Out of the gate, taxpayers are being bullied in local tax incentive deliberations. While deliberations operate under a big lie, the public University of Memphis (UofM) has partnered with the Greater Memphis Chamber in local tax incentive deliberations, that involve a closed to the public joint City Council/County Commission convening. Memphians have been robbed of independent public university thought leadership and don’t even know it. Can it get anymore rigged than that ?

With the Chamber routinely partnering with Memphis Tomorrow, Economic Development Growth Engine (EDGE) and the Downtown Memphis Commission (DMC), one would think the publicly funded UofM would partner with local government and taxpayers to level the playing field. But not in Memphis, making the case for institutional bullying by the UofM.

This is the very Memphis/Shelby taxpayer, that has been bullied for years by local corporate/real estate interests. This occurs as local legislators operate under the lie that regulating tax incentives must occur through some rare joint Council/Commission convening and agreement. Such regulation can occur independently, at anytime, by either legislative body and should be ongoing, while using the pulpit of local government. But local legislators seem content accepting the lie and proceeding in their pre-designed elitist sandbox. 

The Deliberation

Legislators, content being sheltered from reality, as the UofM institutionally bullies taxpayers, have yet to champion any external best practice economic development research during joint discussions. Not even research, by the now untrustworthy UofM, which in 2017 published We Are Not Lost – Amazon Gave Us a Map, was championed by local legislators.

The Amazon Map effectively de-emphasizes tax incentives, while prioritizing areas that excessive corporate incentives dilute, like workforce and public transportation. For that matter, Amazon is making a huge $200M investment in Memphis, without tax incentives, which is sadly going uncelebrated. 

Instead, in deliberations, legislators continue to hear from the same entities that have bullied taxpayers for years in EDGE, DMC and Chamber, without the aid of independent public university thought leadership from the UofM. Authored not by research, but by the excessive incentive examples of FedEx, AutoZone, Nike and International Paper, Memphis/Shelby taxpayers are bullied by some $50M per year in excessive corporate incentives, all while a plethora of industrial development boards are systemically fee incented to regularly approve excessive individual incentive awards. 

At the same time, Commissioner Tami Sawyer, through questioning of EDGE’s Reid Dulberger, was successful in establishing the existence of an elitist cabal by revealing the formal lobbying relationship between Chamber Chairman Circle member Brian Stephens of Caissa Strategies and EDGE. And Councilman Martavius Jones began making a case for linking incentives to higher wages. Commission Chairman Eddie Jones seems to have his eye on the $138M DMC PILOT Extension Fund, previously used for outlandish and wasteful taxpayer appropriations for developers and downtown public parking. 

Given current momentum of discussions, these are specific reforms that should be proposed:

1. Public upfront ask of $1.5B returned back to taxpayers from the Memphis Tomorrow complex for deficient economic development leadership over 20 years.
2. Define and measure “economic development”
3. Centralize all tax incentives, performance and compliance information in a publicly accessible web based repository. 
4. Reward higher wages with higher EDGE abatement amounts on new capital investment while lowering overall abatements, in for example, 35% – 35K, 40%-$40K, 50%-50K and 100%-100K.
5. Require legislative approval for using the EDGE “community reinvestment credit” otherwise known as abating already existing real property taxes and reserving this for high wage transformational economic development opportunities, while performing trade off analysis. 
6. Shut down the DMC PILOT extension fund, outside of current commitments, while reforming parking operations to return more money to local general funds
7. Limit DMC blight reduction real estate development incentives to 10 years, while conceding the removal of  “affordable housing” requirements, which is really a marketing tactic for excessive incentives.

With these reforms, local legislators will make true progress for taxpayers. At the same time, other areas that deserve review are 1) the almost $50M that sits, unused and without a plan, on industrial development board balance sheets 2) code enforcement for Memphis Health, Educational and Housing Facility Board PILOTs and 3) fee structures that reward industrial development boards for awarding excessive incentives. 

Blackjack Smith knows about the unused money sitting on board balance sheets. FedEx got $3M in grants for their Downtown expansion, while ripping off the taxpayer for another $3M in the non-public approval of the 100% abatement extension for the FedEx World Trade Center in Collierville. All the while, local status quo PILOT advocates lie and say, that Memphis does not provide cash grants as part of their tax incentive offering. 

All of this to say, that substantive tax incentive reform is in order for the overall public good. 

