Shelby County Commission:

Thank you for deferring the “more of the same” Economic Advisory Board resolution today. Funding this effort is needed, perhaps even at a higher amount. But fundamental definition, which is lacking in the resolution, is needed to help direct the work of the advisory board from a public perspective.

Please know that YOU are the chief architects of local economic development work and not the economic development complex. And, don’t get distracted by terms like “research based”, because the best research is already available in “what does not work” in local economic development.

In order to earn your support for these amendments, I have removed a number of rhetorical devices while focusing on fundamental definition and needed course correction based on local results for the Memphis Business Attraction and Retention/Expansion Joint Venture Agreement ..

Resolution Amendments

WHEREAS, The vision of Shelby County Government for economic development is to provide nation leading connected workforce development programming and to achieve above peer average total wage growth; and

WHEREAS, The Amazon Road Map policy pronouncement of the University of Memphis shall be adopted as a framework to guide economic development efforts in Shelby County; and

WHEREAS, “Economic Development” is defined as “a process to improve the social well being of people” and will be measured by Shelby County Government using total wage data as provided by the Bureau of Labor Statistics (BLS) Quarterly Census of Employment Wages (QCEW) versus Shelby County peers as identified by The University of Memphis and The Memphis Economy; and

WHEREAS, a career ready workforce is vital to economic development efforts, a “career ready” individual will be based on the completion of a high school equivalency and/or post-secondary credential, a Silver level ACT National Career Readiness Certificate (NCRC) and the completion of a  career plan; and

WHEREAS, more voices from the Memphis general public, that are informed on incentives, outside of the corporate/real estate/political establishment are needed on the Economic Development Advisory Board to present dissenting argument for the benefit of small business and the overall public good as the named members have historically represented corporate/real estate interests and rarely if ever opposed a specific tax incentive on the record; and

WHEREAS, a representative for Shelby County municipalities outside of Memphis is needed on the Economic Development Advisory Board; and

WHEREAS, “small business” and “workforce development”, typically the primary drivers of economic growth, should be emphasized in the Memphis Business Attraction and Retention/Expansion Joint Venture Agreement and are not, which  further underscores the lack of emphasis on small business and workforce development as corporate/real estate incentives have been historically overemphasized by the Memphis economic development complex in the work of economic development; and

WHEREAS, it must be understood that the majority of the Memphis/Shelby deficiency in total wage growth can be attributed to a struggling small business sector and disconnected workforce development efforts and that appropriate informed representation is needed on the Advisory Board to represent small business and workforce development; and

WHEREAS, effective measurement is critical to economic development efforts, a rescoring of the EDGE Scorecard should be undertaken to apply complete accounting methodologies for retention PILOTs and potentially other matters which may include a rescoring for warehouse expansion PILOTs based on research of the Economic Institute; and

WHEREAS, a Shelby County Commission review of all 9 abating boards will commence in April 2019 and the findings of the Commission will be put on record with the Economic Development Advisory Board; and

WHEREAS, a new EDGE Board is immediately needed that reflects more professional balance from across the economic development spectrum to include education, workforce, small business and transit; and

WHEREAS, Shelby County already has a research base that should supersede any external research base in knowing what does not work which would end retention PILOTS, residential PILOTs and unneeded TIFs in affluent unblighted areas with responsible PILOTs for industry recruitment and large local expansions continuing.

Conclusion

These amendments will provide the Memphis/Shelby Economic Development Advisory Board with better and more specific direction from Shelby County government.

Greater public sector leadership is needed in defining economic and workforce development for the public good  within the context of public-private partnerships and the funding for the Memphis Business Attraction and Retention/Expansion Joint Venture Agreement .

Strong corporate executive leadership and vision have often been touted as a defining differentiator in such economic development work but has fallen flat in Memphis/Shelby County. Fallen flat with botched economic development efforts over the past 8 years that have stifled the primary drivers of any local economy in small business and workforce development as corporate/real estate and nonprofit interests are prioritized for the benefit of the small few.

It’s a fact that economic development agencies, over the past 8 years, in the  Greater Memphis Chamber (GMC) and Economic Development Growth Engine (EDGE), have yet to articulate a joint definition for “economic development” or “career readiness” to support economic / workforce development. This goes back to the question raised by Ron Belz in EDGE Ad Hoc where he asked “What is the definition of your goal and how are you going to measure it?”. With this question still unanswered, direction by the public sector is needed.

Unfortunately, public officials have yet to take up an on the record discussion in defining the former. The discussion surrounding or answers to the questions of “Why has Memphis fallen so far behind in the very global economy it cradles?”, “What is economic development?” and “What is career ready?” seem thus far to be a mystery in Memphis/Shelby County. Not taking up the former questions on the record, leads the community down the path of listening to the same incompetent voices and more of the same.

To that extent, the current resolution of $150,000 in support of EDGE lacks definition, guidance and lessons learned rationale to serve the public good.

Recent Headlines

Given recent headlines, greater definition and defined measurement is needed in a public-private landscape that is rich with “clerical errors” based on under assessed property and MWBE with the City of Memphis data, HUD, non-disclosures of elected officials, broken rules by abating boards, and bogus incomplete accounting as featured by the EDGE Scorecard regarding retention PILOTs.  Headlines signal a public-private landscape void of values and ill equipped to serve any community and more specifically a Memphis community in need.

Further, the closed Memphis system and fake economic development “disruption” is evident in the membership of the Economic Development Advisory Board with no change in the players and none of the members ever having gone on record against a specific public incentive with the exception of, on rare occasion, Councilman Martavius Jones.

