watchdog

Friday, October 31, 2008

Where does tax money come from?

My brother and I ran a manufacturing business for 40 years here in Memphis. We made and sold industrial doors, fire doors and electronic door operators. In most years we made a profit, we employed a lot of people and the company and our employees paid local, state and federal taxes.

I hear people complain about the current situation. They say that the government should intervene and should control and raise taxes on greedy businesses. I have asked them a simple question. Where does tax money come from? They say that is simple. Part of my salary goes for taxes, or part of my interest or dividends on investments goes for taxes. But I say if you are a government employee (fireman, policeman, public hospital employee, etc.) your salary comes from the real taxpayers as you produce no profit. (That is not to say that these jobs are not important because they are).

The point here is that the fountain of all tax money is a for "profit business" that hopefully produces a profit and pays salaries, benefits, dividends and interest. Examples of real businesses are chemical companies, oil companies, manufacturing companies, mining companies, aircraft companies, farmers, home builders, software companies, even banks and the like. An example of a non producing business is the gambling and the lottery business which produce nothing and is really a transfer tax from the dumb to the smart.

Now we have politicians who want to raise taxes on business or give greater power to unions or give greater sway to trial lawyers which will hurt the source of all tax money, the golden fountain of business profits. There is nothing wrong with unions as long as they realize that their very existence depends on the health and profitability of the company they work for. You need look no further than the auto companies to see what happens when unions overreach. Trial lawyers have destroyed more businesses than any other group in our history.

I ask that voters step back and look at your choices and they are not good. We have probably the worst group of politicians (local, state and national) to pick from that I can remember in my over 70 years here in Memphis. We need to replace the whole lot with people of honor who put country first. Pray for America but also take some action. “For profit businesses” are the real wellspring of tax money. Kill that source and we have nothing.

DO YOU KNOW WHAT A TIF IS?

With all the financial turmoil in our country and our city, I have been investigating the various Tax Incremental Financing (TIF) deals in Memphis and Shelby County. What are our financial obligations and are the taxpayers liable for the bonds issued under the various TIF deals?

I have found that it is very difficult to get this information but I am making some progress. I have found that from July 1, 2007 to June 30 2008 the state of Tennessee returned to Memphis $1,050,683.25 for the FedEX Arena, $276,489.94 for the Red Birds and $2,373,742.90 for the Uptown Development. What we do not know is the amount of bond payments and if these required payments are being met. For instance the required interest and principal payments for the Arena for 2008 is $8.07 million as shown on the attached Memphis and Shelby County Sports Authority audit and financial statement.

What is a TIF? The politicians claim that it is a no risk way to develop an area or a building (arena) or a convention center. We have four that I have identified and they are the FedEx Arena, the Redbird stadium, the downtown development zone and the Highland area. The FedEx Arena has several sources of money to pay these bonds. They are the seat rental fee at $1.15 per seat, the state and local sales tax (except the .5% designated for local education) paid on sale of admissions, sale of concessions and sale of NBA franchise goods and products, the car rental tax, the city wide hotel/motel tax except that that is dedicated until 2016 for the Cook Convention Center, the county-wide hotel motel tax except that it is dedicated for the Cook Convention Center, the Pyramid and the Convention and Visitors Bureau and finally $2.5 million per year of your MLGW payments from the Water Division.


We need a full and transparent accounting of all these financial obligations, especially in this difficult period where sales tax and property tax revenues seem headed in a downward spiral.


Click here to see the latest financial statement for the FedEx arena

JOE SAINO RECOMMENDATIONS ON CHARTER AMENDMENTS

As usual the Commercial Appeal is mostly wrong. Many friends have asked me about these charter proposals and here are my thoughts and what I am voting for and against and the reasons. Also there is a huge question which is going unanswered. Charter Commission Referendum No. 4 calls for the suspension with pay for an elected or appointed official. Charter Commission No. 6 talks about filling a vacancy in the Mayor’s office. Suppose the Mayor is indicted. The City Council Chairman takes over and becomes the Mayor Pro-Tem and can serve for up to 180 days or until the next general election at which time a new Mayor could be elected even if the indictment has not been resolved. Interesting possibility.



