Low Cost »

One of the key reasons Memphis has seen such growth over the past few years is it just simply cost less to do business here. Studies have shown that Tennessee is one of the lowest taxed states in the nation. When you factor in plentiful, inexpensive real estate, lower shipping costs, lower utility costs and an extremely low cost of living you can see why people and companies are taking notice.

Couple the low cost with aggressive corporate incentives at both the state and local level, and you’ll soon see why Memphis was one of the nation’s top cities for relocations and expansion in 2006.

Did you know:

• A Tax Foundation study found that Memphians pay 8.5% of their income for state and local taxes making it the 3rd lowest taxes state in the country. The national average is 11%.
• The presence of major hubs for FedEx, UPS, DHL and the USPS keeps shipping costs low.
• With quoted rates of $2.72 and $2.52 per square foot, Memphis has the lowest rates for industrial and warehouse space for any large city in the nation.
• Memphis Light Gas & Water (MLGW) is the nation’s largest three-service utility. MLGW provides personal, reliable service to more than 43,500 commercial and industrial customers every day, at some of the lowest rates in the nation.
• The cost of living in Memphis is 86% of the national average.

Operating Costs

The cost of doing business in Memphis is lower than most US cities. Whether you operate a call center, manufacture and distribute pharmaceuticals or run global operations for a Fortune 500 company, the lower costs for critical inputs like industrial or office space, utilities, shipping, taxes, travel, construction and labor are likely to make a difference to your company's bottom line. Memphis delivers lower operating costs.

Lower Commercial Real Estate Rates

Commercial real estate lease rates comparison
real estate market	class a office	total office	warehouse	total industrial
Memphis	$19.90	$16.59	$2.56	$2.73
Charlotte	$20.63	$18.60	$3.50	$4.06
Indianapolis	$19.09	$16.98	$3.67	$4.06
Houston	$23.46	$19.76	$4.77	$5.24
Raleigh/Durham	$20.63	$18.39	$4.69	$6.46
Phoenix	$27.93	$24.79	$7.24	$8.06
Miami-Dade County	$32.86	$28.17	$7.67	$8.10
National Totals & Avg	$27.94	$23.80	$5.29	$6.10
Source: CoStar Group National Industrial & Office Market Reports, 1st Quarter 2007

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Taxes & Incentives

Taxes

local taxes
tax	jurisdiction				rate
Property Tax Rates	Shelby County				$4.09 per $100 value
	City of Memphis				$3.4332 per $100 value
	City + County				$7.47 per $100 value *Note: Memphis residents & businesses pay Shelby County rate of $4.04 plus city rate ($4.04 + $3.4332 = $7.47).
	Other Shelby Co. Municipalities			Arlington	$1.00 per $100 value (plus Shelby Co. tax)
				Bartlett	$1.31 per $100 value (plus Shelby Co. tax)
				Collierville	$1.45 per $100 value (plus Shelby Co. tax)
				Germantown	$1.54 per $100 value (plus Shelby Co. tax)
				Lakeland	$0.00 (plus Shelby Co. tax)
				Millington	$1.23 (plus Shelby Co. tax)
Property Tax Ratio of Assessment	Residential			Memphis	25%
				Shelby Co.	25%
	Commercial & Industrial Real			Memphis	40%
				Shelby Co.	40%
	Commercial & Industrial Personal			Memphis	30%
				Shelby Co.	30%
Sales Tax	Shelby County, including Memphis				2.25% (Totals 9.25% including state sales tax) *Rate applies to single items up to $1,600. From $1,601 to max. of $3,200 per item, rate is 2.75%
Gross Sales Receipts Tax					Rate varies -- 1/10 of 1% to 3/8 of 1%
Payroll (Occupational) Tax					None
Head Tax					None
Hotel Tax					15.25% (additional 6% added to 9.25% state + local sales tax rate )

