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….

Just a quick note before getting started. I think that picture of Beverly Roberston pops on my website. Maybe she will be featured regularly ! Anyway….

No one is really talking about the elimination of tax incentives for industry recruitment and meaningful local business expansion. In fact, it’s the belief of this blog, that while Mayor Harris laid down a needed political marker, he doesn’t practically believe in the end to all incentives. All too often, those that are for incentive reform are labeled as anti-business which could not be further from the truth. The fact is that excessive incentives undermine the societal foundation on which commerce thrives and are therefore bad for business.

The Greater Memphis Chamber’s Beverly Roberston’s Daily Memphian opinion piece and Mayor Harris’s political marker both avoid the question of needed incentive reform and more importantly  the establishment of a  platform for a massive philanthropic ask for socialistic corporate welfare excesses afforded through so called “economic development” incentives.

It’s true, per Roberston’s piece, that elected officials don’t technically understand incentives which creates problems for critical incentive evaluation and reform. And the press has been wholly ineffective in covering incentives because they don’t understand them either or they are trying to protect Memphis Royalty from being exposed  for their excesses that have fed on the taxpayer and a community in need.

This blog is about measuring the effectiveness of the FedEx/ Memphis Tomorrow corporate community leadership complex and quantitatively educating the public on such matters. The incentive discussion is most often all or none and without effective quantitative context which this blog will address and consistently addresses with regard to public-private initiatives while proposing solutions.

The Big Untold Story

The big untold stories in the press related to incentives are 1) critical evaluation of the EDGE retention PILOT program which also affords a critical evaluation of EDGE overall making the Electrolux story a nothingburger 2) Rules not being followed in for example the recent ridiculous Mark Anthony PILOT award or minimum payments not being collected from Electrolux per the published schedule even after the huge abatement and 3) the lack of scheduling for the review of 9 other abating boards per Shelby County Commission resolution.

Roberston’s column identifies examples of three PILOTs in Mimeo, Indigo Ag and FedEx Logistics that can be defended as responsible incentives although the FedEx incentive was arguably excessive overall while still benefitting taxpayer. And there are other incentives that can be defended. Reid Dulberger in public hearings will often cite Evergreen and WM Barr. But citing those incentives, tells only part of the story of an excessive socialistic corporate welfare culture that has undermined true economic development in public safety, transit, workforce and small business development.

And besides Memphis 3.0 identified small business and workforce development as the keys to economic growth while referencing a decrease in industry relocations. The only way out of the economic development conundrum is for Memphis corporate royalty to engage those people and small businesses that they have shut out for years through policy and closed Crump culture obstruction as found in the FedEx/Memphis Tomorrow economic development product. Incentive reform provides that pathway which indirectly results in incentives for small business that depend on public resources for their success.

Robertson knows that the Crump era FedEx/Memphis Tomorrow complex has stifled local small business solutions over 4 years to connect local workforce development efforts on the back of a Canadian contract award costing taxpayers $10-15M per year. This results in legislators currently working blindly to connect workforce development efforts while not engaging the work on the ground and punting to yet another pageantry event in a “workforce summit” as corporate welfare roars. Whatever…..

Socialistic Corporate Welfare – EDGE Evaluation

Socialistic corporate welfare imposes capitalism on small business as Memphis Royalty enjoys the benefits of taxpayer funded socialism. Again, no one is calling for the end of all incentives but incentive reform is needed which requires critical evaluation.

Like the findings of this blog related to the EDGE retention PILOT program, the local Memphis press has yet to cover the Beacon Center of Tennessee Report  involving the incomplete and bogus accounting of the EDGE retention PILOT program that was used to justify excessive wealth transfers from a community in need to local corporate/real estate interests. Unlike Electrolux, which was a significant but unfortunate loss, the retention PILOT program over an 8-year period is systemic and deliberate in imposing excess wealth transfers on Memphis/Shelby taxpayers.

A retention PILOT abates taxes for an existing business for existing jobs to keep operations in Memphis/Shelby County while allowing real estate investors to lock in long term leases while using bogus incomplete accounting to justify the PILOT award. Its indefensible projection accounting that could not be defended by Fred Smith, Pitt Hyde or Warren Buffett on their best day.

