Behind the Headlines – August 4, 2017

– (female narrator)
Production funding for Behind the Headlines is made possible in part by the WKNO Production Fund, the WKNO Endowment Fund, and by viewers like you. Thank you. – A look at economic development in the urban core tonight,
on Behind the Headlines. [dramatic orchestral music] I’m Eric Barnes, publisher of
the Memphis Daily News, thanks for joining us. I’m joined tonight
by Shawn Massey, partner at The Shopping Center
Group, thanks for being here. – Appreciate it. – (Eric)
Along with Reid Dulberger, President, CEO of EDGE, thanks for being here again. – Thank you. – And Bill Dries,
senior reporter, with the Memphis Daily News. So, I’ll start with you Shawn, you’ve done
developments and projects all over the city, and
county, and the whole area. But there are two right now that have gotten a lot of attention that are a little
outside the norm. There’s a project
in Binghampton, people maybe have
seen along Sam Cooper, and what is that,
Tillman, and Tillman, where grocery stores,
other retails going in, and then recently
announced in Frayser the Frayser Gateway Project. These two projects in, you know, rougher parts of
town, parts that haven’t had the kind
of economic development investment that, say,
downtown has had, or East Memphis has
had, or you know other parts of Midtown have
had, how’d you get involved? – I’ll start with Binghampton. Really it was through an
involvement in my church. The Christ Methodist
started Binghampton Development Corporation, to
re-establish the neighborhood, and several other
people, including Robert Montague, who’s a
former Executive Director, was a member of
the church and they had a housing ministry
that they wanted to do, housing economic development,
but long-term plan they wanted to build
a shopping center, bring, establish food,
a good healthy supply of food in the
neighborhood, bring a grocery store into
the neighborhood. And I really am just a volunteer at the Binghampton
Gateway Center. It was a seven year
volunteer so far, but it was on that
part, I’m still acting just as a facilitator
and volunteer with the Binghampton Gateway. Frayser Gateway
was very different. If you know, the
project was a subject to a truck stop being
at the location, and a lot of controversy
that the people in Frayser did
not want that type of development in
their community, and I was brought in, the owner of the property is
a client of mine, a shopping center
group, on a project in West Memphis and he said hey, can you help us here, you
know the people in Frayser. My involvement in Frayser
goes back 20 years, I’m one of the
Co-Founders of the Memphis Business
Academy Charter Schools, and so I’ve been
working in Frayser with Voice of Harmony,
Youth Visions, and Memphis Business
Academy for 20 years. So the opportunity
to do something in Frayser that would
help promote the area, bring good quality
retail that there’s no shopping center
built in three decades, and the chance to work
with an existing client brought me to Frayser. – But there also had to be,
you know, demand, right? I mean, the economic demand. It can’t just work,
I mean, as much as, it can’t just be about
volunteer project, right? It can’t just be from the heart, it’s also gotta
work economically? – Oh, absolutely. There is, I believe, demand. There is no new shopping centers built in Frayser in
the last three decades. You almost have zero percent
vacancy rate in Frayser, only one center
that has any vacancy is actually being purchased
by Memphis Business Academy and being converted
to a charter school, so now you have a great density of population that
is looking for goods and services that
are leaking out of the community, going
to other communities, whether it’s Midtown,
Memphis, Wolfchase, or Raleigh, that could be
spent in the Frayser community. – And the location of
the property is what? – It’s James Road at Hollywood,
right at Hollywood and I-40. Like I said, it’s right
next to Rodney Baber Park and that was a big
factor in the fact that Rodney Baber Park
is the second-largest urban park in
Memphis, and the edges of that park should
be activated, and no different than
Shelby Farms Park should be activated
on the edges. – Reid, we’ll bring you in here. You all are involved
in these projects in a new program, people know
EDGE if they know PILOTs. PILOTs which, you
know, more typically in the past, we associated with say, you know,
Mitsubishi coming in or Nucor Steel, or
even the retail ones. There were PILOT tax incentives associated with IKEA,
this is a different program for you all. And why is it important,
what is the program that focuses on these
kind of projects. – Well, we call it our
Community Builder PILOT, and back in 2014,
2015, the EDGE board was looking at the
basic PILOT program, and looking to
make some changes, and we realized that
our historic mission, our predecessor’s
historic mission in working on large
industrial projects, or headquarters office projects was still important,
but that we had a tool that could be used more
broadly, and hadn’t been. And so we reached
out, at that point, to what was then known as the Community Development
Council for Greater Memphis, and is now Building
Memphis, and asked if they would put
together a group of neighborhood
