What might an independently active area University do to propel economic development? Well, they might compare total wage growth to peer cities while evaluating economic policy incentives. Or, they might advocate for a research based and measurable definition of economic development. Or, they might benchmark local taxpayer funded incentives against another Tennessee city to inform right sizing tax incentives. Or, they might advocate in legislative chambers for their thoughtful policy pronouncements that dampen the importance of incentives for optimal economic and connected workforce development policy for all while promoting local small business.

And then again, an independent University of Memphis (U of M) might deploy their investigative journalism unit to expand on bogus projection accounting used to justify excessive corporate/real estate incentives for the benefit of the small few. But unfortunately, that is not what we have with the U of M. The U of M is merely an extension of the FedEx/Memphis Tomorrow devolutionary community leadership complex through their corporate controlled Board of Trustees.

Dr. David Rudd said he reports to his FedEx/Memphis Tomorrow complex Board of Trustees. That’s the problem. Everyone in Memphis seems to report to the FedEx/Memphis Tomorrow complex hacks and its not working ! The former State Board framework that affords the U of M more independence in local research while allowing for the questioning of Memphis power centers, would be far better for the community.

Worst and Best PILOTs

Given this institutional gap and lack of check in the Memphis ecosystem, this blog reviews corporate/real estate incentives. The following tables rank the worst and best PILOTs based on a benchmarking standard against Nashville. The discussion on economic development incentives has been wrongly framed by the local press around all or none as opposed to questioning excessiveness. Excessive in the below table is determined by the benchmarking contained in this blog and the application of a formula that would right size PILOTs based on the benchmarking.

The proposed PILOT formula applied is 50% of property taxes abated on new capital investment when current jobs levels are maintained and 1% for total wages for new jobs only while maintaining EDGE capital investment and term requirements. The amount in the “Revised Total PILOT” applies the above formula which in effect makes PILOTs more than twice the actual amount awarded on a per job basis than Nashville and still more than Nashville when Nashville property tax rates are converted to higher Memphis/Shelby tax rates.

Then the “Revised Total PILOT” amount is subtracted from the actual EDGE “Abate” award to arrive at the excess “Difference” amount and “Excess” percentage difference. When this model is applied, all 91 approved EDGE PILOTs are still awarded at a total of $309M down from $529M which quantifies some $220M in excessive incentives. It should be clear for readers of this blog that an end to all tax incentives is NOT being advocated here, but what is being advocated is lower more responsible incentives overall.

TOP 20 WORST PILOTS IN EXCESS AMOUNT TERMS

TOP 20 WORST PILOTS IN PERCENTAGE TERMS

BEST PILOTS IN AMOUNT TERMS (Indigo Ag does not include DMC Parking Incentive)

BEST PILOTS IN PERCENTAGE TERMS (Indigo Ag does not include DMC Parking Incentive)

Hats off to the Memphis Business Journal for teeing up the tax incentive discussion. The MBJ, arguably with the least political capital to do so, based on their target audience, more often than any other media outlet raises questions about excessive corporate/real estate tax incentives as advocated for by the FedEx / Memphis Tomorrow complex. The MBJ gets that elitist corporate socialism for the benefit of the small few is anti-business. To that extent, the need for Hack Reform is paramount !

But then again and unfortunately, the MBJ article seems to frame the discussion around an all or none incentive debate. Without question, the use of economic incentives are required in the competitive economic development space. But the questions are, 1) Who is really charged to lead economic development efforts; local government or business development organizations like the Greater Memphis Chamber? 2) Are Memphis/Shelby economic incentives excessive?, 3) Why 75% abatement all the time? and finally 4) Are there perverse drivers in place like fee revenue that contribute to excessive incentives that lead abating authorities to represent corporate/real estate interests over the taxpayer?

And as far as Richard Smith, mentioned in the MBJ piece, he has been in an impossible position. He is charged with optimizing economic development policy while inheriting the elitist economic policy pronouncements of the culturally engrained FedEx/Memphis Tomorrow corporate socialists leadership complex that have not worked. Smith has tried to get movement on economic development reforms only to be undercut by the FedEx/Memphis Tomorrow complex.

