Archive for the ‘Pyramid’ Category
December 21, 2015
There was an interesting article in the CA on December 18, reporting on a large number of visitors to the Bass Pro Shops at the Pyramid. According to the article there were 2 million customers in the first 7-1/2 months. I am hopeful that this report will translate into enough sales taxes that will pay off the millions of dollars that we borrowed to pay for this development. Bass Pro officials didn’t say how the store is performing financially, but an official said the general store has sold 27 tons of fudge. “That’s a lot of fudge,” he said. Let us hope all that fudge will translate into revenue and not a bellyache.
$197 million in taxable and tax exempt bonds were issued for this project. These TDZ revenues to pay off these bonds are received in one lump sum payments from the state in September of each year based on incremental state and local sales tax collections in the TDZ zone by the state as of June 30 of that same year. The TDZ revenues in 2011 shows $12 million none of which came from Bass Pro.
The initial projected TDZ revenue for June 2015 was $20.2 million, an increase of about $8 million due to the Bass Pro Pyramid project. Obviously the delay in the construction of the project will probably cut that figure but I would like to know what the actual figure is for the year ending June 2015. I have asked for this information from the City of Memphis but to date I have not received an answer. Let us hope that that the fudge and moon pie sales and hopefully more expensive items will indicate that we have a bright future for this huge project. Believe me, I want it to succeed.
November 13, 2015
Bass Pro Pyramid Review
Local ABC 24 called and asked me to comment on Bass Pro after 6 months from opening. http://www.localmemphis.com/news/local-news/final-hurdle-remains-for-bass-pro-and-pinch-district
It so happened that I had just spent all day several days previously touring Rhodes College, St Jude and Bass Pro so naturally I am an expert. It was a Wednesday when my wife and I and several out of town visitors did this tour. I must say that Rhodes was outstanding and beautiful. My visitor was a retired orthopedic surgeon and his wife a retired nurse. (He is on the board of Westminster College in Missouri (the site of the famous Winston Churchill speech on the iron curtain). This was before the disastrous University of Missouri incident.)
After visiting Rhodes we went to St. Jude and it was wonderful. Very heartwarming to see the work that they do. Then we went to Bass Pro. As I said it was on a Wednesday at about 2 PM, not exactly prime time.
We toured the ground floor and I was very impressed with the multiple selections of Moon Pies. Also I shopped for camouflaged underwear and pajamas. My wife told me that there was a good selection of women’s clothing (groan). We paid $10 each to ride the elevator to the top and had a good view of the river. We had already had lunch earlier elsewhere but we looked over the menu and it was the typical selection of sandwiches and salads that you could get at dozens of places all over Memphis. The food selection definitely did not match the view.
Now to the financial details. The City of Memphis, through the Memphis Center City Revenue Finance Corporation issued bonds to the tune of $192 million dollars for Warm Lit Shell ($20M) Seismic Retrofit ($25M), Landlord Contribution ($33M), Convention Center Acquisition ($67 M) Pyramid Acquisition ($3.2 M), Lonestar Acquisition ($15 M) and debt reserve and transaction cost of $$28.8 M).
This is to be paid back by increased sales tax revenue over and above a base which will be paid from the State of Tennessee’s sales tax collections for principal and interest. See a distribution report that I obtained from the state of Tennessee on past TDZ zones. Then look at the RKG Associates financial analysis and you will see that they are projectioning an increase in the first full year of $8.1 million more over and above the current level. Keep in mind that each year a new base is set. Also note that ½% of the sales tax goes to the School system.
I sincerely hope that the projections are correct or even underestimated but it will be several years before we know for sure. In the meantime Mayor elect Jim Strickland should publish information on existing City of Memphis financial obligations to the bonds issued by the Memphis Center City Revenue Finance Corporation showing the amount of the outstanding loans and the payment history of each of the obligations. The public has a right to transparency on this financial obligation. The taxpayers are on the hook for these debts even if ad valoren taxes are not. All other taxes collected by the City are obligated.
June 22, 2015
Why OPEN RECORDS Is SO Important
You may have read a front page article last Saturday in the Commercial Appeal by education reporter Jane Roberts. The article announced the creation of an open records reading room (Room 121) in the SCS Coe building at 160 S. Hollywood St. here in Memphis.
I have been working to open local public records since 2004 and have been greatly aided by many local citizens, particularly John Malmo, Eddie and Eve Settles (backinrivercity.com) and Ken Welch. I want to thank these people and many others who have contributed to this effort.
As Ken Welch has said many times, all public records are technically open to the public unless specifically named and restricted by state law. Then why can’t we get all this information easily? The answer is that public bodies and the leaders (Presidents, appointees, Governors, Mayors, Superintendents, etc) can make life difficult and expensive if they want to. The Tennessee open records law clearly states the following. However the particular public organization can drag their feet, threaten big charges paid in advance, refuse you entrances to offices without an appointment and then refuse to make an appointment. What has happened at the SCS system offices is different and significant.
Therefore this is why our agreement with Supt. Hopson and Chris Caldwell is so important. They have shown that they are open to making all legally open records actually open to the public. After all, we (the taxpayers) paid for all this bureaucracy and we are the employers. We recognize that we need good education, good fire and police services, good roads, efficient water, gas and electric services and many other public facilities. However we paid for them and we expect answers to all our reasonable and legally available questions.
Open Records is so important because without transparency there is often corruption, favoritism, waste and inefficiency. The sunshine of OPEN RECORDS and vigilant citizen can prevent this. There are many details to work out and our open records group is willing to work with the Shelby County System to make access easy and convenient. If we can make this work efficiently, we would look forward to using this as a template for other public bodies. Any suggestions from the you, the public, would be welcomed. We need to join together for full open records access.
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.