Based on benchmarking analysis, all the PILOTs on this week’s EDGE Board agenda are excessive. The most excessive involves the taxpayer nightmare of the FR8 project that abates $2.04M in taxes in exchange for a claimed revenue of $1.97M over 10 years. Problem is the project summary is claiming $372K in already existing property tax revenue as project revenue while abating $1.1M in existing property taxes.

Upon closer analysis and generously accepting EDGE analysis multipliers, the FR8 project as configured,  generates $1.25M  (not $1.97M) in tax revenue and abates $2.04M in taxes resulting in a $790K project deficit when more complete accounting is applied.

The question here with this abatement are taxpayers better off investing $1.1M in existing property taxes in other economic development activities like workforce or in another real estate deal to get low wage FR8 jobs ? Workforce development is the pain point in Shelby County not another real estate deal.

Right Sizing EDGE Abatements

Based on the previous benchmarking study that right sizes PILOTs while abating 50% taxes for new capital investment and 1 % wages for new jobs, the following revisions would occur:

FR8 – $750,000 down from $2,040,000 ($1,290,000 excessive abatement)

Patterson – $2,593,178 down $3,753,798 ($1,160,620 excessive abatement)

Grove Highland – $527,892 down from $763,200 ($235,308 excessive abatement)

Grove Southern – $294,106 down from $423,630 ($129,524 excessive abatement)

Conclusion

While collecting fee revenue for maximum abatement awards, total EDGE excessive abatement for the July 2019 meeting is $2,815,352. These excesses are not about economic development in an already low business cost operation environment when filling jobs trough improved workforce development is the #1 economic development challenge.

Data is a bastard. As it reveals what happens when Memphis/Shelby taxpayer funding is unmarried with the implementation work of community and economic development.

This comes as Memphis/Shelby depletes its budget through excessive corporate/real estate incentives to fix a problem that the city does not have in high business operations costs. The PILOT program overall is  a wealth transfer initiative from a community in need to global corporations that undermines the primary growth agents of any local economy in small business and workforce development. This conclusion is based on a recent WalletHub article regarding the best place to start a business where Memphis ranked 13 out of 100 cities for business cost but 84 overall when ranking the best cities to start a business. The average business cost ranking for the top 10 cities was 31 and 46 for the top 20 cities.

Memphis further ranked 93 out of 100 in business environment. This is the area of a closed business culture that I have been confronting and Leslie Smith of the Epicenter recently challenged in a blog. Probably, the same backwards mind set that surrendered the local music industry to Nashville years ago.

In my experience, the corporate hacks protected a Canadian contract that did not deliver connected workforce development programming while ripping off local small business solutions to fix the problem and transferring those ideas to a billionaire in Nashville. This occurs as 100,000 students in a Memphis community in need have been left with disconnected workforce development services over four years all while strangling business and total wage growth at a Memphis/Shelby taxpayer cost of $30M per year. See below table:

WalletHub – Best Large Cities to Start a Business

As has been consistently rambled on in this blog, Memphis has deficient total wage growth while being underwritten with excessive corporate/real estate incentives and botched workforce development efforts that has resulted in $500M in deficient Memphis/Shelby tax revenues since 2010. At the same time, stunningly, Memphis legislative bodies just cannot figure out why property tax revenues are depleted. Go figure….

What has happened is the hack corporate socialist FedEx/Memphis Tomorrow complex has been successful in selling a Memphis community in need a bag of  “trickle down” goods while promising a better tomorrow for all. It’s a bag of goods that cannot be defended as prudently data driven, on the right as fiscally conservative or on the left while considering income inequality. Its completely indefensible !

But the “trickle down” bag of goods has created a market condition by incenting abating boards to consistently surrender more in commercial property taxes for new development (75%) for corporate/real estate interests than the taxpayer benefit while also in many cases additionally abating existing property taxes. Its a design for community decline all while being justified with a bogus projection accounting platform.

Just this week, on the EDGE Board agenda, as customary, are proposals to consider 75% property tax abatements. The University of Memphis is deploying their political capital in support of two projects on their EDGE partner’s agenda. But, it’s a totally unnecessary deployment, as a 75% abatement is a slam dunk for the EDGE Board as they are incented to maximize the abatement award for themselves. The vote would be unanimous without U of M support.

And, what about the previously announced “target sector” strategy ? Well, there is no evidence of any targeting goin’ on at this month’s EDGE Board meeting as Patterson, another warehouse project, is set to get a 75% abatement. Local economic developers like to “smoke their own dope” and talk about things like “target sectors” but implementation is a whole other story.

