The corporate elitist formula is on full display for taxpayers. That formula is to bully taxpayers into a corner, with no good options but to fund a public service that the community needs and the corporate elitists massively consume – public transit. Not funding transit through an increased $20 fee/tax actually makes life worse for Shelby Countians, especially it’s most vulnerable.

The revenue shortfall to fund public transit stems from excessive corporate/real estate incentives and a botched workforce development system over a number or years administered by the Memphis Tomorrow public-private complex. As a result, when coupled with slow growth, Memphis/Shelby taxpayer revenue shortfalls exceed $50M per year.

The challenge for local legislators is that they need new revenue now. And the only way to get new revenue now is to tax the general population. Revenue shortfalls to support growth, which includes, in part, funding for public transit, are already scheduled and baked into future budgets with previously approved excessive corporate/real estate incentives for years to come.

And while yes, some savings can be had here and there, maybe like $500k-$1M from the community enhancement program, massive revenue shortfalls to fund scheduled business growth still remain from the formula product of runaway corporate elitism. So the public and legislators are backed into a corner with the $20 fee as the least bad option. But there are research based solutions to limit future revenue shortfalls that come in the form of true economic development for all.

Solution: Bartik’s Research

In the current environment and with no economic development plan, Dr. Timothy Bartik’s Making Sense of Incentives research should be required reading for local legislators. Bartik’s work was provided to me by Charles Gascon of the St. Louis Federal Reserve. After all, there is nothing research based about bully corporate runaway elitism. 

To that extent, like this blog, while not being opposed to the use of tax incentives, Bartik documents a number of leakages in common tax incentive modeling. Bartik further makes clear that economic modeling assumptions are critical in effectively understanding economic and fiscal impact. In his research, that focuses primarily on state incentives, Bartik communicates the following benefit cost ratios for economic development:

Public transit was not part of Bartik’s consideration in this case above but would certainly be part of overall economic development efforts in helping the most vulnerable get to work. But, while leveraging his research, in a City Lab interview on incentives and specifically in regard to the Amazon HQ2 package, Bartik says about the winning Virginia incentive package that was not the most lucrative:

“In Virginia’s case, a lot of the “incentives” were public-service enhancements: a new campus of Virginia Tech in Northern Virginia, improvements in public transit, enhancements in job skills. This kind of package makes more sense than just throwing a lot of cash at the company.”

The currently proposed tax incentive fiscal note impact (TIFNI) platform fully leverages Bartik’s research based approach to sizing tax incentives. TIFNI accommodates assumption modeling and opportunity costs into its calculations. There are research based approaches to economic development but runaway elitism is not one of them.

Legislators should consider this reality moving forward, while knowing that even within the tax incentive environment Bartik aggressively questions, that Memphis/Shelby tax incentives are still $250-400M excessive when benchmarked against other cities. 

Conclusion

Memphians should know that runaway elitism has been culturally normed. After all, there are a vast number of local leaders that stand by while the workforce development system is botched, cheer on excessive corporate/real estate incentives and turn around and pray for Memphis. 

While becoming aware of culturally normed runaway elitism and bullied into a corner, with no good options, legislators and the public need to bite the bullet on the $20 fee while moving forward with measurable research based economic development efforts. These efforts include massive incentive reform while confronting runaway elitism.

With major employers either tax exempt or getting 75% abatements, there is no money for community evolution. The LOSB and TIFNI research based economic development solution is ready to go and will help confront runaway elitism of the type that requires persistent tax increases while amplifying community imbalances. Implementation of TIFNI will help avoid future revenue shortfalls. 

With no good options, legislators should rest easy voting for the $20 fee while coming back and confronting the fiscal liberalism of the corporate socialists through aggressive economic development reform. In this way, legislators address both short term and long term community needs for years to come….

The Republican Party likes to “smoke their own dope” when talking “fiscal conservatism”. Showing up to oppose a $20 fee to help the poor get a lift to work, while ignoring fiscally liberal runaway elitism, is hardly fiscally conservative. Maybe, Republicans need to check their own house.

In their defense., perhaps its because of Republicans’ own ignorance that stems from a non-investigative local press that fails to communicate the fiscal realities of local affairs. And the reality is no city in America can support growth or even the status quo with major employers either property tax exempt or getting a 75% abatement. Its math. 

Memphians, in many cases, unknowingly live in a community of runaway elitism administered by the FedEx/Memphis Tomorrow complex of Fred Smith and Pitt Hyde where excessive tax incentives roar for the small few – while Memphis Tomorrow public/private initiatives are down in all categories while using your federal, state and local tax dollars. Its a design for decline occurring without public measurement of the public/private complex. 

Its been going on for almost 20 years while racking up below average GDP growth that has cost taxpayers $1.5 billion over time and deficient recurring annual tax revenue totaling $200M. Deficient revenue growth shows up as services gaps in for example public transit as well as others. And local Republicans participate in the wreckage.

