Healthy ignorance often brings communities a breath of fresh air. And that potential resides with Ronnie Ramos, Executive Editor of the Daily Memphian who is from Indianapolis. After all, ignorance is what results in people asking questions that no one else asks. 

Healthy ignorance is why Ramos may have stumbled into the All News Is Local Facebook Group with the following challenge: “Joe B Kent and Fergus Nolan I’d love just one actual example where a rich person is controlling me and what we [The Daily Memphian] publish.” Ramos received plenty of responses that focused on the slant in and what the Daily Memphian (DM) CHOOSES Not to publish. 

Jack and The Daily Memphian – Can Hold No Jockstraps

The social media exchange followed The DM published story on this Wednesday’s EDGE meeting. The story slant trumpeted the successful testimony of Jack Sammons that resulted in an awarded EDGE tax incentive for Jack’s locally booming Ampro business, now in the newly lucrative hand sanitizer business. As a local businessman, Jack is looking for ways to increase his booming bottom line. And, as one might expect, Jack shows up at an EDGE Board meeting. 

Now in Jack’s former policymaking role, as a City Councilman, let’s be honest. Jack could hold no one’s jockstrap in defending, as economic development, policy that awards a $270K job tax incentive for a booming local business going nowhere and 15 new low wage jobs.  And neither can The Daily Memphian hold a jockstrap in defending the slant of the DM regarding this Ampro “economic development” incentive. 

And besides, Jack as a businessman and civic leader, had the opportunity to reform EDGE in 2018-19. Jack was appointed to serve on the County EDGE Task Force. At Jack’s first and only meeting, Jack talked big saying, “leave no stone unturned” and was never seen again at any further EDGE Task Force meetings. 

All of that to say, leaving “no stone unturned” would lead a civic leader to question the Memphis Tomorrow CEO organization that birthed EDGE. Memphis Tomorrow, founded by Pitt Hyde and Daily Memphian donor, is down in ALL of its selected community betterment categories over 20 years while using Federal, State and Local tax dollars.  

Now Jack clearly did not want to turn any stones related to Memphis Tomorrow or reform EDGE for that matter. After all, like many other local CEOs,  Jack needs a “go to” to  increase his booming bottom line with nothing other than a local taxpayer funded “free market” subsidy. You can’t make this stuff up !

And at the same time, with their donor base, nonprofit status and partnerships with numerous publicly funded entities, the Daily Memphian has failed to confront the horrific deficiencies of the Memphis Tomorrow public-private complex or question excessive local tax incentives. The type of journalistic effort required is that of Edward Meeman who persistently and relentlessly confornted the Crump Machine of days gone by. But that is unlikely to occur with The Daily Memphian regarding the Memphis Tomorrow public-private complex.

The former, is not to mention The Daily Memphian’s very own Eric Barnes won’t even read, for publishing consideration, a citizen’s  opinion submission on excessive incentives. This nonreading occurred about the same time the New York Times published an editorial from the Taliban. 

But The Daily Memphian does have employed staff columnists that CHOOSE to write about the Civil War, for no apparent reason, taking down the statues 3 years ago, political commentary from those employed by The University of Memphis and a superior website than the Commercial Appeal.

Then again, as far as local journalism, its more of the same after hefty DM promises of investigative journalism. So needless to say, there are a whole bunch of questions. 

Questions for Ronnie

These are questions for Ronnie Ramos who is locally new. Ramos may or may not want to ask these questions. And I say the former with experience, after my own local professional demise. After working in other communities for a number of years, I started asking the fundamental question, “What in the Hell is going on around here?” Anyway, here are the questions for Ronnie:

Using local public and Bureau of Labor and Statistics data, do you know unreported by staff writers, that Memphis/Shelby paid $14.5K for each new job created in the economy from 2010-18 while both Nashville and Indianapolis, where you are from, paid $2.5K for each new job?

Do you know that locally unreported by staff writers, according to the 2019 State of TN Comptroller PILOT Report that Shelby County has 512 parcels under PILOT contract, Davidson 35, Knox 68 and Hamilton 37 ?

Can you find, anywhere, a published public document or resource, that alerts local taxpayers of the total dollar amount of property tax abatements and tax increment financing (TIFs) occurring and administered by 9 abating boards across all of Shelby County and its municipalities ? If not, do you find this strange?

