The idea of a downtown TIF to pay for improvements to downtown and its neighborhoods is awash with bad information, misstatements, and confusion, all of which is preventing a rational, calm discussion about the potential of the TIF as another tool downtown improvements absent the hysteria that’s attendant with this idea in some quarters. Whether the TIF is approved or not approved, it’s a discussion worth having since it’s an idea that’s been on the table for nine years.
Here are some answers to frequently asked questions emailed to us by someone in the private sector who’s been involved in numerous downtown projects:
Q: Why is CRA calling downtown a slum?
A: As a pre-requisite for creating a Community Redevelopment Plan under the Community Redevelopment Act of 1998 (State Statute, included in the document), there must be findings of the presence of a) slum, b) blight, or c) a lack of affordable or elderly housing within the proposed Redevelopment Area. The Statute defines each of these terms explicitly, however in simple terms, “blight” is the general condition that inhibits private sector investment (a “wet blanket” of poor conditions, low property values, or lack of adequate infrastructure that the private sector finds unable to overcome on its town), and “slum” is a prevalence of dilapidated, unsafe, and unkempt property. Significant slum conditions were found south of the CBD, but blight is also occurring in several places because little private investment is taking place. The fact that a “good” area is within the boundary does not create a stigma that those “good” areas are in fact “bad.” Such a relationship exists between Uptown and Mud Island in the Uptown Community Redevelopment Area and no one would consider Mud Island bad because of it.
Q: Previously disclosed Triangle Noir plans focused on a much narrower boundary area around Cleaborn Homes and Foote Homes. Why were the boundaries expanded so far to take in all the growing areas of Downtown?
A: The northern boundary is shared with the southern boundary of the Uptown Community Redevelopment Area so as to not have any gap between the two Areas. This ensures that no particular areas “slip through the cracks.”
Q: How were the proposed boundary lines created and why?
The proposed Redevelopment Area boundaries were created to encompass the residential areas in and south of Downtown, to the limits of adjoining major thoroughfares and stable neighborhoods. As such the Area takes is shape from the Uptown Community Redevelopment Area, Dunlap Street in the Medical Center, East Street adjacent to University Place, and both sides of Crump Boulevard.
Q. What is the process and timeline to educate Downtown stakeholders and seek their input on the proposed plan before it goes before the CRA, City Council, and County Commission?
Throughout this planning process that began in 2008, numerous stakeholders have been consulted and public meetings have been held. Recognizing that It can be difficult to reach everyone who may have an interest or concern for the plan, we have responded to additional questions, concerns, etc. that have been raised as they have come to our attention. Additional meetings have been scheduled to have more focused discussion. It is also worth mentioning that there are public hearings as a part of the approval process, however we haven’t gotten to that stage in the process yet. It is our hope that those receiving this information will help ensure that the groups listed below are well-informed, provided accurate and timely information, and meet with the proponents of this plan to make sure they get the answers they seek. It is plainly obvious that many stakeholders who may benefit from this plan do not understand what is proposed, or are being given incorrect information.
Those that should be given an opportunity for input include: i. Downtown property owners, neighborhood residents, and businesses; ii. The Downtown Neighborhood Association, the South Main Association, the Victorian Village CDC, the Edge Neighborhood group, the Memphis Medical Center, and other Downtown stakeholder groups; and iii. The Downtown Memphis Commission.
Q: Does the proposed TIF mechanism work alongside the Downtown PILOT program, which has been responsible for most of the private sector growth of Downtown over the past thirty years? Aren’t TIFs and PILOTs mutually exclusive tools?
No, they are not. They are fundamentally different tools and are used in different situations for different kinds of projects. Typically, in other cities, both TIFs and PILOTs are utilized however TIFs are more limited as to the geographic locations where they can be used. Memphis is unusual in that we have not utilized TIFs as extensively or effectively as other communities. TIFs are common in Knoxville, Chattanooga, Florida, California, etc. As tools in our revitalization toolbox sometimes we need a hammer, and other times a screwdriver – the use of one tool does not preclude the use of the other. As it turns out, many communities use both effectively.
Q. The Downtown PILOT program is the most effective, proven tool to promote private development in Downtown Memphis, having attracted billions of dollars of private investment over the last thirty years. If the Downtown PILOT program is curtailed by this proposed TIF, won’t private growth in Downtown be stalled?
