Without taxpayer justice, forget about social justice, fiscal conservatism, workforce as a priority or moving Memphis forward. All of the former is a scam without taxpayer justice occurring in a city where mere taxpayer advocacy is politically incorrect.
Inspired by flat property tax revenues, Ted Evanoff’s article on Tom Intrator, and the local rise of 30 yr abatement terms for urban renewal, this blog benchmarks $11.5M in annual Memphis/Shelby taxpayer shortfalls from Downtown Memphis Commission / Center City Revenue Finance Corporation abatements. The benchmarking is versus Kansas City MO’s similar 353 and Land Clearance Redevelopment Authority (LCRA) programs. The programs are offered by the Kansas City Economic Development Corporation (KCEDC).
The Downtown Memphis Commission (DMC) is administered by Jennifer Oswalt and Bobbi Gillis chairs the abating board within the DMC entitled Center City Revenue Finance Corporation (CCRFC). Thus far, this blog has focused its attention on excessive job incentives administered by the Economic Development Growth Engine (EDGE). This is primarily due to the fact that under Oswalt and Gillis, DMC abatement data is much harder to access, effectively making the data much less transparent than EDGE.
At the same time, urban renewal real estate investment incentives require a different evaluation methodology than EDGE’s job incentives. To that extent, for this evaluation, Kansas City, MO was chosen for a benchmarking analysis based on its many similarities to Memphis. Kansas City is a border, river and barbeque town that like Memphis and unlike Nashville is not a boomtown. For the benchmarking analysis, two KCEDC urban renewal programs were reviewed for benchmarking.
The KCEDC 353 program appears to be a Kansas City municipal government only abatement program while the LCRA program can abate taxes for multiple taxing authorities within Kansas City MO’s Jackson County. Based on a cursory review of past KCEDC agendas, the LCRA seems to be the most popular program used in Kansas City for urban renewal which is possibly due to its broader abating authority.
To that extent, here are each of the program benefits:
353 Program – Up to 75% abatement for 10 years and 37.5% for an additional 15 years for new capital investment (25 yrs)
LCRA – Up to 100% abatement on new capital investment for 10 years
Given LCRA popularity, KCEDC’s LCRA program is used for this benchmarking analysis with the maximum allowed abatement imposed on DMC approved PILOTs as found in the 2018 Shelby County Trustee Report. The 99 year Riverbluff Cooperative was removed from this survey as it appears the PILOT was designed to reflect a residential property assessment.
The analysis took all DMC abatement properties, applied the current day Memphis/Shelby tax rates for the life of the PILOT to derive an overall difference for the entire abatement term of DMC managed projects vs KCEDC LCRA program. The overall difference is a Memphis/Shelby $299M accumulated taxpayer shortfall due to excessive DMC abatements that date back to 1981 well before the time of Oswalt and Gillis.
Historic tax rates were not applied, which perhaps provides a discount mechanism of sorts, to convert amounts into current day accumulated tax revenue shortfall amounts. But don’t get wrapped up in exact historical amounts, as the evaluation is about a comparison of program terms while the historic abatement numbers bring life to the evaluation.
The overall evaluation is then translated into percentage, which shows abatements for DMC managed urban renewal is 56% in excess and resulting in $11.5M in annual Memphis/Shelby taxpayer shortfalls.
The primary excess driver costing Memphis/Shelby taxpayers is the lengthy abatement term of the DMC program. An example would be Auto Zone with a 40 yr PILOT that dates back well before Oswalt and Gillis showed up which current day taxpayers are still carrying around on their back and will be until 2033. This occurs as Auto Zone gets a new 15 yr 75% EDGE PILOT. On the other hand, while PILOT terms under the management of DMC have fallen over recent years, terms have never come close to averaging 10 yrs or less as is the case with the KCEDC program.
And, as of late, under Oswalt and Gillis, those PILOT terms have begun to climb again while abating 75% or more in taxes. Examples include Intrator’s 30 yr 75% PILOT, Loew’s 30 year and FedEx 22 yr 100% PILOT on new capital investment.
It just seems there is never any negotiation with these PILOTs while being excessive in an already nationally low business cost environment. It would seem the longer term PILOTs should have been something more like KCEDC 353 program of 75% for the first 10 years and 37.5% for additional years and up to 15 years (25 yr PILOT), with of course a 100% 10 yr abatement program as the other program option.
But, in a rigged system without oversight, the elitists under a fiscally liberal mantra, have carjacked the taxpayer while programming in flat tax revenues with high property tax rates for years to come on the back of a Memphis community in need. So unfortunate….
Without taxpayer justice, social justice, fiscal conservatism, workforce development as a priority or moving Memphis forward will only serve as a pageantry scam.
In this blog, $11M in annual Memphis/Shelby taxpayer shortfalls have been identified from DMC managed projects and $300M for the life of their projects. From this and previous blogs, add $11M for DMC, $25M for EDGE and $54M for deficient total wage growth since 2010 and one arrives at $90M in deficient annual Memphis/Shelby taxpayer shortfalls. And that does not include excessive TIFs or municipal PILOTs.
And this question should summarize the overall problem. Per the Shelby County Trustee PILOT report and excluding the Riverbluff Cooperative, there has been $824M in development since 1981 under the DMC program with the County now getting annual tax revenue credit for $123M in new capital investment. If there were no DMC PILOTs, wouldn’t there have been much more than $123M in development since 1981 in the Downtown Memphis area?
And the $824M in abated but realized new Downtown capital investment under DMC management makes me wonder where the $15-19B in new capital investment figure even comes from…..