watchdog

Friday, July 27, 2007


My name is Joe Saino and I am a candidate for the Memphis City Council, Super District 9, position 2

I was born and raised in Memphis and Sainos have been here since 1856. I went to CBHS for high school and Vanderbilt University where I graduated as an electrical engineer.

I ran a successful manufacturing business here along with my brother for 40 years. I have a wonderful family with four terrific daughters, two great sons in laws and two of the greatest grandchildren in the world. I want them to grow up in the same safe and clean Memphis that I did.

From 1977 to 1983 I was on the board of the Memphis Light Gas and Water Division and was chairman for one year.

Over the last three years as the memphiswatchdog I have become very well informed about City Government, the City Charter and of course the MLGW operations and management. Because of this inside open records information and study I have become very concerned about the future of Memphis.

Just last week we all got our city and county property tax bills. Your city tax rate is up 62% over the last 9 years and your county rate is up 88% over the same period. Inflation is up just 24%. I promise to push for no property tax increase w/o voter approval. Nashville recently passed such an ordinance with a 78% majority.

I have the energy, experience, time and the desire to make real changes in city government. I will not accept any favors from any one and will donate my council salary to MIFA.

I ask for your vote and your support. Go to http://www.memphiswatchdog.org for more information.

Click here to go to the memphiswatchdog.org website for more detailed information on my research on the City of Memphis and the MLGW

Sunday, July 22, 2007

July 23, 2007

THE INCREDIBLE STORY OF THE 17 BOXES OF BEALE STREET DEVELOPMENT CORPORATION FILES HIDDEN AT 701 N MAIN

There was a remarkable story yesterday in the Commercial Appeal entitled Dance club discord written by Marc Perrusquia. In it he revealed a number of facts concerning Kevin Kane, John Elkington, John Ford, Harold Ford Sr., the Tennessee Valley Center for Minority Economic Development, the Memphis Convention and Business Bureau, Club 152 and the Beale Street Development Corporation (BSDC). My head is still spinning as I read the facts and it called to mind something that happened a few years ago. I received a tip that there were 17 boxes of BSDC documents at 701 N. Main in a locked closet at the Housing and Community Development Building. These documents were City records concerning BSDC going back years. I called Sara Hall, then the City Attorney, and told her about them and she said that she could not go down there herself as that would raise questions. Instead she sent Elbert Jefferson, the current city attorney) down there and he found the boxes of documents and brought them to the 3rd floor of City Hall. She called me and told me about the boxes and I went down with Wil Gotten, a retired lawyer, and we spent an afternoon looking through the documents. I made some copies which I have but basically the documents showed that the City made no effort to get the quarterly and annual statements from BSDC and that they made no effort to audit or collect any money from Elkington. They just did not care that BSDC had not paid one cent up to this date. Here is the article about BSDC that I put on my website two years ago.

October 25, 2005

We keep harping on why the City has received not one cent from Beale Street and John Elkington since 1982 when the lease was signed. Where are the quarterly and annual reports and where is the 1992 $265,000 City authorized audit that the Mayor does not think we should see?

Here is what we know to date. Two open records requests have been filed, one by Mr. Will Gotten to Sara Hall, the City Attorney, and one by memphiswatchdog.org to Mr. John Elkington.

Mr. Gotten has heard from Ms. Hall that some of the reports were in the hands of an attorney, Ricky Wilkins and he was out of town. Mr. Saino first heard from Mr. Elkington that he filed all the reports required with the City and that I was free to come down to his office and see the reports even though he said that he was not subject to the open records law. I took him up on his invitation to visit and he said that he needed a few days to get the information from his accountant. Within a few days I got a letter from his attorney which is shown in an attached pdf file refusing my request to see the documents.

There can be no doubt that since Beale has received millions of public dollars, that they are subject to the open records law. Also the City is dragging its feet on responding to Mr. Gotten’s requests. The question is WHY? What are they hiding?

Here is a sample of past statements from articles in the Commercial Appeal concerning Beale Street and Elkington and Keltner (now Performa Entertainment Real Estate, Inc.).

In a 1985 article in the CA, it was reported that some restaurants and shops in the Beale Street Historic District have been unable to repay loans from a special fund set up with public money. Six businesses have received loans totaling $490,000. A seventh loan for $150,000 has been approved for a company that isn’t sure yet what kind of business it will have on Beale Street or who will operate it.

The loan fund is administered by the Tennessee Valley Center for Minority Economic Development which got $1 million in deferral money. Also in a 1985 article it was reported that the $12 million Phase I development is nearing completion.

In 1986 John Willingham said that he will open a World’s Champion Bar-B-Que restaurant on Beale Street. Willingham is now a county commissioner.

In a 1988 article in the CA, here are some of the financial dealings that were listed.

Leader Federal sued the company for defaulting on a $75,000 promissory note. It has been paid off.

