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 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.
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.