By Matt Tarleton, Project Manager.
I am guilty of having an abnormal affinity for alliteration (see what I
did there?), so let me apologize for the blog title in advance.
A few weeks ago, I wrote about Brunswick County, North Carolina
and the heartbreak associated with finishing runner-up for two 1,400+
job projects. One of those projects, a Continental Tire facility,
ultimately went to South Carolina due to the state’s unwillingness to
grant comparable incentives. The second, a Caterpillar manufacturing
plant, went to Athens, Georgia, as a result of proximity to Savannah’s
deep water port, where further deepening will accommodate the larger
post-Panamax cargo ships. While there are certainly other factors at
play that contributed to the decisions of each prospect, these were the
issues of greatest influence when it came down to deciding between the
two sites (or at least that’s what executives have communicated). These
were relatively large issues in the scheme of site selection – a roughly
$35 million deviation in upfront cash incentives and a major
infrastructure asset in the depth of a port’s channel. But as many
practitioners know, the loss of a prospective company – or the loss of
an existing business – can often come down to less concrete issues and
seemingly smaller issues. While every loss is no doubt a painful
reminder that somehow and somewhere, a community was able to demonstrate
e that it was more competitive or more attractive to a certain business
than you were, these losses can be valuable learning experiences if you
can get honest feedback from the company.
This week an executive from McKesson shed light on a cumbersome process
in Memphis-Shelby County, Tennessee that contributed greatly to the loss
of roughly 800 jobs to Olive Branch, Mississippi in 2010. The Memphis Daily News reported this week
that an executive from McKesson indicated that the inability of
McKesson to qualify for a payment-in-lieu-of tax (PILOT) benefit for an
investment that would not produce immediate job creation, as well as the
requirement to produce a “diversity plan,” resulted in Memphis’ loss of
a new logistics and supply chain headquarters to Olive Branch,
Mississippi (just on the other side of the state line from Memphis). The
PILOT program allows the Memphis-Shelby County Industrial Development
Board (IDB) to take title to the property associated with the project,
lease that property to the company/applicant, and receive
payments-in-lieu of ad valorem taxes on the property, with payments
typically set to a level that is some percentage of the taxes that would
otherwise be due on the property prior to improvements. In addition to a
variety of other criteria that must be met in order to be eligible for
PILOT benefits, the IDB requires that each applicant develop a diversity
plan demonstrating that a sufficient percentage of expenditures on
labor, construction, professional services, etc. will support
minority-owned enterprises, women-owned enterprises, local small
business, and individuals seeking employment through area career
centers.
This particular executive from McKesson was not exactly bashful in his
comments this week regarding this process that took place in 2009 and
2010. Thankfully the leadership in Memphis-Shelby County spoke with
representatives from McKesson shortly after losing the expansion project
and immediately responded with changes to its PILOT program to better
support retention of existing businesses. The new criteria allowed
existing companies making a significant investment in property ($10
million or above) and employing at least 100 individuals in
Memphis-Shelby County to be eligible for the PILOT incentive regardless
of potential future job creation. McKesson would have qualified under
this new criterion. But it was not just the lack of eligibility that
frustrated McKesson; it was the process of navigating the eligibility
criteria and attempting to communicate the value of its investment to
the IDB in order to preserve jobs in Memphis that was described as “slow
walk.” And although it was a tough loss for Memphis, the leadership
listened and responded. Good coaches and players know that you can’t win
them all. But they also know that you can learn from your mistakes
through self-evaluation and attempt to correct those mistakes so you are
in a better position to win the next time. Economic development
practitioners should take a page form the Memphis playbook and do the
same.
