Sunday, April 30, 2006

Spirit of '76

Memphis Magazine, in its 30th anniversary issue in April, began a new monthly column, City Journal. Here's the inaugural installment by our colleague Tom Jones:

City Journal

It was 1976, and the decline of Memphis had ended. Unfortunately, it was because we had hit bottom.

The economy languished; the Chamber of Commerce flirted with bankruptcy and its last campaign, Believe in Memphis, had fallen flat; Beale Street was boarded up; downtown was on life support; Stax Records was shut down; and the closed Peabody Hotel was a potent reminder of Memphis’ flagging confidence in itself.

And yet, there’s nothing like a crisis to inspire new thinking.

As a result, young Turks conceived a new festival called Memphis in May. Other Memphians laid the groundwork for what became the Center City Commission. A small group began to talk about creating a new generation of leaders, giving birth to Leadership Memphis. City Hall fleshed out plans to buy and revive Beale Street. A new, improved Shelby County Government launched, complete with its own mayor. A fledgling company called Federal Express picked up momentum after erecting its first drop box. Some civic-minded Memphians published the inaugural issue of City of Memphis.

Back then, Memphis was all about survival, and that’s why the most important milestone wasn’t a new program, project, or political office. Rather, it was an obsessive determination - equal parts faith and desperation - to fight for Memphis’ future.

It was a sense of urgency that is all too rare in the life of Memphis. Today, there’s less of a feeling that we are facing history-altering choices, but it remains no less true.

Here’s a half dozen issues we could begin to address today in the name of Memphians 30 years from now:

Reinvent the local tax structure. In a survey of 51 cities – Washington, D.C., and the largest city in each state – Memphis has the third most regressive tax structure in the nation. That’s why the ultimate answer to current government budget catastrophes lies in an overhauled tax structure (such as requiring the 88,000 non-residents who work in Shelby County to contribute to the public services they benefit from), not in patching up revenue shortfalls with new taxes that perpetuate the existing reality of families earning $25,000 a year paying a higher percentage of their income in taxes than families earning $150,000.

Stake the future on quality, not cheapness. To compete in the global economy, Memphis can’t sell itself at a discount – cheap workers, cheap land, and cheap costs. The city-county tax freezes program, which is waiving more than $50 million in taxes, is more entitlement than incentive, given even to companies paying food stamp wages. In the global economy, strategies to “out cheap” Bangladesh or India are a race to the bottom. Memphis’ competitive advantage has to be quality – research universities, highly-skilled workforce, efficient government, and attention to design.

Develop a greenprint. More and more, the future is shaped by a heightened environmental consciousness, and knowledge economy workers are drawn to cities with a “green” ethos. Few cities could compete with Memphis if it created a seamless system linking Wolf River Greenway, Shelby Farms Park, Memphis Greenline, and a reinvigorated downtown riverfront.

Develop an anti-sprawl plan. If words were money, rhetoric about sprawl could pay off the county debt. With the opening of Highway 385 – a worthy test case for the state transportation department’s toll road concept – sprawl is poised to get a $450 million boost. It’s not too late to do something about sprawl, but it’s perilously close. Doing nothing will bankrupt county government, create a disposable community, and hollow out urban neighborhoods and first ring suburbs.

Rationalize local government. Local governments’ current division of labor is schizophrenic, because there is no sense of what is always a city service and what is always a regional, or county, service. This confusion prevents accountability and results in Memphis taxpayers paying a disincentive to live inside the city limits. Countywide services should be shifted to the countywide tax base, more equalizing the tax rates of Memphians with their neighbors in Bartlett, Germantown, and Collierville, and allowing Memphis to compete on a level playing field.

Think and act like a region. Regions are the competitive units of the global economy, and although Memphis is now competing against regions in India and Europe, we’re still focused on competing with Northern Mississippi. This balkanizes a regional economy that is larger than nine states and dozens of Third World nations. New alliances aimed at a cooperative vision of the future begin with interests every one in the region has in common – water and air protection, an integrated communications and transportation grid, smart growth, and economic growth.

Admittedly, this is easier said than done. But if 1976 teaches us anything, it is that it can indeed be done, and maybe this time, it won’t take a crisis to make it happen.

Thursday, April 27, 2006

Roadbuilders Continue To Flex Political Muscle In Nashville

When we try to “Imagine” a better future, our ambitions are much more down-to-earth than John Lennon’s. We could be content with a world where Tennessee taxpayers are as powerful as roadbuilders.

Over the years, no special interest group has had more free rein over a state budget than the Tennessee Roadbuilders Association has had over the Department of Transportation. No group is more powerful nor more responsible for the sprawl that characterizes the state’s metro areas.

We thought of this again as we read accounts of State Senator Mark Norris’ shots across the bow at Governor Phil Bredesen because the governor had the gall to shift money from the sacred coffers of the state highway fund to pay for other state services.

While Senator Norris is widely known for his thin skin and the perceived personal offenses and personal attacks that result from it, it’s discouraging to see someone who knows better engaging in such obvious political cleverness, acting as if he truly believes that the public is enraged because roadbuilding interests have seen $44 million taken out of TDOT’s budget of $1.7 billion.

It’s reminiscent of his days as a Shelby County commissioner when he, with great fanfare and a dependable façade of gravity, voted against every property tax increase and every new revenue source such as adequate facilities taxes and impact fees. The fact that this was done in spite of the fact that it was his own district, the unincorporated area and towns of Shelby County, which was largely responsible for the fiscal crisis created by sprawl and schools.

Déjà vu

It was always seen as political gamesmanship by Shelby County Mayor Jim Rout – who shared a political party but little else with then-Commissioner Norris – and it was the mayor who told anyone who would listen that Norris was the consummate political opportunist. There was no love lost by Norris either and eventually, the breach became personal, deep and wide.

That’s why Senator Norris’ defense of the powerful roadbuilders lobby in his dispute with Governor Bredesen has such a “déjà vu all over again” feel to it. At both the county and state levels, he has staunchly defended the forces of sprawl and ignored the tax burdens caused by them, all the while standing four square as a proponent for fiscal restraint.

So, what exactly is Governor Bredesen’s sin, in Senator Norris’ view? He’s had the audacity to shift $44 million in highway funds from TDOT’s budget to pay for pre-K and health care programs.

Senator Norris is the latest object lesson in the strange occurrences that take place when someone takes their seat in a state legislator’s chair. Elected to represent constituents from a specific district, so many times, a state legislator then becomes head of a committee and their primary allegiance is to the lobbyists and the industry for which they are supposed to be providing oversight.

For example, Senator Norris is chairman of the Senate Transportation Committee, and suddenly, it’s as if roadbuilding is the most important function of state government, not whether his constituents are better with the services funded by the $44 million shifted in the governor’s budget.

Steaks and Bourbon

But Senator Norris shouldn’t shoulder all the blame. For decades, the Tennessee Roadbuilders Association has been buying steak dinners and copious rivers of bourbon for legislators, and even in today’s more careful environment, the lobbying group has power that is exceeds any group that more precisely represents the interests of average Tennesseeans.

In truth, this controversy isn’t about the money at all. It’s about the real currency of Nashville politics – power and control.

The shift of the money from the highway fund to other services was the first crack in the roadbuilders’ invincibility, and they are working hard to make sure it never happens again and to prove that they are still a power to be reckoned with.

Meanwhile, in Senator Norris’ district, apparently, asphalt is king, as more and more green space is covered over, as Hacks Cross Road becomes the newest incarnation of Germantown Road’s misery and as Tennessee Highway 385 spawns a new burst of sprawl that gobbles up land, duplicates infrastructure costs and increases county taxes.

To underscore the single-minded focus of the Roadbuilders Association – to line their own pockets - its iron grip on Nashville politics has made sure that state transportation policy means building more roads, never making investments in mass transit nor alternative modes of travel. Bills to make substantial investments in mass transit have routinely been choken to death by the roadbuilders association without raising a sweat.

Road Rage

This obsession with roads by one of our local senators is even more puzzling in light of the report by the U.S. Public Interest Research Group that Memphis is 6th in the U.S. in the number of lanes of highways per capita, contributing to our city’s ranking as the 17th worst city for air pollution from vehicles.