The Downtown PILOT program has been the ONLY tool that has been used outside the Uptown District TIF, so naturally it has been effective and proven because no other option has existed. The Uptown District TIF district has been a very effective and proven tool for neighborhood revitalization in Uptown for the past 12 years. The use of District TIF funds or PILOTs in the financing of any project will not impact the financing of any other separate project, no more than using PILOTs in one project prevents the use of PILOTs in another project.
Q: Other cities have effectively used Site-Specific TIFs to enable particular projects that in turn generate the new incremental revenues used to fund the projects, so the projects pay for themselves. With this proposed large District TIF, isn’t about 98% of the revenue being generated outside the Focus Area for improvements and would be generated with or without the TIF?
This question appears to assume that the Focus Area is the public housing, Cleaborn and Foote Homes. In actuality, these are only a portion of the total request, representing $22 million of the total request of $45 million. The maps and narrative contained throughout the proposed redevelopment plan illustrate that there are other proposed uses of the funding that are not yet specified.
The very fundamental basis of TIFs is that the TIF area must be based upon 1) the presence of slum, blight, or the lack of affordable or elderly housing, and 2) that the project(s) within the area has the potential to create growth in property tax revenue on-site or nearby. Site-Specific TIFs encompass a smaller area because they generate significant amount of new property taxes –often through mixed-use or high density projects which generate more tax revenue than residential projects. A District TIF presumes that multiple projects are possible within a large area of need, and that the effect of those projects in total will raise the tax base over a large area. A District TIF is appropriate when the area that is blighted (not seeing significant private investment on its own) is so wide-spread that one or two projects will not dramatically change the tax base of the area. No one could disagree that the blighted area south-southeast of Downtown is wide-spread or could be transformed with only one or two projects. The problem is bigger than that and so needs a wider net.
Q. Would this large TIF District foreclose the more nimble Site-Specific TIF tool as an option in Downtown Memphis for twenty years?
A TIF is essentially a twenty-year commitment by local government that any new taxes generated in an area are returned to the same area for reinvestment. It’s like earmarking future taxes to be invested in a particular area. If a Site-Specific TIF is created within a District TIF, then the Site-Specific project will have its future increased tax revenues earmarked for the Site-Specific project and not the District. That’s essentially creating an earmark within an earmark – nothing prevents you from doing that.
Q: What are the future financial implications to the City and the County of such a large TIF District?
As described above, a TIF is essentially a commitment by the City or County that a portion of future new tax revenues will be directed back to the Redevelopment Area instead of being placed in the General Fund. While the analysis is being further refined, the current analysis shows that if the City and County both create the District TIF it would mean in Year 1 $31,000 of revenue will be returned to the Area. In Year 5, approximately $550,000 is returned to the Area to be reinvested. By Year 10, after a number of PILOTs expire, that rises to $5 million annually, and by the final Year 20, over $12 million of revenue is returned for reinvestment. Keep in mind that each municipality contributes to the TIF and the City’s property tax rate is lower than the County property tax rate, so the annual impact in Year 10 (an average year), for example, is that the City would be committing about $2.2 million and the County $2.8 million to the Area that otherwise would flow into their General Funds to be expended elsewhere in the City/County. If, for example, only the City contributes to the District TIF, then the total revenue would drop to $45million over 20 years. The average annual impact to the City would be $2.2 million or 0.19% of its $1.153 billion budget (0.35% of the $629million General Fund), and to the County $2.8million or 0.24% of the County’s $1.188 billion budget (0.77% of the $363 million General Fund) be direct to the Redevelopment Area.
Q. What is the total estimated cost of implementing the entire Master Plan, which includes 1,200 housing units, 200 parcels, 27 miles of streetscape improvements, 6 miles of new streets, and a total of 42 acres of new and upgraded park space?
In keeping with the State Statute, this document is a Community Redevelopment Plan, not a Master Plan, and the State Statute requires the Community Redevelopment Plan outline the maximum conceivable public and private development that TIF funds would be eligible to be used for. The potential improvements are described so that it is clear to the public from the outset what public TIF funds could possibly be used for in revitalizing the neighborhood. That is a fundamental protection of the public from the State Statute, that the Plan fully describes what TIF funds could be used for so the public knows what their tax dollars are being used for. When a proposed development requests TIF funding for a project, that project must demonstrate that it contributes to the desired outcomes written into the Community Redevelopment Plan. That project can only eligible for TIF funds for the development of housing, streetscape improvements, new streets, or new and upgraded park space, etc. up to the limits listed in the plan. The cost of those improvements are borne by the developer above and beyond the amount of TIF funds the CRA decides to contribute to the project for the specific items listed above. The total cost of such development cannot be estimated until specific projects are proposed, their design analyzed, and requests for TIF funds are made.
