It's one of the oldest sales gimmicks in the book: This deal won't last long, so you better act now!
After six years of delays, demands, second thoughts, and biding time, Bass Pro wants Memphis to "act now" and make a $190 million bet on its promise to juice up downtown and the riverfront by taking over the Pyramid and building a "destination store" and 80-room hotel.
Act now, because the bond-rating agencies are coming in August! Act now, because the bonds can be priced and placed in September! Act now, so construction can begin in October and 1,665 jobs can be created! Act now, so there can be a grand opening in August 2013! Act now, so that the Memphis Cook Convention Center can get a facelift and won't look like we got the special on weathered concrete! Act now, because we've been over all this already and there's nothing new!
Except that there is. Beneath the colorful renderings, the pitch came with a blitz of confusing financial details, a surprising $10-million-a-year tax surplus in a downtown savings account, conflicting numbers about Bass Pro's investment, optimistic projections of 4 million visitors a year, and questions about the timing and funding of convention center improvements that are harder to figure than the fine print in an infomercial.
At best, Bass Pro could be the equivalent of a new corporate headquarters in a downtown whose future is housing, tourism, and entertainment.
At worst, it could be the next Peabody Place and leave the neighboring Pinch District high and dry.
At the Memphis Flyer, we read the fine print so you don't have to. Here are the big questions and some answers.
Are we there yet? Just about. The Memphis City Council voted 12-0 to approve the deal. The Shelby County Commission followed suit Monday by selling its interest in the convention center to the city for $74.9 million. That gives the Bass Pro Pyramid a $10.4-million-a-year revenue stream and one less legislative body to deal with. If the bonds are placed in September, construction will begin in October.
Why did it take so long? The Pyramid was an unusual building to begin with and became a white elephant when FedExForum was built. And because Bass Pro, which has 56 other stores in the United States and Canada, proposes to build its biggest-ever "destination store" and has a reputation for getting all the tax subsidies it can.
In the optimistic view of Mayor A C Wharton and Housing and Community Development director Robert Lipscomb, Bass Pro is a "transformative deal." The days when downtown was home to three bank headquarters, most of the big law firms, and department stores are long gone. The present and future is conventions, condos, apartments, Beale Street, restaurants, FedExForum, AutoZone Park, and possibly the Great American Steamboat Company. Bass Pro complements that and adds a retail name in a downtown where it's hard enough to buy a pair of socks, much less a camouflage recliner and a pair of waterproof boots.
Who's paying for it? See those people in the architectural renderings walking around inside the Pyramid over an indoor swamp? They're paying for it. The city's consultant, RKG Associates, predicts that Bass Pro will attract 2 million to 4 million visitors a year and that 40 to 45 percent of them will come from more than 50 miles away.
Both numbers are important. Local visitors probably would spend the same dollars somewhere else in town. Out-of-towners bring "new" dollars and are more likely to spend a night in a hotel and visit other Memphis attractions.
"Most, but not all, visitors to Memphis, on average, travel from within an approximate 250-mile radius of the city," says the RKG Associates report, and "the majority of downtown tourism dollars are spent at Beale Street establishments."
The "creative financing" on this deal — a choice of words that will give pause to anyone who remembers that subprime mortgage lending was once known as the same thing — is the Tourism Development Zone, or TDZ. Its boundaries extend one mile north, south, and east of the convention center. Within the TDZ, the increase in revenue from the 9.25 percent sales tax, less a small set-aside, goes into a TDZ fund instead of going to state government in Nashville.
As the centerpiece of the TDZ, the frumpy old convention center is, in a way, a cash cow. The RKG report, citing as its sources the city of Memphis and Morgan Keegan, says that the TDZ fund nets $10.4 million a year that can pay off debt on this deal. RKG calls this an "annual tax surplus" — a phrase heard about as often as "refund" these days in government.
Who has first call on the money? The convention center is "a qualified public facility" under the Convention Center and Tourism Development Financing Act of 1998. It needs work, but it will have to wait. Bass Pro and the Pyramid get the proceeds of the $190 million in Phase One.
The breakdown includes $25 million for seismic protection, $53 million for work in and around the Pyramid, $15 million for buying the Lone Star property and towers south of the Pyramid, $74.9 million for the city to buy out the county on the convention center, and $18 million for a debt reserve fund, plus fees.
Phase Two includes the convention center and the Pinch District, where RKG sees an $80 million ($60 million private, $20 million public) collection of outlet stores. Lipscomb said requests for proposals from developers will go out early next year: "The more you advance the Bass Pro deal, the more interest you will get from potential developers."
How much is Bass Pro investing? State law says TDZs are supposed to attract at least $50 million in private capital. The RKG report says Bass Pro is putting $75 million into Pyramid construction and another $6.5 million into an 80-room hotel.
But there was nothing about that in the presentation to the city council last week. The council was told that Bass Pro is paying rent of either $1 million a year or 2 percent of its sales, which RKG pegs at $106 million a year. Sales taxes on Bass Pro's store and hotel will add $9.1 million to $11.9 million a year to the TDZ fund from 2013 to 2031 when the fund goes away.
