Behind the Headlines — Jan. 17, 2014

Behind the Headlines — Jan. 17, 2014


This is a
production of WKNO Memphis. Production funding for
“Behind the Headlines” is made possible
in part by… Shelby County Mayor
Mark Luttrell tonight on
“Behind the Headlines.” ♪ Theme Music ♪ ♪♪♪ I’m Eric Barnes, publisher of the
Memphis Daily News. Thanks for
joining us. We are joined
tonight by Shelby County Mayor
Mark Luttrell. Thank you for coming back. Thank you Eric. And Bill Dries, Senior Reporter
of the Memphis Daily News. We’ll start with
a conversation. Maybe it’s almost
a national debate, it’s obviously a local and
state-wide conversation about the health of cities,
the health of counties, the health of
state governments, federal governments. Talking about it, a lot of
it’s about taxing and spending. It’s a lot about debt level. I think probably
over the last few years coming out of the recession
and the financial crisis people have been,
at least if not educated, told about debt
levels and pension and all that more than
in many, many years. From the Shelby
County point of view, what is the financial health,
big picture small picture, of Shelby County? Well, Eric, I’m
pleased to say that Shelby County government is pretty fiscally sound. Our bond rating is
still double A-plus, where it’s been
for quite a while. We are paying our
debt down progressively. Our debt about four years ago
was sitting at 1.8 billion, it’s now at about 1.4 billion. It’ll be under 1.4 by the
end of this fiscal year. So we’re progressively
paying our debt down. Most of our debt is
attributed, in fact 1.1 of that 1.4.
billion is attributed to school construction
over the years. But we’re progressively
paying that debt down. We’re living within our means. Our pension funding is being
fully funded on an annual basis. We’ve taken some hits from the
market the last few years but we’re rebounding from that
and we’re sitting at about 88% funded
at this point. Bill, I think I told you
the other day 82% so I need to
correct that. But we’re sitting at about 88%
and continuing to pay that down. So we are
financially in good shape. We’re living within our budget
which we’re required to do and I’m pleased
with where we are. We’re starting to
see some indications of a turn in
the economy. We’re still facing across Shelby
County which certainly impacts the financial
welfare of the county. We’re still facing higher
than normal unemployment. A number of people
below the poverty line is still a
concern to us, which are things
that impact the budget. But from a standpoint of our
financial stability in county government
we’re in good shape. We haven’t gotten any
letters from the comptroller. [laughing] We’ll get to that. You touched on a couple things. I want to come back to
one thing that you said, real quickly. The county debt
is at 1.4 billion, it’ll be under a billion
by the end of this– No, the under 1.4 billion. It’ll be under 1.4. By the end of this fiscal year. The County was able… I think we had a couple of
County Commissioners on in the last few months, talked about
having refinanced and managed
the debt well in a historically low
interest rate environment. The county was
able to refinance, I guess you would
say, responsibly. Yes. Well, we’re constantly looking
for ways to refinance debt. That’s not a
uncommon occurrence. You’ll see that take place
sometimes as often as annually as those opportunities
present themselves. You talked about
the pension being 88, 86% funded. What about health benefits? I mean, for retired workers and
then when you look out that’s another one that gets a lot
of attention with cities and state-level, federal-level– Certainly the cost of health care benefits is
increasing annually. Our benefits are
increasing annually. We have got to, as a
county government, look very hard at
those areas and we are. Last year, Eric, we conducted a
rather thorough efficiency study of county government and
projecting out in the years ahead and we’re following some
of the recommendations that have been made that are focusing
on the health benefits plan. There’s some adjustments to our
health benefits plan this year. There’ll be some other
adjustments moving forward as we see opportunities to really
move the needle in that area. Same with our pension fund. Our benefits package
is extremely expensive. Right now it’s
about 42% of salary. My church is about
15% of salary so that gives you a little
bit of comparison. We have got to, we’ve got to
take into consideration that going forward
there’ll have to be some
adjustments made to keep us in that
sound financial condition that we’re in. Bill. You talked about
this earlier, Mayor, about the switch to
defined contributions. How do you see that unfolding? That particular decision? Well, as I think you’re aware,
we really can’t make any changes to our system that
affect current employees. There’s some minor
adjustments that can be made but our current employees, we
have a contract with them. I think it’s
solid as a contract. So the changes that we make
will be really going forward with future employment. And we’re certainly looking at a
array of different approaches to the contribution
scheme and I think we’re
going to have to bring county
government in line with more what’s taking
