Thursday, September 25, 2008

How It Could Go Down

As Congress weighs a $700 billion bailout, a fearless local forecast.

Posted By on Thu, Sep 25, 2008 at 4:00 AM

Elected officials are understandably wary of cutting themselves out of the action. They're elected, and the rest of us aren't. Shelby County mayor A C Wharton may be the most popular politician in town, but he couldn't persuade the County Commission this week to get the county out of the Pyramid and fairgrounds for $5 million.

In itself, this is no big deal. The Pyramid is empty, and Bass Pro is used to delay. In fact, yet another "deadline" quietly passed for the city and county to sign a "development agreement" by September 15th. The big question is whether the city and county will cooperate when the stakes are higher than negotiating rights for the Pyramid. When the stakes are, say, a local version of what is happening this week in Washington.

Here's one possible time line for how a recession might turn into something worse:

At the end of this week, the Mid-South Fair closes for the last time in Memphis. On my visits last Friday night and Sunday afternoon, the weather was good but the crowds were small, lines were nonexistent, rides were empty, and barkers said they were getting paid in fives and singles instead of fifties and twenties. A nostalgic, family-friendly institution goes out on a low note. Meanwhile, Liberty Bowl Memorial Stadium looks more forlorn than ever, with a losing team and shrinking fan base.

In Washington, a bailout passes Congress but produces bitter resentment of what Newt Gingrich, of all people, calls a "Wall Street-centric" settlement. Regional banks including Regions and First Horizon get relief, but their stock prices slide back to single-digit territory by the November election. All over Memphis, yard signs begin to appear that say, "WHERE'S MY BAILOUT?"

The election turnout is huge, locally and nationally. The result leaves half the voters more angry and dejected than ever, and George W. Bush is still president for two more months. In Memphis, fresh political corruption indictments set off new charges of racism and further polarize the city.

The Grizzlies open the season by failing to sell-out FedExForum. It is an indicator of bad things to come. By Christmas, attendance falls below 14,800, the basis for the arena financing projections. And by early next year, it is below 10,700, the worst-case scenario, where the financing projections don't work. The remodeled convention center, which has been officially "outed" as being third-rate and inadequate, loses bookings, but the payments on the $100 million expansion still have to be made from tourism taxes.

After a promising Thanksgiving weekend, the holiday shopping season is a dud, and charities see contributions dry up as unemployment rises and bonuses are eliminated at big Memphis companies.

In January, the new president is sworn in, vowing an end to the era of earmarks, putting an end once and for all to MATA's plan for a $500 million light-rail line to the airport. In Nashville, Governor Phil Bredesen announces that state tax collections are down 10 percent, and cities can expect little or no help. In Memphis, mayors Herenton and Wharton break with tradition and start the New Year with a series of joint appearances. They warn of impending calamity and make a fresh pitch for consolidation. Thirty-thousand city, county, and school-system employees oppose it.

In March, the Shelby County Assessor's Office sends out 2009 property appraisals, the first update in four years. The phones at the assessor's office start ringing two minutes later. Thousands of homeowners complain that they can't sell their homes at any price and demand a reduction. Many point out that the closest "comparable" home is a certifiably toxic foreclosure down the street that now belongs to the federal government.

Tax delinquencies rise to an all-time high as more people simply walk away from their homes and mortgages. For the first time in recent history, the value of assessed property in the city and county — the tax base — shrinks. The 2008 budgets look robust by comparison. Council members and commissioners, whose predecessors in the good old days lowered the tax rate as required by law to avoid a reappraisal windfall, are faced with a shortfall. They must decide whether to increase the tax rate just to stay even.

Guess what they do.

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