Citibank was seeking $369,000 it claims was unpaid on a $1.35 million loan. The suit was still pending at the time of the article.

The Department of Housing and Urban Development helped Elkington get a $2.89 million loan in 1986 for development of Hidden Woods, a 98-acre tract on Covington Pike.

And there were many other actions at that time.

In March of 1992, Herenton hired Ricky Wilkins, attorney Charles Newman and two accounting firms to review Beale Street operations and suggest strategies for its future. In October of 1994 Herenton said that he had no audit to share after the City spent $276,123.00 dollars and 2-1/2 years on audits. Herenton said he was satisfied that nothing was amiss financially. Relations are said to be cordial on both sides now, and Elkington says he informs the mayor directly about the Beale Street plans and operation.

In a 1993 Ca article, the following was stated. “Elkington’s company, Beale Street Management, has a 52 year contract to manage the city owned district and lease space to tenants. The management company is entitled to 10.5% of the gross rental income, 5% leasing commission, a fee to administer the common area maintenance and a portion of the parking revenue. According to the 1992 budget submitted by the management company to the city, those fees amounted to $113,606.
After 19 years, Beale Street manager John Elkington is ready to pay the city its share of profits from clubs, shops and restaurants in the popular downtown entertainment district.
The amount for 2001 could reach $400,000, Elkington said, based on the $240,000 collected so far this year.

Despite the long wait for income from Beale Street, city officials have let Elkington hold onto the dough for six months while matters remain unsettled with the third party owed money - the Beale Street Development Corp.

On Wednesday, General Services deputy director Darrell Eldred said he will be instructing Elkington by letter to put money into an escrow account, where it will wait until BSDC's future is clear. "Funds he has identified as the excess profits from the street will be transferred to that account pending our resolution of the Beale Street Development leadership dispute," Eldred said.

Private developer John Elkington, who sublet the management rights from Beale Street Development Corp., keeps the profits once he pays expenses connected to his company's management of the district. Last year, the profits totaled $131,486.

We demand that the missing reports and the withheld audit be made public and we demand that the City collect the money due the taxpayers of the City of Memphis.



I have attached the IRS 990 reports for TVC and the Memphis Convention and Business Bureau. In briefly looking over these documents I note the following.

• TVC is sitting on $497,000 cash.
• TVC in the latest report (2006) said that their total service cost $5691 to promote and encourage economic development. Only a lousy 5 grand and they have ½ million in the till.
• The Memphis Convention and Business Bureau is sitting on $8.4 million in net assets.
• Kathryn Bowers and Ricky Peete were on the board as of the latest 990 report.



Click here to read the details of the IRS 990 reports for Tennessee Valley Center for Minority Economic Development,the so called non-profit organization involving John Ford and Harold Ford Sr


Click here to see the IRS 990 report on the Memphis Convention and Business Bureau involving Kevin Kane and the millions of our dollars spent on economic development,

Friday, July 20, 2007

July 23, 2007

LOOK WHAT ARRIVED IN THE MAIL THIS WEEK HONEY,TWO PROPERTY TAX BILLS!!! WHEN WILL IT STOP?


Just a short note to ruin your weekend. Last week I got two mailings, one from the City of Memphis dated July 13, 2007 and one from the County dated July 19, 2007. You guessed it, PROPERTY TAX NOTICES. THE City tax is due August 31 and the County tax is due February 29, 2008, over 6 months from now. Hope I don’t lose the bill by then.

Then I went back and check some old bills and here is the result.

My City taxes have gone up 62% from 1999 to 2007 whereas inflation has gone up 23.7%. My County taxes have gone up 88% whereas inflation has gone up 25.6%.

Something is very wrong here. Why cannot the City and the County expenses go up at near the inflation rate? Both the City and the County are out of control.

CONCLUSION: WE NEED A RESOLUTION FOR BOTH THE CITY AND THE COUNTY THAT REAL PROPERTY TAXES CANNOT BE INCREASED WITHOUT THE CONSENT OF THE GOVERNED, THAT IS THE TAXPAYERS. HERE IS THE NEWS STORY.

Tax ballot measure wins
Voters want to take authority from Metro Council, supporter says
By LEE ANN O'NEAL
Staff Writer


