Dec 08 2013

AC at bat

Posted by Steve Ross in Memphis Politics
The Wharton Administration lost the ball in the sun.

The Wharton Administration lost the ball in the sun.

The whole AutoZone Park affair has shades of the baseball poem, Casey at bat. An idea, a solution for a downtown gem, that should by all rights, be a home run for a city that is trying desperately to keep the momentum going on its effort to revitalize the area.

But a series of missteps and miscalculations sent two pitches past the Wharton Administration. These missed opportunities could sink the whole deal, and deliver a serious blow to an administration that has had difficulty articulating a coherent long-term vision for the city.

Monday is the third pitch, and the question is, will “Casey” be able to deliver, or will the air be the only thing shattered by the force of Casey’s blow…like the penultimate stanza of the classic baseball poem.

The History

We’ve known since 2009 that the Redbirds were in dire financial straits. The team has never made money, and defaulted on its bond payments that year, which is what brought Global Spectrum into the picture in the first place.

In 2010 the private equity firm Fundamental Advisors bought the outstanding bonds for less than .40 cents on the dollar. That discount, reflected the uncertainty surrounding the financial management of the Redbirds and the previous year’s default.

The point is…the problems at 3rd and Union have been known for some time, so it should come as no surprise that we are where we are. Which is what makes the rest of the story so puzzling.

In April, we heard the first details of the deal that is currently before the Council.

At the beginning of November we found out the city was close to closing a deal pending Council approval.

Then just two weeks later, a well publicized invitation only rally, that excluded members of the City Council was held…a move that left some on the Council publicly puzzled…and likely privately annoyed.

The snub could have been managed, but questions raised by incoming Council Chairman Jim Strickland…which were still unanswered by Nov. 27th…just six days before the Council would be asked to decide…were never really answered.

And so, with an 0-2 count, the Council delayed the vote until Monday, Dec. 9th. Whether or not this becomes the hone run the administration…and all the fans of Mudville…are hoping for is largely up to them.

But if it fails, the failure will rest not on the Council, but the Administration, for poor communication, and even worse politics.

An ongoing saga

It seems like we’ve heard this story before. The administration comes before the City Council at the last minute with details on a well publicized deal that seems to blindside the body.

Some of this is overblown (Crosstown, for instance, has been about $15m for a long time…though the details of the financing may not have been as well known), but stretching back since the beginning of the Wharton Administration, this has been the norm.

You might have thought something would change after the most recent budget battle in June. That was more mess than anyone should want to put themselves in. But much like that deal, in this deal the administration came across as looking inept at gaining consensus on a deal that should by all rights be a home run.

Now, at the end of the second year of Mayor Wharton’s first full term, his agenda seems to have fallen into a randomized piecemeal approach, with no articulated long-term plan…much less a destination.

The turbulence the last two years have brought on has also shaken confidence in the Mayor. The biggest structural challenges for the city…poverty, unemployment, and crime are further hampered by a declining revenue base as huge swaths of the city remain underdeveloped due to decades of physical expansion without much population growth. None of these issues are getting the focus they deserve from City Hall.

And to a certain degree, you saw that in the recent referendum on a sales tax hike to fund pre-k education. The small disorganized opposition didn’t oppose Pre-K, but the lack of movement on the issues impacting the population beyond 3-4 year olds. Certainly, creating more opportunities for them would help those same 3-4 year olds…and might even increase support for generating the revenue necessary to fund Pre-K.

From the outside looking in, it seems more like the battles are picking the Mayor rather than the other way around.

Back to the deal

On a couple of levels, it feels like the Administration is getting played on the premium they’re being asked to pay for the ballpark.

Fundamental Advisors paid .38 on the dollar for the bonds in 2010. The City is expected to pay about the same amount for them before the auction next year.

Has anyone asked what the bonds would go for if they actually went to auction? Would Fundamental Advisors be able to turn a profit on them?

It doesn’t seem likely. If the bond holder thought they would, they wouldn’t be willing to sell for the same price they bought. But letting the bonds go to auction would put a major attraction downtown at risk. A risk I don’t think the city is willing to take. Nor should they.

So while this may all seem like a bad idea that saps away money that might be put to better use, in the end, I don’t think its a bad deal. Its just a deal that has been presented badly…and I tend to agree with the Commercial Appeal editorial that says the City Council should be irritated about it.