With, in a sense, collaboratively competing evaluation models, both this blog in MCCLM and Beacon evaluation models reveal incomplete projection accounting which has gone to justify excessive tax abatements. The MCCLM model uses a probability model and considers lost economic impact opportunity costs of public investments while Beacon uses a model to evaluate the net impact of new revenue as afforded by the tax incentive.

Unlike the incomplete bogus EDGE projection accounting, The MCCLM method fully accounts for 1) some probability of retention without a retention PILOT but with an expansion PILOT thus allowing the corporation to avoid massive relocation costs 2) economic impact of remaining workforce should a company depart and 3) economic impact lost opportunity costs that come as a result of the retention component of the abatement.

The published Beacon Study used only a partial sampling of EDGE retention PILOTs. The table below extends the Beacon accounting methodology across all retention PILOTs to derive competing methodology findings for the excessive and socialistic corporate welfare retention PILOT program. The findings are as follows:

EDGE Claims a $664M gain from retention PILOTs

MCCLM effectively confirms common sense that abating taxes against the existing tax base is a direct tax loss in a $253M loss resulting in a $917M EDGE projected revenue overstatement

The Beacon methodology finds a $95M loss resulting in a $759 EDGE projected revenue overstatement

Adjusting EDGE revenue accordingly, the MCCLM method finds that the entire EDGE PILOT program, to include expansion PILOTs, is operating at a $115M projected taxpayer loss and the Beacon method finds $43 gain. EDGE claims a $802M gain.

As the EDGE Scorecard, in this case, has been rendered a useless piece of propaganda, a new EDGE Board is needed and away from the Crump Machine tactic of the same people at the table as championed by Richard Smith. The same people at the table is just another example of the FedEx/Memphis Tomorrow economic development product and closed system in the midst of sluggish economic growth results.

Practical Incentive Reform

So, as the extremes of all or none incentive positions do little to advance the technical conversation around practical incentive reform that considers the entire business community and the taxpayer, the following pro-business incentive reform recommendations can be made:

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

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 the other 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

Conclusion

Again, no one is for the end to all incentives in the current economic development climate. But a new EDGE Board is needed after 8 years and incentive reform is paramount.

The only way out of the Memphis economic development conundrum is by engaging the work of true economic development as opposed to masquerading incentive awards as economic growth. This will involve huge philanthropic contributions by Memphis Royalty to pay the taxpayer back for excessive socialistic corporate welfare policy encroachments and to engage those very people and small businesses that they have shut out for years.

Unfortunately, after a year, there still is no economic development plan or measurable definition for economic development. And its going to be challenging to implement a platform for measurement that communicates the current state of affairs in a “Momentum At All Costs” backdrop. But we will see. So far, it looks to be, more of the same……

You, the taxpayer are paying for a corporate welfare party and nobody knows the cost ! A million here, a million there; who’s counting ???

This blog has stated that the Electrolux loss is small potatoes compared to the EDGE retention PILOT accounting nightmare and what should be forthcoming in the Shelby County Commission’s evaluation of 9 other tax abating boards per a recently passed resolution. The EDGE retention PILOT program is estimated to cost taxpayers $200M while being reported as a $600M gain by EDGE. This type of programming undermines the societal foundation upon which commerce thrives while exploiting a community in need and exploding inequality within the FedEx/Memphis Tomorrow economic development complex.

But this  blog is about Electrolux press reporting and underpaid taxes on PILOT agreements which are reduced property taxes for corporate/real estate interests. Payment – in -lieu of taxes (PILOTs) are always labeled “economic development” even if they’re not. With all types of numbers flying everywhere, current press reporting on the Electrolux incentive package would leave anyone’s head spinning. Reporting, across multiple media outlets, reveals an inconsistency and a taxpayer cost range regarding the total state and local Electrolux incentive package from $170M to $228M, a $58M range ! But no one seems to know the exact cost of this corporate welfare party paid for by you, the taxpayer.

