The winners are Patrice Robinson, Martavius Jones and performance of local government. Robinson/Jones should feel confident about their job tax incentive reform proposal made at yesterday’s Joint City Council / County Commission session. See table above. 

Here’s why they should feel confident. The market is set. FedEx is paying $20 per hour w/ benefits and Amazon, without tax incentives after a $200M capital investment, is paying $15 per hour w/ benefits. In present day Memphis, the market does not get any more clear than that, with a sweet spot at $17 per hr.

Through tax incentive reform, Robinson/Jones demonstrated a savvy intuition to strike the right community balance between market forces and public needs, that support increasing tax revenues and wages with a $17 per hour with benefits target. Away from eliminating incentives and futuristic modeling that has historically paved the way for excessive incentives, the proposal is brilliant in its simplicity, balance and alignment with community needs and market conditions.  

The Robison/Jones proposal supports property tax abatements starting at 71% declining  to 30% based on the percentage of jobs paying at least $17 per hour with benefits. The proposal needs more work, as eluded to by Councilor Rhonda Logan. Such work likely includes resolving PILOT term lengths and provisions that check any abatement of already existing property taxes in PILOT awards. Abating existing taxes brings significant opportunity costs, that should require trade off analysis by local legislative bodies. 

Richard Smith of FedEx gave a thoughtful video presentation, calling for more oversight, transparency and accountability, aligned with a published economic development plan, while not “giving away the store” with excessive incentives. Smith seemed, in many ways, hungry for public leadership. Its a public economic development plan that is needed, which has always been the public sector’s job to author.

To that extent, local government staffs, on their own, put together two legislative packages, rich with useful information highlighting excessive tax incentives when compared with other municipalities, references to independent research, tax incentive approval process maps and an eroding EDGE approval process. Local government should gleam with confidence and know they got this !

Over the years, the Greater Memphis Chamber has been unable to author a public economic development plan, which can be explained by the fact that the private sector, not the public is the Chamber’s customer. On the other hand, it would seem that the Chamber would see it in their interest to bring public incentives in line with market conditions. After all, while being a significant consumer of both local public services and and tax incentives, even FedEx, would likely be hard pressed to understand publicly incenting jobs much less than their very own $20 per hour. 

Ultimately, the data compiled by local government staffs reveal a need for tax incentive reform to reverse an eroding job incentive approval process, while not giving away the store. 

Erosion and Process

Page 10 of the legislative package, assembled by local government staffs, revealed significant erosion in the EDGE job tax incentive approval process, with average wages declining, over time, for approved PILOTs. The table, on page 10, is entitled “Countywide Average Wages vs PILOT Projects”. Informed by the table, the chart above graphs, in blue, EDGE’s average wage PILOT approvals over time, with actual countywide average wages, informed by BLS, appearing in orange. 

Erosion is shown with the EDGE average wage approvals declining and in fact, descending below actual average county wages. As far as historic approval process, Councilman Jones remarked that legislative bodies did better than the independent EDGE Board that started in 2011. Jones is correct. 

Further details in the legislative packet document other municipalities requiring local legislative approval. With this possibility looming of a possible return to local legislative approval, Councilman Worth Morgan prioritized speed in the process as preferable, while for the most part, defending the status quo. Morgan also remarked that only gains occur with PILOTs, but the fact is that taxpayer losses do occur, when abating existing property taxes, which often results in significant opportunity costs. 

Commissioner Whaley asserted changes must be made in light of local economic development outcomes and Commissioner Sawyer stressed the need  for legislative action, the need for community engagement and involvement in the educational system by PILOT recipients. 

Folks seem to like, what is an unreliable measure, the benefit cost ratio. It it is to be used, it should be correctly calculated, while not calculating in already existing property taxes, when figuring project revenue, as that artificially inflates both the benefit cost ratio and overall project revenue.    

Conclusion

The winners are Robinson, Jones and local government. All should be confident. They nailed it while having all community stakeholders and taxpayers in mind…..