Published: Wednesday, 11/08/06
Future property tax rate increases would have to go to the voters under a Metro Nashville referendum on Tuesday's ballot.
Supporters of the ballot measure outnumbered opponents by a strong margin.
"It was very jubilant," ballot measure organizer Ben Cunningham said of the party of supporters gathered at Brown's Diner on Nashville's Blair Boulevard.
"What (voters) are saying is that we want to take some of this authority back from the Metro Council and reserve it for ourselves, for the voters," he said. Cunningham also led the effort by the Tennessee Tax Revolt group to kill a statewide tax on wages in 2001.
Cunningham said supporters' only promotions of the current measure in the days leading up to Tuesday's election were use of informal e-mail reminders and about $2,000 in automated phone calls. No formal committee was organized to oppose the measure.
State Rep. Gary Moore, with the Nashville firefighters union, said he fears the measure would jeopardize public services.
"It doesn't really work that well," Moore said of tax limits imposed in other cities. "It can endanger public safety. It can jeopardize all aspects of government."
Measure supporter Bob Claxton, of Darden Place, said money isn't the way to improve some public services, such as schools. He said he hoped the measure would be approved and serve to restrain government spending.
"I think this is just the beginning," Claxton said. "We need to put the hole in the dam."
The measure would alter the city's founding document, or charter, to require voter approval for any property tax rate increases. Tax bills for individual homeowners could still increase as home values rise. •

Published: Wednesday, 11/08/06


Click here to see what arrived in my mail this past week

Click here to see the petion used in Davison County successfully to put a restraint on the politicians. We could do this in Shelby County but the City Charter does not allow such a petition. Does that tell you something about our politicians and what they think of the taxpayers

Thursday, July 19, 2007

July 19, 2007

JOE SAINO, THE MEMPHIS WATCHDOG, FOR CITY COUNCIL, SUPERDISTRICT 9, POSITION 2

What will Joe Saino do that will have a positive impact on the city of Memphis?

1. The builders of the panama canal said the first thing they had to do was to drain the swamp to get rid of the disease carriers. We need to get rid of inflated programs like the over 200 unauthorized appointed positions in city government and save millions. Also we need to do away with the riverfront development useless construction program, with the Linebarger high commission tax collection program and especially the no bid, private welfare ACS program that the mayor uses to reward his friends and supporters. The result of these changes will be millions in savings.

2. Some of these savings need to be returned to the tax payers in property tax reductions. a large part of the savings need to be used to beef up police programs with high tech cameras and a computer program to pin point high crime areas so that police can be positioned more effectively.

3. We need to utilize the riverfront in a more effective way by leasing land on mud island for restaurants and night clubs facing west so that we can attract people to the beautiful view. Possibly we can put a foot and bicycle bridge from riverside to the south end of the island to make it more easily available. The western view of the river with its river traffic is what will attract people to downtown Memphis.

4. We need to stop or severely cutback busing of our school children in order to save millions from the huge school budget and use this money to teach early reading to preschool children so that when they enter school, they will be better prepared to learn to read, write and do math.

5. We need to design new schools to a standard plan with space requirements cut back to average southern standards and use this same school design which can be computer altered to fit the location but which because of standard design will be at a much lower cost. Reading, writing and arithmetic don’t depend on a school that looks like a palace.

6. Private industry jobs are the most important requirement for our taxpayers and we have been severely restricted by the loss of new businesses due to our high tax rate. This has forced our leaders to give tax abatement through pilots, some $48 million dollars in 2006. We need to get these recipients of tax abatements to start picking up their fair share with strict oversight of the pilot and give the property tax rate for the average residential taxpayer some relief. In addition we need a city charter amendment that will require the approval of the voters for any real property tax increase. This was recently done successfully in Nashville.

Finally, nothing is more important than transparency in government. I call for a change in the city charter to require all rfps (request for proposals), replies to rfps, contracts, purchase orders, related correspondence and selection justification, all professional contract awards with related correspondence, all building projects, related contracts, purchase orders, change orders and correspondence, all salaries, benefits, pension details, land deals and minutes of meetings, all budgets, financial statements and audits to be put on the internet. Only by making open records access easier, can we keep the sunshine on government practices which politicians like to conceal. The current no bid purchase orders given under the ACS contract shield is an example of gross abuse and lack of transparency in bidding and awarding contracts. The fedex arena and the cannon center are other examples of abuse. Only by keeping the sunshine on politicians can we prevent the slime that occurs when something is hidden under a rock.

Two of my heroes are John Lunt and Heidi Shafer. Remember Heidi, she now works for George Flinn. However, back then she came out and opposed the consensus that we ought to build the Fed Ex arena without letting the citizens say yes or no in a referendum as is required by state law for a large project using ad valorem taxes for bonds. Everyone said she could not get the signatures but she did and I helped. When finally it looked like she would get the required signatures, the majority democrat controlled City Council and the majority republican controlled County Commission changed the bonds to revenue bonds, which are still full faith and credit bonds, and denied the citizens a say on the arena.

The other hero is John Lunt. When the democrat/republican controlled city council passed the January 2001 pension resolution giving all elected and appointed officials the right to retire with a full pension and medical retiree benefits after 12 years regardless of age, John Lunt came forward and asked the city council to revoke the resolution. They could not even get a second for the proposal. Then he got a petition going and got 30,000 signatures in 30 days and under this voter pressure they revoked the resolution, but only for future people. Tom Marshall will be eligible for his immediate pension starting after the election.