Conclusion

As for the institutional bullying by the UofM, its really sad and more of the same. The #1 accomplishment that would throw the UofM into the national spotlight is the turnaround of Memphis. That will only occur, with the UofM not surrendering its public university thought leadership and partnering with local and Tennessee taxpayers. 

But sadly, time after time, the UofM has chosen not to partner with taxpayers. Its my suspicion that educational institutionalists, from around the state, were so repulsed by the state funded UofM runs on local taxpayers, that included bullying and lies under Rudd and the new local corporate Board of Trustees, that Rudd in a sense was forced out. 

Memphis needs independent public university thought leadership, that works in partnership with taxpayers, not more institutional bullying……

The community leadership legacy of civic idiots Blackjack Smith and Puke Hyde is bullying. FedEx/Memphis Tomorrow has authored a pageantry filled, public private bully complex, that rips off the taxpayer, censors public voice, kicks people out of the Chamber of Commerce without cause, botches taxpayer funded initiatives, lies on the public record, bullies people out of public buildings and stifles small business.

All of this occurs as the FedEx public relations foghorn blows non-stop, reinforcing the entirely false perception that Memphis would be nothing without FedEx. After 20 years of this bully nonsense, while ushering in years of community decline, its the only currency local so called “leaders” understand. The fact is the Fedex/Memphis Tomorrow complex is a rerun of the elitist Crump Machine and bully complex of days gone by. 

Sheltered in ignorance of anything else, bullying is all that many people know. Following the lead of Blackjack and Puke and rooted in spooner entitlement, bully elitist pansies have, for years now, unfortunately proliferated throughout the Memphis public-private complex, while thinking its “tuff n cool” to bully a community in need. But there is hope. 

Bullying Defeated

At the last City Council meeting, the bullying of small business was caught on record. Supposed small business policy advocates in Ted Townsend of the Greater Memphis Chamber and David Waddell of the Epicenter, were nowhere to be found, as the City Council, through ordinance, attempted to bully a new, full taxpaying local pet store out of business. 

During the meeting, Councilman JB Smiley, saved the day and stood up to bullying. The measure to disallow the retail sale of pets failed when, Smiley who was originally for the measure, discovered that the Strickland Administration had been bullying Petland owner Mike Davis, through local authorities. The small business bullying described by Davis was similar to what was caught on tape, in 2019 , with AC Wharton and an Airbnb owner. 

In City Council testimony (1:38:15) , Davis describes how he returned to his hometown of  Memphis 20 months ago, followed all the laws, and invested nearly $1M to open a pet store to be, only now, harassed by City agencies in the Police, Animal Shelter and Code Enforcement, as he is getting ready to open his new store. Davis was paid 3 visits by agencies, in a two hour time frame on the Friday, prior to the City Council meeting and according to Davis, bogusly cited. 

Besides the strangely coincidental convergence of City agencies on a local small business, what makes this appear to be more about bullying, is that this move to regulate business with regard to animal rights is something that would typically originate from the political left. But surprisingly, the measure is originating from the right, where none of those that identify as Republicans and supporting the measure, have anything on their bios significantly related to animal rights. Is it one of the local “boll weevils” behind this ordinance? No one really knows. 

Those Councilmembers supporting the measure from the right are Colvett, Canale, Carlisle and Morgan. There was one person from the left supporting the measure and that was Warren, whom was left off the image above. Those defeating bullying were Smiley, Logan, Robinson, Thomas, Ford, Johnson, Jones and Swearengen. 

Further, during consideration, as if he is the only one, Davis was furthered bullied and accused of unfair lending practices, while citing regulated lending options, that perhaps are far less than optimal, but common in the retail industry. All of this occurs as Memphis needs more small businesses and businesses that pay their full taxes, which Davis is prepared to do.

From the political right and coming out of COVID, increasing local business regulation, on a matter that few overall locally seem to care about, at a time when Memphis needs more small businesses, just doesn’t add up. This points to bullying out of the elitist complex, that potentially in the end serves one of the “boll weevils”. 

Conclusion

Regardless of how one feels about the measure of locally banning retail pet sales, which is already State and Federally regulated, the measure was soundly and appropriately defeated because of a local pattern of elitist and tactical bullying. Smiley, again once for the measure, was so repulsed by what he saw, moved for “same night minutes” which procedurally prevents the measure, from being reconsidered. 

What was on display, is the type of elitist and culturally embedded bullying that was mocked nationally by Vanity Fair and responsible for grossly excessive corporate/real estate incentives for the small few, oppressed small business sector, botched taxpayer funded initiatives and locally challenged educational outcomes. In the end, persistent bullying serves no one. 

