Behind the Headlines — August 15, 2014

Behind the Headlines — August 15, 2014


(female announcer)
This is a production of WKNO-Memphis. Production funding for “Behind
the Headlines” is made possible in part by.. The debate over pilot tax
incentives and city funding tonight on
“Behind the Headlines.” [theme music] I’m Eric Barnes, publisher
of the Memphis Daily News. Thanks for joining us. We’re joined tonight by two
people who’ve been a part of the debate over tax
incentives, city funding, city priorities. Thomas Malone, head of the
city firefighters’ union. Thanks for being back. Thanks for having me. And Doctor
Kenneth Whalum junior. Thank you for being here. Thank you. Also joined by Bill Dries,
senior reporter with the Memphis Daily News. So, in this
ongoing, uh, conversation, debate, argument over
city funding and the cuts to benefits, I’ll start
with you, Thomas Malone. You all have been fighting and
pushing back on the city with these cuts first at health
insurance and potentially to the pension. One of the issues that’s come up
and has come up in past years is pilot tax incentives. The giveaways I think that
your side of the debate has, um, said. We had some folks from the
chamber and EDGE and economic development people on the
show last week to respond to somethings been said. Now give you a
chance to respond. What are your concerns about
these tax incentives and pilots specifically? First, let me, let me fixate. My organization is not saying
we are opposed to any pilots. That is not where we went. What we started out when
the cuts started happening, everything was based on it
was because of the employees, the rich benefits
of the employees. The $34,000
pension that they get. You know, those
are rich benefits. And so, when we started
looking at different things, where the money in
the city was going, we got the long term debt that
comes out right off the top, which is about 27 to 29%. And then we found something that
was about 14% called pilots. And the thing about it was we
looked at some that do work. Let’s be honest. But the reality is it’s about
63% of these aren’t working. That’s where we
went on the attack. If it’s not working, then to
us, it’s like corporate welfare. You’re giving them
something for nothing. And so, what we were saying
was this thing needs to be restructured. There needs to be some
checks and balances. There’s no claw back provisions. There’s no penalties. I mean I could go on for hours. We have 26 minutes. So, Pinnacle. In two years, they took
everything that was given to them and they cut it. So.. Pinnacle, the regional airline
Downtown with a lot of fanfare. A lot of fanfare. They got three million
dollars right off the top. Ultimately, went bankrupt. Then, they got a five
million dollar pilot. Then, they got a
103 parking spots. And then, the president. Then, he leaves and he
gets a big golden parachute. And they file for
bankruptcy and leave. There’s no
provisions for the city. There’s no claw backs. There were no penalties. Everything we gave them. Now we have to do
something with the building. And guess what. They’re back in business in
Minneapolis and we got no recourse. Okay. And your concerns
about this and about, you know, city
funding generally. But your concerns about tax
incentives and the way the city and county handles them. Well, it’s particularly the
negative effect it has on the people of Memphis. The fact that the Tennessee
Comptroller came in and pointed out four items that he
was really concerned about, not just the pensions but
employee benefits and the $57 million debt to
students and pilots. I didn’t come up with
those areas of concern. The Tennessee Comptroller did. Because every pilot we give away
breaks off a chunk of the tax base. And Memphis is by all accounts
the poorest city in the United States of America. Our metro region is by all
accounts the poorest metro region in the United States. So, we can’t afford to give away
parts of our tax base and still have to fund
municipal operations. That was my concern. I’m not in a union. I’m not a city employee. But I believe I represent the
people who are most negatively impacted. And that’s why I got involved. And what would you.. I’ll stay with you. What would you like to see? And the folks in
favor of pilots.. And again, I always say this but
we’ve never had someone on the show who said pilots are great. Even the people in the economic
development chamber say look, they’re an imperfect, um,
solution to a problem of economic
development, of bringing jobs. And they will tout
a lot of numbers. And we’ll get in
to some of those, you know, thousands of jobs and
millions or hundreds of millions of dollars in investment
that otherwise wouldn’t happen. Sure. What’s your
response to that, uh, to that point-of-view that these
are a necessary evil for lack of a better term? My response is I
don’t believe them. I don’t believe their numbers. Why would any of us
believe their numbers? Their numbers come from them. The numbers that we see have
never been corroborated by an independent source. And to answer your question,
