VOL. 129 | NO. 153 | Thursday, August 07, 2014
Graceland Campus Financing Relies on Tight Boundaries
By Bill Dries
When Elvis Presley Enterprises breaks ground next week on the $75 million, 450-room hotel-resort it will build north of Graceland mansion, it will be the beginning of crossing something off the company’s wish list since Elvis Presley’s mansion opened for tours in the early 1980s.
An expansion of Graceland would be financed by a partial share of sales and property tax returns generated within the campus.
(Elvis Presley Enterprises, Inc.)
It will also be a start on a larger master plan for a 120-acre campus whose development would be financed with sales and property tax revenue generated specifically in that area of development on land already owned by Elvis Presley Enterprises.
Memphis City Council members approved Tuesday, Aug. 5, a tourism development zone application for the Graceland campus and the master plan the zone would finance that includes the resort hotel and an archive exhibition space. The resolution included a minority participation goal of 31 percent for the project.
“It will transform and elevate Graceland,” said Elvis Presley Enterprises executive director Jack Soden, who touted the plan’s “catalytic effect.”
The tourism development zone application goes next to state officials for approval. Sales tax revenue made within the zone, which is the campus itself, goes to finance bonds issued by the Economic Development Growth Engine of Memphis and Shelby County. EDGE would act as an industrial development board for the project.
The portion of sales tax revenue made in the zone that would go to local education would still be used for that purpose.
The Graceland items approved Tuesday are the first in a series of actions by the city connected to an expansion of the landmark’s presence in Whitehaven.
The financing plan includes future council votes on a 5 percent tourism surcharge in addition to the sales tax charged on items bought in the tourism development zone. There would also be a tax increment financing district for Graceland that goes to the council for a vote at some point in the future.
The tax increment financing zone would also be the development itself, with half of the incremental increase in property tax revenue going to city and county governments and the other half helping finance the development of the campus.
“That’s very similar to a PILOT,” council chairman Jim Strickland said, referring to payments-in-lieu-of-taxes – or tax breaks given developers – a controversial political topic at City Hall these days. City employees and retirees have contrasted the use of the incentives to cuts in health insurance coverage approved by the council this summer, with pension changes due for a council vote in October.
The Graceland financing represents the first response to the criticism by Memphis Mayor A C Wharton Jr.’s administration.
Even before the criticism linked to health insurance changes, Wharton’s administration was criticized for the size of the tax increment financing district it proposed for the Heritage Trails project in South Downtown and its tourism development zone proposal to finance a remake of the Mid-South Fairgrounds property. Both proposed zones would have pulled revenue from areas beyond the specific targets of the revitalization efforts.
Strickland said that because the tax increment financing zone for Graceland is exclusively the area to be developed, he can support that part of the financing as well.
“All of the incentives are generated by the property itself,” he said. “If we do not do these incentives, the improvements will not be made. They would not exist were the improvements not made.”
Strickland included, and the council approved, an amendment that puts in writing the assurance from developers that if the three sources of revenue – the TIF, TDZ and tourism surcharge – don’t generate enough revenue to pay the bonds, the city will not be obligated to cover the difference.
The hotel will also generate an estimated $900,000 in bed taxes that go to fund the debt from the Memphis Cook Convention Center and to fund the Memphis Convention and Visitors Bureau.
Council member Lee Harris questioned why some of the revenue couldn’t go to city functions such as paving streets and police protection – services that directly benefit Memphians.
“My fear is that the increase in the hotel-motel tax (revenue) leaves us in the same predicament we are in – still struggling to pave streets,” Harris said before he abstained in Tuesday’s vote on the matter. “I can’t spend it. I can’t eat it. I can’t pave streets with it.”
Attorney James McLaren, representing Elvis Presley Enterprises, argued that there is an indirect benefit to those functions of city government as more visitors come to the city and added that half of the incremental increase in sales tax revenue from the campus goes to city and county coffers.
He also told the council that the zones are so closely drawn that the sales tax from a Memphian who buys food at a Taco Bell near Graceland but not in the zone would not become part of the financing of the project.