Robert Loeb – Memphis Flyer

The 89-page Fairgrounds redevelopment plan released this week is the third major one since 2006 so I’m taking my time digesting it.

The Looney Ricks Kiss firm did one in 2006 that, obviously, didn’t go anywhere. The RKG Associates consulting firm did a 2009 study as well as the one that came out this week. The 2009 study was pessimistic about the $125-million public/private financing proposal for a sports-oriented Tourism Development Zone. The current one is optimistic about a $233-million public/private proposal for a sports-oriented TDZ.

Same property, same qualified public use facility (Liberty Bowl Stadium), but different economy (recession then, comeback now), different mayor (Herenton then, Wharton now), different developer at risk (Henry Turley and Robert Loeb then, unnamed now), different master/enabler (a city-appointed Fairgrounds Reuse Committee then, Robert Lipscomb, head of the Division of Housing and Community Development, now) and different fate of Fairview school at the key corner of Central and East Parkway (out then, in now).

Turley’s Fair Ground plan, which I wrote about here, is not mentioned in the 2013 RKG report despite the obvious similarities. Turley got state approval for a TDZ but ran afoul of the City Council and Lipscomb, who said his fees were too high, which Turley disputed. The new plan needs state approval, and a presentation is tentatively scheduled in mid-October. After that it will also need City Council approval.

In a supporting letter, Wharton wrote that “the fairgrounds project will also serve as the central hub of the city’s family-tourism expansion through its developments at Graceland, Bass Pro at the Pyramid, and the Riverfront.” He makes no mention of the proposed Crosstown project which is less than a mile from the edge of the Fairgrounds TDZ and is seeking $15 million in public funds. The Bass Pro Pyramid is part of a separate TDZ.

In short, Memphis is betting on a whole lot more free-spending tourists coming our way.

As the name suggests, the key to a TDZ is tourism spending as opposed to local spending that would have gone somewhere else but for the new development. In a TDZ, Memphis gets to keep the incremental increase in state sales taxes above a baseline number.

The baseline number is important in determining what “new” revenue can be used to pay off the bonds. From the new report:

“The analysis by RKG Associates concludes that the projected baseline retail sales are approximately $214 million, and as a result there are ample sales tax revenues — projected at $14.3 million yearly beginning in 2016 — to support the bond payments of $11.9 million annually.”

And from the 2009 RKG report: “The estimated stream of sales tax revenue, while significant, is not necessarily new revenue. Additionally, under the assumptions of the bonding in this analysis, the projected stream of sales tax revenues is insufficient to retire $112,264,000 in bonding.”

One more negative note from the 2009 report: “By the very nature of retail there is always some degree of transferred retail sale. In the context of the Mid-South Fairgrounds, it is likely that the majority of retail sales will be transferred sales from existing merchants.”

The 400,000-square feet of “destination retail” that would bring in new money in the current fairgrounds plan is not named. Nor is the operator of the “180-room hotel/conference center.” The location would be north of Tiger Lane and south of Central Avenue. Obviously, it matters whether the retail is a destination for East Memphians or Nashvillians and Mississippians.

The report says “the Fairgrounds redevelopment is being driven by the City of Memphis as owner” and “based on the city of Memphis vision and design” the city will seek “a retail development company” for the property north of Tiger Lane and another developer/operator for the sports facilities south of Tiger Lane. There is no mention of fees.

However there is this statement:

“Using the TDZ as the vehicle for financing the Fairgrounds redevelopment and carefully calibrating a plan of redevelopment, the City of Memphis continues to build economic engines, as it has done with the redevelopment of The Pyramid into destination retail and a tourist attraction.”

Well, let’s hold that praise until after Bass Pro actually opens. As the report says elsewhere, “there is no assurance that actual events will correspond with the assumptions on which such estimates are based.”

The proposed three-square-mile Fairgrounds TDZ would include big Midtown tax generators such as the Memphis Zoo, Overton Square, Union Avenue and the soon-to-be rebuilt Kroger, and Cooper-Young. The report doesn’t flat come out and state cause and effect, but the assumption is that these things are tied somehow to the fairgrounds and the stadium and therefore their incremental tax revenues should be captured.

Again, the big question is what’s the increment? That depends on what the baseline is. The lower the baseline, the bigger the increment. In this proposal, the baseline is 2012 sales tax collections, adjusted for inflation until 2016 when the retails sales stream starts flowing to the fairgrounds bonds.

RKG’s 2013 optimism starkly contrasts with its 2009 pessimism about fairgrounds retail, which went well beyond the recession: “Approximately 80 percent of the sales that would occur at the fairgrounds would come from residents within the primary trade area. Most all of the sales activity would be reallocated sales already occurring elsewhere in Memphis.”

Fairgrounds retail, RKG said then, “would fill a void in the local market area, however it lacks highway presence and the tenant mix to be a regional consumer draw.”

That was then, this is now.