what would I like to see. I would like to see and I
believe most Memphians and Shelby Countians would like to
see a complete accounting of every existing pilot, every past
pilot and every pilot that is still being granted right now. We are hemorrhaging tax base
and nobody is stopping it. That’s what I’d like to see,
just a complete accounting. You said, Thomas, that
some, I think you said, what, 15%. I’ll let you repeat the number. But some percent of the
pilots you guys looked at, you said those are working. A big chunk aren’t. Would you like to see
more accountability? Would you like to
see more transparency? And what makes a pilot
from your point-of-view, the ones that work,
how do you know that? Let me say that first of
all, this whole pilot concept, people know very
little about it. There’s very, very little
transparency in the whole system. So, when you say
something works, if you go back and
look, these pilots, they self-report. In a, uh, report to the
council last Tuesday, the EDGE group reported that
they audit 10 companies a year. Well, in our
findings, they do no audits. They self-report and there’s
nothing to say whether they’re true or false. So, if you go back and look
what Doctor Whalum just said, the city comptroller in his
message to the mayor discussed pilots at late. Forbes Magazine has discussed
Memphis pilots at late. There’s an
organization called ALEC, American Legislative
Exchange Corporation. They’re the most
anti-union group in the country. The Coke Brothers. They wrote a huge, I think,
30-something pages on pilots, just on pilots saying what they
were and how they were eroding the tax base. So, this is not just
labor that’s saying this. These are all these
groups that are saying this. So, when we talk about this,
the chamber reported that we had lost 70,000 jobs in
the recent years. To me, that says
it’s not working. Whether the good jobs
report came out and said 63% are under-achieving what they said. So, the thing is
when we do something, when the unions
have to do something, we have to show the cost out. We have to do this. We have to do that. We see nothing but.. I just read the paper the other
say where the Chisca Hotel got a pilot. I understood apartment
complexes are getting pilots. You know, I understand from
International Paper’s pilots, they got a corporate jet. All these intangible things,
I don’t really know if I read them. They’re in the reports. But I think that if it’s
going to be successful, that let’s see what they have. If we as a community are having
new groups come in here as companies, we should be able to
know everything about them and welcome with open arms and
do what we can to help them succeed. Okay, Bill? Um, the argument from the other
side on this program last week is that we do get
benefits from them, that we get more in terms of the
taxes that they pay than what is abated in the pilots. And they cited
some of their data, granted. But on their own
website to account for this. So, are we not
getting a benefit? I think it depends on
who gets the pilot. I mean, you know, we hear
about the ones that are failing. We’ve been able to kind
of dig through the weeds. And the ones that
are succeeding, I mean, obviously, you
know, let’s be realistic. Let’s be fair to everybody. FedEx, they get a pilot. There’s got to be something good
that comes out of that for the city and state because
of their production. But when you start just
handing them out to every.. I asked one of the EDGE board
members have y’all ever turned anybody down. And I’ve yet to get the answers. And they’ll say, and I’m
not taking their side. But they say absolutely we
turn people down all the time. They don’t put
those numbers out. This isn’t going to go over well
with Doctor Whalum here but they don’t put those numbers out
because they don’t want to embarrass anyone. They don’t want the
embarrassment of a rejection out there. Let me say this. Here’s the deal. We all know. And this is what EDGE reported. That when we lose a pilot,
other cities around here, if they get it, we
know they got it. So, we know we lost it. It’s no different if we get one. What’s going on? Everybody knows it. But the whole thing is is
what’s wrong with the tax payers knowing what’s going on? They say we don’t
put the numbers out. Right. Well then, that makes me think
that if I can’t go somewhere and find them, they do no exist. Bill, and to answer your
question you said do we not get benefits. Somebody’s definitely
getting benefits from pilots. And until there is a complete
and thorough accounting of every pilot that has been
issued in the past, present and future, we
won’t know who’s getting those benefits, Bill. When you think about it,
man, if there is no independent corroboration of the numbers
that EDGE puts forth and EDGE and the chamber are working
together closely hand-in-hand, well, how do we know what’s
benefitting the people whose taxes are being given away? And they say that they have
an independent audit or an independent firm that does
review their numbers and does review their reports. And again, I’m just
repeating what they said. And the show is on the web last