Dammit, Stop the Bullying !

On Monday, the Shelby County Commission should reject any additional funding for the Downtown Memphis Commission (DMC). This rejection request comes after the Commission refused, on December 21, to perform due diligence and approving a $62M DMC appropriation, using an unknown about “PILOT Extension Fund”, for unneeded downtown public parking.  

DMC financials reveal that the County Commission is appropriating $62M of taxpayer money, for a DMC entity, called the Downtown Mobility Authority (DMA), that lost $1M, prior to COVID in 2019. This $1M loss signals a lack of adequate parking demand to support a $62M public investment.

But even with an already excessive taxpayer funded approval in hand, $62M is not enough. Now, the DMC is asking for another $12M to clean up the 100 N. Main blight, left over by the DMC over 20 years. The former request occurred on Wednesday, as County Commission Chairman Eddie Jones obstructs public meeting participation and Commissioner Mickell Lowery, Commission committee economic development chairman, brings forward to make the request, former DMC President, Jennifer Oswalt, who now lives in Knoxville!

This is the same Oswalt that lied on the Commission public record, on December 21, while understating DMC parking garage liabilities by $12M in pursuit of the now approved $62M for unneeded downtown public parking. This is who your County Commission brings forward, from Knoxville, while obstructing public meeting participation in Commission Chambers.

After Oswalt makes the new $12M 100 N. Main request, in Commission committee, Oswalt then proceeds to ask for another $3.5M for a taxpayer funded loan, for private developer Billy Orgel to build a non-public private parking garage. Stunningly, the Commission economic development committee grants approval for Monday’s full Commission consideration of the new $15.5M DMC request, for potentially a total $77.5M overall appropriation for unneeded downtown public parking.

But there is more. After the additional $15.5M committee approval occurred on Wednesday, the June 30, 2020 DMC financials appeared on the committee agenda for approval. These are the very financials that the Commission refused to review, prior to approving $62M for unneeded downtown parking on December 21, 2020.

During the committee hearing on the DMC financials, the DMC, instead launches into a PowerPoint presentation on the work of the DMC. Sadly, no Commission committee discussion of the DMC financials, which includes the PILOT Extension Fund occurs, as the committee approves the DMC financials.

Based on DMC public information requests, over 25 years, the PILOT Extension Fund, mistakenly earmarked for downtown public parking, will consist of $137M in tax proceeds and taxpayer funded loans receivable. Less current PILOT Extension Funds liabilities, in a majority Black community in need, this is what instead $137M in taxpayer funds, now reserved for unneeded downtown public parking, could have been used for over 25 years:

• 1,300 students, per year, served with post-secondary wrap around services
• 130 small businesses, per year, served with $10K each in forgivable loans
• 1,000 impoverished, per year, served with affordable housing

Besides the fact the PILOT Extension Fund appears to be nothing more than a slush fund, the above missed opportunity of better serving a majority Black community in need, is why no more money should be appropriated to the DMC. This misguided use of public funding reveals, in large part, why Memphis does not move forward, while leaving its people far behind.  

County Commissioners should reject all new DMC funding requests, while allowing for the purchase of the 100 N. Main, within the currently approved and obnoxious $62M approved public parking budget, and while rejecting $3.5M for private garage development.

Given the commercial unavailability of the Memphis/Shelby taxpayer funded loans to Orgel, Hyde and Carlisle, this evaluation attempts to convert loan values to grant value, when benchmarking the loans against commercially available terms. 

Local leaders should allow the purchase of the 100 N. Main building using the PILOT Extension Fund. But they should reject Mayor Jim Strickland’s new $15M PILOT Extension and $10M Accelerate Memphis fund requests.

In the midst of COVID, since December 1, 2020, Strickland has strangely sponsored, an astounding $87M in expenditures for downtown public parking related projects. That is $77M from the Downtown Memphis Commission (DMC) PILOT extension fund and $10M from the proposed $200M Accelerate Memphis bond issue for neighborhood revitalization. Here are some quick facts about the PILOT Extension Fund (PEF):

The PEF is Memphis and Shelby County taxpayer, not DMC funds

The DMC manages 5,500 public parking garage spaces, that in 2019 pre-COVID, generate $2,025,547 in revenue or $368 per space.

