Only eight of the 65 new jobs created by a new Overton Square hotel project will pay more than $30,000 per year and 45 will pay so little that the workers will almost certainly qualify for food stamps.
Yet with only one no vote, the city-county economic development agency awarded $6.1 million to Loeb Properties for the boutique hotel project.
Only one member, Natasha Donerson, voted against the project. Another member, Al Bright, abstained. The other voting members present — Tom Dyer, Mark Halperin, Florence Jones, W. Jackson Moore, Johnny B. Moore and Cary Vaughn — all voted yes.
Without the tax breaks, the project in the newly redeveloped Overton Square isn’t viable, Loeb Properties president Bob Loeb told the Economic Development Growth Engine (EDGE) board at its Sept. 20 meeting.
The real estate developer managed to take advantage of a program that wasn’t meant for projects like his or locations like the one he’d build on. The hotel would boost Loeb’s profits but it also translates into poverty wages for all but a few of the hotel’s employees.
Here’s just a few of the ways that Loeb’s Overton Square hotel project isn’t in the best interest of a city grappling with how it’s achieved Dr. Martin Luther King’s dream of economic justice nearly 50 years after his death.
1. The hotel project would keep most of its workers poor
Loeb’s appearance before the EDGE board came less than a week after the Census released data showing that the Memphis metro area is again the poorest large metro in the nation. In the city of Memphis, the poverty rate for black residents is 32.3 percent (132,969 people) in 2016, up from 30.1 percent (121,371 people) in 2015.
Loeb’s aspirations wouldn’t help reverse those grim statistics; the median wages of the hotel’s 65 employees would be less than $20,000 per year, assuming that the housekeepers and food and beverage workers get enough in tips.
Of the 65 jobs the hotel would create, 45 pay less than $20,420. That’s the federal poverty guideline for a family of three, which is the most common family composition in Memphis. In fact, 85 percent of the jobs would pay less than $25,000 per year.
2. The tax break Loeb wants wasn’t designed for projects like his
Loeb, which redeveloped Overton Square and Broad Avenue, asked for a Community Builder PILOT to fund the boutique hotel project. (PILOT = payment in lieu of taxes).
But the Community Builder PILOT is for distressed neighborhoods that couldn’t otherwise attract commercial investments. From EDGE’s website:
“Launched in 2016, the Community Builder PILOT was created as a tool to help spur revitalization of distressed neighborhoods, by attracting retail, office, industrial, or other commercial projects.
“‘As we were rethinking the EDGE PILOT programs to make them more competitive, we realized that our most important local economic development incentive was virtually unusable for most inner-city projects — where it was most needed,” said Reid Dulberger, EDGE President/CEO. “After meeting with the Community Development Council and several other community stakeholders, we decided to create a tool similar to a traditional PILOT that could be used as an asset to help attract users to these distressed neighborhoods.’”
3. The tax break Loeb wants isn’t designed for locations like Overton Square
The Community Builder Pilot is supposed to “help attract users to these distressed (inner-city) neighborhoods,” according to Dulberger.
Overton Square is not distressed. In fact, the Overton Square website boasts of its “sophisticated environment.”
And here are just two stories that shred the notion that Overton Square is distressed.
4. Loeb’s application misrepresents the area that would be developed
From the application:
“This project anchors a neighborhood of more than 13,000 people in a zip code with a 22% poverty rate, in addition to removing blighted conditions from this highly visible location and adding a critical piece to the development of a regional theater district.”
Blighted conditions? Loeb wants to add a hotel to what is currently a parking lot. The parking lot, at the southwest corner of Cooper and Madison, was constructed in the last five years.
West of the lot is a parking garage, built in 2013 with taxpayer dollars. South of the lot is Hattiloo Theatre, which opened in 2014. By no definition are the conditions here “blighted,” yet Loeb’s request for a tax break says they are.
By comparison, some ZIP codes in Memphis have poverty rates of more than 70 percent.
5. For at least 15 years, the cost of the project will far outweigh the benefit
Loeb Properties received $6.1 million in tax breaks over 15 years, yet the EDGE staff estimates the project will generate only $5.4 million in tax revenues in that time.
That’s a projected benefit-cost ratio of .88.
Of 55 PILOTs EDGE has awarded since 2011, as listed on its website, only two have a benefit-cost ratio lower than what Loeb proposes: NuVasive with a ratio of .56 and Ebrofost North America, with a ratio of .78.