development leaders. And they did, and
Frayser was there, and Soulsville was
there, and Binghampton was there, and other leaders
from distressed neighborhoods throughout the city,
and we talked about the fact that
we have this program, it has certain limitations
under state law, but it had other limitations
that we had put on it, our predecessors had put on it. And, could we find a
way to make that program more usable in the inner city? And what came out of that was
the Community Builder PILOT, where we will do spec
projects, speculative development projects,
we’ll do projects with retail, while
we certainly want and love to see
job creation, that isn’t the end all and
be all of the program. We’re looking to
bring needed services to the inner city,
eliminate blight, create job opportunities
for the neighborhoods, but really have more of a
local neighborhood impact. – Well, and before I
got to Bill, I mean, just I think with
the Frayser Gateway, it would look to employ
165 part-time employees, 11 managers, 136
full-time equivalent jobs, excuse me I said that wrong, it was 165 part-time
jobs, an average base salary of around 23,000. So, there’s the
construction jobs that people focus
on, but then there’s ongoing employment
in the neighborhood that fits your
mission, apparently? – It does, indeed, and
those are estimates on what the retailers
will ultimately do. One of the big
distinctions between the community builder
and what we normally do, normally our client,
our PILOT recipient is making a commitment
to job creation, like those numbers
you just read. In the community builder,
because our client is the developer,
we can’t hold them to a job commitment,
that’s what we expect the retailers to do. If we get those numbers, great, if we do better even, you know, we’re even happier,
but what we really want is to see, as to
Shawn said, we wanna see the grocery store, wanna see the apparel store, the
household goods store, the restaurants, et cetera. We wanna see the
blight eliminated, development there, services
for the neighborhood, jobs for the
neighborhood, the parks strengthened,
and all of those other benefits that we’re
really focused on. – (Eric)
Okay, Bill? – So Reid, is there a transfer in ownership still
involved in this, as there is with
the PILOTs that we think of for a larger project? – Absolutely. Unfortunately, we
could only change our own rules, we
couldn’t change some of those state
rules that make the program so
interesting to use. So yes, ultimately when
the PILOT is closed, nominal title is
transferred to EDGE, Shawn’s client
will really retain all real ownership, rights,
and responsibilities, but no, we have to go
through that transfer, we have to do all
the other things that state law requires,
and so at the end of the day it is still a little bit
of a blunt instrument that we are trying
to use sometimes at the neighborhood level. It’s one of the
reasons that we’ve created some other
kinds of tools to go along with it,
like our ICED Loan, Inner City Economic
Development Loan Program, some other things
we’re working on, but the PILOTs are
still good for the larger projects with a
little bit more sophisticated ownership, doing
it in Binghampton, doing it in Frayser, we
have a great project, a medical office,
neighborhood docks, the 2800 block of Lamar Avenue. This is a long-standing, small, dental practice and
internal medicine practice that the doctors
there wanted to expand to better serve
that neighborhood. We think it’s an
outstanding project, and we’ll add some
jobs, but mostly it’ll eliminate blight and bring needed services to
the neighborhood. So, yes we have all the
terms and conditions that the state requires
of the PILOT program, but we’ve waived a
lot of our own rules that made this program
really not work for neighborhood projects. – Shawn, the Frayser
property there at Hollywood and
James, had been retail in the past, it had
been a treasury. – It had been a treasury store, might come into
Memphis back in 82, so it’s been vacant for
30, 40 years at this point, but it was a great, very dynamic retail corridor at one time. – So, does doing
this open the door, does it help other
developers see this and realize that
the usual suspects, in terms of locations
and hot areas for this, does it open their eyes, does
it change their perspective? – It does change
their perspective, it’s still a lot more difficult to develop in the
inner city, and without the PILOT and some
other incentives, we can’t bridge
the gap, and that’s what we’re trying to, if
on a typical developer would go into Frayser,
or Binghampton, or South City, or
someplace and try to do a standard development, he would never get the
rents high enough from the retailers
who base their rents based upon estimated sales
to justify new construction. So therefore, we have
seen three decades of no new construction
in Frayser taking place. This is an incentive to say hey, if that gap is a
little bit smaller, and you have a PILOT or
some other incentives like whether a TIFF, or
new market tax credit, or historical tax credits,
maybe it can work, and then create
some opportunities. You’ve got these
wonderful communities that are designing
goods and services, you got density which is
