Archive for the ‘Agenda Items’ Category
February 13, 2014
There are lots of things that need reform in the Memphis pension system and we have talked about the need for going to a defined contribution system rather than the current defined benefit system. Hopefully we will get there if the Mayor and the City Council do the right thing.
However I have often spoken about the need for line of duty disability reform. The Memphis pension board regularly approves applications for line of duty disability applications and has ten times more former employees on line of duty disability than Shelby County government or the MLGW. (These people on line of duty disability get 60% of their final average salary for their lifetime tax free).
Now I find out from Jeni Diprizio (a great reporter for Channel 24) that last month (January 30, 2014) Jason Webb applied for and (more…)
January 28, 2014
For a number of years I have received the agenda for the monthly meeting of the City of Memphis Pension Board. I have attended a number of these meetings. Here are a few things that you need to know.
1) The board consists of the Mayor, the Comptroller and five employees with at least ten years of service, a retiree and only one citizen member. So it is obvious that this is rigged to approve whatever the employees want within the pension ordinance. Temporary Mayor Myron Lowery tried to appoint me to the board a few years ago and the Council voted it down.
Being familiar with meetings and agendas, I noted the agenda for the next meeting this Thursday, January 30. There were listed 30 DROP applications which will cost the City $1.62 million dollars per year in pension payments over the next three years while the DROP applicant is still working. Then I remembered that there were four periods during the year for DROP applications and January was one of the four. I went back to January, April, July and October 2013 and looked at those agendas and there were a total of 116 DROP applications amounting to $4.8 million dollars per year.
I need to explain the DROP (Deferred Retirement Option Plan) provision of the pension system. This provision allows an employee to continue working for one, two or three additional years (most if not all choose 3 years), and to receive salary and pension at the same time. The pension payment goes into a special account and at the end of the drop period the employee will receive a lump sum payment which can be rolled over into a retirement account. The pension is frozen at the level that the employee starts his final retirement years (1, 2 or 3). The employee’s and the City’s pension contribution cease as of the start date of the DROP program.
The County does not have a similar program.
December 17, 2013
Mayor Wharton Says Spend! Spend! Spend!
In a very interesting article in the Daily News by Bill Dries, the Mayor is quoted from a TV interview in July on the WKNO-TV program “Behind The Headlines” as saying the following.
“ projects like the Mid-South Fairgrounds renovation and the Bass Pro Shops move into The Pyramid are necessary ingredients in an administration he has vowed will not be about austerity measures. It has failed in Europe … this idea that austerity will cure all ills. It has not worked globally. It will not work locally. … Who is focusing on growth? Everything is cut, cut, cut. Anybody can say that. Forrest Gump can say that.”
This sounds like a statement coming from the White House, not City Hall. He may be repeating talking points. However it sounds like someone who has run out of other people’s money and is fishing for more. I hate to sound old fashioned. As someone who has run a business and has had to meet a payroll, spend, spend, spend is not a good long term strategy unless you can show investors from past successes and a well thought out plan, that there will be future revenue, revenue, revenue to cover the debt, debt, debt. But I repeat myself.
Now as to the pension reform mentioned in the CA, I like the framework of the plan but it does not go far enough. Going to a defined contribution pension plan for future employees and non vested present employees is fair and puts them on the same risk level as the private sector taxpayers. The “for profit” private enterprise market generally has been good to investors for the last 25 years with the exception of 2008. Why should public sector employees be insulated from the risk that private sector taxpayers take?
However we also need to consider that it may be necessary to look at current vested employees and consider freezing their earned pension credits at their present levels and also put them on the same future defined contribution plan for their future years before retirement. However he retired pensioners should be protected short of city bankruptcy like Detroit. These considerations and plans are necessary to avoid another Detroit in the future.
December 12, 2013
A Backdoor Tax Increase
The City Council has passed another backdoor tax increase by unloading street lighting electric cost and maintenance on the MLGW. You already see a sewer fee, a solid waste fee, a storm water fee and a mosquito/rodent control fee on your utility bill.
