City, County Differ on Fairgrounds Zone

By Bill Dries

The city of Memphis and Shelby County governments have a difference of opinion about tax revenue and education funding.

It is over where the sales tax revenue would go within a tourism development zone the city wants to use to finance the redevelopment of the Mid-South Fairgrounds.

Shelby County Mayor Mark Luttrell said he and Memphis Mayor A C Wharton Jr. have already talked several times in recent weeks about the matter and plan to talk more and have their attorneys talk more.

Memphis Mayor A C Wharton Jr. and Shelby County Mayor Mark Luttrell are talking over a difference of opinion about whether a Fairgrounds Tourism Development Zone would take sales tax money from local education. Luttrell says it would. Wharton says it wouldn’t.

(Daily News File/Lance Murphey)

The zone would capture sales tax revenue within the 3-square-mile zone and put that incremental sales tax revenue toward financing the redevelopment plan that first began to take shape during the later years of the administration of Memphis Mayor Willie Herenton.

The general plan has changed since Wharton adopted it as a priority. What has become more specific are the boundaries for the TDZ. The city’s application could go to the executive committee of the Tennessee Building Commission in Nashville for approval as early as Jan. 21.

County attorneys say the sales tax revenue captured in the zone for the fairgrounds project could include sales tax revenue that would otherwise go to fund local public education.

City Housing and Community Development Director Robert Lipscomb, who has been shepherding the fairgrounds plan among other redevelopment plans since Herenton’s administration, has flatly denied that the sales tax revenue to local education would be affected by the Tourism Development Zone.

Luttrell said he had a “lengthy conversation” with Wharton about the issue Monday morning.

Luttrell concedes there is a formula with a variable for extracting the sales tax revenue generated in the zone.

“Even with that variable there is the potential for losing tax money for education. That has always been my reservation,” Luttrell said. “(Wharton) has assured me that he does not in any way want to take anything away from education. And he would be willing to enter into any type of agreement that would ensure that money toward education from the sales tax would not in any way be abated.”

The Shelby County Commission delayed action Monday, Jan. 13, on a resolution that would have urged state officials to reject the city’s TDZ application. The delay is so attorneys for both governments can discuss the issue and try to reach an agreement.

“I take Mayor Wharton at his word,” Luttrell said. “State law right now says something different and how we get around that short of going to the General Assembly, I don’t know.”

Commissioners passed a resolution last year urging the Tennessee Legislature to change state law and specifically exempt local sales tax revenue for education within the zones from being used for whatever project the zone is financing.

When Shelby County Commissioner Steve Basar questioned Lipscomb about the point at a Cooper-Young Community Association meeting in October, Lipscomb was adamant that the only sales tax revenue pulled in would be revenue that would otherwise go to state government for possible distribution to other parts of the state.

Lipscomb repeated that several times as Basar said county attorneys had told him otherwise.

“None of that’s true,” Lipscomb said.

Shelby County Finance Director Mike Swift followed the exchange that same month by saying “In the existing TDZ today, it covers both the state sales tax and the local option sales tax. Half of that, off the top, goes to schools. Therefore there would be a reduction in what goes to schools.”

Then County Attorney Kelly Rayne also added that there is no “carve out” or exemption for education funding.

Basar, who sponsored the resolution urging the state to reject the city’s application, complained Monday that Lipscomb hasn’t met with commissioners to talk about the difference in legal views.

“I share his frustration on the lack of communication,” Luttrell said Monday.