Cary Vaughn has sat on two local workforce development boards that have failed to connect workforce development programming costing taxpayers an estimated $15M per year. These botched workforce development efforts have put Memphis 5 years behind in workforce development in a global economy. With no sense of urgency, Vaughn’s mistake was not leading, breaking from his board and going public to confront deficient public-private board leadership on workforce matters. 

And Vaughn also sits on the EDGE Board where he just voted for the excessive $38M tax incentive for UPS that was going to happen nowhere else but Memphis as well as the recent LeSaint Logistics PILOT that abated $4.5M in existing taxes for 52 low wage warehouse jobs. To give Republicans some idea of EDGE’s recklessness, consider the below EDGE approvals:

EDGE job incentives at $500 million + exceed the $335 million in total job incentives in both Indianapolis and Nashville combined.

Three of 96 EDGE tax incentive awards  — involving International Paper, Nike and Technicolor at $148 million  — exceed all of Indianapolis job incentives awards at $135 million involving 110 projects while Indy has greater job growth

In short, EDGE job tax incentives are $250 million+ in excess when benchmarked against other cities. This has resulted in slow growth and lack of available public transit, public safety and workforce development resources.

Further, involving all 13 Shelby County abating agencies, Memphis has 431 PILOT parcel contracts compared to 50 or less for each Nashville, Knoxville and Chattanooga. While these excessive incentives occur, in Commission EDGE oversight proceedings, Commissioner Mick Wright has yet to protest the associated fiscal liberalism as practiced through excessive incentive awards. 

It would certainly be nice to see the Shelby County Republican Party show up in legislative chambers to raise concerns against excessive corporate/real estate incentives or $3.3M Riverfront grants that contain no schedule of deliverables or a $3M UofM tennis center grant without economic impact justification or competing proposals. 

But apparently blind to runaway elitism, perhaps because they know nothing else, Republicans show up to claim the “fiscal conservative” mantel to oppose a $20 annual fee to help the poor get a lift to work. Meanwhile Commissioner Brandon Morrison leads. 

With No Good Options, Morrison Leads

With no good funding options, Morrison leads. I believe she has done thorough research and found that there is no other option available for a dedicated transit funding source. I know she is capable of thorough financial research. And the transit funding dilemma is not new, dating back 3 years when funding was identifed as the primary obstacle to adequate public transit. As a result, again, Memphis falls 3 yrs behind. 

Morrison appealed to her own Republican Party, was rejected and led forward. The $20 fee is the best bad option while supporting advocated business and economic development interests. In committee, Morrison effectively said the ad hoc committee is kicking the can down the road, predicting a version of the fee as the final outcome. She has done her homework. 

To that extent, I hope the Commission quickly passes a $14 or $20 transit fee while expeditiously moving to reform excessive incentives and implementing publicly administered measurement of the vast nonprofit public-private complex. That is where the greatest cost to taxpayers resides in excessive incentives and under performing public – private initatives. 

The proposed tax incentive fiscal note impact (TIFNI) platform provides a fiscal note for every abatement while providing a measurement platform for public-private initiatives. Through the use of a fiscal note, TIFNI helps to right size and reform tax incentives. 

Conclusion

Now Republicans know; a $20 fee is nothing in the overall scheme of things. A city cannot be adequately supported while major employers are either tax exempt or getting 75% abatements. And a city can only decline when the FedEx/Memphis Tomorrow complex is down in all categories while using your federal, state and local tax dollars. 

Its ok to call it a tax. The poor are already being unfairly taxed with inadequate transit. A $20 annual tax on the rest of us, is not much to ask. 

And finally, maybe Commissioners should consider the community debt and ethical invoice to the FedEx/Memphis Tomorrow complex of $1,500,000,000 payable upfront in the wake of 20 yrs of runaway elitism.  

The “Continuing the Legacy” of MLK event came up short on next implementation steps for furthering MLK’s legacy in Memphis where runaway elitism reigns supreme. The event was moderated by Wendi Thomas, with panelists Drs. Elena Delavega, Earle Fisher and Charles McKinney. 

First the good  and appropriate for MLK day, there was high quality oration by powerful speakers in Drs. Charles McKinney and Earle Fisher while referencing MLKs work. Fisher was the primary architect of the Upthe901 Vote campaign. Having produced the groundbreaking Poverty Report, Dr. Elena Delavega used data to support the need to continue the MLK legacy while Wendi Thomas’ pioneering journalism regarding the cessation of medical bill lawsuits involving the poor was celebrated. Thomas journalistic efforts saved local residents $11.9M !

Fisher mentioned concern with Memphis Tomorrow, the author of much of the runaway elitism in Memphis, but an attack on Memphis Tomorrow who is down in all categories while their initiatives use your federal, state and local tax dollars was not sustained by the panel nor was there a call for PILOT reform or concerns over the botched workforce development system. Currently major employers are either tax exempt or getting a 75% tax abatement leaving no money to adequately support business growth much less transformational economic development.