Get this. Over 20 years, taxpayers will pay $12M more than One Beale private developers, in Carlisle Development, for $10M in public parking garage assets. Its more elitist bullying of the taxpayer, in a majority Black community in need, carried out by a racially diverse public private complex. 

This comes as the the Downtown Memphis Commission (DMC) loans taxpayer cash to Carlisle Development, using generous commercially unavailable terms, while the taxpayer borrows, at private placement rates, for Highland Row public garage construction. 

Bully elitism is routinely occurring through appropriations, public parking financing and excessive incentives. Very recent appropriation examples include $20K by the DMC, for a Adams Keegan’s “national search”, that yielded local Paul Young and just this week $100K for Downtown’s Innovate Memphis for a transit plan “update”.

Bully elitism goes on and on. But why should, over 20 years, taxpayers pay $12M more for $10M in public parking assets than private developers? They shouldn’t ! 

Private Placement

To make matters worse, in 2018, EDGE had $21M sitting on their balance sheet, that could have been loaned for public garage construction, at the time of this private bond placement. And today, $25M sits on EDGE balance sheets. All of these unrestricted cash assets sitting on board balance sheets seem to be reserved for the elitist Memphis Tomorrow “government efficiency” program, while taxpayers pay through the nose and get no benefit from such public funds sitting with quasi government agencies.  

The private bond placement occurred under the Memphis and Shelby County Community Redevelopment (CRA) Agency and board leadership of McKinley “Mack” Martin, who also serves as FedEx senior counsel. CRA placed the bonds at 7.25% for 20 yrs, which are payed for by local tax dollars directed to support public parking infrastructure, in the Highland Row tax increment financing (TIF) district. 

The former bond placement compares unfavorably for taxpayers, when compared to the terms taxpayers extended to Carlisle Development at 2% for 50 yrs for the $10M construction of a “public” garage with the private One Beale development. 

The actual CRA Highland Row bond placement was for $12.5M. For the purpose of this $10M comparative discussion, using the table above and driven by the DMC $10M One Beale DMC parking garage loan, the annual bond payments were reduced by 20%, as shown in these CRA financials.  

To that extent, for the next 20 yrs, taxpayers will pay $920K per year for $10M in parking assets residing on public balance sheets, while Carlisle private developers will pay $317K for parking assets on private balance sheets. Over 20 years, that represents $12M more for taxpayers. Or put another way, over 20 yrs: 

300 at-risk post secondary students, per year, not served with wrap around services

30 small businesses, per year, not  served with $10K each in forgivable loans

Transactions like this and many more are why Memphis does not move forward. 

Conclusion

With no oversight, transactional bully elitism of a Memphis community in need, is happening all of the time, through transactions such as is discussed in this blog. With such elitist wealth transfers defining “economic development”, no community will move forward, especially a Memphis community in need….. 

Out of the gate, taxpayers are being bullied in local tax incentive deliberations. While deliberations operate under a big lie, the public University of Memphis (UofM) has partnered with the Greater Memphis Chamber in local tax incentive deliberations, that involve a closed to the public joint City Council/County Commission convening. Memphians have been robbed of independent public university thought leadership and don’t even know it. Can it get anymore rigged than that ?

With the Chamber routinely partnering with Memphis Tomorrow, Economic Development Growth Engine (EDGE) and the Downtown Memphis Commission (DMC), one would think the publicly funded UofM would partner with local government and taxpayers to level the playing field. But not in Memphis, making the case for institutional bullying by the UofM.

This is the very Memphis/Shelby taxpayer, that has been bullied for years by local corporate/real estate interests. This occurs as local legislators operate under the lie that regulating tax incentives must occur through some rare joint Council/Commission convening and agreement. Such regulation can occur independently, at anytime, by either legislative body and should be ongoing, while using the pulpit of local government. But local legislators seem content accepting the lie and proceeding in their pre-designed elitist sandbox. 

