Archive for the ‘PILOTS’ Category

There Is No 4 Or 8 Year Solution To Poverty

Monday, August 20th, 2018

Lee Harris will become the new Shelby County mayor on September 3rd of this year. In a recent article in the CA he stated that he would use the borrowing power of the state’s most populous county to spur regrowth in old Memphis neighborhoods and ease poverty. A graduate of Yale law school, he wants blight and poverty eased, and favors building four or five public schools (each costing $100 million) in humble neighborhoods.

 

He states that better schools would help children climb out of poverty. Improved education and could draw new residents in waves. They’d repair blighted houses to live near the schools, bring new life to entire neighborhoods. He’d have the county borrow the school construction money.

 

I have several thoughts about his vision.

 

  • A fancy $100 million-dollar school building does not guarantee a great educational institution. It is the eager to learn students and great teachers that make a great learning place.
  • How do you pay for $500 million dollars in bonds for education services without raising property taxes or cutting other county obligations such a health services, law and fire services, pension and OPEB obligations?

 

These short-sighted political solutions to a long-term problem is typical of many politicians. The real problem of poverty lies in a lack of education in the population that Mr. Harris wants to help but his solution will not work and could be counterproductive. Poor education is a generational problem caused by the destruction of the family and children growing up without the support of two parents who demand that their children learn principally at home and also in school. A demand for learning at home and for discipline is what is missing and fancy schools will not help.

What is your opinion of Mr. Harris’s plan to end poverty?

ELECTIONS ARE COMING

Wednesday, July 11th, 2018

Elections Are Coming

 

July 11, 2018

 

There is an important election coming up on August 2, 2018. Let us look at some of the important elections.

A new Tennessee Governor will be elected as our current governor is term limited. You will be asked to choose whether to vote in the Republican or Democratic primary. I am voting in the Republican primary. For me it comes down to Diane Black or Randy Boyd. I met Ms. Black recently and was impressed. Mr. Boyd has the support of Mike Huckabee. Take your pick but I am voting for Ms. Black.

Another important election is the United States Senate because of the retirement of our current senator, Bob Corker. I am voting for Marsha Blackburn. She will have a tough fight in November against Phil Bredesen, the Democrat.

The most important local election is the County Mayoral election. Shelby County has been well run under Mayor Luttrell and David Lenoir is the best candidate and I will be voting for him.

Another important election is the District 8 United States House of Representatives between the current representative, David Kustoff, and George Flinn. I know and like George and while he has a high hill to climb I would vote for him, but I am not in his district. In my district I am voting for Charlotte Bergmann.

I am in Tennessee Senate District 31 and will be voting for Brian Kelsey.

I am in Tennessee House of Representative District 93 and there is no Republican running, so I will not be voting on this district.  I used to vote in District 83 and if I was still there I would vote for Mark White.

Another important election is the Shelby County Commissioners. I am voting in District 7 and will vote for Samuel D. Goff. I recommend the republican candidates where they are running.

I have listed a complete ballot with my choices listed in red. Vote your convictions but please vote.

Open The Purchasing Records

Tuesday, May 15th, 2018

Open The Purchasing Records

May 15, 2018

There was an interesting article in the CA entitled “Memphis has lost focus”. The article went on to quote the Chairman of the Memphis City Council, Berlin Boyd, saying “We can’t continue down this path and expect a different result”. Also Richard Smith of Federal Express and Chamber of Commerce chairman, demand that elected leaders gut or fix the city/county EDGE board. The EDGE board is well known for handing out tax freezes for various businesses. The Edge board also has rules for minority vendor participation for any EDGE granted pilot. The article stated that Mr. Smith urged the end of minority spending rules.

 

Concerning EDGE minority spending rules the article stated that Boyd said that the biggest beneficiary of the minority spending rules is white women. Assailed by critics, Boyd and Smith agreed to keep the spending rules in place.

 

I have railed against this minority spending requirement for several years. I am not against economically disadvantaged minorities getting a leg up. However what should be changed is the following.

 

The paperwork and legal qualification rules are very complicated and discourage otherwise qualified firms. There should be a common-sense method such as the better business bureau or other independent organization that gives a rating system based on customer satisfaction reports.

 

Most importantly the purchasing system should be open and transparent with the final bids and selection on line and open to all. If a minority firm is the low bidder, so be it. If it is not the low bidder and is selected, then the price differential should be no more than 3% to 5% and then the minority firm should be given a one to two year time to graduate to a no price differential status for future competitive bids.