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state taxes
tax	rate
Sales Tax	7.0% (added to local option sales tax, so total sales tax in Shelby Co. is 7.0% + 2.25% = 9.25%)
	*Exemptions include items bought for resale and manufacturers’ exemption for materials that become a component part of the finished product, containers, labeling and packaging; and materials coming into direct contact with the product and consumed in the manufacturing process. Numerous other exemptions - details available upon request.
Property Tax	None
Corporate Excise Tax	6.5% on net income from business conducted in Tennessee
Franchise Tax	Equity Method: $0.25 per $100, or major fraction thereof, of the issued and outstanding capital stock, surplus and undivided profits; minimum $10
	Book Value Method: $0.25 per $100 on book value of all real and tangible goods owned or used by the corporation in Tennessee. Same rate applies to finished goods inventory for distribution facilities, but caps at $30 million
Unemployment Compensation Tax	0.15% to 10% of first $7,000 of wages paid to each employee in calendar year *New employers: 2.7% other than construction and mining (applies for the first 4 years before moving to an experience-based rate)
Inventory Tax	None on finished goods inventory
Personal Income Tax	No income tax on wages
Hall Income Tax	Taxable dividend and interest incomes are taxed at the rate of 6%. The first $1,250 on an individual return and the first $2,500 on a joint return are not taxed.

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Incentives

STATE LEVEL

TENNESSEE DEPARTMENT OF ECONOMIC & COMMUNITY DEVELOPMENT
JOBS TAX CREDIT - Provides qualified new or expanding businesses in Tennessee a $2,000 credit per new full-time employee if the business creates a minimum of 25 new full-time jobs and capital investment of at least $500,000. This credit can be used to offset franchise and excise tax liability starting at 33 1/3% for businesses creating 25-1,000 jobs, 50% for 1,000-3,000 jobs, 75% for 3,000-5,000 jobs and 100% for more than 5,000 jobs. Any unused credit can be carried forward for 15 years.

INDUSTRIAL MACHINERY EXCISE TAX CREDIT - One percent (1%) of the cost of industrial machinery that has been certified by the Tennessee Department of Revenue can be taken as an industrial machinery excise tax credit. Recent legislation expanded this credit to include distribution equipment, computer equipment and telephones for all types of new and expanding companies that qualify for the Franchise Jobs Tax Credit.

SALES TAX EXEMPTION - Sales tax exemptions and reductions are available on industrial machinery, energy, fuel and water used in manufacturing or processing of products for resale off the premises.

FASTTRACK JOB TRAINING ASSISTANCE PROGRAM - Provides funds for eligible projects that can help offset costs that are incurred during the training process. Each project is considered separately based on its economic impact to the State.

THE FASTTRACK INFRASTRUCTURE DEVELOPMENT PROGRAM (FIDP) - Can be used to offset infrastructure improvement costs, site grading costs and other infrastructure related costs. The maximum amount available to any single project is $750,000. The amount of the grant is based on a cost-benefit analysis conducted by the State.

Click here for more information on state incentives.

TENNESSEE DEPARTMENT OF LABOR
WORKFORCE ASSISTANCE - This office maintains the files on the State’s largest single pool of job seekers from professional, technical and managerial workers to skilled and unskilled workers. The files include recently terminated applicants, as well as applicants seeking to make a job change. Other services include labor market information, screening, and selection/referral of applicants from the Job Service files.

Click here for more information about workforce assistance.

TENNESSEE VALLEY AUTHORITY (TVA)
ECONOMIC DEVELOPMENT LOAN PROGRAM - TVA offers a federal economic development loan program to assist businesses in financing industrial development projects, including new industrial plants, existing industry expansions, infrastructure development and service industries. A maximum low interest loan of up to $2 million per project is available with up to 10 years to repay.

Click here for more information about the TVA Economic Development Loan Program.

TENNESSEE DEPARTMENT OF TRANSPORTATION (TDOT)
STATE INDUSTRIAL ROAD PROGRAM - TDOT is authorized to contract with cities and counties for the development of “Industrial Highways” in order to provide access to industrial areas and to facilitate the development and expansion of industry within the State of Tennessee. TDOT provides 100% funding for qualified projects.

Click here for more information about the TDOT State Industrial Road Program.

