A type of tax incentive doesn’t seem to be a powerful enough force to drive major revitalization across wide swaths of South Memphis. So, the quasi-governmental Community Redevelopment Agency might start by awarding an incentive for a small portion of South Memphis that includes Lemoyne-Owen College, Stax Museum, and the Four Way Restaurant.
Consultants told CRA board members on Thursday that a Soulville-focused tax-increment financing district would likely make more sense than the much larger districts that two groups — led respectively by local entrepreneur J.W. Gibson and Shelby County Commissioner Reginald Milton — proposed in April and May.
“Bigger isn’t necessarily going to give you anything better in this instance,” said John Brancaglione, a senior director for PGAV Planners, a consultant hired by the CRA.
In the type of tax incentive called tax-increment financing, the CRA would receive any extra property taxes paid within the district — whether through new development or rising property values — that are above the current taxes paid there and then it would reinvest this money in the same area. Successful tax-increment financing districts are often driven by either a major development project — such as Mud Island in the Uptown TIF — or naturally rising property values.
The consultants’ analysis has shown that property taxes aren’t likely to rise significantly in South Memphis anytime soon, which would provide little increment to be reinvested. While Milton’s group has said its TIF would generate a roughly $6 million annual increment over the 30-year life of the district, the consultant report lists an expected annual amount of $28,000 for it and $0 for Gibson’s district.
Tax-increment financing, the consultants said, is not a silver bullet for a chronically disinvested community like South Memphis. The median household income in the area’s predominant ZIP, 38126, is below $13,000 and the median value of owner-occupied homes is about $36,000.
However, a new tax-increment financing district in South Memphis could theoretically help attract investment to the area, especially if paired with other local efforts, the consultants said. For this reason, the CRA would like to grant one, if it could become comfortable with the regulatory burden it’d be creating for itself.
“If there’s ever a neighborhood that needed help, it’s South Memphis. That keeps running through my head,” CRA board member Sam Cantor said. “Despite [the consultants] saying there’s no increment … it might boil down to the CRA making a policy decision that this is something we want to do.”
Brancaglione said most tax-increment financing districts start with this type of policy choice, knowing it may take multiple years for property taxes to start rising in the district.
The drawback to making this decision — whether for a large district or a small one — is the CRA would have to monitor it while receiving very few funds unless property values in the district rise significantly. The CRA is currently solely funded by accepting 5% of the increment.
CRA director of planning and community development Andrew Murray said conversations in years past haven’t led him to believe the organization could easily get an additional $150,000 annually from the City of Memphis or Shelby County to fund oversight of a South Memphis tax-increment financing district. To watch over a large district, Cantor has said the CRA would likely need multiple new staff members.
In lieu of additional funding, a smaller district could allow some sort of incentive for South Memphis without needing to generate an immediate increment to pay for CRA employees.
However, the groups that presented the larger districts — Milton’s SoulsvilleUSA Neighborhoods Development District and Gibson’s Southeast Regional Development Corp. — have said they don’t think a smaller one makes as much sense. The Soulsville boundaries, for instance, would cut out many of the development projects they’ve said could generate increment.
“My biggest concern is if we decide to do something small, are the applicants going to get mad at us and take their toys and go home? Or, are they going to say, ‘Great idea, guys. Let’s work together on this,’” Cantor said.
Milton said in June 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 the acute poverty and lack of investment. Gibson declined to comment after the June meeting and left Thursday’s before it ended.
The CRA is planning to make decisions on the proposals from Milton’s group and Gibson’s group at its September board meeting. From there, the creation of a tax-increment district would still need the approval of the Memphis City Council and Shelby County Commission.
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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