watchdog

Tuesday, September 16, 2008

$600 MILLION FOR A NEW CONVENTION CENTER???

If there ever was a great argument for term limits, Mayor Willie Herenton makes the case. Now after blowing over $100 million for our present convention center ($60 million over budget), he is now talking about $600 million +++ for a new convention center.Guess where he (and unnamed others want it), close to the Peabody Hotel , Beale Street, the new Westin Hotel and the FedEx Arena. Look at the attached map. I have been told that they are talking about the area bounded on the east by S. Danny Thomas, on the north by Union Avenue, on the west by Hernando and on the south by Gayoso. I wonder what or who influenced this location?

First of all regardless of where it is, it makes no financial sense at all. The Mayor and Kevin Kane talk about keeping up with the Jones (read Nashville). They are talking about a $600 million dollar new Nashville convention center which has been proposed but at this point it is still just talk. At least in Davidson County they have a provision in their charter that there will be NO PROPERTY TAX INCREASE WITHOUT VOTER APPROVAL. Naturally we do not have such a provision in either our City or County charter, although I proposed that when I ran for City Council.

This is just a warning to beware of Greeks bearing gifts, or Mayors promising development without risks to your pocketbooks. I have also attached two newspapers articles about similar no risk Tourist Development Zone financial deals in Chattanooga, Knoxville and Sevierville. Have a nice week.


Click here to see where Herenton wants the proposed new $600 million dollar convention center to be located


Click here to read about the Sevierville project. Sevierville has a $39 million dollar operating budget but is on the hook for $180 million in development costs


Click here to read about the downtown development in Chattanooga using TDZ bonds

Thursday, September 11, 2008

YOU HAVE TO ASK YOURSELF WHAT ARE THEY SMOKING DOWN AT CITY HALL?

THE PYRAMID/BASS PRO DEAL , FAIRGROUNDS, ELVIS PRESLEY, HIGHLAND AVE AND NOW $600 MILLION FOR A NEW CONVENTION CENTER!!!

HAS ANYONE PAID ANY ATTENTION TO THE OVER $3 BILLION UNFUNDED OPEB LIABILITY FOR RETIREE HEALTH CARE PROMISES MADE BY THESE POLITICIANS? OUR DEBT AS A PERCENTAGE OF THE LEGAL DEBT LIMIT HAS RISEN FROM 50% IN 1998 TO 75% IN 2007.

We are now seeing a rush of deals being put forward by City Hall and local developers. What they are saying in their sales pitch is that "This building or this area is dead and we can bring it back at no risk to the taxpayers". Is that true?

I want to concentrate on the Pyramid deal as this is the current one that is being promoted by the City and the County.

After reading the Development Agreement, the following is a list of my thoughts on this agreement which need to be addressed before we decide whether to go ahead.

  • We need an accounting of all the current tourist development zone (TDZ) bonds and what portion of the increased income tax stream takes precedence over the Bass Pro deal. I talked to the State of Tennessee Department of Revenue concerning TDZ financing and they said that they start with a base of taxes in the TDZ zones and that only the increases over the base goes to pay the TDZ bonds. The state portion base is increased annually by the average sales tax increase for the whole county (not just the TDZ) and therefore only the tax portion over the average increase goes to pay off the bonds. They pointed to several TDZ deals in Tennessee that had zero increase in the TDZ tax rebate due to their average increase in sales tax receipts not being greater than the county average increase.
  • The next thing that needs to be done is to survey other similar tourist development zone (TDZ) deals around the country that have been in effect for at least five years to compare terms of agreement and to see how the initial promises made in fact turned out such as sales, new tourists, sales taxes, etc. I have attached an article about a similar deal in Texas that was done by a competitor of Bass Pro. Also I have attached a list of Bass Pro and Cabela stores.
  • Herenton and Lipscomb claim in the document that "Under the terms of the Development Agreement, local government would have no financial risk or local government funding in the Pyramid redevelopment project". However they fail to state that the bonds that would be issued in a TDZ project are full faith and credit bonds and that if the additional tax income is not there, then the taxpayers of Memphis and Shelby County are on the line as they are for all the other downtown projects financed by TDZ bonds.
  • Bass Pro gets a large tax credit which means that they will pay less federal income taxes. And yet they are competing with Walmart and other smaller hunting and clothing goods stores in the area that pay property taxes and income taxes. Is that fair? We need to hear from these people.
  • The agreement calls for the City and County to complete a title search and review of the surrounding site as well as those parcels of land which may be beneficial to the success of the project. This raises the question of emminent domain similar to the Kelso case and the prospect of the City and County taking property away from owners by emminent domain.
  • Finally, as in the past, if we decide to go ahead with the deal, we must be assured that we hold our investment at no more than the $30 million plus the remaining debt. I can envision a scenario where we start on front end infrastructure work and invest a lot of money and then they pull out and say the market is not right, goodbye. We need an arrangement that we are protected by a clause that makes Bass Pro guarantee payment for these expenditures if they pull out during the construction period. Our history here in Memphis is to walk into a deal and once we get involved, we have to go forward when unexpected things happen. Look at the past Convention Center debacle.