What would happen in Indianapolis, regarding a hypothetical civic organization, that is down in ALL of their selected categories, versus their peers, over 20 years while their initiatives use Federal, State and Local tax dollars ? Would there be any persistent reporting about it ?

Can you defend as “economic development”, policy, that awards job tax incentives to existing local companies in exchange for, in many cases, no new jobs or new low wage jobs ? Or job tax incentives that abate EXISTING taxes for low wage jobs ? Or what about urban renewal real estate development incentives with double the term length of peer cities ?

Those questions are just the beginning and, we hope, Ronnie, being new and a healthy type of ignorant will bring in a breath of fresh air and press these needed questions and several others. We’ll see…..

Ripping off taxpayers is rooted in flawed local assumptions. And with strapped local budgets and Shelby County the only County in the State offering residential tax incentives, the last thing taxpayers need is overly generous assumptions to justify a $5.2M residential tax incentive for a prime real estate location. But overly generous assumptions, is what is happening with the 2601 Central Apartments residential PILOT application. 

Further, this blog has written off Minority Women Business Enterprise (MWBE) and affordable housing programming as mere marketing to justify excessive incentives for corporate/real estate interests. Given the former and what will be disclosed in this blog, the 2601 Central Apartments payment-in-lieu of taxes (PILOT), should not be approved. 

And if an incentive is approved, it should be no more than 25% abatement. Sadly, The Economic Development Growth Engine (EDGE) is stuck on 75% abatements for all and not financially incented to represent the taxpayer but instead to represent corporate/real estate interests.

In this case, EDGE will pocket $300K in fees for awarding a $5.2M residential incentive which is $5.2M more than a developer would be awarded in any other County in the State of TN. See the problem ? And the fee design results in EDGE using overly generous assumptions and bogus accounting to award excessive incentives. If the 2601 Central incentive is granted, EDGE will have approved more than more than $700M in abatement awards since 2011. 

Problematic “But For” Assumptions

The 2601 Central Apartments application has several problematic assumptions which are shown below 

A -1.8% return on equity (ROE) without a PILOT and a 5.3% ROE with a 75% abatement is disclosed. The problem with the disclosure is that the disclosed ROE is for year 1 only, which is the lowest ROE over 15 years and does not average out ROE for the entire project. If returns, as shown in the application, are totaled for the entire project and averaged, the ROE is -.3% without and 7.2% with a PILOT. Disclosing lower projected ROE benefits, EDGE, the real estate developer in pursuit of a tax abatement and not the taxpayer.

The application uses a 5% interest rate. At the same time,  a bank letter in the application states that the permanent loan interest rate will be based on 10 year Treasury rate plus 225 basis points. As of Friday 5/16/20, the permanent loan rate would be 2.9%. Disclosing and assuming higher debt service costs from a higher interest rate benefits EDGE, the developer and not the taxpayer as it reduces ROE which further justifies the need for a tax abatement. 

The loan term assumed a 25 year term and not a more traditional 30 year term. The other EDGE residential applications use a 30 year term. The shorter loan term increases annual debt service costs and reduces ROE. The former further justifies the need for a tax abatement. 

A cash out is not disclosed as was contained in the recent Link Apartment application. If a cash out is not disclosed, one should be as it provides insight into the developer’s project financial benefit. 

The above findings results in several questions. What interest rate and term should be used ? And what about a cash out to reveal the developer’s projected financial benefit ? 

“But For” Modeling Using Responsible Assumptions

“But for” analysis is used to justify public participation in economic development. It is derived from the clause “But for the incentive, the project supporting community economic development will not occur.” The tables above contain a “but for” analysis using more responsible assumptions derived from the proforma contained in the 2601 Central application. The analysis considers the mutual interest of the taxpayer and the developer in a “but for” return on equity (ROE) analysis. 

ROE is typically used to judge the need for  public participation. The lower the ROE, the more likely public participation through tax abatements is needed. At the same time, while accommodating generous assumptions, EDGE has never disclosed an ROE threshold standard for public participation in residential development. This is problematic.