And if that is not enough, recent reporting in the Commerical Appeal reveals that Electrolux underpaid taxes on an already significantly reduced tax liability as afforded by the PILOT agreement. The CA reports Electrolux paid $500K in taxes in 2018 which would result in a $100K underpayment on annual property taxes that were already reduced by $2.7M per year based on an analysis of the Industrial Development Board’s Project Summary. PILOT payments, per the project summary payment schedule, should have been $600k and this does not include the under assessed property values that result from Shelby County Assessor staff shortages. So, how many more PILOTs are being underpaid and how much is PILOT property being under assessed ??? Nobody knows…..

Further, the lack of local enforcement of tax collections, per the IDB agreement now administered by EDGE, would coincide with a recent incident where the EDGE Board did not follow their own rules in the Mark Anthony PILOT award. The award resulted in a $1.2M excessive abatement award for 30 warehousing jobs, per EDGE rules, which in the end resulted in a $500k taxpayer loss as EDGE pocketed $51k in fees. Clearly, EDGE does not represent the taxpayer but instead represents corporate/real estate concerns while in pursuit of fee revenue. And, close examination of the Mark Anthony PILOT approval should reveal that this PILOT award was a real estate deal and Not economic development.

True Story and Press Reporting

It’s a true story that this week, the establishment publication in the Daily Memphian reported that Electrolux exceeded its PILOT commitment by 3x as voiced by the tone deaf EDGE. This assertion cannot be grounded in any sort of reality. And it’s also a true story that NONE of the Memphis press outlets reported on the incomplete bogus accounting of the EDGE retention PILOT program found in the Beacon Center of Tennessee study. This reporting leaves the Memphis public divorced from the facts as the corporate welfare party continues, uninterrupted, using taxpayer dollars.

While the lack of a clawback provision has been covered as a criticism of the taxpayer incented Electrolux project, another fact not covered by the local Memphis press is that the project, which consisted of 15 years of abated taxes, did not break-even until year 20 after Electrolux had paid full taxes for 5 years. Breakeven in this analysis includes the $38M abatement. See IDB/EDGE Documentation.

To see the the Electrolux incentive package ranges reported across Memphis press outlets, see below chart. A frequent reader would know that some of the reported amounts do not include the $38M tax abatement which should explain some of the discrepancy. But, while understandable in a fluid environment, the reporting on the Electrolux incentive package value remains inconsistent and confusing to readers which shows nobody really knows the total dollar value of the Electrolux incentive package. A million here, a million there; who’s counting ???

Conclusion

Its unfortunate that nobody knows the estimated cost of the corporate welfare party paid for by you, the taxpayer. Disconnected and understaffed government and inconsistent press reporting leave the taxpayer confused on the economic impact of incentives. This blog attempts to educate the taxpayer on the economic impact or the lack thereof of corporate/real estate tax incentives. Until taxpayers understand the cost of the corporate welfare party, the party is likely to continue, uninterrupted, at your taxpayer cost while undermining the societal foundation on which commerce thrives.

Given the current visibility of Electrolux, which on balance is small potatoes to what has been and not happening in the Memphis economic development space, the below table attempts to quantify the taxpayer cost of the Electrolux project. The table below references employment levels and Electrolux property taxes paid to determine the net taxpayer cost as of 2018 and projected cost through 2020 using these three data sources: Daily Memphian , Commercial Appeal and IDB/EDGE Documentation. Based on this latest analysis, current Memphis/Shelby taxpayer loss of the Electrolux project is $38M while excluding the cost of State of Tennessee incentives.  Memphis/Shelby taxpayer losses are projected to be $26M when Electrolux exits under current conditions.

Opportunities do exist to minimize the stated and scheduled losses below such as going back 2 years and collecting on taxes underpaid and based on new higher property value assessments as well taxes being paid on the property following the departure of Electrolux. Or even better, a new employer for the facility. See below table and email jkent@pathtrek.net if you have questions.

About This Site –  Memphis Corporate Community Leadership (MCCL) Measured

With a special focus on Memphis Tomorrow, MCCL Measured is the first ever and exclusive tool to attempt to measure the effectiveness of Memphis Corporate Community Leadership efforts that use taxpayer money. The site is designed to facilitate financial literacy education regarding taxpayer funded initiatives. Additional videos and resources can be found by browsing the entire site or at http://mcclmeasured.net/resources .

