at possible changes to the PILOT program, including a monetary cap. The city and county office of planning and development expects the results of an external PILOT study within the next three weeks, including an assessment of peer cities and several PILOT-ed companies to see if they brought the jobs they said they would.
In part, the city’s new industry-wary attitude resembles that of the county. Last month, in an attempt to stop and study sprawl, the County Commission approved a six-month moratorium on development in unincorporated Shelby County.
“We do want to encourage growth,” said councilmember TaJuan Stout Mitchell, “but we want it to be planned growth.” Mitchell was talking about the PILOT program, but she could just as easily have been talking about county sprawl.
Both issues rest on sort of a land grab: In unincorporated Shelby County, developers have capitalized on the lack of city taxes, forcing the county to provide services it cannot afford; under the PILOT program, corporations are lured to the area with large tax breaks, which local government can scarcely afford.
So is it location, location, location or no taxes, no taxes, no taxes?
PILOTs might be a saving grace for this area. The program was used to lure International Paper’s headquarters to Memphis from Connecticut and might be the only thing keeping some industries from moving to Southaven. The bottom line is that we know we’re making a lot of concessions to get businesses to locate here, but at what overall cost?
In reviewing the PILOT program, council members want to look at the type of jobs the businesses are providing, if they are paying workers a living wage, and what kind of accountability measures are in place
Budget committee chair Mitchell suggested that corporations would never do business the way the city does. “I’m supportive of PILOTs, but I’m supportive of well-managed PILOT programs, and we don’t have that now,” she said.
With the amount of money at stake, the program deserves the scrutiny. At an earlier meeting, Councilman E.C. Jones suggested making PILOT applicants come before the council.
The council is responsible for approving the city’s budget — and raising taxes if revenues fall short. Shouldn’t they have some say? And really, if temporary street closures have to come before the council, shouldn’t International Paper’s 15-year, $15 million tax freeze?
“We’ve created government outside of government,” said Councilman Joe Brown. “We’ve lost control. … We’re not receiving the jobs we should be receiving.”
So, just what are we getting in return? No offense to Emdeon — or any other company with a PILOT — but 25 $40,000-a-year jobs just isn’t enough to sell me.