Regarding the 2601 Central application, ROE of the above “but for” discloses multiple interest rate scenarios. In this analysis, the “but for” interest rate recommended is 4%. A 4% rate provides a 38% increase interest rate cushion from 2.9% to 4% for the developer while also representing the taxpayer and discarding the overly developer generous 5% rate. A 5% rate would provide the developer with a 72% cushion which would be excessive. 

Next, it is recommended that the more standard and traditional 30 year term should be used which has been the prevailing standard in other residential PILOT applications. Further, to get at the developer’s projected financial benefit, an 8 year cash out analysis is provided.

While rates and terms for multiple scenarios are disclosed above, the below findings will use a 4% rate which is higher and more generous to the developer than today’s rate of 2.9%. See below findings: 

Projected annual average ROE for the entire 15 year project operational life without a PILOT is 3.5% and not -1.8% as contained in the application. And with a PILOT, the annual average ROE is 11.1% and not 5.3%.  

Cash out in 8 years without a PILOT, the annual average ROE is 15.8% and with a PILOT it is 23.1%. This calculation includes average annual operational and cash out ROE over 8 years.

Without a PILOT, over 8 years, the developer would generate $6.3M  on the $5M equity investment. With a PILOT, the developer would generate $9.2M on the $5M equity investment. Based on this 8 year cash out, tax abatements of $2.8M would contribute to the developer’s $9.2M windfall.  

A 25% abatement would contribute 900K to the developer’s take leaving the developer with $7.3M and an 18.25% ROE on the $5M equity investment. In this case, EDGE would make a $120K fee as opposed to a $300K fee while taxpayers would increase tax revenue by $1.9M over 8 years and $3.4M over 15 years. 

All of the above supports rejection of the tax abatement for a prime real estate location or no more than a 25% abatement. 

Conclusion

EDGE has not slowed down at all during the Coronavirus awarding excessive corporate/real estate incentives. And this comes at a time, when local government and an impoverished community is strapped for cash. 

The solutions are the same as repeatedly recommended by this blog. Aggressive incentive reform is needed supported with publicly administered research based measurement to serve a majority black community in need…..

2

Folks in Memphis know about racism and social justice. After all, significant media coverage is dedicated to the former subject matter, all while ignoring the real problem of runaway elitism. And to add fuel to the fire, unnecessary rhetoric like “institutionalized racism’, pertaining to current day local governance, is routinely circulated in the local discourse presumably thereby giving sanction by way of excuse.

Circulating such rhetoric is irresponsible and unfortunate. As it typically divides the taxpaying public along racial lines when they should be united in pursuit of taxpayer justice for a majority black community in need. Besides, such terminology markets Memphis to the world as backwards in 2020. And while appropriate for the history books, institutionalized racism in current day local Memphis governance cannot be proven.

Connecting the Dots

At the same time, institutionalized elitism in local Memphis governance can be proven. The straightforward proof comes from connecting the dots between the racially diverse public-private complex and its resulting product. The public-private complex consists of local government, tax abating boards and non-profits.

Elitism is most evident in the primary beneficiaries of the public-private complex in the elite small few. And to the extent that elements of elitism exist elsewhere, its far worse in Memphis when benchmarked against other cities.

Further, several players exist that allow elitism to persist, on the back of a majority black community in need in its authors, overseers and enablers. Some of these players are examined below:

Local governmental bodies that oversee and look the other way as taxpayer funded economic and workforce development efforts go unmeasured. The former occurs as $50 of $120M in annual recurring economic development tax incentives can be shown to be in excess when benchmarked against both research and tax incentive awards in other peer cities. To make the excesses even more unnecessary, Memphis already delivers some of the lowest business operational costs in the county.

Memphis Tomorrow facilitated botching of the workforce development system over a 5-year period while local small business solutions to fix the problem were systematically dismissed. The former results in deficient employment, wage, business and tax revenue growth. Memphis Tomorrow is the top CEO organization in Memphis that is down in all its selected categories over almost 20 years while their initiatives use your Federal, State and Local tax dollars.

While benefitting from excessive tax incentives and taxpayer injustice that undermines the tax base, in a majority black community in need , local elitists “smoke their own dope” participate in pageantry and serve on the National Civil Rights Museum Board (NCRM) Board. The NCRM has not generated any local public policy positions since the one that supported the symbolic gesture of taking down confederate statues 3 years ago.