We’ll see what happens tomorrow. I won’t make any predictions. But I will say, that if this administration wants to get more done in the city, they need to get some messaging together other than waiting until the last second to stir a panic and then get a deal done. That’s no way to run a city, plan for the future, or keep your gig in Oct. of 2015.

Nov 22 2013

Nobody Won

Posted by Steve Ross in City of Memphis

But not everyone has lost either

But not everyone has lost either

Last night’s election results in the sales tax vote were surprising in the definitive margin of defeat…more than the defeat of the measure itself.

It was an issue I struggled with, much like more than one of my friends.

As a long time advocate of Pre-K, and someone who actually spent over a year researching the impact it can have on the development of young children, I understand all too well the high rate of return in the long run. I knew that return wouldn’t be measured in years, but in decades. That’s really how everything should be measured…but will never be as we quest to ever shorten the time we see a return on our investment.

As a society we’ve morphed from a relatively patient people, to the policy equivalent of day traders, buying and selling for pennies of return, to Adderall junkies demanding we be fed pills to fuel our “more better faster cheaper regardless of just how crappy the product ultimately is” lifestyle.

But that’s another point entirely.

The failure of the measure doesn’t have to be the failure of the cause. The slogan didn’t say: “Our Only chance to advance”.

It was a chance. One we as a city chose not to take. Arguing the wisdom of that vote is walking backwards. But in looking backwards, perhaps there are some lessons to be learned for the next time. There can be a next time if we want it.

Reservations

The Poor Pay More

The Poor Pay More

Tennessee ranks as the 6th most regressive tax structure in the US according to the Institute on Taxation and Economic Policy.

This is not entirely the City Council’s fault. The state government plays a much bigger role in the way we collect revenue than the City ever could. But because the poor pay a disproportionately larger percentage of their income in taxes than wealthier Tennesseans, there’s ample reason to be leery of a sales tax to pay for something that will largely benefit the poor.

This was my secondary objection to the measure, though I did vote yes on it.

My primary objection was that it was a sales tax increase to pay for Pre-K and mask a property tax decrease, that would amount to basically nothing for middle income people ($20/year).

I feel confident that if all the money were benchmarked for Pre-K, and certain elements were better crafted, the issue would have passed.

Rhetorical Whimpers

Last night, after the election result was certain, I heard several elected officials who lent a good deal of political capital to the cause say several things. To paraphrase the most oft repeated refrains:

1. People don’t want to pay more taxes.

2. People don’t trust government.

3. Things have to change.

There are some important things to note here:

1. None of them said people don’t want Pre-K.

2. Isn’t it the height of irony that an elected government official would acknowledge publicly that the people, who elected them, don’t trust the government they were elected to play a deciding factor in?

3. Taking these first two into account, it seems clear that things do have to change, though perhaps not in the way said elected officials intended.

Speaks volumes in my book.

Systemic Failures

But there are other issues as well.

The 8 member, unelected board that would administer the funds made folks queasy. Memphis has more than its fair share of unelected boards that handle city money in ways that make even the least observant question the rationale. I’m not sure many people have the stomach for another.

Another thing that added to the discomfort is the charge that the Pre-K system in Memphis already has empty seats…one that, to my knowledge at least, was never verified. Because the City can no more make Pre-K compulsory than levy an income tax, the practical considerations here may have given some voters pause.

Finally, the silver bullet nature of the campaign…

Pre-K isn’t going to solve long-term unemployment, or generational poverty…at least not in any term that I will live to see.

Pre-K isn’t going to train people for the hundreds of jobs at Electrolux that remain unfilled due to a low-skill workforce.

It isn’t going to help get people to those jobs if they are qualified to do them.

It isn’t going to hold slum-lords accountable when they allow their property to deteriorate so they pay lower property taxes, all while charging the same amount of rent to their tenants.

Pre-K doesn’t do anything for the generations that came before this one, that need just as much, if not more help than their kids, so they can take part in making a better future for their community.

It doesn’t work to fill the gaps in skills that people desperately need to get out of the grip of poverty level minimum wage jobs.

It doesn’t give a second chance to the folks who may have made a bad decision or two in their lives, and are now cast aside as economic untouchables with little or no opportunity.

It may help increase educational attainment, and by extension, help decrease crime and poverty, but lets be honest, that’s no less than 20 years out.

That doesn’t mean we shouldn’t work to have universal Pre-K here in Memphis, it just means we have to be honest with ourselves.

