Amazon, who will finish completion of a million-square-foot distribution center along Joe B. Jackson Parkway this fall, will be taking advantage of a “PILOT” deal, saving the world’s largest online retailer over $16 million in local property taxes.
The 1,000-plus full-time jobs Amazon will create has city officials excited, but small business owners are concerned that if the special interest deals continue, politically unconnected, new competitors and small businesses will have trouble competing and surviving.
These PILOT deals, or payments-in-lieu-of-taxes, discount the annual amount of taxes Amazon will pay on real and personal property. Rutherford County has agreed to 16 such deals since 2005, worth more than $70 million over the life of the agreements.
“Amazon came to Murfreesboro because the high level of cooperation between our Chamber of Commerce and the various development boards,” said Parks Group Commercial Real Estate Broker John Harney. “We could not have asked for a better team.”
The property, 87.7 acres, will be held by the Rutherford County Industrial Development Board for 15 years. Since government-held properties are exempt from property tax, the property, formerly owned by Corporate Woods GP, will host Amazon tax-free for that period of time.
After 15 years, the Industrial Development Board will sell the property to the United Services Automobile Association for $1. USAA will then lease the site to Amazon.
“Each of Middle Tennessee’s communities approach tax breaks differently,” said Vice President of Economic Development Holly Sears. Some have strict standards, while others have a more subjective process. Tax-exempt industrial revenue bonds are available to both existing and prospective companies with a qualifying manufacturing project. The financial strength of the company at the time that the bonds are taken to market will determine the rate of the bonds. By offering a large number of new jobs with higher wages and large capital investment, Amazon and companies like them may qualify for these rebates.
The site, located off I-24 and not far from the 840 interchange, is a popular area for industrial businesses who depend on the state’s transportation infrastructure. Access to Tennessee’s interstates and highways and the industrial zoning level of the area will provide Amazon with a portal to serve customers.
“We had already evaluated the site, so we knew what we were getting into,” said Murfreesboro Planning Director Joseph Aydelott, who assisted Amazon in the early construction plans. Prior to Amazon’s interest, the property had been prepared with a utility infrastructure and backup power source, but additional infrastructure was needed.
State Fast Track Infrastructure Development and private funds of $1,820,000 capital were needed to complete the site work and street improvements to serve the distribution center. State tax dollars have paid for improvements to city streets with turn lanes and traffic signals to better facilitate truck traffic on Joe B. Jackson Parkway, the extension of sanitary sewer service, and site grading and drainage for the one million-square-foot building. The area along the parkway is currently home to a collection of industrial producers who will also utilize the road improvements including EM Farms, NHK Seating of America Inc., and SMI.
The facility in Murfreesboro will be one of five Amazon centers in the state including Chattanooga, Cleveland and two in Lebanon. The center in Murfreesboro will be the largest in size, number of employees, and level of automation. The center will handle relatively smaller items, the size of a “bread box” or smaller, with a high level of automation and interaction from employees.
Brandon Meyers, 20, worked in a fulfillment center in New York for almost two years.
“The interior of one of these centers shows you the heart of consumerism,” he said over the phone. “It’s not always pretty.”
Inside a center, one can expect to see rows and rows of consumer products, conveyer belts that run throughout, and a work force keeping each part of the process, from a product coming in to going out, running smoothly. On any given day, hundreds of thousands of packages are moving throughout a center. Amazon partnered with the Tennessee Career Center to ensure new employees will be from the local community.
“Hundreds of candidates are currently being interviewed,” said Amazon spokesperson Ty Rogers.
Additionally, for local businesses wanting to work with Amazon, the company offers a Fulfillment by Amazon system which allows merchants to store inventory and fulfill orders from an Amazon fulfillment center.
As a growing member of the Tennessee community, Amazon also announced that it is donating $20,000 to the Books from Birth Foundation for its chapters in Wilson, Rutherford, Bradley and Hamilton counties—the locations of Amazon’s current and future fulfillment centers. Books from Birth is a non-profit organization committed to helping preschool children develop their love of learning and reading.
But even with the additions Amazon is making to the community, residents raise ethical questions with the tax incentives offered.
“It’s only fair for relatively similar tax incentives to be offered to all small businesses in the city,” said Small Business Alliance member, Jake Robinson.
“I would rather see old and new retail stores filled with something. How many strip malls do you drive by with only one or two businesses in them?” said area resident Ben Spjut.
At one time, Amazon had the potential opportunity to pay neither sales tax, state income tax (Tennessee is one of only four states without a state corporate income tax) nor property tax. The 1992 Supreme Court Case of Quill v. North Dakota, stated a company without a physical presence in a state cannot be required by that state to collect sales tax. Because Amazon is an online retailer without a headquarters in Tennessee, and distribution centers do not apply as headquarters under the decision, they were not obligated to collect sales tax.
But after negotiations with Governor Haslam, in 2014 the state will begin collecting sales tax from Amazon. Until then, Amazon is asking customers to pay back taxes on items that were already sold in Tennessee.
Tennesseans for Fair Taxation estimated Amazon had $271 million in sales last year in Tennessee. If Amazon had collected sales tax, that amount would have been $25.6 million for the state.
“We are essentially providing Amazon with a huge favor by offering them a route for distribution to help them to build their communities,” said Tennesseans for Fair Taxation member, Samantha Wallace.
While the tax specifics continue to see changes, the Amazon deal does has potential to increase investments in Murfreesboro.
“We are heavy in education and automotive, and a new national employer presence should lead to other national firms seeing our labor market as a plus for relocation or new facilities. And commercial and retail investment will follow,” said Murfreesboro Mayor Tommy Bragg.