A local press corps that chooses to not write about even the possibility of excessive tax incentives for the benefit of the small few occurring on the back of a black community in need. Proving excessive incentives can be done in a variety of ways. The simplest, is pulling the 2019 State of TN Comptroller  report which documents tax abatements across the state. The report reveals that Shelby County has 512 parcels under payment-in-lieu of taxes (PILOT) contract, Davidson 35, Knox 68 and Hamilton 37.

A Public University of Memphis, while in partnership with the Economic Development Growth Engine (EDGE), does not exercise thought leadership regarding economic development. One example of the former was, without explanation, the discontinuation of economic development measurement under the UofM Memphis Economy project during the 2019 City Mayoral election. Among other items, such measurement could have served to debunk claims of competitive momentum which would typically inform course correction for community benefit.

Of course, when connecting the dots and reporting on the above, enablers of elitism question one’s clarity in communication as well as their methodologies. This tactic is a common one while at the same time uncommon in American cities is the existence of runaway elitism coupled with an unmeasured public-private complex that is down in all its categories over almost 20 years.

And uncommon further, is a racially diverse and elitist public-private complex that feels no accountability to course correct when taxpayer funded work goes off track while the small few benefit. This reality is a design for community decline.

Solution: Community Actualization through Taxpayer and Social Justice

As one can see, the Memphis taxpayer is disconnected from reality. Without measurement, public university thought leadership, press and governmental oversight, the Memphis community is ignorant as the small few benefit on the back of a majority black community in need.

To that extent, non-traditional education, such as this blog, becomes necessary while knowing social justice will never happen without prerequisite taxpayer justice. Given this, public measurement provides the best opportunity to educate the taxpayer in a majority black community in need. With the aid of public measurement, a supporting framework is the Hierarchy of Community Actualization. The hierarchy, as shown above, prioritizes taxpayer justice for all in a majority black community in need.

Properly monitored social justice programming comes in addition to taxpayer justice for target populations. An example of social justice programming would be Minority Women Business Enterprise and Locally Owned Small Business (MWBE/LOSB) programming targeting small, less established businesses on the margin and not highly established businesses or businesses with locally affluent individuals at the helm.

Equipped with public measurement, taxpayer advocacy for all becomes the norm, in a majority black community in need, away from divisive and false claims of institutional racism in current day governance. The former work occurs, while checking runaway elitism using public measurement that all can understand. In this way and through public measurement, taxpayer and social justice can proceed with community actualization in mind. 

I apologize to The Shelby County Trustee’s Office for asserting that a file had been changed compromising local transparency. After a 4 hour investigation, I discovered what I had done wrong in saving the 2018 Trustee Report on my computer which caused the file to not convert to Excel. 

To that extent, I am protective of the integrity of the Trustee PILOT Report and have witnessed other authoritative public data sources compromised and feared it may be happening again. Again, I apologize The Shelby County Trustee’ s Office. 

With that said, significant County administered opportunities exist for improving local public-private measurement and transparency of the economic development space given the significant taxpayer investment where LOSB solutions exist. 

I do not apologize for the following regarding the persistent prosecution of runaway elitism. 

• Asserting bogus PILOT projection accounting
• Botching the workforce development system
• Asserting excessive incentives occurring on the back of a community
• A $1.7M misappropriation by a local abating board

Thank you. 

First the annual Shelby County Trustee PILOT report is an invaluable authoritative data source for which the Shelby County Trustee’s office should be commended. As a data source, it provides taxpayers with a County wide view of payment-in-lieu of taxes (PILOTs) programming. Without the report, taxpayers are blind. 

The report is produced by the Trustee’s office originally in Excel and then converted to PDF for web based publication. Commercially available software allows taxpayers the ability to convert the report back to its original Excel spreadsheet version which is what I did with the report in December. For research and analytical purposes, Excel allows users to sort and perform calculations. 

But for some reason, a newly posted 2018 Trustee PDF report no longer allows the user to convert to Excel. This obstructs taxpayer analysis and results in the user having to transcribe over 10,000 fields to Excel which would take a community researcher some 4-6 months. Its my guess the file conversion was authored within the bowels of County government and not by the Trustee Administration. My experience with the compromised data source can be seen in the video above.  