These two people were able to get citizens to unite against politicians who put their own interests first and foremost. This is what we need to do for this election. Unite with me and send a message to my opponents that the people are sick and tired of race baiting and self serving politicians and want some one who puts the taxpayer first and foremost. The taxpayers are tired of being sheared like sheep every year and want to take back the power and that is what I will do. I have worked for 3 years through open records request to expose the corruption and cronyism that is the basis of the City Council and the Herenton Administration. Put me on the City Council and I will contribute ½ of my salary to MIFA and if you put a new mayor in City Hall I will contribute the other half to MIFA.

TO DONATE TO MY CAMPAIGN FOR HONESTY AND TRANSPARENCY IN GOVERNMENT, GO TO MEMPHISWATCHDOG.ORG AND CLICK ON DONATE NOW OR SEND A CHECK AS SHOWN ON THE WEBSITE.

Click here to read about my campaign and donate or volunteer to help.

Sunday, July 15, 2007

July 16, 2007

PILOTS, POLITICS AND PROPERTY TAXES

The local politicians talk about the need to give PILOTS (payments in lieu of taxes) in order to attract businesses to Memphis and Shelby County. Well the 2006 figures are out and here are the results county by county. You can look for your self at the following state website. Shelby County is #79, Davidson County (Nashville) is # 19, Knox County (Knoxville) is # 47 and Hamilton County is #17. Go to

Click here to go to the list of PILOTS for every county in Tennessee for the year 2006

I have also attached a pdf file for Shelby County itself. Read the names of those that are getting the pilots.

Click here to see who and how much contributors to local politicians are getting in tax abatements, aka PILOTS

All the Tennessee counties’ property tax rates can be seen at the following website.

Click here to see the property tax rates for all the cities and counties in Tennessee

• Shelby County $4.09 Memphis and Shelby Cty $7.4732
• Davidson County $4.04 Nashville and Davidson Cty $4.69
• Knox County $2.69 Knoxville and Knox Cty $5.50
• Hamilton County $2.69 Chattanooga and Hamilton $5.096
• Tipton County $2.85 Covington and Tipton Cty $3.95
• Fayette County $1.74 Piperton and Fayette Cty $2.22

In 2006 Memphis and Shelby County gave $48 million dollars in tax abatements to various companies. Study the list and see the connection between those who contribute to local politicians and those that are getting the tax abatements. Who picks up the slack? You guessed it, the homeowners who are paying the highest tax rate in Tennessee. Davidson County gave $6 million in pilots, Knox county $1 million and Hamilton County $17 million.

What we need to do. We need to drain the swamp and cut the patronage jobs, cut the no bid contracts, cut the professional contracts that the Mayor gives and generally cut the fat so that more money is available to lower property taxes and do the things that the tax payers really want, a lower crime rate, better educational performance, cleaner streets, better job opportunities and open and transparent government.

Here is what I recommend.

Give the voters a chance to vote on changes in the City Charter, preferably by City Council ordinance or by the Charter Commission recommendations to do the following.

• A charter section like the Shelby County charter sections which allow citizen generated referendums like the voters used in 1994 to set term limits on County Commissioners.
• An open records charter amendment requiring election commission reports of donations and expenditures to be submitted electronically in spreadsheet format so that they can be entered into a unified database and published for notification and verification of information. All required election commission documents detailing contributors to and expenditures from all local elected officials needs to be put in an electronic data base so that the public can tell who is contributing to whom and how the contributed money is being spent.
• TERM LIMITS- Prevent elected officials from getting the tenure that gives them the position to sell their influence to developers and other buyers of political influence exhibited by Tennessee Waltz and Main Street Sweep.
• NO SALE OF MLGW WITHOUT VOTER APPROVAL- Because MLGW is piling up cash at the ratepayers expense, politicians want to get their hands on the cash. As of December 31, 2006, MLGW had $306 million balance in current assets minus current liabilities, up from $277 million in one year. The law says that any surplus remaining after establishment of proper reserves, shall be devoted solely to the reduction of rates. Also the board of MLGW should be expanded to seven or more members to include members from the largest Shelby county cities outside Memphis such as Germantown, Collierville and Bartlett, those members to be appointed by the Mayors of those cities.
• THIGHTEN ETHICS RULES- No election official should be able to serve if he benefits from any contract involving City taxpayer money even if he recuses himself from voting on that particular contract or issue.
• PENSION REFORM- the January 2001 pension change has cost millions of dollars to date and will go on costing millions more as these elected and appointed officials retire. Since hardly any of the taxpaying public who work in private industry has a defined benefit pension plan anymore, a defined contribution plan should be instituted in the future for all newly hired public employees.
• OPEN RECORDS- The following should be put on the internet promptly. All RFPs (Request for Proposals), replies to RFPs, contracts, purchase orders, related correspondence and selection justification. All professional contract awards with related correspondence. All building projects, related contracts, purchase orders, change orders and correspondence e.g. the FedEx Arena and the Cannon Center and school projects. All salaries, benefits, pension details, land deals and minutes of meetings. All budgets, financial statements and audits. Only by making open records access easier, can we keep the sunshine on government practices which politicians like to conceal. The current no bid purchase orders given under the ACS contract shield is an example of gross abuse and lack of transparency in bidding and awarding contracts.
• APPOINTEES- There are over 400 appointees whereas the charter, according to Sara Hall’s reading, only allows about 110. This needs to be defined and limited to much less. The January 2001 pension resolution allowing elected and appointed officials to collect pensions and health benefits after only 12 years regardless of age has already cost millions and has the potential to cost $60 million if all of the current eligible elected and appointed people retire under that provision.
• RESTRICT ELECTED OFFICIALS FROM VOTING MEMBERSHIP ON CITY AND COUNTY BOARDS AND COMMISSIONS- This is where the influence peddling starts and needs to be stopped.
• CONTRACTING AUTHORITY- Prohibit the Mayor, any Mayor, from signing any contract unless it has been approved and funded by the City Council.
• Reinstate a separate non political Park Commission as it was previously constituted before the City Council dissolved it to its detriment.