The DMC PEF presently owes the City of Memphis  $10.5M

Over 25 years, the PEF will consist of $137,381,691 in taxpayer funds. $15M existing balance + $102,622,791 in restricted tax proceeds + $19,758,900 in debt service payments

Most interesting, $19,758,900 in PEF proceeds comes from debt service payments from $23M in DMC loans for private garage development. The PEF was never intended to serve as a loan fund for private garage development. 

Effectively, through the DMC PEF, $23M in taxpayer money has been misused, to construct private garages, using taxpayer funded loans. The loans provide an overly generous weighted average 49 yr term and 2.18% interest rate. The taxpayer funded loans were made to local “visionaries” like Hyde, Orgel and Carlisle.

Orgel is teed up to get another $3.5M loan with Strickland’s $87M parking plan, that includes $62M in parking projects, $22M to clean up the 100 N. Main blight, indirectly incented by the DMC Loews incentive package and $3.5M for Orgel’s Snuff District private garage. 

Meanwhile, Councilman Martavius Jones is questioning these plans, where he seems to confuse who is behind the support of these lofty parking projects. Jones, representing taxpayers, stated in Council Committee, “we have already spent 80% of the $100M (actually $137M)”. It’s not spent yet, without City/County legislative approval.

Jones should be commended for his healthy skepticism of the proposed parking expenditures, while noting it is not the taxpayers but the Elitists planning to spend $87M for public parking. The $87M also includes $22M to clean up the 100 N. Main mess left by the DMC, who again, currently owes the City of Memphis $10.5M. 

All of the above occurs under the Memphis Tomorrow “government efficiency” program. In their coaching, the corporate elitists commonly advise to “run government like a business”. Perhaps that is what should be done with the PEF, while serving the customer taxpayer. 

Awakening and Run it Like a Business

Another legislative player in the public parking binge has been Commissioner Mark Billingsley. In December, after referring the PEF back to committee for review, Billingsley had an awakening of sorts. Two week later, Billingsley plowed forward in favor of $62M in public parking expenditures, while disallowing committee due diligence. 

Now that is quite an awakening ! With that in mind, the below generous analysis occurs with a similar hypothetical awakening, that reluctantly accepts the need for more downtown public parking. To get there, one has to ignore the $250K DMC Downtown Parking Study, that showed a surplus of available parking in the downtown core. 

To that extent, the below generous analysis evaluates planned downtown parking investments like a business. In this way, using a business lens, the question becomes:

“Today, what is the MOST that should be spent on downtown public parking?” 

Given: DMC generated $2,024,547 in Pre-COVID 2019 parking revenue with 5,500 spaces or $368 per space.

Given: Currently, DMC will add 1029 public parking spaces from the $87M project

Assumption: Generously, all revenue from increased spaces will be treated as profit, with no associated expenses. 1029 spaces x $368 = $378,672. Even more generous, make it $400,000 per year in increased profits from increased and improved public parking infrastructure

Assumption: Downtown commercial property taxes will increase by $1M per year, due to improved public parking infrastructure.

Assumption: 20% of overall project cost are attributed to interest costs, since the $62M in approved projects do not include interest on borrowed funds. 

Analysis: $400,000 (parking profit) + $1,000,000 (commercial property taxes)=$1,400,000 per year x 25 years = $35,000 000. The current approved public parking expenditures do not include interest costs, so the overall amount needs to be discounted for interest cost by an overall 20% . $35,000,000 x. 80 = $28,000,000

In this overly generous analysis, the most that should be approved today for downtown public parking is $28M. 

Better Way – Recommendation

In the midst of COVID and considering the DMC owes the City of Memphis $10.5M, today, there is just a better way than $87M for downtown public parking related projects.

Given what has been approved in $62M, that leaves a $34M approval surplus from the most that should have been approved for public parking in $28M. Additionally, there is $25M more proposed. Given the former, these are recommendations to make up for the $34M approval surplus, in context with the $25M currently being  proposed by Strickland.  

The DMC should purchase 100 N. Main for $12M,  within the existing $62M approved budget. This leaves an approval surplus of $22M ($34M-$12M)

For economic development purposes, EDGE should contribute $10M of their $22M in cash assets to the overall project. $22M – $10M = $12M approval surplus

The Orgel private garage project of $3.5M should be rejected because it is a misuse of taxpayer funding. $12M-$3.5M=$8.5M approval surplus. 

Using a business approach, the above recommendations leave in place the current $62M approval but requires all proposed PEF work to be done within the approved $62M budget, while not allocating any of the proposed Accelerate Memphis funding to the 100 N. Main. 