And from the article, its true that economic incentives are required for the FedEx Downtown expansion but not $32M in incentives. But Smith is not an activist or an economist, but a FedEx corporate leader charged with pursuing the maximum available incentives just like his Chamber Board Vice Chair in Willie Gregory of Nike did a few years back with a $57M abatement that transferred wealth from one of the most impoverished areas of the country in Memphis to one of the least impoverished in Portland, Oregon.

This excessive wealth transfer systematically occurs at the same time Nike’s social justice campaign proceeds. Again, its an impossible position for Smith to have the objectivity to chart optimal economic development policy while being hampered by the FedEx/Memphis Tomorrow corporate socialists. The very corporate socialists who are down in all of their community and economic development categories over 20 years while their initiatives feast upon your Federal, State and Local tax dollars.

So, moving forward lets answer the questions posed above and propose solutions.

Who Should Lead Economic Development?

Since taxpayers fund economic development efforts, local government should define, measure and lead economic development efforts with input from first the University community and secondarily from the business, education and public at large communities. But, good luck on getting the University of Memphis and Robot Rudd to show up and allow his subject matter experts to present based on objective research findings.

Over time, local government has unfortunately allowed the FedEx / Memphis Tomorrow complex to botch the workforce development system while allowing excessive corporate/real estate incentives for the benefit of the small few to roar as small business vitality has plummeted. This is a corporate socialist design for decline and has cost Memphis/Shelby taxpayers some $250M in tax revenue shortfalls since 2010 while presently recurring at $50M per year.

Are Memphis/Shelby Incentives Excessive?

Memphis/Shelby tax incentives are excessive while having been justified with hack bogus projection accounting over 8 years while in many cases abating taxes against existing property. The below charts show per job total incentives for Memphis vs Nashville for retained and new jobs benchmarked against Nashville incentives. The chart on the left shows actual abatement amounts and the chart on the right converts the Nashville abatement amount to higher Memphis/Shelby property taxes.

The proposed solution for right sizing job tax incentives is to maintain EDGE and DMC term and capital investment minimums with a 50% abatement for new capital investment down from 75% while not abating existing property taxes. Further, in order to qualify for capital investment abatements, current employment levels must be maintained for the abatement term while 1% of total wages for new jobs would be abated in addition to the capital investment abatement.

Applying this formula against approved EDGE abatements since 2011 would have reduced total job tax abatements by $220M and would have still been equal to Nashville per job retention abatements and 20% more than Nashville for new jobs when Nashville abatement amounts are converted to a higher Memphis tax rate.

Under this arrangement, to give a few specific examples, the FedEx Downtown total project abatement would have totaled $9.2M down from $32M and Auto Zone would have totaled $8.9M down from $11.3M. The FedEx proposed abatement calculation assumes $20M in real property investment and $13M in personal property over a 15 year term. See below chart to see the impact of the proposed incentive solution when benchmarked against Nashville.

75% Abatements and Perverse Drivers

Fee revenue for abating boards creates perverted drivers that in effect have abating boards representing corporate/real estate interests over the taxpayer. This results in creating a perverse market condition and 75% abatements for all while maximizing fee revenue with higher abatement awards . Its a design for decline authored by the FedEx/Memphis Tomorrow corporate community leadership complex.

Fee revenue should go to local government with abating boards funded through annual appropriation. Its unfortunate that this perversion was not addressed in the sham EDGE Council / Commission review committees both chaired by FedEx employees. And its also unfortunate that the review of some 9 other abating boards has yet to be scheduled by the County Commission as required by their own resolution.

Conclusion

Local government should lead economic development efforts and listen to taxpayers. Listening to economic development subject matter experts and taxpayers is the best possible economic development strategy available. Such a strategy, would mark a departure away from a closed economic system and the hack elitist corporate socialism of the FedEx/Memphis Tomorrow complex while engaging in Hack Reform.

And then again, there is $250M in lost community investments presently accelerating and recurring at $50M in Memphis/Shelby tax revenue shortfalls. Really, how does a Memphis community in need, left behind in the global economy, recover from those shortfalls ???

An open thoughtful debate regarding economic development policy has been needed for sometime in Memphis where the University of Memphis could be a pivotal voice. But the University of Memphis, under Robot Rudd, has been a no show on the economic development policy front, seemingly with Rudd programmed by the hacks of the FedEx/Memphis Tomorrow complex.