And with regard to the recent Chamber reports and headlines regarding the Memphis Metropolitan Statistical Area (MSA) that includes parts of Arkansas and Mississippi regarding employment gains, the latest report of the Bureau and Labor and Statistics (BLS) Quarterly Census of Employment Wages (QCEW) tells another below average trend line story.

The BLS QCEW data ending in Q3 2018, that includes both employment and wages paid which results in tax revenue, reveals the following accumulated wage and tax revenue shortfalls versus Shelby County’s peer average and national data growth rates:

See spreadsheet here and tab “031819”

The above accumulated tax revenue shortfalls reveals the source of  a declining Memphis/Shelby ecosystem over time due to deficient total wage growth and subsequent tax revenue funded community investments under a closed FedEx/Memphis Tomorrow/GMC decline by design economic development system. These tax revenue shortfalls are further irritated by an additional estimated $200M in total tax losses that come from an excessive EDGE retention PILOT program that transfers challenged community wealth to corporate/real estate interests justified using bogus incomplete accounting.

Most of the deficient total wage growth can be attributed to a culturally closed social construct that prioritizes corporate/real estate and nonprofit interests for the benefit of the small few while closing out the primary economic driver of  small business and minimizing education and workforce development. To that extent, the following recommended amendments are suggested for the resolution to better support more robust, balanced economic and workforce development efforts with supporting lessons learned rationale:

Resolution Amendments

WHEREAS,  “Economic Development” is defined as “a process to improve the social well being of people” and will be measured by Shelby County Government using total wage data as provided by the Bureau of Labor Statistics (BLS) Quarterly Census of Employment Wages (QCEW) versus Shelby County peers as identified by The University of Memphis and The Memphis Economy; and

WHEREAS, a career ready workforce is vital to economic development efforts, a “career ready” individual will be based on the completion of a high school equivalency and/or post-secondary credential, a Silver level ACT National Career Readiness Certificate (NCRC) and the completion of a  career plan; and

WHEREAS, more voices from the public, that are informed on incentives,  outside of the corporate/real estate/political establishment are needed on the Economic Development Advisory Board to present dissenting argument for the benefit of small business and the overall public good as the named members have historically represented corporate/real estate interests and rarely if ever opposed a specific tax incentive on the record while the GMC has no small business growth goals and hasn’t for years; and

WHEREAS, the Advisory Board membership is a product of “more of the same” and fake economic development disruption and requires new voices to provide the community the vitality to grow which is the very vitality needed that the FedEx/Memphis Tomorrow/GMC complex routinely stifles; and

WHEREAS, “small business” is not mentioned in the Memphis Business Attraction and Retention/Expansion Joint Venture Agreement, which further underscores the lack of emphasis on small business as corporate/real estate and nonprofits are emphasized by the FedEx/Memphis Tomorrow / GMC complex; and

WHEREAS, it must be understood that the majority of the Memphis/Shelby deficiency in total wage growth can be attributed to a dismissed small business sector and botched workforce development efforts and that appropriate informed representation is needed on the Advisory Board to represent small business and workforce development; and

WHEREAS,  the FedEx/Memphis Tomorrow/Greater Memphis Chamber has botched workforce development in Shelby County over a period of 4 years by stifling small business proposals made by PathTrek, a local sole proprietorship, in favor of a foreign contract award and remote vendors; and

WHEREAS, to help both small business and workforce development efforts, the Shelby County Commission will direct private concerns to engage PathTrek, which is only one of  thousands locally shut out small businesses by the closed Memphis business culture, to facilitate connected workforce development efforts based on the PathTrek proposal submitted to Commissioner Willie Brooks per his request; and

WHEREAS, effective measurement is critical to economic development efforts, a rescoring of the EDGE Scorecard should be undertaken to apply complete accounting methodologies for retention PILOTs and potentially other matters which may include a rescoring for warehouse expansion PILOTs based on research of the Economic Institute; and

WHEREAS, a Shelby County Commission review of all 9 abating boards will commence in April 2019 and the findings of the Commission will be put on record with the Economic Development Advisory Board; and

WHEREAS, as a new EDGE Board is immediately needed that reflects more professional balance from across the economic development spectrum to include education, workforce, small business and transit; and

WHEREAS, The Amazon Road Map policy pronouncement of the University of Memphis shall be adopted as a framework to guide economic development efforts while knowing that “strong corporate executive leadership” in matters of economic development policy development is entirely overrated in Memphis and Shelby County; and

WHEREAS, Shelby County already has a research base that should supersede any external research base in knowing what does not work which would end retention PILOTS, residential PILOTs and unneeded TIFs in affluent unblighted areas with responsible PILOTs for industry recruitment and large expansions continuing.

Conclusion

These amendments will provide the Memphis Economic Development Advisory Board with better and more specific direction from Shelby County government.

Memphis economic growth and vitality have been botched from the top of the Memphis ecosystem. And the cultural problem cannot be solved if it is not articulated. Shelby County Commission testimony has consistently revealed that the primary drivers of ANY local economy in small business and workforce development have been minimized in Memphis by the FedEx/Memphis Tomorrow/Chamber complex which includes EDGE in favor of corporate/real estate and nonprofit interests.

In Commission economic vitality workgroup testimony,  it was revealed that The Greater Memphis Chamber has no goals for small business growth and with 32 employees, no one in the building at the Chamber even temporarily tasked with overseeing small business.

