Tag: EDGE

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Mayor Harris Goes Hard on Local Tax Breaks

Shelby County Mayor Lee Harris. (Courtesy Shelby County Government).

Shelby County Mayor Lee Harris took aim at city and county tax breaks last week and pulled no punches, calling components of it “made up” and “laughable.”

Harris spoke candidly about the issue during a panel convened last week by The Beacon Center, a Nashville-based free-market think tank. The panel included Mark Cunningham, the center’s vice president of strategy and communications, and was moderated by Otis Sanford, Memphis journalism professor, columnist, and television commentator.

The conversation followed an online viewing of a documentary called “Corporate Welfare: Where’s the Outrage?” (below). The film features The $9.5 million tax break given by Memphis and Shelby County in 2015 to lure Swedish retailer Ikea to Germantown Parkway. (The company returned some of the money in 2019 after failing to meet job numbers set out in the original agreement.)

Harris has been publicly against tax breaks for some time and said (as he did again last week) that investing in infrastructure like schools, roads, and law enforcement would do more to lure companies to Shelby County.

Here are some of Harris’ hardest-hitting quotes from Thursday’s discussion:

• “I am generally against tax breaks for corporations. One of the main reasons is because it sets up government to pick winners and losers, to decide which companies should get a government subsidy and which companies should not.”

It sets up government to pick winners and losers.

“Those kinds of things should be determined by the market, by what consumers demand, and by entrepreneurship, and what kinds of companies are good at their craft, not by government.

“This idea that government somehow steers a company one way or another doesn’t sound believable to me.”

On the prestige of having an Ikea and the competitive pressure to woo the company here:

• “This stuff is just made up from the start of it to the end of it.”

This stuff is just made up from the start of it to the end of it.

“A few weeks after [Ikea] got the millions in tax breaks from Memphis and Shelby County, they announced that we’re going to also open something in Nashville and they continue to open stores all across the country.

“It’s just made up stuff. It’s a made-up theory about how the economy works. It’s a made-up theory about ‘if we do this, they’ll go somewhere.’

“Businesses want to achieve profitability. That is what drives their decision-making. Government’s getting in the middle of it actually hurts and hinders all of us. It doesn’t help them to make their businesses better. It hurts us all.”

• “That’s what I’d say about the repetitional effects: They just weren’t there. [Ikea was] announcing these openings all over the place. So, those things are just made up to get the tax breaks and they tell you what’s really happening.”

On why politicians support tax breaks:

• “I think it’s just the idea among politicians is still — that for the last 50 years or more — jobs has been such a high-polling issue. So, if you want to attach yourself to that high-polling issue, this is one way to attach yourself to it.”

You just got to understand that the businesses create jobs, not government elected officials.

“But … if you go back to the fundamentals of the economy, government officials don’t create jobs except jobs in government, right? You just got to understand that the businesses create jobs, not government elected officials. That just doesn’t really happen. They come, but it doesn’t really work that way.”

On why tax breaks continue:

• “The system [for tax breaks] already exists. The consultants are already out there.

“[Consultants] produce the reports, which are generally not worth a lot. They come with these packages to say, ‘Hey, we can get you a little extra.’

“So, from the business perspective, they start to feel like suckers. If they say, ‘No, no, no, I’m all about the free markets.’ They’re almost boxed into saying, ‘Okay, you’ve got a package of incentives and subsidies that you can bring from a municipality or from a state. I’ll take it.’”

So, from the business perspective, they start to feel like suckers.

“So, the businesses are boxed in, too, even if they agree that it would be better to not have this practice at all.”

Sanford: What if Memphis and Shelby County decided to get out to the tax break game? Wouldn’t that depress the economy here?

• “I don’t think it has an effect on these kinds of decisions. Governments are in charge of some things. They’re in charge of infrastructure in schools, and crime, a lot of quality-of-life-kinds of issues.

“At the margins, executives are making decisions based on those issues. Can I recruit other executives [to the city]? Is it a place families want to live?

“So, if we shifted from economic incentives to quality of life [improvements], we all know, or we all should know, that we would get a lot more benefit. If you have high-quality schools, and low crime, and great roads, and bicycle lanes, we all know that that’s a thriving community and that’ll be very appealing.”

Tax cuts for all:

• “There are alternatives; just give everybody a tax cut, right? Everyone agrees that any level of tax cut across the board, is going to stimulate the economy. There may be some disagreement about how much a tax cut stimulates the economy, but every tax cut helps the economy.”

