VOL. 130 | NO. 126 | Tuesday, June 30, 2015
Memphis Finance Gurus Retrace City’s Fiscal Path
By Bill Dries
Mayors come and go at City Hall and what was a priority for one administration can change with the next. But one constant is finance.
It defines a city’s overall health, no matter who is in office, and thus its ability to borrow money to fund those priorities and then pay off that debt.
To Marlin Mosby, finance director for the city of Memphis under Mayors Wyeth Chandler and Dick Hackett and a financial adviser to the mayors after Chandler, the city reached a critical juncture in 2007, just before the onset of the national recession.
“The tax base was such that it wouldn’t support new population and generate additional revenue,” Mosby said on the WKNO TV program Behind The Headlines. “The people were unwilling to raise taxes, so the administration made really bad decisions and tried to balance budgets without any source of revenues.”
When the full effect of the recession hit, after Mayor Willie Herenton left office, “it all turned,” Mosby said.
Mosby was one of several former city finance directors and chief administrative officers and consultants who discussed a 40-year arc of city financial decisions on a two-part program. The second part airs Friday, July 3.
The first episode can be seen on The Daily News Video page, video.memphisdailynews.com and is hosted by Eric Barnes, publisher of The Daily News.
Rick Masson, finance director and CAO for the first 11 of Herenton’s 17 years in office, said Herenton, like the other mayors, was elected and re-elected based on his priorities and plans.
“There were major investments that were long-standing needs to the community,” he said, highlighting the needs of inner-city neighborhoods. “There was never a situation where someone said, ‘You are going beyond your capacity to issue debt.’”
When Henry Evans became Memphis Mayor Wyeth Chandler’s CAO in 1975, city government had “virtually no reserves” and the country was coming out of Nixon-era wage and price freezes.
Evans cautions against comparisons.
“We’re looking at a 40- to 45-year period in Memphis history,” he said. “Priorities in government change dramatically. You’ve got to look at what was driving those decisions at that time.”
Annexation is a common issue across those decades.
Herenton repeatedly said annexation was the primary means of city growth including tax revenue during his administration.
Annexation across the administrations of Chandler, Hackett and Herenton also made the city’s land area bigger as its population decreased.
“At the time we looked at other cities that had been landlocked,” Mosby said, citing St. Louis in particular.
“We were blessed here with state law in that we could avoid the issues other cities had,” he added. “What we didn’t do is realize what we had to do to keep people in the city and develop the core city.”
But Masson points to other forces outside City Hall driving annexation including sewer extensions sought by developers.
“Annexation is the end result of sewer extensions and urban sprawl,” he said.
If the city hadn’t annexed, Masson thinks developers might well have gone to the Tennessee legislature in the late 1960s seeking new laws to permit the incorporation of the towns of Whitehaven, Oakhaven and Raleigh – areas that were instead annexed into Memphis.
“If we had stopped the growth, those folks would have left anyway and we wouldn’t have had that tax base,” Masson said, adding that it wasn’t city crime driving an exodus to the east with new houses and subdivisions.
“They wanted this new-fangled thing called a den,” he said. “They wanted a ranch home.”
Tom Jones of Smart City Consulting, who has worked as a consultant to several city administrations, says few American cities have been able to annex like Memphis has for several decades. State law was changed in 2014 to require referendum approval of annexations among residents who are to be annexed.
“You can certainly question the risk of increasing the area,” Jones said in looking at the impact of the Memphis annexations. “The city really didn’t have any choice as long as you’ve got a county government that’s providing an incentive for sprawl and subsidizing road costs.”
Since Memphis property owners are 70 percent of those who pay county property taxes, Jones said, city taxpayers have helped fund the move to the east.
“The irony is that if you get a heat map of where Memphis’s property tax comes from, it’s largely within the 1972 limits of Memphis,” he said, speaking of the city of Memphis property tax base.
Evans said the city’s geography has played a role in the push to the east and annexation designed to keep the city’s path to growth open.
“We had a geographic issue that a lot of cities don’t have,” Evans said. “Our western city limit is the (Mississippi) river and our southern city limit is another state.”