This ain’t the walk off home run that it was billed to be.

Hail to the winners…who achieved nothing

The winners…if there is such an animal in this situation, have a heavy load to carry, though I am skeptical that they will.

I partially agree with Shea Flinn and Jim Strickland when they said, the onus is on the opponents to bring something forward to help make this happen, though I think they give their opposition too much credit. The scant voices who fought this on a wing and a prayer aren’t why it failed. They didn’t help get it passed, but they don’t deserve credit for squashing it either.

The solution, that has been said by some of the anti’s is use the $57m the city owes the schools to pay for it. That assumes a lot…most importantly, that the schools are ok with the city spending their money without their permission. It is also a very short-term plan for funding Pre-K. $57m would last for about two years, if that.

To the anti-salestaxers I ask, “What’s your plan?” How should the city begin the work of addressing the long-term inequities that have brought us generational poverty, low educational attainment, and an opportunity vacuum for those whose circumstances are beyond their control?

I ask this, with the implied understanding that the City, on its own, cannot address all these issues…the State and Federal government have more than their fair share of the blame in complicating…if not exacerbating these circumstances.

I ask this because simply acting as a foil to political rivals isn’t leadership any more than 40-odd meaningless votes to repeal Obamacare is leadership. Opposition without a workable alternative is nothing more than a cynical political ploy.

I’m actually looking forward to it, because perhaps the ideas will net something this initiative never did, which is community input on the final product. Maybe this alternative will actually look, sound, and feel more like the people it seeks to serve. And maybe, just maybe it will be successful at the polls.

Until then, the ball is in your court.

How Bad Do You Want It?

The real thing I’m interested in is seeing just how quickly the next group picks up the ball and runs with it on this and related issues. Something’s gotta give.

We’ve got too much of a whole lot of things that keep us down and a whole lot more of the “it can’t be done” attitude that I fear this result will only fuel.

We can do more, we just have to start. Its that simple. We can start anywhere…housing, workforce training, education…seriously, we’ve got more than enough people that need help in these and more areas that finding a place to start isn’t the issue…starting is.

It all comes down to how bad we want it, and the next few weeks will go a long way to answering that question.

How bad do you want it? I hope the answer to that question isn’t “Not bad enough”.

Jun 20 2013

Face hates nose…AKA the continuing saga of the #membudget

Posted by Steve Ross in Memphis, Memphis Politics, Policy, Shelby County

Noses are funny. Often the most noticed facial feature…next to the eyes, noses are also one of the most complained about things people have on their face.

My nose, is what I affectionately call a “3 finger nose”…meaning, from my face to the tip is three fingers long. You can see it below.

My actual nose

My actual nose

Noses, such as this are common in my family. We’ve had an ongoing discussion about the “Ross nose” for as long as I can remember.

When I was a kid I hated it. I wanted a smaller nose.

It was an object of teasing and torture through my adolescence. I’ve never been so vain as to consider plastic surgery on it, but I certainly “wished it smaller” more than once.

My nose is a feature that provides a great deal of utility from the obvious, smelling, to holding up my glasses. This, of course comes with some costs. Allergies or head colds aren’t a small affair for me. There’s a lot of real estate there. A lot of ground to cover. More than one tree has died in the service of blowing my nose. I’m sure many more will as well.

Eventually, I came to grips with my feelings about my nose, even beating people to the punch with jokes. It is a dominant feature, no doubt, but its one that I have come to embrace over the years.

Focusing on the wrong feature

So what do noses have to do with the Memphis budget? Simply put, by focusing on tax rate, and cutting, cutting, cutting, we’re proposing a solution that not only doesn’t address the bigger problems, but also creates an environment where there’s no oxygen in the room to even discuss them.

Sometimes the answers are really right out in front of you.

Sometimes the answers are really right out in front of you.

This is almost like the behavior of a newly single middle aged person trying to find the one thing that will make them attractive once again to the opposite sex.

Its easy to focus in on one thing, and proclaim that by fixing this one thing…everything will somehow be ok. The unfortunate reality is that by focusing in on that one thing, we ignore the real problems…the fact that we can’t see our toes, that we need to eat healthier and exercise, or that we need more therapy than we can afford.

We focus on this one feature, like a nose, because its simple.

We convince ourselves that by correcting this one simple single problem we have shot the silver bullet that will make the others go away. But this never works out. The problems remain, and we are still in the same situation we were before.