• “If you do shift away from this winners-and-losers mode into a general tax cut mode, then you can stimulate a whole bunch of additional economic activity.”

We don’t even know how much money we’re giving away, right?

“First, you’ve got to quantify where the incentives are, which no one does a good job at, right? We don’t even know how much money we’re giving away, right?

“But if you were to quantify it and know what you were giving away and then shift as much as possible to just the general-tax-cut mode, then you can create a whole lot of additional economic activity, the same way that some of these other things like infrastructure, schools, law enforcement, and crime reduction create.”

On companies living up to their promises and clawback protections if they don’t:

• “They definitely don’t [have to live up to promises].”

We were told for years, “we’ve got these clawbacks” and “there are these clawbacks coming.” I mean, it’s laughable.

“We were told for years, ‘We’ve got these clawbacks’ and ‘There are these clawbacks coming.’ I mean, it’s laughable.

“I’m not trying to belittle anybody. But it’s just the truth of the matter. We don’t have clawbacks. We didn’t get anything back. It doesn’t happen.

“I’m not trying to belittle anyone because I understand the need to talk about jobs and it’s a really, really high-priority issue, but I’m just saying when these deals are done and put together with the customer, they just don’t happen the way they are advertised to happen.”

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City Council Considers Minimum Wage Increase for PILOT Projects

A Memphis City Council committee discussed Tuesday raising the minimum pay for those working at companies incentivized to do business here.  

Councilmember Martavius Jones wants to raise the minimum hourly wage to $21 at businesses that receive pay in lieu of taxes (PILOT) incentives through the Economic Development Growth Engine (EDGE) for Memphis and Shelby County.

“This is not that I’m against incentives,” Jones said. “I know we have to play the game. This is about what we incentivize and what dollar amount we incentivize.”

Currently, the minimum wage requirement for PILOT projects is $13 an hour, which Jones said is less than a livable wage. 

PILOT projects give temporary tax abatements in return for a commitment to contracting local minority- or women-owned businesses, creating jobs, and making other community investments. 

To date, EDGE has incentivized 128 PILOT projects. Recipients include large companies such as ServiceMaster and Amazon to local companies, such as Hollywood Feed and Superlo. 

Reid Dulberger, president and CEO of EDGE said while he would like to see wages increased, the resolution “has the realistic probability of hurting the people we say we want to help.”

Dulberger said EDGE must compete with neighboring communities that offer tax abatements. 

“It’s a competitive world,” Dulberger said. “We have wage requirements now that our competitors don’t have. We have a health insurance requirement now that our competitors don’t have.”

These additional thresholds are good public policy, Dulberger said.  But if the standards are set too high, good public policy becomes “ineffective,” he said. 

Councilmember Worth Morgan opposed the resolution, saying that Memphis does not have the leverage to require more without incentivizing more. 

“It’s pretty clear that if this resolution were to pass, we would potentially lose out rather than gain more,” Morgan said. 

Councilmember Patrice Robsinson said if businesses don’t want to come here, “then so be it.”

“We want them to make an investment in us and we have an opportunity to make an investment in them,” Robinson said. 

Robinson suggests having a sliding scale, offering greater incentives for companies that pay higher wages. 

“We have got to be intentional about working on poverty in our community,” Robinson said. “If we reduce poverty, we reduce crime, we increase educational rates.”

Though the base pay requirement is $13, Dulberger said for projects approved in the last five years the average wage is $58,000.

If EDGE was to increase the base pay today based on the 2020 Shelby County annual average wage, Dulberger said it would only raise it to $15. 

Councilmember Cheyene Johnson proposed amending the resolution to allow companies to pay $21 an hour if they first receive city council approval. 

“At least people can come in and explain why they can’t pay $21 an hour,” Johnson said. “They may have a reasonable explanation for it.”

Dulberger said requiring companies to come before the council would be a “significant hurdle,” possibly costing Memphis a number of projects. 

“They don’t want to come before any public body,” Dulberger said. “They want to know if they’re getting an incentive or if they’re not getting an incentive. They prefer it all be done confidentially.” 

The council will return to the discussion at their next meeting on Tuesday, September, 7.

