Strong Oversight
is pro business
By Joe B. Kent – Guest Blogger
BALANCE, OVERSIGHT AND FISCAL CONSERVATISM IS GOOD FOR BUSINESS

Strong legislative oversight and true fiscal conservatism is good for local business. Fiscal conservatism can be defined as governmental restraint of expenditures against optimized revenue policy and debt minimization. Historically, after paying the ultimate political price in the loss of the 1992 presidential election, President George H.W. Bush’s fiscal conservative leadership that considered spending restraint, revenue optimization and debt minimization led to the last Federal Balanced Budget.

Unfortunately, unbalanced fiscal conservatism today, is often viewed through the prism of low taxes, governmental spending restraint and excessive tax incentive expenditures for corporate and real estate interests to increase growth to “improve the lives for all”. In effect, such tax incentives assume private business as a preferred allocator of capital to evolve the community ecosystem.

In Memphis, the former has proven to be a failed experiment under Memphis Tomorrow a local CEO organization that promised improved community outcomes, while using taxpayer money, for improved public safety, workforce and economic development. But the good news is local business leaders know there is a problem. Richard Smith, Greater Memphis Chamber Board Chairman has spoken out for reforming the tax incentive granting Economic Development Growth Engine (EDGE) which Memphis Tomorrow birthed.

Reforming EDGE should demand a new EDGE Board to drive balanced economic development policy. This need exists after most of the corporate EDGE Board members have served 7 years and have systematically overstated total new tax revenue generated by an estimated $800-900M through incomplete accounting that in effect claimed existing revenue as new revenue per the EDGE Scorecard. This practice resulted in an estimated  direct taxpayer loss of $250M+.

The incomplete accounting justified excessive corporate and real estate tax incentives for the benefit of the few to “retain” company operations in Shelby County. Further, current EDGE Board members have gutted public comment from the public record and per a Greater Memphis Chamber report have overseen poor customer centric process design.

A new professionally diverse EDGE Board would ideally support balanced economic development which can be referenced by the Amazon Road Map economic development policy pronouncement of the University of Memphis. Board seats would represent 1) K-14 Career Ready 2) Public Transit 3) University – Economist 4) Quality of Life 5) Airport 6) Small Business 7) Small Business 8) Real Estate and 9) Corporations. To insure balanced economic development policy was implemented, strong legislative oversight with trained legislators would need to occur on a quarterly basis.  

Strong Oversight Needed to Support Business Growth

Legislative and press oversight have been missing in action regarding the Memphis Corporate Community Leadership (Memphis Tomorrow, EDGE and Chamber) initiatives to support local economic development. This appears to come from the “business friendly” view of unbalanced fiscal conservatism that in the end hurts the overall business community.

In this way, legislators do not practice informed oversight and the press doesn’t ask questions. In fact, on WREG Informed Sources on 8/18/18, Commissioner Heidi Shafer praised the friendly local media. This makes sense because the local Memphis press doesn’t question the establishment or the lack of legislative oversight. Instead the local press provides what appears to be fake investigative news. The lack of press and legislative oversight contributes to a lack of vitality that is needed to spur local growth while providing needed checks and balances.

Examples of fake investigative news include the recent $1,000 Local Memphis 24 expenditure for a City Councilman’s portrait story – the Commercial Appeal’s story on the $9,000 City Council New Orleans expenditure and the recent Memphis Business Journal EDGE editorial that nitpicked at a Greater Memphis Chamber request for company anonymity in relocation efforts regarding EDGE. This reporting occurs as opposed to wrestling with the excessive tax incentives and deficient processes of EDGE and while the Daily Memphian sets to launch with the support of an anonymous donor base.

None of the former questions real power or the lack of legislative oversight that has occurred with Memphis Corporate Community Leadership. A lack of legislative oversight and non-investigative press results in a rigged system without needed checks and balances and a economic ecosystem out of balance.

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Let History Be Your Guide

Local business leaders often leverage historical knowledge to explain system imbalances or to support their positions on for example issues like tariffs. To that extent, recent and long-term history shows that trickle down economics as supported by policy implementations that support excessive tax incentives don’t work for the overall business community, total wage growth or addressing income inequality.

This historical graph shows the impact of excessive retention PILOTs in Memphis under a closed rigged Crump like system that benefit only a few while undermining support for small business. This historical graph shows the impact of a closed rigged economic system on overall Shelby County total wage growth. And this New York Times graph shows the impact of trickle-down economics over time and the acceleration of income inequality nationally. Trickle down doesn’t work and the Memphis system is out of balance.

The local historical cultural roots of the closed rigged imbalanced system can be traced back to the  Memphis Crump Machine of the 1940’s. A machine that insured dissidents had little or no voice with support by social elites and developers which can be shown in the current day to result in significant known local imbalances which don’t work to evolve a competitive ecosystem in a global economy.

Out of Balance

A lack of balance and culture for real oversight can be seen in public testimony and board makeups. In a recent City Council hearing involving the Poplar Corridor TIF, Councilman Martavius Jones can be seen in the video at 13:00 reassuring colleagues that he is not anti-growth due to his legitimate concerns over restricting future tax revenues to one of the most affluent areas of the City of Memphis. In a 2015 Good Jobs First study small business survey, respondents echo Councilman Jones concerns stating that incentive programs are not helping small business grow which results in further system imbalances.

In the discussion that starts at 2:49 in the video, Councilman Jones is just doing his job by advocating for fiscally conservative economic development policy that serves the entire business community. After all, Councilman Jones is a professional financial advisor that understands business and finance.

In his closing remarks at 13:00, Jones goes on to point out the myth of high property taxes while conceding that the Memphis and Shelby County property tax rate is high but the total amount paid by taxpayers due to lower property values make current revenue generating tax rates competitive. In this way, Councilman Jones is supporting true fiscal conservatism by making the case for needed revenue to support the evolution of the ecosystem for the purpose of competitive economic growth while dispelling hype that property tax rates are excessively high when considering all variables.

To the right, a table displays average property taxes paid and annual housing costs with a 30-year mortgage for Shelby County, Memphis, Nashville and the Nation as a whole. The table proves Councilman Jones argument that the overall amount paid for housing costs in Memphis and Shelby County are below that of Nashville and the national average making high property tax rates in effect a minimal issue.

As far as board makeups, just review the makeup of the current EDGE Board for imbalances. On the current corporate like EDGE Board, there are 2 bankers, 2 attorneys, 2 hospital executives, 1 non-profit ministry administrator, 1 commercial real estate broker and 1 accountant. This board makeup is a prescription for further economic imbalances without adequate representation for workforce, university economics, public transit and small business. Based on the data, small business vitality is the chief area of local economic development deficiency that would surely get more attention from a more professionally diverse board.

Conclusion

Greater Memphis Chamber recommendations for EDGE reform backed by customer centric process improvement and responsible targeted industry tax incentives focused on recruiting new businesses to Shelby County are a welcome step in the right direction. At the same time, needed economic growth will only occur with a new EDGE Board that includes new professionally diverse players, fresh ideas and strong informed oversight that supports true fiscal conservatism while driving balanced economic development for all.

joe b. kent
Guest Blogger
Mr. Joe B. Kent has worked throughout the country on workforce and economic development projects and is a reform activist in Memphis. Joe B. has a BBA in Finance, Masters in Instructional Technology and is a certified Global Career Development Facilitator with an emphasis on labor market information.

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