This can be done and passed if only the new City Council or the Charter Commission has the courage and resolve to propose it for the voters. If we can elect people to the City Council who have the taxpayers interest at heart rather than their own self interest, they may be forced to put these items on the ballot and let the voters decide.

Wednesday, July 11, 2007

July 12, 2007

WHY THE NETWORX CONCEPT FAILED IN MEMPHIS BUT WORKS NEARLY EVERYWHERE ELSE. THE REASON. POLITICS AND POLITICIANS

Watchdog has been doing some research on Networx and here are my thoughts.

Memphis Networx -- Chronology of Events and Impetus for Concept

Origins 1997-98

Legislation was passed by the U S Congress to begin deregulating electric utilities in a manner similar to the way natural gas utilities were deregulated in the late 70’s / early 80’s. MLGW along with electric utilities across the country began to look for ways to bring more value to their customers and communities. One idea was to utilize existing infrastructure and know how to provide communication services of various sorts to the communities served.

At the same time, the FCC commissioned a study which reported that certain U. S. citizens were being underserved by existing communications companies. These citizens were primarily the rural and the inner city urban poor. The FCC issues guidelines suggesting that the states encourage competition to existing communication companies.

Other studies compared various U.S. cities with respect to high speed high capacity data transfer -- broadband communication services. The City of Memphis was considered a Tier 3 city and was not standing up very well in comparison to not only the large cities such as New York, Chicago, Dallas, and Atlanta -- but also to smaller cities such as Columbus, Ohio, Palo Alto, Ca, etc.

This issue was discussed by MLGW executives during planning sessions during this period and noted as an issue worth more review. Also, changes were made in State and Federal law allowing Electric utilities to enter the communication business.

Catalyst for Action 1998

One of MLGW”s construction contractors, A&L Underground and its principal owner, Alex Lowe, had taken notice of the same issues and proposed that MLGW and A&L look jointly at developing a high speed communication network for Memphis and Shelby County. MLGW executives noted that though they had interest, any such arrangement must be subjected to a competitive selection process. MLGW also noted that a reasonable business plan must be in place before MLGW could go forward to get necessary approvals. A&L asked to do a preliminary analysis and business plan development at A&L’s cost, but with access to MLGW’s staff and facilities data to conduct the study. MLGW agreed subject to the requirement for a competitive proposal if MLGW were to go forward and allowing other potential partners the same time and access during that competitive process.

The concept study and business plan development were done by Arthur D. Little & Assoc. and did indicate the potential for a successful business. Requests for proposals were issued, 8-10 responses were received, three were reviewed in detail, and the A&L proposal was accepted as being the best overall proposal, based largely on the in depth study done by Arthur D Little. Most of the other responses were very conceptual in nature even though time was allowed in the proposal process for a more in depth analysis.


Organization and Approval Process 1999-2001

After selection of A&L Underground as the preferred partner, much of 1999 was spent developing a more detailed business plan, agreeing upon an appropriate structure for an organization with partners with different investing objectives, different tax concerns, and public vs. private oversight guidelines. The selected structure was a Limited Liability Corporation ”LLC” with an operating agreement which included clauses which described trigger points and courses of action for either party to exit the agreement.

The MLGW approved the proposal and appropriated $20 million for investment in August, 1999. Members of the board at that time were Netters, Graves, Jalinek, Franketta Guinn and Olin Morris. The City council approved the project as part of the budget process in late 1999. John Bobango who served as Chairman of the Utility committee was provided an in depth briefing and other members of the council were briefed as their interest dictated.

