HARD TIMES? TAX WINDFALL AWAITS WHARTON
Jackie Welch and Karl Schledwitz, a pair of political kingmakers, were having lunch together the day after the election at a deli on Germantown Parkway, the epicenter of the suburban sprawl that Welch Realty helped create.
Their main man, A C Wharton, had won his race, as did sheriff-elect Mark Luttrell and some Shelby County Commission candidates they supported. All in all, it had been a successful election by their lights. But there was a tone of caution as well as self-congratulation in their conversation.
Now that the election was over, they wondered, why exactly would anyone want to be county mayor or sheriff anyway? So many problems, so few solutions. Or, as Welch put it, “the county’s broke and you can’t raise taxes any more.”
No money? Not exactly. Insiders know there is always money for government, even without touching politically off-limits sources such as the wealth in Memphis Light Gas & Water and Shelby Farms or the waste in new but underused city high schools. And the insiders always know where to look.
In A C Wharton’s first term as mayor, in fact, the city and county will reap a windfall of several million dollars in new tax money from a single source: tax freezes that expire in the next four years. The details are a little complicated, but to put it in layman’s terms, it’s a little like the Memphis Grizzlies getting Pau Gasol off the disabled list.
In 1979, the Center City Commission (CCC) gave out the first of, to date, 199 downtown property tax freezes. The freezes, usually for 10-25years with some extensions, were an incentive to develop and rehabilitate what was assuredly a blighted downtown. Another agency, the Industrial Development Board of Memphis and Shelby County, has also granted 15-year property tax freezes to hundreds of businesses outside of downtown since 1987.
Thanks in part to the incentives, as well as public projects like The Pyramid, the new arena, AutoZone Park, and the trolley and private developments like Harbor Town, Peabody Place and St. Jude Children’s Research Hospital, downtown is in better shape today. Coincidentally, several tax-exempt properties are due to come back on the tax rolls next year, including such big names as the Rivermark Apartments, the attractive building on the South Bluff that used to be a Holiday Inn long long ago.
The difference between its subsidized tax payment this year and the garden variety property taxes it will begin paying next year is $82,576, or about two teachers’ salaries. And the Rivermark, because it was a going concern when its freeze was granted in 1987, has been paying much more in taxes than its downtown neighbors. In 2003, One Memphis Place, the black glass tower formerly known as “One Empty Place” before federal government office leases saved its bacon, throws away its crutches and starts paying an additional $162,998 in taxes each year.
Jim Street, chief financial officer for the Center City Commission, says tax freezes on 14 downtown projects are scheduled to expire by 2005. The bigger windfall will come from the Industrial Development Board, where more than 100 freezes are scheduled to expire by the end of 2006.
Add them all up and pretty soon you’re talking about some real money. At the Flyer‘s request, Shelby County Trustee Bob Patterson compiled a list of all properties due to come off the dole in the next four years. The grand total in additional taxes starting in 2007: approximately $7.3 million a year. Patterson said he expects heavy pressure to extend the freezes or divert the money to special projects and districts instead of letting it go into the general fund.
Complicated? Yes. But the things that can be done by a supposedly broke county by tinkering with taxes and fees are wonders to behold. The Grizzlies debate showed how to painlessly build a $250 million arena without recourse to property taxes. The CCC says $2 billion has been invested downtown and another $2 billion is needed. Whatever, downtown is hardly the blighted area it was 20 years ago.
Tax freezes are subsidized by taxpayers who don’t get a break, even if they too live or do business in blighted areas. Developers and their tax lawyers are acutely aware of their ins and outs. Uptown, the ongoing development north of St. Jude by Henry Turley and Jack Belz (both board members of Contemporary Media, the parent company of The Flyer), is being financed in part by the windfall tax increase from formerly subsidized properties as well as increased taxes from new growth in the North Memphis area and HarborTown.
The financing mechanism is known as a TIF, or tax increment financing. Depending on the success of Uptown, there could be more TIFs — in fact there has been talk of turning all of downtown into a gigantic TIF. A TIF that counted new taxes from expired tax freezes as growth instead of the bookkeeping change they are would be worthy of the boys at Enron and Arthur Andersen.
Inclusiveness and consistency were two of the notable qualities of A C Wharton’s recent campaign and his career as private attorney and public defender. He got 62 percent of the vote by doing well in precincts from the inner city to the suburbs. As mayor of Shelby County, he’ll have a say over the size of the coming tax windfall, where and how it gets spent, and which projects and neighborhoods stand on their own.