Implementation

So what if the public U of M would have independently gone to work as a transformational and data driven economic leader advocating for their Amazon Road Map and credible economic development measurement while supporting that advocacy with  investigative journalism?  It’s likely we would already have an economic development plan with more budget responsible incentives and connected workforce development deployed. But that did not happen under the FedEx/Memphis Tomorrow Board of Trustees.

And, what if EDGE would have executed on their neighborhood, entrepreneurial, small/medium size business development mission as originally presented in 2011 prior to Council/Commission approval ? Well there would be a more robust and resilient small business economy and maybe $200M in less corporate/real estate incentives. But EDGE was not incented to do that. They were incented to serve corporate/real estate interests with large abatement awards while also abating existing taxes.

Or, what if EDGE would have come out of the gate and executed a connected workforce development strategy when they took over GMACW instead of hanging out with Orrin Ingram. Well there would be a connected workforce development implementation addressing the areas’s #1 economic development problem. But it has never been about marrying taxpayer funds with the work of community and economic development. To that extent data is a real bastard.

Conclusion

Here’s the challenge. Memphis corporate community leadership is NOT data driven at all. They are data manipulators content on maintaining the status quo which is why Memphis does not grow. And, it’s sad that Memphians have been robbed of yet another institutional check on local economic development efforts through the area’s leading public research university and the U of M’s FedEx/Memphis Tomorrow Board of Trustees.

Solutions that would likely not change Memphis/Shelby’s business cost profile one bit are on the table regarding incentive reform. That overall solution is 50% abatement on new capital investment, while sustaining current job levels and a 1% abatement on total wages for new jobs while maintaining PILOT investment and term requirements. In a target sector strategy, target industries might get slightly more than 50% while non-target industries like warehouses would get less than 50%. But keep in mind, based on the data, this proposed abatement strategy is fairly liberal as excessive business operating costs are not the problem.

Of course, solutions for connected workforce development have been on the table for 4 years as well. Folks do buy in and propose solutions only to be shut out by a closed economic development system seemingly content with feeding on a community in need. And its true. If economic development investments are not directed to areas of need, the corporate socialists will run themselves out of town while blaming Memphis/Shelby public entities.

Away from PowerPoint presentations and the announcement of new initiatives, in the end it’s about marrying taxpayer funding with the implementation work of community and economic development. If that doesn’t happen, quality of life suffers.

And what about that nagging question of $500M in Memphis/Shelby tax revenue shortfalls since 2010 ? That data point is just one real bastard……

One can tell what the leading area public University of Memphis Board of Trustees cares about as an area economic development partner  based on their local legislative activity and partnerships. The Board of Trustees cares about their Highland TIF, pool renovation, partnership with EDGE and hanging out with Orrin Ingram while stifling small business.

What the U of M Board DOES NOT CARE about is: 1) advocating for their Amazon road map and a measurable definition for economic development 2) expediting connected workforce development for a community in need, 3) bogus projection accounting justifying excessive incentives for corporate/real estate interests, 4) fee revenue for abating boards incenting them to award larger incentives for corporate/real estate interest, 5) maintaining their peer city research standards as a public resource to facilitate objective economic development measurement and 6) investigative journalism that questions real power.

Memphis lacks the institutional vitality to grow resulting in a rigged system with deficient corporate community and university leadership, press and legislative oversight.

This blog overall attempts to educate ignorant educated Memphians that the culturally normed decline by design framework under the FedEx/Memphis Tomorrow complex is far from normal. To do this, the blog creates awareness around often technical subject matter regarding the dismissal of core tenants that support community checks and balances. Checks and balances provide a basis for course correction of taxpayer funded initiatives thereby avoiding persistent decline. But through a lack of check and balances, the FedEx/Memphis Tomorrow complex has, in many ways, invested the community in a culture of decline which the press rarely if ever confronts.

Some have referred to my thematic assertions as “ramblings”. Ramblings are fine with me when it comes to consistently asserting that the FedEx/Memphis Tomorrow complex is down in every category over twenty years –  as their initiatives feast upon Federal, State and Local tax dollars – all while transferring wealth from a community in need to corporate/real estate interests that benefit the small few at a estimated taxpayer cost of $500M.

But back to technical subject matter. Examples of technical subject matter addressed by this blog overall include: 1) bogus EDGE projection accounting to justify excessive corporate/real estate abatements 2) botched workforce development initiatives,  3) benchmarking excessive tax abatements against peer cities and 4) measuring economic development outcomes all of which the local press dare not do….

The Press

Measuring economic outcomes involves comparing Memphis to peer cities based on a collection of city peers as established by an authoritative source like the University of Memphis (U of M). So when the U of M abandoned their publicly available peer city research parameters as they pursue Carnegie Research 1 status without cause, I was taken back.