week from some of the folks from the chamber and EDGE. You know, if you go
to their website, it’s EDGE Memphis. Just Google it. They’ve got all their reports at
least from 2011 going forward. Because when the
changeover happened, there’s an
independent authority. But you still don’t trust them. And I’ve printed out a
couple of walk through, a couple of these
recent projects. You just don’t
trust the numbers. I will never leave my hen house
under the supervision of the foxes. I won’t do it. Now, I can, you can say whatever
you want to about our motives. But I think it’s unreasonable
to ask how many jobs did this company create. How many people living in the
poorest city were given jobs by this pilot? And what bothers me is that
I and the unions are seen as troublemakers because we’re
asking questions that the taxpayers have every
right to know the answer. And when they get through
defending the processes, when they get through
presenting their own numbers, what’s the answers
to the questions? How many pilots? How much money? Right. Let me add this. When we talk about
some of these things, first of all, the pilot program
should be an incentive program. It is now become an
entitlement program. If you have a pilot and you want
another one and you don’t get it, they say well, we’ll move. You know, and now they’ve added
retention and expansion to the pilot program. Now, where is the benefit? This goes back to 2006 when they
put in the cut for provision. But for a pilot would this
project go forward or will this company relocate or whatever? We think that with all the
money that’s being given away.. And let me say
this right up front. Regardless of what anybody says,
some of the pilots have to be a good thing because
obviously we built something. But think about if we would have
put the same amount of money in to our work force education or
our infrastructure or all these things that we have,
the fire and police, sanitation,
streets, all these things. Would we have to beg
somebody to come here? Would we have to give
them all this tax incentive? The original pilots were set
up for three to five years. Now, everybody is 15 years. Yeah. The McKesson was
the big project. Back before EDGE was formed,
right before Wharton took office if I’m not mistaken, McKesson
moved across the border. And they said that the Memphis
economic development efforts weren’t, um, they
were just out of step. They were behind. They were difficult. They were bureaucratic. And so, McKesson goes
across the border to, um, DeSoto County. And it’s employees may still
live in Memphis or not and they can still use the
airport and they can still, you know, if they get a heart
attack in the city of Memphis, your E-M-Ts are going to
come help them and the police department. They use the amenities of
Memphis but they based in a place that was more,
from their point-of-view, lucrative and helpful
to their recruitment. What’s the answer
to that problem? They only move to one
part of the organization. They didn’t move
their full organization. Sure, yeah. It was the expansion that they
were going to do in Memphis. They did it across the river. There was a million.. I should have numbers. I don’t. It was well over a
million dollars. It was more in the warehousing
part where we didn’t have. But what’s the answer
to that possibility? Here’s the answer
to that retort. Give us a complete accounting. Why is that so objectionable? We’re talking about millions
of dollars just in the air. Poof, pow, gone. Just give us an accounting. Nobody’s saying take away all. I’ve never said that. I’ve never heard
Thomas say that. Just give us an accounting. But, okay. But let me say this. Where we have our problem, and
this is nothing against these companies. They all might be doing
great but we don’t know that. But think about this. If all of these pilots that
they’re talking about giving away, $42 million in 2011. I mean 2013. If they were all doing good,
would they be coming after the employee’s benefits? Would they balancing the budget
on the backs of the employees? If these things were working and
generating the economic income that they’re supposed to do,
they wouldn’t be trying to take the retirees insurance. They wouldn’t be
trying to take the pension. They wouldn’t be
cutting the employee’s. They’d be funding the city at
the appropriate level to pay for those bills. Okay, Bill? Do you think the trust factor
that you’ve both talked about here, do you think the trust
factor translates on a wide spread basis beyond this issue
of what to do about employee benefits and the reaction to
what the council has voted to do? I think not only does it spread
but I think the spread will intensify the longer the chamber
and the mayor and the council justify the existence of pilots
without telling the public the entire truth about the pilots. Bill, there is a darker
side to this picture as well. What if? I’m not saying
that this is a case. But what if as a result of
complete accounting we find that there are connections between
pilot recipients and politicians who vote on these
