June 26, 2012
Stockton California is set to declare bankruptcy. What can Memphis learn from this profligate city? Stockton is a city of 300,000 in northern California. Stockton got caught in a morass of debt because of high retiree costs for
municipal workers and big spending on a downtown revitalization effort. This was coupled with falling property tax revenue due to the real estate downturn.
Does this sound familiar? I have been trying to get some important information about the BassPro deal here in Memphis as well as some other downtown projects. I asked the City of Memphis for a Pro Forma financial plan for the Pyramid project. I want to know what is to be spent, who is spending it, what the taxpayers’ obligation is, what is the expected income stream to pay for the project and who is on the hook if things do not work out. I asked the City of Memphis for this financial plan and was told that they are not aware of a “financial plan”.
I looked at press reports on this project and I find the following. The CA reported on November 10, 2010 that the Center City Revenue finance Corp. voted 7-0 to support as much as $125 million in revenue bonds for a $90 million revamp of the Pyramid for Bass Pro shops and redevelopment of the surrounding neighborhood. The board also voted without dissent for as much as $18 million in Recovery Zone Facility Bonds to help relocate Pinnacle’s corporate headquarters and about 600 employees to 40 S. Main. A total price tag $111.75 million includes costs of funding a debt service reserve and capitalized interest and issuing of bonds.
Then in 2011, the City Council approved a plan allowing the Center City Revenue Finance Corp. to issue $215 million in bonds to fund the project.
Now we hear that Pinnacle is in bankruptcy and it is possible that Pinnacle may move to Minneapolis. Why is the price tag for all these developments always increasing and no one is telling the full story with a complete financial analysis and a price tag that is rock solid. We remember the Beale Street Landing that increased every year in cost but the City Council always went along with the increases saying that they had to vote for the increase because of what they had already invested.
The best analysis of Bass Pro that I have found is a CA article by Amos Maki. In this article, Robert Lipscomb says that the taxpayers are protected because if the sales tax increases after opening are not enough to cover the bonds, then there is a reserve fund and if that is not enough, then only non AD VALOREM (property taxes) taxes can be attached such as fines and fees the city collects to cover the shortfall. However guess what taxes will be increased to cover the loss of fines and fees.
I will still be looking for the written financial plan for these projects and will publish what I find.