Meanwhile, corporate/real estate and pet nonprofit interests are represented at the staff level by the Chamber Chairman’s Circle  VP and former FedEx employee, Phillip Spinosa. This has resulted in $20M government pension fund ask for a pet nonprofit to support small business development as the Chamber has no small business growth goals or assigned staff support for small business. And further increased emphasis has been placed on corporate/real estate incentives as “the only economic development tool” to make up for gaps that result from botched workforce development efforts over 4 years by the complex.

“Incentives” as the only economic development tool have been forced upon taxpayers by the choice of the FedEx/Memphis Tomorrow/Chamber complex as small business and workforce have been dismissed. Disconnected workforce development has persisted over a 4 year span on the back of foreign contract award that did not deliver while local small business solutions to fix the problem are shut out as a result of the culturally closed Memphis economic system.

Does The Chamber Want Memphis To Grow?

In a Commercial Appeal article last April, David Waddell of the Chamber Chairman’s Circle  rhetorically asks “Does Memphis Want to Grow?” Some people want Memphis to grow. MRYE – Memphis Raise Your Expectations is on the legislative record  proposing pro-business and research based economic development solutions early last Summer.

But, after 4 years in some cases, and this is cultural and not because of any unfortunate events last year, from the Greater Memphis Chamber, these are the results:

No public transit policy position

No workforce development goals

No Coherent economic development plan

No small business growth goals and with 32 employees, no Chamber small business ownership staffing per Commission testimony

And, small business growth culturally obstructed by informal networks that exist, per the Disparity Report, while enabling excessive incentive policy

Everyone is supposed to be positive about the above in the backwards FedEx/Memphis Tomorrow/Chamber Crump like culture of the 1940s. With the promise of strong corporate executive leadership in community affairs and through a system of low performance expectations for the small few, Memphis has systematically declined as an ecosystem, since the founding of Memphis Tomorrow almost 20 years ago.

This occurs as the same few in the FedEx/Memphis Tomorrow/Chamber complex benefit with tax incentives as seemingly everything else with regard to true economic development is pushed aside. The cost to the community of this rigged backwards culture, that appears to tap down advocacy for change, through corporate “philanthropic dogbones”, is in the billions of dollars.

A better question to ask at this point is “Does the Greater Memphis Chamber want Memphis to grow?” And besides what does “economic opportunity for all” as touted by the Chamber really mean? Nobody knows, while everyone has economic opportunity even if  the economics of that opportunity are poverty or a shut out small business.

But what is known, is that the same closed group of Memphis elites, starve out small business, stifle innovation and rip off proposed solutions, to hand them to foreign providers, remote providers and the same local closed group of pet nonprofits to take credit for and announce in a sea of pageantry. As a result, true local small business innovation is obstructed and Memphis falls further behind and fails to competitively grow in a global economy.

And again, it’s a closed system, with the Chamber promoting  the same people to gather bimonthly to chart economic development. After all the big talk, there has been no disruption; its just more of the same….

Conclusion

The only pathway forward is for Memphis Royalty to engage those very people that they have shut out for years with increased small business transactions, better education/workforce development, massive philanthropy and away from excessive tax incentives that undermine true economic development.

Getting there will require political leadership, most likely that of the Shelby County Mayor Lee Harris Administration to chart the economic development course that would include, for example, a new EDGE Board and more balanced economic development policy. With this in mind, Harris is the only political leader that has yet to question the status quo of the economic development complex which is what is needed to move Memphis forward and out of the closed thinking of the 1940s…….

This blog was encouraged by Mayor Strickland’s weekly letter, Memphis Business Journal editorial and Behind the Headlines on Friday March 1, 2019. These entities did address some facts related to payment-in-lieu of taxes (PILOTs) and tax incentive awards, but they did not address ALL the facts to inform a balanced conversation about tax incentives.

Incentive discussions occur with the backdrop of the Electrolux loss, which on balance, can be chalked up as a a single event occurrence and bad front end deal. The much more important discussion should involve incentive reform that confronts, arguably, an out of control incentive system consisting of 9 abating boards which in many cases don’t represent the taxpayer in the work of economic development. Its often said that incentives are Memphis/Shelby’s only economic tool and incentives create jobs. Incentives are not the community’s only economic development tool and incentives alone do not create jobs.

Unfortunately, complete facts pertaining to incentives awards are not discussed on the record by local legislators because they only invite presenters from the pro tax abatement establishment (EDGE, DMC, Chamber and etc) to present in legislative hearings, leaving taxpayers without a recognized voice. These facts in this blog have been entered into the public record in legislative hearings through public comment but are dismissed by legislators without any legislative inquiry. Therefore, a robust and complete on the record discussion and debate on tax incentives never takes place, as legislators, as a matter of process, fail to engage all the facts pertaining to incentives while not engaging the content of public comment with legislative inquiry.

The local press further covers these tax abating organizations while not addressing all the facts related to incentives. All the facts are important in making economic development policy decisions. As this blog has continually stated, there is not a groundswell movement for ending ALL incentives. 

At the same time, the following facts support balanced and pro-business tax incentive reform that discontinues retention and residential PILOTs and Tax Increment Financing (TIFs) for non blighted areas. And continues expansion PILOTs for new industry recruitment and large local expansions while continuing TIFs in truly blighted areas. Please see below:

FACTS

FACT: Regardless what anyone may tell you, payment-in-lieu of taxes (PILOTs) have the same value as cash payments

FACT: There are good PILOTs that result in net community investments, like JNJ, Indigo Ag, Agilent Technologies and Mimeo

FACT: There are bad excessive PILOTs that result in net community disinvestment while eroding the societal foundation on which commerce thrives resulting in lost economic development opportunity which is bad for the business community. Examples include:  Valero, Nike and Mark Anthony

FACT: Different and individual projection accounting methodologies are required each for new job expansion and existing job retention PILOTs. An expansion job PILOT abates taxes against projected tax revenue from new jobs. A retention PILOT abates taxes against existing jobs based on potential company operations departure.