kinds of incentives? What if we find out that the
millions of dollars that are being given away by tax payers
in Memphis and Shelby County are being used to make philanthropic
donations to make campaign contribution? That’s not legal, Bill. But we won’t know that until
we have a complete accounting. And I for one am not
going to be quiet about this. If I have
anything to do with it, pilots is going to be a huge
issue in the 2015 municipal elections. Why shouldn’t it be? Well, if I may. If you see, we were doing 90%
on the pilots here in Memphis. Shelby County was doing 75%. In terms of level of
abatement, tax abatement. Correct. So, the question becomes why. Why were they not level? So, there was a
move, not a council, to reduce these over a
period of time to get to 75%. Now, the thing is this. When you have a 15-year pilot
that is ending and the company puts in for another 15 year
pilot with a threat of moving if you don’t get it, to me,
that’s almost like extortion. But back to your question,
Bill, on the trust thing. When you have no transparency
here or when we talk about the insurance and the pension and
the numbers are so skewed and the numbers keep
changing every pension meeting. You’ve been there. Everybody’s been there. But the numbers continue to
change and the council asks questions of the administration. And they come with a
presentation but they can’t answer the question. They don’t have those numbers. They got to get numbers. Then, when you sit there and
watch that every two weeks, then yes, you start to wonder. Why? If I go to the council with a
presentation and I don’t have everything that
they’ve asked for, I doubt very seriously if
they would let me finish my presentation. The annual
required contribution, as you said, began at an
estimate of $100 million. And you publically came out
right off the bat and said that’s not an accurate number. We don’t think it’s that number. It wound up being at this
point 78 million in terms of the annual required contribution. If you look, and I spoke to
the treasurer yesterday on an unrelated matter. But we discussed some of this. And now you hear the
administration and the council saying well, if this number
is not good we still got this unfunded liability thing. Well, they work on
conjunction with each other. And on the insurance, the
unfunded liability means zero. But you’ll hear
the argument that, well, the state is going to come
in and mandate this just like they did the pension. Well, I got verification
yesterday that every single municipality that has
anything to do with insurance, state, local,
county in this city, in this state and all
around the surrounding states, every single one hs
an unfunded liability. The state has probably two
to three times more unfunded liability than we have here in
Memphis just on their insurance. So, that’s the problem that
when you talk about trust, to me. I’m not a real smart person. So, I sit down and we work
hard to come up with something. And if we don’t
understand how to do it, we go get the
experts to help us. And then, we put our plan there. The numbers that are thrown
around are just made up numbers they seem like because
they go up here one day. Well, we’ll get back to you. How long will it take
to get back to you? 30 days. Well, when we have that, we
got to be back in two to three, four days. On this issue of trust, you
talk about accountability and transparency. Define what would
transparency look like. What would accountability
and transparency look like? Because I think you’re saying
if it’s truly transparent, if it’s numbers I can trust,
you’re not blanket opposed to incentives and pilots. Okay. Absolutely not. So, define how would that? What mechanism would be in place
to bring that accountability and transparency? I would start with David Lenoir,
Shelby County trustees annual pilot report where he
clearly points out the problems, the problem with communication,
the problem of getting information between the
organizations and agencies that extend pilots. Just start with David. Start with the
trustee’s office. And let him sort of drive
the analysis in terms of accountability. Because if we don’t
get that accountability, we won’t ever be able
to trust the numbers. EDGE is going to
just double-down. The chamber is going
to just double down. They have the financial
resources to double down. They can buy radio time. They’ve got a new radio show on
black radio all of a sudden to educate about pilots. Listen, man. The people of Memphis and Shelby
County are the ones who are giving away their tax dollars. This is not something
where we hate rich people. I love rich people. I want to be rich one day. It’s not about that. But it’s about accountability. So, you would view the trustee’s
office as a fairer and neutral kind of? Yes, absolutely. And that would be a
new function for him. He’s been complaining about
this since he’s been doing the reports. This is not new with me. Let me make this real
simple, the transparency. It’s pretty simple. These people enter
in to a contract. Yeah. Or they should. And the contract should