Our only choice is to either focus on addressing the real issues, which is hard, or find another distraction that will be our next failed “silver bullet”. Thus far, this Council and the Administration has focused on the distractions.

Its not personal, its about vision

Earlier this month, Polar Donkey wrote a defense of some of the things I’ve brought up in previous posts (this one in particular) that framed the debate as Strickland vs. Vibinc.

via Polar Donkey

The post showed things that are well beyond my technical ability in support of my core argument, that real problems (crime, education, lack of opportunity), not tax rate, are what leads to flight and population stagnation.

I do appreciate the support, but this isn’t just about any one person.

I consider Jim Strickland a personal friend. He supported me in my campaign, and I’ve supported him in his past campaigns. We disagree on this issue.

I started down this road because, aside from my belief that “tax rate” is a poor metric by which to judge efficiency, I am also curious as to what the end game is. What is the long-term vision? How will doing this address the long-standing problems that impact Memphis…from crime and education to economic opportunity and flight…especially for those who are suffering most (low income families) and leaving the fastest (middle income families)?

Thus far, that hasn’t been described in any tangible way. So, absent something to convince me otherwise (which would be a tough sell to begin with), I’m left with little understanding as to the long game.

Policy and Political Cycles

When I ran for County Commission last year, I talked about solutions that outlive political cycles. “Solution” is a word I don’t really like to use, because it implies permanence or that there is a “silver bullet”. Policy is neither permanent nor a “silver bullet”.

Policy, is supposed to be a living, breathing thing that evolves as the situation evolves. This is hard for politicians to accept. We all want things to be simple. We want answers to be certain…”If A then B” type statements. That may make for a good TV sound byte, but it doesn’t make for good policy.

Its harder to believe when your city leaders don’t seem to.

What we get, more often, is gut reactions and hill to die on declarations, especially from legislators. This is only compounded when the administration has failed to either articulate, or gain widespread support for their vision.

And that’s where we’re at, and where we’ve been for some time…even before Mayor Wharton took over. We’ve been a city without a policy vision.

The CVB has a vision of Memphis that it is pushing both internally and externally.

A slew of local non-profits have articulated their vision for either attracting or building up local talent. (more than I want to try to mention)

Hell, even the Grizzlies have articulated a sense of self-identity with their “Believe Memphis” and #Grit #Grind mentality.

Why we can’t adopt any of these ideas, these identities, and turn them into an attitude for a long-term policy vision for the community is beyond me. But here we stand, fragmented. Looking toward our future with little to no idea of what we’re working for when we get there, or how to do it.

So rather than do the hard work, we go for the nose job, or the facelift. We buy some snake-oil salve from a late night tv infomercial, or rehash tried and failed “tax cuts = job creation/growth” strategies we borrowed from an administration that saw the single largest devastation of middle class wealth since the Great Depression.

We get caught up in cosmetics, rather than getting on the treadmill and putting down the Pork Rinds, or maybe reading something other than a trashy pulp novel for personal development.

In short, we focus on the fast food solution for our challenges, and leave feeling just as unsatisfied as we were when we started, and a little bit fatter.

Conclusion

I’m not saying I have all the answers. But come on:

If flight out of the city is something you’re concerned about, laying off and eliminating jobs is one helluva way to say don’t move from Memphis. You just nearly guaranteed 400 people will move. They’ll have to.

If Public Safety is something you think we should focus on, eliminating 280ish public safety positions is one really self-defeating way to do that.

If you think taxes are too high, then how will you explain to the public that these very actions will increase insurance premiums by 11% to 15% (which by the way, is more than the tax hike would be).

I’m just saying, with four members of the City Council supposedly angling to run for Mayor, you’d think there would be something better on the menu than the paper plate of failed ideas and broken dreams we keep getting served.

You’d think that some kind of coherent vision would emerge…something people could get behind. Because what’s going to happen now is people are going to love the tax break and be pissed when their house burns to the ground, or Ma-Maw dies of that stroke because response times increased, or you wake up to find some dude rifling through your car at 3am because the police presence just ain’t there any more.

That tax cut isn’t going to mean anything when that happens. And people will use those experiences to drive their decisions and belongings out of town…just like they have been for more than 20 years (with a lot of help from the County Commission, I might add, which has, in turn, negatively impacted their ability to raise revenue).