Given this occurrence, I reached out to Mark Russell at the Commercial Appeal to write an editorial which I have successfully done on 2 previous occasions. Mark openly greeted the offer and said he would edit the piece on the following Monday when he returned from weekend vacation. I thought, while welcoming Russell’s editing, that the piece was a go.

As I was open to edits, clean up and needed clarification which is typical, Russell returned with a completely different tone than I have never experienced. Without any journalistic curiosity, Russell declined to run the piece on the basis of incoherence while newly copying a Dann Miller with a Gannett email address in his communication.

Upon looking up Miller on the web, he is associated with the Tennessean out of Nashville. The shift in Russell’s tone was rather dramatic, signaling to me anyway, that somebody got to Russell. This has happened before when the CA published an editorial of mine only to have Russell strangely come back and edit the editorial with a pro Memphis Tomorrow correction even though I had a reference to the contrary. Here is the entire communication between Russell and me (scroll to the bottom for conversation sequence).

The thesis of the rejected submission was coherent involving the public U of M’s removal of economic development measurement standards, as a public resource, thus robbing the community of a needed system check. Russell dismissed these concerns as “ramblings”.  These ramblings reference the type of core tenants that are constantly being peeled away by local community leaders to sustain the status quo of decline while robbing the community of needed system checks. These systemic manipulations come in the form of mistaken data, bogus accounting, moved goal posts, goal post removal and etc.

All the while, the local press rarely reports on the above, seemingly fearful of questioning Memphis power centers. The only investigative reporting that questions Memphis power centers is being originated by local bloggers and outside organizations like ProPublica and The Beacon Center of Tennessee.

In the meantime, Ryan Poe spent all week analyzing the politics of the Harris veto; seemingly the very politics that Harris cares nothing about. At the same time, no one in the press dare question U of M Board of Trustee leadership after the U of M touted the promise of economic thought and investigative journalistic leadership under the new Board.

At any rate, here are some examples of issues going unreported and/or uninvestigated by local press staff writers:

FedEx/Memphis Tomorrow corporate community leadership complex down in all categories over 20 years while their initiatives leverage Federal, State and Local tax dollars

Botched workforce development system by the FedEx/Memphis Tomorrow complex over 4 years costing taxpayers $20-30M per year on the back of a Canadian contract award while stifling small business (Probably the biggest botch of all since lagging employment growth can be shown as the most costly variable contributing to lagging total wage growth).

Bogus EDGE retention PILOT accounting over 8 years while justifying excessive PILOT costing taxpayers $100M

Excessive job PILOTS costing taxpayers $200M which includes both retention PILOTs above and new job PILOTs (Samuel Hardiman thankfully wrote an article about Mayor Harris concern on this matter but without investigative analysis on quantitative excess.)

Reporting on measurement of the economic development complex vs. peer cities showing below average total wage growth and cost to taxpayers of $250M since 2010

Gutting of public comment in EDGE minutes

Following up with the County Commission on why the evaluation of all 9 abating boards has not been scheduled per the Commission approved resolution

Following up with local leaders on the absence of an economic and workforce development plan as excessive tax incentives continue

Reporting on the configuration of abating boards that are incented to represent corporate/real estate interests over the taxpayer based on being paid fee revenue based on the abatement size 

Conclusion

All of this to say, without needed corporate community and university leadership, press and legislative oversight that questions Memphis power centers, decline will likely continue. But as a wrap up, here is a shout out to Mark Russell through an Allman Brothers song:

Governor Bill Lee,

Can the State take back over the University of Memphis Board of Trustees ? I think it would provide a degree of local independence in matters of local research that would call into question Memphis power centers. Its stunning to see the complete lack of creativity and the just more of the same of the FedEx/Memphis Tomorrow complex assembled as Board under Brad Martin. Dr. Rudd said he answers to the Board. That’s the problem in Memphis. Everyone answers to hack FedEx/Memphis Tomorrow complex…..

Dear Dr. David Rudd,

As The University of Memphis (U of M) pursues Carnegie Research 1  status, it is disappointing to see the U of M Memphis Economy project abandon its 15 peer city economic development research parameters. Such a platform could have provided the Memphis community with an objective and authoritative economic development measurement tool to support community evolution.

What you have done at the U of M in effect, through the abandonment of your research parameters, is removed the local economic development establishment’s peer competitors from the football field, while setting the score back to zero in the 4^th quarter. As you know, your former measurement platform smartly identified 15 peer competitors like Little Rock, Nashville, Indianapolis, St Louis and etc. This platform provided the community with a means of comparing economic growth against peer cities which goes to measure the effectiveness of economic policy and incentives.