Per Evanoff, Electrolux may only be a bump in the road. Electrolux is only a bump in the road when compared to the cultural restraints of the closed FedEx/Memphis Tomorrow governed economic development complex that has successfully stifled economic growth for years. The closed system even culturally permeates local legislative bodies where, now, public proceedings regarding workforce development (Workforce Ad Hoc) have apparently been taken off the public calendar while morphing into  “workgroups” that are not publicly promoted on the County Calendar.

This blog will examine the following:

• Cultural roots that result in a closed economic development system
• Examples of 1 sided corporate / real estate deals that sacrifice economic progress
• Data results of a closed economic development system

Rigged System

Electrolux is just the tip of the iceberg in a long list of  overused and excessive 1 sided corporate/real estate deals to the disfavor of the Memphis/Shelby taxpayer. Supported by the rhetorical mantra of “economic opportunity for all’ corporate/real estate interests of the FedEx/Memphis Tomorrow complex choke off growth and vitality for a Memphis community in need.

From the top, the Memphis ecosystem is designed to decline through the implementation of 1 sided corporate/real estate deals as true economic development efforts that benefit all in public transit, workforce, small business and site development are dismissed in favor of excessive corporate/real estate incentives for the small few. Connected workforce development efforts have been obstructed over four years by the FedEx/Memphis Tomorrow economic development complex on the back of a foreign contract award at an estimated recurring annual taxpayer shortfall of $10-15M.

While the unfortunate Electrolux outcome gets the headlines, the big untold story is the systemic design of ecosystem decline by the FedEx/Memphis Tomorrow complex that dismisses entire population segments for the benefit of the small few. Both technical and cultural underpinnings of the economic development system, result in a closed rigged Crump system of the 1940’s that does not course correct for community benefit while using federal, state and local tax dollars.

The founders of both FedEx and Memphis Tomorrow were raised during the times of the closed Crump Machine. A closed rigged culture still persists in Memphis which smothers economic progress. The lack of course correction, non-reporting press and legislative oversight underwrite the rigged condition – as the Crump Machine like Memphis Corporate Community Leadership complex that consists of  FedEx/Memphis Tomorrow, Chamber and EDGE goes largely unchecked in the work of economic development.

The lack of course correction by the corporate elite in favor of decline is what proves a rigged state of affairs in Memphis while preserving at all cost the same social construct of economic development players. At the same time, if 1 sided corporate/real estate deals worked for the benefit of the Memphis ecosystem, it would show up in the data. The following sections will discuss 1 sided corporate/real estate deals, dismissed economic development work to the detriment of  all and the outcome data associated with those choices.

One Sided Deals

The following are bi-products of the FedEx/Memphis Tomorrow system and serve as an inexhaustive example listing of 1 sided corporate/real estate deals and dismissed economic development work for a Memphis community in need:

Electrolux deal resulted in $188M in total incentives and $100M in local incentives that did not protect the taxpayer.

EDGE retention PILOT program that went unchecked over 8 years abating taxes 20 local operations while using incomplete bogus accounting to justify excessive incentives against the existing tax base. EDGE realizes existing revenue as a $600M gain while abating taxes against existing revenue. In reality,  abating taxes against existing revenue results in an estimated $200M taxpayer loss when complete accounting is applied. The Beacon Report of Tennessee also provides a reference regarding this bogus practice that goes unreported by the local press and unchecked by local legislative bodies.

Epicenter nonprofit request of a $20M investment of local government pension funds as FedEx invests $10M. Given the size of FedEx’s $24B pension fund, the appropriate FedEx investment would be $144M. This is an example of a 1 sided corporate deal that threatened to raise the risk profile of government retirement fund by an inordinate amount compared to raising the risk profile of the FedEx retirement pension fund. The FedEx/Memphis Tomorrow complex has traditionally supported a web of nonprofits while the local business culture does not support transacting with small business. The Epicenter ask comes before even a simple ad campaign that would advocate for local small business support.

