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Memphis: The Wharton view - Part II

Bernal E. Smith II: Mayor, considering annual inflation and flat to declining tax revenue/collections, what is your plan for continuing to provide adequate municipal services? The New Tri-State Defender is endeavoring to inform readers about the plans, thoughts and actions of our elected and appointed officials through conversations with city and county leaders. One of the goals is to provoke dialogue and to initiate an ongoing conversation between leaders, readers and the community at-large.

This is the conclusion to TSD President and Publisher Bernal E. Smith II’s recent conversation with Memphis Mayor A C Wharton.

Taxes and revenue options

Bernal E. Smith II: Mayor, considering annual inflation and flat to declining tax revenue/collections, what is your plan for continuing to provide adequate municipal services?  Unless new sources of revenue are identified, isn’t a real estate tax increase inevitable?

 A C Wharton

Mayor AC Wharton: Yes, it is inevitable, unless, two things: we must maximize efficiencies in terms of how we deliver services and utilize technology, and or create alternative sources of revenue. For instance, we are one of the largest cities in the country that does not have a 311 system or essentially a centralized call-in for all related city services….now, calls go in to public works, animal shelter, etc. and we have different people in each office fielding calls. As we improve efficiencies, the reality is as we invest in new equipment and technology people will be displaced.

For example, some suggest we go to the one-armed bandit garbage trucks, where one man drives and an automated arm picks up the cans and dumps them. If we were to go to such equipment, two jobs are lost on each truck. So as we improve efficiencies there will be jobs lost and that is a balancing act we’ll have to deal with.  

There are many ways to create new sources of revenues. We need to study and implement some, and then others require state involvement. Tax on cell phone usages, taxes on per glass beer and alcohol sales are examples, say a 50 cents a month tax on cell phones or a ten cents tax on every glass of alcohol consumed.

Another example is if we charged a $50 incident fee against the defendant in every one of these domestic dispute calls. If you listen to my police radio starting about 4:30 p.m. each day, you would see quickly how costly it is for police officers to run here and there on a vast number of domestic related calls. We don’t charge to inspect cars but it costs us about $3 million per year for those cars to be inspected.

B.E. Smith:  Obviously there are alternative revenue options, when do we begin to implement them?

Mayor Wharton:  We’re working on them now. We almost got the car inspection fee passed this time. I’ve had the hardest time explaining to some council members the need to do so. They say it’s just another tax, but it’s not. The retired widow woman who never puts her car on the road, or people who may have only one car, are paying out of their real estate taxes the cost to inspect cars for people who may have three or four cars in their households. Those people should be paying for those costs themselves. We also have to make sure fees that are in place now, like the sewer fees, are adequate. After we have become as efficient as we can and pursue all the alternatives to property taxes and maximized those, then and only then do we move to increase property taxes.

B.E. Smith: What are your thoughts on being able to lobby the State General Assembly to allow for the creation of a payroll tax? Or would you even be in favor of it?

Mayor Wharton:  If you look back at what I did as mayor of Shelby County, I worked long and hard for an occupation privilege tax. Some argue why not just charge it to people who work here but don’t live here, but constitutionally that just wouldn’t work. Everyone would have to pay.  However, Memphians would still benefit from having it in place because the way I would structure it there would be a cap on property taxes. People in Mississippi or Arkansas wouldn’t benefit from that but the people living in Memphis would because their property taxes would be lowered and stabilized. That’s one advantage. Additionally, when a resident of Mississippi or Arkansas pays the tax, we don’t have to invest in the infrastructure to support them. It’s like tourist dollars; they contribute to our community and go back home.

B.E. Smith: So what are your thoughts about the possibility of working with the folks in Nashville to put this in place?

Mayor Wharton:  It would be extremely difficult. Just as you see the difficulty in passing legislation in Washington, we’re a microcosm of that politically.

B.E. Smith: There seems to be a lack of understanding or desire to understand the unique issues of Memphis by legislators in the rest of the state relative to putting in place policy that allows us to strive and grow.  

Mayor Wharton: We really haven’t found our “home” in the state yet. Most folks, once you get on the other side of the Tennessee River, don’t realize how big this place is, how urban we are and how the social needs are drastically different from the more rural areas in the state.  The majority of the members of the legislature don’t have a public transit system in their communities so they don’t understand when we say we’re spending money on city buses. They haven’t had the family disintegration the way that we’ve had so that our juvenile crimes are so significant that we’ve had to invest in putting classrooms in jails and Juvenile court. The investment and cost of being an urban center located where we are is high and requires unique approaches. In most instances, the committees that would have an up or down vote on alternative sources of revenues are not controlled by individuals who share the urban point of view. So I would be less than honest to say, sure I think we can get it done. I think it would be extremely difficult.  