Meanwhile, Shelby County was cited by the Federal Highway Administration for lack of safe alternative forms of transportation such as bike and pedestrian lanes and light rail. Also, the Federal Highway Administration’s recent report on the country’s major bottlenecks doesn’t mention Memphis even once. Rather, it points to I-24 at 440N in Chattanooga and I-40 at I-24 in Nashville as major problem areas.

It would seem to suggest that Memphis has all the roads that it needs. At the same time, we have serious needs in pre-K and health care, so if Governor Bredesen could earmark the $44 million for our community, it would be the best use of highway money we’ve gotten lately.

Wednesday, April 26, 2006

Some Hopeful New Energy Behind PILOT Reform

Memphis Councilman Tom Marshall's comments about changes in the PILOT program elicited an immediate response here: "Amen."

Like only a few members of our local legislative bodies, he has seemed to understood from the beginning the importance of acting on recommendations by consultants to reform the programs giving away tax freezes in a number unprecedented in the rest of the state.

Councilman Marshall rightfully observed that the City Council and County Commission members must have a voice in decisions that affect budgets, tax revenues and tax policies, all of which are in their purview. Most of all, he should be applauded for ignoring the perpetual bogeyman conjured up by real estate developers - the unverifiable notion that Memphis will be bypassed altogether by companies unless we sell ourselves at a discount.

The fact that other cities don't have to give away the store to get new companies to locate and expand there seems to be inconsequential to many of the PILOT proponents. The fact that our obsession on DeSoto County is disproportional to the problem caused by it since Memphis remains one of the most solid centers for metro jobs in the country. The fact that if we are going to talk like a region, we should walk like one, too, and quit treating adjacent counties as enemies. The fact that real estate development is far different than economic development.

As Councilman Marshall breathes a breath of fresh thinking into the PILOT deliberations, here's a quote by the widely-revered David Birch, former Harvard and MIT academician and now president of a company that advises companies on where to locate:

"The cities growing fastest right now have the highest taxes, most expensive workers, most expensive land...To say you want the cheapest worker is an old way of thinking. What you really want is a talented labor force, not the least expensive labor force." Birch says the days are over when companies selected locations for new factories or offices on the basis of where business costs are cheapest.

Or as Professor John Eger puts it: "The effort to create a 21st century city is not so much about technology as it is about jobs, dollars and quality of life. In short, it is about organizing one's community to reinvent itself for the new, knowledge-based economy and society; preparing its citizens to take ownership of their community; and educating the next generation of leaders and workers to meet these global challenges...At the heart of this effort is ultimately defining a 'creative community.'"

In the end, it seems logical that the overriding question about current tax freeze policies is whether they are encouraging the reinvention of Memphis into a creative community known for its quality and innovation. The answer seems obvious, and so then is the rationale for changes to the PILOT program.

Dylan Lyrics Are Just As Relevant Today...Unfortunately

I went to another Bob Dylan concert last night, this time, in Memphis at the Orpheum Theatre. It’s been 40 years since the first one – February 10, 1966 at the old Ellis Auditorium on the other end of downtown – when I took my new girl friend, now wife, to see him on our first date.

He came down from Nashville while recording the seminal rock music record, Blonde on Blonde, with a little-known back-up band that would become “The Band.” Those were simpler times, in an era before every movement, every set list and every word by Dylan were documented by acolytes convinced that he was singing for them. It was so early in his career that it’s impossible to find a bootleg, unlike every concert in the recent decades.

As a result, I’m not sure what Dylan sang that night, but it was in the days when he broke the concert in half – one half was acoustic, and after a break, it became the electrified half that provoked the boos and the cry of “Judas” memorialized as a defining moment in rock music history.

One of the acoustic songs on that night long ago could easily have been “Masters of War,” but when he burst into last night’s version of the classic anti-war anthem, it produced no feelings of nostalgia and sentimentality. It only provoked angst and sense of disquieting foreboding that the song remains as relevant today as he prepares for his 65th birthday next month as when he wrote it as a promising 21-year-old songwriter.

Masters of War

Come you masters of war, you that build all the guns,
You that build the death planes, you that build the big bombs
You that hide behind walls, you that hide behind desk.
I just want you to know I can see through your masks.

You that never done nothin' but build to destroy.
You play with my world like it's your little toy.
You put a gun in my hand and you hide from my eyes,
And you turn and run faster when the fast bullets fly.

Like Judas of old, you lie and deceive.
A world war can be won; you want me to believe.
But I see through your eyes and I see through your brain
Like I see through the water that runs down my drain.

You fasten the triggers for the others to fire.
Then you set back and watch when the death count gets higher.
You hide in your mansion as young people's blood
Flows out of their bodies and is buried in the mud.

You've thrown the worst fear that can ever be hurled --
Fear to bring children into the world.
For threatening my baby, unborn and unnamed,
You ain't worth the blood that runs in your veins.

How much do I know to talk out of turn?
You might say that I'm young; you might say I'm unlearned,
But there's one thing I know though I'm younger than you.
Even Jesus would never forgive what you do.

Let me ask you one question: Is your money that good?
Will it buy you forgiveness? Do you think that it could?
I think you will find when your death takes its toll
All the money you made will never buy back your soul

And I hope that you die and your death'll come soon.
I will follow your casket in the pale afternoon,
And I'll watch while you're lowered down to your deathbed
And I'll stand o'er your grave ‘til I'm sure that you're dead.

What Dylan brings to my life is something that my children’s generation will not experience, because of the realities of today’s music industry. I’ve had a single musician who has verbalized the passages through life. It’s been despairing, hopeful and joyful. It’s been poetic, personal and prophetic.

But last night, with the depth of feeling that he brought to his words, “Masters of War” was a punch in the gut.

Tuesday, April 25, 2006

Tax Freezes Should Have Requirements To Eliminate Hidden Costs To The Public

The interests that oppose any serious reform to local policies on tax freezes are positioned to win. At this point, all they may need to do is run out the clock.

That’s because, as one of them said in his normal, matter-of-fact candor, on September 1, two anti-tax freeze voices will leave the Shelby County Board of Commissioners – Julian Bolton and John Willingham. Both have been strong advocates for changes in the program, and at times, their frustration has even led them to suggest the abolition of the tax freezes altogether.

Meanwhile, the committee convened by the two mayors seems to be letting the air out of the ball, and its input seems to be moving closer and closer to a time when real estate developers have friendlier faces on the county’s legislative body.

As a result, the ultimate arbiter on whether there will be changes in the PILOT (payment-in-lieu-of-taxes) program is Shelby County Mayor A C Wharton. In the past, he’s called for changes that inject more common sense and strategic thinking into the tax freezes, which now waive between $60-80 million in taxes a year, but if events since the consultants called for sweeping reform of tax freezes policy teaches us anything, it is that there will be a great deal of pressure exerted on him to keep the status quo. Privately, real estate developers already predict that there will no substantive changes in the policies.

But Mayor Wharton is one of those unusual elected officials who actually seems to care about policy, so look for him to take a more studied approach to the recommendations of the consultants’ report. So far, he’s managed to stay above the political fray through the appointment of the study committee and because of the focus has been on comments from the City Council and Shelby County Board of Commissioners, but his time is running out.

Setting Standards

So, while it seems increasingly certain that the final recommendations of the consultants will be watered down because of the political clout of the real estate development industry, as Mayor Wharton considers his next steps, we submit a recommendation of our own – tying incentives to wage and health benefits standards.

At least in this way we can be certain that our tax freezes aren’t going to companies who pay so poorly that we then have to subsidize their employees through public services, such as medical care and social services. This link between tax freezes and standards alone could shift the local mindset from “jobs, any kind of jobs” to “good jobs.”

While on the surface this doesn’t sound like anything drastic, it in fact would produce a sea change in our economic development strategies. After all, it’s only been a few months since the Industrial Development Board gave an eight-year tax freeze to a company paying so little that a family of three would still quality for food stamps. Under the IDB matrix, a company can now pay salaries that are only 70 percent of the per capita income for Shelby County and still get points for a tax freeze. It’s bad enough when we give our taxes away for low-wage companies, but when they don’t even hit rise to the per capita income, there’s should be a serious question about whether there is any public benefit in the public investment.

The trend toward governments setting standards that require “quality jobs” in return for business incentives is expanding. There are more than 120 governments that have attached standards to their incentives, including almost every state and about 50 local governments.