The Trustee staff has always been helpful and transparent with my requests but I wanted the community to know of the type of manipulations that routinely occur somehow that obstruct transparency and inquiry. 

Its the type of obstruction the local elitist would in fact support. After all, the community is disconnected from reality on several fronts while blind to the total amount of total annual tax incentives occurring throughout Shelby County and its municipalities. Excel allows for estimates to be made through calculations as many of the abating boards do not publish anything that would accommodate a global Shelby County view of tax incentives. 

Further, the elitist have authored bogus accounting for 8 years with EDGE to justify excessive incentives for the small few while bothcing the workforce development system and administering MWBE programming seemingly to benefit highly established and in some cases affluent companies. Given this pattern of behavior by the elitist, this obstruction is the type the elitists would author to disconnect the community from reality in knowing an estimated total of excessive corporate/real estate incentive amounts.

Solution 

Given this obstruction, the following specification is being requested for the 2019 Annual Shelby County Trustee PILOT report. 

Publicly downloadable and user unprotected 2019 Trustee PILOT report with individual fields populated in Excel

Fields – PILOT Owner, Property Owner, Abating Board, Board Parcel Number, County Parcel Number, Begin Date, End Date, Assessment Taxes, Contract Taxes, Difference

Report Tabs – Summary, ICC Contrcts, IDB Board Contracts, IPH/IHE/IMC Contracts, Debt Service Contracts, Contracts, Aged by Expiration Date and Delinquents.

TIF report available in Excel with above specified populated fields. 

While the above minimum requirements will get taxpayers by, given an estimated $120M in annual estimated incentives, a more robust measurement solution is need to inform taxpayers. A County administered web based application is needed for consolidated tax incentive management for multiple abating boards that would facilitate PILOT sizing, PILOT contracts, MWBE compliance tracking and etc. 

While in the throws of the Coronavirus, runway elitism persisted at the EDGE Board on Wednesday for the benefit of the small few. Citing competition with Southaven, MS., the racially diverse EDGE Board unanimously approved an excessive and sick $2.4M DHL PILOT to retain 105 already existing low wage warehousing jobs. 

The DHL PILOT award violates, just about, every leg of the Brookings FOCUS Economic Development plan while exploiting the taxpayer in a majority black community in need. The problem is, like workforce development and so many other plans in Memphis, the FOCUS plan was never implemented or measured.

Had the plan been implemented, the DHL PILOT would not have even been considered as one of the FOCUS plan goals was to “Diversify the Economy Beyond Logistics”. Incenting the retention of low wage warehouse jobs is anything but the former while in competition with Southaven, MS., which also violates the regional collaboration leg of the FOCUS plan. See below graphic taken from a FOCUS Plan document:  

The fact is that this DHL incentive is another real estate deal and not economic development. The package mirrors in many ways other excessive EDGE job PILOT real estate deals such as LeSaint Logistics and Mark Anthony Brewing.

All of these deals abated taxes on existing property, which is expressed through EDGE’s community reinvestment credit (CRC) program in exchange, unfortunately, for low wage warehousing jobs in these cases. These elitist real estate deals are unjust to the taxpayer in a majority black Memphis community in need. 

Some Facts About the DHL PILOT

An excessive $2.3M will be transferred from a Memphis community in need to a $69 billion dollar DHL company headquartered in Bonn, Germany and a real estate landlord located in Atlanta, GA. 

Had the jobs been retained in Southaven, MS. there would have been virtually no job loss for Memphians.  

By abating taxes on existing property, which cost taxpayers $1.2M, EDGE increased their fee revenue by more than 100% from $57K to $117K. 

Conclusion

Runaway elitism, carried out by a racially diverse public-private complex, continues in the midst of the Coronavirus while feeding on a majority black Memphis community in need. The winners are a $69B DHL company headquartered in Bonn Germany and a real estate landlord in Atlanta, GA. Oh well. So much for taxpayer justice in an impoverished Memphis community in need…..