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‘Pork Report’ Takes Aim at FedEx, Wiseacre, Wharton, Bluff City Law

CREDIT: Beacon Center of Tennessee

Beacon Center of Tennessee

The Bacon Center, a Nashville-based, free-market think tank lambasted several Memphis and Shelby County projects in the group’s annual Pork Report.

The 2019 report is the 14th from Beacon seeks to expose ”government waste, fraud, and abuse.”

”While the Pork Report is a fun and creative outlet for our team to expose the top 25 most ridiculous instances of government spending in the past year, it is also a call to action to the state and local governments to cut the waste from their budgets,” reads the report. “After all, it is state and local taxpayers who are funding all of the ’pork’ found in this year’s report.”

Below are the top examples of Memphis-area “pork” Beacon cited this year:

FedExcellent at Taking Tax Dollars

LRK/FedEx Logistics

“The Memphis-Shelby County Economic Development Growth Engine (EDGE) board, the entity formed to bring business into the city, instead continues to redistribute the tax dollars of hard-working Memphians to enormous corporations.

In one of its worst moves ever (which is really saying something if you have seen its other handouts), EDGE is giving FedEx $2 million to move its company’s headquarters from one part of Memphis to another. This is in addition to the $10 million from the state and $1 million from the Center City Development Board.

So in total, FedEx got $14 million of taxpayer money to move a few miles. The point of economic development is supposedly to bring new companies to the area, not give hard-earned tax dollars to huge corporations to move down the street.”

Bluff City Naw
Jake Giles Netter/NBC

Going straight — Caitlin McGee (left) and Jimmy Smits play father-daughter attorney duo at the Strait Law Firm.

What do you think about forking over $4.25 million of your hard-earned money to Hollywood?

We’re not bluffing. After spending more than $50 million on the canceled “Nashville” TV show, the government continues to pump money into the TV business. This year’s feature is “Bluff City Law,” a new NBC series based in Memphis.

Study after study shows that film and TV incentives have a horrendous return on investment, bringing in as little as seven cents for every dollar spent. This is a fairytale for Hollywood elites, as the overwhelming majority of tax dollars spent on these incentives wind up in their pockets, not local workers’.

At least temporarily, because most of these shows don’t last very long. “Bluff City Law” only filmed 10 episodes before pumping the brakes this fall.

Memphis Tax Dollars are Leaving the Building

In another example of a company holding a city hostage and leaving taxpayers all shook up, the Memphis City Council authorized $75 million in incentives for Graceland, Elvis’ historic mansion.

This came on the heels of veiled threats by the management company to actually move Graceland brick by brick from Memphis. The council’s only stipulation was that Graceland couldn’t build an auditorium or theater to compete with the city’s other taxpayer-funded arena, FedExForum. Apparently, they have to draw the line on giving away taxpayer money somewhere!

This isn’t even the first time that Graceland has pocketed taxpayer money. It received $21 million back in 2015. When will Memphis taxpayers realize their leaders ain’t no friend of theirs and call for fiscal restraint?


The Next Round is on Memphis Taxpayers

Wiseacre Brewing Co.

Wiseacre’s soon-to-be Downtown location rises from the ground along B.B. King.

Lots of guys love to brew their own beer. It’s like a science experiment at home that you can drink!

While it’s not a very labor-intensive hobby, it sure can get expensive. Between equipment and ingredients, it can add up quick. Too bad most didn’t think to get a $1.7 million property tax subsidy like Wiseacre Brewing Co. did from Memphis.

Sure, most of us don’t brew professionally, but here’s the problem: many others in Memphis do. Do a quick search and you’ll find a handful of microbreweries that now have to pay higher property taxes to subsidize their competition.

Everybody loves the guy who brings free beer to the party. Too bad Memphis taxpayers will have to pay even more money to try the beer they already paid for.

Enemies in High Places

Garth Brooks sang about his appreciation for friends in low places, yet Memphis resident Kareema McCloud probably never thought about having enemies in high places.

But that is exactly what happened when her neighbor, former mayor of both Memphis and Shelby County, A.C. Wharton, found out she was legally renting out rooms in her home through Airbnb.

Interactions caught on McCloud’s security camera showed Wharton and a barrage of government officials from at least six agencies showing up at her home day after day to hassle her. This included a three-day police stakeout at McCloud’s home on the unfounded claim that she was not running an Airbnb, but a brothel.

While a Memphis spokesman stated that anyone can call and complain about a neighbor, it is hard to dismiss that Wharton’s political connections brought about more scrutiny — and more wasted tax dollars — than the average citizen’s complaint. Let’s hope this political, taxpayer-funded bullying has been put to bed.