FACT: EDGE uses the same accounting methodology for expansion and retention PILOTs which is problematic.

FACT: The accounting methodology used by EDGE for retention PILOTs is incomplete.

FACT: Based on reviews of two entities in Beacon Center of Tennessee and MCCL Measured, using their respective complete accounting methodologies, it is estimated that EDGE revenue overstatements range from $759M to $917M for retention PILOTs.

FACT: When EDGE overstatements are adopted using the complete accounting methodologies above, estimated taxpayer losses range from $95M to $253M and not a $664M gain as claimed by EDGE for retention PILOTs

FACT: Small business vitality in Memphis plummeted after the introduction of retention PILOTs that serve primarily corporate/real estate interests. Plummeting small business vitality can be shown to result in 14K fewer jobs, $700K in total wage shortfalls and $20M in Memphis/Shelby tax revenue shortfalls since retention PILOTs began.

FACT: Baseless and ungrounded assumptions are used in tax abatement applications such as the 7,000 job creation claim found in the Poplar Corridor TIF (page 3)

FACT: Tax abatement boards don’t follow their own rules in awarding tax incentives. Examples include EDGE – Electrolux, EDGE – Mark Anthony and Downtown Memphis Commission (DMC) – FedEx

FACT: Shelby County is the only county in the State of Tennessee that awards residential PILOTs

FACT: In the implementation of the Broad and Thrive residential PILOTs, developers were afforded $19M more in abatements than they would have received in any other county in Tennessee and developers walked away with nearly twice as much as the Memphis/Shelby net taxpayer benefit

FACT: Incentive awards for the same project are now being awarded by multiple abating boards in EDGE and DMC. This will likely make incentive award evaluation more complicated for the general public

FACT: The Economic Institute published a study that in effect concluded that only direct revenue from lower wage warehousing projects should be considered for tax revenue projections and multipliers should not be used in projecting tax revenue. Multipliers increase projected tax revenue that results from PILOTs for economic activity beyond direct employment of the project. If only direct employment were considered for the Amazon PILOT projected revenue would drop from $37M to $19M

FACT: The Shelby County Commission has yet to schedule a review of all abating boards as stated in their resolution past in December 2018. See resolution (pdf page 5).

If you need references for any of the above facts, please email jkent@pathtrek.net

POLICY SOLUTIONS

New professionally balanced EDGE Board that represents all facets of the economic development equation

End retention PILOTs and abating taxes against the existing tax base. Retention PILOTs create a moral hazard while making true economic development efforts lazy.

End residential PILOTs as Shelby County is the only County that allows them in the State of Tennessee

End unneeded TIFs like the Poplar Corridor TIF in affluent unblighted areas. Use TIFs for only truly blight areas which does not include blight as defined by census tracts.

End the use of economic multipliers in projecting revenue for warehousing jobs

Continue responsible incentives for new industry recruitment and large local expansions. (The Mark Anthony expansion PILOT is an example of a stupid PILOT award that was nothing more than a real estate deal presented as “economic development” that lost taxpayers $500K as EDGE pocketed $50K in fees)

Legislative training for incentive evaluation

Shelby County Commission should schedule the evaluation of all 9 abating boards

A benefit / cost ratio in excess of 1.0 should be established to more accurately recognize the value of needed and competing public investments to inform PILOT awards

Recognized and scheduled presented taxpayer advocacy in legislative hearings regarding incentives as opposed to just 1 presented side and that of the Chamber/EDGE/DMC economic development complex

Fee reform to insure the taxpayer is being represented in economic development transactions as opposed to representing corporate/real estate interests

Pigs have no rules and Memphis taxpayers pay for it. The reckless unruly nature of the Memphis Tomorrow corporate community leadership complex would threaten any ecosystem. So hats off to the resiliency of the Memphis people and Shelby County taxpayers.

Adding to the Electrolux headlines, a deeper dive into the Electrolux contract (pdf page 55), it can be determined, that EDGE did not follow procedural guidelines when it was discovered that Electrolux had made a $321M capital investment over and above the PILOT approved $195M investment.

The Electrolux contract allows for a reasonable 10% in excess capital investment of the originally approved PILOT to remain in compliance which would amount to $19.5M investment over the $195M PILOT approved abatement or a $214.5M capital investment. The EDGE reported $321M capital investment exceeds the allowable threshold by $106.5M and should have triggered increased assessments that would have resulted in increased tax revenue with additional abated or paid in full taxes on the increased capital investment.

But who cares about tax revenue ? Certainly not the Memphis Corporate Community Leadership complex ! To include the newly billed increased assessments, its estimated from 2014- 2018 there remains $1.8M in lost abated tax revenue based on EDGE not following rules and if that was unabated and not allowed to fall within the PILOT, the revenue loss is more like $7M.

While considering the allowable threshold for 10% and $19.5M increased investment , it appears total real and personal  property taxes for Electrolux for their remaining 2019 and 2020 operational years should be approximately $3.3M per year which includes the maximum allowance for personal property depreciation.