place in the private sector. To go into a little
bit of background, at one time county government
salaries were considered to be rather low and county
government compensated by having a generous
benefits package. Well over the years we’ve
seen our salary come up to a very
competitive level but we kept our benefits
package at a high level. So it’s a little bit out
of balance with reality. So we’re going to have to
adjust our benefits package so that we’re not
consuming 42%. And this, you know,
for folks listening, I mean, you know,
pensions, defined benefit. It’s not the sexiest issue but
those are the issues that were critical
to sinking Detroit. The state of Illinois
is in huge trouble. I read a thing recently,
the military benefits, health care, pensions, to
military folks is skyrocketing and the military is very
worried about how they’re
going to actually, you know, bullets
and ships and planes when they’re spending so
much on benefits. And, again, it goes back to
that same thing you describe. Historically, public sector
jobs were low paid so they had
high benefits. Now it’s relatively high paid… Not really high paid
but relatively high pay, relatively high benefits. So it’s a sea change nationally. It’s the very foundation
of the problems that you’re seeing in
municipal government. I worked for the Federal
Government several years ago, back in the ’70s and ’80s and
federal government back then started making some adjustments
to the benefits packages. It has served them well. But the reality of it is
that if we’re going to stay solid
and solvent we’re going to have
to make some adjustments going forward. Also on the issue
of funding, I mean, there’s a sea change in the
funding of education that’s been going
on and evolving and we’ve talked
a lot about the schools on this show, the papers. You’ve obviously been right
in the middle of all that. I had someone who is very
close to these issues who we were talking
about having you on and talking about the fact
that county government will now be the source
of funding not just for all the schools
within the county including the municipal
school districts. And I said wait, I thought they had separate
school districts out there. I thought they raised
their taxes out there. I thought they were funding
their own schools in Germantown
and Collierville but the funding still runs
through county government. It is and everybody who
pays a property tax is paying for education
in Shelby County. Out of our property tax of four
dollars and whatever 38 cents about $1.91 of it
goes to education. And every property owner
in Shelby County if you live in Bartlett or
Memphis or Collierville, you’re paying that. So, we have an obligation
to all the school systems. Now, granted, the municipal
school districts also have a huge
responsibility. Funding for education comes
through a multitude of sources. It comes through
some federal sources, state sources, city, county. The school budget, the
total school budget, is in excess of $1 billion. The County’s contribution
to that is $382 million. So you can see that
there’s a lot of money coming from a lot of
different directions to fill that balance
between 382 and 1.4. But that county, for the county
that 382 is the biggest number. It’s the biggest single number. And that 382 goes from
everywhere from Collierville to what will
be the Legacy County School
System which is mostly the
Memphis schools, all that. The money will be distributed
across the County Schools, the Municipal Schools
and the County Schools, based on the ADA, average daily
attendance, formula. How many students you
have in your school today, you get X-number of
dollars per student. So, as you have noticed
in the news last few days, there was a great deal of
competition that’s taking place now among the
schools to get students. So it’s going to be
interesting to see over
the next few months how this kinda levels out
among the municipalities. And then, about the
first of the school year, we’ll start making payments
to those schools systems based upon their average
daily attendance. Next August– Actually this year, in August. And also this brings up kinda
the balance that you have to strike in making the budget
proposal when you get some idea of how much this is going to
cost each of these suburban municipalities for their school
system because it will involve some mix of county funding
on the formula you mentioned, the ADA formula. But there will also be
some money from those local governments, from
Lakeland and Arlington. Absolutely. Money from the
local governments. Governments have
some latitude there but certainly their sales tax
goes to education as well. So property tax
goes to education, sales tax goes to education. All of the municipalities last
year voted to increase their sales tax in
their communities and it’s my understanding
that their intent was to devote 100% of
that to education. But they have some
latitude there so within the municipalities they’re going to be funding
education with sales tax and with property tax
from their residence and then property
tax revenue that comes from the
county property tax as well. And then, of course, what
you get through the state BEP formula and
then federal grants. So it’s a lot of money coming
from different directions. Do you anticipate at this early