Application was made to the Tennessee Regulatory Authority in November, 1999. An approval process which should have taken two months was drawn out for approximately 18 months because of intense opposition by Time Warner. MLGW and A&L Underground spent in excess of $2 million on legal fees and associated costs which should never have been needed. Ricky Wilkins was the attorney for networx). Time Warner also applied intense political pressure locally, in Nashville and in Washington.

At approximately the same time, a group of prominent Memphis businessmen formed a group know as the Memphis Angels. Their objectives were to make investments with the potential for high returns, but also of benefit to the greater Memphis community. The group included: Frederick W. Smith, Robert B. Blow, Thomas M. Garrott, J. R. Hyde III, William B. Dunavant, and Willard Sparks. MLGW and A&L had already agreed that a strong approach would be made to include minority investors. A group of minority investors formed a partnership called Memphis Broadband and joined the Memphis Angels to buy out the A&L Underground position in Memphis Networx. They included Archie Willis III, Luke Yancey III and Bridget Chisholm, Gloria J. Thomas, Fred Jones, Jr, George M. Jones, Bennie Marshall, Gilbert I Noble, Alvin & Carla Ray, Dr. Sandra Reed, Anthony Tate, Darrell K. Thomas, Jesse H. Turner, Jr., Dr. Phillip & Ritchie Bowden, Tyrone Burroughs, Elliot Perry, Charles L. Ewing, Sr., Dr. Lovelace Gipson, Herbert Hillard, Dr. B. L. Banks and Lee Jackson and a number of other investors amounting to about $1.1 million dollars (approximately 22@$50,000+ each). The operating agreement was again structured to recognize the different objectives of the parties and options for exiting the arrangement.

The business plan was refined as well with input from McKinsey and Company. Memphis Networx had been seen as a common carrier or provider of “wholesale” service rather than a retail provider. Related offerings such as “off site data backup” were added.
The new partners agreed to the original objectives of serving the entire county rather than just downtown and the Poplar the business corridor. There were also provisions for a portion of the profit to go to providing expanded communication service to underserved parts of the community.

With the involvement of the Memphis Angels, the approval process moved forward with approval in mid 2001.


Business Start-up 2001-03

Construction of the network began in September, 2001. The 100 mile plus loop was completed on time and under budget. Customers began to be added in late 2002. The role and public statements by political leaders such as Mayor Herenton, Ricky Peete, and Joe Brown was the real obstacle to finalizing sales. Joe Brown was persuaded by Time Warner. John Farris was a lawyer for Time Warner and lobbyist. John Farris is the son of Bill Farris who was head of the state democrat party. John Farris was active in the democrat party for a time and the Farris family made a lot of money off cable in Memphis. He was with Time Warner. Dean Dayo of Time Warner also opposed networx. The Tennessee Regulatory Authority chairman was Sara Kyle, Senator Jim Kyle’s wife. Though Mayor Herenton had written a letter supporting the project and the Council unanimously approved the project, critical statements, probably motivated by a competitor, causes the loss of many customers and causing greater effort and business concessions to land others. This political rhetoric also hindered efforts to add other investors. In spite of these obstacles, customers included UT Medical Group, Allenberg Cotton, Enterprise National Bank, Managed Hosting Solutions, Xspedius Communications, Infutero/Informed Medical Networks, and Transnetyx. The Memphis Networx system was the only communication system to withstand the windstorm of 2003 (Hurricane Elvis) without interruption.

In 2003, MLGW sought and the Board and Council approved an additional $12 million in investment Memphis Networx on the part of MLGW. Networx had initially been projected to become “cash flow positive” in late 2004/early 2005. Political opposition had now delayed these projections to late 2005/early 2006.

Recent Developments 2004-07

Little is know about Memphis Networx since Joseph Lee became President and CEO of MLGW. Though the President of MLGW was designated as a board member of Networx and though Lee was quoted as expressing support and enthusiasm for Networx, it appears he never participated in Board meetings and did not manage the MLGW investment at all. There are reports that CEO Mark Ivie was forced out and that the sales force was drastically reduced. In spite of this, Networx was reported to be cash flow positive, but not generating enough profits to grow with future needs. The person in charge at Memphis Networx is reported to be from Colorado, the location of the firm formed a few months ago which was selected and recently approved by the MLGW Board as successful bidder for Networx.

Questions

Prior to 2004, all operating agreements between private investors and MLGW included at least three options in the event either party wanted to sell. The options for MLGW (either party) included: accepting the new partner, agreeing to sell, purchasing the other parties interests.

1. What are the provisions of the current operating agreement? When and by whom was it approved?

2. Why was there no public discussion of the options available to MLGW rather than sell for cents on the dollar? Was there private discussion between the parties?

3. Why did MLGW representatives on the Board allow the sales force to be decimated thus essentially assuring failure?

4. Why and how was Mark Ivie forced out? Is there any prior relationship between the current CEO at Networx and the successful bidder?