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LOCAL LEVEL

MEMPHIS/SHELBY COUNTY INDUSTRIAL DEVELOPMENT BOARD
PAYMENT-IN-LIEU-OF-TAX (PILOT)- Projects involving large capital investment and high levels of job creation may qualify for a property tax freeze (PILOT). Formal approval for all PILOT applications is determined by the Memphis and Shelby County Industrial Development Board at regularly scheduled meetings. Approval is based on a number of performance standards, including the number and type of jobs created, annual base wage, capital investment in real and personal property, and the location of the project. The PILOT freezes property taxes at the pre-development level, so any portion of the project (such as the raw land) that is already on the tax roll prior to construction will continue to be taxed at the same level.

A Phase I environmental audit is required for real property PILOTs. The closing fee for the PILOT is calculated on a sliding scale from 1% to 5% of the tax savings to the company for the term of the PILOT with a $1,500 minimum and a maximum of $300,000. Minimal additional fees are levied on projects completed in varying phases. The timing of the property tax freezes varies depending on the community impact and length of construction. The Memphis and Shelby County Industrial Development Board is currently authorized to grant PILOT incentives for up to fifteen years. Twenty-five percent of the county and ten percent of the city’s school portion of the property tax is not eligible for abatement.

In order to qualify for PILOT incentives, a company must apply to the Industrial Development Board at least 10 days prior to the board’s monthly evaluation committee meeting. All PILOT benefits must be approved by the board before any property for the project is leased or purchased in the county.

COMMUNITY REINVESTMENT CREDIT - The Memphis and Shelby County Industrial Development Board now can grant a PILOT on existing buildings already on the tax rolls with the new Community Reinvestment Credit.

RENEWAL COMMUNITY - Forty-eight census tracts in Memphis have been designated a federal Renewal Community (RC) with special tax incentives during the period January 1, 2002, through December 31, 2009. These tax incentives are generally designed to encourage businesses to locate or expand operations in an RC and to hire RC residents. The incentives include:

• Wage Credits - Credit against Federal taxes of up to $1,500 during each year of RC designation for all existing employees and every new hire living in the RC
• Deductions - Increased Section 179 Deduction
• Commercial Revitalization Deduction
• Environmental Cleanup Cost Deduction (Brownfields)
• Bond Financing - Qualified Zone Academy Bonds (QZABs)
• Capital Gains - Zero Percent Capital Gains Rate for RC Assets
• Other Incentives - New Markets Tax Credit
• Low-Income Housing Tax Credit (LIHTC)

JOBS PLUS - Jobs Plus is an optional add-on incentive to the PILOT Program. One to four additional years can be added to the end of the initial PILOT term by meeting designated certified minority/small business hiring or contracting goals

INDUSTRIAL REVENUE BONDS - The Memphis and Shelby County Industrial Development Board is authorized to issue bonds for financing industrial facilities. Tax exempt industrial development bonds are available for manufacturing operations. The financial strength of the company, at the time the bonds are taken to market, will determine the rate of the bonds. There is a $10 million cap on small issue bonds; however, there are a number of categories of projects or project components that may be exempted from this limitation. Due to federal tax regulations associated with revenue bonds, it is important to obtain the backing of the bonds by a letter of credit from a strong financial institution. The Board is prepared to act quickly on an application after it is submitted.

Click here for more information about Memphis and Shelby County Industrial Revenue Bonds

MEMPHIS LIGHT, GAS & WATER (MLGW)
UTILITY INCENTIVE RATES - MLGW offers electric and natural gas incentive rates to qualified businesses locating or expanding in the Memphis service area. Electric incentive rates are available for new or expanding loads through the Enhanced Growth Credit, Variable Price Interruptible, Time-of-Day and Limited Interruptible Power programs. A special five percent demand billing credit is available to large manufacturers exceeding 5,000 kW demand monthly. Natural gas incentive programs include the Prime Plus Program, Interruptible Gas Service and the Economic Development Discount Rider.

TECHNICAL UTILITY SERVICES - MLGW has designated Commercial Marketing Representatives to aid businesses with their electric, gas and water service needs. These no-cost services include on-site energy audits, utility rate comparisons, third-party recommendations, indoor lighting audits, outdoor lighting design, energy seminars and One-Stop-Shops to put businesses in touch with the right utility resource.

Click here for more information about MLGW incentives and services.