Wage and Health Care Standards

These standards are attached to every conceivable type of incentives, from tax credits to training, from industrial revenue bonds to loan programs, from enterprise zones to tax increment financing. The most common standard is on wages, but the requirement that companies must also have employer-provided health care benefits is also gaining in popularity.

Generally, wage requirements aim at more than poverty thresholds. More and more jurisdictions are requiring a living wage or requiring companies to at least pay the statewide average hourly wage plus health benefits.

While most states cite the hidden public costs as a motivator for the standards, some also say that chasing any kind of job actually contributes to a weaker community economy, because low-wage jobs routinely don’t offer training that qualifies employees for advancement. In this way, the workforce of these low-paying employers often is characterized by large-scale turnover, leading the employer to complain about the need for subsidies because of the unreliability and presence of a quality workforce.

In other words, it’s a vicious cycle, fed by incentives that are given to companies who salaries that are so low that their employees rely on the public health department and The Med for health care. In this way, while taxes are being given away on one hand, on the other hand, taxpayers are paying for public services that are essentially subsidies (rather than incentives) to the company’s bottom line.

If a company is not viable enough to pay decent salaries and provide basic benefits, why is in the public interest of Memphis and Shelby County taxpayers to subsidize them in the first place? Are these really the companies on which we want to rest the future of our economy?
In effect, these low-wage jobs have hidden costs, and as we’ve suggested before, the evaluation for all tax freezes should include a tally of all public costs, not only of roads and interchanges, but public health care costs, utility subsidies and housing assistance caused by low-wage jobs.

For example, in Minneapolis, companies seeking business incentives must provide the names of all programs to which they are applying, profiles of their workforce, projections of future wages and the total cost of public assistance for their workers. There are some who say that government shouldn’t get involved in setting standards for the paychecks of company employees. But then again, they don’t have to. All it takes is for the company not to ask for the tax freeze.

We should be well past a day when we are too embarrassed to ask companies for information to justify their requests for public subsidies or to set standards that make subsidies more palatable as public policy.

The heart of economic development is in increased opportunity, better jobs and bigger paychecks. Tax incentives should be aimed at achieving all three objectives, because if government is a party to a process that puts its own citizens in low-wage, dead end jobs, it is not just bad public policy. It is unconscionable public policy.

Saturday, April 22, 2006

"Commodities' Economic Development" Limits Memphis' Future

There are times when it just seems that Memphis can’t get its economic development strategies into the 21st century. It’s as if we just don't want to compete in a knowledge economy in a global marketplace.

Our economic development strategies are caught in the commodity trap, stemming from our background as an agricultural center and continuing with our pride in being a distribution center. Our experience is in selling products that tend to be seen as commodities, to a consumer making a decision based on the lowest price.

Commodity economic development is premised on the same thing – appealing to companies who make their decisions based on the lowest prices. This kind of economic development is forever in a race to the bottom to offer the cheapest land, and the cheapest workers.

Selling Cheapness

Because our tradition is in businesses with thin profit margins, our economic development culture is one with an aversion to risk-taking, which in turns undercuts innovation and entrepreneurship. Cities with commodity mentalities think they can grow their economies with low wages, low land costs, low utilities, low taxes.

In a commodities world, these are seen as the factors that must be controlled to keep prices down. They are often cited as justification for the tax abatements that we hand out to any company that can complete the forms.

Unfortunately, when we are competing with workers in Southeast Asia, Mexico and Bangladesh, commodities economic development is doomed to failure.
Most devastating of all is that cities that are accustomed to a commodity approach to economic development are at a huge disadvantage in attracting and retaining knowledge economy workers. It is not merely a coincidence that companies like FedEx report constant problems in attracting young, mobile, highly-educated workers to Memphis and convincing executives of International Paper to move from the Northeast to Memphis has met with similar hurdles.

Rather than make the investments in the intellectual infrastructure that we need to complete for knowledge-based companies, Memphis continues to sell the infrastructure of the industrial age, at the same time that its last remnants are vanishing before our very eyes.

New Approaches

What is needed are new approaches to economic growth – approaches like economic gardening which focuses on existing entrepreneurs rather than corporate relocations, on biological models of business and entrepreneurial policy and new economic theories and philosophies.

The words of a specialist in economic gardening seem especially especially pertinent to Memphis:

“There was another, darker side of recruiting that bothered us. It seemed to be a certain type of business activity – the branch plant of industries that competed primarily on low price and thus needed low cost factors of production…cheap land, free buildings, tax abatements and especially low wage labor. Our experience indicated that these types of expansions stayed around as long as costs stayed low. If the standard of living started to rise, the company pulled up stakes and headed for locations where the costs were even lower. This was the world when we proposed another approach to economic develompent: building the economy from inside out, relying primarily on entrepreneurs.”

Survey after survey concludes that tax incentives are far down on the list of critical elements that influence companies’ decisions on locations and expansions. Much higher is the presence of a high quality of life – vibrant downtown, outdoor recreational options, rich cultural and intellectual scene and research universities.

For Memphis to succeed in today’s economy (and more importantly, tomorrow’s), it needs to base its economic development strategies on quality rather than cheapness. After all, in selling our city for its cheapness only cheapens what we have to offer in the first place.

Memphis' Creativity Gets Its Headlines

Several unique Memphis assets received coverage in national magazines that hit the stands this week. The National Ornamental Metal Museum gets the attention that it deserves in Smithsonian, while Three 6 Mafia - called instant stars - are shown in Vanity Fair at its Oscar party.

Sunday's New York Times gave prominent coverage to movie director Craig Brewer's latest, "Black Snake Moan." It's at

Thursday, April 20, 2006

Like It Or Not, City Council And County Board Of Commissioners Have Seats At The Table In Decisions About Tax Freezes

While we’re on the subject of tax freezes (as we were yesterday), it sure looks like most of the candidates in the races for county commissioners are using the real estate developers’ talking points.

One of the questions put to candidates by the Coalition for a Better Memphis asked about their strategies to improve the county’s economic development, and it was eery how similar some of the answers were to the mantra of the real estate development community fighting any changes in the PILOT program.

For example, take Mike Carpenter, running as a candidate for Board of Commissioners’ District 1, Position 3:

“Next, the County Commission must avoid politicizing PILOTS, while balancing the need for accountability…County Commissioners, nor City Councilmen, should review and approve PILOTS. This should be left to the economic development experts on the Industrial Development Board. The County Commission could play a role in revamping the PILOT formula to give preference to economic development targets such as Biotech and Corporate Headquarters.”

Isn't that the current system, the same one that's waiving about $60 million a year?

Let’s say a couple of things for the record one more time.

One, there is no way to politicize PILOTs. They are political to their core. They exist as part and parcel of a political system. They eat and breathe politics. The notion that there are IDB officials sitting in some pristinely nonpolitical conclave making decisions on tax freezes is humorous in its naivete.

Two, it’s City Council members and County Commissioners who are charged with the power over tax freezes, not the mayors. That’s because Tennessee Law gives the power to the legislative bodies, and they in turn delegated that power to the Industrial Development Board and Center City Revenue Finance Corporation.

Legal Responsibilities

Put simply, the legal responsibility for tax freezes rests with the legislative branch. And yet, there’s this persistent belief – cultivated by well-connected political insiders - that City Council members and County Commissioners are meddling where they have no business.

Besides their legal authority, there’s an even more compelling reason that legislators should have a voice in these decisions. They are the ones charged with balancing the budgets although about $60 million has been taken off the table in the form of tax freezes before they even start.

Since 1987 – when power to grant tax freezes was shifted from the local legislative bodies to the IDB and CCRFC – City Council and Shelby County Commissioners have been directly dealt out of decision-making on tax freezes.

Some philosopher said that the definition of insanity is doing things the same way and expecting different results. It’s becoming clear out on the hustings that taxpayers are not insane and the pressure for sanity within the PILOT program will only build.

It’s a high stakes game that some real estate developers are playing, because eventually, the public will get the action it demands. The greatest risk for developers is that tired of being belittled and ignored, the City Council and County Commissioners take back control of the tax freezes. It can happen on any day that the stars align and the votes come together.

As the Shelby County Attorney’s office said in an opinion a decade ago, if the local legislative bodies giveth, they can also taketh away.
It’s in everyone’s best interest to develop the best solution --a tax freeze system known for its accountability, its transparency and its objectivity, three qualities in short supply in the present system.