really important in retail, but you have no new development, and that’s gotta
change, and with, I applaud EDGE and the
opportunity to work with them first in
Binghampton, now in Frayser. And Frayser is very
much in the infancy, we could not go out and
even talk to retailers until the PILOT was in place. – And the national
retailers, is this a scale that’s too small for
what they’re looking for? – No, not a chance. Actually, retail, the
trend is to go smaller, to go a little
bit more, the idea of big boxes and
I just came back from a convention up
in Tennessee, Kentucky, ICSC convention this
week, and the trend is to go to smaller
centers, more dynamic in-filled
developments that can meet the needs to
be more experimental to the customer,
and that’s kinda changing trends and hopefully
we’re on the front end. I think when you
see Binghampton, it’s a very
different type center that’s gonna be pretty cool. – And this, just
technically the Frayser one is a $16 million project,
about 100,000 square feet. – Again, those are estimates. On that part, like I
said, I needed the Pilot in place so I could sit
down with the grocery store, sit down with an
apparel retailer, I couldn’t even
quote them a rent until I know, at this
point, it could get bigger. We have a 20-acre
site that could go to 200,000 square
feet, I don’t think so. I think we’re probably in reason within that 97 to 100,000
square foot center, the jobs, and the
other creation. I actually went kinda low, cause we’re three years out
before we’re opening, but I went with today’s dollars,
it’s gonna be a little higher. I would rather
have them exceed it than to come in and
say hey, somebody questioned why it’s lower. – Right and let’s go through, as we’ve done before,
and you get asked all the time, and
when we’ve had you on the show in the past. So, if it’s a 15 year tax
abatement, how does that work, because the critics
of these PILOTs say all it is is a big giveaway, they don’t have to
pay taxes, you know, the city’s, you know,
struggling to meet its ends and balance its budget, and people like EDGE are
just giving away tax dollars. Tell me why that,
and tell people who believe that, why you
think that’s not true. – Okay, let’s take the
Binghampton project since it’s under construction
and will soon be open. So, why do we care, why
should the community care? And Shawn’s really
laid it out quite well, these are services that
this neighborhood needs, this is a US Food and
Drug Administration designated food dessert, people in this neighborhood
have difficulty getting to the grocery
stores that exist, because they don’t necessarily have the access to
personal transit. They don’t own cars. They need jobs in
this neighborhood, this is also a blight
elimination project, so it does many things
that I would hope we would all want to see happen in the Binghampton
community, but as Shawn says, the numbers don’t quite work. It doesn’t pencil. So, what the abatement
does is it says of the taxes you
would otherwise pay, you’re gonna pay 25% and we’re going to abate, or forgive, 75%. Even doing that, however,
cause think of this this is a vacant piece of land, there are virtually no taxes
being paid on this land today. You’re gonna put up a,
they are putting up, a multi-million
dollar retail center. During the PILOT, the amount
of real estate tax alone that this city and
county will receive will go up dramatically from
the Binghampton project. So we as a community are getting more real estate tax, plus all of the other taxes
that will be derived from this project,
companies that are there spending money in
the communities, their employees spending
money in the community. But real estate taxes go
up, other taxes go up, we eliminate blight, we provide needed services
to the community, we provide jobs
to the community, and what did it really cost us? Really nothing. Because, as Shawn has said,
without the abatement, that was going to
be an empty field. Might have been
a football field, might have been
a baseball field, but it wasn’t gonna
be a productive asset for the community, so we really gave up zero to get this
phenomenal new project. – And, talk, how about,
a bunch of questions. But one would be
the other criticism of PILOTs in Memphis
and Shelby county, people say well Nashville
doesn’t do them, Nashville does TIFFs and
Shawn mentioned TIFFs, they don’t do anywhere
near this many. And why… you
all have the authority to do TIFFs, is that correct? – (Reid)
Yes. – Why aren’t there
more TIFFs done historically in Memphis
and Shelby county? – I can’t truthfully
answer the question, I can tell you that up
until fairly recently there were just two. One dating back to
the early 2000s, which is the Uptown
Project, and then. – Which is one of
the housing projects that was torn down and
replaced, and right? – Well it’s actually,
that’s part of it, but the Uptown Project is huge, it’s 5,000 some-odd
parcels, and it stretches from Mud
Island, essentially to the medical district. And that project continues. And then in around
2007, 2008 time frame, we had the Highland Row Project on Highland Street
near the university, which is the mixed use project that’s just coming out
of the ground today. So really two, up
until the last couple of years, as we sit here today there are six approved