Cited was MLK’ s quote of “I have almost reached the regreatable conclusion that the Negro’s great stumbling block in his stride toward freedom is not the White Citizen’s Counciler or the Ku Klux Klanner, but the white moderate, who is more devoted to “order” than to justice; who prefers a negative peace which is the absence of tension to a positive peace which is the presence of justice; who constantly says: “I agree with you in the goal you seek, but I cannot agree with your methods of direct action”; who paternalistically believes he can set the timetable for another man’s freedom; who lives by a mythical concept of time and who constantly advises the Negro to wait for a “more convenient season.”

McKinney extended the “moderate white” from MLKs quote to include moderate blacks and others. Common themes that rang out were  the need for radical activism, higher wages and taxes, checks on over policing / local public safety agenda and speaking to power. Next steps for over policing were for attendees to sign a petition against amending the consent decree. But beyond that, next steps for continuing the MLK  legacy were hard to find. The need to organize was consistently referenced but with a focus on 2021 ???

Radical Activism ? Maybe Basic Taxpayer Advocacy First

Across the board, implementation is the problem in Memphis with runaway elitism, arguably the #1 problem. Failed publicly funded initiatives routinely occur with a plethora of social justice organizations locally silent in the practice of  basic taxpayer advocacy in public chambers. This occurs while everyone remains in planning mode and in the case of “Continuing the Legacy” planning for 2021.

The social justice complex routinely fails to prosecute the business case against runaway elitism in that it is in fact antibusiness as evidenced by peer bottom GDP growth under the corporate socialism of the FedEx/Memphis Tomorrow complex over almost 20 years. People aren’t pissed about that ! Runaway elitism is not even good for the FedEx/Memphis Tomorrow complex.

Much less radical activism, social justice organizations are never  in public chambers protesting against excessive incentives for the small few, botched public-private workforce development initiatives that have occurred over 5 years or public subsidies for favored nice to have projects. In fact, one questioner asked where is the activism in Shelby County School Board meetings ? Great point, as one of the area’s economic development assets is its youthful population.  If social justice organizations are trying to impact change and are not present in chambers, where decisions are made, they might as well pack it up. 

Earlier this year, I applied to be a journalist for MLK50. As on old white dude, my thinking was that I would add a degree of diversity to the MLK50 effort while focusing my journalistic efforts on making the professional business case against runaway elitism which has not locally occurred.

The business case against runaway elitism would be made though the lens of the taxpayer in a majority African American city with the idea that social justice starts with taxpayer justice. Its an easy case to prove and make with authoritative public data. I am not a professional journalist and was hopeful and open to coaching and editing by such a journalistic professional as Wendi Thomas and her team. But I never heard back for even an opportunity to pitch the idea. That made me wonder if the local social justice effort even wants to sustain and make the easy business case against almost 20 yrs of runaway elitism. 

Upon expressed concern to the panel over the lack of basic taxpayer advocacy by, in many cases, publicly funded social justice organizations in public chambers, certain panelists seem to question the “method” and right of the questioner to raise concerns saying that raising such concerns dismisses the work of Wendi Thomas. Wendi Thomas was not even mentioned in the questioner’s remarks. 

At the same time, the “Continuing the Legacy” event seemed ripe for planning immediate next steps in the practice of basic taxpayer advocacy in public chambers like for the next City Council, County Commission or EDGE meeting. Instead of radical activism, the unachieved threshold, at this point, is sustaining mere taxpayer advocacy. EDGE is easy to raise concerns with $250M in excessive incentives on the heels of a $38M excessive UPS incentive approval. 

But the overall next steps charge seemed to be planning for 2021. For whatever reason, planning is implementation in Memphis where growth has stagnated over 20 years. Maybe its because everyone is planning.

Conclusion

The remarkable accomplishments of the panelist should be celebrated – $11.9M ! And the historical references and oratorical representation of MLKs work were second to none and so appropriate for MLK Day. But at the end of the day, vitality and taxpayer advocacy is missing in public chambers for a Memphis community in need as planning seems to be the norm in a 20 year wake of runaway elitism….

So what is the priority, workforce or excessive incentives ? For years now the local establishment says that workforce is the #1 priority but connected workforce programming has never taken place. But what takes place regularly is EXCESSIVE incentive awards. For Workforce to be #1, public funding must be prioritized to serve the need. 

Louisville, KY., just last fall awarded UPS with a $40M incentive package for 1,000 announced jobs and a $750M capital investment. Memphis awarded $38M for 25 jobs and a $261M capital investment. UPS is making strategic geographic investments. The $261M Memphis investment was always going to be in Memphis and the $750M investment was always going to be in Louisville.

But in the current economic development climate, with “but for” gone in practice, some local incentive can be defended for the $261M UPS investment in Memphis. Using the TIFNI tool and applying generous assumptions, we recently right sized the UPS incentive down from $38M to $27M. 