As for the Coalition for a Better Memphis, it’s encouraging whenever leaders and organizations – grassroots and prominent – are willing to get their hands dirty by getting directly involved in the political process. Dean Deyo, former head of Time Warner here, deserves a lot of credit for putting together this new program.

We admit that we are perplexed by some of the evaluations and the framework used by the Coalition members to reach the grades announced this week, but those are expected first year growing pains. Regardless, the Coalition’s a welcome voice in the political process if it can improve the quality and qualifications of candidates for public office in this community.

Wednesday, April 19, 2006

"But For" Test For PILOTs Could End Tax Freeze Controversy

City Councilman Scott McCormick, during the recent questioning about the proposed eight-year, $2.6 million tax break for Harrah’s Entertainment, was quoted by the Memphis Flyer as saying: “They might have $7 billion in revenues each year, but we don’t know what their profits are. I know they comp a lot of steak dinners.”

Well, for the record, its profits were $236 million (in a bad year, by the way), and it remains the second largest company listed in Fortune’s “Hotels, Casinos and Resorts” category, only exceeded by Marriott Hotels, but comfortably ahead of MGM Mirage, Starwood Hotels and Resorts, and Hilton. In the past 10 months, the company's been on a buying spree, purchasing the largest casino company, Caesar's Palace, and a Las Vegas casino, Imperial Palace, for more than $9 billion.

While McCormick’s question might sound innocuous enough, it actually points up a familiar question about the present PILOT process: who represents the people? It frequently seems that Council members have these issues dropped on their desks with no background information, with no one to explain the big picture to them and with no one serving their interests alone.

There are those who complain that we don’t criticize the Memphis Regional Chamber for its strong advocacy of tax freezes in these Council meetings. But to us, the criticism seems misplaced. That’s what the Chamber gets paid to do – sell business on locating and expanding in Memphis.

In that process, Chamber officials – who have proven themselves extremely adept in sealing deals – have a number of cards they can play (excuse the Harrah’s pun) but PILOTs are essentially the trump card. So, they have PILOTs to sell to clients, and they do. No mystery there.

The challenge is for the public sector to develop an arsenal of incentives that are balanced, reasonable and fair - not just to the company, but to taxpayers.

Checks and Balances

What’s missing in the process now are the checks and balances that undergird almost every other part of government. There seems no one in the process, as demonstrated in last week’s City Council hearing, representing the public’s interest and balancing public policy so that tax freezes aren’t used as indiscriminately as they have been in the past and that they make sense within the context of other public services and investments.

That’s why it’s so disheartening that the common sense recommendations of the consultants who issued a thorough, pragmatic report last December continue to languish as business as usual continues.

One of those recommendations is for companies asking for tax freezes to prove that they need the public investment (and that’s what it is) to make their projects work. Council members seem especially confused on this point and rely on generalities from real estate developers and others as the basis for determining if the companies really need the tax freezes.

So, let’s revisit what the consultants wrote in their report: “The current matrix approach (the score sheet now being used to award tax freezes and set their terms) for awarding PILOTs should be abandoned and replaced by a ‘but for’ test or the true economic need of the project.”

This is what’s always been missing from the PILOT process. Instead of an emphasis on facts, there is now an emphasis on rhetoric: “This company will move to Mississippi if it doesn’t get the PILOT,” “This company is looking at locations in Indianapolis right now,” or “This company wants a sign from government that Memphis values its presence.”

In truth, this “but for” test is straightforward. The consultants define it as a private investment that isn’t reasonably expected without the public tax freezes, and it can be proven by a “gap analysis, a competitive cost analysis for competing sites, or a combination of the two,” the report states.

“The current evaluation process is very decentralized and based upon esoteric criteria and lend themselves toward approval of projects which do not necessarily merit a public investment.”

It’s hard to say it any clearer than that.

It’s hard to say it any better than that.
That’s because it puts the emphasis where it belongs – back on the public’s money and the need for it to be invested wisely and in a more targeted way.

“There currently is not a ‘but for’ test established or considered when approving or disapproving specific projects for a PILOT. This, for all practical purposes, means that the city/county or other approving bodies may very well have been giving away tax revenue unnecessarily as opposed to gaining taxes, albeit, a smaller portion than the total,” said the consultants’ report.

Gap Analysis

That’s why it recommends strongly that companies asking for PILOTs submit this “gap analysis” showing the financial return with and without the public investment, typically in leveraged and unleveraged rates of return.

“The establishment of a ‘but for’ test is the whole premise of any public investment or the need for it from a logical, moral and legislative standpoint,” the report said. “Most, if not all, business incentive programs across the country imply a ‘but for’ test in their intent and enabling legislation.”

Previously, we’ve expressed our concern about the pervasive feeling of unworthiness that is found in Memphis, and which is mirrored in public policy like the PILOT program. It embodies the attitude that we aren’t worthy to have new business and business expansions without bribing them. Is it at all possible that unlike the other cities who ask for justification, we come off looking less businesslike and less professional, and a result, we give more than necessary?

Somehow, consideration of tax freezes needs to quit being a poker game. As Harrah’s proves (with its considerable experience in casinos), government almost always folds.

The sad part of the controversy about the Harrah’s tax freeze is that it’s a premier company, and it deserves better than being the poster child for tax freezes. There is a simple way to make sure it doesn’t happen again: add the “but for” provisions to the PILOT program beginning immediately.

If it takes someone paying for the consultants to come back and explain this to City Council so it can be resolved once and for all, we're willing to chip in.

Monday, April 17, 2006

Broad Avenue Plan Cries Out For TIF

If there’s ever been a justification to create another TIF (tax increment financing) district in Memphis, we need wait no more. The Broad Avenue Corridor Planning Initiative gives us a powerful reason to act.

This seems especially timely to us, because a couple of weeks ago, we advocated that Memphis and Shelby County use the TIF as a way to decrease the overreliance on tax freezes by the Industrial Development Board and Center City Revenue Finance Corporation.

Like most taxpayers, we have been impatiently waiting on city and county governments to implement the recommendations from the well-reasoned consultant’s report about the current PIILOT (payment-in-lieu-of-taxes) program. The consultants made a compelling case that should have created a sense of urgency by our public leaders, but it was not to be, because of the powerful real estate interests arrayed in opposition to some of the key recommendations of the report.

In a presentation some weeks ago by the consultants, one comment went unreported, but has special meaning for Broad Avenue. At that time, the consultants said that downtown Memphis seemed to have the momentum for a sustained recovery, and perhaps it is time to shift the focus of tax freezes from downtown to neighborhoods where they are more needed.

Broad Avenue would certainly head that list. The planning initiative to be unveiled tomorrow night (Tuesday) is the most impressive in recent history.

The plan paints the portrait of an entirely new Binghamton, one that becomes an anchor for redevelopment and a model for the principles embraced in the new unified development code being written by the Office of Planning and Development.

And that’s why the Broad Avenue plan has even more importance than first meets the eye.

The same consultants writing the unified development code developed the plan for Binghamton, continuing the progressive thinking that has characterized their work so far.

They wrote in the Broad Avenue report: “The current development regulations in place today reflect a previous desire to ‘suburbanize’ the city and county with larger lot sizes, and development standards that reflect an auto-dominated environment. As part of the unified development code process, a set of more urban, mixed use, pedestrian-friendly development standards has been developed. The Broad Avenue Corridor area was selected to test the ability of the new regulations to effectively implement these improved standards. The lessons learned from the planning process will be incorporated into the larger Unified Development Code.”


From the beginning, the consultants writing the unified code have laid a foundation that can make the code a model for the country, shifting our community from a sprawl at any cost community to a more environmentally sensitive, more walkable, more mixed use view of the future.

Even without the ties to the unified code, the Broad Avenue Planning Initiative would be historic in its own right. Directed by Louise Mercuro of OPD, who always manages to inject innovation and aspiration into city/county planning projects, the initiative should mark the rebirth of the neighborhood destroyed by the highway (then intended as the I-40 route through Memphis and now Sam Cooper Boulevard) that carved it into two pieces and ripped its soul into even more.

