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Warehousing tax repeal lures companies to DeSoto County

Third-party storage warehousing is one of the fastest growing industries in the country when other industries are falling off, and thanks to the repeal of a tax levied on such warehousing companies, Mississippi legislators and economic development officials are now seeing the fruits of their efforts.

The repeal, which went into effect July 1, 2001, has led to capital investments of about $122 million in DeSoto County and the creation of 415 new jobs there to date.

“That’s a pretty good return on investment,” said Jim Flanagan, president and CEO of the DeSoto County Economic Development Council.

Since the tax was repealed, various companies have moved into DeSoto County. Atlanta-based IDI put up a speculative building on 150 acres the company had purchased at Stateline and Airways in Southaven. IDI’s 435,000-square-foot warehouse was the first to be built in DeSoto County since the ‘80s. Cooper Lighting leased and later bought the warehouse, which now serves as a distribution center for the company.

Stephen Nelson, senior vice president and regional manager of IDI, said it’s not possible to directly attribute Cooper Lighting’s purchase of the warehouse to the repeal of the warehouse tax, but it’s likely the repeal had some impact on the company’s decision to buy it.

Nelson said the tax was a major factor on whether IDI entered into the North Mississippi marketplace.

“We did some checking around to find out how big a factor it was,” Nelson said. “It was fairly significant in terms of at least third-party warehouse companies going to Mississippi, but not on those doing their own distribution.”

Soon after Cooper Lighting purchased IDI’s Southaven warehouse, IDI started construction on a second 619,000-square-foot spec building across from the first.

Hillwood Investment Properties (HIP) has also jumped on the bandwagon by purchasing 93 acres in Southaven with an option to purchase an additional 125. Tal Hicks, president of HIP, said the property would not have been as attractive if the warehousing tax was still in effect, but there were reasons other than that which led to HIP’s interest in the DeSoto County property.

“Southaven and Mississippi offer a proven business-friendly environment,” Hicks said.

That, along with the “outstanding labor” in the region, the close proximity of Interstate 55 and economic incentives to locate in Mississippi persuaded HIP to invest in Southaven.

“The DeSoto Trade Center allows Hillwood to offer one more alternative to national users who are considering AllianceTexas and AllianceCalifornia —two prominent Hillwood business parks,” Hicks said.

Rep. Wanda Jennings (R-Southaven), who helped to repeal the third-party storage warehousing tax, said the tax generated only $800,000 during 1999. The amount of business that has been brought to the area as a result of the repeal has more than offset the money the tax brought in.

“This is only just getting started,” she said. “This will multiply as the years go on.”

Jennings said she would like to see more emphasis placed on third-party storage warehouses throughout Mississippi.

“It’s a way to get NAFTA jobs back into the state,” Jennings said.

Diane Hill, executive director of the Southaven Chamber of Commerce, said the companies that have chosen to invest in the city bring national attention to Southaven and the opportunities the city provides.

“It gives the economic development agency another tool to bring more people here,” Hill said.

Hill anticipates additional warehousing growth in Southaven in the future.

Vickie DuPree, manager of the Olive Branch Chamber of Commerce, said because there is no longer a third-party storage warehousing tax, more developers have come to the area to look around. She noted that Berkshire, England-based Exel had entered Olive Branch since the repeal of the tax, and Atlanta-based Robert Pattillo Properties has purchased land as well for the development of spec buildings. There has also been other warehousing activity in Olive Branch since the repeal of the warehousing tax.

“Without the repeal of this tax I’m sure this probably wouldn’t have happened,” DuPree said.

Don Wilkinson, executive director of the Horn Lake Chamber of Commerce, said immediately after the repeal of the warehousing tax, Patterson Warehouses moved across the Mississippi-Tennessee state line into a 427,000-square-foot building formerly used by Case.

“They were waiting for the repeal of the 7% warehousing tax,” Wilkinson said. “The building sat vacant for just a short period of time but we were worried about who we could put there. When that warehouse tax was repealed, we got Patterson. That helped us a lot.”

Wilkinson said the repeal of the warehousing tax in Mississippi would be better for other cities than it is for Olive Branch.

“It affects us, but our size affects a lot of warehousing here,” Wilkinson said. “There is only so much space.”

Blake Wilson, president of the Mississippi Economic Council, compared repealing the warehousing tax to “blowing up a dam and letting the water run freely.”

“When you used to look at the Mississippi-Tennessee line it was like a wall,” he said. “There was nothing to speak of in Mississippi, aside from some modest incursions, but there is no reason for that. Mississippi is much more suited to serving that market from an expansion point of view than Memphis.”

Wilson said Columbus, Meridian and Hattiesburg could also benefit from the repeal of the warehousing tax but to a lesser degree than DeSoto County.

“DeSoto County is where the market is, and it just goes to show that if you let a free market run the water is going to find its own level. That’s what’s going on now.”

Contact MBJ staff writer Elizabeth Kirkland at ekirkland@msbusiness.com or (601) 364-1042.

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