Monday, February 20, 2006

Changes For PILOT's Should Include Reporting Entire Cost To Taxpayers

Emily Trenholm must sometimes feel like the tiredest member of the Donner Party. If she dozes off, there’s just too much that can happen.

As executive director of Community Development Council of Greater Memphis, Emily is apparently the designated community representative on the 13-member Mayors’ Joint PILOT Review Committee. She is surrounded by people who make their livings off the tax freezes they are are now asked to objectively evaluate.

Apparently, the political pressure to protect the PILOTs (payments-in-lieu-of-taxes) is so great that there isn’t much pretense of assembling a representative group to evaluate the changes recommended to the PILOT program by consultants. The call for the overhaul of the tax freeze program comes at a time when yearly property tax increases are the norm, but these PILOTs continue to mount, now waiving $60 million a year in city/county property and personalty taxes.

On the Mayors’ Joint PILOT Review Committee with Ms. Trenholm are the people who head up the public agencies who dole out the tax freezes, there are people from the economic development agencies who defend the tax freezes at all cost, there are a couple of beneficiaries of the program’s largesse and whose companies each have more than $2 million in waived taxes, and people whose professions are closely dependent on real estate development (which seems to be the real purpose of the PILOTs in the first place).

Then, there is Ms. Trenholm, representing an agency that lists one of its roles as making sure that the interests of community development are considered in policy decisions. This one looks like the ultimate test for her organization.

Last week, according to the latest article in the fine coverage by The Commercial Appeal’s Amos Maki, the PILOT consultants who recommending the reinvention of the tax freezes program finally were invited to present their findings.

Central to their recommendations is the belief that the PILOTs have become entitlements given to any one who can complete the application form. Michael Laube, principal of Nex Gen Advisors, said in the article: “You don’t need a program that’s one size fits all. Let’s change the system around where the key measure is what is needed for that development, how much is needed and when it is needed.”

That makes such eminently good sense that it would seem that it could be adopted by acclamation. But that’s never the case when the subject of tax freezes come up.

While it’s difficult to imagine why this committee appointed by the mayors was needed, especially since the authority to grant tax freezes rests with Shelby County Board of Commissioners and Memphis City Council, but when faced with a politically volatile situation, the appointment of a committee is always a reflex.

In the end, what is most needed in city and county governments is a new attitude. Their officials need to quit seeing themselves as supplicants and instead, see themselves as investors. That’s because in truth, that's what they are. They represent a partnership between the taxpayers of this community and a business. Because we place a value on a company and its presence in our community and its positive impact, we choose to invest in it. Until officials see the difference in being an investor and being an beggar, we will continue to pursue low-wage, low-skill strategies that in the end will drag our region down.

The most interesting suggestion made by the consultants last week was that until land use decisions must be tied to economic development decisions. Now there is no connection, and as a result, we are constantly taking one step forward and two steps back.

That’s because PILOT decisions are made in a vacuum. Without an overall land use plan, companies simply choose to locate anywhere they please, including in areas where there is no transportation to link the employment base with the new jobs, where the infrastructure is inadequate and where public transit is nonexistent. This is seen in areas like Holmes Road and Hickory Hill, where essentially every warehouse in sight has a PILOT and is paying no taxes, but before the tax freezes were approved, there was no thought given to this being the best land use, to whether the area has adequate public transit or to whether there were sustainable transportation plans for the future.

Put simply, amazing as it sounds, there was never an effort that connects the decisions governing PILOTs to a more comprehensive, overall plan and to waive taxes in places where the existing infrastructure had already been paid for by local taxpayers. Too often, as a result of PILOTs approved by the Memphis and Shelby County Industrial Development Board, city and county governments then have to spend more money to build roads, bridges and sewers, but these factors weren’t considered in the evaluation process.

While changes are being considered to the PILOT process, here’s a recommendation from us. Every PILOT should have a fiscal note that tells not only the amount of taxes being waived, but any costs that will have to be incurred by the taxpayers through their local governments as a result of the PILOT. Tax freezes don’t operate in isolation, and if we are to act as investors, we need to know the size of the entire investment that we are making in each company.


Anonymous said...

Carol, et al-
Thanks for your thoughful comments on the PILOTs. I appreciate you recognizing Emily as the lone outsider on the committee.
The CDCouncil is very pleased with the progress it's making in studying real policy and figuring out concrete ways to have some possible impact. Emily's presence is a good example. We also have a rep on the Zoning Variance Board. We plan to get a rep on the MPO Advisory Committee (to at least stay on top of the process). And the real coup, of course, would be to get someone on the Land Use Control Board.
Your blog is very useful to us on the Policy Committee of the CDCouncil. We appreciate your contribution.


Steve Lockwood
Frayser CDC

Smart City Consulting said...

Steve, Thanks to Emily, you and everyone connected with the CDCouncil, because it's because of you that the voice of our neighborhoods is heard in this important decision-making (and others). The ultimate prize is to create a city where representation by your organizations on these key policy-making bodies is seen for its natural logic. SCC

Smart City Consulting said...

And, Steve, thanks for the kind words about the blog.