Archive for the ‘PILOTS’ Category
November 20, 2014
The Fairgrounds TDZ Zone
Here we go again with another proposed development project directed by the City of Memphis development wizard, Mr. Robert Lipscomb. Now it is the Fairgrounds involving the old Coliseum, Liberty Bowl Stadium and all the other buildings and improvements on the fairground property.
In an August 2014 article in Smart City Memphis it was stated that “the TDZ does not siphon dollars from the city’s tax base because no city general fund money is spent on the project, and in fact, it may expand the city’s tax base by increasing adjacent property values and citywide sales taxes. That’s one of the reasons we prefer TDZ and Tax Increment Financing (TIF) over PILOTs: the project pays for itself with the taxes created by the project itself. In other words, it is self-financing, but best of all; the new incremental taxes in the TDZ are predominately state sales taxes that stay here to pay for the project rather than being sent to Nashville where about 80% of it would be spent all across Tennessee.”
However here is what a Moody’s investor’s service bulletin said about a Memphis Center City Revenue Corporation’s $20.1 million Stadium project and other Tourist Development Zone projects downtown.
The current issue is ultimately secured by all non-tax revenues that are legally available, other than ad valorem revenues, in the city’s General Fund. The ratings of the bonds are based on the city’s pledge to replenish the debt service reserve fund in the event of a draw on non-ad valorem tax revenue.
My point here is that if these bonds issued for the Fairgrounds TDZ are the same as those for the downtown TDZ zone; then if the incremental tax revenue is not sufficient to cover the required bond payments, then all city revenue other than the Ad Valorem Tax (basically property taxes) will be called on to make up the difference. It is not risk free. Take a look at the attached general fund revenue sheets from the 2013 City of Memphis budget. You will see that ad valorem taxes are about 40% of the revenue. The rest presumably would be subject to the bond insurance.
October 30, 2014
ON THE EDGE (Economic Development Growth Engine)
Last Tuesday I attended the Memphis Rotary Club Luncheon at the University Club. The speaker was Mr. Reid Dulberger, President of EDGE and related entities.
He presented an excellent presentation of the PILOT (payment in lieu of taxes) program. His main point in favor of Pilots is his contention that without the Pilot program Memphis or Shelby County (or both) would lose the opportunity for new jobs or investment and future enhanced tax revenue. An example would be a company that expresses an interest in investing here or somewhere else. Unless we give them a tax break for up to 15 years, they say the company will go elsewhere. So the choice is nothing or something. That seems clear enough.
Another example is an existing local business taxpayer who says they want to expand but they need a tax break or they will not expand or they (more…)
August 18, 2014
Property Developer With Other People’s Money
A recent CA article stated the following “After a delay of several months, Robert Lipscomb said recently that his team is ready to move forward with a long-standing plan to redevelop the Mid-South Fairgrounds into a sports complex and retail center.”
What a remarkable statement. Most professional property developers risk their own money or gather together other investors based on their good track record. However Mr. Lipscomb uses government programs such as TDZs (Tourist Development Zones), TIFs (Tax Incremental Financing) and various State and Federal programs paid for by the general taxpayers. Bonds are issued with the promise of payment from a fund of incremental taxes over and above a predevelopment base tax rate. If the incremental taxes are there to pay off the bonds then everything works out fine. If they are not there, then the local taxpayers pick up the load.
My question is who appointed Robert Lipscomb as chief Memphis property developer? If the City of Memphis is his property development company, then we need to study the financial records of his company. The State of Tennessee through the office of (more…)
July 21, 2014
$568 Million New Tax Revenue
Pilots (Payments In Lieu Of Taxes) are front and center in the current controversy about bringing our City finances under control. I went to the EDGE website (Economic Development Growth Engine). It is beautiful. On the lead page is the following information.
$568 Million in new tax revenue
Well the problem is solved. With $568 million in new tax revenue why are we cutting health care benefits for City retirees and raising health care costs for active employees? Why are we discussing changing the pension plan at the City of Memphis?
The reason is that it is all smoke and mirrors. If you go to the City of Memphis CAFRs (Comprehensive Annual Financial Reports) and the same for the County you will see that sales tax receipts have been level at best and decreasing over the last few years.
