Archive for the ‘Expenditures’ Category
December 4, 2013
The Convention Center
I have been out of town visiting my daughter, son in law and grandson in San Francisco. It is a lovely town but not much fun getting there and returning by air from Memphis. I picked up a recent morning paper and found that the flights from Salt Lake to Memphis and back were being cut further. In past years there were nonstop flights from Memphis to San Francisco but now we have to fly to Timbuktu to get there and the price is out of sight.
I spent the first day back visiting with Kevin Kane, President and CEO of the Memphis Convention and Visitors Bureau. It was a pleasant visit and he is very knowledgeable about the Convention Center and visiting Memphis in general.
What I was after was the annual financial statements of the Cook Convention Center. I had tried to get these statements directly from the Convention Center office but either they were never in or they refused to answer calls. I had the June 30, 2007 financial statement but none later. The 2007 statement showed a loss of $3.5 million dollars.
After discussions with Kevin he promised me that he would get the 2008 through 2012 statements to me and that since 2007 the losses have been cut at the convention center. He sent the statements later and the 2012 loss at the Cook Convention Center was cut to $2.8 million dollars. We discussed the future of convention centers in general and the new costly one in Nashville and the old Cook Convention Center and the possibility of a new one for Memphis. He said that all convention centers lose money but the purpose is to develop tourism for the city and make money on tourism generated sales taxes and hotel, motel and car rental taxes. I speculated that internet advertising and electronic face to face meetings might eventually diminish convention trade but he contended that face to face meeting were still important.
November 21, 2013
Close to $400,000 spent to pass this 1/2 cent sales tax increase. This is a top down proposal, we know better than you, type solution. City finances are on fire compared to the County which is in relatively good shape. This reminds me of Washington DC top down proposals. Shea Flinn and Jim Strickland are good guys and if they could get seven votes, they would reform city finances. Pastor Whalum knows the problem and the people and I think he has a better handle on the solution.
The real problem that this is intended to address is simple in origin.
The problem is single parent families from which comes illiteracy and welfare dependency.
The answer is a stable family, a good education encouraged by the parents and taxpaying work.
This proposed solution nibbles around the edges and throws money at the problem with a little left over to reduce property taxes, maybe.
The proponents of this proposal think sales taxes are the answer to everything. Finance Bass Pro, rebuild the Sears Tower, finance fairgrounds, finance heritage trail, finance a new convention center all from increased sales taxes. Have you looked at your Memphis CAFR (Comprehensive Annual Financial Reports)? The local share of State Sales taxes have gone down by $4.5 million dollars from 2008 to 2012. And they tell you that all these projects can be financed by the incremental amount of sales tax collections generated by these multimillion dollar projects. Go figure!
November 14, 2013
Voting is proceeding on the ½ cent sales tax increase. There is a lot of money being spent to pass this initiative as evidenced by the two expensive direct mail pieces I received yesterday. This was paid for by the Memphis Pre-K initiative.
You know my position on this as I am against it until City Hall and the City Council reform their finances and get them on a sustainable basis. For more information on this question, there is a very good article in this week’s Memphis Flyer.
However look at the whole question of sales taxes. According to Robert Lipscomb there is an endless source of money for development in Tax Incremental Financing (TIF) developed by Tourist Development Zones (TDZ) in Memphis. According to Mr. Lipscomb all you have to do is build it and it will be paid for by the incremental amount of sales taxes spun off from the development. Don’t worry about whether the incremental amount of sales taxes will be there to cover the principal and interest. The full faith and (more…)
November 7, 2013
I sent the attached open records request to the Shelby County Board of Education addressed to the records custodian. I got the answer shown in the attachment. Since then I have called twice and have gotten no return call. I then sent an email to Jennifer Collins and requested that she put the documents at the front desk a week ago Friday which I would pick up with a check. In the email I said if that was not possible to let me know. I arrived Friday morning and there were no documents and they could not get Ms. Collins on the phone. Also I was not allowed into the general counsel’s office in contradiction to the Tennessee open records law. I snail mailed the check and I finally received some documents about the books by return snail mail rather than by electronic mail. This cost them $2.32 to mail them.
The arrogance of these people is amazing. They don’t think they work for the taxpayers. They get this attitude by watching what goes on in Washington DC. Nothing really has changed since the consolidation. It seems to still be the Memphis School System. Obviously (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 26, 2013
As I read through this massive document I want to point out some of the good suggestions from the ridiculous ones. I have attached a section entitled “Implement Strategies to Lower Volatility of Pension ARC”
The Pension ARC is the annual required contribution necessary to fully fund the promised pensions. For the plan year ended June 30, 2012 this figure was $89 million dollars. WOW!! The City of Memphis put in 22.6% of this. The difference in the ARC and what the City actually contributed of course adds to the unfunded liability plus the interest on the difference.
The suggestions from the plan are as follows.
- Freeze cost of living (COLA) adjustments until the plan achieves 90% funded status.
- Contribute the full ARC each year. Where is the Money ($69 million) coming from?
- Close the current defined benefit pension plan and begin a defined contribution plan.
- Extend the City’s 2011 pension reforms to non-vested employees. Extending the 2011 reforms to all non-vested employees (47.7% of total employees) would reduce the ARC by $5 million in 2014 and by $28.2 million from 2014 through 2018.
Read through the report and let me know if you think any of this is really going to happen. The answers are there to make real reforms (more…)
September 19, 2013
For three days running there have been lead articles in the CA about our City of Memphis pension unfunded liability.
Finally yesterday, they mentioned the even greater OPEB unfunded liability (cost of health care for retirees).
I have attached the report from PWC consultants for your review. Read it at your leisure but here are some highlights.
- Despite better than average asset returns for 2010 and 2011, the plan’s funded status will continue to deteriorate, from $682 million to $740 million.
- Assuming no other changes, it is estimated that it would require an annual asset return of 13% over each of the next 10 years in order to fully fund the plan.
- Conclusion: Based upon the actuarial assumptions used to determine the plan’s liability and ARC, a projection of a workforce similar in size to the current one, and the current funding policy of 6.0% of compensation, the plan is not sustainable in the long-term.
September 16, 2013
I am reviewing another part of the Shelby County Efficiency Review, Legal costs. Ugh! I will be the first to admit that good legal advice is necessary in our litigious society. So let us look at the County versus the City.
I have attached some pages from the City budget and the County budget. The County budget for the County Attorney’s Office is $3.7 million for 35.5 people. This includes legal services for the County Commission. From this in the future, if the suggestions are adopted, they propose to cut $300,000.
Now look at the City of Memphis. Their actual expenses for FY2012 were $13.6 million with 58 people. Their proposal for 2014 is $9.5 (more…)
September 12, 2013
As I start reading through this massive document I have to start with the introduction and rationale of the plan. Here are the first 26 pages of the draft plan.
To be a successful urban area, Memphis has to do the following.
- Increase property values
- Decrease poverty
- Ensure government efficiency
- Improve neighborhoods
- Invest in human capital
- Grow the economy
Wow!! What great ideas. Why did I not think of those?
September 9, 2013
Strategic Five-Fiscal and Management Plan
I have been reading through the huge five year City of Memphis Management Plan prepared by the Mayor’s Office of Strategic Planning and the PFM Group involving Rick Masson and V. Lynn Evans.
It is fascinating and full of information. It will take me some time to digest it. As I do I will let you, the tax paying public, share in the (more…)