Archive for the ‘Pyramid’ Category
Last Tuesday I braved the ice (black and otherwise) and went to the City Council committee meetings at City Hall. There were two particular subjects in which I had an interest and they were the Pension Funding Policy chaired by Jim Strickland and the Executive session on Debt Restructuring chaired by Myron Lowery.
These two subjects are related because due to the 2010 scoop and toss bond refinancing and the State of Tennessee demanding that the City of Memphis increases its pension ARC (annual required contribution). It turns out that the 2010 refinancing created a bubble starting in 2016 making it difficult to pay both the increased ARC and the bond payments at the same time. The answer, scoop and toss again. The City (Brian Collins) claims that this is reasonable due to low interest rates. Jim Strickland, Harold Collins, Wanda Halbert and Shea Flinn raised questions as did the Commercial Appeal. Here is the presentation given at the meeting.
I decided to investigate some past bond financing so I asked the City of Memphis for some bond information on recent bonds such as the stadium project and the Pyramid and Pinch District redevelopment. All I got from them was a computerized reply with answers to follow SOME DAY. So I went online and got the following Moodys financial analysis report.
Here are some of the things that the report says about Memphis.
- The current issue is ultimately secured by all non-tax revenue that is legally available other than ad valorem revenues in the city’s general fund.
- The Series 2011B and 2011 C subordinate are secured by a second lien on TDZ revenues with a pledge from the city to replenish the debt service reserve in the event of a draw on non-ad valorem tax revenues.
The negative outlook on the Series 2013A&B and 2011B&C reflects Moody’s expectation that the city’s financial position will remain challenged as fixed costs, including debt service, pension and other post-employment benefits represents 42% of operating expenditures in fiscal 2012.
In spite of all this the City continues to spend on questionable projects like the Raleigh Springs Mall renovation and to talk about the fairgrounds project as if these will all be paid for by tax incremental financing and fairy dust.
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…)
May 13, 2014
The Handling of Appointed Positions
As the Memphis City Council discusses the problem of unfunded liability and possible solutions I hope they do not forget the handling of appointed positions and their action in January 2001 and their action in 2004. But more on that later.
What are appointed positions? I recently asked Shelby County Government for their list of appointed positions. As you will see this goes from the Assessor’s office all the way to the Trustee’s office for a total annual salary of $36.6 million. The latest list that I have from the City of Memphis shows a total annual salary of $21.7 million for appointed positions.
The difference here is that in January 2001 the City Council proposed and passed a resolution that allowed elected and appointed people to retire after 12 years regardless of age. This disastrous decision by the City Council and the mayor has added millions of dollars to our unfunded pension liability. After a city council member stated that this resolution would help keep and retain good (more…)
January 6, 2014
I spent the month of December trying to get answers to the following questions.
1) How many tourist development zones (TDZs) have been approved by the state of Tennessee, the date of approval and a map or designation of the zones?
2) For those zones that are approved, how much is the base sales and use tax amount from which the incremental amount of taxes will be distributed?
3) How much incremental taxes have been received each year since the inception of the TDZ zones?
4) On what have the incremental taxes been spent?
I asked these questions of the City of Memphis and have again and again been promised answers. I know that during the Christmas season it is hard to get action. I also asked the first three questions of the Tennessee Department of Revenue and did get some answers from them. I have attached a schedule of distributions to municipalities for qualified tourism development zones by fiscal years earned. Also I received a similar schedule for sales tax allocation for sports authorities such as the NBA facility in Memphis and the minor league baseball facility in Memphis. This is interesting information and you will see that Memphis received $13.2 million in FY 2011-12 for the only TDZ zones we currently have approved (downtown) and $1.9 million for the Arena and zero for the baseball facility in 2012.
I received further clarification from the state concerning the rules on TIF distribution as shown below.
In an attempt to answer your question related to the 1.9 million. The 1.9 million dollars was paid to the city of Memphis / Shelby County as a separate payment each month as the sales tax dollars for the Grizzlies is collected. The information of zero that you have relative to the Redbirds is incorrect the amount paid to the Memphis Redbirds foundation was $586,282.41. These amounts are after we take the ½ percent for education off the top of the collections.
In calculating the TDZ we do back the amount of these sports authorities off of the collections for that year in determining the growth to apply.
