Forget the conventional wisdom, forget the talking points, and forget the comments on newspaper websites. The real question is this: What if City of Memphis government is efficient and productive?
Yes, we know that it’s more accepted to presume that city budgets are expanding wildly, that city government is bloated, and that money is wasted at every turn. There’s only one problem: that’s not what the evidence shows.
Just this week, Memphis Daily News opined that city government “still hasn’t mastered the art of making budget cuts and truly shrinking the size of local government instead of making budget cuts in one area and finding other areas to spend that savings in.”
The only problem – it’s just not true.
Real Balance in Budgets
There are fewer workers in city government, the city tax rate is dramatically less than it was only a few years ago, and the size of government has shrunk so much that basic services – such as libraries, parks, community centers, and public transit – are delivered on shoestring budgets.
More to the point, in light of key city services that are underfunded and undermanned, editorial writers should be asking themselves: why exactly should city government be shrinking its size in the first place?
Cutting government may be the stuff of kneejerk popular opinion, but the truth is that shrinking Memphis services more is simply a race to the bottom. Successful cities have governments that invest in their future, provide vital services effectively, and have balanced budgets.
We don’t mean that they balance the revenues and expenditures columns of numbers, but instead, they have budgets that balance responsibilities to a variety of services that make neighborhoods more livable, give youth better options after school, and connect neighborhoods to job centers with efficient public transportation.
Memphians can pay now or pay later. City government can pursue cheap services rather than quality services, but we’ve already seen the consequences of selling Memphis on the cheap with our economic development policies. Doing the same with services that are crucial to the health of Memphis neighborhoods and their people is already taking its toll, and cutting budgets even more is precisely the wrong strategy for City of Memphis at this time.
Tale of the Tape
As we wrote last week, when compared to its peer cities, Memphis is on the lowest rungs for funding everything but fire and police services. For example, Memphis provides $23 in per capita funding for libraries compared to $35 in Atlanta, $37 in Nashville, $74 in Birmingham, and $78 in St. Louis. City funding for public transit falls below its peers, and it would take a $20 million increase in funding for it to move more toward the middle of its peer cities. In a ranking of 88 cities for per capita park funding, Memphis is next to last with per capita funding of $27, compared to the overall average of $82. As we pointed out last week, Memphis needs to invest $35 million for services like public transit, libraries, community centers, and parks to move to a respectable ranking but not nearly to the top.
Here’s the thing: City of Memphis ranks high on efficiency and productivity rankings, largely because it is delivering services at low per capita costs and doing it with a property tax rate that has been reduced from $3.43 in 2006 to its present $3.11.
Too often, in government at all levels these days, budget-cutting is treated like it’s the same thing as making government more efficient. That’s not true. Often, as is the case with the Memphis services we mentioned, it is the budget cuts themselves that are unraveling efficiency, because services are being provided to fewer people for fewer hours and with fewer employees. If city government is unwilling to invest more in its own city, we wonder why we should expect businesses to do it.
We wrote several years ago that local government needs a “Department of Connecting the Dots.” Widespread blight not only makes Memphis more unattractive, but blight results in more fires and more crimes. And yet, the tendency is to only put more and more money into police services, which means that fighting blight has less money although it’s key to fighting crime.
Status Quo Is Not Good Enough
Budget cuts often create their own self-enforcing loop. For example, the budget for libraries is cut 20% which means hours are cut 20%. Then, the number of people going to libraries drops by about 20%, and the drop in usage is used as the premise for more cuts in its budget.
There seems to be the opinion by many people that libraries, community centers, parks, and public transit are luxuries that Memphis cannot afford to fund adequately. And yet, there are children and families whose only Internet connections are in libraries, there are hundreds of thousands of people using library computers to apply for jobs, there is a rise in obesity that corresponds to the decline of the city park system, and students are using libraries as homework centers although the system’s books budget has been reduced to record lows and some science books don’t even have the correct number of planets.
Meanwhile, public transit is crucial in creating highly functioning neighborhoods where residents have efficient connections to job centers. All of us have criticisms of MATA, but when consultants evaluated its efficiency and productivity, the system came out well, because like many city services, it’s handling a large number of people on flat or declining budget. The evaluation also pointed out why most improvements to MATA are merely nibbling around the edges: there’s not enough money to do anything more.
Fortunately, there are city officials in both administrative and legislative branches who understand that the status quo is simply not good enough, and that Memphis needs a plan to fight for neighborhoods with better funding for services. Even more, if Memphis is serious about competing for population, economic growth, and new residents, it can’t do it by providing marginal city services.
Taxing Numbers
We know there are many theories about why people are moving out of Memphis, and one of the most popular is that people leave Memphis because of high tax rates.
There is a heavy dose of nostalgia that comes into play in these discussions, because it is often suggested that city government was so much more efficient 30 years ago. And yet, the tax rate in 1980 when Wyeth Chandler was mayor was $3.74, and if that tax rate had kept pace with inflation, it would be $10.26 today rather than $3.11.