To see the area now, it’s hard to believe that in 1956, it had three grocery stores, three dry goods stores, three doctors, a dentist, a civil engineer’s office, a lawyer’s office, several restaurants, a shoe repair shop, a barbershop and a handful of light industries. In other words, it was a functioning neighborhood. That ended in the late 1960s when the road construction displaced more than 200 residents.

So, how does the plan seek to solve this problem?

The plan intends 1) To reconnect the surrounding neighborhoods; 2) To promote diversity, mix uses, and mix incomes; 3) To make the streets more walkable; 4) To make it easy to built the right thing; and 5) To control the scale of new development.

To achieve these goals, the planning initiative proposed, among other things, a grand pedestrian gateway into Overton Park, public gardens and common spaces for the neighborhood, landscaping to make the area more walkable, diagonal parking to support businesses, new at-grade intersections crossing Sam Cooper Blvd., a shift from high-speed thoroughfares to walkable boulevards, and sidewalks safely located a distance from the road.

There are recommendations for retail and service businesses (such as a 40,000 square foot grocery store), lofts, senior housing and new housing.

Back to our original point about tax increment financing, there’s no better place for TIF district than in pursuit of this vision for Broad Avenue. In fact, it’s almost a textbook justification – it has a clear plan, it has mixed use with every type of land use and person, it is in dire need of infrastructure improvements such as sidewalks and streetscapes, it has right-of-way that can be sold to create new taxes for the TIF district, and it has some solid civic anchors such as the new school and new police precinct.

TIFs are now authorized in 47 states, and although they’re regulated by the state, they’re actually controlled by city governments to help redevelop areas that are deemed “blighted.” When an area is redeveloped, it creates new property taxes. From these taxes, the original property taxes (based on the unimproved values) are paid to the city and county, and the balance (the tax increment) goes into a special fund to pay debt service on bonds for the infrastructure. Usually, TIF pays for streets, sewers, parking facilities, land acquisition, planning expenses, job training, demolition and clean-up costs.

Tax increment financing is not perfect. No business incentive is, but it’s time to look beyond PILOTs to a time when we have a more balanced, diverse mix of business incentives in Memphis and Shelby County. Tax increment financing didn’t get anywhere last time it was discussed by local legislative bodies, but perhaps, with some much-needed controls put in place on the PILOT program, it’s time to revisit it.

To read the Broad Avenue plan, go to

Friday, April 14, 2006

Vietnamese Calls To Prosecutor Await Answer

Following yesterday’s post about the use of Memphis versus Nashville crime statistics as political fodder, we received a call from two members of the Midtown Vietnamese community. Their question: how do they get Attorney General Bill Gibbons to return telephone calls to his office?

So, we pass it on to you in the event that you see General Gibbons on the campaign trail in the coming days. Ask him to please return the phone calls from some constituents asking for help.

Here’s the problem: in recent weeks, more than 40 Vietnamese people have been robbed, and because of cultural factors, they refuse to talk to the television media although they have been asked and are afraid of retaliation if they go the police. As a result, they decided to call Atty. Gen. Gibbons, who frequents their restaurants and was considered a friend of theirs.

Distrustful of the media, wary of the police and fearful of being targeted again if they report the crimes, they want to talk to the chief prosecutor as someone they know, but also, because they’ve been told of his anti-gang initiatives, and it is their belief that these crimes are the work of gangs.

Much of the Cleveland area between Madison and Poplar became home to the waves of hard-working Vietnamese families who came to Memphis following the war in their homeland. Because of the language barriers and the misgivings about reporting crime, they are frequent and tempting targets of thugs.

Little Vietnam is a tough part of town on its good days, but on its bad days, it’s unbearable. Right now, with the crime spree, people are afraid of leaving their houses.

They’ve called the attorney general’s office and asked to speak to Bill Gibbons. They haven’t heard anything and their concern grows.

As we said, if you see the attorney general on the campaign trail, ask him to please return this call. These people need his help.
In fact, based on comments posted to previous commentaries on the blog, citizens of the entire area need his help. In the end, the results from attacking crime in this area is much more powerful than comparisons of Memphis and Nashville crime statistics.

Thursday, April 13, 2006

Nashville Crime Hits Five-Year Low

This article in the Nashville Tennessean this morning was made even more potent by the counterpoint on Memphis television of police officers expressed dismay over climbing crime here, especially the disturbing increase in murders.

It was also made interesting because in recent years, some politicians, notably Attorney General Bill Gibbons, has contended that crime statistics show that Memphis is safer than Nashville. It's been the kind of political rhetoric whose primary response is incredulity, but regardless, since these comparisons were being tossed around for their political impact, it would prove interesting to hear what he and others have to say now.

We know that crime is not a problem unique to our urban area. After all, Atlanta has consistently ranked higher than Memphis for years, and yet, its economic boom continues. However, what is disturbing here is the general resignation that all of us have that we will be victims of some kind of crime, most likely property-related, and there is nothing we can do about it.

Sometimes, you feel that crime is something that happens to other people, but the other day, we were talking about the crimes we'd experienced, and we quit counting when the number went above 20 for the three of us in the conversation. Yes, they were multiple car thefts (apparently, now our birthright as Memphis citizens), stolen purses, house break-ins and similar crimes, but the fact that we just accepted them as part of life in this community was telling and sad.

Here's betting that crime will rear its head as a potential political issue in this year's elections, especially for the county prosecutor.

From the Tennessean:

Crime in Nashville fell to a five-year low for the first three months of the year, paced by steep declines in the number of homicides and auto thefts, according to figures released yesterday by Metro police.

Robbery was the only major crime category to increase during the first quarter, rising 1.1% to a five-year high of 530.

Police Chief Ronal Serpas yesterday celebrated the decline after a year in which Nashville's murders soared more than 67% and all violent crime rose nearly 2%. Thus far, overall crime is down about 13% in 2006, police figures show.

"It is a good healthy sign showing that our community, our employees, and every part of this police department are continuing to work hard to help reduce reported crime," Serpas said.

Individual Metro police officers should get the credit for the drop in crime, said Jack Byrd, attorney for the International Brotherhood of Teamsters, the union that represents Metro police officers.

"This shows that the police officers are doing a good job, considering the fact that they are undermanned, overworked, and working in adverse conditions," Byrd said.

The Teamsters, who recently won a contentious election to become the officers' union, have been critical of Serpas' policies, such as an initiative that dramatically increased the amount of time officers spend enforcing traffic laws.

Union officials have said the changes have resulted in lower morale and contributed to last year's increases in some major crime categories.

In recent weeks, the Davidson County Grand Jury also issued a report that criticized Serpas' public safety agenda, saying his policies place too much priority on traffic enforcement and not enough on combating illegal drugs and curtailing violent crime.

Serpas has said that much of Nashville's crime problem is driven by juvenile offenders and called for the involvement of parents, clergy and other sectors of the community to help keep youth on the right track.

The figures released yesterday offer hope that the rise in crime, which has led some to criticize the chief's methods, could be headed down.

But Serpas was quick to caution yesterday that crime in Nashville typically rises during the summer months.

"Last year and this year, and the year before, we continue to plan for that," Serpas said. "The important message to our community is we are aggressive and proactive in trying to solve problems in neighborhoods."

Police and juvenile probation officers have stepped up monitoring at the homes of juvenile offenders to ensure they are complying with court orders, Serpas said. Officers are averaging about 70 home checks per week, he said.

In 2005, at least 100 homicides occurred in Davidson County, up from 58 the year before. It was the third highest homicide total since Nashville and Davidson County became a consolidated Metro government in 1963.

It was also the sharpest year-over-year increase in killings last year among the 35 largest U.S. cities.

During the first three months of 2006, Nashville recorded 16 killings, down from 20 during the same time last year.

Earl Jordan, whose group Partners in the Struggle, organizes anti-violence rallies and other events, said he was most encouraged by the decline in killings.

"That's good that we're down four from last year," he said.

"The community is tired of a lot of the senseless homicides that are going on." •

Spring Hill Proposes Doubling Its Impact Fees For Developers

As Shelby County officials grapple with their limited options to reduce the burden on local property taxpayers, it's worth remembering that the Tennessee Legislature has allowed other places to enact impact fees.

For about six years, impact fees have been a priority on the county's legislative agenda in Nashville, but they never get a fair hearing, primarily because of the opposition by some of our own East Shelby County legislators who represent the districts being gobbled up by new sprawling development.