Currently, I am writing a white paper entitled “The Problem is Elitism; Not Racism – The Case for Taxpayer Justice”. The paper will conclusively prove that current day imbalances are being accelerated by elitism and not racism. This is important because spending time and energy on solving the wrong problem can result in more of the same while distracting from problem root cause. 

In the meantime, as I complete the white paper, I am rolling out some data tools that will be used in the paper. The “Hierarchy of Community Actualization” will be the conceptual basis of the white paper where social justice along with fiscal conservatism informs taxpayer justice.

Next, I am launching a locally owned small business innovation in the MWBE Dashboard measurement platform. The platform can be accessed by clicking on the MWBE button at the top of this page or accessing http://mcclmeasured.net/mwbe.

Both, The Hierarchy of Community Actulaization and The MWBE Dashboard are scary in their simplicty. Both are designed to help Memphis evolve out of the stone age through public measurement and effective governmental oversight. 

The National Civil Rights Museum (NCRM) is a world class tourist attraction. I know. I have been 4 times and taken visitors from NYC who frequent museums that were blown away by the high quality NCRM production. 

At the same time, the NCRM is not a local social justice activist organization. Over the weekend, Terri Freeman wrote in the Daily Memphian about the possibility of a new national initiative for the impoverished. But sadly, in it’s hometown, the NCRM lacks a local agenda to combat poverty. They stay out of the fray on such local questions. And if the NCRM decided to enter the local debate as a social justice organization, they would find themselves taking on their very own NCRM Board and Memphis Tomorrow founder, Pitt Hyde.

Memphis Tomorrow is a corporate CEO organization that is down in every category over 20 years while their initiatives use your Federal, State and Local tax dollars for community betterment. The fact is that in a majority black community in need, true social justice starts with taxpayer justice. And unfortunately, in Memphis, so called “social justice” and marketing initiatives hog the news cycle where taxpayer advocacy should otherwise reside. Social justice marketing and initiatives, in many ways, are locally mistaken for taxpayer justice. If Memphis is to move forward, in a majority black community in need, social justice starts with taxpayer justice. 

If one just scans the NCRM Board of Directors one will see a plethora of companies that benefit from excessive corporate/real estate incentives on the back of majority black community in need. Or one will find organizations that don’t need the help, that have benefitted from MWBE programming. This local economic development and social justice programming is largely birthed out of the archaic and highly deficient Memphis Tomorrow organization while being accommodated by a lack of local legislative oversight. 

The overarching problem in Memphis is not racism but runaway elitism. Unchecked runaway elitism is carried out by a vast and racially diverse Memphis Tomorrow public-private complex where fundamental social justice in the form of taxpayer justice does not exist in a majority black community in need. 

To gain a better understanding of social justice marketing, we will pose some questions to our moderators Farmer Joe and Church Lady.

When Nike discontinues the sale of the Betsy Ross sneaker, is that social justice?

No sir. That is marketing. Nike, a so called “social justice” company, annually transfers an excessive $4.5M in corporate incentives from one of the most impoverished areas of the country in Memphis back to one of the least impoverished areas in Portland, OR. And to make matters worse, Nike has neglected to regularly report MWBE spend to EDGE, which at this late juncture, anything that they might now report, would likely be highly questionable. 

Is MWBE programming social justice?

Well, isn’t that special. MWBE programming in Memphis is a marketing tactic to justify excessive corporate/real estate incentives for the benefit of the small few. Further, upon investigation, the primary beneficiaries of MWBE programming are long standing, well established and in many cases affluent local entities. Some of these companies do not even reside in Shelby County. 

Are Pitt Hyde and Fred Smith community visionaries ?

No Sir. Pitt Hyde and Fred Smith are elitist corporate socialists. Their influence and power has resulted in a rigged system that serves the small few, accommodated by a lack of local governmental oversight and stone age measurement tools that have resulted in community ecosystem decline. 

Conclusion

Before there is social justice, there must be taxpayer justice to serve a majority black Memphis community in need. 

FEBRUARY UTILITY BILLS

In this analysis, 66% Higher Total Utility Bills in North GA  Chattanooga, TN area over Memphis. 

• MLGW Memphis – $209
• February North GA Utility Bill – $348
  • Scana Gas – $211
  • Georgia Power {Electric} – $80
  • Ellijay Water – $57