The Pilot program is a crutch used by local developers and real estate interests to give us something to attract new companies to Memphis and to keep local companies from leaving. Memphis has many assets to recommend it. Location, water, transportation and utilities. However it has two deficits. A high tax rate and poor education of the local work force.
The real report that EDGE should produce is a report that shows all companies that have come off the PILOT program at the end of their tax abatement. The report should show the amount of taxes abated over the length of the pilot program, the ending date and the amount of taxes paid after the end of the abatement period. This they have refused to do. Until they do that and show us where the $568 million is, I will continue asking the question WHERE IS THE BEEF?
April 10, 2014
PILOTS-Are They Paying Their Way?
I am not talking about Malasian flight 370 but they are just as mysterious. “PILOT” stands for Payment In Lieu of Taxes. A company opens a business here or expands a business here or moves from one place to another and asks for abatement of taxes for the next 5, 10, 15 or more years from the City or the County or both.
They go to EDGE (Economic Development Growth Engine) run by Reid Dulberger and 5 will get your 10 that they will get the tax abatement for 15. According to the EDGE website “The impact of the program since 2008 includes: 14,500 new jobs with $581 million of new annual payroll, $3.88 billion new capital investment, $464 million new Minority/Women-owned business receipts and 17,900 talented individuals attracted/retained.”
WOW. Who could be against those numbers? But wait, why does it not show up as additional income for Memphis and Shelby County?
Here is what their database says. “To date, EDGE projects have generated $1.6 billion in projected capital investment, 6,676 new/retained jobs, $545 million in projected new tax revenue and $344 million in MWBE/LOSB spending commitments.” WHERE IS THE BEEF?
Here are my thoughts on what needs to be done.
Attached here is David Lenoir’s (Shelby County Trustee) 2013 In-Lieu Properties Annual Report. Total tax exemptions stand at $49.9 million at the end of 2013. Section VI shows contractS aged by expiration date and Section VII shows In-Lieu delinquent tax notices.
It is my understanding from Mr. Lenoir that this shows only in lieu information from the county, not the city. Therefore the $50 million annual tax abatement is probably more like $75 million total city and county.
Here, in my opinion, is what needs to be done to restore some confidence to the EDGE program.
1) The City of Memphis should publish a similar annual report showing their figures as the County does in the same format.
2) Both the County and the City should show a report showing all the past Pilots that have been completed (Section VI) and showing the abated tax amount and then the actual tax amounts for each year after the end of the Pilot for the property so that the (more…)
January 23, 2014
More Info From the Memphis CAFR
Pick up the CA and you will get more articles than you can read over your morning coffee. They all point to the upcoming decisions of the Mayor and the City Council. The chickens are coming home to roost as they have been disturbed by the noise of the cans that have been kicked down the road.
As I sift through the current 2013 Comprehensive Annual Financial Report (CAFR) of the City of Memphis, I decided to compare several pages from the 2008 CAFR with the same pages from the 2013 CAFR.
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…)
In an article published in the Commercial Appeal on Sunday discussing the recently passed property tax increase for Shelby County (http://www.commercialappeal.com/news/2013/aug/11/a-perfect-storm-unique-challenges-on-revenue/) County Commissioner Henri Brooks takes aim at the Memphis-Shelby County PILOT program. Brooks objects to PILOT programs taking resources that, in her view, would be better spent on education than the business community. The PILOT program (Payment-In-Lieu-of-Taxes) provides relief of 90% of Memphis property taxes and 75% of Shelby County taxes to qualified businesses. The program is administered by EDGE (Economic Development Growth Engine) in Shelby County.
The PILOT program seeks to grow the economy of Memphis and Shelby County by making it more attractive for companies to locate here. PILOT grants are given to companies and projects that meet the goals of EDGE, but there is no obligation to give PILOT money to (more…)
July 15, 2013
There was an article in the CA yesterday entitled “What path to long-term fiscal health for Memphis”. The article had statements by several Council members and here is my take on their statements.
Shea Flinn: He starts off with the theory of the survival of the fittest. He states that some of his colleagues see city government as the employer of the first, second and last resort. I agree because whenever I suggest a reform evolving layoffs, most of the City Council members have a nervous breakdown. He points out that the majority of the Council refuse to face the facts.
He made the bold proposal to raise the tax rate to a level to pay for the present level of services. They refused and stuck their heads in the sand.
Myron Lowery: Myron pointed out that the $3.36 tax rate would produce the (more…)