Pigs Gone Wild

But, this blog has stated on numerous occasions that Electrolux is small potatoes overall when considering the damage of an overall reckless Memphis corporate community leadership complex. While Electroux will end up costing taxpayers around $30M+ when considering tax revenue from jobs and property taxes, it can be chalked up as a single occurrence bad front end deal that went bad.

This makes Electrolux small potatoes when compared to the systemic recklessness of an excessive socialistic corporate/real estate welfare culture imposed on Memphis/Shelby taxpayers promoted using the label of “economic development”. Here as some examples:

$8.6 Million in excess abatements when the Downtown Memphis Commission did not follow their guidelines for the FedEx incentive package. The FedEx deal works for taxpayers but it contains 6 years of excess incentives. 

$1.2M excessive Mark Anthony PILOT award when the EDGE Board neglected to follow the rules of their “Tax Incentive Eligibility Analysis” while losing taxpayers $500K and pocketing $50K in fees. This demonstrates that EDGE Board does not represent taxpayer interests. 

$100-200M over ten years in direct taxpayer losses from systemically ignoring any basic business rules for projection accounting in the EDGE retention PILOT program as reported on by this blog and the Beacon Center of Tennessee. This is the Shoney big boy locally unreported story by the non-reporting Memphis press. 

$15M per year for persistent botched workforce development efforts over 4 years rooted in failed grant performance and not following rules of basic course correction away from a Canadian contract award. This is  brought to taxpayers by the FedEx/Memphis Tomorrow complex while stifling local small business, a local cultural norm. 

$47M in taxpayer revenue shortfalls from deficient wage growth while not following the rules of economic development planning and execution while prioritizing corporate/real estate incentives that recorded local wealth transfers as growth.

Anyway, the above total is about $75-80M per year with the $8.6M FedEx excess to arrive 16 years down the road. All total, the excesses approach $750M over the next 10 years which imposes a decline by design framework on the Memphis ecosystem with the $8.6M kicker by FedEx to start accruing for 6 years in 16 years. And, at this point, only 2 of the 10 tax abating boards are being scrutinized in the above analysis. This may be only the tip of the iceberg.

So what does $75M per year mean for Memphis/Shelby County ? $75M means fully funded adequate public transit, state of the art community centers, connected workforce development and top notch vocational programming, increased funding for public safety and site development for economic development.

Brick Wall 

Try to talk to local legislative bodies about some of this going on and its like talking to that brick wall. Approximately, 9 months ago, the new economic development thought leader in MRYE-Memphis Raise Your Expectations, presented in public comment, a research based framework for economic development that embraced the Amazon Road Map policy pronouncement of the University of Memphis. This advocacy was conducted knowing that a coherent economic development plan that has not existed for years was not going to emerge anytime soon.

And, while now, its known that MRYE was right, MRYE might as well have been talking to a brick wall. Its because, in Memphis its a closed Crump system that only considers the same groups of people that have been running the city into the ground for years while dismissing entire segments of the population. This dismission stifles the small business sector and economic growth as corporate/real estate and pet nonprofit interest thrive.

After all,  the “big idea” for economic development is to reward and get the same cluster of folks  in EDGE, DMC, Chamber and elected officials together twice a month. The very group that has recklessly disregarded the rules, not proposed thoughtful economic development policy solutions or practiced needed oversight required to implement the work of true economic development.

MRYE promotes a Balance Memphis agenda based largely on the Amazon Road Map that includes incentive reform and responsible tax incentives for remote industry recruitment and large local expansions. For example, at the July 2018 EDGE Board meeting, MRYE representatives spoke out in favor of the JNJ Logistics expansion and against the unneeded Poplar TIF that was justified with a baseless 7,000 job creation claim. Any such pro-business incentive reform advocacy is met with thoughtless “anti-business” labeling of the the local socialistic corporate welfare culture.

There’s a rumor that legislative bodies are going to convene some legislative committee to review some of this excessive recklessness but don’t hold your breath. If they do convene, its always softball questions to staff members of the corporate community complex. Just a note to local legislators, these staff members don’t have votes most of the time for many of these rule breaking approvals and excessive incentive awards. Maybe legislators should drag some of these abating board members into legislative chambers for inquiry that moves beyond a game of patty cake.

Conclusion

The only pathway for Memphis to rebound is through massive economic development reform and philanthropy to pay taxpayers back for past policy encroachments and excesses of Memphis Royalty while opening up the system and engaging those very people the system has shut out for years.

If you have questions about numbers used in this blog or in general, please email me at jkent@pathtrek.net

What about personal property tax reporting for PILOTs ? With new elected officials in place in Assessor Melvin Burgess and Trustee Regina Newman and understaffed overall, while inheriting, arguably, an out of control and disconnected tax incentive environment, this taxpayer advocacy blog is attempting to help Burgess and Newman by connecting the dots and asking questions. Disconnected systems in Memphis/Shelby County seem to be a common theme that result in taxpayer exploitation. It should be noted that Trustee David Lenoir made the following recommendation in the 2017 Trustee report:

“ The stakeholders should seek funding for the development of an integrated database that each Board can update and maintain. This integrated database would provide a centralized information source, resolve comparability issues, simplify record or parcel maintenance, ease reconciliation, reduce billing errors, and speed up the transfer process when a parcel returns to the tax rolls and most importantly, provide a mechanism for accurate and timely reporting.”

This recommendation is right on target because this blog cannot make sense of the disconnected abated tax schedules of  IDB/EDGE documentation for Electrolux and the reporting of the Assessor and Trustee. All of which, they both inherited, as newly elected officials.