The utility expects the fee to raise a total of $12.9 million per year, of which roughly half would go toward electricity for the streetlights and half would go toward maintaining them. This is an expense that is covered by the services paid for by property taxes. Now the City Council wants to take it out of their expense budget and bill it directly to the taxpayers through the MLGW billing process.
Here is what I investigated and found out. If you will look at the 2012 operating budget. The City shows an actual cost of $4.3 million for street lighting in 2010 but a 2012 adopted budget of $12.1 million. Then look at the 2014 operating budget and they show an actual (more…)
October 7, 2013
The Sears Crosstown Project
I am old enough to remember going to the Curb Market in crosstown with my mother and buying a bushel of snap beans for canning. I would have to spend the rest of the day cleaning and preparing them. On many occasions we then went to the Sears Crosstown store. It was huge and impressive. It was built for a certain time and market and whether it paid for itself over time I do not know. Looking at the Sears Company today, you have to wonder about their long term business knowledge. The Sears catalog was the amazon of its day and this store I believe was a catalog sales and warehouse center. Too bad they did not keep up with technology.
Now we have a choice. Tear down the old Sears building or spend at least $175 million to turn it into another Robert Lipscomb non tax producing renovation project. Where is the financial pro forma report on this project? If it is available I would like to see it.
Meanwhile let us look at how this is currently being financed according to a recent CA report.The Crosstown Development team says it has essentially assured $160 million in
funding — $25 million raised privately, $30 million in historic preservation tax credits,
$15 million in new market tax credits, $10 million in grants and other sources, and an
$80 million loan. Add the $15 million requested from the City of Memphis and you have the $175 million supposed front end cost.
- $30 million in historic preservation tax credits. The legislative incentive program to encourage the preservation of “historical buildings”. Congress instituted a two-tier Tax Credit incentive under the 1986 Tax Reform Act. A 20% credit is available for the rehabilitation of historical buildings and a 10% credit is available for non-historic buildings, which were first placed in service before 1936. Benefits are derived from tax credits in the year the property is placed in service, cash flow over 6 years and repurchase options in year six.
- $15 million in new market tax credits. The New Markets Tax Credit (NMTC) Program was established in 2000 as part of the Community Renewal Tax Relief Act of 2000. The goal of the program is to spur revitalization efforts of low-income and impoverished communities across the United States and Territories. The NMTC Program provides tax credit incentives to investors for equity investments in certified Community Development Entities, which invest in low-income communities. The credit equals 39% of the investment paid out (5% in each of the first three years, then 6% in the final four years, for a total of 39%) over seven years (more accurately, six years and one day of the seventh year) . A Community Development Entity must have a primary mission of investing in low-income communities and persons.
If it goes forward, will it throw off tax money to the City of Memphis? If there are new small businesses that rent space or locate in the general area because of new traffic and people who live in the renovated building, I suppose there could be new sales tax money and employment opportunities. However it sounds like most of the occupiers of the space will be non-profits and art enterprises. There will be people living in the building but many of these will be rent subsidized people under section 8 or other federal and state programs. Taxpayers will be funding the whole project funded through these various federal tax credits.
As far as the building is concerned, I think it is ugly and really not worth saving. Possibly the architects can make it beautiful but at what cost compared to tearing it down and doing something else? I would like to see a financial analysis of this proposed project and no decision should go forward without this being presented to the public for discussion.
September 4, 2013
At the last meeting of the City Council (August 20, 2013) they passed the smart meter resolution. There was also on the agenda an item for a resolution to approve the 2014 Street Lighting Schedule of Fees. This item was delayed until sometime in September.
Let me get this straight. This is an expense that is covered by the services paid for by property taxes. Now the City Council wants to take it out of their expense budget and bill it directly to the taxpayers through the MLGW billing process. If you will look on the back of your MLGW bill you will see that you are already being billed directly for the following.
