Its official Memphis taxpayers don’t have a chance. Legislators, when confronted by the public on the record,  are unresponsive and dismissive of huge tax losses that result from excessive corporate / real estate tax abatements authored by the Memphis Tomorrow corporate pig elitist establishment.

And the local Memphis press does not report on findings of external studies in for example The Beacon Center of Tennessee or taxpayer concerns which quantify Economic Development Growth Engine (EDGE) overstatements at $850M. The recently released unreported Beacon study revealed  an estimated $451M in overstated projected tax revenues from the Economic Development Growth Engine (EDGE) retention PILOT program.

Memphis taxpayers do not have a chance against the pig elitist while corporate/real estate incentives thrive and true economic development suffers in disconnected workforce development, inadequate public transit and  weak small business vitality. And, there’s nothing close to an  Edward Meeman in the local Memphis press willing to question real power.

At a recent gathering at Abssynian Missionary Baptist Church, hosted by Dr. Earle Fisher,  Eric Barnes of the Daily Memphian, when questioned about lack of coverage on excessive tax abatements, said “Not everyone agrees with your data” to me. I have published numerous blogs questioning the incomplete accounting of the EDGE retention PILOT program. Barnes further remarked “That the Daily Memphian covers/discusses the pros and cons of PILOTs all the time”. But those discussions go nowhere because they lack a quantitative context from which to draw informed conclusions.

Keep It Simple but Model Anyway

Overall, to keep things simple, one should know that abating existing taxes against an existing tax base is a direct tax loss. But in this blog, we will model through retention PILOT accounting while explaining two different approaches to evaluating the tax revenue impact of the EDGE retention payment-in-lieu of taxes (PILOT) program. And in defense of Barnes, not everyone should agree with the data until it is defended. The problem is that no one asks anyone to defend the data because the establishment press and local legislators know that the bogus incomplete accounting authored by the corporate pig elitist is indefensible.

In summary, this MCCL Measured blog estimates an approximate $850M overstatement for 19 retention PILOTs from 2011-2017 with a $224M loss to taxpayers. Beacon estimates a $451M overstatement of tax revenue and a $163M taxpayer loss. Beacon’s methodology will be explained  followed by MCCL Measured’s methodology for evaluating the tax revenue impact of the EDGE retention PILOT program. This will provide a quantitative defense for the assertion of  grossly excessive tax incentives under the EDGE retention PILOT program. Regardless of how one views this analysis, when complete accounting for retention PILOTs is applied,  it’s both a big pig lie to project tax revenue gains from abating existing taxes and also a big taxpayer loss. Let’s get started.

Beacon Methodology

Beacon rejects the use of economic multipliers for existing jobs to project increased new tax revenues while using economic multipliers with new jobs. Economic multipliers are used to model projected increased economic activity that result from filled jobs which range by industry employment from 1.5 to 4.0.

Beacon’s calculation is as follows (New Job tax revenue with multipliers applied) + (construction tax revenue from capital investment)+ (property taxes during PILOT). In the below example, where Beacon evaluated 10 retention PILOTs, it resulted in a $63M loss to taxpayers and $288M tax revenue overstatement. And, this sample analysis does not include all retention PILOTs. The Beacon data is shown below:

One concerning calculation in the Beacon work, involves ServiceMaster which did have a uniquely high probability of relocating without an intervention. This is not an indictment on the Beacon analysis methodology as much as to say that economic modeling is imperfect and imperfections arise in modeling while also revealing concerning trends in a data set. In this case, the trend is significant revenue over projections by EDGE and taxpayer losses.

MCCL Measured Methodology

Unlike Beacon, MCCL Measured methodology fully embraces the use of economic multipliers and applies them consistently throughout the analysis while using a probability model and applying economic multipliers to forgone economic impact of investing in the community. From 2011-2017 there were 19 retention PILOTS administered by EDGE with some of them having new jobs associated with the PILOTs.

$811M was projected from the retention PILOTs with $194M in associated retention abatements. Abatements for new jobs were subtracted to arrive at $194M in abatements associated with existing jobs or retained jobs (retentions).