substantially protect the interest of Memphis
and Shelby County. Report on the contract. If the contract says that you
will bring in X number of jobs within three years at
such and such salary level.. And this is the push back
I hear from these folks. This is the push back they have
is in part other cities don’t require these things. And if they don’t,
the company will say, you know what. Saint Louis doesn’t require it. They don’t need
this transparency. They don’t want this
level of accountability. We don’t want to expose our
private business transactions. So, maybe you
deserve that, Memphis. But Saint Louis
doesn’t require it. So, we’re going to
move to Saint Louis. I would say that, too, if, with
a hand shake I was going to get a $23 million tax break. It doesn’t make sense. Why are we sitting at
this table talking about it? Why is Mister Malone
here at the table? Why are we talking
about unions and benefits, employee pensions? Because of the overly aggressive
involvement of the Memphis Chamber of
Commerce in this issue. Had they kept their
hands off of this, I believe the political process
would have resolved it in a way where the unions
would have given some, the employees
would have given some. Our problem is that the chamber
is the voice of business. And our elected officials
are the voice of the chamber. And no body’s the
voice of the people. Pretty much so. But the one thing about the
chamber is when I spoke with them, I said why are you getting
involved in our benefits. They never have. We belong to the chamber. Our organization belongs. We never got any information
that they were changing their tactics or their ideas. But the thing about it is.. Here’s what bothers
me about the chamber. The chamber gets, as
Doctor Whalum said, they got the money to
go get the tv time, the Commercial Appeal. They get all these intangible
things that we have to fight to try to get in a little bit. Right. Thank y’all for
having us, by the way. But the bottom line is
they go on numbers that the administration gives them. We have proven council meeting
after council meeting that the administration’s
numbers are wrong. But the chamber says they’re
still going on the numbers that you talked about on the unfunded
liability of the pension. They will not get off
of the high numbers. And so, I met with them. I met with two different groups. And I said let me see
where you got your numbers. Here’s mine. Here’s my report for my actuary. Let me see y’all’s. They got nothing. They have nothing. But they sit up there and
they mimic these numbers to make everything look bad. And so, that’s the
problem that I have. Alright, just
three minutes left, Bill. So, about a week
after this program airs, you’ll make a presentation
to the city council. You’ll make a pitch to them for
a solution to what the council has voted to do on
healthcare and benefits. Actually, it will be the
oversight health insurance committee. Which is a body that
includes the city council, as well as union leaders
and the administration. So, what will your
pitch to them be? Well, obviously we took the
charge when they sent it back to the healthcare meeting. We got busy. We got with underwriters. We got with actuaries. We got with simple
insurance people. We called all around the country
to get ideas for people that have had this happen. And so, our pitch will be that
we will be shifting some costs and freeing up. We were charged with
coming up with $23 million. We will come up with
$24.6 million of shifting, which will free up money
for the administration. That’s what we
were charged with. Now the goal posts are moving
as we get near our presentation. They have moved the goal post. Now they want to talk about what
we’re doing about the unfunded liability, which no
body has done anything. So, we have a presentation that
will keep all the employees, all the spouses and do away with
the 24% huge increase a lot of people can’t afford. And we will be making this
presentation about keeping our insurance the way it is and make
it some options in there for individuals to choose which best
is for them and their family. And what we’ll be doing in the
interim before and after their presentation is
drawing out the numbers, drawing out the connections
between pilot recipients and members of the city council who
will be voting on these issues so that the public can know. Well, wait a minute. It’s not just a sort of
disinterested sort of view that the councilmen are taking. Their campaigns have been sort
of helped along by indirectly these pilots that
they’re receiving. We just want to raise
the level of awareness. Let me add this. One of the things that concerns
us is we talk about bringing companies in. Yet, we’re sitting here losing
employees on a day-to-day basis because of all these things
that are going on with them. And nobody seems to care. Alright, we’re going
to leave it with that. Thank you both for being here. Doctor Kenneth
Whalum, Thomas Malone, Bill Dries. Thank you for joining us. Join us again next week. Goodnight. [theme music] CLOSED CAPTIONING
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