After rival groups announced massive visions for a tax incentive-funded revitalization of South Memphis, it appears the quasi-governmental body in charge is leaning toward a much more conservative approach.
In April and May, groups led by local entrepreneur J.W. Gibson and Shelby County Commissioner Reginald Milton presented dual plans to the Community Redevelopment Agency for tax-increment financing districts that would cover large swaths of southern downtown, French Fort, South Memphis, and Soulsville. In tax-increment financing, the CRA and the selected applicant would receive the extra property taxes paid in these communities that are above the current taxes paid there and then spend this money in the same areas.
The vision was that rising property values and new construction in these huge districts would generate large amounts of extra property taxes that could be reinvested into further redevelopment of the neighborhoods.
On Wednesday morning, the consultant MuniCap Inc. presented CRA board members with an analysis of the applications that called their feasibility into question. Approaching the numbers conservatively, neither application will generate enough money for the plans to succeed, according to the firm’s analysis.
Milton said after the meeting the MuniCap analysis — which predicted an annual increment of about $28,000 for his TIF — was “far too conservative.” His group’s analysis had predicted a roughly $6 million annual increment.
“We consider ourselves very cautious in our numbers,” Milton said. “We’re trying to basically predict the future and that is always a very challenging thing to do. I personally am more optimistic [than MuniCap].”
CRA board member Ann Langston said MuniCap’s conservative approach made sense to her.
“You don’t have enough [in South Memphis] to be able to create a [significant tax] increment. The property values are so low,” she said.
Gibson declined to comment for this story.
Most of the land that would be part of the TIF lies in ZIP codes 38126 and 38103. The former is 3% white and 95% Black, has a median household income below $13,000 and has a median value of owner-occupied homes of about $36,000. The latter — which includes downtown and Mud Island — is 54% white and 33% Black, has a median household income of almost $73,000 and has a median owner-occupied home value of $270,000, according to the most recent U.S. Census Bureau estimates.
In the 8,300-parcel, 2,800-acre TIF boundaries presented by Gibson’s group, 37% of the land is tax-exempt because it’s owned by a church or public entity, such as the Memphis Housing Authority. After then subtracting out property that is exempt under a payment-in-lieu-of-taxes agreement, MuniCap estimated the city and county are receiving roughly $15 million in taxes from the region per year. The estimates for Milton’s group were similar.
Because of this low starting number and the fact that the city and county aren’t likely to raise their tax rates soon, MuniCap’s message was that the increment would likely have to come from new construction in the area that doesn’t receive a PILOT. CRA director of planning and community development Andrew Murray pointed out that it’s hard to build the type of development most prevalent in South Memphis — affordable housing — without a PILOT.
Leaders of both groups have said a TIF would lead to new apartment buildings, redeveloped shopping centers and various other new developments. However, they haven’t presented any projects that are ready to be built immediately.
“If you’re going to rely on that development to consider the TIF … you want a project ready,” MuniCap senior vice president Emily Metzler said.
Langston and fellow board member Sam Cantor said after the meeting that they aren’t confident there would be enough new construction to allow them to govern the TIF well. The CRA would have to staff up significantly to cover even the smaller, Milton-led TIF, which includes 6,000 parcels over 1,850 acres, Cantor said. Since the CRA is only funded by 5% of the tax increment produced, Cantor finds it unlikely the increment would cover the costs of a handful of new employees.
With this in mind, Cantor said he’s hoping the applicants, consultants and CRA can come up with a significantly smaller TIF district that can spark new investment in South Memphis but could be managed without a larger staff.
“My hope is [the applicants] come back with something smaller around an area (where) we can pinpoint some growth,” Cantor said.
Milton said he would be open to a conversation about smaller boundaries but isn’t sure this would best serve the needs of South Memphis. He hopes the CRA will be flexible — given these acute needs.
If Milton or Gibson want to push through their full, ambitious plans for South Memphis, it appears they’re going to have to do some convincing of board members within the next two months.
Murray said his goal is for the CRA board to vote on some version of the two applications at its August meeting. This would allow the development teams to potentially advance through city and county approvals by the end of 2021.
Jacob Steimer is a corps member with Report for America, a national service program that places journalists in local newsrooms. Email him at Jacob.Steimer@mlk50.com
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