In this MCCL Measured analysis, there is a generous 60% probability that companies will remain in Memphis/Shelby without a retention PILOT but with the benefit of an expansion PILOT for new jobs while avoiding hefty relocation costs (40% departure rate). Next there is a 50% impact to the existing workforce for departing companies (40% X 50%), resulting in 20% economic impact of a remaining workforce in the modeling. A conservative 1.5 economic multiplier is applied to the retention abatement amount of $194M to arrive at forgone economic impact of investing in the community. And lastly 50% of the retention abatement is treated as a lost principal amount in the form of personnel experience/capacity, building assets such as community centers, equipment assets and etc. See below resulting equation:

$811M (Projected Revenue) – 487M (Probable Revenue)- 162M (Remaining Workforce) – $291M (Forgone economic impact) – $97M (Depreciated Principal Abatement) = $226M (Taxpayer Loss)

A $843M overstatement in projected revenue results from incomplete EDGE accounting and a $226M taxpayer loss when complete accounting is applied to the EDGE retention PILOT program for the 19 retention PILOTs from 2011-2017. Please feel free to ask questions regarding this analysis.

Conclusion

Both the Beacon and MCCL Measured accounting models reveal significant EDGE accounting deficiencies and overstatements in projected revenue. After modeling through the EDGE retention PILOT program, using complete accounting, one can just keep it simple and  revert back to common sense which is a abating existing taxes against an existing tax base equates to a direct taxpayer loss and NOT a taxpayer gain. Whatever the final conclusion, there is a big ass load of taxpayer losses that result from the EDGE retention PILOT program.

The unfortunate part of these findings is that this has been going on for 8 years as the corporate pig elitist feed on a community in need. The pigs go unchecked by a local press corps and legislative bodies that favorably schedule presentations by the informal network organizations without competing views  while dismissing entire segments of the Memphis population. The taxpayer in Memphis does not have a chance and paid taxpayer advocacy is needed to at least provide a buffer to the Crump Machine like, Memphis Tomorrow informal network of pigs.

Memphians and legislators only get one side of the story in a closed system and that’s the pig elitist side of the story which sets the stage for more nonprofits and corporate/real estate incentives. The former occurs as Memphis gets further left behind with disconnected workforce development, inadequate public transit and struggling small business vitality. Something needs to change and taxpayers need recognition for economic growth to occur.

The local Memphis priority is corporate / real estate development; not economic development for all. One can just watch local proceedings, to draw the above conclusion, that approves a $100M Union Row project with blistering speed, while seemingly bulldozing through a mayoral request for additional review time citing approval delay could threaten the project. And then just as the first $100M traunch is approved, the Downtown Memphis Commission (DMC) comes right back to ask for a $50M loan for parking that, yet again, threatens the Union Row project without expeditious approval.

Meanwhile, entire segments of the Memphis population are dismissed  without a coherent economic development plan after almost a year, disconnected workforce development efforts persist as workforce development is touted as the #1 priority, public transit is sidelined  and small business vitality plummets. And the local press, without differentiation, enables the corporate pig feeding frenzy while generating siloed reporting without connecting the dots for the public. Connecting the dots would reveal corporate pigs feeding off taxpayers as entire segments of the population are systematically dismissed.

Economic Development Reform

Without a plan from the Greater Memphis Chamber, economic development reform has stalled as corporate/real estate development speeds ahead. It must be stated that, in the summer, Memphis Raise Your Expectations (MRYE), advocated for specific solutions that included adopting a researched based definition for economic development, a method of measuring economic development progress and adopting the Amazon Road Map economic development policy pronouncement of the University of Memphis as a framework for an economic development plan. But that proposal was dismissed by the corporate elitist establishment in favor of what exists now; no economic development plan.

The Shelby County Commission further passed a resolution, without a time table, to review 9 abating boards besides the Economic Development Growth Engine (EDGE) which has garnered most of the local attention. While reviewing  9 tax abating boards is desperately needed, the effort will go nowhere with an enabling non-differentiating establishment press reporting in siloes and without paid representation for the taxpayer. The Memphis taxpayer has no voice as the establishment press proceeds without needed inquiry, all while covering only representatives of the Memphis Tomorrow informal network.