Additionally, this blog in general is designed to add a quantitative context to all or none tax incentive conversations. In the current economic development climate, this blog generally recommends responsible incentives for new industry recruitment, large local expansions of more than 100 jobs while offering incentives for new jobs only and TIFs for truly blighted properties and not based on census tracts.

Connecting the Dots

Connecting the dots with recent reporting from multiple press outlets and reports distributed by Assessor and Trustee raise several questions about PILOTs to include, “What about reporting on personal property taxes for PILOTs ?” Below are some observations to help connect the dots:

Connect the dots between recent reporting from The Commercial Appeal which reports EDGE rescoring states that Electrolux made a $321M as opposed to a $195M capital investment and the Memphis Business Journal reports an increased real property appraisal from $38.7M to $82.5M. That would leave an additional $238.5M in personal property that needs to be accounted for somehow which would include state allowed depreciation starting from $238.5M amount ($321M – $82.5M = $238.5M).

The most recent distributed Assessor report does not appear to report on personal property but only for real property

The Trustee report has a range of figures concerning Electrolux under headings of  “Assmt Taxes” and “Contract Taxes” but none of them seem to reconcile with the scheduled minimum PILOT payments in the IDB/EDGE documentation that consists of both real and personal property taxes of in Year 1 – $849K, Year 2 – $784K, Year 3 – $723K, Year 4 – $658K  and Year 5 – $598K. And that is before considering the increased capital investment report by EDGE from $195M to $321M that would result in $238.5M in personal property that somehow needs to be documented  but was announced after the release of the latest Assessor and Trustee reports.

The Commercial Appeal reported that Electrolux made a short of $500K in PILOT payments in 2018. That would make Electrolux short $100K on minimum PILOT payments based on IDB/EDGE schedules that amount to almost $600K that preceded any new appraisals or announcement of increased capital investments.

Connecting the dots between EDGE documentation and available press reports, the following table is generated to document suspected PILOT payments made by Electrolux as well as new full taxes based on an increased $321M capital investment up from $195M as announced by EDGE.

Based on press reports, the below table articulates projected taxes to be received from jobs, PILOT taxes due per EDGE IDB documentation, projected taxes that should have been due based on $321M capital investment under “PILOT fully assessed” and property taxes paid per press reporting.  Projected taxpayers losses are documented as well for the Electrolux project based on press reporting and IDB/EDGE documentation.

Any questions about the above table, please email jkent@pathtrek.net.

Conclusion

The big questions at this point are:

1. Why was Electrolux short on its PILOT payments that already afforded approximately 82.5% in property tax abatements by $100K in 2018  and perhaps other years ?
2. What about documentation for abated personal property taxes from the Assessor ?
3. Why is there not more continuity between scheduled EDGE abatements and the Assessor and Trustee reports ?

And finally and respectfully, the Assessor has already stated that he lacks staffing to effectively appraise property. With that admission, the Assessor would not appear to be in a position to effectively evaluate the overall effectiveness or net economic impact of tax incentive programs or to draw the conclusion that “PILOT agreements are NOT overused”.

County Commissioners,

Contained in this blog is the proposal that Commissioner Willie Brooks asked for in Economic Development Committee on 2/20/19. The below defines the problem followed by an implementation solution that contains minimum fundamental components for improved economic development outcomes through a connected workforce development / career pathways system. Disconnected workforce development efforts are resulting in estimated taxpayer shortfalls of  $10-15M per year. Disconnected efforts to date are estimated to have cost Memphis/Shelby taxpayers $30M and those cost are now recurring.

With 20 years experience in the education and workforce development space, I have participated in a variety of educational initiatives and instructional transformations to include 1) instructional technology implementation 2) starting the credit recovery program in  the early 2000’s in Tennessee with the Tennessee Organization of School Superintendents, 3) Mathematics instructional transformations in the states of GA, NC and SC and 4) Connected and demand driven workforce/education programming. There are not many people in the United States that understand the combined work found in data, the technology and the implementation of connected workforce development using a demand driven approach and I am one of those people with a small business right here in Memphis, TN.

I have been observing disconnected workforce development over three years in Memphis and have attended or listened to most of the Adhoc/workgroup meetings concerning workforce development. Given this, I would like to discuss a few high level positive and disappointing areas to help focus on the root problem of solving disconnected workforce development through proper alignment between Workforce Investment Network (WIN) and Greater Memphis Alliance for Competitive Workforce (GMACW) with a research-based solution.

Bright Spots and  Problem Disconnect

First are the bright spots. The Greater Memphis Medical Device Consortium (GMMDC) as supported by the MoveHire work of Alan Gumbel of GMACW, is a revolutionary and needed vehicle in workforce and economic development while leveraging true economic momentum in the medical device industry. And the Bartlett Chamber is working on the ground to promote the ACT WorkKeys occupational assessment with  its National Career Readiness Certificate (NCRC) to address the skills gap and build common language between employers, educators, policymakers and workforce practitioners.

Next, having called on workforce development boards throughout the country, while there are always improvement opportunities, the bureaucratic concern related to WIN is universal to Workforce Innovation Opportunity Act (WIOA) and state regulated workforce development agencies throughout the country. And as it relates to all the changes at WIN, I could not sympathize with Ms. Franklin more when she talks about stabilizing WIN in her testimony. WIN, while imperfect, seems to be functioning well considering the circumstances.