5. Were Joseph Lee and Odell Horton active on the Board of Memphis Networx? Is Ricky Wilkins involved in the sales negotiations or contractual documents? Is Reginald French involved with the purchasing entity in any manner?

6. Why are the 22 minority investors so quiet and not objecting to this forced sale. Are they somehow involved in the deal? Have they been promised something by the new buyers?


Other Tennessees Communities

Laws were changed in Tennessee in the late 90’s to allow Municipal utilities such as MLGW to enter the communications business. The Chattanooga Electric Power Board offers full telephone service in addition to Broadband and internet service. Covington Electric offers cable service. Morristown offers a rage of communication services. The difference between these communities and Memphis -- stable knowledgeable management and ethical political leaders, even if some opposed the initial effort.

Many utilities are already looking at the next stage of leveraged assets -- carrying communication services over electric power line BPL or Broadband over Power Lines. Will Memphis be left behind?

Of Special Note

Legislative/Regulatory
1. Public Power Provides Community Broadband Services

More than 2,000 communities across the country have created public power systems-not-for-profit electric utilities that are owned by the communities and the people they serve. Public power systems share a common purpose-to provide adequate, reliable service at a reasonable price. They are locally owned and operated, giving citizens a direct voice in utility decisions through public meetings, the ballot box, and open policy board meetings. Across the country, not-for-profit utilities have an established track record of delivering affordable services. Nearly 500 of them have already celebrated 100 years in business, with 70 percent of all public power systems serving communities of less than 10,000 people.

Along with supplying electric power, public power systems build and maintain advanced, fiber optic communication networks. They rely on sophisticated networks to monitor their electric systems and generation plants, and to provide voice and high-speed data communications between non-contiguous facilities.

Numerous public power systems have leveraged these communication assets to provide broadband network services to local businesses and households. This is a natural extension of the utilities' role for the community in maintaining and operating communication infrastructure. With a skilled and mobile workforce, public power systems can construct, maintain, and operate a complex communication system. They have 24/7 call and monitoring centers, professional customer service departments, as well as an existing relationship with the customer.

The minority investors have been promised something by the new buyers.

Mlgw has three options.

Agree to sell.

Buy out other investors.

Enter into an agreement to accept the new people as a partner.

Here is some research on the networx buyers.

Did some research....

The company that is looking to buy Memphis Networx, Communications
Infrastructure Inc is co-founded by a guy named John Scarano. He is a
former executive of ICG Communications a company that has been in bankruptcy
and was at near death at the time it was purchased by Level 3
Communications. (sound familiar?)

Information on ICG Communications.

I did a search on ICG (Level 3) at the Denver Post and I think that Level 3
bought it and laid off everyone immediately after.

Here is the SEC link for John Sacrano at ICG.

When I checked the Denver secretary of state it showed that CII has only
been in business for seven months. (see attached).

The timeline goes like this:

In May 2006, ICG is purchased by Level 3 Communications and is immediately
downsized to almost non-existence. John Scarano, with ICG, (and probably
other executives) start Communications Infrastructure Inc in November of
2006 and make a bid on Memphis Networx in ? 2007.

I wonder if CII was put together for the sole purpose of buying Networx and
who is on the board of directors? They may not be new to the game but I can assure the Company is.

Saturday, July 07, 2007

July 9, 2007

WHAT WILLIE AND THE CITY COUNCIL DON’T WANT YOU TO KNOW BEFORE THE ELECTION

Politicians love to hide the ball from the electorate. But there is no hiding this ball which is a huge one the size of a hot air balloon, filled with politician doubletalk.

This is the GASB 43/45 government accounting requirement to report the unfunded liability of retiree medical and life insurance liability. The county has already reported that it would mean a 22 to 24 cent property tax increase to fund this requirement. The MLGW has reported a $55 million dollar annual cost and they have in the past wisely put aside $56 million in a trust fund for this purpose.

The City of Memphis has not shown any figure in their 2007 annual budget. Obviously they want to put off this bad news until after the October election. This is what politicians do best. They put off any bad news until the future when they will be out of office and receiving their pension checks and health care benefits in a condo in Florida. What will happen is that they must show this unfunded liability in their 2007 financial statement which will not come out until after the election. If they do not put in money to meet this unfunded liability, their financial credit rating will fall. This type of unfunded liability is what bankrupted many major American Corporations, promises to retirees not backed up with money.

I have attached the PriceWaterhouseCoopers report on the City of Memphis situation. It discusses various scenarios including cutting retiree benefits to lower the cost.



Click here to read the PriceWaterhouseCoopers report on the City of Memphis situation. It discusses various scenarios including cutting retiree benefits to lower the cost

Tuesday, July 03, 2007

July 3, 2007

THE REAL COST OF INEXPERIENCE AND CRONYISM

Reading the Commercial Appeal article this morning about the loss in the gas Division, I wonder again at the competence of the City Administration, the City Council, the MLGW board and the top executives at the MLGW. I do not criticize the rank and file of the MLGW as they continue to do a good job in their day to day work of keeping the lights on and delivering the gas and water.