The Deliberation

Legislators, content being sheltered from reality, as the UofM institutionally bullies taxpayers, have yet to champion any external best practice economic development research during joint discussions. Not even research, by the now untrustworthy UofM, which in 2017 published We Are Not Lost – Amazon Gave Us a Map, was championed by local legislators.

The Amazon Map effectively de-emphasizes tax incentives, while prioritizing areas that excessive corporate incentives dilute, like workforce and public transportation. For that matter, Amazon is making a huge $200M investment in Memphis, without tax incentives, which is sadly going uncelebrated. 

Instead, in deliberations, legislators continue to hear from the same entities that have bullied taxpayers for years in EDGE, DMC and Chamber, without the aid of independent public university thought leadership from the UofM. Authored not by research, but by the excessive incentive examples of FedEx, AutoZone, Nike and International Paper, Memphis/Shelby taxpayers are bullied by some $50M per year in excessive corporate incentives, all while a plethora of industrial development boards are systemically fee incented to regularly approve excessive individual incentive awards. 

At the same time, Commissioner Tami Sawyer, through questioning of EDGE’s Reid Dulberger, was successful in establishing the existence of an elitist cabal by revealing the formal lobbying relationship between Chamber Chairman Circle member Brian Stephens of Caissa Strategies and EDGE. And Councilman Martavius Jones began making a case for linking incentives to higher wages. Commission Chairman Eddie Jones seems to have his eye on the $138M DMC PILOT Extension Fund, previously used for outlandish and wasteful taxpayer appropriations for developers and downtown public parking. 

Given current momentum of discussions, these are specific reforms that should be proposed:

1. Public upfront ask of $1.5B returned back to taxpayers from the Memphis Tomorrow complex for deficient economic development leadership over 20 years.
2. Define and measure “economic development”
3. Centralize all tax incentives, performance and compliance information in a publicly accessible web based repository. 
4. Reward higher wages with higher EDGE abatement amounts on new capital investment while lowering overall abatements, in for example, 35% – 35K, 40%-$40K, 50%-50K and 100%-100K.
5. Require legislative approval for using the EDGE “community reinvestment credit” otherwise known as abating already existing real property taxes and reserving this for high wage transformational economic development opportunities, while performing trade off analysis. 
6. Shut down the DMC PILOT extension fund, outside of current commitments, while reforming parking operations to return more money to local general funds
7. Limit DMC blight reduction real estate development incentives to 10 years, while conceding the removal of  “affordable housing” requirements, which is really a marketing tactic for excessive incentives.

With these reforms, local legislators will make true progress for taxpayers. At the same time, other areas that deserve review are 1) the almost $50M that sits, unused and without a plan, on industrial development board balance sheets 2) code enforcement for Memphis Health, Educational and Housing Facility Board PILOTs and 3) fee structures that reward industrial development boards for awarding excessive incentives. 

Blackjack Smith knows about the unused money sitting on board balance sheets. FedEx got $3M in grants for their Downtown expansion, while ripping off the taxpayer for another $3M in the non-public approval of the 100% abatement extension for the FedEx World Trade Center in Collierville. All the while, local status quo PILOT advocates lie and say, that Memphis does not provide cash grants as part of their tax incentive offering. 

All of this to say, that substantive tax incentive reform is in order for the overall public good. 

Conclusion

As for the institutional bullying by the UofM, its really sad and more of the same. The #1 accomplishment that would throw the UofM into the national spotlight is the turnaround of Memphis. That will only occur, with the UofM not surrendering its public university thought leadership and partnering with local and Tennessee taxpayers. 

But sadly, time after time, the UofM has chosen not to partner with taxpayers. Its my suspicion that educational institutionalists, from around the state, were so repulsed by the state funded UofM runs on local taxpayers, that included bullying and lies under Rudd and the new local corporate Board of Trustees, that Rudd in a sense was forced out. 

Memphis needs independent public university thought leadership, that works in partnership with taxpayers, not more institutional bullying……