As far as the root problem of disconnected efforts, that resides with the introduction of GMACW and the lack of widely communicated and clarified role in the workforce development system by Memphis Tomorrow, Chamber and subsequently EDGE. The need for and the concept of GMACW is right on target. But there has been no execution by GMACW in the area of connecting local efforts. The root of the problem does not reside with GMACW staff but with the Memphis Tomorrow, Chamber and EDGE Board complex. These are the very board members that legislative bodies do not question in  legislative proceedings.

If County Commissioners were to examine the GMACW grant documentation, they would see that GMACW was to be the data aggregator and high-level connector for the workforce development system. GMACW was to do this while operating initially as a Chamber Chairman’s Circle initiative by aligning the educational system with employer demand while getting leads from WIN for enrollment in the post-secondary education system.  Where both WIN and GMACW overlap with unclear roles is with educational institutions and employers. This overlap  will be addressed below in the proposed solution while leveraging the intended roles of both WIN and GMACW.

EDGE later took over GMACW and the Board did not hold regular board meetings over a 2-year period, which further documents the problem at the board level, as 60K students went without connected workforce development services. This disservice came on back of a Canadian contract award and vendor that lacked a track record of experience with the United States workforce development system while partnering with Tech-Hire, which was a federal grant, to support increasing technology jobs for the United States domestic citizenry.

And finally, as one of many locally shut out small businesses, I have written 6 blogs, while proposing a connected workforce development solution, that have been published on 4 platforms over the last 2 years. At the same time, none of these organizations has published a proposed connected workforce development solution in Memphis Tomorrow, EDGE, Chamber, GMACW, WIN or Seeding Success as disconnected efforts unnecessarily persist within a community in need. Below are my blogs:

• Memphis Business Journal Workforce Solution Editorial– (5/26/17)
• Smart City – Beyond PILOTs – Thinking BIG and National Leadership (4/30/18)
• Just My Memphis – Regional Talent Pipeline Development
• Just My Memphis – An Engine for Economic Development – GMMDC 7/31/18
• MCCL Measured – Get Started 11/11/18
• MCCL – Disconnect 12/11/18

Solution – Connected Workforce Development and Pathways

The Pathtrek process provides technical assistance and is an open tool platform that delivers process support  for connecting workforce development efforts while implementing career pathways. “Career pathways” is just another term that broadly defines “curriculum” sequenced in pursuit of a career goal. More technically, career pathways can be defined as a hierarchy of 16 career clusters that relate to 72 career pathways which then relate to 1000s of educational / training programs that are linked to over 800 occupations.

The Pathtrek process embraces research to connect workforce/career pathways efforts while systemically leveraging three broad areas of data/marketing, curriculum and professional development to address the skills gap, align efforts and promote local career opportunities. Given the open process, when a brand name  like “ACT WorkKeys” or “Indeed” is used in the following, it serves only as an example with alternative tools available for implementation use.

A connected solution involves the following non-negotiable minimum requirements that are widely marketed and understood to get all stakeholders on the same page using common language regarding workforce development. Establishing common language between professionally diverse stakeholders is paramount in connecting workforce development efforts. O*NET, serves as the the Nation’s leading authority on common language development in support of connected workforce development efforts. In their Office of Management and Budget justification report, O*NET mentions the term “common language” 9 times. See minimum requirements below:

Clear organizational alignment with Shelby County Government under the leadership of the Shelby County Mayor directing connected workforce development efforts per Shelby County Commission Resolution

Supply / Demand Data – Coherent and easy for all to understand that embraces business return on investment methodology while promoting common language development, employer aligned educational and program offering

A research base to guide career pathways system, instructional and implementation design that recognizes employers as the chief customer of the workforce development system

Occupational assessment adoption to address the skills gap and promote common language development

Connecting technology for cost effective career navigation and planning, job listings, marketing, promotion and workforce pipeline measurement.

Professional Development – Stakeholder training for professionally diverse audiences while facilitating common development for connected workforce development and career pathways implementation. This work gets everyone on the same page regarding workforce development in support of economic development efforts.

Clear Organizational Alignment – Based on current mandates, intended roles, Commission testimony and the need to create clear lanes, WIN, while working with partners, should focus on adult job seekers while interacting with employers to fill jobs, student career awareness and  planning and increasing post-secondary enrollment.  GMACW should serve as the authoritative supply/demand data publisher and instructional design facilitator through industry councils while spearheading supplemental funding support and grant development for the workforce development system. When WIN and GMACW coexist in an area, a lead should be designated with the other in a supporting role. Establishing clear lanes will eliminate confusion and overlap in the workforce development space. Shelby County Government under the leadership of the Shelby County Mayor’s office should lead connected workforce development efforts.

Supply Demand Data – GMACW would be the aggregator of workforce supply demand trend data unless determined otherwise while leveraging current direct oversight by the County Commission as an EDGE entity. Currently, there is no widely known and promoted aggregated workforce supply/demand data from which local policymakers are making decisions.

The source data that that is used in the Pathrek process for cost effectiveness, comes from public domain authoritative sources in Bureau of Labor and Statistics, Jobs4TN, Occupational Information Network (O*NET) and United States Department of Education. The leveraging and mastery of these data sets is fundamental in establishing baseline data before resorting to any other surveys or data collection efforts. In Memphis, given the lack of published data, these fundamental baseline data sets in the public domain have not been leveraged, locally distributed, marketed, promoted or mastered to locally inform workforce development and instructional design efforts.

At a minimum, these authoritative baseline data sets should be routinely published, updated and distributed while serving as a starting point for data informed workforce development decision-making. The authoritative data from the public domain is not an end all solution but serves as a starting point for demand and data driven conversations with further data collection, as needed, to enhance existing data sets, decision-making and system implementation. Employer demand data should be used to inform the academic curriculum for all learners and post-secondary program offerings while facilitating common language development between professionally diverse stakeholders in support of connected workforce development programming.