Growing African-American businesses

B.E. Smith: Various disparity studies have shown dismal numbers relative to government and private corporate spending with African-American businesses in Memphis. I’ve always argued that this entire community benefits from growth of African-American businesses and wealth. With that said, is it a priority of your administration to grow existing African-American businesses and attract investment from African-American businesses outside of Memphis? What are the specific strategies? What plans, if any, are there to increase government spending with minority firms and encourage the private sector to do the same?

Mayor Wharton: Yes to all of those. There are plans; let me outline a few of those. First of all your premise is correct. It is unacceptable, whether it’s 1 percent, 2 percent, or 10 percent or whatever the number is now. The numbers are not acceptable. So what are we going to do about it? One is the Office of Contract Compliance has become much more aggressive and diligent in its review, enforcement and application towards ensuring participation goals are met.  We’re going to implement the new MWBE ordinance passed by the council that requires a quarterly review of everything that we are spending in city government.  We’ve drafted a new program that we will be rolling out/announcing in the next 45-60 days that allows us to go out and find businesses and structure deals that increase our numbers.

There is a saying we had in the country, “I ain’t going to kill nothing, but I might let something die.” That attitude won’t work for us in this situation. We have to be proactive, we have to go out and “kill something” as it relates to building minority businesses. We can’t just sit here and hope that it happens. We’ll do like we did on the Tiger Lane project on which we had 54 percent minority participation. That didn’t happen through chance. We broke the jobs up in to smaller pieces where smaller, locally owned companies could get a bigger piece of the entire pie.

We’re taking the same approach with Electrolux. We’ve set up a multi-million dollar loan fund that will be used to provide capital to these companies and will be providing the technical assistance necessary to help these firms take advantage of the opportunities that will be available.  We will have people in place to make sure these companies have what’s necessary to do business and we’ll make sure the opportunities are there for them.

To be a mayor of a city and make these things happen, you have to have a sense of intentionality. You have to be creative and intentional to get results. It’s not enough to say, “I’m AC Wharton, the doors are open and I’m fair.” We will stay within the letter of the law, but we will do everything we can to make opportunities accessible for minority- and, obviously, African-American owned businesses and level the playing field as we go.

B.E. Smith: The funds that you’ve put in place, how are they accessed? Tell me more about the minority business loan fund.

Mayor Wharton: The funds are accessed through the Renaissance Business Center at 555 Beale Street. We’ve allocated money into a fund that’s being supported by the Small Business Administration that will come up to about $5 million dollars.  

B.E. Smith: That certainly sounds like a great start in the right direction to improve business development and wealth in our community. But I will challenge you, as a part of the intentionality that you’ve spoken of, to make sure that African-American businesses in particular have information early in the game so that they can get a foot in the door. Too many times we find out about new ventures, including those with significant local tax incentives, after all the deals have been cut and all the money has been divvied up. It’s incumbent upon us to be poised and ready, but information is critical. From my days with the chamber of commerce, working in economic development, I know that we can do a better job of informing and preparing not just minorities but locally owned firms across the board about deals on the horizon so that they can get prepared to take advantage of them.  

Mayor Wharton: I agree, point well taken. There is a lot of truth in what you stated. (Even) most of the white-owned firms couldn’t qualify because they simply weren’t large enough to handle parts of the deal. So yes we will do a better job of informing and getting firms prepared early in the process.

Sanitation workers – the future

B.E. Smith: In terms of the sanitation workers buyout plan, can you give us an update?

Mayor Wharton:  Were working on the criteria and will be finalizing the plan. The acronym for the plan that we’ve developed is called C.O.V.E.R. As I thought about the plan, the most important aspects of it dictated the name: enrollees participate by choice, we needed to make it clear it was optional, then I said we have to make it really clear that it’s voluntary and lastly we wanted to make it clear that its early retirement; Choice Optional Voluntary Early Retirement Plan.  

No one will go into it blind and not understand the consequences of it. We’ll continue their health insurance, particularly those that are eligible for Medicare, and make sure there is no gap in coverage and we’ll also help them with their financial and retirement planning. It’s really targeted at some of the workers, many of whom are pass retirement age, but are working out of necessity. The plan is designed to assist them with their transition and help them secure their futures in retirement.  