Click here to read about similar deals in Texas involving Bass Pro and a competitor, Cabela


Click here to see where Bass Pro and Cabela have stores in the United States

Tuesday, September 09, 2008

BASS PRO AND THE PYRAMID! IS IT A GOOD DEAL FOR THE TAXPAYERS?


I have been studying and reading about the Pyramid deal with Bass Pro until I have almost gone cross eyed. Please inform yourself about this deal and the whole area of what I call Stealth financing that is growing in Memphis and the whole country. Is this a good deal for the taxpayers or is it a good deal for Bass Pro and the downtown developers and landowners? Could it be good for all? Here is a link that will take you to the City of Memphis website that shows the proposed development agreement between the City, the County and Bass Pro.


 

http://www.cityofmemphis.org/pdf_forms/082508_PyramidPresentation0001.pdf


 

Also I have attached a copy of the Bass Pro meeting with the County Commission. Pay particular attention to the questions from Mike Ritz and Steve Mulroy who are trying to get answers to the inside workings of this complicated deal. Also look at the testimony of Charles Carpenter, a local attorney and good friend of the Administrations who has gotten a lot of bond work on all these deals and is remembered in connection with MLGW bonds and Larry Thompson. One last thing is an article I have attached talking about TIF (Tax Incremental Financing) deals in Texas involving a competitor of Bass Pro.


 

This whole area of TIF's in Memphis is growing and should be looked at closely. Politicians are selling TIF financing as a no risk way to development, that is, no risk to the taxpayer. In any deal like this you have to ask "Cui Bono", Who Benefits.


 

Clearly Bass Pro benefits. They put up very little money on the front end and they can pull out without paying very much. If the project goes forward, they get huge tax benefits through the New Market Tax Credits thereby paying much less in Federal Income Taxes on profits. The favored developers and landowners downtown benefit by increased traffic and business and possible increases in land value. The favored attorneys benefits through legal business and bond business, like Charles Carpenter.


 

Do the taxpayers benefit? Possibly, but the property does not pay any property taxes. Sales taxes will be used to pay off the bonds and due to the Tourist Development Zone agreements, additional sales taxes will go to pay off other downtown zone bonds. Looking at the latest City of Memphis Comprehensive Annual Financial Report, which I have attached, you will see that sales tax collections that go to the general fund revenues have decreased significantly over the last ten years. This is probably due to the diversion of these tax revenues to cover the downtown and other TIF and TDZ (Tourist Development Zone) projects. We need a complete accounting in one place for all the obligations put on sales taxes in these various TIF and TDZ areas so that we can know what our true bond obligations are and why sales taxes receipts for the general fund are dissapearing.


 

What about the other businesses in Memphis and Shelby County who sell products that are competitive to Bass Pro? They do not have the political clout of a Bass Pro, Target or WalMart and therefore they have to pay property taxes and if they make a profit, they have to pay federal income taxes at the full rate.


