Author: Steve Basar

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Opinion Viewpoint

Formula For Growth

Last week, during our regular committee meetings, I suggested to my colleagues on the Shelby County Commission that we should take another look at the existing Uptown TIF district — one that is generating $4 million per year in economic activity.

Inasmuch as crime is the No. 1 problem facing our community, I have been looking closely at the county budget with an eye toward finding an income stream that could be repurposed toward the crucial issue of public safety. The Uptown TIF may provide just such a stream.

Commissioner Walter Bailey and I have been talking with District Attorney General Amy Weirich, Shelby County Sheriff Bill Oldham, Memphis Police Department director Mike Rallings, and Operation Safe Community director Bill Gibbons. We know that the city is 300 to 400 police officers short of a full complement, and we have been advocating that we add 100 sheriff’s deputies to help supplement the critical shortage of law enforcement. (After going public with the idea I discuss here, I found out rather quickly that no good deed goes unpunished, but that’s another story.)

The Uptown TIF is a very complicated financial arrangement, and it is important to understand the background and rationale that led to its creation.

First, a word about the workings of a TIF (tax increment financing) project in general: TIFs are generally created to help subsidize a specific private project. They are intended to capture the incremental taxes from the project and use those specific funds to pay for public infrastructure (streets, sewers, parking) that was required as part of the project. The additional property-tax revenue generated by the TIF pays for the specific improvements; when the improvements are paid off, the TIF is ended. The Uptown TIF bears no resemblance to the textbook TIF I just described.

More than 16 years ago, when Jim Rout was the county mayor and Willie Herenton was the city mayor, St. Jude Children’s Research Hospital was growing, amid legitimate concerns that there were neighboring public housing projects that presented adverse “slum and blight” conditions. The Uptown TIF was created with the specific intent of generating positive redevelopment in these adjacent areas.

The geographical TIF area from which the property tax growth was derived came from the Mud Island/Harbor Town area, and it was used to pay for the activities of the Community Redevelopment Agency (CRA) in the Uptown area. I believe we can get a better return on investment by spending more on public safety and crime prevention.

The Uptown TIF has generated sufficient tax revenue to pay for the bond debt incurred by the CRA. We are at a crossroads: whether to choose to continue the TIF and spend $4 million of county property taxes in the Uptown area, or return that income stream to the county general fund and use it for public safety. I am suggesting that we have that discussion and allow the Shelby County Commission to come to a consensus.

I have been a vocal supporter of downtown development, and I believe that the job of government is to assist and partner with the private sector. I would also like to state for the record that I fully support St. Jude Children’s Research Hospital. I believe that we can improve the neighborhoods adjacent to St. Jude without relying on proceeds from the existing TIF.

The areas of the city that are experiencing growth — Sears Crosstown, Overton Square, South Main, etc. — have a few things in common. Primarily, they are anchored by private developers with a vision. The job of government is to get out of their way and let them flourish.

I have held discussions with the Memphis Home Builders Association, and they are ready to develop market-rate housing in the area around St. Jude Children’s Research Hospital.

At the moment, we have a significant crime issue. Homicides are up. Violent crime is increasing. We need to invest more in crime prevention and crime deterrence, and we need to fully support our law enforcement officers. The current county budget is tight, and I thought it prudent to at least investigate an available $4 million revenue stream that could pay for 50 extra sheriff’s deputies.

Over the past three years, the county commission has focused on improved funding for education, and the result is a financially stable Shelby County Schools District which is improving on all metrics. It is time, now, for us to put additional resources toward fighting crime and supporting law enforcement.
I like to work toward a win-win solution, and I believe strongly that we can help promote the economic development that will improve downtown and the neighborhoods near St. Jude Children’s Research Hospital and simultaneously work on solving our crime problem.

Businessman Steve Basar is budget chair of the Shelby County Commission.

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Opinion Viewpoint

NOLA’s Good Example

Last week was Thanksgiving, and more than 200 Memphis citizens were not able to celebrate with their families this year because we, as a community, do not have a handle on homicides. The murder rate in Memphis is up 40 percent from last year. That is totally unacceptable, and we have to do more than get mad about it. There is no silver bullet, but there are three steps that I believe will make a difference and put us on the path to meaningful solutions.

Steve Basar

The first and most important step is defining the problem. In Memphis, crime is epidemic. Of 80 cities across the United States with a population of more than 250,000, Memphis is in the top 10 for murders, robbery, property crime, aggravated assault, and burglary. While all crime is deplorable, I believe that reducing homicides should be the number-one priority of county government, city government, and the law enforcement community. If we can all agree that reducing murder is our number-one objective, then we can get to work on achieving our objective. We need a comprehensive murder-reduction strategy.