The removal of the goal posts works well for your partner in EDGE who has approved some $200M in excessive corporate/real estate abatements for the benefit of the small few while at the same time falling significantly behind their peer competitors in economic development performance. But in typical rigged system fashion, we as a community now have REMOVED goal posts, which unfortunately, culturally sits well locally with missing records and mistaken data within a decline by design framework.

All too often, through a lack of institutional vitality, Memphians are robbed of real facts and news that confronts the status quo of a  rigged system that occurs through deficient corporate community leadership. It seems, always in close proximity to you and others, at the board level, are company representatives from the highly deficient and embarrassing FedEx/Memphis Tomorrow complex. It’s a complex that is down in all categories over 20 years while using Federal, State and Local tax dollars.

Recently in a Mayor Strickland Weekly Update, Strickland attempted to make the case for momentum while disconnecting the community from reality when comparing Memphis to 6 cities. Upon an independent review of the BLS data, its a failed case. Houston showed some weakness, explained through a slow down in the energy sector but still had greater percentage total wage growth than Memphis. Unfortunately, if elected officials and public institutions like the U of M choose to drink the Kool-Aid of a hack FedEx/Memphis Tomorrow complex, it does not bode well for the Memphis ecosystem. Its a complex that has managed to accomplish the following as confirmed by data without an explainable external event:

1. Botched Workforce Development System
2. Stifled Small Business Sector
3. Deficient Total Wage Production
4. No Proposed Funding Solution to Support Adequate Public Transit
5. Excessive Corporate/Real Estate PILOTs for the Benefit of the Small Few
6. Depleted Tax Revenues Required to Attract Economic Investment
7. No Completed Plan or Defined Measurement for Economic Development

We Bought In Too….

It was never a plan of mine to send you an open letter or to publicly confront FedEx/Memphis Tomorrow. This is because I and other community “outcasts” from Memphis Raise Your Expectations (MRYE) believed in the transformational promise of a U of M with their own Board of Trustees. It’s a U of M that came with promises of investigative journalism partnerships through the hire of Marc Perrusquia and transformational economic development work through Ted Townsend. And, we also have the annual Poverty report issued by Dr. Elena Delavega and journalist Otis L. Sanford on staff at the U of M.

We, the “outcasts” believed and bought in to the promise of a transformational U of M. We did this while conducting surveys around and advocating for, in legislative chambers, the brilliantly written Dr. John Gnuschke’s , Amazon Road Map policy pronouncement . But unfortunately, we only saw the U of M in legislative chambers when they were lobbying for local taxpayer funding involving their pet U of M projects and not for community economic transformation.

All of which brings us to where we are today. We in Memphis have no completed plan or measurable definition for economic development as excessive corporate/real estate tax incentives roar while being justified with bogus EDGE projection accounting. Many of the corporate recipients of excessive incentives sit on your board.

The former occurs as true economic drivers in workforce and small business development have been botched over 8 years while funding solutions for public transit are nonexistent. Given these realities, as a result, total wage growth lags the Memphis/Shelby peer growth average and needed local government revenues required to attract economic development are depleted. Depleted and deficient local tax revenue growth since 2010 approaches $500M as a result of failed FedEx/Memphis Tomorrow economic development efforts.

The momentum we have in Memphis concerns subsidized corporate/real estate development for the benefit of the small few and not community economic development.  To that extent, if you are listening exclusively to the FedEx/Memphis Tomorrow complex, the U of M is robbing the community of needed growth vitality and will not be a transformational force; but instead just a cog in the wheel of a rigged system that has stifled economic evolution for the last 20 years.

So, congrats on falling in line with the cultural norm of missing records, moving goal posts, mistaken data and now totally removing the goal posts with the abandonment of a peer city economic measurement platform.

It all comes with an incestuous partnership, which I questioned but overlooked early on between EDGE and The U of M Memphis Economy project. An incestuous partnership, that is just typical of a rigged system within a FedEx/Memphis Tomorrow authored decline by design framework.

In the end, if there is not needed institutional vitality to check the corporate socialists, they will run themselves out of town, blaming public institutions like yourself for an inferior Memphis product. And the U of M, who is going nowhere, will be holding the bag. Better speak up U of M….

PS. Oh, Good luck with your Carnegie R1 designation approval. And tell Richard Smith regarding his concerns for credible measurement, the U of M with the support of the FedEx/Memphis Tomorrow complex just completely mangled objective measurement….

Sincerely,

Joe B. Kent

MCCLM and MRYE