State Pork DepART- ment

Tennessee Arts Commission

Another year, another multi-million- dollar check written for the Tennessee Arts Commission. This year brought over $6.5 million in tax dollars for the Arts Commission to increase participation in all areas of the arts, including music.

However, with Memphis and Nashville as two of the main cities where everyone from aspiring musicians to incredibly successful artists move to, it begs the question as to why state government continues to fund music awareness through the Arts Commission.

If you speak to anyone from Tennessee, chances are they personally know a musician. Speak to someone from the Tennessee Arts Commission, you’ll probably hear about their large budget. Even in a state with amazing artistic talent, wasted tax dollars will always be a sour note.

How Much Does It Cost to Start a Podcast?
 Shelby County Commission

At the Beacon Center, we are pretty familiar with what it takes to get a podcast started.

Do you know what it doesn’t take? Over $100,000. Apparently Shelby County didn’t get that memo. County officials approved a $109,800 contract to produce a podcast where they talk about county commission meetings. But commission meetings themselves are already streamed live online, so why the need for more?

It’s hard to imagine people wanting to hear play-by-play coverage enough to justify that expense. Hey Shelby County, if you’re looking for a great podcast to fund, check out Beacon’s “Decaf” podcast. If you can’t beat ‘em, join ‘em, right?

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Raymond James Wins Tax Break to Move From Downtown

CREDIT: Raymond James

Raymond James

A company that saw record-setting, multi-billion-dollar revenues and record-setting, multi-million profits in 2018, won’t have to pay full taxes for its new operations in Memphis over the next eight years.

Raymond James Financial won a $3.2 million payment-in-lieu-of-taxes (PILOT) deal from the Memphis and Shelby County Economic Development Growth Engine (EDGE) Wednesday for a project to move its Memphis operation from Downtown to East Memphis.

The vote was unanimously approved by EDGE board members, with two members recusing themselves from the vote. The vote came after zero debate on the deal and only a few questions from one board member.

The broker-dealer firm will have its full tax bill partially forgiven here over the next eight years for a $23.6 million project in East Memphis. That project would add 100 employees here and yield more than $5.8 million in local taxes over the term of the agreement, according to the company.

EDGE president Reid Dulberger said the properties Raymond James will move into now yield about $670,000 each year in real and personal property taxes for the city. During the eight-year course of the PILOT, the properties will yield $805,000, which Dulberger characterized as a “tidy increase for the city and county.” Once the PILOT term is finished, the property will yield $1.1 million in taxes annually, Dulberber said in his short remarks to introduce the project to the EDGE board Wednesday.

With the PILOT in hand, the Memphis facility will expand, providing service for the Private Capital Group, Equity Capital Markets, Fixed Income Markets, and maintaining a portion of the company’s back office operations.

The company said it needs to leave the iconic, step-roofed building in Downtown Memphis for a new location in East Memphis. Raymond James officials would not give any timeline as to when the 705 employees in the tower now will leave for the space in East Memphis.

Worth Morgan, the recently re-elected Memphis City Council member, hold the council’s non-voting seat on the EDGE board. He said while it’s hard to see companies leave Downtown Memphis, he doesn’t lose sleep over the future of the Raymond James tower the way he does over properties like 100 N Main.

“Because of the deterioration of its Downtown facility, Raymond James has signed two leases to relocate its operations into a 250,000 square feet in two buildings located in East Memphis,” reads the firm’s application to EDGE. “The leases are contingent on EDGE’s approval of our PILOT application. If approved, Raymond James will add at 100 jobs at these East Memphis locations.”
[pullquote-1] Those jobs would come with a an average salary of nearly $64,000, far north of the $40,400 salaries targeted by EDGE. More than half of those new jobs would be operations clerks with annual salaries of $50,000 and a benefits and incentive package worth $20,000. Thirty-five asset management clerks would earn the same package.

An operations manager could earn a package worth $152,000 annually. An asset manager supervisor could earn $154,000.

Each year, the company would pay nearly $8 million in wages and benefits to all of its employees here, according to its application.

