Public Safety and Real Estate Values – $3.3B in lost real estate values and $48M in lost potential Memphis/Shelby tax revenues
In the article Interactions Between Crime and Schooling in the Housing Market a study from Florida State University is cited that shows for a 1% increase in violent crime rates, holding all other factors constant, housing prices decreased by .25%. Given this reference, a 25% increase in violent crime as reported by The Memphis Crime Commission would have a 6.25% negative impact on residential real estate values. In this case, we will substitute the median for the mean to come up with an estimated value of lost value in residential real estate values due to an increase in violent crime using census data. There are 406,022 housing units with a median value of $132,200 in Shelby County. Let’s do the Math. 406,200 x $132,200 x 6.25% = $3,356,227,500 in lost real estate value in Shelby County due to a 25% increase in violent crime from 2011 or $8,262 per residential unit. As it relates to tax revenues, using a blended Memphis/Shelby County rate of $5.74 potential lost Memphis / Shelby County tax revenues can be calculated as follows: ($3,356,227,500/100) x 25% x $5.74 = $48,161,865.
Lagging Growth Rate 2010-2017 -$46,960,184 annually recurring tax revenue shortfall
The lost tax revenue calculation for the lagging growth rate uses data from the Bureau and Labor Statistics . In this analysis, Shelby County’s 15 county peers are compiled as identified by the University of Memphis and The Memphis Economy. The average growth rate for total wages paid from 2010-2017 for all of the counties to include Shelby County in the peer group was 28.2%. Shelby County’s growth rate was 21.2% which is 7% deficient of the average. So lets do the math. In 2010 total wages paid by employers in Shelby County were $22,258,167,000 x 1.28.2 (peer average wage growth for 7yrs) = $28,530,518,460 would have been the total wages had Shelby County Wage growth been average. $$28,530,518,460 – $26,965,179,000 (2017 total wages)= $1,565,339,460 in deficient wage production versus peer averages. Next to derive the resulting deficiency in Memphis and Shelby County tax revenues an approximate 3% rate used by EDGE in their economic impact studies is applied to produce the following calculation. $1,565,339,460 x 3% = $46,960,184 in Memphis and Shelby County tax revenue shortfalls.
Incomplete Accounting by Business Leaders – $881M EDGE revenue overstatement / $178M total projected or $14M annual taxpayer loss
The Memphis Commercial Appeal reported on 1/19/18 $1.1B in “New Tax Revenue” generated by EDGE. Closer examination of EDGE data reveals a much lower number of revenue generated. Approximately $800M in revenue of the $1.1B reported “new revenue” generated was already existing revenue. Next the economic modeling irresponsibly assumes that without a PILOT that provides a tax incentive for the retention of jobs, ALL of the companies will leave Shelby County and pay 3 to 10 times more in relocation and operation disruption cost of a PILOT benefit in an alternate location to leave Shelby County. The truth is nobody knows the exact probability of a company departure without a retention PILOT but its safe to say that 100% of the companies will not pay 3 t0 10x to disrupt operations and move. Next, should a company depart, a significant portion of the workforce will remain behind and part of the tax base. Some will work somewhere else, go to school, start a business, retire or etc. So a projection for the value of the remaining tax base needs to be modeled into EDGE economic impact studies. Finally, the tax benefit of investing tax dollars directly into the local community in the traditional areas of public safety, transportation, education and etc. must be considered. In this modeling analysis, an expansion PILOT for new jobs of existing local companies and remote companies would remain in place.
So let’s do the math against the EDGE retention PILOTS first assuming that 60% of the companies would avoid the hefty disruption and relocation costs without a retention PILOT and would remain in Shelby County. Revenue Calculations $811,449,560 – 486,869,736 (Stay in Shelby County) – $133,507,880 (Retained Workforce) – $260,770,547 (Tax Benefit of Investing in Community) = (69,698,603) revenue loss. Next, lets add in non-retention PILOT revenue. 331,886,390 – 69,698,603 (retention PILOT revenue loss) = $262,187,787 in new EDGE revenue. This modeling results in EDGE overstating new revenue generated by $881,148,163. Finally, lets apply the new revenue figure against the abatements to arrive at a net impact figure for Memphis and Shelby County taxpayers. $262,187,787 – $440,513,595 = (178,325,808) loss to taxpayers or on an annual basis (178,325,808)/12.8 (average retention PILOT length) = ($13,931,704) Memphis and Shelby County Tax Loss.
Another way to consider the potential benefit of a retention PILOT strategy in context with peer averages would have been through above average growth rates. Had Shelby County experienced above average total wage growth rates of approximately 26% or equal to that of Jacksonville Florida’s Duval County, the retention PILOT strategy would pay for itself through increased wage growth and resulting tax revenue. It is assumed that the goal of EDGE retention PILOT economic developers had to be above average growth rates in order to serve the community development needs of Memphis and Shelby County.
Greater Memphis Alliance for a Competitive Workforce (GMACW) No Sense of Urgency – $15M
Covered in detail on the GMACW page, with proven domestic expertise, 60,000 more could have been served with career development services. This would have resulted in an increased educational and training completion rate of approximately 10%. Lets do the math. 6000 greater completions x 2.3 (EDGE Multiplier) = 13,800 filled jobs. 6000 X $15,000 job filled or higher wage for higher level training = $90,000,000 in increased wages. 7800 indirect x $53,000 (Avg Shelby County Wage) = $413,400,000 for . Total increased wages $503,400,000 x 3% (EDGE tax rate) = $15,102,000 in lost tax revenue in the pipeline.