Bustin’ out that MWBE programming is a scam. Such programming is a scam to carjack the taxpayers through excessive corporate/real estate incentives. From increased corporate receipts, MWBE programming is supposed to help build new and stabilize existing Minority Women Business Enterprises (MWBEs) and Locally Owned Small Businesses (LOSBs). But the MWBE program seems mostly to benefit well established, even affluent local business enterprises carrying forward the culture of elitism.
Based on a review of the last individual performance report issued by EDGE PILOT recipients, Kathy Buckman Gibson’s KBG Technologies led all vendors with $12M in MWBE recorded receipts from the EDGE MWBE PILOT program. For 2019, International Paper (IP) recorded $21M in MWBE receipts, with $12 of $21m expended to Gibson’s KBG Technologies. KBG receipts dwarfed the second contender in R&R Plumbing, a woman owned business enterprise (WBE) at $5.6M in receipts from Amazon.
Why is this important now? Because crisis, like the Coronavirus, are ripe for public scams. And the Coronavirus comes amidst a culturally sustained Memphis crisis in lacking governmental oversight of the Memphis Tomorrow public-private complex. Rigorous oversight is needed more than ever.
Given the former need, if one digs deeper into the local MWBE program, one will find City Councilman Frank Colvett’s Greenscape enterprise carrying designations at one time or another of LOSB, WBE and MBE. Or one may find Duncan “Donuts” Williams well established financial management firm with a WBE designation. Greenscape and Duncan Williams are just examples of well established and known second generation businesses participating in local MWBE programming. And there are several others, like Tri-State Plumbing, an established 45 year old Asian owned firm that carries an MBE designation.
Then there are the corporate PILOT players themselves in International Paper (IP) and “social justice” icon Nike each with $57M PILOTs. Nike sends approximately $4M per year back from Memphis to one of the least impoverished areas of the country in Portland, OR. And while IP reports MWBE, Nike arrogantly does not even bother to report EDGE MWBE compliance. And with regard to KBG Technologies found in IP’s report, KBG does not even carry an LOSB designation. So what’s really going on here?
What is Really Happening ?
MWBE social justice programming is a marketing scam for excessive corporate/real estate incentives. The marketing programming, along with bogus projection accounting, helps justify excessive incentives on the back of a Memphis community in need. Effectively, local taxpayers are underwriting purchase orders of global corporations for local MWBE vendors to serve global audiences under the heading of “economic development”.
Currently, with flat property tax revenues that potentially are about to get worse, there are approximately $120M in recurring annual tax incentives occurring across all of Shelby County that benefit corporate/real estate interests. This occurs in community, where the primary economic development challenges are workforce and a small business sector, with a relatively low number of business establishments. But sadly, the MWBE spend appears to be going to well established, long standing and affluent firms.
In a majority black community, MWBE is largely sold based on increasing the spend with minority owned businesses or MBEs. In reviewing the data for each of the EDGE PILOTs’ latest compliance report and/or diversity report, which does not include all EDGE MWBE spend, here are how the numbers break out for MWBE:
There were a number of firms that are local, but a classification for MBE, WBE or LOSB could not be found. Those firms are classified as “Vendor”. KBG Technologies is classified as WBE making up $12M of the $49.8 WBE total above. But while KBG is a WBE, KBG appears to exceed requirements for an LOSB.
Solution and Conclusion
Instead of excessively serving global corporations and their audiences, taxpayers would be better off to reduce incentives and contract with MWBEs to build out a more attractive city to increase organic economic development demand. After all there is $500M in deferred maintenance of Shelby County Schools.
Better yet, savings from reduced incentives should be optimally expended for the public good in workforce, public safety, transportation and etc. But with the existing crisis in local government oversight, that has not been happening or may never happen.
With MWBE as a scam, here is a pre-corona virus solution for economic development incentives:
Baseline and reduce incentives when benchmarking against other cities which include no social justice requirements like affordable housing and MWBE requirements. In this way, tax dollars are saved from excessive incentives and used for the common good in a majority black and Memphis community in need. Residential PILOTS would go away, urban renewal incentive terms would come down and job incentive amounts would be reduced. This might involve the locally owned small business (LOSB) proposal in the tax incentive fiscal note impact (TIFNI) platform. This effort would likely reduce overall baseline incentive amounts by 60%.
Allow tax incentive recipients to optionally buy into social justice programming in exchange for additional years of tax incentives while being supported with targeted and aggressive MWBE requirements, oversight and program enforcement.
Allow residential development tax incentives for true affordable housing or for market rate residential developments when engaging 50% or more MWBEs and LOSBs
Purge MWBE list of affluent participants
This is a path forward for economic development incentives. But it will only work when engaged with rigorous local government oversight.