The second step is to break the problem down and find root causes. I have been looking at the statistics in Memphis for a few years, and we can identify a small segment of the population that is responsible for a majority of the homicides. The data clearly shows that African-American males between the ages of 19 and 29 represent more than half of both the victims and perpetrators of our homicides, and yet this group constitutes less than 8 percent of our population. When faced with the data, it is difficult to ignore the obvious need to find effective strategies to address this population if we are to stem the rise in murders. In fact, this is exactly what other communities have realized and are now addressing.

The third step is to identify specific strategies to address the root causes. The city of New Orleans has a strategy called “NOLA for Life,” and I believe we need to adopt a similar strategy. The number-one pillar of the New Orleans approach is embedded in the motto “stop the shootings.” If we want to be successful, we need to have a similarly clear message, and all the resources in city and county government should be tasked to finding and implementing solutions. The Health Department, Community Services, Law Enforcement, and Shelby County Schools need to work together in this endeavor. It will require extensive cooperation and coordination, but if we are to be successful, it must be done.

New Orleans has seen sustainable success reducing homicides over the past four years because that city is focusing on its at-risk population of young African-American males. One small example is a midnight basketball league that attracted more than 10,000 participants this spring. The success of New Orleans is being recognized and copied by other cities, such as Gary, Indiana. We can and should move quickly to begin implementing the most successful programs from New Orleans, and we should cast a wide net to see what is working elsewhere.

We also need to direct resources toward crime prevention on the order of the data-driven analysis of Milwaukee’s Homicide Review Commission. We need a comprehensive, systematic approach to be able to identify the most at-risk youth and the areas where additional resources need to be allocated.

We cannot arrest and prosecute our way out of crime. We have a high number of youth not working, who have criminal records, and who feel disconnected from society. We are not the only community facing high crime, but we have been unusually lacking in the resolve to define the problem and put together an effective strategy to address it. That can begin to end this week. I am asking the County Commission to adopt a “Memphis for Life” strategy, and I propose appropriate budget amendments to allocate resources toward the initiative. We can choose to be leading the nation in homicides, or we can do something about it. I choose action.

Steve Basar is a member of the Shelby County Commission and chairman of the budget and finance committee.

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Opinion Viewpoint

Balancing Accounts

Perhaps the most important job of the Shelby County Commission is setting the property tax rate. The first vote of three required readings will have taken place this week. The third and final one will occur on July 8th.

Steve Basar

I am fairly certain there are sufficient votes among my peers to increase the tax rate, but is that the right decision? We all want to support funding for the schools, and we need to ensure that public safety is not put at risk. At the same time, we need to find ways to reduce the tax burden and make Shelby County more competitive. This leaves me with the most important decision of my short political career: Should I vote to increase taxes? 

I am reluctant to vote for a tax increase. While I can easily make a case to increase taxes, I also believe we have a duty to reduce spending. We need to find a balanced approach of spending reductions combined with any tax-rate increase.

The current tax rate is $4.02, and Mayor Luttrell has proposed a rate of $4.38. To put that in perspective, on a $100,000 property, the additional tax would be $90 per year. While that doesn’t sound like a lot, the total tax would increase from $1,005 to $1,095 — and that is just the county portion of the tax bill. If you live in Memphis, you will also pay a city tax of at least $3.11, or $777.51 on a $100,000 property. We have high property taxes relative to other cities in Tennessee and surrounding communities. We cannot blindly increase taxes and expect to remain economically competitive.

We should have built a base expectation that each department and local official would present a budget asking for 2 to 5 percent less than last year. Instead, we gave everyone a “hall pass” if they were not asking for additional funding. I think this sent the wrong message. We need to start managing expectations for the next budget cycle now.

I have been fortunate to work for great companies my entire business career. One thing every manager dreads is trimming the budget and finding ways to do more with less. In my brief tenure on the county commission, it appears that the majority of my peers prefer raising taxes over reducing spending. In my opinion, it isn’t enough to just raise taxes. The more rational approach would be to work both sides of the equation.

We have multiple budget deficits. The county revenues are currently less than projected expenses, and the Unified Schools board has approved a budget that would require the county to increase funding by $30 million. I am very pleased that the school board put together a budget that is $75 million lower than the combined budgets of the MCS and SCS last year, but part of that decrease would have happened regardless of the merger. Overall, I support keeping teachers in the classrooms and minimizing change during this first year of a combined system, especially since this may end up being a one-year experiment. If a $30 million increase will keep more teachers in the classrooms and minimize disruptions, it will be money well spent.