MEMPHIS / SHELBY COUNTY OFFICE OF ECONOMIC DEVELOPMENT
FAST TRACK PERMITTING - Through our Office of Construction Codes Enforcement we offer a Fast Track program that can cut red tape or delays occasionally associated with construction permitting. Through this program, review of plans is expedited and we work with design and construction personnel to ensure an efficient construction approval process.

ONE-STOP-SHOP ASSISTANCE - The One-Stop-Shop (OSS) program is designed to facilitate and expedite the regulatory/permit process and to answer questions on building and fire codes, taxation, utilities, permitting or other issues. When the timing is appropriate, we would welcome the opportunity to arrange a confidential One-Stop-Shop session. During an OSS session, company representatives are introduced to key resource people in local and State governments and members of our economic development team who can answer questions. These resource people can also initiate any required permits or reviews.

FOREIGN TRADE ZONE - The Foreign Trade Zone provides extraordinary flexibility and cost savings to importers and exporters. Goods can be stored, processed, manipulated and integrated with domestic goods, all before paying duties. There are currently three General Purpose Foreign Trade Zone sites and two Foreign Trade Subzones in the Memphis area.

MEMPHIS BUSINESS OPPORTUNITY FUND - This $50 Million loan fund is a partnership between the City of Memphis and a consortium of local banks. The fund is designed to provide capital & technical assistance for small, minority and women owned businesses. All loan requests will be processed through Southeast Community Capital, Inc.

MEMPHIS AREA RIDESHARE - Memphis and Shelby County provide free transportation management services to area employers through the Memphis Area Rideshare Program. Memphis Area Rideshare staff works with employers to establish personalized rideshare programs. Free ride matching for carpools and vanpools and information on available transit services are the transportation services provided to employees. Also available at no cost to the employer is a full service vanpool program that includes the provision of passenger vans, maintenance and insurance. Benefits of an active rideshare program include reduced traffic congestion at the work site, reduced parking demand, decreased employee absenteeism and tardiness, improved employee retention, an expanded geographic labor market and an enhanced company image in the community.

MID-SOUTH QUALITY PRODUCTIVITY CENTER (MSQPC) - MSQPC is a partnership of the Memphis Regional Chamber and Southwest Tennessee Community College. The center provides training and consulting services that include ISO 9000 training, consulting and workshops; Malcolm Baldrige National Quality Award Assessments and Self-Assessment training; and cycle-time reduction training through the Center’s Process Activated Training System (PATS).

Click here for more information about MSQPC.

UNIVERSITY OF TENNESSEE CENTER FOR INDUSTRIAL SERVICES (UTCIS) - This program offers existing industries no-cost assistance in helping to solve their managerial and technical problems. Issues addressed include industrial engineering, plant layout and process improvement, waste assessments, solid and hazardous waste and selling to the Federal Government. UTCIS utilizes staff professionals and professors from The University of Tennessee, Knoxville and Martin; Tennessee Tech; The University of Memphis; and Christian Brothers University.

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Find Out More

annual operating costs - data center
geographically- variable costs		memphis	phoenix	houston	chicago
Labor Costs	Weighted Avg. Annual Earnings	$58,583	$58,444	$61,238	$66,545
	Annual Base Payroll Costs	$5,858,300	$5,844,400	$6123,800	$6,654,500
	Fringe Benefits	$2,167,571	$2,162,428	$2,265,806	$2,462,165
Total Annual Labor Costs		$8,025,871	$8,006,828	$8,389,606	$9,116,665
Electric Power Costs		$115,882	$145,740	$221,572	$163,416
Amortization Costs		$2,949,429	$3,323,747	$3,030,892	$3,323,264
Property & Sales Tax Costs		$715,636	$1,032,539	$902,603	$867,671
Heating & Air Conditioning Costs		$212,824	$346,283	$438,893	$285,420
Corporate Travel Costs		$199,680	$203,231	$219,230	$239,622
Total Annual Geographically-Variable Operating Costs		$12,219,322	$13,058,368	$13,202,796	$13,996,058
SOURCE: The Boyd Company, Inc., "The Cost of Operating a Data Center in Memphis", May 2007. Annual costs in this study were "scaled to a representative data center employing 100 workers and occupying 100,000 sq. ft. of newly-constructed space."

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