TIFNI assumes a corporate expansion fiscally paying for its growth with the taxpayer netting at least as much as the corporate beneficiary in sizing job incentive awards. What’s good for the taxpayer is good for business. But if you benchmark the UPS Memphis incentive against Louisville’s UPS incentive, TIFNI assumptions are liberal. 

Here is what the benchmarking reveals about the UPS Memphis vs Louisville abatement while calculating in the higher Memphis/Shelby property tax rate and using 300 jobs for the Louisville. 300 jobs as opposed to 1,000 jobs is used for the Louisville analysis because the puff 1,000 jobs is not promised to materialize until 2035.

Louisville abated 35% of the estimated total projected new tax revenues to include taxes from wages and property and Memphis abated 68% with their UPS project. Had Memphis abated 35% of the new UPS project revenues, the Memphis abatement would have been $19.5M not $38M. See the $18.5M excess ?

With this $18.5M excess and no connected workforce development implementation, excessive incentives remains the local priority. 

Sizing Incentives, Taxpayer Advocacy and Process

New Councilman JB Smiley just wrote a Daily Memphian editorial where he discussed increased oversight for external agencies but Commissioner Martavius Jones tried that with his “reeling in” initiative. Jones’ initiative went nowhere. In fact, Jones has seemed to harden on EDGE reform while not allowing citizen subject matter expertise testimony in Budget committee on excessive incentives. Leadership in Memphis constantly dismisses the taxpayer which is why Memphis has fallen behind in the global economy. 

The new Council missed a major reform opportunity by approving the reappointment of 3 EDGE Board members which will result in service on an abating board of up to 16 years; 8 years longer than they can serve on the Council. As a result, just last week, the EDGE Board just approved 2 tax incentives in UPS and Blues City that can be shown to be $20M in excess. And that was only 1 EDGE meeting ! Generally, EDGE overall incentives are $250M in excess. 

And regarding external agencies, there is a bunch of them with 13 abating agencies in all of Shelby County. But starting with EDGE is a good start while working through the standard committee process without the creation of “Task Forces” that don’t work. 

Basic data driven decision making and taxpayer advocacy, evident in other communities, is missing from the Memphis discourse. Take for example the $3M riverfront Commission approved grant which did not contain a schedule of deliverables or $3M tennis center without hearing other proposals or having economic impact justification or the lack of rigorous EDGE oversight for 8 years. That’s not to mention the simple middle school math problem that is “if your major employers are tax exempt or getting 75% property tax abatements can business growth be adequately supported ?”

Anyway, EDGE is a good place to start with taxpayer advocacy and reforms. And they better put a stop on abatements as they consider reform or EDGE will ram a bunch of excessive crap through the system before reforms take hold. With a hold in place, research is available to reform and size incentives. Dr. Timothy Bartik’s work,  “Making Sense of Incentives“ ,  contains a diagram on page 23 that identifies leakages in typical economic incentive modeling.

Leakages that need accounting for in tax incentive economic modeling include:

75% of the time, incentives do not impact business location decisions

Few jobs go to residents that are not employed

Higher public support cost due to new residents

Incentives displace business for existing businesses that trade regionally

Currently local leaders have a both a measurement and data problem with incentives. The measurement problem is that the above leakages are not accounted for in current projection accounting and the data for incentives is not consolidated in one centralized database. The Shelby County Trustee for years has been calling for a consolidated database and Trustee Regina Newman has shown favor toward the TIFNI approach. 

The tax incentive fiscal note impact (TIFNI) platform proposes to provide a fiscal note for every abatement with all tax incentives consolidated in a centralized database with a taxpayer centric measurement platform for public-private initiatives. 

Conclusion

For years the community has viewed those from the FedEx/Memphis Tomorrow complex as economist. They are not. They are businessmen and their advice has resulted in an implementation of corporate socialism in the form of excessive incentives and a botched workforce development system.

If local legislators quit listening to the same people in the FedEx/Memphis Tomorrow complex, use data, start thinking for themselves while practicing rigorous oversight and view the taxpayer as the customer in publicly funded initiatives, Memphis will move forward with workforce as the #1 priority. 

These economic social justice panels are constantly running in Memphis. Such a panel is scheduled for Monday, MLK Day, entitled “Continuing the Legacy”. The panel touts a “radical economic agenda” while featuring Wendi Thomas, Drs. Elena Delavega, Charles McKinney and Earle J. Fisher. But with major employers either tax exempt or getting 75% tax abatements, by design, there is no money for a transformational economic agenda. 

Many of these panels appear to be more pageantry than activism as they run in parallel to a culture of runaway elitism in Memphis while rarely intersecting the unmeasured FedEx/Memphis Tomorrow complex. While still imperfect in other communities, a meaningful degree of taxpayer advocacy is just part of the discourse, where checks and balances are implemented, policy change advances and course correction occurs. But not in Memphis, all while social justice panels seem to run in parallel with runaway elitism. 