Assuming the hotel is completed by 2019, it would be at least 2034 before the city and county would begin to reap a return on its investment.
By comparison, the benefit-cost ratio for IKEA, which opened in 2016 but with zero black business participation on the construction project, was 1.64. International Paper’s ratio for its 2013 PILOT was 4.26.
And that brings us to our next point.
6. Loeb’s business partners don’t employ any black people in leadership roles. Neither does Loeb.
King said: “If a city has a 30 percent Negro population, then it is logical to assume that Negroes should have at least 30 percent of the jobs in any particular company, and jobs in all categories rather than only in menial areas.”
Loeb’s application lists two partners, LRC2 Properties and MMI Hospitality. LRC2’s website refers only to its founder, Luke Chamblee, who is white.
MMI Hospitality’s website shows the pictures of 27 of 28 corporate leaders. (Kevin Krzeminski is not pictured.) None of those pictured are African-American. MMI is based in Flowood, Mississippi, which is 19 percent black. Flowood is a suburb of Jackson, Mississippi, which is majority African American.
Loeb Properties has 14 people on its leadership team. None are African American. The company is based in Memphis, which is 63 percent black. The nine-county metro area is 46 percent African American and Shelby County is 54 percent black.
Asked if he intended to employ any black people at his company, Loeb said he intends to reduce the size of his staff.
By King’s measure, both Loeb Properties and MMI get an F.
Loeb and MMI are each connected to horrific homicides during the civil rights movement
This isn’t # 7 because neither business can control the past. However, the families’ connection to the racial oppression and exploitation of the past — and the wealth it allowed them to accumulate and pass to the next generation — helps explain the racial wealth gap that persists today.
The Loeb family has a connection to the 1968 assassination of King and MMI, founded by the Sturdivant family, has a connection to the lynching death of 14-year-old Emmett Till in 1955.
Loeb Properties is the modern-day iteration of Loeb Laundries, which started in 1887. The family wealth was made, at least in part, by paying its workers, most of whom were black, poverty wages for decades.
Bob and Lou Loeb, who run Loeb Properties, are the nephews of Henry Loeb III, the anti-union segregationist who was Memphis’ mayor when King came to Memphis to support the striking black sanitation workers.
On Mayor Loeb, from Michael K. Honey’s “Going Down Jericho Road: The Memphis Strike, Martin Luther King’s Last Campaign.”
Mayor Loeb refused to negotiate with the striking black sanitation workers. King interrupted planning for his Poor People’s Campaign to come to Memphis, where he was killed April 4, 1968. Time magazine blamed Loeb for King’s death.
MMI Hospitality was founded in 1956 by Mike Sturdivant, whose family farm is in Glendora, Mississippi.
In a seed barn on the farm, a black plantation worker reported hearing Emmett scream, according to the Emmett Till Memory Project. There is no evidence that the Sturdivant family was directly involved in Emmett’s death, although Sturdivant, who ran unsucessfully for governor twice in the 1980s, did know the two men accused of Emmett’s killing.
The Sturdivant name — sometimes spelled as Sturtivant — does not appear on easily available lists of Mississippi slave holders. The cotton plantation dates to the 1850s. In 1860, Census records indicate that 55 percent of white Mississippi residents owned enslaved people.
Where do we go from here?
Read: Download Loeb’s PILOT application here. Sign up for EDGE’s mailing list (bottom of the website) to get notified about upcoming meetings.
Read more: About how the Loeb family made their wealth by exploiting black labor.
Go. The EDGE board meets monthly and all EDGE meetings are open to the public.
EDGE CEO Reid Dulberger, RDulberger@Growth-Engine.org
The EDGE board members and their email addresses are:
Al Bright, Jr., Chairman, firstname.lastname@example.org
Shelby County Commissioner Willie Brooks, email@example.com
Natasha Donerson, Secretary, firstname.lastname@example.org
Tom Dyer, Vice Chairman, email@example.com
Mark Halperin, firstname.lastname@example.org
Larry Jackson, Treasurer, email@example.com
Florence Jones, firstname.lastname@example.org
Memphis City Councilman Martavius Jones: Martavius.Jones@memphistn.gov
W. Jackson Moore, email@example.com
Johnny B. Moore, firstname.lastname@example.org
Cary Vaughn, email@example.com
This report is brought to you by MLK50: Justice Through Journalism, a nonprofit reporting project on economic justice in Memphis. Support independent journalism by making a tax-deductible donation today.