Robert Loeb says his company’s redevelopment of Overton Square can move forward with or without an underground storm water detention basin, but he needs to know by the end of this year what the city is going to do.

Loeb Properties has a contract to buy the property that expires December 31st. The company proposes to spend $19 million on Overton Square. The city is considering spending up to $19 million for a parking garage, underground detention basin, and street improvements. The proposed investment has to clear the City Council, which has two more meetings this year.

Loeb said he has no preference between an $8 million detention basin and a smaller, less expensive one, but believes the smaller one — less than one tenth the size of the bigger one — wouldn’t hold enough water to do much good.

“If the funds are in there it isn’t my decision,” he said. “But it works kind of hand in hand with the garage structure.”

Without a garage, Loeb said “we’ll have low-density, surface development” and shared surface parking with Playhouse on the Square and others instead of high-density development.

Overton Square and other Midtown developments with big parking lots such as the Home Depot at Poplar and Avalon contribute to the flooding problem during heavy rains. Detention basins (the soccer field at Christian Brothers University is one example) hold water temporarily, as opposed to retention basins that retain it. The city engineering department is considering several flood abatement options for Midtown, including the one at Overton Square and another one in the Snowden School playing field. A detention basin in Overton Park on the greensward was rejected because of public opposition.

“I’d like to be a good neighbor,” said Loeb, who presented his company’s plan earlier this year at Playhouse on the Square. It included restaurants, new and renovated retail spaces, and a new home for the Hatiloo Theater.

Flooding after heavy rains is a problem for residents in Midtown neighborhoods north and south of Overton Square. The total cost to protect them against a 25-year flood is estimated at $24.3 million.

Mary Wilder, cochairman of the Lick Creek Storm Water Coalition, has followed this issue for years and is also a Midtowner in the Vollentine-Evergreen Community Association (VECA). She sent me the article here. She makes a strong case for small-scale “green” measures that, if they catch on, can have a significant impact on flood abatement.

The coalition opposes detention basins in Overton Park and supports Loebs’ project “as long as detention is part of it.” She adds that even the largest detention basin under Overton Square “is not going to solve VECA’s flooding problem” because Lick Creek picks up more water between the square and the VECA neighborhood. Wilder is frustrated that city engineers “start talking engineering to you” and have not been clear on why the cost of the proposed Overton Square detention basin suddenly went up so much. There is suspicion that Overton Park will come back in play as an alternative.

I am a shameless homer on this one. I live in Midtown, although not near Overton Square, and like driving five minutes instead of 20 minutes for dinner and a movie. I was for the Loeb-Henry Turley fairgrounds redevelopment, Fair Ground, that was rejected by the previous administration and the City Council. But the football crowd won that one, and the result, for better (Tiger Lane, Southern Heritage Classic, AutoZone Liberty Bowl) and worse (about 2000 people at the last Memphis home football game, acres of empty parking lots, nine events a year, and nothing at the old Libertyland site) is plain to see.

Low density or high density, Loebs’ development would be a nice addition to a budding “theater district” hanging on to memories of better days in the Sixties and Seventies. I’d like to see an upscale grocery store in the mix and believe it could still happen. I question how much a relocated repertory theater company brings to the party and prime space on Cooper.

A $6 million parking garage? I don’t know about that. Can’t imagine it being free for long, if ever, and pay-to-park can be a deterrent when there are alternatives. If there are a few nights when the theaters are full and so are the bars and restaurants so parking is scarce, well, we should have more such problems.

As for the financing, I think the place in Memphis for a Tourism Development Zone (TDZ) is Graceland. That’s clearly other people’s money, and Whitehaven and Elvis Presley Boulevard, as Councilman Harold Collins says, are overdue for attention. In hindsight, Whitehaven should not have hitched its wagon to Robert Sillerman’s grandiose plans for Graceland.

The Fair Ground TDZ was tied to that specific project and it’s gone now. Getting another TDZ is easier said than done. It took Turley’s considerable reputation and political skill to get the first one.

Another funding alternative is a Tax Increment Financing (TIF) district. That captures the incremental growth in sales taxes and pours it back into project financing, but the proposed boundaries are bigger than Overton Square. I don’t think higher tax revenue from a pizza joint on Union Avenue or small business on Central necessarily has anything to do with new investment in Overton Square. And TIFs strike me as very similar to special school districts.

Finally, or foremost depending on where you live, there is flooding. I would be going ballistic if I lived in one of the flooded areas in the big flood of 2010 or in a house where sewage came up through the basement drain and flooded my living room and the city was slow-walking flood abatement. There’s a case to be made for bundling flood abatement and development of Overton Square, but there’s a better case to be made for doing what’s best for flood-afflicted residents regardless and paying for it out of general funds. Much as I wish the money could be taken away from boondoggles such as Beale Street Landing, that isn’t going to happen. So we will see what the city council does in December, and Loeb will make its decision after that.