Meanwhile, the FedEx/Memphis Tomorrow complex is down in all categories while their initiatives use your federal, state and local tax dollars. Memphis has persistently declined as a competitive ecosystem, over almost 20 years without an external event. Folks should be pissed off about the former but they are not as decline has just become normalized. And without university thought leadership and an investigative traditional press, the public white, black, Republican, Democrat, male, female is ignorant of anything else other than systems of decline. 

The social justice civic confrontation that one would expect to regularly occur as part of the public discourse never really happens. The lack of civic confrontation results in a system without the vitality to grow while contributing to lacking checks and balances. The lead to the “Continuing the Legacy” event discusses a “radical economic agenda”.

Radical in Memphis is mere taxpayer advocacy. That is advocacy that comes with a more vibrant discourse in legislative chambers that confronts runaway elitism – while insisting on measurement of an unmeasured public/private complex –  that awards excessive corporate/real estate incentives for the small few. Such a vibrant discourse with checks and balances, evident in other communities, is just non-existent in Memphis.  

And with a plethora of social justice organizations in Memphis, such organizations are rarely seen in public chambers objecting to excessive incentive awards at an EDGE meeting, or objecting to the reappointment of EDGE Board members, or objecting to a $3M riverfront grant that contains no schedule of deliverables or objecting to a $3M UofM tennis center grant without hearing competing proposals. 

Just as a matter of standard process, even if everything were going fine which its not, abating board members should have only 4 year terms with only 1 allowed reappointment resulting in 8 years of service at the most. Currently, abating board members can serve twice as long as the Mayors or local legislators ! Anyway most of the above wreckage occurred just in the last 2 weeks with the EDGE Board reappointments approved by your new City Council. 

At the same time, these panels convene regularly calling for more programs when there is no public money to support transformational programming. The money has already been transferred to corporate/real estate interests in some $250M in excessive incentives while other growth tax revenues have been stifled with a dismissed small business sector and disconnected workforce development system.

Routinely, these panels fail to prosecute the business case against runaway elitism. It’s a simple case. Elitism is, always has been and always will be anti-business. 

The Business Case Against Runaway Elitism

The business case against elitism is that it does not work for business as shown in the above chart. If the cities in the chart were unknown and someone said that the city in the orange trendline is rigged and has stagnated with the same rotating band of players sitting on boards while the small few benefit from runaway elitism, that would be easily believable to most. That is the simple business case against runaway elitism but the social justice complex never prosecutes the case.

Recently, Charles Gascon of the St. Louis Federal Reserve was in Memphis speaking. Above is a chart using the same data set and source that Mr. Gascon used in his speech but dating back to when the FedEx/Memphis Tomorrow complex began in 2001.

It shows Memphis Gross Domestic Product (GDP) being effectively flat vs the GDP peer average that consists of 16 cities over 17 years. Tired of Nashville comparisons, also included in the chart is Louisville, a similar to Memphis border, river and transportation hub city. Cities like Nashville, Charlotte, Jacksonville, Oklahoma City reside above the black peer average trendline.

So what does this mean in dollars? It means approximately $150,000,000,000 in accumulated business GDP shortfalls in the Memphis MSA vs the peer average since FedEx/Memphis Tomorrow began. This translates into about $1,500,000,000 in accumulated local tax revenue shortfalls while now annually recurring at $200M vs the peer average since 2001. Explained with $200M more per year, is the fulfillment of local public safety, adequate transit, education, roads, trash and utility infrastructure needs with lower property tax rates for all. 

The policy stack of FedEx/Memphis Tomorrow consists of the excessive incentives that we all know about as well as a vast public-private network that leverages taxpayer dollars for community betterment. But again, decline is normal in Memphis with the public and  social justice organizations seemingly unalarmed by the fact that Memphis Tomorrow is down in ALL categories while using taxpayer money over almost 20 years. All occurring as Memphis declines and corporate/real estate incentives roar for the small few with taxpayers paying increased fees. 

I communicated with Gascon after his presentation. And he shared a presentation with me that he gave in St. Louis and not Memphis. The presentation in  slide 6 aggressively questions the economic impact of incentives. The slide validates much of the projection accounting in the proposed tax incentive fiscal note impact (TIFNI) platform and the type of projection accounting that is not presently occurring with Memphis tax incentives. Maybe Gascon will share slide 6 with new St Louis Fed Board appointee Carolyn Hardy.

More expanded references for Gascon’s summary points found in slide 6, can be found in Dr. Timothy Bartik’s work, “Making Sense of Incentives“. The work contains  a diagram on page 23 that identifies leakages in common economic incentive modeling. The diagram supports the devlopment of a more complete accounting model for incentive projection accounting.

Anyway, TIFNI proposes to provide a fiscal note for every tax incentive while erecting a measurement platform for public- private initiatives. Based on research, other communities are doing some degree of TIFNI already, based on their incentive sizing, but not Memphis with the award just this week of a $38M UPS incentive for an investment that was going to happen nowhere else except the Memphis Airport. 