The beauty of impact fees, and adequate facilities taxes, for that matter, are that they shift the cost of the new infrastructure needed for these new developments from taxpayers to developers. After all, most taxpayers live inside Memphis, where they have already paid for the roads, bridges, parks, libraries and infrastructure that they need.

Of course, the funding of infrastructure is a curiosity at its core. For example, Shelby County Government has been willing for decades to fund half or more of the costs of road projects within the smaller cities, while at the same time refusing to consider the same policy for Memphis. But that's another subject.

It's dispiriting that county government must go to Nashville with hat in hand to ask for the taxes that it needs for its own operations. There are times when you have to wonder what really improved when county government got home rule.

The political irony is that the politicians who talk so much about smaller government and government closer to the people are also the ones who refuse to give Shelby County Government more autonony to chart its own destiny. There is the added irony that many of the same politicians propose user fees to raise revenues, but then oppose fees for developers whose profits are given to them through governmental largesse.

It's discouraging to think about it, but perhaps if average taxpayers could band together and hire lobbyists in Nashville, our interests would receive greater priority.

From the Nashville Tennessean:

SPRING HILL — Developers who are turning farmland into subdivisions may soon pay more for the impact those developments are having on the city.

Doubling the city’s impact fees from 25 cents to 50 cents was a topic discussed at Spring Hill’s Board of Mayor and Aldermen work session last night - and aldermen expressed support for the idea.

“I feel comfortable going to 50 cents,’’ said Mayor Danny Leverette. “We all know there are needs coming our way, some are already here - like roadways, infrastructure and the city will need to hire more employees.’’

City Administrator Ken York agreed.

“This is something whose time has come,’’ he said.
In other action, board members discussed raising the base pay of the fire chief, allowing non-resident property owners to vote in city elections and setting standard penalties for businesses caught selling alcohol to minors.

The board meets in its regular voting session at 7 p.m. Monday.
For more on Spring Hill development, see tomorrow's Williamson A.M.

Monday, April 10, 2006

Merger Of Our Two School Districts Deserves A Place On The Agenda

It’s been almost an exact year since Memphis Mayor Willie W. Herenton convened a group of civic leaders to hear his presentation – the most thorough, documented and intelligent one given in this community - on a possible future for our dual school system as a single, merged one.

It was his attempt to set in motion a process that would consider the consolidation of the city and county schools systems, and the logic of his argument, based on the data that he presented, should have made it a priority for public debate.

However, the substance of his presentation got no media coverage, because reporters were instead captivated by the no-shows of the petulant chairs of the two school systems, Wanda Halbert and David Pickler. Rather than setting the stage for a much-needed civic conversation about educational policy, the media instead sacrificed policy debate in pursuit of personality conflict.

It was a lesson in how much any proposal by Mayor Herenton polarizes the community, and by the first of September, he had bowed out of the process to look into the relative merits or demerits of consolidation.

In truth, the mayor’s proposal hardly reflected strict consolidation as we know it. Rather, it was a pragmatic merger of operational services, while setting up five districts with approximately 41 schools each and 32,000 students.

It was anything but a bomb-throwing performance by Mayor Herenton. After all, a similar structure had been proposed almost 20 years earlier by former Shelby County Mayor Bill Morris, who saw it as a way to eliminate the onerous county debt which was back then beginning to climb as a result of ADA (Average Daily Attendance) requirements for funding.

By the time Herenton waved the white flag and abandoned yet another of his campaigns for consolidation, City Hall staff said that the committee had already been hijacked by interests largely sympathetic to the concerns of the Shelby County Board of Education.

With a recent article by Ruma Banerji Kumar in The Commercial Appeal, those same City Hall observers had only one comment: “We told you so.” According to the newspaper report, six scenarios for the future center on creating special school districts, the fulfillment of the county school system’s long-held dream to fight its eventual irrelevance. As more and more of the unincorporated area is annexed and Memphis City Schools assumes responsibility for education there, the district is predicted to have about 25 percent fewer student in 15 years.

The news coverage made no mention by the committee of any study of the merger of the two school systems, which has taken place in every other major metropolitan area (including Jackson), but not in Memphis. Apparently, the political specter of Mayor Herenton hung too heavily over a proposal for merging the systems, and his visage always produces a highly-charged political atmosphere that dooms any hope for consensus. This time, however, his idea deserved a better fate.

The merger of the two school districts is the cleanest organizationally, it’s the most transparent and it’s the most easily understood. And county school officials’ rhetoric to the contrary, it does not bring about the end of Western civilization as we know it.

That said, we’re not even arguing that it should be the final recommendation. We’re just suggesting that it deserves serious consideration, and that if county school influence can force a discussion about special school districts on city school officials, surely the county school officials should at least have to consider merger of the two systems.

After all, in the past decade, the two systems have cost the community $9 billion dollars. Keep in mind that 72 percent of all the families in this community do not have children in either district, and it’s easy to conclude that it’s the majority interest in cutting costs and increasing efficiency that is too often ignored in favor of the parochial political interests of one system or another.
After all, a review of operating expenses for the four largest counties in Tennessee plus Jackson/Madison County show that it is our school districts that have recorded the largest increases in their budgets – 91.2 percent for county schools and 94 percent for Memphis City Schools.

Meanwhile, budgets for the consolidation district of Jackson/Madison County increased 50.2 percent, Chattanooga/Hamilton County 60.8 percent; Knoxville/Knox County 64.9 percent; and Nashville/Davidson County 73.5 percent.

Equally telling is the fact that suburban Tennessee schools in Brentwood, Oak Ridge, Franklin and Nashville made it on the list of 1,000 top schools in the U.S. There’s not one Shelby County School despite the frequent chest-thumping about the excellent education offered there. It’s supreme irony that once again the only local school on the list is White Station, yes, part of the Memphis City Schools.

It makes at least a prima facie case to look closer at Mayor Herenton’s proposal for a merged system with multiple districts. Recommendations about converting Shelby County Schools into a special district is a minefield, and for it to be approved, it will demand that the needs of Memphis City Schools are not only addressed, but that there’s serious money behind it to make it worth the city schools’ support.

In the end, there was a time about 15 years ago when freezing the school boundaries might have been a policy initiative that could have influenced flight out of Shelby County, but in light of annexations in that same period of time, it’s almost academic now, excuse the pun.

The thrust of Memphis’ growth remains eastward, and the annexation reserve agreements have in effect already frozen school district boundaries. These agreements were the product of the “tiny town” controversy and passage of the Chapter 1001 planning process, which moved 150 square miles of Memphis’ annexation area to the smaller municipalities.

In this way, the size of the county school district – even with no special district – has already been increased by 150 square miles. With a special school district, only the area between eastern Cordova to Fisherville and the Fayette county line would be affected, unless you are the solitary planner who predicts a boomtime for north Shelby County.

Special school districts feel on some days like one of those political battles that have been made essentially moot by changing times, but that remains on the agendas of the politicians who can’t grasp the fact that times have passed them by.

Impressively, the Five-Year Facilities Master Plan issued by Memphis City Schools Superintendent Carol Johnson has poked a gaping hole in the popular myth that her system doesn’t need capital funding and it has enriched itself from the unfairness of the ADA funding requirements.

In truth, as Superintendent Johnson has meticulously shown, the capital needs of her district are substantial and should be the driving force in any discussions about school funding. The smaller county district has driven the agenda for the past 20 years, and it’s time to get our priorities in the right order.

Back to the prospects for a special district, as Memphis City School Commissioner Wanda Halbert was quoted in The Commercial Appeal article: “I feel like Memphis City Schools comes second. That’s starting to weigh on me.”

The task force looking into the crystal ball for the future of our school districts would be wise to fight their temptation to be dismissive of her opinion. It represents the very serious reality that stands between them and creation of a special district.

Sunday, April 09, 2006

Emerging Trends On Tax Reform Deserve Our Attention

Portland, Oregon, is one of our favorite cities. More importantly, it’s one of America’s most progressive, most innovative ones.

That’s been proven in its leadership for smart growth, for regional planning and financing, for cultural development and for investments in the workforce needed by the knowledge economy.

But if those weren’t enough reasons to admire the city, it’s now won us over again with its version of tax waivers.

