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Taylor Berger

Taylor Berger is co-owner/operator of the local restaurant group PartyMemphis.com. He also works as a development consultant and is an affiliate broker at Trotz Real Estate Services.

Union Row points out inequities in development process

By Updated: January 09, 2019 4:00 AM CT

First, let me say I’m pretty much all for development, especially in the Memphis city core, but I think the massive Union Row project demonstrates an inequity in the development process that we need to examine. The beauty of this problem, however, is the solution would have a positive impact, helping create new small “infill” development across Memphis in neighborhoods that might otherwise be ignored.

The Union Row developers say they are going to spend almost $1 billion around Union Avenue and Danny Thomas Boulevard. That is awesome! The project will eliminate blight at the gateway to our already booming Downtown. It will bring light and people and energy where today there is virtually none. It will create huge amounts of new tax revenue for the city that can be spread into communities that really need the help.

The city and county agencies and officials in charge of incentives are rightfully excited about the project, lavishing tax breaks and grants and loans on the project like we haven’t seen since we flirted with Amazon. They are right to do so because the project won’t happen without the help.

Residential and commercial rents in Memphis are low and cannot financially support quality new construction of this scale, especially when we factor in our notoriously high property tax rates. If we want to build up not out, as our much-awaited Memphis 3.0 plan suggests, we have to get creative on financing this kind of project. We have to help.

What bothers me is when I think about all the smaller projects that never happen because the same incentives that will enable Union Row are not available to them. The essential problem these smaller projects face are the same faced by the Union Row developers. Memphis is a poor city. Most of our population cannot afford the goods and services and rents that support and enable development in other cities. Think everything from single-family homes to small apartments and offices to restaurants and other retail.

How often have we seen a small developer sink their life savings into a dream project only to see the crushing weight of debt and lower-than-expected revenue force them into closure? Would a little help on taxes, a small grant for parking or a forgivable loan help them bridge that gap and remain open, slowly but surely bringing the same energy, light and people to forgotten corners of the city that really need it?

Now there are incentive programs geared toward small neighborhood development. The Downtown Memphis Commission has been especially aggressive in this area, creating storefront improvement grants and other programs that have helped hundreds of people improve their property. But how much can $25,000 really help a project happen that may exceed a million dollars? The complicated nature and cost of tax-based incentive programs like PILOTs and TIFs render them useless for small projects.

To put in perspective, if Union Row succeeds in obtaining all their proposed incentives, it would amount to almost $200 million of the $1 billion project cost, or 20 percent. To use an example close to my heart, we spent nearly $2 million and a lot of blood, sweat and tears developing Railgarten, a restaurant and entertainment venue in the heart of Midtown. What if we’d had another $400,000 to help with parking and a playground and utilities?

It’s not just the lacking availability of public incentives for small projects that is keeping more of them from happening. Another significant barrier is the permitting process. To use Railgarten as an example again, we paid consultants and lawyers almost $100,000 to guide us through the process of obtaining the permissions we needed to start construction. I would hate to guess what the Union Row developers are spending.

The fact is the permitting process is largely the same for Union Row as it is for a corner store. I’ve completed more than a dozen small projects and I used to be a tax attorney, but I was befuddled by the process. What about the young person who’s trying to open her first shop or build a little duplex for rent? We say we want to help minorities and the underprivileged of our city, but then we throw up barriers like this. It’s hard enough to raise the money for a project or execute an idea, but if they have to hire a bunch of lawyers and consultants just to get a building permit, then I think we have a problem.

I’m not calling for an overhaul of government bureaucracy or the Unified Development Code. Honestly, the more I learn about them, the more I see at their root they are fairly elegant solutions to the complexity of development in a city that struggles to respect its history and residents but wants to grow. What I believe we need is a concerted effort to represent the struggles of small developers in the halls of power.

There are numerous elected, appointed and employed bodies that need the advice of people on the ground trying to build better communities through development. We need to listen. The result may not be as shiny as Union Row promises to be. It will instead help create pockets of commerce that will spread, organically changing neighborhoods and empowering people.



<strong>Taylor Berger</strong>

Taylor Berger

Topics

Economic Development Union Row Incentives

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