So in the year we are looking at the overall collections for state sales tax was $ 750,776,304.38(this figure includes food) we reduce that amount by the amount of total state sales tax collections relative to the sports authority which was $2,722,845.30 (please remember the figures are different because this is before the ½ percent for education is calculated).
That net number $748,053,459.08 is compared to the same data as the previous year to determine the overall growth in the area.
This growth is then applied to the base to create the current base in the 2011-12 year the base was $34,215,152.17. The TCA reads the TDZ will benefit from the amount collected within the TDZ area that was above the base. The amount collected in the zone for state sales tax was 50,352,645.09 ( we adjust this number by the ½ percent for education) Giving a net collections of $46,156,608.12 then we add the food sales tax collections within the TDZ area which was $176,729.12. Those two figures combined total net state sales tax collections $ 46,333,337.24. This is the amount compared to the base and the TDZ receives the above and beyond in this case it was $12, 118,185.06. The local portion of the sales tax is calculated under the same basis.
Please let me know if you have any questions.
I still want to know how this money is applied to our debt which I expect the City of Memphis to answer.
Now it is my understanding that the City of Memphis is asking for a second TDZ zone for the Fairgrounds project. The question is this. IS THIS A SOUND WAY TO FINANCE BIG PROJECTS LIKE BASSPRO, FAIRGROUNDS, PINCH DISTRICT AND ON AN ON?
Look at some of the other cities like Chattanooga and Sevierville that went down this same path. In one report there was the following statement.
*Chattanooga received no state sales tax distribution in 2007 because taxable sales fell below their pre-TIF level. Several businesses left the designated area.
Also Sevierville has had problems with paying for their debt by this method. So the assertion that there is no risk for tax incremental financing is not true. At the very least the City of Memphis should provide a detailed analysis showing the expected amount of incremental sales tax expected from the TDZ needed to pay the debt and tell the public and the taxpayers the truth about their downside risk if the expected sales tax revenue does not materialize.
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?
You have probably read about the four huge Bass Pro lighted signs that will adorn the Pyramid if approved by the City Administration. Here is what John Malmo, a noted marketing expert had to say about the issue.
John Malmo, Memphis advertising executive, said, “That’s one helluva sign package, but if you rent the Lincoln Memorial to a retailer and he wants to put up a huge sign to advertise autographed pictures of Jefferson Davis, he’s going to do it unless the lease forbids it.”
January 22, 2013
The City of Memphis has decided to go ahead with the Pyramid/BassPro/Pinch project to the tune of $192 million dollars. The following is from a 2011 article in the Commercial Appeal.
While acknowledging that the project carries risks, Memphis officials and financial planners say the deal to fund The Pyramid’s transformation into a Bass Pro Shopsdestination store has been structured to provide several layers of protection fortaxpayers.
Conservative estimates regarding the major financing component — state sales tax revenues from a Tourist Development Zone covering all of Downtown and the MedicalCenter district — indicate that there should be ample funds to repay bonds issued forthe project, they say.
January 15, 2013
Since the future of the poor City of Memphis seems to depend on future income from TDZs (Tourist Development Zones) and TIFs (Tax Incremental Financing) I decided to investigate these schemes further at the State level. I show below an email and response from Mr. Garrett Guillory, Tennessee Department of Revenue. There is his letter response, sales tax returns on TDZs and sales tax returns on Sports Authorities. Except for the Tennessee Titans stadium in Nashville, Memphis has far more of this type of financing than any other city in the state.
Dear Mr. Saino, Thank you for returning my call and providing clarification on your public records request, which the Tennessee Department of Revenue (the “Department”) received via email dated December 12, 2012. The Department seeks to provide public records in a timely manner. Per our telephone conversation from this morning, I am sending you this follow-up email with the (more…)
December 17, 2012
I went to a Community Redevelopment Agency meeting recently at City Hall and about 50 members of the public were present prepared to discuss and protest the Heritage Trails redevelopment proposal put forth by Robert Lipscomb. He failed to show up. You ask yourself, who is Robert Lipscomb? Good question.
July 26, 2012
Let’s take a look inside the engine of the bonds for this project, $197 million dollar deal. (page numbers shown are the pdf page numbers not the actual document page numbers).
Market Study (Page 4) states “There is no assurance that actual events will correspond with the assumptions on which such estimates are based. Consequently, no guarantee can be made that the estimated new TDZ (Tourist Development Zone) Revenues will (more…)