Residential PILOTS that are only permitted in Shelby County in all of the State of Tennessee, when locally implemented by EDGE, allowed developers to benefit nearly twice as much as Memphis/Shelby taxpayers from residential PILOTs while walking away with $19M in abatements. That is $19M more than developers would have received in any of the other 94 counties in the State of Tennessee. At any rate, it seems Memphis/Shelby taxpayers should have benefitted as much as the developers.

Poplar TIF – Awarded tax increment financing to the most affluent area of the City on the baseless claim that it would create 7,000 jobs.

Mark Anthony EDGE PILOT, approved in November 2018,  that abates $2M in existing taxes resulting in a $500K taxpayer loss as EDGE rewards themselves with $51K in fees. This shows that EDGE is incented to conduct transactions for the company while not representing the taxpayer. Close examination of the project summary reveals that the EDGE Board did not follow their own rules by applying the “Tax Incentive Eligibility Analysis” which would have resulted in the $2.3M total abatement being reduced by $1.2M.

One sided corporate/real estate deals are a hallmark of the closed  FedEx/Memphis Tomorrow economic development complex which leave Memphis further behind in a global economy that is largely cradled in Memphis, Tennessee.

True Economic Development Dismissed

The deficient Memphis Corporate Community Leadership complex dismisses entire Memphis population segments by neglecting the following core areas of economic development which hurts the overall business community to include small business.

Disconnected workforce development efforts through a lack of course correction and on the back of a foreign contract award that under-served 60,000 learners over a 4 year period. This results in a recurring estimated Memphis/Shelby taxpayer loss of $10-15M

Lack of advocated Memphis Corporate Community Leadership funding solution for adequate transit, 2 years following the release of the Transit Study that identified lack of funding as the primary obstacle to adequate public transit.

Lack of site development activity handcuffs industry recruitment

Dismissed taxpayer funded economic development work when accompanied by 1 sided corporate/real estate deals is a design for decline.

Outcome Data

If 1 sided corporate/real estate deals and the dismission of entire population segments through neglected economic development worked, then it would show up in the outcome data. The following shows the impact of deficient economic development policy and work on a Memphis community in need.

The Memphis Tomorrow CEO organization is down in all of their chosen categories of public safety, workforce and economic development while their initiatives use federal, state and local tax dollars. The Memphis/Shelby tax revenue shortfall is estimated to be $124M in recurring Memphis/Shelby tax revenue shortfalls

The below chart shows Memphis/Shelby percentage total wage growth compared to the average of Shelby County peers. Shelby County total wages paid growth rate trails the average of its peers by approximately 7% with 21.15% total wage growth since 2010-17. Shelby County peers had an average growth rate of 28.18%. Had Shelby County had average growth of 28.18% total wages paid would have been $1.57B higher annually in Shelby County with Memphis and Shelby County tax revenue being approximately $47M higher on a recurring annual basis than it is today.  The tax shortfall is derived by using calculations informed by EDGE. The graph below shows the gap between Shelby County’s total wage growth rate and the average of its peers accelerating at a rate of 1% which equates to approximately $250M in total wage deficiency and $7.5M in additional tax revenue shortfalls per year. The data is sourced from the Bureau of Labor and Statistics Quarterly Census of Employment Wages.

The below graph shows the impact of 1 sided corporate deals and dismissed economic development on the small business sector using the small business vitality index of the American Cities Business Journal who is the parent of the Memphis Business Journal.

A small business vitality index was not published in 2015 so the 101 ranking of 2014 was assumed.  This trend line graph is concerning because typically local economic growth comes mostly from small business. Local small business is less likely to demand tax incentives while further diversifying the local economy. In this Good Jobs First – Small Business study, small business believes excessive incentive programs strain the tax base and compromise community wide services that support small business growth. The following ACBJ links provide the data sources for the below graph with the 2016 rankings contained in the 2017 rankings link: 2012 Rankings  2013 Rankings 2014 Rankings 2017 Rankings.

Conclusion

Given the outcome data and in comparison to Memphis/Shelby peers, Electrolux is just a bump in the road when compared to the closed economic development system of Memphis that favors the small few over economic growth for all. Small business and workforce development appear to be the primary challenges which will require culture change from the top to realize the potential of Memphis for the benefit of customer taxpayers.