TIFFs, so we’ve had four just in the last few years, one in Lakeland,
one in Millington, and two others in Memphis. We have the Binghampton project, which was introduced to the
county commission yesterday and is just
beginning its journey through the approval process. And truthfully,
there are probably at least a half-dozen
others under consideration. So, I don’t know
why we historically didn’t look at
it, but clearly we have seen the light
as a community. – And, I should have
done this at the outset, a TIFF is different than
a PILOT in what way? How does that incentive
work in a TIFF district? – That’s a show into itself. At a high level,
PILOTs and TIFFs both do the exact
same thing, they take some of the property
tax, real and personal property tax, they take
some of the property tax that otherwise would go to, say, the city and the
county, and they invest it back in the project. The mechanics of how they
work are very different, some projects are
much better as TIFFs, some projects are
much better as PILOTs. You know, that gets
into the weeds, into the mechanics,
but at the high level they’re both taking
property taxes that otherwise would have
gone to the city and county, had the project happened,
and investing them back in, so the project
in fact can happen. So, Shawn can go ahead and
sell the Frayser retail space, at least the retail space. – Right. From your point of view, from a developer’s point of view if
you’re looking at incentives, does PILOT versus TIFF matter? – PILOTs are project specific, where a TIFF is area specific. So, from a developer’s
point of view, a PILOT is easier in a sense of I can go in and say it’s
specific from a project, you have to have a
more of a macro-view that looking at a TIFF is like, cause your TIFF district
is gonna be greater than, you know, real property
that you’re building on, and you’re getting
the incremental tax lift from those
other properties that are coming to you
to build your project, and it’s a little
bit more difficult, a little bit more challenging, a little bit more controversial, in the sense, it’s a lovely tool that developers
should have, again, coming back from
Nashville, seeing all the construction going on
and everything by TIFFs, it’s a great way to develop. The PILOT, and
because of the ease they have put into
it at EDGE recently, is just a good first step. We could end up in
Frayser, and I’m talking with the CDCs up
there, trying to establish a TIFF district
in the future. Binghampton just submitted
their TIFF district, along with other
developers there. But it’s how you
allocate those taxes as they’re collected to
the different developments, and which really one lifted up? The PILOT was the first step. – And they’re not
mutually exclusive. – You know Binghampton,
we have a PILOT on the retail development,
and TIFF district encompasses that,
and is much larger. In the Uptown district,
we have a PILOT approved on the grocery store
there on Jackson, the former, the
long-vacant grocery store which is part of a
larger TIFF district because the development
entity thought if we’re ever going to
find a grocery store to come in there,
we’re gonna need everything we can throw at it. So the two can
work hand in hand. – Speaking of
grocery stores, Shawn everybody it seems it seems to that we talk to,
says supermarkets are really, really hard to do. Are they easier,
now is the degree of difficulty something… – They’re extremely hard to do. Like I said, it
took me seven years to find a grocery store
to go to Binghampton. I hope, from what I
learned in Binghampton, I can leverage to
go into Frayser. Already talking to
them, it is a challenge because most of the independent grocery stores tend to go
into second generation space. We’re talking new construction, they are able to
get a lower rate, and that’s why the
PILOT helps us, but changing nature
of the grocery store, with Amazon Whole
Foods purchase, and the whole dynamics of
having delivered groceries, it’s very challenging
without the tools, I couldn’t get them to sit down, we do have interest
because of density. People in those communities
are buying food. In an inner city, I think
from a grocery store point of view, and
you know there’s operational issues that
they have to deal with, with shrinkage and
security issues. But somebody in
those communities of Binghampton, Frayser,
South City, White Haven were more likely to buy at a grocery store than to
have Amazon deliver. – And part of the
discussion has always been okay, well let’s
have a supermarket or a grocery store
in these certifiable food desserts, but someone who has a supermarket
chain, big or small, are they necessarily seeing it or do supermarkets
operate these days on more of a hub
concept if you will? – No, they look at
the neighborhoods and all that part, and
I just wanna clarify, Binghampton is a
certified food desert, the location of the
Frayser Gateway Center is surrounded by a food desert. Frayser itself is
not a food desert, it’s just the amount
of grocery stores that are in Frayser
that are supplying goods and services
are not necessarily always providing healthy
food, healthy alternatives. You have a great Superlo store, you have a great Kroger store, a lot of the independent stores that come in and say hey,
we’re not a food desert because all these