What really irks me is the barefaced lies to the media during the past year! If you recall, several times, they blamed the entire situation on "volume issues". Watchdog and friends have reiterated to you, and everybody on God's green earth, that the problems in the Gas Division are due to a lack of expertise in purchasing and a lack of integrity, and professionalism, in the financial area. We lay the blame on Jeanes & McCullough almost as much as purchasing ... because of their reluctance, or inability, to decipher and honestly report on what was actually happening. Watchdog and friends knew ... and, we were "outsiders"! Their Board didn't know as much as we did, about the gas problem!

Even, using MLGW's questionable internal "11 month numbers" in 2005 & 2006, and a monthly comparison to the Henry Hub prices vs what was billed to ratepayers ... we came to the conclusion, lonnnnnnng ago, they made some very bad decisions regarding gas futures and were paying well in excess of any spot market prices - costing the ratepayers & the MLGW bottom line mega $$millions$$. They finally admitted this today in the article and it is shown in the audited financial report.

Oh and another thing!! The statement by Jeanes that they saved rate payers $30 million in 2005 is baloney. Look at the attached figures and you will see that saying they "saved" $30MM is stupid! That was what they were supposed to do. They are saying, during the period immediately following Katrina they would have spent $30MM more if they hadn't hedged. Well, they were supposed to react and do what they did ... That's not saving anyone anything. That is their job. But then they went long on gas prices and really cost the rate payers in 2006/2007.

What will happen next is this. During the upcoming winter season (AFTER THE ELECTION), they will raise gas rates to recoup the $36 million that they lost on the futures contracts. Hold on to your hats for your upcoming winter gas bills.



Click here to read the read the real facts about the mess at the MLGW in the gas division

Sunday, July 01, 2007

PLATFORM FOR MAYORAL CANDIDATES

July 2, 2007

I like John Willingham and by chance I met him recently at Kinko. He gave me a copy of his platform on which he is running for Mayor. What a great list of ideas. I wish all the candidates for Mayor would publish their specific platforms instead of just the normal GOD APPOINTED ME, VOTE FOR CHANGE, HONESTY, INTEGRITY, LEADERSHIP, ETC.

The voters need to know if the candidates have any real ideas for meaningful change. Look at what he proposes.

Immediate Actions
• Audits of City of Memphis and MLG&W
• Recall Our City’s Tax Debt Collection from Linebarger and place same with Bob Patterson and save $5 million a year of tax payers money
• Properly fund Police & Firefighters so they can fight Crime in the streets and gangsters in our schools
• Appoint Bill Crawford as president of MLG&W to restructure operation and reduce utility bills

In addition, he would he would offer resolutions to the City Council to
• Set Term limits as 2 terms for the Mayor and City Council members
• Reduce Mayor’s Unlimited Contract Authority to $75,000
• Increase MLG&W board of directors from 5 to 9 with citizens electing 4 board members
• Citizens would elect the Director of Police, Fire and the City Treasurer
• Limit Mayor’s patronage appointment authority to 80 positions as opposed to 300 at present
• Call for 18 month Pilot Moratorium
• Save Mid-South Fair Grounds
• Make the Empty Pyramid a priority by reissuing an RFP for open proposals
• Convert Sears Tower on Cleveland to a Tech School for Gifted and Creative students
• Public School Architecture to be standardized to save money over the costly schools being built now and in the past which has caused such a huge public debt
• Reinstate Neighborhood schools to reduce cost of busing
• The Pidgeon Properties, 4000 acres should be developed, leased or sold by the City for an Industrial Park to create new jobs
• All Bond Issues would be publicly offered and bids opened publicly as opposed to the special deals now where friend of the Mayor benefit

I would add several more.
• Change the City Charter to state the following. Require voter approval for any property tax rate increases. Tax bills for individual homeowners could still increase as home values rise.
• PENSION REFORM- the January 2001 pension change has cost millions of dollars to date and will go on costing millions more as these elected and appointed officials retire. Since hardly any of the taxpaying public has a defined benefit pension plan anymore, a defined contribution plan should be instituted in the future for all newly hired public employees.
• OPEN RECORDS- Only by putting all important contract bids, purchase orders, personnel salaries and benefits on the internet and by making open records access easier, can we keep the sunshine on government practices which politicians like to conceal. The current no bid purchase orders given under the ACS contract shield is an example of gross abuse and lack of transparency in bidding and awarding contracts.
• Require all local political candidates to publish their required election commission documents concerning contributions and expenditures in electronic spreadsheet format so that a data base could be made to reveal who and how much they contribute to each candidates.
John Willingham may not win, but he has earned my respect as a candidate who is honest and is not afraid to state his platform for positive change. The other candidates should do likewise.