Finally, why are we in this situation? It is because of the ill conceived contract that the City and the County signed for the FedEx Arena. That contract made the Pyramid useless and a silver elephant. I remember Mayor Herenton saying that he had to sign the contract because Hoops was to be made responsible for the maintenance and possible losses of the Arena. But if anyone read the contract, they would see that the one of the hookers in that contract was in Section 8, Arena Repairs and Maintenance. Section (a) states that during the term of the agreement, the City and County will be responsible for and, at its cost shall make all Capital Repairs as shown in Exhibit B (Heating and Air Conditioning, roof, etc). In other words, the big ticket items are to be paid by the tax payers, not HOOPS. HOOPS is responsible for (1) making all minor repairs, (2) undertake normal and routine maintenance, (3) provide adequately trained janitorial, maintenance and support staff and keep the Arena in a safe, uncluttered, clean, sanitary and sightly condition and (4) provide security for the Arena Complex 24 hours a day, 365 days a year. In addition the City and County have to pay for all fire insurance policies and other perils. Also HOOPS has a way to get out of the agreement after 10 years if Memphians do not buy enough seats under Section 31, EARLY TERMINATION RELATING TO SHORTFALLS, and the clock is running. Also, of course, the contract did not allow any functions at the Pyramid. Some deal.

I ask that you look over this information and let me have your thoughts. Many of you have written me on other subjects and I am aware that you are a lot smarter than I am and I would appreciate your thoughts and expertise. I will hold your comments confidential unless you say otherwise.



Click here to see the Bass Pro presentation to the County Commissiion

Click here to read an article about TIF financing involving BAss Pro and a competitor in Texas

Click here to see how sales tax collections in Memphis have gone down and property taxes have gone up over the last ten years

Tuesday, September 02, 2008

MAYOR HERENTON, JOB CREATOR


National politicians make promises about job creation during every political cycle. It is usually all talk and hot air. However our local Mayor, WW Herenton, takes this job seriously. With this article I am posting the personnel files from the two most recent Deputy Directors, Tony Elion (Solid Waste) and Yalanda McFagdon (Public Services). Both start at $100,897.68. Then before I could get these two posted, WW announces that his good friend Joseph Lee, late of the MLGW and pumping for over $400,000 from the MLGW in legal fees, has been appointed as another Deputy, this time to the Park Service at $105,000. Also Maura Black Sullivan at the Office of Planning and Development at $98,000. Where will it end?

Take a look at the resumes of Yalanda McFagdon and Tony Elion.

Yalanda McFagdon:

Page 4- She got raised from $72,000 as Executive Director of Second Chance to this $100,000 job. On page 5 you will see that the funding grant for second chance ended. Second chance is a federally funded program intended to give at risk people another chance, a very worthy objective. However, who has ever audited or honestly reviewed the effectiveness of this and the thousands of other similar programs. These programs certainly give the Mayors a great opportunity to employ friends and cronies.

On page 10 see a letter to WW noting that the job title for Yalanda should be changed from WORKSORCE DEVELOPMENT SPECIALIST to SPECIAL PROGRAMS COORDINATOR at a salary increase. Who ever said that job titles are not important. At City Hall, they mean big salary increases.

On page 12 you will see the re-employment form in 2000 after serving 5 months in prison in 1999 for concealing $70,000 in drug-dealing proceeds and interfering with a federal search. Previous to serving time, she was head of Herenton's bodyguard detail.


 

Tony Elion:

His resume is not nearly so colorful as Yalanda's but I do have to credit Yalanda for persisting in her education. Here again, he was involved in protecting the Mayor. Apparently this is the path to promotion. Could it be that they are both potential witnesses to events in our government? Who knows. But protecting the Mayor gets a 5% salary bonus for what could be hazardous duty service. (See page 5).

I can't wait to read the other personnel files from our Directors and Deputy Directors.


 



Click here to see parts of the personnel file of Yalanda McFagdon, your new Deputy Director of Public Services

Click here to see parts of the personnel file of Tony Elion, your new Deputy Director of Solid Waste