 

The system now is not transparent and we do not know what minority spending rules are costing us and we do not know who are the beneficiaries.

 

 

 

 

$281M Downtown Cultural Center And Now $160 M For The Fairgrounds

Wednesday, November 8th, 2017

$281M Downtown Cultural Center And Now $160 M For The Fairgrounds

 

I have to give the administration credit for thinking big. And it all will be paid, we hope, with money generated by tax incremental financing due to increased tourism sales taxes and state economic development funds.

The presentation on the downtown cultural center by the administration was well done and presented. I looked at the plan and wondered what had been spent so far for the well done concept work. So I asked the City to tell me what has been spent so far for this work. Here is their answer.

 

Original amounts for the Bicentennial Gateway development project.

# Vendor Original Amount

 33400 RKG Associates $40,000 and another $40,000 for Amendment #1

 33401 SR Consulting $250,000 and another $150,000 for Amendment #1

 33413 Bass, Berry and Sims $250,000

 33885 CH Johnson Consulting $20,000 and another $18,000 for Amendment #1

 34548 Glankler Brown $25,000

 34607 Archimania $128,325

 34619 Stephen Schreiner & Renee Barrett $518,270.97

That is a total so far that they have admitted to of $1.439 million.

I will pursue this further as we need to know what has been spent in addition to the above plus what has been spent on the fairgrounds planning so far. If you have additional questions and want further information let me know.

$281 Million For A Freshwater Aquarium And Downtown Cultural Center!!

Tuesday, October 24th, 2017

$281 Million For A Freshwater Aquarium And Downtown Cultural Center!!

 

Talk about an ambitious plan, this one takes the cake. Here are the details in a well presented and concise exhibit. The major elements of the proposed plan are as shown below.

  • Close Monroe between Front Street and Riverside Drive.
  • Create a new cultural center bounded by Union Avenue on the south, Front Street on the east, Riverside drive on west and the Cossitt Library on the north. This cultural center may become the relocation building for the Brooks Museum.
  • Build a pedestrian bridge going across Wolf River to Mud Island.
  • On Mud Island build a new 250 foot tall fresh water aquarium.
  • Upgrade the mosquito infested Mud Island Amphitheatre to something better suited to the outdoor concert business.

I must say I am impressed with the whole concept and plan. The Mud Island investment has been a failure as it never developed continuing attractions to draw people to come. It should have had bars and restaurants along the west side overlooking the river. I believe this was never done because it was opposed by the Beale Street interests. Also access to the island was limited to the north entrance.

Now as to the Brooks Museum. This is not mentioned in the plan but the CA article of October 18th said that this was a possibility. The Brooks Museum has a fine collection of art and much of it cannot be displayed as they do not have the space. Also there is a possibility this cultural center being the site for the William Eggleston collection, a world famous collection of photographs.

Now as to paying for this plan! The exhibit shows the cost and how it would be financed. Excluding the Pinch District Development and the Convention Center Renovation, the document projects a cost of $282 million.

  • Aquarium Museum $121 Million
  • River Park & Pedestrian Bridge $35 million
  • Cultural Center and Monroe Terrace $84 million
  • Fourth Bluff and Civic Commons $21 million
  • Riverfront Improvement $20 Million

For a total of about $282 million.

Basically they claim that it would be financed with the following items.

  • $100 million paid for by increases every year in incremental sales tax revenues in the expanded TDZ zone.
  • $74 million in net new sales taxes from sales of consumer goods.
  • $30 million in new aquarium sales taxes.
  • $7.3 million in sales taxes from the cultural center attendance and purchases.

 

  • $2.3 million from hospitality contribution (convention center hotels)
  • $3.7 million from land leases

The questionable items appear to be the projected growth of TDZ sales tax revenue and the amount of private equity and philanthropy that will be pledged to the project. The other item that occurs to me is the question of philanthropy. What will Bass Pro contribute to this project as Bass Pro seems to have a great upside when we are talking about a fresh water aquarium. After all they are in the business of fishing and hunting and if you look at what they spent on their Big Cedar Lodge near Branson Missouri, they certainly have a great upside in seeing this downtown Memphis project succeed.

The real big question is what has plagued past public projects. PROJECT PRICE CREEP!! As with other public projects (think Beale Street Landing) and with the difficulty of construction on the unstable riverfront and the necessity of building in an earthquake zone) can it be done at the projected cost?