Conclusion

All in all, the business case against runaway elitism is easy to make, as expressed through excessive incentives and an unaccountable public-private complex. But for whatever reason the social justice complex is not making the business case. That is the case that runaway elitism is not good for business or the community as whole.

While commonplace elsewhere, radical in Memphis, is taxpayer advocacy. Basic taxpayer advocacy is where to start. But if the panel wants to be radical, maybe they should send the FedEx/Memphis Tomorrow complex a data supported invoice for $1,500,000,000 payable immediately for deficient community results occurring as a result of runaway elitism. 

And the elitist don’t care about your race, they will in a sense, “carjack” any taxpayer regardless of their demographic.

Maybe something will change and be sustained in the public discourse following the “Continuing the Legacy” panel. We shall see…..

The Memphis/Shelby economic development plan is excessive corporate/real estate incentives. That’s it. And measurement of taxpayer funded economic development work is occurring in a bubble. According to EDGE Board Chairman, Al Bright, the EDGE Scorecard, which has consistently been shown to be unreliable and bogus, is the Memphis/Shelby measurement tool for economic development. 

On Wednesday, with barely a quorum of 5 of 9 members present, the EDGE Board approved a $38M tax abatement (5-0) for UPS and $3.6M Blues City Brewery abatement (4-0) with Al Bright recusing himself from voting. As a matter of note, neither Commissioner Lowery or Councilman Morgan were in attendance. With already existing PILOTs, under their belts in UPS and Blues City, neither of these capital investments are going anywhere else other than where they sit right now. We will dig deeper on these PILOTs later.   

And meanwhile, after 2 years, with the existing failed Brookings FOCUS plan going unmeasured, still, there is no new economic or connected workforce development plan as excessive incentives roar for the benefit of the small few. Excessive corporate/real estate incentives is the plan, while runaway elitism leaves a community behind in the global economy. 

Lower Expectations – “But For” Gone

Some local bloggers still rightly assert the “but for” criteria for tax abatements. The “but for” criteria is based on the philosophy that “but for the tax abatement the capital investment will not take place”. “But for” imposes a much more stringent requirement on awarding tax abatements.

In reality, “but for” left the building in 2012 with the $25M Valero award for a plant, that for all practical purposes, cannot leave. This recent UPS abatement is a repeat of Valero in many ways for an expansion that would not occur anywhere else other than at the Airport where it sits today. And pretty much the same goes for Blues City which already has a tax abatement with a well established facility in Southwest Memphis. 

But as expected, with an entity such as EDGE that is incented to award large tax abatements, one can predict that more stringent requirements like “but for” will be effectively nullified lowering the performance expectation to the detriment of the taxpayer. Lowering performance expectations for the public-private establishment is core to the FedEx/Memphis Tomorrow public-private complex. This lower expectation reality has been reluctantly accepted even by this blog by recognizing that “but for” is gone. 

As a result, today, $42M in future tax revenue was abated for corporate/real estate interests. With, “but for” gone what is the standard ? Well there really isn’t one. Seems all major employers are tax exempt or are getting a 75% abatement leaving no money to support growth and community evolution. But in the current environment, with “but for” gone, let’s at least try and apply some standard to see if we can get any recognition of the taxpayer. 

TIFNI – UPS and Blues City 

With “but for” gone, the tax incentive fiscal note impact (TIFNI) platform recognizes the taxpayer by sizing tax incentives based on reliable economic and fiscal impact analysis while insuring that the taxpayer benefits at least as much as the corporate/real estate interest. Applying fiscal analysis insures that growth can be publicly supported while the taxpayer return helps the community competitively evolve by addressing local service gaps in for example workforce, transit and public safety. 

In effect, while recognizing that “but for” is gone, TIFNI implements both a business and taxpayer friendly arrangement based on the philosophy “what is good for the taxpayer is good for business”. In this way business growth can be publicly supported while bettering the workforce, transit and public safety for all. 

UPS – When applying the TIFNI approach to UPS, the $38M abatement is $11M in excess and should be approximately $27M. Pretty business friendly for a UPS entity that was going to expand nowhere else. But what’s in it for UPS ? They are better insured of a quality workforce, safer streets and better transit all of which helps the UPS bottom line while retaining UPS in Memphis for the long term.

Blues City- When applying the TIFNI approach to Blues City, with 155 new projected employees, the $3.6M abatement works for Blues City. But here is the problem. After promising 500 employees following ramp up, overall, Blues City has underperformed on their already existing PILOT by approximately $1.6M in resulting local tax revenue. This analysis was done using EDGE Performance Reports and Project Details.

Given this underperformance, the EDGE Board should have not considered the new Blues City project or at a minimum reduced the abatement from $3.6M to $2M while stringently enforcing employment and wage requirements on the new project in the future. At the same time, performance requirements have not been enforced on this project while the EDGE Chairman, Al Bright, recused himself from voting. 

But even with the underperformance, TIFNI could manage to see a $2M abatement for the new Blues City project. Not bad for an underperforming project and pretty business friendly for a Blues City project that is going absolutely nowhere else. 

