Sunday, August 21, 2011
Touristotropolis: Bass Pro's Pyramid Deal
Posted by John Branston on Sun, Aug 21, 2011 at 3:23 PM
- O. T. Marshall Architects
They have to do with the timing of the convention center improvements, the development of the Pinch District, the acquisition of property in the Pinch, a $10.4 million annual "surplus" in the downtown Tourism Development Zone fund, a 400-percent growth in that fund in less than ten years, and the amount of money Bass Pro is putting into the deal.
The Shelby County Commission meets Monday to sign off on a $74.9 million deal that would transfer all of the debt as well as some well-stocked tax revenue streams to the city of Memphis. This is part of the widely reported $191 million financing package, which gives the impression that it includes the cost of improvements to the convention center. But it does not. That is Phase 2 of the project, along with a proposed $80 million development of the Pinch District, and is not included in the financing.
A county commission committee voted 6-1 last week to go ahead with the deal. To some members eager to shed all things Memphis, the deal is "a no-brainer." But members were given only an overview of the project and no time to study the financials in detail. The Memphis City Council approved it 12-0 on the basis of recommendations from Mayor A C Wharton, Housing and Community Development Director Robert Lipscomb, and a slide presentation showing how Bass Pro could transform downtown.
That presentation, along with a study by the city's consulting firm RKG Associates, raise some important questions.
In the RKG report, finished in mid-July, Bass Pro's contribution to Pyramid reconstruction is $81.5 million, including a 80-room hotel. The public contribution is $50 million, plus another $25 million for seismic protection. But there was nothing in the council presentation about a Bass Pro contribution other than the rent of $1 million a year or 2 percent of sales.
The RKG report says Bass Pro sales will be about $106 million a year. It says a Tourism Development Zone will capture the 9.25 percent sales tax (less 8 percent of that) for debt service. The estimated debt service from Bass Pro sales taxes is $9 million a year. A "TDZ surplus" of $10.4 million a year is also included as a source of debt service. It is not clear what the surplus comes from.
The TDZ was set up in 1998, specifically for the benefit of the convention center. The Pyramid is considered an ancillary facility even though Wharton and Lipscomb are acting like it is the other way around. But the improvements to the exterior and interior of the convention center don't happen until "Phase 2" of the project, and it is not clear when that occurs. All of the work in Phase 1 is on the Pyramid or the land south of it, including acquisition of the Lone Star property for $15 million. If the main entrance to Bass Pro is on the south side (the Lone Star side) and not the Pinch side (as in the rendering with this blog post), then why would a developer want to invest in the Pinch side without a cleaner connection?
Reports show that the TDZ fund was collecting about $3.3 million in 2002 — the base year to establish the tax increment — and that the fund collected more than $14 million in 2010. How that has happened, particularly during a recession since 2008, is not explained.
The city has not acquired the land in the Pinch District, much of which is vacant or blighted. The RKG report says it will be the future site of a collection of outlet shops. But there is no private developer, and there are physical barriers between the Pyramid and Pinch including a train track and a steep grade change. Nor is there an expressway ramp leading into the Pinch District. The current ramp swings south into downtown.
The TDZ is a huge area stretching from Crump Boulevard to Chelsea to Danny Thomas. It is much bigger than the traditional skyline picture. The rationale for capturing the sales tax revenue is that it would otherwise "go to Nashville" and allows downtown projects to be funded wthout tapping property taxes.
The expansion of the Marriott Hotel is scheduled for 2016. But without work on the convention center and in the Pinch District, why would Marriott expand?
There are probably fewer than a dozen insiders working on the project who know the answer to these questions. And there may not be a single council member or county commission member who knows them, yet they are the ones who have to approve the deal.
Comments (13)
Showing 1-13 of 13
Good piece, John. Somebody needs to keep a close eye on that Tourism Development Zone sales tax. In addition to the state sales tax revenue increase over the base year, it includes the increased revenue from the 2.25 percent local option sales tax, which would be 24.3 percent of the total. If the TDZ did not exist, half of the local option sales tax revenue in the area would go to Memphis city government for general uses and the other half to schools. To the extent that spending in that zone is a shift in retail spending from other parts of Memphis and Shelby County, local government and schools lose revenue. Basically, big events and increased tourism downtown doesn't produce any increase in sales tax revenue for local governments and schools. And unless the sponsoring entities themselves pay for the added costs of police and fire protection, the general property tax payers of the community have to pick up the tab. And property taxes are abated on a great deal of the property downtown. That means that property owners in the rest of the community are paying the costs. Public officials and the advocates of such projects have come up with TDZ's and sales tax rebates as a way of hiding the costs and who is actually paying the costs in certain areas. If certain things deserve to be publicly funded downtown and in other parts of the community, I would much rather see the City Council, County Commission and state legislature stand up and appropriate the money rather than handing it out through the back door.
like
dislikeOk, that's funny, because if you get the rss feed the link for this article was:
http://articles.latimes.com/2011/jul/04/ne…
Could you please crunch the numbers yourself. I hate that one of the biggest symbols of our city will become in effect, a gargantuan bait shop. I don't see how that outcome will end up with a positive economic effect on our city. It would be nicer to see the area become a casino (I would prefer an aquarium) center, but unfortunately I don't believe the bosses in Nashville can see the greater picture. Eventually, the entire Mississippi border of Tennessee will become a casino and the quicker the center of the state realizes this, the better.