Q: How were the planned public improvements selected?
The planned public improvements were based upon the physical inventory and analysis of the neighborhood needs as described in the document.
Q: Aren’t many of the needed streetscape improvements identified in the Downtown Streetscape Improvement Plan were omitted from this Master Plan.
The Community Redevelopment Plan identified streetscape improvements that are needed in order to overcome the blighted conditions that inhibit new private investment in the Area, are not part of an existing Streetscape program, are not seeing significant private investment already, or may be required to create developable property. The Master Plan was intended to focus on areas that are overlooked and not currently targeted or funded for Streetscape Improvements.
Q: Is it a good idea to build new streets and public parks when we can’t afford to properly take care of the streets and public parks we have?
The same argument could be made throughout the City and County wherever new or improved roads and parks are being invested in. Our analysis shows that when compared to the rest of our community, this part of the city is a) served by few parks and open spaces, b) has sub-standard streets and sidewalks, and c) is not being maintained at a level that encourages much-needed private sector investment. Numerous studies have shown that creating desirable neighborhoods and attracting new investment often requires reinvesting in our existing infrastructure. This Area cannot continue to be ignored.
Q: Why does the Master Plan document outline the sources and uses of funds designated for the Cleaborn public housing redevelopment project, but there are no such details about improvements in other parts of Downtown. How will needed improvements in the rest of Downtown be paid for?
Just like it is today, improvements will be paid for the same as they would if there were not a District TIF, except that the proposed District TIF creates a new source of funds to assist in private-sector developments that meet the goals of the Master Plan within the limits it describes (housing, infrastructure, etc.). If a proposed Downtown improvement seeks TIF funds and fits within the limits defined by the Plan, then it is eligible to apply for those funds. The Community Redevelopment Plan has no effect on other sources of funding that might be used for other improvements. The details of each proposed redevelopment will become known when those details are presented to the public and the CRA at the time of application.
Q: What is the schedule for implementing the Master Plan?
The Community Redevelopment Plan is a 20-year vision for reducing conditions of slum and blight, and to create affordable and/or elderly housing for the Area. It will be implemented as quickly as the private sector produces projects which address those issues. This plan does not, in and of itself, undertake any new development – it simply creates a pool of funds that can be accessed by the private sector if redevelopments are proposed that address the issues above. With appropriate public improvements, the private sector will drive the schedule, just as it has in Uptown.
The application provides a schedule for the redevelopment of the Cleaborn/Foote area, but no schedule, cost estimates, or funding source is provided for any other improvements Downtown. As stated above, the proposed District TIF creates a new source of funds for projects that fit within the Community Redevelopment Plan. It is not the role of the Plan or the CRA to create schedules, cost estimates, or secure funding for projects; rather, it provides a potential source of funds previously unavailable. Cleaborn Homes is currently being redeveloped with significant public funding; if Foote Homes is ever redeveloped it will also require significant public help – TIF is one possible option, if it exists.
Q: What happens to ongoing private development initiatives if the CRA officially adopt this new, largely unfunded Master Plan for Downtown?
This is a Community Redevelopment Plan, not a Master Plan, and outlines the limits to which CRA can assist to help private investment in the area. For example, the Community Redevelopment Plan recommends the CRA work with entities such as the Memphis Land Bank to acquire and make available tax-delinquent and City/County owned property for private development, assist government agencies in community development programs, work with other funding sources (banks, foundations, non-profits, etc.) in establishing funding for housing rehabilitation, etc. in addition to recommending a District TIF be established. Ongoing private development initiatives that fit within the scope of the Plan will become eligible to apply for funding (TIF or otherwise) to assist in the financing of their projects. If a TIF is not established, the Community Redevelopment Plan outlines several ways in which the CRA can contribute to the revitalization of the Area. It is possible to adopt the Plan without establishing a District TIF, however the available funds will be greatly dimished.
Q: What are the unintended effects on the private marketplace of a largely unfunded, government master plan?
The unintended effects would be status quo – that nothing more, new or different happens tomorrow than it does today. While much has been done in Downtown over the past thirty years, more could have been done if the resources were available. As is clearly evidenced outside of Downtown, conditions have largely gotten worse rather than better in the same time.
Q: If the CRA announces a new master plan and expresses an intention to acquire (with the threat of eminent domain) and redevelop private properties, might it not tend to freeze any private development progress being made while the private sector waits to see what the CRA will do?