stage in the discussions that those suburban
school systems are going
to come to you or to their respective
governments for the
startup cost? Well, we’ve had
some discussions with the municipalities
about that. We’ll continue to have some
discussion about it but we don’t have a lot of flexibility
in county government for advancing money. We’re on a pretty tight
schedule ourselves based upon when the
revenue starts coming in from the property tax. We’re going to look on where
we can help the municipalities. It’s been my objective
from the very beginning that it our responsibility
in county government to see what we
can do to help. What are those startup costs? I mean, is that like they’ve
hired superintendents and they’ve got some
planning that’s got to happen? Many of these funding
sources won’t start hitting the municipalities
until this summer but yet they’re
wrapping up now. They want to start
signing contracts for teachers, they’ve gotta start
ordering supplies. The nuts and bolts. A great deal of that that’s got
to happen between now and July. You think about it,
they’ve got, really, the municipality’s got
about six months to ramp up and be ready to go. They’ve got to be ready to go
by about the first of July, really. You think all of
them will be ready? I’ll put you on the spot. Well I hope they are. We’re going to certainly
work with those that may be struggling
a little bit. So, it’s my objective to help
them in any way that we can in county government
to hit that deadline. I’ve asked a lot of people this,
as we’ve gotten the shape of the future school
systems in Shelby County, I mean there’s so
much uncertainty for what two, three years? We now have this
kind of re– We consolidated. Now we’re deconsolidating
into a very different shape then we were
in before. Separate school
systems in the suburbs, a really a
reshaped, in many ways, County School
System that– – A sea change. It’s a sea change. And then all so much education
reform going nationally, going on from the
state level and so on. Are you happy, you’re one of
the few people who sits over, you know, the whole of this. You are, as we were
talking about before the show, people sometimes forget that you’re not just
mayor of the suburbs, you’re Mayor of Shelby County
including Memphis, including
Collierville, Millington, everything. Are you happy with the way
that this all shook out? That the shape of the
school system is right, appropriate? I think,
relatively speaking Eric, when you look at the
chaos and confusion that we were
facing two years ago and see where
we are today it’s somewhat
amazing. We took two large systems and made a
larger system which is contrary to
conventional wisdom and then from the
larger system you’re breaking it up into
six smaller systems where, again, that
transition is taking place. So we’re still very
much in transition. I am pleased to see that we’re
getting this whole discussion kind of out of the
political arena and we’re getting
it into the hands of the professionals
in education. I’ve been pleased with the
selections that I’ve seen for the superintendents
and the municipalities. I have talked to a number of the
municipalities and there seems to be a good working
relationship that’s moving forward so, relatively speaking,
we’re in a heck of a lot better shape than we
could have been. Do you see there being
coordination work between the County School
System, Dorsey Hopson, again the legacy, I don’t
know… people call it the
City School System it’s the County
School System and some of the
suburban schools? I’ve been very pleased
with what I have seen with Superintendent Hopson
and his school board. They seem to be, once again,
professionals that are looking at this issue and every
indication seem to be that they’re working
with the municipalities and I’m seeing
that as well. So, the professionals know
what they’ve got to do and they know the challenge
that’s ahead of them. So we’re moving in
the right direction. Goodness, it’s still
going to be a tough slog. I think this transition’s going
to take a few years before we really
get settled. You talked to
Hamilton County. They did it ten years ago and
they’re still transitioning. Charlotte Mecklenburg’s
still transitioning, Davidson County. So there’s still some
struggles ahead of us but relatively speaking we’re
in pretty good shape. Bill. Let’s switch gears here and talk about the
tourism development zone that the city wants. That the City of Memphis
wants to finance fairgrounds
redevelopment. It seems as if we have a
difference of opinion there about whether harnessing
the sales tax revenue, incremental sales tax revenue,
from that zone would affect education, public education
funding in Shelby County or not. The city seems to be saying
that it will not affect that. What is your belief
about how that works? Well, first of all, this is
where county government and city government
have gotta be very careful that we don’t step on
each other’s toes. What Memphis hopes to
do with that property is really a
Memphis decision. Where the county has an
interest is sales tax and as we talked
about earlier there’s a portion of sales
tax that goes to education. I want to ensure that
education in no way is going to be adversely impacted
financially by this decision. And there are