Take for example The Memphis Economy of the University of Memphis partnership with the Economic Development Growth Engine (EDGE). What’s that all about? If anything, such an incestuous partnership compromises the University’s ability to be an independent voice on economic development matters with respect to excessive tax incentives for corporate/real estate interests. The former excessive incentives have been a long term local mainstay all while a measurable definition or plan for economic development remain outstanding.

As of late, the only time that one sees University of Memphis representation advocate or present in local legislative chambers is when they are looking for a legislative appropriation or for TIF approval. But, the U of M does have all of the politically correct designates in Ted Townsend on economic development, John Gnuschke at The Memphis Economy, Elena Delevaga and her annual poverty report and  both Marc Perrusquia in an investigative reporting / public services unit and Otis L Sanford on staff while working with the establishment funded Daily Memphian.

All sounds great right? But, they all seemed tamped down, under Robot Rudd, by the hacks of the FedEx/Memphis Tomorrow complex. None of them regularly advocate on the record for transformational economic development policy change while questioning local power centers. And real power is not gonna be questioned in the Daily Memphian. Just looks to be more pageantry than anything else.

Gnuschke, wrote a brilliant economic policy pronouncement almost two years ago in The Amazon Road Map but no one from the U of M has advocated for it on the record as a way to jump start economic development with specific reforms. The local “outcasts” in MCCL Measured and MRYE got behind the Amazon Road Map, conducted surveys and advocated for the Road Map on the record, all while Robot Rudd and the U of M sat back with the hacks and watched from a safe distance. And so, no one talks about The Amazon Road Map.

If the U of M were going to advocate for economic development transformation, they just missed a stellar opportunity as the Shelby County Commission struggled through a challenging budget season. Its clear that property tax rates were excessively decreased in previous years, while botched workforce development efforts and excessive corporate/real estate incentives justified with bogus projection accounting have taken a  toll on the County budget. And, its also true that real economic development needs such as adequate public transit are going unmet. But effectively silent on such matters was, you guessed it,  the U of M.

Conclusion

The hacks seemed to have stifled subject matter expertise and yet another needed policy voice in community and economic development matters. Such action, only robs the Memphis community of needed vitality to grow, all while rigging the system for stagnation and perhaps further decline. Its just more of the same……

Complete Tennessee was never needed anyway as featured in the Daily Memphian. Locally, Complete Tennessee was redundant to what the Greater Memphis Alliance for Competitive Workforce (GMACW) was to do but wasn’t doing in connecting local workforce development efforts. GMACW was founded out of the FedEx/Memphis Tomorrow and Chamber Chairman’s circle complex with FedEx originally as GMACW’s chief private sponsor. But, in practice, connecting local workforce development efforts was never the chief economic development priority as excessive PILOTs have been and continue to be.

After all, with workforce the stated #1 priority, the EDGE/GMACW Board has failed to hold a public board meeting in the last year as they have met every month to award PILOTs. All the while local small local business solutions have been systematically locally blocked within a closed economic system so Canadian contracts could be protected that didn’t work or so that a billionaire out of Nashville in Orrin Ingram, who sits on the SCORE Board, could have plenty of time to get his new Youscience venture off the ground. In the meantime, 100,000 students and a Memphis community in need have gone without connected workforce development services for a period of 4 years.

And even if Complete Tennessee were needed, local Complete Tennessee Board members in Barbara Hyde and Carolyn Hardy didn’t take up the 2017 Complete Tennessee findings by publicly advocating for a sense of urgency with interventions or solutions on the matter. There is still no published employer demand quantitative data, articulation of career pathways or connected research based career pathways implementation plan for Memphis. Related to the Memphis region, the Complete Tennessee 2017 study states:

Institutions voiced concerns about understanding the region’s labor market priorities. Inversely, local industry expressed frustrations with the timeliness of student completion, often desiring micro-credential programs as a way to meet pressing needs for both employers and low-income citizens. Additionally, participants stressed the importance of clear career pathways for students that align with regional workforce demands.