Unlike our PILOT program, which waives taxes for businesses regardless of whether incentives are even needed, Portland city government and Multnomah County government will waive property taxes for new homeowners who buy houses in the urban core.

To get the tax breaks, homeowners must meet federal income guidelines (a family of four cannot earn more than $67,000); the house cannot be valued at more than $258,000, and the homeowner must live in it.

In return, taxes for the homes are waived for 10 years. Only the tax on the land is paid.

The program is touted as a major incentive for redevelopment in Portland. In the past 15 months, more than 125 homeowners have received tax abatements under the program created by the Oregon Legislature.

An official for the Portland Development Commission says that the program is responsible for creating stable neighborhoods where empty lots and vacant homes used to be the norm. Best of all, the tax abatements have been a lure that has attracted homebuilders back into the inner city.

If Tennessee law can allow property taxes to be given away for new jobs and new businesses, surely it can allow for investments to be made that could help stabilize our tax base and to rebuild declining city neighborhoods.

Meanwhile, all the way across country from Portland, Pennsylvania Governor Edward Rendell is calling for property tax relief for homeowners. He says that the mounting property tax bills need attention right now, because property owners have been waiting for someone to help them for 30 years.

To publicize the seriousness of the issue, he has taken to regularly visiting the homes of senior citizens as a way to put pressure on the legislature to take up the issue.

These are the kinds of developments that are showing up more and more in jurisdictions across the country. It would make sense that they surface here sooner better than later.

Memphis and Shelby County are in crisis financially and so are many of the taxpayers footing the public budgets. Perhaps, we can learn something if we pay attention to the emerging trends on property taxes and the innovative means being taken in other parts of the country to address this issue.

As we’ve said often, we need to reinvent the tax structure for Memphis and Shelby County. It’s not just malfunctioning. It’s unfair, regressive and totally broken.

Oliver Wendell Holmes said: “Taxes are the price we pay for civilization.” But surely, he never contemplated that the tax structure would become this uncivilized – waiving $60 million in property taxes yearly to businesses in the PILOT program while taxing those on the lower rungs of the income ladder at rates higher than those earning six times more income.

Saturday, April 08, 2006

How Hardheaded Business Metrics Can Help The Hard-Core Homeless

From Fortune:

ROUGHLY 200,000 Americans will sleep rough tonight; many have done so for years. The fact that this is happening in the richest country in history is a travesty. But you know that. You've heard it again and again. You're not heartless, but you're tired of being guilt-tripped.

Yet there is a new way of thinking about homelessness whose language will sound familiar to FORTUNE readers. It uses terms like performance-based contracting, consumer-centric solutions, and ROI. Applying business logic to this intractable area of social policy is more than semantics. It is a revolution that both the public and private sectors are beginning to buy into.

Social scientists in the 1990s began to document the fact that the hard-core homeless are not like you and me; they are not even typical of homeless people. They are a distinct market segment. On any given night, perhaps two million Americans are homeless, but only about 10% are chronically so (on the streets for a year or more). The chronically homeless are overwhelmingly male, and almost all have some impairment--mental illness, disease, disability, drug or alcohol abuse.

The second crucial datum is that life on the streets is not cheap. That guy you've been passing in the box under the scaffolding costs the city of New York at least $40,000 a year in jail time, shelter costs, emergency room visits, and hospital stays. In Dallas, researchers put the figure at $50,000; in San Diego, as much as $150,000.

The new paradigm is that by focusing on the chronic homeless, cities can get people off the streets and spend no more and maybe less than they do by letting them stay there. "Cost-benefit analysis is a friend to the homeless," says Philip Mangano, a former music impresario who heads the federal government's Interagency Council on Homelessness. His goal is to end hard-core homelessness in ten years. So far, 200 mayors--Mangano likes to call them "CEOs of cities"--have drawn up plans to do just that.

That's where business metrics come in. The first step is to establish a baseline of just how big the market is. This is typically done by a street count--going out at night and seeing how many people are sleeping rough. Atlanta figures it has as many as 2,000 chronically homeless; Detroit, 1,200; New York, 4,400. Accountability comes by setting benchmarks for improvement and rewarding those who meet the numbers.

Next there are the consumers--the homeless themselves. The market research is done the usual way: asking what they want. The typical response is emphatic. They don't want a 12-step program or a bed in a shelter. What they want is a room of their own.

Putting it all together has resulted in a strategic plan, Housing First. That is, get people into a room or apartment, by either renting in the private sector or building permanent supported housing, and then bring social services to the tenant. The rationale is brilliantly simple: If you give people what they want (not what you think they should want), they might just accept it.

It seems to work. Pathways to Housing, a nonprofit, has placed some 400 chronically homeless, mentally ill New Yorkers in rentals and reports a success rate of 88% (defined as not returning to the streets for five years), at a cost of about $22,000 a year per person. ValueOptions, a managed-care provider, reports a 92% success rate with a similar population in Phoenix, also using private housing. Having a real address boosts medical compliance, reducing costs down the line, which matters to ValueOptions, a for-profit company. Using the same strategy, San Francisco has seen a 40% drop in street homelessness, and companies like PG&E, Gap, Charles Schwab, and J.P. Morgan Chase are supporting the city's ten-year plan.

So are these 200 cities really going to end chronic homelessness? As with any business plan, a lot has to go right. But while applying the metrics of business to homelessness may sound icily clinical, ultimately this is the language of hope.

Thursday, April 06, 2006

Business Improvement Districts Can Be The Spark For Cleaner, Safer And More Attractive City

Following up our last post about TIF, how about another alphabet approach that could be a positive addition to Memphis’ tools for the future? It’s a BID.

To recap, we’re suggesting that our economic and community development experts move beyond the dependency on the tax freezes of the PILOT program, and rather than being mired in the present policy, we’d like them to think about what the perfect system of business incentives would look like and present them to the community as the goals for our public policies.

A couple of days ago, we wrote about tax increment financing (TIF), which has been a powerful tool for transformation in cities like Nashville and Chicago. Another tool producing equally impressive results is the business improvement district (BID).

A BID is created by public law, but it is privately operated, supplementing public services to make a specific geographic district cleaner, safer and more attractive by services funded by taxes that district businesses assess against itself.

Some highly successful examples of BIDs are the Cleveland Theater District Development Corporation, Milwaukee’s Historic Third Ward Association, Central Atlanta Progress, Downtown D.C., Renaissance Group in Cedar Rapids and Alliance for Downtown New York. Each uniquely addresses specific needs of their respective geographic areas.

One of the most important development in governance in the past couple of decades, the model BID programs across the U.S. mount crime prevention programs, such as security patrols, police mini-stations and community service representatives. They aren’t police officers, but they are highly trained to help in making arrests, helping victims and testifying in court.

To make their districts cleaner, they have programs to remove graffiti, to install and maintain landscaping and to clean public spaces. They also brand the district, mounting marketing campaigns, streetscape improvements, signage, banners and flags and organizing festivals.

The reasons these districts work is that they are not in response to a public mandate from government, accompanied by new taxes to pay for the added services. In BIDs, the impetus comes from businesses, who get together to tax themselves to raise money to improve their areas of the city. Once the BID is formed, the tax assessment is mandatory, but unlike other taxes, city government returns the revenues to the BID for its use in the district.

The reason that BIDs work so well is that they are the antithesis of government. They operate without bureaucracy, without volumes of Civil Service rules, without red tape, and their workforce is hired on performance, not government mandates.

As budgets have gotten tight and financial crises become common, local governments have responded by cutting services that improve the public realm – landscaping, walking patrols, sanitation, etc. That’s why these are the focus of BIDs, because they, in effect, harken back to a simpler time when the cleanliness and quality of the public space was a major public priority.

BIDs represent a breakthrough in creative thinking at the local level. As one study concluded, “as entrepreneurial enterprises, BIDs are expected to channel private-sector energy toward the solution of public problems,” and the New York Times has hailed them as “one of the engines of New York City’s renaissance.”

Yes, it’s infuriating that even with the cumulative high tax rates of Memphis and Shelby County, we can’t guarantee safety and cleanliness in our commercial districts. But rather than howl against the wind, BIDs are a way that business districts can take control of their own destinies.

The most obvious testimony to their effectiveness is that 20 years ago, there were only a handful of them, but today, there are hundreds in the 42 states and the District of Columbia where they are allowed. It’s time that we give them a serious look in Memphis.