differing opinions about that. In fact, I’ve got a meeting
today with Robert Lipscomb, the city and several
people from the city and several folks
from the county to see if we can
work through this. At the County Commission
this past week just before the County
Commission meeting Mayor Wharton
and I had talked and Mayor Wharton
expressed his desire to not in any way take
money away from education. So he and I agree on
that particular point. I think what we have to do is
just take a look at the law and get some
understanding of the law and appreciation
for that particular fact and if we can be
assured that there’ll be no financial adverse
impact on education then certainly
I’ll be supportive of what the city
wants to do. And hopefully we can
work through that. I promised the County Commission
I’d try to get back with them by their next meeting which will be a week
from this coming Monday and see if we were able to get that particular
question answered. That seems to be the
issue that resonates with the County
Commission as well. So I think we’re all interested
in giving the City of Memphis the discretion that they need to
develop their property as long as it doesn’t
impact in any way the financing
that we need for schools. And to just explain,
this involves a formula for the distribution of the
sales tax revenue within a zone of about
three square miles. That’s correct. And there is some kind of factor
that’s in there that is kind of
at the heart of whether this happens
or it doesn’t. Yes. There’s a baseline that’s
established that ensure education will still get tax
funding out of that district. The area for discussion is
the increase in tax revenue, sales tax revenue, from the
improvements in the TDZ that are in question. If the TDZ is going to
generate more sales tax then we want to make
sure that that formula for ensuring
that education gets its share of
the sales tax is still in place. And there seems to be
some ambiguity in the law in that
particular place. Do you have to go to the
State for clarification on that? Not really. Well, yeah it is because
the State’s the one that actually
approves the TDZ. It’s not like
the local level. A lot of that money
goes to the State and then it
comes back and it’s distributed
throughout. TDZ allows the local government
to intercept some of that money, in my layman’s terms, right? That’s correct. As long as it’s redeveloped to
improve an area that otherwise
isn’t functioning. I think what we’re
really striving to do now, what the City’s striving to do,
is to be able to go to Nashville with some degree of unanimity
on this particular project. It makes it a lot easier for the
State to make a decision if they see county government
and city government agreeing. If there’s disagreement that
makes it more difficult for them so we’re trying to get our
disagreements worked out at the local level before
we take it forward. TDZ on some high
level is, you know, we talk about changes in
sales tax to redevelop an area, similar concept
to a PILOT in the sense that a
PILOT is about industry or companies that
come in or that stay. A lot of criticism
of PILOTs, I mean, from some people who say
that’s just a big tax break for corporations other people who say
look you’ve got a, you know, that’s one of
our weapons to compete to keep
companies in– I like to say tool. Tool, excuse me. [laughing] Well, yeah. I think some of the
economic development folks that we’ve had on in
the private sector have maybe referenced
them as weapons. [laughing] But yes, in the
public sector you might want
to say tool. So, that debate, I
mean what is it, some $100 million of
PILOTs in the last number, I mean, Shelby County Memphis
uses the PILOTs aggressively. Electrolux, which
has been open, has a thousand people or
so working there. Mitsubishi, all kinds, Nike just did a
big expansion, I mean all kinds of
local companies have either been
retained or expanded. Smuckers jelly, peanut
butter is about to do a big, just got
a big PILOT. How do you feel
about PILOTs? Do you feel like
they’re give-aways? Do you wish that you had a
different tool than them? I do not think that
it’s a big give-away. We’re always very
careful with PILOTs to look at the
benefit/cost ratio. And we never approve a PILOT
where the benefit/cost ratio is less than one to one and typically
it’s going to be about one to 1.5 which mean that
for every dollar abated, we want $1.50 return though capital investment,
through salaries, wages, things of that nature. So PILOTs do not give
away tax money and that’s one term
that I hear so often. We give a dollar relief on taxes
for a dollar plus return on that tax abatement. And it’s not as, I mean… one clarification I think the
media does a terrible job, we try, but I think
generally there’s a lot of confusion put out there
about PILOTs in the media that most of the companies are
still paying property taxes. They’re still
paying property taxes. It’s just they’re paying a lower
rate because they’re investing. Well they’re paying
the property tax, they’re hiring more people
and they’re making capital investment and construction
which benefits small business. Now, the second
part of your question, we don’t have that
many tools in Tennessee. And in the tri-state area that