In the meantime, as I advocated for a research based solution as a Greater Memphis Chamber member, with my local small business, it was blocked by the Chamber of which Carolyn Hardy was Board Chairman at the time in 2017. The Chamber kicked me out without written cause while not providing me with a copy of the Chamber bylaws or my membership rights as 100,000 students and a community in need went without connected services. Now, that is a closed economic system that shuts out local small business and community in need with employer connected education/workforce development services.

At the same time, employment severely lags the peer average costing taxpayers millions. It was never about the Memphis/Shelby taxpayer, a community in need or supporting locally owned small business. It was always about Canadian contract awards or an order for SCORE Board member, billionaire Orrin Ingram, while local connected workforce development services were being botched from the top of the Memphis ecosystem as the same hacks obstruct Memphis growth.

Memphis can’t fill jobs. And that can be linked directly back to the hacks of Pitt Hyde, Fred Smith, Willie Gregory, Christine Richards and Jack Moore. I know. With a proven ready to go solution in hand, I personally communicated with all of them more than 2 years ago that they had a disconnected workforce development problem occurring on the back of a Canadian contract award that could not deliver for taxpayers. They didn’t care.

More, the hacks were incumbent on dismissing my local Memphis small business solution, like they culturally do so many others,  so they could give Nashville billionaire Orrin Ingram time to get his new Youscience venture off the ground. This occurred as 100,000 Memphis students and a community in need went without connected workforce development services for 4 years. My local small business needed the deal. Orrin Ingram didn’t need the deal.

But its a closed system in Memphis that shuts out its own people from business opportunity to education. They starve out small Memphis business, rip off their ideas and give them to their hack friends, a foreign company or a billionaire in Nashville while they are stuck on Stupid with excessive 75% tax abatements for every local corporation that walks in the door for jobs that they cannot fill !

That’s one of their perennial “strategic” decisions in 75% abatements for ALL corporate/real estate interests and not a better tomorrow for all in the community while unwilling to course correct as they are unchecked and measure absolutely nothing. And everyone thinks they are visionaries. At some point, most can be a visionary if they hog the plate, unchecked for 20 years. But not this crew.

Take for example the upcoming Auto Zone tax abatement. Benchmarked against Nashville, that would be a $3.5M abatement when converted to higher Memphis tax dollars, not $11.3M. That’s not to say Auto Zone, already here, shouldn’t get an abatement but not 75% for 15 years. Guarantee it. This Auto Zone deal goes forward at $3.5M with a 15 year term.

Then again, the problem is a more responsible downsized abatement from $11.3M, reduces the $300K in fee revenue for EDGE who is incented to represent corporations over the taxpayer. Another example of the a design for decline authored by the hacks of the Memphis ecosystem.

Conclusion

A more robotic economy ? They already have a robotic economy in Memphis. The robotic economy comes with needed vitality for growth tapped down and a community sheltered from real facts and programmed with the support of a non-investigative press, advocacy organizations that don’t advocate with specific solutions for critical questions and a scared ignorant educated population that knows nothing else but decline in the face of pageantry and bogus measurement.

There is no sense of urgency and no real measurement of taxpayer funded initiatives in the home of FedEx. The hacks want government funding for their nonprofit complex, excessive tax abatements, lower taxes and most of all, no accountability. It never has worked and never will.

From the top of the Memphis ecosystem, unmeasured, they don’t course correct in Memphis when using taxpayer dollars. They keep misdirecting funds with excessive tax abatements when the real priority is filling jobs, educating the population and transacting with local small business to grow tax revenues. All of this deficiency is home grown from the the hacks at the top of the ecosystem. If you have ever worked in other communities, you know.

The rigged condition from the top is why Memphis doesn’t grow while being left behind in the global economy. Its just more of the same from a closed social Crump culture of the 1940s…..

Reference

Real measurement is blaspheme to the Memphis economic development complex. Throughout history, hack visionaries have used bogus measurement platforms, pageantry and other forms of idolatry to distract from reality in order to maintain the status quo. Memphis is no different.

To that extent, MCCL Measured is about supporting real measurement, within a quantitative context, translated into a taxpayer dollar common language everyone can understand. The recent release of the Bureau of Labor and Statistics (BLS) Quarterly Census of Employment Wages (QCEW) of 2018 data provides an opportunity for real measurement and away from unreliable devices like the EDGE Scorecard. A comprehensive set of tables, graphs and rankings can be found in the below following sections.