What do you think about this big idea for downtown and Mud Island?

Non Profits In Memphis

Wednesday, July 26th, 2017

Non Profits In Memphis

 

July 25, 2017

 

Not many people know the extent of nonprofit organizations in Memphis and the surrounding area. A recent count put the number of local non profits at over 3000 with an annual expenditure of over $6 billion and total assets of over $12 billion.

A nonprofit organization is an organization that has been formed by a group of people in order “to pursue a common not-for-profit goal”, that is, to pursue a stated goal without the intention of distributing excess revenue to members or leaders. A nonprofit organization is often dedicated to furthering a particular social cause or advocating for a particular point of view. In economic terms, a nonprofit organization uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization’s shareholders (or equivalents) as profit or dividends.  Nonprofit legal structure is one that will often have taxation implications, particularly where the nonprofit seeks income tax exemption or charitable status.

 

Donations for non profits comes from either public tax money, from private donations or from their nonprofits’ investment income. How can donors evaluate whether or not a charity will ultimately deliver on their promise or mission? In the nonprofit world, however, there is no common, easily understood measure of success. There are three types of data that might be used to measure a nonprofit’s success, input, output and results. Input can be measured by reading the 990 (Return of Organizations Exempt From Income Tax) form available through Guidestar or others. Output and results are more difficult to evaluate.

What I am looking for when looking at a local non profit is the mission statement, revenue and sources of revenue, expenses, net assets and fund balances and compensation of officers, directors, trustees, key employees, highest compensated employees and independent contractors. Also I want to know about family relationships amongst these people if any.

I have attached a partial list of non profits in the Memphis area. I have listed them from the highest in gross receipts to the lowest. (St. Jude would be second in gross receipts at $1.029 billion). Look over the list and let me know of others not listed about which you would like further information such as their 990 form. I can provide this to you or you can go to guidestar to get it yourself. Many of these organizations do a great job and provide needed services. There are no doubt some that are questionable. We need to expose the bad ones and support the good ones.

Workforce Development And Training

Wednesday, May 31st, 2017

Workforce Development And Training

 

I am an advocate of open records access and workforce development and training. For many years I have been asking taxpayer funded public bodies for information on finances and evaluation of the effectiveness of the public money that they spend. Some of these bodies are very forthcoming and I would rate the local Shelby County government at the top of the accessibility scale and the old Memphis school board and the successor, Shelby County School Board, at the bottom.

Mainly my focus is local and generally I have not tried to get detailed information on any agency at the Federal Government level. In 2015 there was an article in the CA which caught my eye. This was an article about a $42 million dollar federal grant to provide no-cost career technical and academic training to nearly 300 people over five years. The facility designated was the Dr. Benjamin L. Hooks job Corps center at 1555 McAlister Drive here in Memphis.

As a taxpayer I felt I was entitled to enter and see the facility and learn how my tax money was being spent and how effective was the program. I drove out to the facility one day and was stopped at a guard gate. I told them that I wanted a tour and was told that I would have to make an appointment. I said fine, I would call and make an appointment.

I tried several times and never was able to get to anyone but an answering machine. I left word and a return call number and message but never got a return call. I was frustrated but I did not give up.

This year I tried again and after several calls I got the names of some of the staff. I was able to make a 10 AM appointment with Mr. Smith and I showed up for the appointment at 9:45 at the guard gate. I told the guard about the appointment and was told Mr. Smith was not in. I had the names of several other people and finally the guard tracked down Mr. Harris and I was allowed for the first time to enter the facility.

The facility is interesting. The facility history is that it started out as Memphis Preparatory School which was setup in the face of school integration in the 1970s. It eventually had to close due to finances and the property and the buildings eventually sold to the US Department of Labor for $1.975 million dollars. According to the 2015 CA news story the facility had 232 students aged 16-24 living at the center and 55 non-residential students. According to Mr. Harris this is still the approximate numbers.

I toured the facility with Mr. Harris and saw two dormitories which separately house women and men students. Also there is a child care building for children of the students and outside families able to get into the facility. I viewed classes which included carpentry, industrial electronics and medical and nursing assistant programs and forklift training.

I asked if they published a financial statement and he said he was not aware of one. Concerning performance reports of results I was able to pull up one on the internet as shown from 2012/2013. It showed a graduate average wage of $8.73/hour and a 44.5% full time graduate placement.

Upon further research the facility is run by Minact Inc. under a subcontract with the labor department.