When Mr. Chandler left office, the city property tax rate was $3.55. Through most of Dick Hackett’s terms as mayor, the city property tax rate was $3.31. The average property tax rate while Willie W. Herenton was mayor was $3.17 and when he left office, it was $3.25.
For us, the tax facts pretty much unravel arguments that tax rates are a primary reason for Memphis’ massive out-migration since 1980. It also makes it pretty hard for us to accept the converse: that if the Memphis tax rate were decreased, the city suddenly would be a magnet for new residents and businesses.
Simple Math
Some of the most successful cities in the U.S. have the highest taxes. What matters is the value proposition, and right or wrong, polling shows that Memphians don’t feel that they get full value from city taxes. Cutting budgets and reducing services blast a hole in the value proposition when citizens see that the city is unable to get the basics right.
Many people complaining about the property tax rate in Memphis regularly compare it to lower tax rates in Nashville, Knoxville, and Chattanooga. But the difference isn’t about efficiency or smarter management. It’s merely simple math. The Nashville property tax rate is significantly lower because the average house price is significantly higher.
If Nashville had the same property tax rate as Memphis, every house in Nashville would produce $505 in property taxes more than here simply because the Nashville average house price is $164,100 compared to $99,000 in Memphis. (In Chattanooga, the average house price is $134,700, and in Knoxville, it’s $114,500.)
The difference in home prices means that although Memphis has 28,000 more homes than Nashville, Nashville still produces $141 million more in property taxes than Memphis. Or put another way, if Memphis had that much more in property tax revenues, its tax rate would be $1.71. Conversely, if Nashville had to cope with a median house price of $99,000 like Memphis, its tax rate would be roughly $7.46 – or higher than the $7.15 cumulative city-county property tax rate in Memphis.
Of course, the amount of tax freezes granted to corporations equates to 40 cents on the Memphis property tax rate, or put another way, if Memphis had those property taxes, the city rate would be $2.71.
Investment Strategies
When people talk about high taxes in Memphis, they’re generally referring to the cumulative city and county tax rate, but it’s curious that they rarely mention Shelby County Government. Some of this is rooted in racial stereotypes about a majority African-American city – and city government – but as we have written before, people who live on the east-west axis in Memphis largely have no idea how vital and important city services are on the north-south axis.
Lost on many Memphians is the fact that Memphis delivers its services at a lower per capita cost than Shelby County, Germantown, Collierville, or Bartlett. They also don’t know that Memphis has reduced the number of employees by 214 employees in two years, but south-north Memphis sees the reduction play out in their neighborhoods every day.
What is needed is for city officials to give as much attention and expend as much energy on growth strategies as on budget-cutting tactics. The good news is that Memphis is in the process of making these kinds of investments at The Pyramid, Sears Crosstown, Overton Square, Raleigh Springs Mall, Fairgrounds, and Whitehaven. Best of all, by developing funding plans using a combination of innovative financing sources, City of Memphis has mitigated the impact on property taxes and mitigated its risks.
It may seem counterintuitive, but there’s never been a better time for Memphis to invest in a dramatic investment program to create new economic engines, new jobs, and new vitality. Interest rates are at historic lows, and in creating this network of revenue-producing projects, Memphis has its best opportunities for lowering property tax rates….by increasing prosperity and economic activity.
Increasingly, I am getting the feeling that the elected officials of Memphis are not interested in its continuing to be a city, They seem to be eliminating or wanting to eliminate more and more of the things that a city is created to do.
I assume you meant to type $2.71 instead of $3.71, if we didn’t have the “corporate welfare” tax freezes lowering the property taxes collected?
The Memphis operating expenses may be efficient, but as you suggest, per capita expenditures do not measure effectiveness.
However, the problem is low density, inefficient pattern of land development that city council has approved while at the same time finding ways to cut muscle to lower government costs. It’s time to stop digging that hole.
And annexation has not been the problem as suggested by recent article in CA. If past annexations were taken away, Shelby County government expenses and taxes would be higher or a lot of people would have even less effective services.
Finegold: Thanks for catching the typo, which we have corrected in the post.
Jcov40: It sure feels that way. Great point.
Would a shrinking physical footprint make more sense than a shrinking budget? The city has within its annexation boundaries large swaths of property that either never fully developed or whose densities have greatly decreased over the years. While services in these areas may be limited at best, they still present demand for basic support such as fire, police and waste management. A prime example is the still largely rural area west of Weaver Road in Southwest Memphis and increasingly empty quadrants of north and south Memphis. The prospect of another annexation “cold war” was greatly diminished once the annexation reserve boundaries were set many years ago, thus the financial need to retain large swaths of undeveloped land has been greatly (if not entirely) reduced. While it would no doubt cost additional money that is not included in the city’s already tight budget, a financial analysis based on census blocks or block groups would greatly help in painting a picture of the physical correlation between revenue generation and expenditure.
The primary purpose of a municipality is to provide services to a population above and beyond what would be found in a rural setting. This of course assumes that a certain density of population and/or financial resources is present. If there are large areas where the population density is akin to a rural setting, then why provide services befitting an urban neighborhood?