Informal networks were documented as a concern in the diversity report. Memphis Tomorrow informal network members such as EDGE and the DMC dominate economic development legislative schedules while taxpayers are left without paid representation and an establishment Memphis Tomorrow press that reports the “economic opportunity for all” and “momentum” rhetorical bullet points of the informal network. Legislators hear only one presented side and that of the paid Memphis Tomorrow informal network. It’s a network that has spearheaded persistent community decline, working largely unchecked, as the corporate/real estate elitist pigs have devoured true economic development through excessive tax incentives at an estimated taxpayer cost of $124M recurring per year.

At a community meeting, led by Dr. Earle J. Fisher at Abyssinian Baptist Church with The Daily Memphian represented by Eric Barnes (whose voluntary on the ground community presence was not required but appreciated), concerns over nuance, slant and non-differentiation were voiced by participants away from establishment reporting that could otherwise give the taxpayer at least some voice. But that is unlikely to change with The Daily Memphian, who has an anonymous establishment donor base. Hopefully, some press outlet will pick up the slack in a more investigative press as it relates to questioning the Memphis Tomorrow informal network.

EDGE

As far as EDGE reform, nothing has occurred. This is especially concerning after a majority of EDGE Board members have served seven years while employing incomplete and bogus retention PILOT accounting to justify excessive corporate/real estate PILOTs. In the summer, as a proposed solution, MRYE advocated for a new EDGE Board with professional balance from small business, education, transit and the corporate sector to drive balanced economic development reform but still nothing has evolved to reform EDGE. Legislators and the local press, in reference to the highly ineffective Memphis Tomorrow informal network, have been reluctant to even broach the topic of new faces on the EDGE Board.

In the meantime, except for the favorable Indigo PILOT (with the specifics of the DMC parking incentive still outstanding), EDGE unfavorably roars ahead, unquestioned by the establishment press, while approving real estate deals labeled as economic development. In a stunning EDGE Board action in November, the Board approved an expansion job PILOT for 30 warehouse jobs for Mark Anthony, Inc that abated $2M in existing property taxes at a $500K loss to the taxpayer while EDGE pocketed $51K in fees. EDGE is clearly incented to conduct transactions as opposed to representing the needs of taxpayer. This reality helps explain the drivers behind the corporate welfare culture of the Memphis Tomorrow informal network as the the $500K taxpayer loss and corresponding $51K in fees to EDGE went unreported by the establishment press.

Curiously omitted from page 2 of the Mark Anthony Project Summary was the customary page 2 of EDGE project summaries entitled “Tax Incentive Eligibility Analysis”. Upon investigation, which doesn’t occur by the local press or legislative bodies, an external “Tax Incentive Eligibility Analysis” was conducted using EDGE requirements.  The analysis reveals that the EDGE Board did not follow their own requirements when granting a PILOT award of 10 years to Mark Anthony, Inc. A 10 year PILOT would have required a score of 100 according to EDGE requirements. The external analysis resulted in a score of 46.5 far off the 100 required score for a 10-year PILOT. See the below analysis.

This occurrence is unfortunate in that if for some reason the EDGE Board wants to continue incenting warehouse jobs, they could have somehow accommodated the taxpayer while honoring their published guidelines by 1) reducing the tax incentive by 53..5% over 10 years or 2) reducing the PILOT term TO 4.5 years. Had the EDGE Board followed their own guidelines the incentive would have been reduced by $1.2M from $2.3M saving taxpayers 1.2M.

But the EDGE Board chose neither and to not follow their own policy requirements. This is just another in a series of actions that points to the need for a new EDGE Board. And besides, EDGE recommended reform efforts have been delegated to the EDGE Board itself by local legislators which means reform efforts won’t work because the EDGE Board will likely not follow their own guidelines. So, a new EDGE Board is needed as recommended in the summer by MRYE.

Conclusion

The taxpayer, in a community left behind, has been systematically dismissed by the deficient Memphis Tomorrow informal network of corporate elitist pigs. It’s a culture, rooted in a rigged Crump culture of years gone by, enabled by conforming legislative bodies and an establishment press that leaves the citizenry further behind in a knowledge based global economy. Going forward, paid taxpayer representation is needed to give the taxpayer voice and to provide needed balance for legislative bodies in considering taxpayer funded economic development efforts. This is best for all and that includes the Memphis Tomorrow informal network.