In the meantime, Memphis/Shelby taxpayers are saddled with the same closed social construct of economic developers that starve out small business, obstruct needed workforce development services and  kick members out of the Greater Memphis Chamber without cause while rhetorically championing “economic opportunity for all”. The former occurs as economic development efforts seem to strangely revolve around endless planning efforts, sloganism and pageantry while being divorced from any type of data supported reality.

Sadly, culture change will only occur with the support of activism that questions the status quo. This will not sit well with the FedEx/Memphis Tomorrow complex that, on balance, demands positivity regarding the past, which dodges accountability, while asking taxpayers to trust them with their tax dollars for a better tomorrow while having consistently delivered deficient results….

About This Site –  Memphis Corporate Community Leadership (MCCL) Measured

With a special focus on Memphis Tomorrow, MCCL Measured is the first ever and exclusive tool to attempt to measure the effectiveness of Memphis Corporate Community Leadership efforts that use taxpayer money. The site is designed to facilitate financial literacy education regarding taxpayer funded initiatives. Additional videos and resources can be found by browsing the entire site or at http://mcclmeasured.net/resources .

Electrolux Analysis – 2/9/19

With all types of numbers flying around in the press, this is the latest update on the taxpayer loss of the Electrolux project. The table below references employment levels and Electrolux property taxes paid to determine the net taxpayer loss as of 2018 and projected loss through 2020 using these three data sources: Daily Memphian , Commercial Appeal and IDB/EDGE Documentation. Based on this latest analysis, current Memphis/Shelby taxpayer loss of the Electrolux project is $38M while excluding the cost of State of Tennessee incentives and scheduled to be  $26M when Electrolux exits.

Opportunities do exist to minimize the stated and scheduled losses below such as going back 2 years and collecting on taxes underpaid and based on new higher property value assessments as well taxes being paid on the property following the departure of Electrolux. Or even better a new employer for the facility. See below table and email jkent@pathtrek.net if you have questions. 

Electrolux Analysis – 2/5/19

Based on an article in the Daily Memphian on 2/5/19 that rescored the Electrolux IDB PILOT for the number of years of PILOT, this blog used the numbers published in the article which is 530 jobs with increased wages and a capital investment of $321M up from $195M to refigure the cost to Memphis/Shelby taxpayers using this EDGE documentation for the Electrolux PILOT. The findings are that as of now, the cost to Memphis/Shelby taxpayers is $41M and by 2020 it will drop to $34M.

Electrolux Analysis Published on 2/3/19

The common take away from the Electrolux PILOT is that its just another of many one sided corporate/real estate deals laid upon the back of the taxpayer and a Memphis community in need. One sided corporate/real estate deals such as this result from culturally normed deficient corporate community leadership led by the FedEx/Memphis Tomorrow complex.

The outputs of this culture prioritize corporate/real estate incentives for the benefit of the small few over true economic development that improves the social well being of people. The result of these policy pronouncements are deficient wage growth, stifled small business vitality and disconnected workforce development. Disconnected workforce development has persisted in Memphis over 4 years as Memphis Corporate Community Leadership has obstructed course correction and service delivery for 60K learners. These deficiencies are bad for economic development and the overall business community.

The following analysis was conducted using this EDGE documentation where based on EDGE comments, the Electrolux property was added new to the tax rolls. That in effect lessens the taxpayer cost from $100M by $38M to $62M from 2014 to 2020 based on reduced taxes paid and increased taxes to be paid in 2019 and 2020. The Memphis/Shelby taxpayer loss to date on the Electrolux project, assuming Electrolux reaches 60% of its projected employment goals, as of 2018 is estimated to be a $38M loss and by the end of 2020 the taxpayer loss is estimated to be $28M. This analysis does not consider State of Tennessee losses that were also part of the Electrolux incentive package. See analysis below.

About This Site –  Memphis Corporate Community Leadership (MCCL) Measured

With a special focus on Memphis Tomorrow, MCCL Measured is the first ever and exclusive tool to attempt to measure the effectiveness of Memphis Corporate Community Leadership efforts that use taxpayer money. The site is designed to facilitate financial literacy education regarding taxpayer funded initiatives. Additional videos and resources can be found by browsing the entire site or at http://mcclmeasured.net/resources .