For 20 years, as a city (and a County) we’ve bought one facelift and tummy tuck after another, expecting our fortunes to magically change, all while not dealing with the real problems facing the city (and County), and chasing after folks that just don’t and ain’t gonna love us no more.

Its dumb.

For 20 years we’ve given lip service to the real issues that are driving down revenues, and stymying population growth, all while cramming Ho-Ho’s and pork rinds in our face and ignoring the real hard work that has to be done to correct the problem.

That’s not just dumb, that’s a slow suicide.

File under – Things that don’t work

Its got to stop. But to stop, we have to have leaders who don’t look at the whole enterprise as a lost cause, and I’m not convinced that’s what we have right now.

And while the facelift we’re currently contemplating (aka the rate cut) may make us look pretty on Facebook and Twitter, there’s still all those real issues lingering beneath the cropped edges on that profile picture that have been, and will continue to drive people out, or keep them away.

In the end, this facelift will be just as successful as all the past ones…un…and we’ll still have all the same problems, but worse.

And a year from now we’ll be sitting here wondering why it didn’t work, and still have no long-term plan, and wonder if that stomach electrocution thing really will give us six-pack abs or if they just hired models that already had them and put it on them.

What’s worse, we’ll probably buy that dumb piece of crap looking for another silver bullet.

We shouldn’t be surprised or disappointed when it doesn’t work.

Jun 05 2013

Who’s driving this bus?

Memphis budget back and forth raises questions about long-term plans, vision for the City among other things

If you’re not confused you’re not paying attention.

To be honest, I’ve been on vacation for a week, and doing everything I can to not pay attention, but the events of yesterday’s Memphis City Council meeting snapped me back into reality.

By my count, I’ve seen five separate budget proposals put before the Council:

• The original plan that increased the rate to $3.39.
• Three plans reported by the CA on May 30th. All three have a variety of options, all dire either through extreme cuts, or tax increases.
• The current plan, which increases the rate to $3.51 reported on June 4th.

I reserve the right to revise and extend this list in case I’ve left one out (I’m a blogger, not a journalist, I can do that).

I haven’t seen the latest four budget proposals, so all I can do is rely on media reports until I can track them down. I also don’t know which one Mayor Wharton is most wed to. I presume its the most recent budget, which seems to resemble the original proposal more closely, but also seems to ignore the results of impasse proceedings that have made their way through the pipeline over the past several weeks.

The long and the short of it is: We’re 25 days out from the new fiscal year, and we seem no closer to a resolution to the budget issue than we were back in the middle of May when I published my last post.

Coincidentally, Nashville just passed their budget. $1.8b for all Metro and County operations. $1.8b is also the sum of all City and County operations, even though our population is nearly 300,000 more people. Maybe if I add in the budgets of the other municipalities it would make more sense, but I kinda doubt it.

Footloose and fancy free

There’s been a lot of rhetoric surrounding this budget season. The reasons for this are many: ideology, political aspirations, and personal vendettas are the first three that come to mind. But beyond the rhetoric is the basic reality of 9th grade civics involving government. Simply put:

It is the responsibility of the Executive Branch to propose a budget.

The proposed budget should reflect the priorities of the Executive branch with an eye towards the long-term direction of the community and the realities of the revenue sources, long-term liabilities, and nuts and bolts expenditures of the city. An accurate portrayal of these financial realities is critical, because they ultimately inform the public, and Legislative Branch, of things that are coming down the pike. This is just a proposal, however, not the final product.

It is the responsibility of the legislative branch to enact a budget.

The enacted budget can be similar or radically different from the proposal. Legislative branches have wide latitude to re-shape all kinds of priorities with the budget pen. The tailoring of these priorities can be surgical in nature, or a Frankensteinian hack-job.

But lets not get it switched. It’s not the fault of the Executive that the Legislative branch passes a budget that conveniently ignores any or all of the revenue streams, liabilities, or expenditures. Once the Legislative branch is done either giving a haircut, creating a monster, or anything in-between, it is the job of the Executive to try and make that budget work, and realize as many priorities as possible, with the tools they have available as a result of that budget.

Seems to me that both sides have forgotten portions of this throughout this and previous budget seasons. And while I believe that a skeptical eye is both critical and necessary to being an effective legislator, personal issues seem to have taken over what should be a professional exercise.