With these changes, a $34M approval surplus can be cut to $8.5M. More work to be done to find $8.5M but that too can be found. More on that later……

Who the hell in the community is FOR this pipeline ? If one thinks about it, no one really. Even Commissioner Edmund Ford, Jr., who has been cited as the closest public proponent of the pipeline, is not for it, but publicly neutral. That’s because, considering the risks, there is no community benefit to running an oil pipeline through the City of Memphis. 

Valero, Plains All American and Byhalia Connection are really the only ones for the pipeline. Valero and Plains All American, headquartered in Texas, are set to net nearly $100M per year in estimated profits from the local 49 mile pipeline  project, scheduled to transport $7.7B in oil product per year, from Oklahoma to the Gulf Coast. 

More analysis on the project profits later. But the project involves the construction of an underground pipeline, in a seismic zone, putting high quality drinking water, located deep underground in the sand aquifer at risk. At risk, is high quality drinking water, also commercially used by a number of local companies. 

Meanwhile, Byhalia Connection touts $3M in regional taxes during construction and $500K in Memphis/Shelby recurring annual taxes as benefits. Oh and lets not forget the $1M in mostly hush money doled out to local groups with the unfortunate inclusion of the Center of Applied Earth Science and Engineering Research (CAESER) at the University of Memphis for $250K. C’mon, this is community benefit?

CAESER is an unfortunate inclusion, because they could provide a powerful community voice by exercising public university thought leadership on the matter. CAESER is publicly tasked with researching risks to the sand aquifer that supplies local drinking water. But sadly, in exchange for a “gift” of $250K out of the $1M, from pipeline advocates, CAESER cannot take a public position on the pipeline.  

While there are really no true community advocates, opposition has been mobilized by Memphis Community Against the Pipeline (MCAP), led by Justin J. Pearson. MCAP, while representing those that would be most impacted by a potential pipeline in the Southwest Memphis Black community, has mounted a strong community business case for opposing the pipeline, based largely on environmental injustice and community risks to precious drinking water.

And, Protect the Aquifer, led by Ward Archer, has also mobilized against the pipeline. Protect the Aquifer is dedicated to the protection, conservation and management of the Memphis Sands Aquifer. So why is Valero and All Plains for the pipeline ?

Analysis – Why FOR a Pipeline ?
First Valero is already into the Memphis/Shelby taxpayer for a $25M EDGE retention PILOT that they should have never been awarded in 2012. They were never going anywhere else other than where Valero Memphis sits today. Now, Valero wants to put local drinking water, which also serves as a commercial resource at risk, for increased profits and no community benefit. 

The reason a pipeline is desirable for Valero is increased profits through the reduction of oil transport costs. Collectively, while scheduled to transport $7.7B per year in oil product, Valero and Plains All American are set to pocket an estimated $100M in increased profits. So how is $100M in profits derived ?

Analysis and Assumption

Below are the givens and the assumptions: 

Given: Memphis Daily News $7.7B of product per year and $21M per day. At $50 per barrel that is 420,00 barrels per day to be transported from Oklahoma to the Gulf Coast and 153,300,000 barrels per year. 

Given: US Energy Information Association The price to transport oil from point A to B by rail is $10-15 compared to $5 per barrel for pipeline. 

Given: Byhalia Connection – Based on $3M in personal property taxes per year, along the entire route, the cost of the pipeline is estimated to be $200M. Depreciation at $10M per year over 20 year life.

Assumption: The cost of shipping by rail is assumed to be the higher $15, due to disrupting pipeline flow to load and unload tanker cars in transporting oil from Valero to the Capline pipeline in Marshall County MS.

Assumption: Plains All American profits $2 per barrel on $5 per barrel before pipeline depreciation costs. Both Valero and Plains All American profit by $12 per barrel before pipeline depreciation costs. 

Estimate: Length of pipeline from Oklahoma to Gulf Coast is 800 Miles. Byhalia Connection is 49 Miles. 49/800 = 6.125% of total route. 

Therefore the following analysis can be conducted:

153,300,000 Barrels per year x $12 x 6.125% = $112,675,500 

$112,675,500 – $10,000,000 (Annual Pipeline Depreciation) =$102,675,500

The total annual estimated profit of Valero and Plains All American for the Byhalia Connection pipeline project is $102,675,500. Or, over 20 years would be $2.05 Billion. 

Conclusion

Nobody in the Memphis community is FOR the pipeline. And this is why. While putting high quality drinking and commercial water resource at risk, $500K in annual property taxes is NO community benefit. Even Edmund Ford, Jr. knows that !