B.E. Smith: What about the notion that there are plans to privatize the sanitation department?  Obviously if a high number of current workers take advantage of early retirement, it may create a shortage of workers, which in the minds of some opens a “backdoor” to privatization. How do you respond?

Mayor Wharton: No, privatization is not my first option, but I have given a lot of thought to a plan that I believe has a lot of merit. In that instance, my first choice is not to go out and contract with some outside firm, but to take the current sanitations workers, the members of the union and set them up as a private company. We would lease to them the rolling stock for a dollar a year. We sign a contract with them; they become their own company. They know more about that operation that any one, they know where the efficiencies are. Everything they save could be a dividend. We at the City wouldn’t care as long as the service is there. That would take people who have worked 30 or 40 years with nothing to show for it when they leave to being business owners with an interest in a business that can be passed on to their families. It’s wealth creation.

B.E. Smith: Mayor I wrote about the potential of that option early this year and believe it has merit.  Instead of fighting for jobs, there is an opportunity to establish ownership and fight for wealth creation. It will take a paradigm shift of sorts, but it’s the kind of thing that should be considered.

Mayor Wharton:  Yes, it could be a win-win situation. And you’re right, it will take some change in mindset and approach and a bit of creativity. I believe, if necessary, we could find an existing business owner, a Charles Ewing for instance, someone who is in logistics, has run a business enterprise, and create a joint venture to make it work. If he can pick up and deliver furniture across the world, he could certainly navigate neighborhoods to pick up trash. I guess I’m just of a different mindset because growing up my family was always in business. In fact, my mother still gets paid from a business my father started when we were kids and she’s 94 years old now.  

Beale Street and the Pyramid

B.E. Smith: What’s the plan for the management of Beale Street?

Mayor Wharton: We hope to have lawsuit settlement in the near future with the existing management agency. After which we will be creating a new governance structure to manage the street, to reinvest money generated from it to clean, improve and grow it as a business and entertainment district. We had a committee headed by Jeff Sanford to advise me on the best structure to operate Beale Street and we now have a plan in place pending the settlement. It will allow for significant improvement to Beale Street in many ways.  

B.E. Smith: What about the Pyramid? What is the status with Bass Pro, other alternatives?

Mayor Wharton: As of this interview and as days pass, I have every reason and become more convinced daily that Bass Pro will happen. Not just Bass Pro, but improvement of the Pinch District. Right now we have completed what it takes to sure up the Pyramid underground from an earthquake/seismic perspective and now we have to study what it’s going to take in order to sure up the above ground.  The below ground costs came back at about $6 million dollars or so and right now we are in the wrap-up phases of the remaining seismic studies needed to move forward and determine what the cost is going to be going forward.

B.E. Smith:  Is it your contention that the costs will be reasonable enough for the project to move forward? Or could they come back and be a deal breaker?

Mayor Wharton: I have to be honest with you, the cost reports could come back and be a deal breaker. But the studies we have show that the return on the dollars invested in the project will justify what we have to spend. Those numbers are demonstrated in a study that was done for us by one of the best firms in the world, RKG.  I have confidence based on that report that the investment will be well worth it and feasible.  

The case for re-election

B.E. Smith:  Last question. We are coming upon an election cycle and you are coming back to the voters asking them to put you back in office. What is the basis of your campaign and request for voters to return you to the office of City Mayor?

Mayor Wharton: There is the tangible and the intangible. Let us take the intangible first.  I think even the most begrudging of individuals in the City would say that we’ve seen upsurge in the way Memphians see themselves and the City. We have begun a process of changing the way we see ourselves as a community and I see it working through a number of efforts that I’ve directed or supported and its happening.
Secondly, on the tangible side, I promised jobs, jobs, jobs. Businesses are investing and we have delivered on that promise of new jobs, KTG, Electrolux, Mitsubishi and more on the way. We’re cleaning up the City with an aggressive blight removal plan, Marina Cove, for example in partnership with New Direction. We’re building up, cleaning up, crime numbers are down. We’re attracting investment and grants from around the country, such as the Bloomberg funds, “Strong Cities, Strong Communities” fund from the White House.

The bottom line is we said we wanted to make Memphis into a city of choice and we are delivering on that effort. The key component to being a city of choice is having a strong middle class. You show me the destruction of the middle class in any given city and I’ll show you a city that is going down. We are investing in strengthening and building our middle class with value added job opportunities, investing in education in the broad sense, and supporting those on the fringe to get folks out of poverty. We’ve done all that in eighteen months. Just imagine what we will do in four years. We’ve got a vision, we’re working on it and more importantly we’re delivering on it.

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