Wednesday, March 16, 2011

A Bodacious Tax Grab

How taxes are funneled to the Fairgrounds, the Pyramid, and parking.

Posted By on Wed, Mar 16, 2011 at 1:03 PM

You have to be a code-breaker to understand economic development in Memphis.

It's a world of TIFs, PILOTs, CRAs, TDZs, CDCs, and HCD that makes high finance, the IRS code, or special school districts seem clear and reasonable. And that's the point. You, reader, are not supposed to understand this stuff. Because if you did you might get upset at how your taxes are funneled into various pet projects of dubious merit and jumbo price tags.

(For the record, the acronyms stand for tax-increment financing, payment-in-lieu-of-taxes, community redevelopment agency, tourism development zone, community development corporation, and the Memphis Division of Housing and Community Development.)

Consider the Fairgrounds, home of Liberty Bowl Memorial Stadium, Tiger Lane, the future Kroc Center, the shuttered Mid-South Coliseum, and several acres of parking lots and fields.

Under a plan being developed by HCD director Robert Lipscomb, the Fairgrounds will soak up millions more dollars in taxes from Midtown residents and businesses. The method is a TIF. Future tax revenues above a baseline amount within the TIF district would be used to back bonds to redevelop the Fairgrounds. In addition, part of the sales taxes generated by the new development goes to the city instead of state coffers.

The interesting thing about this TIF district: the boundaries. The proposed district is a chunk of Midtown and East Memphis bordered by North Parkway, Southern Avenue, Belvedere Boulevard on the west, and Goodwyn Street and Memphis Country Club on the east. On a map of Memphis, this is the donut hole. It includes the Cooper-Young district, Overton Square, Playhouse on the Square, miles of retail stores on commercial corridors Poplar Avenue and Union Avenue, the proposed Broad Avenue arts district, and parts of Central Gardens, the Evergreen Historic District, and Chickasaw Gardens.

Lipscomb told me the "Fairgrounds TIF" would also pay for improvements to Overton Park, Overton Square, the Lick Creek drainage basin, and maybe a new parking garage. An update on the project was on the City Council agenda after our deadlines.

Here are a few potential sources of the "tax increment": a homeowner in Chickasaw Gardens who builds an addition that increases property value; the future CVS pharmacy at the site of the Union Avenue United Methodist Church; a new business on Poplar or Union; a new art supply store in Cooper-Young. At a time when budgets are being cut and Memphis is losing population and tax base, a TIF is one way of funding big projects without a politically unpopular tax increase.

One reason Memphis has the highest property taxes in Tennessee is the popularity of TIFs, TDZs, and PILOTs, which are dispensed like green beer on St. Patrick's Day. They support fiefdoms that gobble up tax money that might otherwise pay for schools and police officers.

The model for economic development by acronym is downtown. TIFs and TDZs support FedExForum, the convention center, Uptown and the proposed redevelopment of the Pyramid, Pinch District, and the area south of Beale Street that is sometimes called Triangle Noir. Agencies including the Riverfront Development Corporation (RDC), Center City Commission (CCC), and Memphis Convention and Visitors Bureau (CVB) jockey for influence and funding for special projects.

The key player is Lipscomb. For developers, architects, philanthropists, bond underwriters, and consultants, he is the man to see. He has served under mayors Willie Herenton and A C Wharton for more than 20 years, with an interlude at LeMoyne-Owen College, his alma mater. He wears two hats and draws two salaries as head of HCD and the Memphis Housing Authority (MHA), which oversees redevelopments of housing projects such as Uptown, Legends Park, and College Park. His influence extends from Whitehaven and Graceland to Soulsville to the Pyramid to the Fairgrounds and Overton Square.

During the debate over merger of the city and county school systems, we heard a lot about the implications of a special county school district and suburban school systems. With taxing authority, they might somehow, some day, some way, stop paying county taxes to support all public schools and instead support only the schools outside the city of Memphis.

If you don't have taxing authority, a guaranteed tax revenue stream will do just as well. Maybe even better in a budget crisis. Memphis City Schools and the code-breakers who work for and with the acronym agencies figured this out a long time ago.

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