- Sewer Fee (Memphis)
- Solid Waste Fee (Memphis)
- Storm Water Fee (Memphis)
- Mosquito/Rodent Control Fee (Shelby County)
Now they want to put a street lighting fee on your bill directly instead of raising your property taxes.
August 20, 2013
Several interesting things are on the City Council Agenda today.
- The smart meter item is up for voting at a cost of $10.15 million.
- There is a proposal for time of use residential rate schedule for those customers choosing smart meters.
- There is a new charge to be on your MLGW bill for street lighting at a residential charge of $51.84 per year, an apartment charge of $12.96 per year and a commercial business charge of $103.80 per year. This is a backdoor tax increase.
- A resolution to accept funding for Memphis Public Library from Humanities TN for the public program Bridging Cultures: Muslim Contribution to the US Since 1776.
I previously made a comment about smart meters and was squarely in the middle of the two sides. One of my readers said that my comments were similar to the famous Whiskey speech by Judge Soggy Sweat. I plead guilty to listening to both sides of the debate and each side has a point. I think it should be approved but without time of use rates. It should be defeated if time of use rates are also approved.
August 6, 2013
I have commented several times on the question of smart meters. Generally I have been against buying and installing 1.3 million smart meters for a price of $215 million starting with the upcoming decision on 60,000. I have heard two presentations by the IBEW union, two by the public activists and two by Jerry Collins, President of the MLGW. Of the three parties, I must conclude that Mr. Collins makes the most sense and has the most points in favor of smart meters.
Here are the favorable points in favor of smart meters.
- To have the MLGW alerted automatically when power fails. The failure information will help speed the restoration effort.
- To eventually do away with the need for meter readers saving overall in operating costs due to less personnel required and saving the hassle of locked gates and pet problems.
- To have the availability of pre-pay service wherein customers can pay as they use the utilities and to automatically notify customers when they are running close to their prepayment amount. Customer cutoffs and reconnection can be done without a visit to the site.
I was at the recent Thursday night meeting on smart meters. Regardless of what the CA wrote the meeting was very informative. I am a graduate electrical engineer and a former chairman of the MLGW board. I respect the job that the MLGW does and Jerry Collins, Chris Bieber and the employees of the MLGW are good people.
However the union and the public delivered facts that are indisputable. Here are the really important points.
- There is no national construction standard for smart meters. This is still evolving and will not be prepared for some years from now. The meters we buy now will probably not comply.
- These meters have a very simple computer board that could be easily hacked and made to run slower or faster or introduce viruses into the system. We already know how vulnerable our national energy system is to hacking.
- The City of Memphis is broke and there is no benefit for spending some $215 million dollars ++ and all the extra expense for the collection software and hardware. “MLGW places the cost of smart meters in Shelby County at $215 million,” Burton said. The Memphis activist pointed to the example of Chattanooga, which has 100% smart meter compliance. “The cost there was estimated to be $226 million. They have 170,000 customers. But what they need in Chattanooga now is $552 million. When you think that MLGW has more than a million customers, you can see that $215 million won’t cover it.
- The potential saving in meter readers could be achieved by a system of average billings for the great majority of customers who pay their bills on time. The MLGW does this now with average billings for some customers until an actual reading can be made. This average billing program could cut meters readings in half. However as pointed out in the Thursday meetings, the meter readers are the eyes and ears of the MLGW to prevent utility theft and abuse of equipment.
May 6, 2013
The question is not should we buy 60,000 smart meters. The real question is should we buy any smart meters.
There is one benefit of smart meters that the MLGW claims that is true and that is less meter readers. Regardless of what the MLGW says, The Federal government through TVA will be calling the shots and it is about control and your loss of freedoms. Nationally, smart meters have delivered unemployed meter readers and a deluge of meter data that utilities have no idea what to do with. They delivered little or nothing of value to the consumer. The smart meter also delivered a public increasingly soured on the smart grid, which came to be perceived as a “bait-and-switch” by industry and politicians.
It is a question of Trust. Do you trust the MLGW, the City Council, the Tennessee State Government, the TVA and finally the National (more…)