How is a TDZ like a suburban special school district? They both keep tax money from desirable areas at home and out of the hands of someone else. If Memphis-slamming Lieutenant Governor Ron Ramsey from East Tennessee didn't exist, we would have to invent him. The first line of defense for spending state sales tax money on Bass Pro is "otherwise it would go to Nashville."
What is overlooked is that state government would spend some of that money for the general benefit of Memphis but not necessarily downtown. The sales tax is the biggest source of revenue for Tennessee, one the few states that does not tax wages. A dollar less in sales tax is a dollar that has to come from somewhere else to maintain the same level of state services.
The General Assembly has had second thoughts about TDZs, particularly the use of local sales taxes.
"Sales tax is a major source of growth revenue for school systems. Lack of growth in sales tax not only negatively impacts operating budgets but also hinders a school system's planning ability," said a 2009 report by the state Department of Revenue.
The downtown TDZ captures the additional sales tax revenue above a baseline number set in 2002. The baseline amount is $3.3 million a year. In 2010, collections were $14.7 million. FedExForum was likely a big contributor along with an increase in the number of downtown residents. Still, the 400 percent increase is remarkable considering the recession.
The TDZ extends from Chelsea on the north to Crump Boulevard on the south and east to the medical center. If there is a shortfall in the TDZ account, there is a debt-service reserve fund backed by city funds excluding property taxes.
Who is gatekeeper of the TDZ fund? Robert Lipscomb, the steadfast champion of Bass Pro. This is his baby. There is no private developer at this point for the Pinch District or for two other Memphis TDZs at the Fairgrounds and at Graceland in Whitehaven. The city — which is to say Lipscomb — is master developer.
Who is calling the shots? Bass Pro founder Johnny Morris. He is said to be a creative genius who started with a bait shop in Missouri, caught him a bass when he was only 3, fishes with Bill Dance on the Mississippi, and wants Bass Pro to take its place in Memphis alongside Graceland, Beale Street, FedEx, and the barbecue sandwich. He is sighted less often than Elvis.
What about jobs? Lipscomb says the seismic work in and around the Pyramid and the demolition of the interior will create 1,665 construction jobs. There will be 576 "ongoing jobs" in retail when the store opens. The construction payroll is $77 million. The goal is that 40 percent of the work goes to minority firms, but RKG says 30 percent local is more likely. The retail payroll is $7.6 million, or about $13,000 a year per job.
Is 4 million visitors a realistic number? That's what Bass Pro says its flagship store in Missouri draws. But the Pyramid opening is two years away, and Bass Pro is carrying on in other markets, including Nashville and Jackson, Mississippi, while negotiating with Memphis. A competitor, Gander Mountain, has stores in Knoxville and Jackson, Tennessee.
Counting visitors is an inexact science at best. The Great Smoky Mountains National Park drew 9.4 million visitors last year, and the Memphis Zoo drew about 1 million. The 10 casinos in north Mississippi get about 8 million visitors a year, according to the Mississippi Gaming Commission. The Memphis Convention and Visitors Bureau says Beale Street draws 4 million visitors a year. But RKG says the total annual attendance at the more than 60 tourist attractions in greater Memphis is only 2.9 million. Go figure.
Is this a transformative deal? Lipscomb and Wharton envision Bass Pro as the catalyst for a retail outlet center in the Pinch, a facelift for the convention center, and a $75 million expansion of the neighboring Marriott Hotel to be completed in 2015. But there is no start date for those things, no developer, and no financing has been approved.
As far as the empty Pyramid is concerned, Bass Pro is transformative. Beyond that, however, even Memphians with a front-row seat to 50 years of downtown development are not sure.
County commissioner Walter Bailey has seen every big downtown deal from Mud Island to FedExForum, and he lives downtown on the South Bluff.
"It's speculative," he said last week, after a long pause to consider the question. He later said "it's a blind bet," and he would "defer to the wisdom of the city."
Lipscomb agreed: "It's a roll of the dice, but it's the only roll we have."
Downtown developer Henry Turley has doubts.
"I should be the happiest guy in Memphis because I own apartments and property all around the Pyramid and the Pinch, but I am not sure how I benefit," he said.
No price tag has been put on acquiring private property in the Pinch, and it is unclear whether it could be taken by eminent domain in light of the U.S. Supreme Court's 2005 Kelo v. New London decision.
For Bass Pro to be transformative, Turley said, there must be investment in the convention center, direct access to the Pinch from the interstate, and a main entrance to the Bass Pro Pyramid from Front Street. But renderings show the main entrance and parking lot on the south side, at the end of Bass Pro Boulevard, which starts at Jefferson and goes under the interstate ramps and past Lone Star.
Bass Pro employees making $13,000 a year won't be able to afford market-rate housing.
Fishermen are not known for welcoming strangers to their favorite fishing hole. Would Johnny Morris want an outlet mall that might compete with Bass Pro next door? If so, what conditions might he impose?
Remember when the Grizzlies and Michael Heisley came to town and unleashed lawyer Stan Meadows to dictate the terms for events at FedExForum? Their number-one concern was what was best for the Grizzlies. And that's why the Pyramid is vacant.