Raymond James is based in St. Petersburg, Florida. In 2012, Raymond James and Memphis-based Morgan Keegan merged to form “one of the country’s largest independent full-service wealth management and investment banking firms not headquartered on Wall Street,” according to the Raymond James website.
[pullquote-2] The company posted “record annual net revenues of $7.27 billion” in its 2018 fiscal year, according financial reports. In 2018, the company also posted “record annual net income [or profits] of $856.7 million.” It’s total return on equity during the year was 14.4 percent.

[pdf-1] “Our focus on attracting and retaining client-centric financial advisors and providing them with industry-leading tools and resources continues to produce record results,” Raymond James Financial chairman and CEO Paul Reilly, said in a statement at the time. “It is especially gratifying to deliver shareholders an attractive return on equity in fiscal 2018, particularly given our strong capital position and the significant investments we made during the year.”

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EDGE Awards Tax Break for South Memphis Grocery Store

CREDIT: Belz

Belz

Southgate renovation rendering

A new grocery store could soon take the place of the former Kroger in South Memphis that closed in February.

The Economic Development Growth Engine (EDGE) for Memphis and Shelby County awarded Belz Enterprises a tax break to redevelop the shopping center where the vacant grocery store sits.

Belz is proposing to lease the 31,000-square-foot vacant grocery store to a new grocer and to attract five businesses to the smaller vacant retail spaces in the shopping center.

Belz plans to invest $6.8 million into the property to pay for exterior renovations, grocery store equipment, and other finishes. To revitalize the Southgate Center and open the grocery store, EDGE gave Belz a Community Builder pay-in-lieu-of-taxes (PILOT) incentive.

The goals of the project are to provide the approximate 55,000 individuals living within a 3-mile radius of the shopping center with access to food, reduce blight, and attract new businesses to the area, the group’s application to EDGE reads.

During the 15-year term of the PILOT, it’s estimated that the shopping center will produce about $4.5 million in local tax revenues.

The new store would provide the equivalent to 92 full-time jobs with an average annual salary of just under $25,000.

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City Councilman Calls EDGE ‘Broken,’ Wants to See Changes

A Memphis City Council member called the city and county Economic Development Growth Engine (EDGE) “broken.”


Councilman Philip Spinosa Jr.

Councilman Philip Spinosa Jr. said Tuesday that changes need to be made to EDGE and how it operates.

“I think we all agree that EDGE is a little bit

broken, to put it gently,” Spinosa said. “I think at the core, the issue is that there is no accountability.”

The first change is a move to amend the city ordinance that originally created EDGE, so that the president of EDGE, Reid Dulberger, reports to the board and not to the mayor, to whom he currently reports.


Spinosa said enforcing this will have to be a joint effort between the council and the county commission. The move will “get the ball rolling” on “changing the way that EDGE looks.”

Spinosa said he wanted the discussion to start six weeks ago when he sent an email to EDGE, asking for a copy of their policies, procedures, and performance reviews, but never received a response.

“I didn’t get any of the information I asked for, and that’s completely unacceptable,” he said.

Discussion of changes to EDGE first arose in late February during a joint meeting of the council and Shelby County Commission. Spinosa said he believes the intent of these changes are to make Memphis more competitive, while keeping EDGE accountable to taxpayers.

Another joint meeting will take place in the next coming weeks, Spinosa said, so that both bodies can have a “good healthy debate” on how to “restructure EDGE.”

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EDGE Approves Extension for IKEA

IKEA is moving forward on its Memphis location.

Tuesday afternoon, the Economic Development Growth Engine, or EDGE, unanimously approved an extension of the global chain’s 11-year PILOT agreement by up to 18 months.

[jump]

Reed Lyons, real estate manager for IKEA, said the extension is a “safety net, taking uncertainty out of this process.”

The tax break extension is meant to offset a potential $1.2 million loss in savings from a re-evaluation of the property value by the Shelby County Assessor Cheyenne Johnson. IKEA has already purchased the land on Germantown Parkway for $5.6 million in July of this year. Last month, Johnson appealed a Shelby County Board of Equalization ruling that allowed the property to be reverted to its value back in 2014, which was $1.25 million. The matter is now up to the state, which has yet to determine a ruling.

The base deal that was approved in January remains the same. The company will still be providing 175 new jobs, plus at least 50 seasonal and part-time positions.

Now that the extension is approved, IKEA could start construction as early as this winter. Lyons said the construction could take anywhere from 10 to 15 months.

Al Bright, chairman of the EDGE board, thanked the IKEA team for coming to the meeting.