Conclusion

Clearly, with flat tax property tax revenues, Memphis/Shelby tax incentives are excessive leaving the taxpayer and the poor holding the bag. TIFNI provides a business and taxpayer friendly approach to tax incentives while effectively measuring public-private partnerships for the customer taxpayer. 

Additionally, given the findings of this analysis, governmental entities should directly fund, manage and oversee performance auditing away from the EDGE fox guarding the chicken house approach while implementing the business and taxpayer friendly TIFNI platform.

And appointing different people to local boards would likely help evolve local thinking. Mayor Strickland just reappointed Al Bight, Johnny Moore and Mark Halperin to the EDGE Board where they may serve as long as 16 years !  More of the same. So Sad. Also, Carolyn Hardy was just appointed to, yet another board,  in the St. Louis Fed Board. B-O-R-I-N-G !!!

Anyway, the idea of real measurement in Memphis is highly revolutionary. All of the above gets measurement out of a bubble while recogning the taxpayer as the customer in publicly funded community and economic development work. So, what can it hurt ? Why not give real measurement and the potential for subsequent economic growth a try……

C’mon Man ! Don’t give a Memphis Tomorrow initiative $3M upfront ! Memphis Tomorrow is down in every category over 20 years while their initiatives use your federal, state and local tax dollars. Recently, Memphis Tomorrow botched the workforce development system over five years. This particular initiative involves the Memphis Riverfront Parks Partnership (MRPP)

This is not an objection of MRPP or even against public funding for riverfront improvements. It is about scrutiny when both Memphis Tomorrow and Pitt Hyde are creeping around. And sadly, the product the Shelby County Commission passed on Monday related to MRPP is legislative slop.

Its legislative slop because there is not even an attempt in the grant contract to define a framework of scheduled deliverables for $3M in taxpayer money ! There are quarterly reporting requirements mentioned but MRPP is getting all of the money upfront and due to lack of defined deliverables there is no performance standard to report against. MRPP is effectively free to report whatever regarding an unmeasurable $3M taxpayer funded appropriation.  

In section 1.6 of the passed grant contract, where there seems to be some attempt to define deliverables, verbiage from the University of Memphis Natatorium project is mistakenly used while referring the reader to “Exhibit A”. The mistaken verbiage in 1.6 is no big deal and can be cleaned up but when the reader gets to Exhibit A, there is nothing. It only states in Exhibit A,  “Memphis River Shoreline in Tom Lee Park – $3,300,000”.  Huh ???

For a $3M public-private partnership award, taxpayers are at least entitled to have a projected schedule of deliverables with completion dates and estimated cost with estimated public and private contributions noted. Thankfully, Commissioner Edmund Ford, I believe, moved a while back to break up the original ask of $10M into 3 annual contributions. This will at least allow for some degree of annual progress monitoring.

At any rate, the TIFNI philosophy to public private measurement would require a measurable set of deliverables. But the philosophy under Memphis Tomorrow is seemingly no measurement when it comes to taxpayer funds. Oh well, maybe next time.

But there is some good news, at least Commissioners in Braford, Mills, Wright and Sawyer voted against the grant contract in its current form. Again, this is not about being against public funding for Riverfront improvements but more about legislative slop that contributes to an unmeasured Memphis Tomorrow public-private complex. C’mon Man ! Sloppy, Sloppy, Sloppy…..

Public measurement of the public-private complex is the only solution for Memphis. Runaway elitism has taken its toll on Memphis and Shelby County. The former occurs, as small business and the taxpayer shoulder the burden of elitist corporate/real estate interests through increased fees and a competitively declining ecosystem. 

Meanwhile, its Ground Hog Day in Memphis with Mayor Strickland announcing yet another workforce development initiative. The announcement of the “Public Service Corps” to also support a cleaner Memphis comes on the heels of the failed workforce initiatives in GMACW and ACT WorkKeys.

Additionally, the cleaner Memphis need comes with the existence of other similar initiatives in Clean Memphis and City Beautiful. All of these failures could have been avoided with reliable public measurement and oversight to support implementation of taxpayer funded initiatives. This absence of measurement brings me to my meeting with Richard Smith some time ago. 

Meeting With Richard Smith

About 2 years ago, I sent out broadcast email alerting a local audience that the Memphis Tomorrow CEO organization was down in all categories over 20 years as their initiatives use your federal, state and local tax dollars with an openness to meet with anyone interested in learning more. Surprisingly, Richard Smith responded and agreed to meet. 

Richard and I met for about 90 minutes on Friday March 2, 2018. This meeting followed the March 1,  joint City Council/County Commission meeting where local legislators voiced their displeasure with the Economic Development Growth Engine (EDGE). In the meeting, now City Council Chair, Patrice Robinson said, “We need to just stop incenting those low wage warehousing jobs”. As a note, since that event, Robinson never has moved any legislation to address her concern. But the publicly administered TIFNI measurement solution would provide Robinson with a basis to curb excessive incentives for low wage jobs as they are losers for the taxpayer. 