County Commission Ordinance No. 364. YES as this is the best we can get and I do not want the Mayor appointing any of these positions as the voters should decide, not politicians.

County Commission Ordinance No. 365. YES as the County Commission wanted more than two terms for themselves even though the voters years ago voted for two four year term limits. Because they are mad that their attempt to get more than two terms failed, they are proposing only two terms for these five formerly constitutional officers. Vote yes because term limits for everyone is a good thing in this new American era of corrupt politicians.

City Council Ordinance No. 5232 Vote Yes.

City Council Ordinance No. 5265 Vote NO as it is ridiculous to require city officials to live within the city. They should be able to live where they want in order to get the best people to take these jobs.

Charter Commission Referendum No. 1 Vote YES as this is term limits. The Commercial Appeal brings out the old argument that the voters can vote out incompetent politicians. Everyone knows better as it is very difficult to vote out an incumbent. It takes them 8 years to learn how to steal and then we need to turn them out. The prime example for term limits resides at City Hall.

Charter Commission Referendum No. 2 Vote NO as the argument is that we need experienced politicians in these positions. Thirteen new City Council members at one time would be better than six incumbents and seven new people. Also this would allow the first group of politicians to get 11 years in office rather than 8 years as the first three years would not count towards term limits if term limits passes which I hope and pray it will.

Charter Commission Referendum No. 3 Vote YES on no sale of MLGW without voter approval.

Charter Commission Referendum No. 4 Vote YES on suspension, with pay, for appointed or elected officials who are indicted.

Charter Commission Referendum No. 5 Vote YES on instant runoffs. It is not complicated and it saves money and it corrects the situation where you get a big vote at the first election and a small vote at the runoff.

Charter Commission Referendum No. 6 Vote YES and hope that the Mayor’s office becomes vacant.

Thursday, October 02, 2008

MORE NONSENSE FROM CITY HALL AND DOWNTOWN

The basic question is do we need a new convention center? Recently there was a puff piece written by Kevin Kane, CEO of the Memphis Convention and Visitors Bureau, "If they build it, they'll definitely come here." Mr. Kane makes over $250,000 in salary as head of the bureau. In making the case for a new $600 million dollar convention center, he points out the following. 1) No property taxes or any other taxes on local residents were used for the project completed in 2003 to expand the Cook Convention Center. He says that this expansion has generated over $200 million in new business in five years. Yet when you look at the total sales tax income for the City of Memphis from 1999 to 2007 as a percentage of General Fund Revenue for the City of Memphis, it is flat at 12%. Moreover, when you look at local sales taxes over the same ten year period, the percentage of general fund revenue has gone down from 26% to 19%. However, there has been one increase in tax revenue to the city of Memphis. Unfortunately, that is property taxes which as a percentage of General Fund Revenue have gone from 28% to 38%.


In order to further check on the facts on the convention center, I obtained a copy of the Memphis Cook Convention Center Financial Statement dated June 30, 2007 which is attached. It was not easy to get this document even though it states in the latest 2007 Comprehensive Annual Financial Report for the City of Memphis and for Shelby County that the statement is available at 225 N. Main. It was not available and I finally had to get it from a friend who had some influence.


In going through the statement I noted that they exceeded the budgeted event days, attendance and rental revenue by a considerable amount. However, in spite of exceeding the budget figures, they managed to lose $3.5 million dollars. The interesting fact on the financial statement is that the City of Memphis and Shelby County governments contributed $3.2 million dollars to cover the loss. I have to wonder if Mr. Kane forgot about this contribution when he stated in his article that the Cook Convention Center is not costing the taxpayers any money.


Any revenue projections coming from CEOs of convention centers or consultants who have an interest in seeing a project go forward have to be taken with a large portion of salt as I have never seen a consultant with a negative report or a convention center CEO who did not want to expand his operation, regardless of the cost to the taxpayers.


Click here to see the convention center financial statement