Wow, those are some awesome visuals. They look like they were done in Second Life. Can we add some dancing crappies, and maybe a Bill Dance Jesus dropping a spinner bait from on high?
Bass Pro (spelled - Sidney Schlenker II) along with city government only see dollars. They dont have a clue as to what tourist nor locals want when they come to visit and play in Memphis. When tourist come in my place "ESCAPE ALLEY -Sundry-" they say "now this is what we have been looking for. They laugh about BEALE ST. being a Blues version of DISNEY LAND. They dont want acartoon cut-out of the Blues, Rock -N-Roll and the South. They want the real deal. They want Escape Alley, Kudzus, Wild Bills, Earnestine and Hazels, The Arcade, Sun Studio, Goner Records, Shangri La records, The Yea Room, etc. They want MEMPHIS damnit. So give it to them. If we build a fake Memphis they will come but they sure as hell wont come back. Is the city giving tax breaks to these ultra small businesses? No! Should they? YES. Why? Because these small mom am and pop venues are the fabric that continues our roots, our culture, local music, food and Heritage. These places are MEMPHIS. While Bass Pro may look good to the bottom line now it is pushing out the real Memphis. When thats gone there will be nothing left and Bass Pro and Wally World will move on to another town to take the money and run.
P.S.- O.T. Marshall should be fired for calling that Architecture. Whats the O.T. stand for? Obviously Terrible?
I was at the City Council meeting when Lipscomb and Wharton presented this project. Several Council members questioned the urgency without having had a chance to look at the specifics. Fullilove at one point turned to Stickland and said, "I can't believe that I am agreeing with you on this...."
My experience with "phases" in Memphis is that by the second phase, the phase that connects the middle and the end, the other shoe drops....on our heads. And by then, either the project is over budget and more money is needed and "we've gone too far to turn back." Or. Phase two changes, "because circumstances have changed" and it's never what the public wanted, "but there is nothing we can do about it."
I'm not against Bass Pro. I'm against the unethical duping of the public time and time again.
By the way, Lipscomb specifically wanted Berlin on the committee that reports to the Council (no, it won't be in the transcripts. He was pointing to Berlin). That tells me, as the committee is appointed by the Chair(Lowery), that someone a little less "endorsed" should be on that committee. There is nothing wrong with unbaised input. In fact it's usually what our projects are missing.
The bottom line question is: Will Bass Pro, the redeveloped Pyramid and restaurant and other development in the area produce any tax revenue--sales or otherwise--that will go to finance general city government--such as fire and police and other services--and schools?
Thanks Merc, I've been MIA too long, missed you all!
@jcov40
Of course it will produce tax. If nothing else, it will produce State sales tax. State don't play. We might give all kinds of incentives from the City but State won't play that game with the Sales Tax. And the largest portion of school funding comes from State, not Bill and Melinda Gates :) It can't help but help us. Not only producing Sales Tax and Payroll Tax, but JOBS! Wonder the local election has anything to do with the urgency. Wouln't hurt Wharton to show new jobs coming in an election year.
In a Tourism Development Zone, the State of Tennessee does give up any increase in state sales tax revenue. The state money goes to pay the debt costs on the project. The same is true on the local option sales tax. Basically, none of the increased sales tax in the area will go to state or local government general funds. And there is no payroll tax in Tennessee. It may improve the quality of life in the community but it is not going to produce any tax revenue for state and local governments other than revenue to pay the cost of the project. The cost of city services in the area will be paid by the general taxpayers of the city. As I said above, what bothers me is this hidden way of doing things. If it is needed by the community, I would like to see state and local officials stand up and openly appropriate the money to carry it out.
It's my understanding that only a portion of the sales tax goes to directly back into the TDZ. The rest still goes to the state. As well, this is not just a tax on existing residents, but a tax on outside dollars coming into the City/State. Outside dollars helps no matter what. Recycling our own money is not smart business.
As far as payroll tax, I paid someone payroll taxes. In fact, I remember my employees up in arms a few years back because the City Council was considering raising payroll taxes.
Unless something changed that I am unaware. But I do agree with you that it is the "hidden way of doing things" that bothers me too.
jcov40,
You may never come back to this page, but I stand corrected. You were right on the taxes. All go to TDZ and no payroll. Opps.
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