As far as the 90 minute meeting with Richard, it was a professional exchange of ideas with productive agreement and disagreement here and there. But where there was strong agreement was on Smith’s exclaimed point in “There is no measurement generally or [specifically] push back on EDGE incentives !”. Richard was right, at the time, the Brookings FOCUS economic development plan, led in part, by former FedEx Chief Counsel Christine Richards, was unmeasured and failing while EDGE used bogus projection accounting to justify excessive incentives. 

The disconnected workforce development system was also discussed where I shared with Richard an employer, data-driven approach to workforce development. In that exchange, I discussed ACT WorkKeys as a career readiness assessment and the fact that “Customer and Personal Service” was the #1 area of in demand knowledge across all occupations while recommending its thematic inclusion in the academic curriculum. To which, Smith replied as he enthusiastically took notes, “That’s a great idea !”. 

When Richard and I met, Richard was new to the scene and I had been observing oddities in the Memphis public-private complex for almost 2 years.  After having worked throughout the country, I knew there were massive deficiencies in the Memphis Tomorrow leadership complex and with implementation generally. At the time, I attributed those problems to the hack elitist Pitt Hyde and thought at the time of the meeting that Fred Smith and FedEx were mere bystanders. 

Little did Richard and I know at the time, that both Fred Smith and Pitt Hyde were resolute in stifling my small business which addressed connecting the workforce development system. But from the top of the ecosystem, that is the culture in Memphis, with historically lagging small business vitality that dismisses the taxpayer and the local small business community. 

The Monday after our meeting, Richard started his “disruptive” campaign chronicled in part in a recent Memphis Business Journal article. Richard’s disruption, which involved confronting the Memphis Tomorrow crowd, of which FedEx is actually heavily involved, would soon soften to that of a  whimper with only the creation of yet another entity entitled the “Shelby County Regional Economic Development Agency”. There were no changes to EDGE or measurement implementation as disconnected workforce development and excessive corporate/real estate incentives continued for the benefit of the small few in a Memphis community in need.  

What Memphians need to know, is that throughout the country, communities announce a grant and then start implementing 6 months down the road with supporting measurement, oversight and course correction when needed. Course correction, strangely, does not happen in Memphis. Instead, maybe some joke report appears a year down the road with implementation, probably never happening. There is effectively no measurement or oversight. This is why the FedEx/Memphis Tomorrow complex is down in all categories over almost 20 years with still a disconnected workforce development system after 5 years. 

The elitist FedEx/Memphis Tomorrow complex has no idea who the customer is in taxpayer funded initiatives. But there are available LOSB  solutions to confront runaway elitism and the decline of the Memphis ecosystem. 

TIFNI Measurement and Trustee Report

The tax incentive fiscal note impact (TIFNI) measurement platform is a taxpayer centric solution that confronts runaway elitism and Memphis ecosystem decline. TIFNI also provides a measurement platform for the public-private complex while recognizing the taxpayer as the customer in publicly funded initiatives. It delivers on Richard Smith’s voiced concern while rebuking runaway elitism with measurement and a fiscal note for each abatement that everyone can understand. 

Currently, and thanks to the Trustee’s office, the only reliable tool that is available for tax incentives is the Shelby County Trustee Report. The report, while helpful, in isolation, is inadequate to measure return on taxpayer investment of tax incentives. This is why the Trustee has repeatedly called for an integrated database in the annual Trustee report and why Trustee Regina Newman has shown favor toward TIFNI. 

For example, in digesting the multiple section report, I concluded that there were underpayments on PILOTs. While I await clarification from the Trustees office, this does not appear to be the case. What one must do to see the full PILOT payment is to add the owner section to the debt service section. Additionally, there is no direct relationship between many of the PILOT parcels and PILOT projects which causes further confusion. The PILOT owner is often a landlord and not the PILOT project owner. 

At the same time, while offering 75% abatement or more to everyone and with 431 PILOT parcels in existence compared to the other municipalities in the State at 50 or less, one can safely conclude that corporate/real estate PILOTs are excessive in Memphis. 

Given this, TIFNI provides a consolidated database for tax incentives with return on investment analysis to right size PILOT awards. With TIFNI:

Taxpayers will know the return on investment (ROI) of economic development investments 

Policymakers will understand economic development modeling to project future tax revenue

Policymakers will understand and apply the assumptions used in economic development modeling to project future tax revenue

Taxpayers will better understand the effectiveness of public-private initiatives with access to a measurement platform

Without TIFNI local leaders cannot practice oversight and the taxpayer is in the dark. 

Conclusion

Through LOSB innovation, TIFNI delivers needed customer taxpayer centric measurement to the public-private complex to support the evolution of the Memphis ecosystem. And it also delivers on Richard Smith’s concern of needed measurement.

Without TIFNI, runaway elitism continues with local small business and the taxpayer shouldering the burdnen in a Memphis community in need.