Without credible accountability and measurement regarding community development initiatives, an investigative press and financial advocacy for the taxpayer from the business community, Memphis does not have a chance in competing as a community ecosystem.
As an example, just consider the unfulfilled promises of Memphis Tomorrow of a better tomorrow and the low quality of life ratings in poverty, crime, education and slow economic growth for Memphians. Memphis Tomorrow, founded in 2001, is a community development organization represented by the top Memphis CEOs focused on public safety, economic and education / workforce development. Many of Memphis Tomorrow initiatives are implemented through a local and growing web of often taxpayer supported 501c3 non-profits.
Close examination of the Memphis Tomorrow Executive Committee Fast Forward project launched in 2011 in the areas of public safety, economic and education/workforce development reveals an estimated $124M recurring annual Memphis/Shelby taxpayer shortfall based on the following results:
- Increase in violent crime of 25.6% since 2011 per the Memphis Crime Commission Report. Estimated recurring annual cost to taxpayers $48M.
- Lagging total wage growth from 2010-2016 of 5.7% when Shelby County is compared to its county peers’ average as identified by The Memphis Economy using the Bureau of Labor and Statistics program of Quarterly Census of Employment and Wages (2016 is the last full year of QCEW published results). Estimated recurring annual cost to taxpayers $47M + $22M due to incomplete and arguably irresponsible accounting of retention PILOTS by the EDGE Board for a total estimated recurring annual taxpayer shortfall of $70M.
- Challenged education and workforce development efforts with the Greater Memphis Alliance for Competitive Workforce board takeover in April of 2017. Estimated annual recurring cost to taxpayers $15M.
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Further, a local press report of $1.1 Billion in new tax revenue generated by the Economic Development Growth Engine (EDGE), another Memphis Tomorrow Fast Forward 2011 launched initiative, raises questions. Close examination of EDGE data found at http:// database.growth-engine.org/search-results/pilots/ reveals the following:
- $800 million of the reported $1.1 billion was already existing revenue in the form of retained jobs resulting in only $300 million in new revenue generated; an $800 million reported overstated difference.
- New revenue calculations, are derived from job retention/expansion Payment In Lieu of Taxes (PILOT) analyses. With regard to the retention PILOT component, these analyses do not account for the tax benefit of a remaining skilled workforce upon a company departure or forgone tax benefits if tax abatements were otherwise invested in jobs to directly support the local community in police, education, workforce and transportation. This lack of complete accounting further depresses the above mentioned $300 million in new revenue generated.
- An alarming trend for PILOT renewals like Pfizer and Technicolor. Alarming because PILOTS are often initially sold based on the resulting tax benefit for taxpayers when the 10-15 year PILOT ends.
While the above points challenge the accounting used in justifying retention PILOTS (tax abatements for existing private sector jobs), a recent study entitled “Unfulfilled Promises” published by The Economic Institute takes issue with expansion PILOTS for lower wage warehousing jobs with a focus on Amazon. Different from retention PILOTS, expansion PILOTS provide tax abatements to accommodate new job expansion. The conclusion of the study states, “We find that opening an Amazon fulfillment center does lead to gains in warehouse jobs in a county, but does not lead to gains in overall county-level employment.”
At a minimum, this finding would call into question the use of economic multipliers commonly used in local EDGE economic impact studies in relationship to lower wage warehousing jobs to justify tax abatements. Economic multipliers are used to show the increased local employment that would result directly and indirectly as a result of new job expansion in the local economy. The use of these multipliers in economic impact studies results in an increased forecasted tax impact for the local community over and above the impact of the direct expansion jobs of the corporate PILOT beneficiary. This increased forecast provides a financial justification for larger tax abatements.
Unfortunately, financial advocacy for the taxpayer has been lacking from the business community which would draw into question the accounting procedures used to derive the reported and grossly overstated $1.1 billion in “new revenue generated”. This as taxpayer funded non-profit community initiatives come and go getting the same declining results with the same players at the table.
When connecting the dots, the lack of credible measurement, an investigative press, business community financial advocacy and subsequent non-profit 501c3 execution for the taxpayer provide a cultural foundation for community decline. This cultural foundation arguably deprives the taxpayer of community benefits like safe streets, proficient workforce, adequate public transportation and competitive economic growth. Those very assets that retain and attract new jobs.
Sadly, in this case, it starts in Memphis with corporate community leadership in Memphis Tomorrow. Something needs to change, because Memphis Tomorrow has not delivered a better tomorrow for Memphians.