A very interesting thing happened. Due to my telephone requests to the center I got an email from Mr. Wayne Gillard asking me for the best number to reach me. On his email he is listed as “Outreach and Admissions, Job Corps, Alutiiq Commercial Enterprises, LLC, 22 N. Front St, Suite 680, Memphis, Tn 38103.

I looked up Alutiiq and it is listed as a wholly owned subsidiary of Afognak Native Corporation. Here is a statement from their website.

Afognak Native Corporation (Afognak) is an Alaska Native Corporation (ANC) formed under the 1971 Alaska Native Claims Settlement Act (ANCSA) and through the 1977 merger of two Alaska Native village corporations: Natives of Afognak, Inc. and Port Lions Native Corporation. Native corporation shareholders are those Alaska Natives who were alive on December 18, 1971, and have proven their lineage to the respective region and village. Congress termed ANC enrollees “shareholders,” although being an ANC shareholder is truly more comparable to a tribal membership – it is a lifetime enrollment that cannot be bought or sold.

This all seems very strange to me. Is there anyone out there who can provide more information how native Alaskan tribes are involved so deeply in workforce development all over the country?

The Hooks center seems well run to me. My question is “What is the cost per student and what are we spending per student nationally on workforce development? Is our tax money being spent wisely? How can we find out? Open the Hooks center to the public and let the public see this facility as we are able to see Southwest Tennessee Community College and Tennessee Tech. Also provide detailed cost and result information to the taxpaying public. What do you think?

 

The Highland Street TIF District

Tuesday, May 16th, 2017

The Highland Street TIF District

 

TIF stands for tax incremental financing. The theory is that a certain part of a city is in decline and that by creating a TIF district and investing in certain projects in the district, the future for that district will improve economically and that the tax revenue increases from that district year over year will finance the investment required to pay for the new projects in that district.

There is a TIF district on Highland Avenue south of central and the genesis of this TIF district comes from the University of Memphis and their desire to change the area to benefit the university and its growth. The city public library on Highland was closed as a result. The area of the TIF district is as shown on this map.

The finances of this district are as shown on this Highland Row Bond Amortization schedule. I hope that it works financially which depends on the incremental increase of tax revenue in the district  sufficient to cover the bond payments with interest to the tune of almost $26 million.

As I drive around this area along Highland and Ellsworth I wonder about the design and appearance. Frankly in my opinion the apartments along Highland are ugly, boxlike and unattractive. I wonder about the neighbors along the west side of Ellsworth and the future of this residential area. Maybe over time and with sufficient plantings the appearance will improve. What is your opinion? I would love to know.

 

The picture below in the center is a view of the west side of Ellsworth. The picture on the west below is a view of the west side of Highland of some of the apartments. The picture on the right side below is a view of the parking garage for the apartments.

E Mails From Public Officials

Monday, October 24th, 2016

 

October 23, 2016

I recently sent out an email concerning how I was going to vote in the upcoming November 8th election (www.memphisshelbyinform.com). I then got a few emails from government officials explaining why I was wrong on my recommendation to vote against these two items.

Shall the Shelby County Charter be amended to require both the County Mayor and County Commission’s approval to dismiss the County Attorney from office?

 

Shall Sections 691 (4) and 693 (4) of the Charter of the City of Memphis, Tennessee be restored and amended to require distribution only to the general fund of the City, before any distributions of tax equivalents to the County under state law, of that portion of any Electric or Gas Tax Equivalent Payments calculated and determined by the Council under state law or agreement with the Tennessee Valley Authority, equal in amount to the City taxes assessed and levied on the fair market value of properties of MLGW electric or gas divisions situated within the corporate limits of the City of Memphis in the same manner and as if said properties were privately owned?

I, BRIAN COLLINS, DIRECTOR OF FINANCE FOR THE CITY OF MEMPHIS DO HEREBY CERTIFY THAT THE NET ANNUAL INCREASE IN REVENUES TO THE CITY IF THIS AMENDMENT IS ADOPTED IS ESTIMATED TO BE $5,000,000.

I got an email from County Commissioner Heidi Shafer as shown below.

“I got your email, and wanted you to see why the county would benefit from merely having the approval process for dismissal as we have for hiring.  The County Attorney is to serve both branches, but that has been far from the case for over two years…BTW, the mayor has authority to veto our appointments…

I believe in checks and balances.” I greatly respect Heidi and her good work in keeping the county fiscally responsible. However I believe this good Mayor and his record has been better than the County Commission and the rancor we see in their various squabbles. I believe the Mayor should retain his authority to dismiss the County Attorney without cause as is currently in the County Ordinance.