Comptroller Complications

The budget season was on track to be a contentious battle in the first place. Lower revenue outlooks due to decreases in property values meant either a tax increase (from 3.11 to 3.36 to remain revenue neutral) or serious cuts were in the future.

In the midst of that angst, a powder keg was ignited when the Comptroller’s report came out on May 22nd (read the whole report here).

The report detailed many problematic financial issues. The one most widely mentioned is the “scoop and toss” debt refinancing the City has engaged in several times in recent years. While there’s no doubt that using one credit card to pay another is a bad idea, if it means a lower interest payment, and there’s a commitment to actually pay down that debt, it can be an effective strategy for reducing the impact of debt on revenue streams.

It should be noted, Shelby Co. government has refinanced a great deal of debt over the past several years using historically low bond interest rates to reduce short-term liabilities. I’m not sure why Memphis’ use of this tactic is any worse, except that the overall revenue outlook probably doesn’t have as much upside.

So debt is a big deal. The other big deal is revenue, which the report notes, is declining necessitating a tax increase, a reduction in spending, or both.

What most people haven’t keyed in on is the section of the report called Fiscal Concerns located on page 4.

In that section the Comptroller says:

“…We are concerned with the low level of general fund balance after accomplishing the corrective actions listed above. The City appears to have funding needs in the near future for liabilities related to pension obligations, other post-employment benefit obligations, and money owed to the school system. Also, the City has aggressively used PILOTs and other property tax incentives for economic development purposes which have cut into future property tax revenue growth.”

You can take that paragraph a couple of ways, but all of them include the following: We’ve got some big bills coming due.

Really, most of this is stuff people already knew.

Pensions aren’t in the budget, as far as I can tell, but its a subject that some of my more conservative friends consistently herald as a bad long-term liability. Its hard for me to tell if this is reality or just some bias against paying pensions, but I sure would like some clarity on the issue. (though this article mentions the liability problems, though not in detail)

There is a section called OPEB (Other Post Employment Benefits). We borrowed $22m from that fund last year to pay for Pensioners Insurance (that’s what it looks like anyway). From my perspective, that money never should have been borrowed. Period.

So now, we not only have to fund the current year, but also last year. I don’t know who proposed that, but it was a bad idea that follows a trend of folks taking a promise and turning it into a threat when it comes to dealing with retirees.

That ain’t cool.

What’s most interesting to me is the comment about the aggressive use of PILOTs and other tax reduction schemes for business. Does this mean these things aren’t paying off? This year the budget mentions $5m in PILOT payments. Last year, AFSCME had a list of the top PILOT recipients. I used to have it somewhere, but I can’t find it. Needless to say, the savings to business was north of $20m…for the top 10 recipients.

This begs the question…are these incentives doing what they’re supposed to? The Pew Center on the States has a paper from last year that deals with state incentives and some of the pitfalls. It might be a good read for local governments too. While the EDGE Board may be super transparent compared to other IDB’s, I haven’t seen them recommend the revocation of a PILOT due to non-compliance. That’s a little concerning since, I’m pretty sure there is at least one isn’t meeting the terms of the agreement.

What’s the long-term vision?

The Comptroller’s report makes mention of a 5 year strategic plan. I haven’t seen this document. I’ve heard a lot about it, but until someone can point me to a copy its vaporware as far as I’m concerned.

The Administration hasn’t done a good job of selling this plan to the public, and that’s part of why the Council is picking them apart.

The Council has, in the past, sought some kind of longer-term budget guidance. I’m not aware of any vote or resolution that would mandate such a plan. Right now, I’m not sure the politics of the situation would allow some members to give that kind of high ground to an administration that they’re basically actively running against. That’s a missed opportunity in my book.

The Council, by contrast doesn’t have to be as consistent. Legislative bodies, by their nature are supposed to have a somewhat adversarial or at least skeptical eye toward administrations. I’m not sure this level of adversity is productive, but political fortunes and personal vendettas being what they are…this kind of thing isn’t entirely unexpected.

In the absence of an articulated, concrete vision, legislative members are free to roam the hills of fishing expeditions and rhetoric that suits their political needs. I see more of that than an honest appraisal of what needs to happen to make Memphis more sustainable going forward.

The City Council has not seemed to be able to muster any kind of consensus long-term vision. 12 of 13 members are in the second year of their second term. Many of the decisions they have made over that nearly 6 year period have brought us to where we are today. I don’t blame them for the overall national economic conditions, or all the things they inherited, though 6 years in, the timeframe for that pardon is quickly diminishing.