grocery stores are there are not necessarily providing
the nutritional food that we need for our kids. – Okay, Reid, you all have also gotten involved in
residential just recently, in Madison and
McLean, and I wanted to talk a bit about
the requirement that some of those units have to be affordable housing,
what’s the standard for affordable, how do
you define affordable in awarding these incentives? – The US Department of
Housing and Urban Development identifies income
levels by community around the country for low
and moderate income people. So, the set the standard
of what it means, the definition of what it
means to be low and moderate. And under the
federal guidelines, they expect that
people can spend up to 30% of their
income on housing. So what we do with those units is we say that at least,
ours is a sliding scale so it’s between
10% and 20% of all the units
are required to be available for people who are
of low and moderate income, so we take a look
at what the HUD, on any given year
we’ll take a look at what HUD says,
those definitions are for our community,
which 30% of that income, we have to have units
that those people can afford to lease. And we’ll enforce it
on an annual basis. It was important to
Mayor Strickland, it was important
to Mayor Luttrell that as we were trying
to build density, as Shawn’s mentioned
on several occasions, it’s so critically
important that we make sure that we accommodate all
Memphians as we do this. – And this is the part
at Madison and McLean? – This is our very first
residential project. – And is that, how many, I mean, do you have targets
or goals for how many of those you’ll do
in a given year, or is it just as the
developers come to you? How do you market yourself,
or do you market yourself that this is now available? – So we set this up
as a trial program, cause we’ve not
done this before, we said we’ll do up to
10 of these projects and then we’ll call a timeout, and then we’ll reconvene
with the board, the mayors, and
see is it working the way we want it
to work, and if so do we continue it, do we tweak
it, do we discontinue it? We have not really
marketed the program, but word has gotten out, and so developers have quite
frankly been coming to us. We’re working
within the parkways, we’re working in
conjunction with the Downtown Memphis
Commission and their Center City Revenue
Finance Corps. I believe that over
the next few months, they’ll be modifying
their program, and I think they’ll
become a little bit more aggressive, and probably
take over, if you will, the projects within the loop. And then we’re gonna
focus our attention outside the parkways throughout
the rest of the city. – Okay good, cause the project that has been sort of off and on at Union and McLean,
just down the street. – (Reid)
The Bells Project. – The Bells Project. That’s not you all, the
downtown Memphis is doing that? – Yes. – Would you hand off
the Madison McLean one to downtown Memphis
or no, that’s done, that’s gonna stay with you? – That’ll stay with us. Again, these projects
that come along as the Downtown
Memphis Commission is repositioning
themselves, we’ll take care of those and then when they’re
ready, we’ll step aside. – And what about the big
one, the Overton Gateway that people are
talking about, right off Sam Cooper, where
it intersects with the park, were you all involved
with that one? – We have not had
discussions with them at this point, cause
MRG is the same firm that we are dealing with
at Madison and McLean. State law right now
makes it a little bit difficult, a little bit
more clunky if you will, to do these kind of projects
outside the parkways. And we talked earlier
about state law, and how it sometimes
gets in our way. We will be approaching
the legislature later this year, and
hopefully early next year as they reconvene to
try to do a carve out for Shelby County,
because Mayor Strickland and Mayor Luttrell are convinced that this is a tool we need
in all our neighborhoods, that we don’t have to be
making it more difficult to do it in White
Haven, or Orange Mound, or New Chicago, et
cetera, if anything it oughta be easier
because the challenges there are that much greater. – Yeah. And, Shawn, just a minute left,
people you work with you know peers of
yours, other developers, when they hear about
these incentives, and I think some people
look at incentives and they understand,
okay Frayser and Gateway have been underserved, but now we’re talking about Midtown. Midtown’s happening,
Midtown’s hot, downtown’s hot, why would there continue to be incentives
in those areas? What’s the talk among developers about the need for
incentives in ostensibly very popular places like
Midtown or downtown? – Again, it’s still
sometimes bridging the gap. You have very expensive
land, you have infrastructure that has to be upgraded. It’s not necessarily
for the development and the construction,
but when you don’t have a sewer system,
street networks need to be put in
place, lighting, and some of those
initial costs just require some
incentives to bridge the gap to make it an economically
viable project. – Okay. Well that is all
the time we have. Thank you for being here,
and thank you for joining us. Join us again next week. [dramatic orchestral music]