“You are a great local partner,” Bright said. “Welcome, again, to Memphis.”

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Black Wealth Matters

African Americans make up 63 percent of Memphis’ population. The Memphis metro area is the poorest large metro area in the nation. You don’t get rich working for someone else, or so the saying goes. Connect those three points and you have a straight line between the success of local African-American entrepreneurs and the city’s financial future.

If nearly two-thirds of Memphis is shut out of the city’s economic growth, the city will always be burdened by the problems that follow poverty. Here’s where the Economic Development Growth Engine for Memphis and Shelby County (EDGE) could make difference, although I’m not optimistic. Next month, the EDGE board will vote on new policies, including diversity spending requirements for companies that receive PILOTs, the tax breaks and incentives used to lure new businesses and jobs to town.

Right now, companies are asked to make a best-faith effort to spend 25 percent of construction and controllable spending with minority- and women-owned business enterprises (MWBEs) and locally owned small businesses (LOSBs). The new guidelines would go from a “try-your-best” model to an “or-else” requirement of a 15-percent MWBE/LOSB spend in all categories. Companies that don’t comply could have to pay back some of the tax breaks. But the change won’t translate into additional dollars for MWBEs or LOSBs, which makes it feel more like window dressing than a substantial revision.

Since 2011, EDGE has secured nearly $2 billion in projected investments. About 14 percent ($292 million) of that will go to MWBEs and LOSBs. Fourteen percent. In a city that’s 63 percent black and 50 percent female. But if you ask EDGE’s CEO Reid Dulberger how many millions went to African-American businesses, he can’t tell you, because he doesn’t know.

EDGE doesn’t know because it lumps minority-owned, women-owned businesses, and locally owned small businesses into the same pile. This failure (refusal?) to calculate how PILOTs affect black-owned businesses is inexplicable. We measure what matters. Does building black wealth matter much to EDGE, local government, the Chamber of Commerce, or any other agencies with a vested interest in the city’s financial future?

After white men complained that Shelby County’s race/gender-conscious contracting program was biased against white men, the county switched to a program for locally owned businesses, defined as those with annual sales under $5 million.

To understand how thoroughly people of color are shut out economically, look at data measured by the city of Memphis. Although white men make up around 18 percent of Memphis’ population, their businesses received nearly two-thirds of city municipal contracts.

Those most likely to dismiss the racial disparity are also those who profit most. “Blacks are enjoined to get over it, to stop playing the victim role, take personal responsibility,” said Darrick Hamilton, associate professor of economics and urban policy at the New School. But diligence and hard work doesn’t translate into wealth for families of color, Hamilton said last week during a webinar on racial wealth inequality sponsored by the Ford Foundation and the Federal Reserve System.

Among the alarming figures he shared from 2011 federal data: An unemployed white head of household had nearly twice as much net wealth ($21,892) as a black head of household working full time ($11,649). Households headed by white high school dropouts had more wealth ($34,700) than households headed by black college graduates ($23,400). Low-income white families had more household wealth ($60,000) than middle-income black families ($42,800).

“The source of the racial wealth gap is that some individuals have access to some seed money so that they can purchase an asset that will appreciate over their lifetime when they are young adults,” Hamilton said.

It would be easy to blame the gap on black people’s bad choices, said William Darity of Duke University, but there’s no evidence to support that theory.

“These historical and existing structural factors mean that individuals who are engaged in trying to do the right thing are actually overwhelmed by the constraints that they’re confronted with,” Darity said.

Those factors are, in short, rooted in racism — a subject that ruffles feathers for black and white people, although for different reasons. But if EDGE, local politicians, and civic leaders want something we’ve never had — economic parity — they have to do something they’ve never done. We could start by measuring what matters, unless it doesn’t really matter.

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Editorial Opinion

The Invisible Hand

A once little-noticed phenomenon in public and governmental affairs is getting more and more attention these days, by no means all of it favorable. Call it “political out-sourcing,” an equivalent to the long-accustomed practice whereby governments — as in the case of prison management, say — turn over the operation of a traditional public enterprise to a private entity. The purpose of traditional out-sourcing is two-fold and reciprocal: The governmental body, which usually maintains at least some nominal amount of oversight, divests itself of an expensive obligation, while the private entity, which commonly acquires the formerly public operation via an accepted bidding process, has a potential profit opportunity.