Currently, I am doing work with labor market information that I have not seen done anywhere. That’s not to say it can’t be done. I just have not seen it. Additionally, there are a range of options by which this data can be communicated through various web platforms but the following serves only as a small and partial data sampling for download and printing.

Research Base – A research base serves as a technical document to inform connected workforce development efforts and career pathways implementation across the educational and workforce development system. A published research base does not currently exist to support the work of connected workforce development programming and instructional design. The following research base integrates convergent references from business, education, workforce and career development theorists to inform system design. For example, constructivist learning theory and the career development theory of “story” drive the recommended implementation of career portfolios. See the following research base which can be evolved and improved based on local needs.

Occupational Assessment Platform – Currently, the Bartlett Chamber is leading Shelby County ACT WorkKeys promotion as an occupationally aligned assessment per on the record testimony in the Commission Economic Vitality workgroup by John Churchill. Unfortunately, while the Strickland Administration endorsed ACT WorkKeys in 2016, Shelby County has not reached its ACT Workready Community goals while surrounding counties have. The Greater Memphis Chamber has never seemed to promote ACT WorkKeys for some reason.

While there are acceptable alternatives to ACT WorkKeys and its companion NCRC,  WorkKeys  is the most widely used occupational assessment in the country. ACT WorkKeys is a highly credible product but often fails throughout the country due to a lack of local stakeholder promotion. An occupationally aligned assessment platform, such as WorkKeys, helps to market the community for economic development purposes based on quantifiable workforce readiness measurement while closing the skills gap.

In addition to standardized occupational assessments, other diagnostic assessments, which are not scored, are used to inform career exploration and include interests and workplace preference assessments which become part of a completed career portfolio for participants.

See ACT WorkKeys Data and also a this Gwen Ifill 8 minute PBS video that explains ACT WorkKeys.

Connecting Technology – Centralized technology efficiently connects efforts for the purpose of articulating supply / demand workforce trend data, promoting job openings and for career exploration, navigation and planning, Per Commissioner Willie Brooks concern, an authoritative centralized job board would market job opportunities for employers and to applicants through the use of technology.

To that extent, in the current environment, Jobs4TN is mandated by the State for WIN to use. Jobs4TN was originally designed as a case management system for dislocated workers while housing workforce trend data. The limitations are that for many audiences, to include students, the platform is not engaging or user friendly. At the same time, I personally use Jobs4TN as my raw baseline authoritative data source for local occupational projections in Tennessee.

Given these limitations, a centralized commercial job board, such as “Indeed”, needs to be selected that will minimize employer implementation costs since many already use a commercial job board such as Indeed. A commercial job board promotes and advertises Memphis job openings locally, regionally and nationally appearing high in search results to attract population to the area.

Further, the selected job board should be connected to an engaging career navigation platform to support educational career pathways planning and to retain and develop talent while increasing post-secondary completion rates. In this way,  local career opportunities are being marketed with career promotion and planning seamlessly integrated into the standards-based curriculum for all learners and optionally for adult programs such as drug court and re-entry while being shaped by employer demand data. The output of such a program would look something like this for a student or adult in the form of a career portfolio. Career portfolios are sometimes referred to as career plans, transition plans or individual learning plans (ILPs).

Through this process, students, parents and participants in non-traditional programs learn about a range of in demand career pathways and post-secondary opportunities aligned to their interests and preferences that may involve a job opportunity, apprenticeship, post-secondary certificate, associate’s degree, bachelor’s degree or graduate degree. To see a video on career navigation based on true employer demand, please review this Success in the New Economy 8-minute video.

And finally, through this process, educators learn the language of careers by teaching through the lens of employer skills and knowledge demand data. By teaching standards aligned career content, educators learn the language of the business workplace that until now has not been afforded to them. After all, most educators’ career path consisted of going to school, going to college and going to school to work. Through this process educators, build confidence in talking about careers thereby becoming key advocates in serving economic development efforts.

Professional Development

Kick Off Meeting – Community wide ½ day kickoff meetings help to create awareness of career pathways and the regional economy. These meetings help participants to begin using a common language of careers in support of regional workforce and economic development efforts. Typically, kickoff meeting participants include all stakeholders from business, education, workforce and government such as executive administrators, building administrators, human resource professionals, counselors, instructors and parents.

Career Content Academy – Following the ½ day kick off, administrators depart and service delivery personnel continue on with a “Career Content Academy”, which is a minimum 3-day session. The career content academy immerses participants into the student and job seeker work of career development in self-exploration, career exploration and career pathways planning as well as program administration.

Career content academies help educators fill the workplace knowledge gap by helping them develop the language of careers and classroom implementation strategies while helping participants outside of education to develop an understanding of the education workplace and academic language. This collaborative approach strengthens communication through common language and partnership development.

Typically, career content academy participants include human resource professionals, workforce and education career counselors and instructors. The former helps support a deep implementation of career pathways into daily instructional practice while building community partnerships in support of regional career pathways and economic growth.

Online -And finally, follow up onsite coaching and online training tutorials would be available for post training support and training in general.

Conclusion

Memphis has an opportunity here and could think “big” with a Nation Leading Career Education initiative which would go to address the skills gap while marketing Memphis nationally for economic development. At any rate, its time to get started after 4 years with connected workforce development. Waiting until the Fall for another Chamber pageantry event, would not seem to be an option….