Existing and Additional Facility Capital Investment (3)

CUMMINS, HOLLYWOOD FEED and NIKE / 60% RETENTION PROBABILITY / CATEGORY GRADE –  F (60)

The below companies pursued thoughtful for profit motives by leveraging existing facilities and investing in additional facilities with their capital investment avoiding the hefty cost of significant operational disruption of existing facilities, employee and distant relocation costs. These thoughtful for profit motives would have still been served without the benefit of a retention tax abatement for existing jobs and with a tax abatement offered outside of Shelby County equal to the locally offered EDGE retention abatement. For this reason, a retention probability of 60% is applied to the below quantitative analysis without the benefit of a tax abatement for existing jobs but assumes a locally extended expansion PILOT abatement for new jobs. When responsible accounting is applied to economic modeling for a retention existing jobs PILOT, complete and responsible tax revenue accounting starts with EDGE Reported Revenue (ER) less a probability of retention times reported revenue (RP) less remaining workforce upon company departure as a percentage of retention probability (RP) less forgone tax revenue impact for local investment in jobs and resources that directly serve the local community (LI). In the below EDGE Company Retention Profiles, the previously mentioned accounting equation is applied to arrive at an estimated Memphis/Shelby County tax revenue figure for a given company PILOT. The assigned grades are evaluating the Retention PILOT; not the company. See below EDGE Company Retention PILOT profiles for this capital investment category:

EDGE Retention/Expansion PILOT Company Profiles:

Cummins – Grade F: The Cummins PILOT leveraged existing and expanded into new facilities in their capital improvements avoiding operational disruption and the hefty cost of existing facility and employee relocation. The EDGE Board reported $59M in tax revenue generated. When modeling in complete accounting, estimated taxpayer revenue is significantly less. Modeling in EDGE reported revenue using complete accounting, the following taxpayer estimated revenue generated can be derived for Cummins: (ER $59M) – (RP $35M) – (RW $10M) – (LI $22M) = $8M loss less $12M retention tax abatement results in a $20M loss or $1.3M per year Memphis/Shelby County taxpayer loss. Estimated EDGE Overstated Revenue Generated: $67M

Raw Data Source (absent above calculations): http://database.growth-engine.org/pilots/Cummins%2C+Inc.

Hollywood Feed – Grade F: The Hollywood Feed PILOT leveraged existing and expanded into new facilities in their capital improvements avoiding operational disruption and the hefty cost of existing facility and employee relocation. The EDGE Board reported $1.1M in tax revenue generated. When modeling in complete accounting, estimated taxpayer revenue is significantly less. Modeling in EDGE reported revenue using complete accounting, the following taxpayer estimated revenue generated can be modeled for Hollywood Feed: (ER $1.1M) – (RP $675k) – (RW $10ok) – (LI $500k) = $175k loss less $240k retention tax abatement results in a $415k loss or $52k per year Memphis/Shelby County taxpayer loss. Estimated EDGE Overstated Revenue Generated: $1.1M

Raw Data Source (absent above calculations): http://database.growth-engine.org/pilots/Hollywood+Feed%2C+LLC

Nike – Grade F: The Nike PILOT leveraged existing and expanded into new facilities in their capital improvements avoiding operational disruption and the hefty cost of existing facility and employee relocation. The EDGE Board reported $105M in tax revenue generated. When modeling in complete accounting, estimated taxpayer revenue is significantly less. Modeling in EDGE reported revenue using complete accounting, the following taxpayer estimated revenue generated can be derived for Nike: (ER $105M) – (RP $63M) – (RW $15M) – (LI $67M) = $40M loss less $50M retention tax abatement results in a $90M loss or $6M per year Memphis/Shelby County taxpayer loss. Estimated EDGE Overstated Revenue Generated: $145M

Raw Data Source (absent above calculations): http://database.growth-engine.org/pilots/Nike%2C+Inc.