The proposed tax rate of $4.38 could be increased an additional 4 cents with a simple majority vote of the county commission. This rate would yield an additional $6.4 million that could close most of the $10 million gap between the mayor’s proposed budget and the Unified Schools system’s requested funding. On a $100,000 house, that would amount to $10 per year.

As stated earlier, I am no fan of increasing taxes. The incremental $64 million generated by a 40 cents increase would allow the county government to avoid making painful cuts this budget cycle while also minimizing cuts in the school classrooms. If the city of Memphis were to fulfill its $57 million obligation to the schools, we could avoid a tax increase this year. If the municipalities were to share a portion of their sales tax revenues (which were approved to fund education), we could reduce the tax rate. I think it is important that everyone in the county realize the city of Memphis owes the new Unified Schools system $57 million, and the city’s failure to pay is what is driving a majority of the proposed tax increase.

The county budget is lean, but we need to streamline and improve efficiencies so we can avoid raising tax rates in the future. We cannot sit by while the cost base increases and revenues decline. Less talking and more doing — that is the challenge for the county commission, the city council, and our school board.

Steve Basar is a Shelby County commissioner and chairman of the economic development committee.

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Opinion Viewpoint

Tired of TIFs

We need to have more transparency and debate around the future of tax increment financing (TIF) districts in Memphis and Shelby County. This broader discussion is needed because recent data from Illinois confirms that TIFs — which commit long-term tax revenues to development projects — have many unintended consequences and may even hinder the very development we as public officials desire.

As we move into a new budget cycle and prepare to deal with the complexities of school consolidation, we need to refrain from making impulsive decisions that will impact revenues and expenditures for decades.

TIFs leverage our future. As more and more tax revenues are pledged to specific projects, it will become very difficult to generate any additional revenues for the city and county. This reallocation of revenues will directly impact our ability to fund education and government services. A TIF is an alluring tool that in theory promotes economic development. In practice, a TIF more often subsidizes businesses and various social objectives.

The most recent example of a proposed TIF in Memphis drives home the need for a broader conversation on this funding mechanism. The Heritage Trail Community Redevelopment Plan, encompassing most of the core downtown area, includes a TIF designed to capture $45 million in revenue from properties that will generate higher taxes as their existing payment-in-lieu-of-taxes (PILOT) arrangements expire. In fairness, TIF districts should capture future taxes only from growth they directly inspire, and revenues from expiring PILOTs and inflation should be excluded.

We cannot afford uncoordinated development in Memphis and Shelby County. Future projects need to have a return on investment, and we need more transparency and accountability in decision making. A TIF district that proposes to capture PILOT revenue is not creating any incremental value. A TIF district should stand on its own, creating true incremental revenues. If we desire to subsidize public housing, we should make that direct decision and not fund it indirectly by creating a TIF district.

What we need now is a public review of all existing and proposed projects. In the private sector, capital spending is evaluated for a payback — the benefits have to exceed the cost. I do not see evidence of that return-on-investment discipline in our current public spending. We need to do better. We need to prioritize our projects based on value creation, and we need a comprehensive master plan for the city that will establish a strong core.

We also need an annual report detailing all existing TIF districts, their remaining life, and an independent analysis reviewing the actual benefits compared to the original plan. If a TIF district has outlived its use, it should be dissolved. We need to know where the TIF funds are being spent and who is responsible for the decision making. In short, we need more transparency and accountability.

In my opinion, we need to move away from the public credit card and shift toward a “pay as you go” philosophy. TIF districts are a creative way to use future revenues to pay for projects today, and it is relatively easy to position them as creating “free” money. The redevelopment agency that creates the TIF then becomes the exclusive economic development authority making spending decisions. There are no checks and balances with a TIF once it’s created. Just because we can create TIF districts to pay for public debt does not mean we should.

TIF districts were created to finance public infrastructure and encourage private economic development. In my opinion, TIFs should be excluded from our future economic tool kit. We need to reduce public debt, not expand it.

As we begin 2013, our elected leaders need to plan for the future. We need to be asking hard questions. What do we want Memphis and Shelby County to look like in 20 years? What types of capital spending are needed to achieve our goals? What are the urgent priorities and what projects will maximize our return on investment?

State and federal dollars are becoming scarcer, and the county and city should be very cautious about adding additional debt. TIF districts add to the public debt and remove revenues from the general fund. In my opinion, TIF districts may have had a place in the economic tool kit, but that day has passed.

Shelby County commissioner Steve Basar is chairman of the commission’s economic development committee.