Its time we got serious…and if this is what serious looks like…then wow, just wow.

A couple of months ago I gave a talk on school funding. In that presentation I said:

Budgets are a reflection of the moral convictions of a community.

I hold to that.

I hope our moral convictions are such that we would be very cautious about seeking additional sacrifices from working families that just happen to work for the City. The 4.6% cut last year was a hit in hard economic times. There should at least be a timeframe for restoration of that cut. We can’t be a city that penalizes people who serve our community. That’s no way to grow.

I think everyone understands that some positions will be eliminated while we try to clean up the financial mess we’ve made. Hopefully that can be done through attrition rather than layoffs to give more of a soft landing than a hard bump.

In the mean time, the Council needs to think long and hard about their ideas of revenue, expenditures, long-term liabilities, rate and most importantly, value.

“Reduce spending”, “increase efficiency”, “raise revenue”, “decrease the tax rate” and many of the other phrases used in this and previous budget negotiations are empty political rhetoric unless they include specific proposals backed by accurate data that adds real measurable value to the citizens of Memphis, not conventional wisdom or ideological flights of fancy. Sure, it makes for a great sound byte for the media, but it doesn’t mean anything until there’s some real meat on the bone. I hope all parties concerned will take that to heart.

For reasons unknown to anyone, the Mayor seems to have decided to let the City Council drive the bus. Hopefully, they’ll find a place to stop, get a map, and take us somewhere we can at least deal with for a while…that isn’t FantasyLand.

I can’t clap to keep Tinkerbell alive any longer.

May 13 2013

Why Your Property Tax Rate WILL Increase

Posted by Steve Ross in Memphis, Policy, Shelby County

And why that’s not such a big deal really

Old photo of the City Council because they don't update their Facebook page

Old photo of the City Council because they don’t update their Facebook page

Its budget time again. A time of wrangling and posturing about spending and tax rates and the “appropriate role of government”.

In City Hall, the County Commission, and most importantly, the school board, politicians will be putting together numbers for the upcoming year.

The schools budget hasn’t been released yet, though it is expected on Tuesday, so a complete picture isn’t really available.

What we do know is thanks to a whole lot of economic factors outside of our control, and many more within our control (though few would admit it) we’re going to see a property tax increase in both Memphis, Shelby Co., and likely many of the municipalities that were once thought above such measures.

While we’re talking about an increase, Nashville Metro is talking about a small decrease in property tax rates.

Considering the overall economic climate, this may come as a surprise. I know I was surprised when I heard it. But the underlying reason Nashville gets a cut, while we’ll most likely see an increase goes to a whole lot of issues we, as a community have been unwilling to face. None of which, by the way, have to do with “spending too much”, though that is the most often cited reason.

Home Value and Property Taxes Comparison

Property tax is the single largest piece of the City and County “revenue pie”. As property values increase, the tax rate required to remain “revenue neutral” drops. As values decrease, the tax rate required must increase.

Almost no one wants to see critical services cut: Police, Fire and Trash Collection. Trash collection is its own thing, funded by a fee collected by MLGW, so tax rate has basically NOTHING to do with that (regardless of what Kemp Conrad says), but Police and Fire make up a huge percentage of the City budget. Law and order plays a big role in the County budget as well, though the impact is muted because the Sheriff doesn’t have to staff up the way municipal police departments do. The single largest issue the County has to deal with is education, which we’ll save for after the budget comes out.

The data in the above spreadsheet comes from the Census and from published tax rates and calculations listed in the budgets from each area.

There are a couple of things that should jump out at you immediately:

1. Value – The median home values in each area. As you can see, Nashville’s median value is much higher. This means they can collect the same amount of money without levying a higher tax rate. Shelby Co.’s median home value is one reason for our high tax rate.

2. Vacancies – Shelby Co. has a very high rate of vacancies compared to Nashville, and Memphis is an even higher percentage than that. High vacancy rates depress value and overall collections for two reasons: oversupply and weak demand brings down prices over time, and long-term vacancies not only mean lower collections from that home, but often many of the homes in the area as home values decline, especially if there is a high volume of vacancies in a specific area. (Note: Shelby Co. vacancies include Memphis vacancies, because, you know, Memphis IS in Shelby Co.)