I have been here for 7 years. I see lots of fighting among counsel members regarding small issues. I would like to see visions of a great Memphis. Mr. Mayor, where is your vision for Memphis? There is lots of land that could be utilized for operational businesses to keep the kids working and provide tax revenues for the City of Memphis. We have many people coming to Memphis for vacation, lets give them more to see and more to do. The more they see and do, the more money is spent and the greater our tax revenues.
I know Memphis is proud of the fact that there are no state taxes. But, what’s to be proud of if funding is in a slump. What is wrong with a city income tax? What is wrong with people paying $5 for car inspections? I’m sure people would do that rather than the continued property tax hikes. Seems every year there is a tax hike. If I could see some good in those tax hikes, I would probably not mind but I never see anything good coming from these hikes; only more hikes and more complaining.
How about building Memphis to a wonderful city to bring in more tourism, ergo, more money. If you build on such a dream, people will come and people will spend money. Come on Memphis, let’s start dream building!!!
How about taking a look at other cities to see what they are doing to keep their budget balanced and moving forward?
This is once again an excellent post. I am so grateful that we have an outlet for intellectual discourse about the direction of our city.
This article does some of the heavy lifting that the Mayors office appears unwilling or unable to provide in defense of its tax policies.
Memphis must return to its urban core to drive the future growth that will drive increases in property values.
It’s not a zero sum game between different areas of the city – but Downtown and Midtown are attracting private investment and that needs to be nurtured. If the economic engine is revving up in Midtown – which it is – projects like Crosstown need our full support.
A revitalized urban core will help us to increase property values.
Those of us who reside within the east-west axis in Memphis are well aware of who utilizes and receives City services and who doesn’t. Generally, we understand and appreciate how blessed and fortunate we are compared to our fellow citizens who reside on the north-south axis. I agree that City government is relatively efficient, and that a lot of the public criticism directed against it is due to the fact that it is controlled largely by African-Americans. What bothers me is when we see City government wasting our money and their time on idiotic sideshows which are completely unnecessary, like the recent flap over renaming of the parks. Reasonable minds can differ on the wisdom of retaining the original parks’ names. However, because of the ham-handed way the City’s Chief Administrative Officer handled the removal of the Forrest Park sign, we ended up wasting several weeks of time and several hundred thousand dollars of valuable tax money trying to clean up the resulting mess. This whole incident could have been avoided had it been handled with a modicum of intelligence. Just when I think Memphis is making progress, the folks in charge do something stupid like this which ends up making us look bad and bringing out the worst in everybody. It certainly gets discouraging.
Folks should pay attention to this budget season and weigh in via email to their council members. The budget is extremely right, and it is going to be impossible for the city to afford any significant investment in public amenities and services that will move this city forward, e.g., public transit, etc. Meanwhile, EVERYONE is constantly complaining about the state of public transit in our city and comparing to that of other cities as a point of derision. As SCM has stated, we’re simply not paying for it. But we could if we wanted to.
SCM, would you mind following this post up with a post explaining where the money Memphis residents are paying in county property taxes goes? To get to the point, are Memphians being asked to overpay for county services that they don’t receive or benefit from? Or is that also a myth?
It is quite obvious that Memphis leaders
Ambrose asks a very good question. I believe we are paying more to the county than the city, correct?
“To get to the point, are Memphians being asked to overpay for county services that they don’t receive or benefit from? Or is that also a myth?”
I agree with BC Hammersmith above. It is good to see an intellectual evaluation of what is going on. I agree 100% that the push of the city and Mayor Wharton has been to cut costs at all costs. That is not a good long term strategy Part of this is not his fault but the fault of what has happened in the city.
One thing that few people fail to mention because it is a touchy subject is that race relations has been terrible in the city for a long time. Nashville is not like this. This as well as crime, etc. has not only caused flight to the suburbs not just by whites but blacks as well who want to get out to the county or Mississippi where the education and safety is better. This urban flight as well as bad racial relations with political infighting going on, has caused business flight as well.
I agree that the only way to get Memphis to grow is for the economic base to grow. Now this is not going to happen by just cutting costs. Nor will we be able to grow fast enough by trying to draw other companies in from other places although this is needed. We will not be able to do this until race relations, crime, education, etc. get better in the city. THEREFORE, WE NEED TO GET OUR OWN CITY HEADS TOGETHER INCLUDING POLITICIANS, BUSINESS LEADERS, REGULAR CITIZENS, ESTABLISHED COMPANIES LIKE FEDEX AND OTHERS AND GROW MANUFACTURING ESPECIALLY AND OTHER BUSINESSES IN OUR OWN CITY AND TAKE CARE OF GROWING OUR OWN ECONOMY. THE PRIME OBJECTIVE OF THE MAYOR’S INITIATIVE TEAM SHOULD CONCENTRATE ON THIS ABOVE ALL BECAUSE IF THIS IS DONE, A LOT OF THE OTHER PROBLEMS WILL SOLVE THEMSELVES. I PLAN TO APPLY FOR THE NEW MANAGER’S JOB, BUT DOUBT IF I WILL TAKE THE JOB UNLESS THE MAYOR AGREES TO DO THIS AND NOT CONTINUE WITH THE STATUS QUO. THANKS.