Section 2.12. Approval of nominations.

All nominations by the mayor for any board, commission, agency, authority, chief administrative officer, county attorney, public defender, or divorce referee shall be subject to the approval and consent by resolution of the board of county commissioners.

The county mayor, subject to approval by resolution of the board of county

commissioners, may create or abolish major divisions of county government with each division having a division director. The chief administrative officer, the division directors of the county, the county attorney, the public defender, and the divorce referee shall be appointed by the county mayor, subject to approval by resolution of the board of county commissioners, and shall be subject to dismissal by the mayor without cause, and shall be residents of Shelby County at the time they assume the duties of their office and at all other times while serving the county in such capacity.

Now as to Section 691 and 693 of  the City Charter I got the following emails.

“Dear Mr. Saino:

Thank you for your inquiry about the City referendum. I’m sorry for the delay in responding to your inquiry.

The purpose of the referendum is to restore provisions in the City’s charter that were originally added in 1939. The provisions required that the City’s general fund receive MLGW PILOTs based on City taxes on MLGW properties within the City of Memphis as if those properties were privately owned.

In 2015 the Tennessee Courts held these charter provisions were repealed because they interpreted the language of the City’s charter to be in conflict with a 1987 State law. This amendment corrects the language of the charter provisions consistent with what the Courts required, which explains its complexity. As amended, the prior charter provisions will be given the effect as intended and applied from 1939 to 2015.

“To address your specific concerns, this amendment benefits Memphians. It does not effect the surburban municipalities. It does not change the total PILOTs paid by MLGW for the benefit of all eight taxing jurisdictions in the County and therefore will not cause any MLGW rate increase.

What it does is restore the status quo allocation between the City and County that existed before the 2015 Court decision. While this status quo allocation will eliminate the arguable increase due the the County as a result of the 2015 Court decision, it restores a fair allocation for the City.

You indicate that the PILOT should be allocated based on the revenue received in the City vs the County. I am advised that the state law, the TVA agreement and the City’s charter do not allocate PILOTs using situs based revenue; the PILOT is not an income tax equivalent, but an ad valorem tax equivalent. However, if it is based on income, we have been provided information from MLGW that the revenue earned from City MLGW customers is more than 72% for electric and 81 % for Gas. By any other measurement,there is no justification for a 22.5% allocation to Shelby County; for example,  69.73% of the County’s population is in the City and 11.77% is in unincorporated Shelby County. 74% of all electric assets are in the City as compared to 14% in unincorporated Shelby County; the percentage of gas assets in the City is even greater 82% vs. 8.23%.

As you know MLGW’s major distribution assets are located in the City’s streets and rights of way, which bear an undue burden from MLGW utility cuts. Despite paying an overlapping tax the County of $7.78 per $100 of value, none of the $4.38 paid by City taxpayers is use to reimburse the City for Shelby County’s use of and MLGW’s damage the City’s roadways.

So if your premise is that you oppose the Charter Amendment because you think it will hurt Shelby County, I respectfully disagree. The Amendment benefits Memphians and I for one cannot imagine why any MEMPHIAN would vote against the amendment because of some perceived effect on unincorporated Shelby County.

In any event I trust I have explained why I voted for the referendum, why I am voting FOR it and why I am enthusiastically urging my constituents to vote FOR it. If you would like more information a detailed explanation is on the Council’s website.

Patrice Robinson Memphis City Council

Now I am under no illusions that this will not pass as Brian Collins is promising $5 million dollars more from somewhere. However I am always suspicious of money that comes from somewhere other than the other party (the county) or the taxpayer. My objection was based on a lack of pre vote public discussion. No doubt it will pass as free stuff always wins as our national elections prove.  Also the City Council weighed in on this issue with the following email to yours truly. No doubt it will pass but now you have the City side of the issue. The County side may end up in court in a lawsuit.

Council is Unanimous: Vote FOR the Memphis Charter Amendment

City of Memphis sent this bulletin at 10/22/2016 07:51 AM CDT

Good morning Memphians,

Your City Council hopes that you will exercise your civic right to vote this upcoming November 8th, or beforehand by absentee ballot or early voting, which started this week and runs through November 3rd. No City offices are up for election this year, but the City Council did vote 11-0 (with two absent) on July 19th to add a Charter Amendment Referendum on this ballot. See this example of what that will look like for you.