The below analysis provides elected officials with an opportunity to understand return on investment for $500M in job tax incentives which have been shown to be $150-200M in excess. This excess is based on a previous benchmarking analysis conducted by MCCL Measured while also identifying EDGE’s application of incomplete bogus projection accounting to justify excessive corporate/real estate tax abatements.

At the same time, a completed economic development plan or defined measurement methodology has yet to be released after 1.5 years. MCCL Measured and MRYE have proposed specific research based proposals for economic development measurement, PILOT reform and workforce development on the record over the last year. But those proposals have been systematically dismissed by local legislators within a closed economic development system.

The below analysis adopts “improving the social well being of people through increased total wages” as a measurable economic development definition. Total wages in a region increase as a result of increased employment and wages. Return on investment is measured based on measuring total wages, employment and average wage growth against the growth average of 15 Shelby County peers as established by The Memphis Economy of the University of Memphis.

Additionally, the most recent small business vitality rankings of the American Cities Business Journal are summarized for review. The overall findings of this blog suggest that lagging small business and employment growth brought on by disconnected workforce development efforts are the primary drivers of deficient total wage growth. Using a common language of tax dollars, the below analysis quantifies deficient tax revenue at $250M since EDGE began and annually recurring at a $51M shortfall. Combine $250M with $200M in excessive abatements and a $450M Memphis/Shelby tax revenue shortfall has accumulated since 2010 while annually recurring at $71M. And then there is the disassembled Assessor’s office but that is another blog story.

And finally, using BLS QCEW data with tables and graphs, the below analysis quantifies accumulated taxpayer shortfalls due to below average total wage, employment and average wage growth. A bright spot can be found in the below data with Shelby County eclipsing the employment peer average growth rate for 2018. The analysis spreadsheet is available for review and please forward any questions to me at jkent@pathtrek.net

Total Wage Growth

The below data reveals $8.3 billion in deficient accumulated Memphis/Shelby wage growth and $250M in tax revenue shortfalls since 2010 versus the peer average. One anomaly showed up within the data with New Orleans having far below the peer average for average wage growth of 4.9% while having above average employment growth and small business vitality. This points to potential unreported wages tied to tips based on a highly concentrated New Orleans hospitality industry. Unreported wages would have a depressing effect on New Orleans total and average wage growth and the anomaly shows up in the next to last Average Wage Growth section of this blog.

See below tables, graphs and rankings:

Employment Growth Data

The below data shows $5.2 billion of the $8.3 billion in deficient Memphis/Shelby wage production and $157M of the $250M accumulated tax revenue shortfalls due to lagging employment growth. See below graphs, tables and rankings:

Average Wage Growth

The below data shows $2.3 billion of the $8.3 billion in accumulated deficient Memphis/Shelby wage growth and $69M of the $250M tax revenue shortfall  is due to deficient average wage growth. The remaining amounts to balance the employment and average wage shortfalls with total wage shortfalls would be found in the the combined marginal difference of employment and average wage shortfalls multiplied and added together which can be done but is not part of this analysis. Additionally, this is where the New Orleans data anomaly reveals itself. See below graphs, tables and rankings:

Small Business Vitality – 106 Metros

The below summaries the findings of the ACBJ Small Business Vitality Index of 106 metros with Memphis/Shelby 15 peers extracted. See below graphs and rankings.

Conclusion

A departure from bogus measurement and idolatry is needed to improve economic and workforce development efforts. The implementation of a completed economic plan, PILOT reform and real measurement that reconnects leadership with reality is the only path forward to improving quality of life and evolving the Memphis ecosystem in order to attract economic investment.

An implementation of economic development reform is needed to reverse years of backwards anti-business economic policy authored by hack “visionaries”. Over the past 8 years, Memphis has suffered in an anti-business economic policy environment that has promoted corporate/real estate interests over the primary drivers of any local economy in small business and workforce development. Implementation is key to reversing Memphis ecosystem decline.