As we’ve said previously, Memphis and Shelby County need to break their over reliance on tax freezes, and as a community, we need to plant the seeds for an innovation culture.

A BID could be a step in the right direction, but we need our economic development experts to help us out. We need them to apply their expertise and experience to a broader mission – to consider all the options that are available to communities these days and tell us what we need as a city to compete, to innovate and to succeed.

Tuesday, April 04, 2006

Tax Increment Financing Could Be A Valuable Tool In A Balanced System Of Business Incentives

It’s time to resurrect tax increment financing (TIF) as a possible incentive for economic growth in Memphis and Shelby County and as an alternative to our overreliance on tax freezes.

The TIF is the favored business incentive in Nashville, and it is a major reason that our capital city issued only five tax freezes in a 10-year period, while we were handing out 415 of them.

Meanwhile, in Chicago, the TIF is credited with the city's economic turnaround of recent years. On the city's list of available financial incentives, TIFs are first, and the city has used them heavily to its advantage. Chicago has tailored strategies around tax increment financing to create TIFWorks, which allows businesses in the TIF district to get up to 75 percent of workforce development costs; Small Business Improvement Fund, which uses TIF revenues to fund improvements to small business properties; and the Laboratory Facilities Fund Program, which uses the TIF to attract lab space and technology companies.

The TIF listed in a report -- six-pages, single-spaced -- that inventories business incentives offered by city and state governments. It’s an impressive list of tools that Chicago has at its disposal.

The list of incentives in Illinois speaks volumes about our well-documented lack of similar incentives in Tennessee and is part of the reason -- beyond tradition, a sense of unworthiness and pressures from the development industry -- that our economic development experts say they have to use tax freezes to make up for the lack of incentives at the state level.

Rather than make a last-ditch effort to keep the PILOT (payment-in-lieu-of-tax) program from changing, economic development officials would be wise to turn their attention to telling us what a well-rounded arsenal of incentives would look like. We all know that we have to offer some kinds of incentive, and we want something to support. That's something that our experts can deliver in the form of changes that we can get behind.

Absent a broader context, protectors of the status quo run the risk of the PILOT program in a political environment that will slowly strangle the program to death. Already, there are widespread complaints on the campaign trail, by candidates and supporters, about the $60 million in taxes that are waived each year in tax freezes.

Make no mistake about it, adverse public opinion is like water dripping on a stone. It may look at times like it’s having no effect, eventually, it will erode away the rock. Even in the face of the considerable influence of the real estate industry, it is an inevitable conclusion if no changes are made to the PILOT program.

In truth, the TIF never got a fair hearing in Memphis. A few years ago, Robert Lipscomb, as part of his community development master plan, proposed a number of TIF districts, and the Center City Commission had one of its own in the works. Mr. Lipscomb got one of his requests approved – the much-lauded Uptown project – but the others got a deaf ear. The Center City Commission’s proposal couldn’t even get off the ground.

The reluctance by the Memphis City Council and Shelby County Board of Commissioners to embrace TIFs was directly related to concern about PILOTs. In the legislators’ minds, if tax increment financing was approved without reining in the existing PILOT program, they wondered if local government would be undermining its tax base to the point of no return.

In Nashville and Chicago, where they have witnessed a renaissance in economic growth, there’s been almost no mention of tax freezes. Instead, it’s about the TIF, which allows government to borrow money and build the public infrastructure that a business prospect needs, such as roads and utilities. Government then pays off the debt by taxing the higher values of the development. In other words, business gets the benefits, but not by shifting the tax burden to existing taxpayers.

Nashville has used tax increment financing for a number of projects, including the BellSouth Tower, and late last year, TIF came into play in the negotiations for a new baseball stadium and for the $200 million, 55-story Signature Tower, a residential skyscraper at Fifth Avenue and Church Street. For the skyscraper, $12 million in TIF bonds will be guaranteed by future property taxes from the developer of the building.

In this way, the TIF is sometimes seen as cash up-front to a developer, and there are some complaints in Nashville that it’s handouts to wealthy developers and being used in parts of downtown that aren’t really blighted (a condition in the law creating the TIF).

As Nashville Mayor Bill Purcell contends, the TIF loan doesn’t cost taxpayers anything because it involves property tax revenues paid by the new developments themselves. These days, here, we not only waive taxes for the new business, but then government accepts responsibilities for infrastructure improvements, like roads, interchanges, new exit ramps, etc. Essentially, it amounts to a double hit for local property taxpayers.

TIF is now authorized in 47 states, and although it’s regulated by the state, it’s controlled by the city to help redevelop areas that are deemed “blighted.” When an area is redeveloped, it creates new property taxes. From these taxes, the original property taxes (based on the unimproved values) is paid to the city and county, and the balance (the tax increment) goes into a special fund to subsidize some portion of the redevelopment.

Usually, TIF pays for streets, sewers, parking facilities, land acquisition, planning expenses, job training, demolition and clean-up costs. The annual TIF payments are used to pay the debt service on special bonds. It is this flexibility that makes it so attractive to cities across the U.S. Chicago Mayor Richard M. Daley says it’s the “only game in town.”

Tax increment financing is not perfect. No business incentive is, but it’s time to look beyond PILOTs to a time when we have a more balanced, diverse mix of business incentives in Memphis and Shelby County. Tax increment financing didn’t get anywhere last time it was discussed by local legislative bodies, but perhaps, with some much-needed controls put in place on the PILOT program, it’s time to revisit it.

In leading this review and in creating a new system of incentives, our economic development experts demonstrate their concern to the taxpayers who are footing the bill for all these incentives in the first place.

Saturday, April 01, 2006

Neighborhoods Rank High In Census Bureau Survey Of Memphis

Memphis loves its neighborhoods.

All prevailing political conjecture to the contrary, there is no argument that the thread that runs through the U.S. Census Bureau’s American Housing Survey of the Memphis MSA is our overwhelmingly favorable opinions of our neighborhoods.

The American Housing Survey is an almost yearly survey of housing and household characteristics. It’s hard to imagine what you would want to know about housing in Memphis region that’s not included in the 356-page report. There’s voluminous information on total occupied housing units – owner-occupied or renter-occupied, or black-occupied or Hispanic-occupied, number of rooms, building conditions, air conditioning, and more and more.

Residents were asked more than 800 questions, ranging from whether they find their neighbors bothersome to their opinions on public schools. A different group of cities is picked each time for the survey, and Memphis last hit the list in 1996.

Although favorable attitudes toward neighborhoods have dropped somewhat, it’s worth noting that 24 percent of us rate our neighborhoods as a “perfect 10.”

Included in the survey with a dozen other cities, Memphis’ perfect 10 rating is near the average of 27 percent for all cities, but was more than Seattle (20%) and Denver (19%). Meanwhile, 26 percent of Atlantans gave their neighborhoods perfect 10’s and St. Louis had a 28 percent rating.

In fact, 62 percent of the occupants of area housing rate their neighborhoods (on a scale of 1 to 10) as eight or better. Only three percent rate their neighborhood on the worst end of the scale -- one, two or three.

Some other factors that interested us targeted crime, schools, safety and bothersome neighborhood conditions. About three-fourths said there was no street or traffic noises in their neighborhoods, and about 60 percent of those who did report noise said it didn’t bother them.

As for crime, 28 percent said crime was present in their neighborhoods, but only 17 percent said the condition was “bothersome” and only half that number said they were bothered so much they wanted to move. Police protection was ranked unsatisfactory by only nine percent.

On the list of problem conditions, problem people finished at the top, but still at only about five percent. Litter or housing deterioration had 3 percent and poor city and county services received 1.2 percent.

Of the total 430,800 units, the occupants of 123,400 units had children between the ages of five and 15, or about 29 percent.

Thirty-two percent had children between birth and 13 years old, and of the number with children, about 11 percent said their public elementary school was unsatisfactory, but only five percent said they were so problematic that they want to move.

These are extremely positive ratings, but it’s worth noting that when compared to eight years ago, those who rated their neighborhoods as 8, 9 or a perfect 10 back then accounted for 68 percent, as compared to this year’s 62 percent, a drop of about 10 percent.

But then again, however, those who ranked their neighborhoods on the “worst” end of the scale had also dropped – from five to three per cent.