we’re in we’re competing with two other states that have
different tools than we do. That’s gotta drive you nuts. I mean, it drives other people
nuts because what happens is Shelby County gets
compared to Nashville and everybody says well
Nashville doesn’t do PILOTs so why is Shelby
County doing them? But Nashville isn’t up
against Mississippi, I mean, 10 feet
from Mississippi where Mississippi can do
all these creative things. Base a company there
but, oh, by the way, you’re going to be based
in Desoto County but you’ve got the Grizzlies and
the Tigers and a, you know, an international airport or a
big airport and all the things that a big city has, right. Nashville’s not up against that. We were in a meeting
the other day where just that issue was
being discussed. We were talking about,
from a regional standpoint, how can we
complement each other? We had Mississippi, Arkansas
and Tennessee people there and that very issue
was discussed because we are
different from Nashville. We’re different
from Little Rock. We’re different from Louisville. All cities that
we’re often compared to, we’re different than they are. Chattanooga is in a little bit
of the same situation that we’re in because they’ve got Georgia
and Alabama that border them. But even more so than
Chattanooga we’re different because
our MSA is so much
more concentrated. So, we have got to think
of creative ways to work and we can do
that through PILOTs, we can do it through other types
of infrastructure incentives. But we really just don’t
have a great deal going for us. What we do have going for us
is we have a very low cost of living in a very
urban environment. People complain about our tax
rate being high but we’re still, from an
affordability standpoint, we’re a very
affordable community and we have got to look at
those things that really sell
our community. And if we can get our
schools in good shape, if we can have our
property values affordable, if we can effect crime and
get crime under control… Right and crime is down. We have just three
minutes left in the show. Crime was down 6% last year in the whole area
of violent crime and all that. So your role in
that is what, contributing to
crime prevention? Well, again, public safety
is a basic function of county government. If you look at the definition
of what county government is responsible for
covering is education, safety and health are
the three main pillars. And id you think what
all falls under that, education, safety and health, it
covers a pretty broad territory. It’s interesting, I was talking
to one of my counterparts in another large city and he was saying how
they had been successful was the fact that they
sold the fact that they had
good schools, they had a low
crime rate and they had
amenities. They had
beautiful parks, they had
greenways, they had the theater,
they had the ballet, the community
theater. If we can build the
infrastructure of amenities within our
community that will go a long way toward
really selling our community. Then we don’t have to
rely as much on PILOTs. Bill, just a
couple minutes left. All right. We were at the Electrolux
opening just a while back there and what happened
when we got that, when we got Mitsubishi, there
was this euphoria at first and then there was
kind of this concern about do we have workers
adequately trained for it. Where do you think we are in
terms of workforce investment and getting the right
workers in the right jobs with those new places? Well, we’re recognizing that
we still have much to do to prepare our workforce
for the 21st Century. Our Industrial Readiness
Training Program where we have gotten some
support from the state we’re using Southwest
Tennessee Community College to help us work with
some of those people that need some brushing
up on their basic skills. It’s a concentrated eight-week
program that helps us get those folks ready for
the market today. Our challenge, Bill,
is really two fold. We’ve got to
continue to invest in industrial readiness training
programs that very quickly ramp up the skill set
of our workforce. But then also it tells us that
your public education system has really got to
be strengthened to work on
those core values. I’ve got to put in a
plug for one thing that Superintendent Hopson
is doing right now with the school
system. He’s identified
elementary reading level as being a priority of
his administration. Focusing on grades
one through three, getting our students
up to skill level. Right now, about 30%
of our third graders are reading at
grade level. We’ve got to do
better than that. So we’ve got to start working
on our public education to ramp up this workforce and then in the short
term work on our industrial readiness
training programs where we tailor programs to the needs of the
particular industry. We have worked with
Electrolux in that area. We worked with many other
industries in that area and that’ll continue
to be a priority. And we just 20 seconds left. You are filed for re-election? I have drawn my petition. I intend to run for
re-election this year. That in? In August. In August. Mhmm. Primaries coming up. Ok, thank you for being here. Thank you, Eric. Thank you, Bill. Thank you for joining us. Join us again next week. Good night. ♪♪♪

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