Plans to reverse decline are being birthed from organizations such as the Greater Memphis Chamber and Memphis Interfaith Coalition for Action and Hope (MICAH). But, again, plan IMPLEMENTATION will be key as ecosystem decline is evidenced in slow economic growth, inadequate public transit, struggling small business and workforce development efforts all occurring amidst positive talking points and promises of a better tomorrow for all.

Creative deliberation, to solve community problems, seems, at times, to be making its way into local legislative chambers. Creative deliberation in public chambers to support economic development reform has often been viewed by the establishment as a form of blasphemy as it confronts the status quo. If this is the case, political blasphemy is good !

One item in reform plans concerns payment-in-lieu of taxes (PILOT) reform which involves reducing future tax abatements for corporate/real estate interests while tapping expiring PILOTs for funding. PILOT reform seems most often mentioned when identifying contributing funding sources to support needed community development in for example, a $30M adequate public transit price tag.

But given all the talk on reform, only talking points exist. There are no specific PILOT reform models being proposed by either Mayor, local legislators, Chamber or MICAH to support needed reform. Specific PILOT reform models are needed to course correct and implement economic development reform.

PILOT Reform

Often, hack “visionaries” attempt to label those that express concern over excessive PILOTs as anti-business. This could not be further from the truth as excessive PILOTs are anti-business as they erode the societal foundation on which commerce thrives and new small businesses emerge as confirmed in the data.

Proposing a specific PILOT reform model will, with a capital “D”, DESTROY the anti-business labeling of the hack “visionaries”. To that extent, this blog and the social media group Memphis Raise Your Expectations (MRYE) have been, over the past year, the local economic development reform thought leaders while advocating specific reform models on the record.

Given this reality, this blog proposes the following thought leading Economic Development Growth Engine (EDGE) job incentive reforms, while promoting an easy to understand formula, balance and being sensitive to the competitive economic development climate with a rebranded “PartnerForward” model. The model confronts the fiscal liberalism that has been exercised over the last 8 years having occurred under the label of “economic development” with a more fiscally conservative pro-business approach that supports community investment to attract economic development.

PartnerForward

1. Wage PILOT – 1% of total projected wages for NEW direct jobs will be annualized and abated in property taxes. Multipliers will not be used in economic modeling and higher wage jobs will be recognized with larger wage PILOT incentives.
2. Capital Investment PILOT – 50% of new capital investment in property taxes will be abated. Taxes on existing property will not be abated.
3. Abatement term will be determined by the EDGE PILOT Evaluation Matrix (pg. 13) which can include community reinvestment credit for existing property to qualify for increased abatement term.
4. Existing EDGE Capital Investment minimums will remain in effect
5. Assessor will have direct reporting administrative oversight over PILOTs and tax revenue forecasting responsibility generated from PILOTs with Commission legislative oversight
6. Fee revenue to EDGE will revert back to local government and EDGE will instead be funded through annual appropriation. This fee revenue will fund above Assessor oversight.
7. New EDGE Board

Applying the above model would have reduced the total EDGE PILOT award amount by approximately 40% or by $210M+ over the past 8 years. The model would have awarded PILOTs twice as much as Nashville on a per job basis while still awarding all 88 EDGE PILOTs. And as another matter for comparison, the number of allowed job PILOT awards, under this model, would also well surpass Nashville for years 2011-17 with 63 PILOT awards for Memphis/Shelby and 25 for Nashville. See spreadsheet here from which the analysis was conducted. Proposed PILOT reform can be found in the green shaded areas of the spreadsheet.

Another implementation example would have been the recent Pandrol PILOT that was recently touted as an exemplar by this blog. The Pandrol PILOT remains an exemplar under this proposed implementation model and relatively unaffected.

This model provides balanced reform while remaining sensitive to the competitive economic development climate all while incenting higher wage jobs at an increased abatement amount within a more fiscal conservative framework.

Conclusion

Implementation is key to reversing Memphis ecosystem decline. While plan talking points are circulating, a completed economic development reform plan with defined measurement remains outstanding after 1.5 years. A completed plan is needed to support implementation and accountability measures are needed to insure plan implementation to reverse economic imbalances.

Next blog will be on the mysterious and systemic dismantling of the Assessor’s office which may rise to #1 on the Botch Report. Stay tuned….