As evidenced by the Council’s unanimous vote, we believe you should vote “FOR” the amendment. Despite its technicality (Full Explanation), this amendment is simple: we needed to make some legalistic changes to the Charter to realign ourselves with state law and receive our fair share of MLGW’s PILOT payments each year. If this vote fails, $5 million that should go to the City budget will instead go to the County. A vote “FOR” won’t raise your taxes. A vote “FOR” won’t raise your MLGW bill. (Other FAQs here) As we see it, the choice is clear for every Memphian.

If you want to know even more, follow those links to our website, or you can always call our office at 901-636-6793 for more details.

We hope this helps you make an informed decision this election day, and we sincerely believe you should vote “FOR”.

Sincerely,

Your Memphis City Council

Bill Morrison – District  1

Frank Colvett, Jr. – District 2

Patrice J. Robinson – District 3

Jamita Swearengen – District 4

Worth Morgan – District 5

Edmund Ford, Jr. – District 6

Berlin Boyd – District 7

Joe Brown – Super District 8-1

Janis Fullilove – Super District 8-2

Martavius Jones – Super District 8-3

Kemp Conrad – Super District 9-1

Philip Spinosa, Jr. – Super District 9-2

Reid Hedgepeth – Super District 9-3

 

 

What Is Going On With The Pilot Payments From MLGW To City And County?

Tuesday, October 11th, 2016

October 11, 2016

 

What Is Going On With The Pilot Payments From MLGW To City And County?

There is going to be an item on the ballot this November that proposes to amend Article 65, Section 691 and 693 of the Charter of the City of Memphis. It is relative to distribution of payments of in lieu of taxes (Pilots) by MLGW to the City of Memphis. On page 7 of 8, Brian Collins, Director of Finance City of Memphis, says that the estimated increase of this pilot payment to the City of Memphis may be $5 million dollars. Is this coming out of Shelby County’s share of this pilot payment?

There is litigation going on concerning the issue of sharing of this MLGW pilot payment. It seems to me that the pilot payment should be shared on the basis of income to MLGW from customers who are inside the city of Memphis versus those outside the City limits. It seems that the City of Memphis wants it all. There needs to be an explanation of this move by the City of Memphis before voting starts on this issue.

This is a difficult issue for to understand since the referendum only proposes an Amendment to the City of Memphis Charter. Our concern is that the charter amendment may be a precursor to a different method for calculation by the city for the County share of the tax equivalents being paid by MLGW. It may very well be that the county payment will be reduced by the $5 million increase in revenue to the city.

What are your thoughts on this issue?

Below are some statements from the annual MLGW financial statement.

Each year the MLGW pays a tax from the electric division and the gas division as if it were a private company based on the equity or investment of MLGW properties.

The amounts remitted by MLGW to the City and Shelby County were calculated based on City Council resolutions and City Charter provisions governing the PILOT sharing arrangement with Shelby County.

MLGW’s transfer to the City is based on the formula provided by the May 29, 1987 TVA Power Contract Amendment (Supp. No. 8). The formula includes a maximum property tax equivalency calculation plus 4% of operating revenue less power costs (three-year average). Transfers to the city represent the Electric Division’s in lieu of tax payment. The transfer for 2015 decreased by $2.6 million due to a $1.9 million reduction in the tax equalization rate, a decrease of $1.5 million resulting from higher PILOT to Shelby County and the City requesting $0.5 million less than the maximum allowed by TVA contract. The decreases are partially offset by an increase of $1.4 million due to increased net plant investment and operating revenue less power costs (three-year average). MLGW’s transfer to the City is based on the formula provided by the State of Tennessee Municipal Gas System Tax Equivalent Law of 1987. The formula includes a maximum property tax equivalency calculation plus 4% of operating revenue less power costs (three-year average). Transfers to the City represent the Gas Division’s PILOT.

The transfer for 2015 decreased by $0.8 million due to a decrease of $1.0 million resulting from the City requesting less than the maximum allowed by statute and $0.8 million due to a decrease in the tax equalization rate, offset in part by an increase of $0.8 million due to net plant investment and three-year average revenues and an increase of $0.2 million resulting from lower PILOT to Shelby County.

Another important statement is the legal provision of 691 that any surplus remaining, over and above safe operating margins, shall be devoted solely to rate reduction.