None of this is new. We’ve known it for a long time. I’ll have to address why this is the way it is another day, but for now, lets just say both Memphis and Shelby Co. government have been chasing population rather than giving people a reason to stay. This is also reflected in outmigration information. Again, that’s a different post.

Tax Hikes – The Herpes of Politics

A lot of politicians believe that pushing for a tax hike is like getting Herpes. You might be able to manage it, but it will never go away.

This is due in part to politicians focusing on spending rather than what we get for said spending. Most people prefer a visible police presence in their neighborhood. Fully staffed and nearby fire stations bring down response times and, by extension, insurance rates, not to mention that your chance of survival if tragedy strikes is greatly increased.

Understand, we can’t have these things if we don’t have the money to pay for them.

At the same time, almost no one is talking about the conditions that play in to our tax rate, including oversupply, and vacant, often blighted homes. This depresses our ability to get the same level of service for a lower rate. Note, that doesn’t mean your tax bill will go down. Things still cost what they cost. It means the rate would be less.

The reality is, all this fussin’ about “tax rate” is double talk. Everyone with half a brain in their head knows you can’t field the same level of police or fire presence with substantially less money. It ain’t gonna happen.

But “tax rate” is the thing that fits on most political literature. It’s an easy sell. Its harder to explain to people that a series of policies you put into place helped raise home values.

So, in a sound bite driven world, what we end up talking about is what fits on a postage stamp, rather than the big things that actually play in to that “postage stamp” issue.

How Much Is This Gonna Cost Me?

For a homeowner with a median value, increasing the tax rate in Memphis by the proposed amount will cost $70/year, or about $6/mo.

If you’re fortunate enough to have a million dollar home, it will run you about $60/mo.

In both cases, its pocket change relative to the income one must have to own such things.

Of course, the County is most likely going to raise Property tax rates as well. Even still that’s an increase of about $14/mo. Hardly the oppressive increase that we are told it will be.

Tax Rate, Tail Lights, Total Baloney

When you talk to realtors, they give you a three main reasons people move: Crime, Schools, and Space…not necessarily in that order.

I’ve talked to a lot of realtors over the past several years, and none of them have said someone wanted to move out of Memphis because the tax rate is too high. I’m not saying there aren’t some people who do. I’m just saying its a tiny percentage.

Crime and Schools are the top two things that the City and County could actually tackle to keep people from moving (I don’t think they can do much about space) you have to ask yourself what have they done, and to what effect?

Here’s what they’ve done: They’ve inadvertently fed into the notion that neither are solvable problems.

How have they done this? In a couple of ways.

By threatening to reduce funds for public safety, and thereby planting the idea in people’s heads that the city will now become less safe because fewer police will be on the beat. If you’ve ever had your home broken into (and I have) this plants a seed in your mind that will eventually move you to action.

On the schools front, the lack of certainty, some of it real, some manufactured, and some imagined…along with low test scores and a general feeling that all is lost. This comes from leaders who choose to accentuate negatives as a political wedge to ultimately fund schools less in search of lower tax rates.

In both cases, this is about political rhetoric meant to shift blame from political leaders to “bureaucrats” in the various departments, or just any other political leader, rather than seeking real solutions to the County’s top two self-identified problems.

It’s baloney, pure and simple, and it shows a greater commitment to the four-year political cycle than the long-term health of our community…whether they mean to or not.

If we were really committed to addressing the long-term problems our community faces, we would redirect our efforts from the “Tax Rate Tango” to poverty cessation. 26% of everyone in Memphis lives in poverty. Another 36.6% is considered “working poor”. That’s nearly 63% of the total population of the City, or 410,000 people. Enough to fill the Liberty bowl almost 7 times.

High poverty means lower than average wages (about $7000 less than state household median), which translates to lower sales tax collections (less disposable income) and the necessity for lower housing rates (which means lower property values and less revenue per home).

This doesn’t mean the City needs to undertake a huge Welfare program. We already have that for Corporations…they’re called PILOTS. It means we have to do more to support efforts already underway by the Federal, State and County governments, as well as the litany of non-profits that work on these issues. It means we have to stop doing the same thing over and over again expecting different results.

Most of all, it takes a little “outside the box” thinking, and a commitment to correcting this issue.

How does that impact crime and schools? The short answer is poverty, crime, and low educational attainment are all intertwined. Poverty doesn’t cause crime or low educational attainment, but higher poverty rates correlate to them.

I’ll delve deeper into that in my next post.