Fly on the Wall

Look At Me!
“Normally I don’t have a problem with cameras, but these are turned the wrong way.” – a quip from city council member Brent Taylor at a council hearing last week, where all attention focused on Mayor Herenton’s announcement of the city’s victory over would-be incorporators. Unfortunately for Taylor, he was hemmed in behind the camera crews and was unable to get involved in the ensuing photo-fest.

Bad Role Model
It seems that city leaders are always looking for a model for downtown development, whether it be St. Louis or Nashville or wherever. Well, why not Beirut?
“If Memphis officials think they have a daunting task in revitalizing Downtown, all they have to do is take a look at the effort being undertaken by Lebanon to rebuild the war-ravaged central business district of Beirut.” So began a recent item in the Memphis Business Journal about a Lebanese real estate developer meeting with local officials to discuss what Beirut and Memphis can learn from each other about urban redevelopment. The headline read “Downtown Is Cakewalk Compared to Beirut,” and we should hope so since, as MBJ details, “Beirut was devastated by a 17-year war, which ended in 1990 and all but ruined its central business district. More than 1,000 buildings were destroyed during the war, and the once-thriving area was literally reduced to a garbage dump.”
It probably doesn’t even have a trolley.

What’s In A Name?

Ever since Memphis State University became the University of Memphis in 1994, the school has had a hard time convincing its graduates to use the new name. Apparently, it’s a problem for fictional graduates as well. Rudy Baylor, the idealistic young attorney in the latest Grisham-novel-turned-major-motion-picture-event, The Rainmaker, mentions several times in the film that he graduated from “Memphis State,” despite the fact that the action is set in the present. Rather than mourning the loss of a potentially valuable public-relations plug, however, the university doesn’t seem particularly bothered by the anachronism.
“If we could round up all the people who continue to call us Memphis State and charge them a quarter each,” says Curt Guenther, assistant director of the U of M’s media-relations office, “we’d be filthy rich by now.”

“And now he’s written a book. A book I will not be reading. I don’t need to. For 25 years now, I’ve had to put up with LP’s loud mouth. I know all about the stories in the book because LP never shuts up. In fact, he’s been calling me late at night and reading aloud from his book on my answering machine. He’s annoying. I see enough of him.” – from Anfernee “Penny” Hardaway’s foreword to Knee High and Livin’ Large, a new book by his shoe-shilling alter ego Li’l Penny.

City Reporter

City May Sell Memphis Light, Gas and Water

by John Branston

The city of Memphis may sell Memphis Light, Gas and Water, the largest three-service municipal utility system in the country.
Mayor Willie Herenton was scheduled to make an announcement to members of the city council Tuesday afternoon. A press conference was also scheduled. Both occurred after this newspaper’s deadlines, and the mayor’s office declined to release details prior to them. The Flyer confirmed the story with investment banking sources and others.
The proposed sale was apparently driven by deregulation of the utility industry as well as concerns for the financial welfare of Memphis in light of the difficulties of annexing new areas into the city.
MLGW has been a division of Memphis since it was created in 1939 by the Tennessee General Assembly. It is managed by president Herman Morris and a five-member board appointed by Herenton.
The announcement came as a surprise to almost everyone. About a month ago, Morris sharply criticized a Flyer story that said the utility was a valuable asset that might be for sale if the city can’t grow via annexation.
MLGW, which serves Memphis and Shelby County, is a huge asset for Memphis. The company’s pension plan is worth close to $1 billion, and its utility plants and other assets are worth at least $1.3 billion. The utility owns and operates one of the largest artesian water systems in the world.
It has 385,000 electric customers, 287,000 gas customers, and 216,000 water customers. Operating revenues were $1.014 billion in 1996. MLGW buys 10 percent of TVA’s electricity. Each of MLGW’s three divisions has a AA credit rating. The company paid $32 million in lieu of taxes to the city of Memphis in 1996.
Its pension plan is a gold mine worth over $800 million. The exact total was $761,053,000 at the end of 1996, and 1997 has been another big year in the stock market. There are 2,900 retirees and beneficiaries and about 2,600 active plan members, according to MLGW. That works out to roughly $150,000 per person.
MLGW has $267 million in long-term debt. But it has total assets, including utility plants in service, of $1.37 billion.
Although no politician flatly suggested putting MLGW up for sale or “in play” in investment banker jargon during the annexation/incorporation controversy, both Herenton and Shelby County Mayor Jim Rout alluded to the utility at various times. In responding to Herenton’s Formula for Fairness, Rout said the county would be glad to take it under its umbrella.
But when the Flyer wrote a story in October headlined “MLGW Is a Hidden Asset For Mem-phis” that detailed the value of the utility company, Morris was quick to object.
“The suggestion that MLGW or the pension benefits paid and earned by these loyal employees over the course of their career are be-ing viewed as a bargaining chip in the incorporation/annexation debate causes us extreme concern,” he wrote in a letter to the Flyer. “While I recognize that there are many difficult issues facing our community, I must voice my vigorous disagreement with your suggestion.”
City council members were generally surprised by the announcement. John Bobango said he has three concerns about a sale: what will happen to customer rates, what will happen to employees, and how the city will use the proceeds.
“Overall, I think MLGW has been an excellent corporate citizen,” Bobango said. “I would be concerned about the new corporate culture of any purchaser.”
MLGW has announced that it plans no rate increases for any service until at least the year 2001. The company has never had a layoff in its history.
“It’s an interesting notion, but one that deserves extensive evaluation by the council,” said Tom Marshall. “It is the council’s obligation to keep the ratepayers’ interests first and foremost, and depending on how this proposed deal is structured, I will reserve my final judgment.”
n(Staff writer Phil Campbell contributed to this story.)

Annexation: What Now?

by Phil Campbell

The incorporation law is now dead, struck down by the Tennessee Supreme Court. The city council celebrated with the mayor last week, with hugs, handshakes, and photo ops for everyone on a day the mayor dubbed “historic.”
But the party is short-lived. Now the mayor and the city council have to grapple with the aftermath of the state law that screwed up their well-laid plans, and they’re finding that things are a lot more complicated than when they were approving annexations back in April.
How should annexations proceed? On one hand, there’s the mayor’s “Formula for Fairness,” which calls for a five-year moratorium on annexation. On the other hand, there are the annexation guidelines that the administration proposed and the council approved last year, which had their own formula for growth, one based on whether developed land outside and adjacent to Memphis would be profitable for the city to take.
Tying up both these hands are two potential issues: The state legislature may or may not pass a law this upcoming session that would govern how future incorporation and/or annexation can occur in Tennessee. And city and county relations may or may not get better as representatives from both sides try to agree on a redistribution of the property-tax base.
Herenton said last week that he still wants the “Formula for Fairness” to be considered. When pressed, though, the mayor said he needed time to think about what, exactly, his administration would do. As of this Monday, his staff hasn’t met to begin work on a comprehensive plan.
As for the mayor’s relations with Shelby County Mayor Jim Rout, Herenton doesn’t seem to consider it a major concern. Asked on Monday, Herenton said that he has yet to discuss the Supreme Court decision with his county counterpart.
Not surprisingly, city council members have differing views on what to do next.
“I think that we have to see what kind of action the state legislature takes,” says council member Rickey Peete. “That could answer that question for us. If the legislature restricts the annexation powers [of a city], that could directly impact [us]. If, in fact, the legislature does nothing, then I personally don’t have a problem with us utilizing the Formula.”


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