The Community Redevelopment Plan does not call for using Eminent Domain to acquire property except as a last resort, and within the limits of Federal, State, and Local law. The same process and limits are currently in effect in the Uptown Community Redevelopment Area, and the Plan calls for the same policies and procedures be used as in Uptown. It is clearly evident that the potential use of Eminent Domain has not frozen private development progress in Uptown. While a concern often voiced in the face of change, MHA and the CRA have amply demonstrated effective neighborhood revitalization with no or limited use of Eminent Domain. Recent Supreme Court decisions and State legislation have strengthened private property rights and limited Eminent Domain powers to protect the public.
Q: Some targeted property owners may become speculators and squatters waiting for the CRA to buy them out rather than move forward with any realistic development plans.
The potential for speculation is always present in every area of our community. In fact, speculation is already having a limiting effect on development around and south of FedExForum. The Plan provides for new funding and programs which could help the private sector overcome barriers to development, including speculation. The Plan calls for property purchase only when it contributes to the overall redevelopment of the area or of strategic importance to a particular project. The Plan does not call for purchase of property that is overpriced, unnecessary, or not contributing to the reduction in conditions of slum or blight.
Q: What are the lost opportunity costs of borrowing against and spending twenty years of property tax growth in Downtown Memphis?
The lost opportunity is the potential of proceeding along with Downtown development and neighborhood revitalization at the established pace. Tools such as PILOTs and TIFs leverage time to make financial resources available for redevelopment today. The opportunity cost is that the City and/or County will have (on average) about $2-3million less in their respective General Funds because that money will be committed to revitalization in the core of our community, instead of being spent elsewhere. The Community Redevelopment Plan presupposes that reinvesting in the Downtown and nearby neighborhoods will have a substantially higher impact than the same investment elsewhere.
Q: If the next twenty years of property tax growth in Downtown Memphis is pledged to pay for the public housing redevelopment project in the southeast corner of Downtown, then how do other important Downtown plans and projects get funded over the next twenty years?
If a District TIF is established, the projects listed below will be funded exactly the same as they would without a TIF because the proposed TIF does not alter other funding sources (like CIP). The potential is, however, that if one of the items below addresses the problems of slum, blight, or the lack of affordable or elderly housing, then it is possible that TIF funds can help enable those projects move forward because a new source of funding will be available. If a District TIF is not established, then none of these items below are affected in any way and will proceed exactly the same as they do today.
- Downtown Streetscape Improvement Plan
- Convention Center improvements and expansion
- Potential new convention center space
- Beale Street Entertainment District improvements and expansion
- FedExForum neighborhood plans aligning with new Grizzlies ownership group
- Riverfront Promenande development
- Downtown School Neighborhood plan including Sterick Building rehabilitation
- Edge Neighborhood plan
- Victorian Village Master Plan
- Memphis Medical Center Master Plan
- South Main District plan
- South End plan
- Other projects that are unknown today but will arise over the next twenty years.
Q: Is the CRA well suited to implement this twenty-year master plan for Downtown?
The CRA, as dictated by State Statute, has been created and is expressly charged with helping revitalize neighborhoods such as these. That is its very purpose and nature – therefore it is one of the only entities that can take on such issues. By law, the CRA cannot exist but to help with neighborhood revitalization and housing.
Q: Is the CRA adequately staffed to carry out this enormous responsibility?
If the Community Redevelopment Plan is approved, the CRA is allotted a 5% administrative fee that would be used to hire additional staff to manage the project.
Q: Is the CRA organized to represent the interests of Downtown stakeholders?
In order to carry out neighborhood revitalization, all the Downtown stakeholders should come together in partnership with the CRA, such as in Uptown, to ensure that the needs of the community are met every step along the way. It is the responsibility of the Downtown stakeholders and CRA to make their interests known and work with each other to improve the neighborhood.
To qualify for tax increment financing, the area must be declared blighted. The tax increment financing means that any new revenue goes to the pay the debt for the redevelopment–that is money diverted away from police, fire, etc. Once the debt is repaid, then the new revenue will go to the general fund.
Who benefits from redevelopment debt? Bond brokers.
Bond brokers may handle debt, but the benefits from the redevelopment clearly is with the public. And if the money returns to city coffers, it will be spent largely on police and fire while our public spaces and downtown infrastructure deteriorate.
See here to read the analysis of this tif district.
From this analysis, the increased revenue would be small in the first five years. Only interest could be paid during that time.