Defenders of traditional out-sourcing, on both the giving and taking sides of the line, extol the process as a means of letting what economist David Ricardo called the “invisible hand” of the marketplace achieve efficiencies that are not possible for the clumsy and presumably visible hand of bureaucracy.

The newer practice of political out-sourcing is something superficially similar — but fundamentally different. One current instance of it is on display in the Achievement School District (ASD) now being operated by Tennessee state government on behalf of “failing” public schools via state takeovers of those instutitions. Another is the joint city/county Economic Development Growth Engine (EDGE), which is charged with charting the course of economic growth locally and customarily does so through the proffering of incentives to this or that industry that is eyeing a site for expansion and which EDGE has decided is worthy of being courted.

The out-sourcing here is different from the traditional kind, in that the administering institution is not private and its operating currency is not profit for itself but control over public policy (a short name for which is “power”). And its procedures are not the marketplace ones of Ricardo’s invisible hand, though they are, as critics are increasingly charging, “invisible” in a different sense (i.e., outside the purview of any significant public oversight). This is despite the fact that the enterprises themselves never cease being fully public in their scope and after-effect.

State ASD Director Chris Barbic’s powers are virtually dictatorial. He has been heard to boast that he has no elected school board to answer to. One result has been the perhaps predictable one of parental outrage at what, understandably, seems to them to be ASD’s arbitary co-optation of community property.

Similar reactions are now evident with respect to actions of the EDGE board, whose 11 members, mainly drawn from the business community, are almost entirely chosen by the mayors of Memphis and Shelby County, with minimal input from the city council and county commission, whose one-member reach is essentially cast in the role of observers.

Recent payment-in-lieu-of-taxes (PILOT) arrangements and other incentives extended to target industries — as well as the selection of the targets — have drawn fire from the public as well as from the two local legislative bodies, where discontent has begun to simmer and calls for the overhauling or even the abolition of the EDGE board are beginning to be heard.

It might behoove the folks in positions of authority vis-a-vis these matters to pay more attention to the vox populi and less to that which is invisible.

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Editorial Opinion

A Mixed Bag in 2014

If you’re standing up, sit down; if you’re sitting down, stand up — whatever you need to do to take stock of the year that just passed or get ready for the new one. Frankly, we don’t know whether to be shocked, bemused, or encouraged.

There was a rush of things at year’s end regarding which we’re just going to have to wait and see.

To start with, it was one of the most satisfying: Yes, considering how often we’ve been on the short end of the stick in matters having to do with our relations with our sister city of Nashville, it does feel good to have something to gloat about. Folks up that way may not have noticed how well our NBA Grizzlies did in 2014 compared to their NFL Titans, but they dang sure noticed when the Swedish furniture giant IKEA chose to locate its newest mega-store not in the Middle Tennessee environs of the state’s capital city but on a generous stretch of land along Highway 64 in our own Shelby County bailiwick — within the city limits of Memphis, in fact. We know from things we read or saw on TV or picked up online that Nashville had been competing pretty hard for that honor. 

The folks there had let it be known that they were tired of having to truck the 250 miles or so to Atlanta to shop for the nifty, lightweight, modernist stuff that IKEA makes. Well, the good news for Nashvillians is, they won’t have to drive quite so far to get to the IKEA store in Memphis. And, in season, they’ll be able to take in a Grizzlies game while they’re here, and, you know, get that sense of what it’s like to be a winner.

Along with the news that Target intends to locate a fulfillment center here, the news about IKEA would seem to provide some justification for the high hopes that had been invested in the joint city/county EDGE (Economic Development Growth Engine) board, as well as to allay some of the doubts about that board’s incentives policy.

We still think, though, that the policy of attracting new business and industry through the liberal use of PILOTS (payments-in-lieu-of-taxes) needs careful oversight, lest it be abused. We don’t have much of a tax base for public purposes to start with, and to squeeze it much further could be counter-productive — and regressive. Surely nobody needs to be reminded that the city’s first responders are aggrieved by changes wreaked in their health-care and pension options as a result of austerity measures in local government. Nor has memory faded about the recent outbursts in public violence that caused such concern about our ability to counter or contain them. 

We are ending the 2014 year with a nice seasonal glow, thanks to some successes like those mentioned above, and we’re grateful. But we’re well aware from the all too obvious disturbances and discontent that have also manifested themselves that we have continuing and grave problems that have not gone away. It’s a mixed bag, but Happy Holidays is still the right thing to say. So we do.