LOOKING OUT FOR NUMBER ONE
In an unprecedented tax grab, downtown’s power elite plans to corral as much as $250 million in property taxes over 30 years for the exclusive benefit of downtown at the expense of the rest of Memphis.
The plan working its way through the City Council is known as a Tax Increment Financing District, or TIF. Here’s how it works: Over the past 25 years, the Center City Commission (CCC) has granted property-tax freezes as an incentive to downtown development and property ownership. Several properties are now “rolling off” their 20- or 30-year freeze and are supposed to start paying full freight.
But now the rules are being changed in the middle of the game. Instead of going into the city’s general fund, downtown property taxes would be earmarked for downtown projects under the guidance of the CCC. The general fund would be left with less revenue, and city taxpayers, who already pay 50 percent higher property taxes than Nashville residents, will likely face a property-tax increase after the upcoming election.
It’s a measure of the clout downtowners have that the TIF proposal has gotten this far. If the residents of Central Gardens or River Oaks or Zip Code 38117 banded together and proposed hoarding their property taxes (less 24 percent for public debt service, as the TIF proposes), it would be branded as the betrayal of the spirit of democracy that it is. Only downtown has the clout, push, and publicity machine to pull it off.
An influential downtowner candidly told me that, given a choice between sending his taxes to his neighborhood or my neighborhood, he will quickly and gladly choose the former. The CCC has prepared a nine-point defense of the TIF and given it to politicians who will vote on it, probably within the next few weeks.
It says CCC research, based on a “block-by-block analysis,” indicates only 30 percent of downtown’s redevelopment has been completed. My own research, based on a walking/driving tour from the north end of Mud Island past Harbor Town, down Front Street, along the Bluff Walk, and up Riverside Drive to the old bridge, found almost no blight. Just the opposite, in fact. And if downtown is 30 percent redeveloped, what of Frayser, Midtown, Whitehaven, Hickory Hill, the Fairgrounds, the Mall of Memphis, and Raleigh Springs Mall? None of them even has an agency that can afford to do a block-by-block needs analysis.
The CCC says a “$615 million public investment Master Plan has been drafted to leverage billions of dollars in private investment.” There is no evidence that incentives work that well. In the past 15 years, Memphis has spent roughly $600 million on The Pyramid, riverfront, trolley, mall, convention center, and FedExForum. The CCC has granted tax breaks currently worth $6.2 million a year. The incentives have not brought one out-of-town corporation downtown. They couldn’t lure FedEx from Southwind and Collierville. They couldn’t stop Union Planters and Baptist Hospital from moving to East Memphis and leaving white elephants behind. And they couldn’t keep the First Tennessee Bank building from falling into bankruptcy.
Downtown’s best success story is residential development, thanks largely to the efforts of Henry Turley and Jack Belz and the unique opportunities presented by Mud Island and the South Bluff. The single most cost-efficient incentive, hands down, was the $10 million Auction Street Bridge that enabled 5,000 people to move to Mud Island since 1987. Thank you, C.H. Butcher Jr., and rest in peace.
The CCC’s TIF plan counts “PILOT roll-offs” (expiring tax freezes in layman’s terms, but wrapping a proposal in jargon helps keep it under the radar) as “new growth.” That’s the “increment” in TIF. In fact, an expiring tax freeze is a completely predictable accounting entry, akin to the Memphis Grizzlies getting a key player off the injured list.
Downtown tax freezes were granted with the understanding that their recipients would eventually become full-fledged taxpayers. On older projects such as the Shrine Building, that is exactly what happened, to the benefit of downtown and the city. With a few exceptions, the CCC’s case-by-case approach of giving real dollars to real deals has worked well. Some of the worst downtown blight is not due to a lack of incentives but to ex-downtowners like Baptist Hospital which simply abandon their old buildings. It could be that what’s needed is not more carrot but more stick.
Now several big properties are facing loss of their privileged status. Downtown’s power brokers have their eyes on the loot. They have campaign contributions, contracts, free tickets, advertising, board appointments, and other goodies to pass out. Neighborhood groups have potluck-supper invitations.
In such circumstances, it will take political courage for elected officials to suppress their sycophantic tendencies. Sure, a giant TIF would be good for downtown. The question that needs to be fully debated is whether it would be good for the rest of Memphis.
