Flush with excess public cash, EDGE is entering the downtown parking business. This entry occurs within the boundaries of the Downtown Memphis Commission’s (DMC) Central Business Improvement District (CBID).

Why would EDGE engage within the CBID? Because EDGE has excess public cash and DMC does not. Excess public cash in Memphis goes to corporations, affluent developer interests and public-privates; not where public investment is most needed. This systemic practice furthers the public costs of inner-city public disinvestment, by effectively using South Memphis Depot funds for a downtown garage purchase.

DMC has already obligated $77M in public cash to other affluent developers to include Hyde, Carlisle and Orgel, as well as such projects as the Downtown “Garage Mahal” Mobility Center, various private developments and Brooks Museum.

EDGE today will consider, a proposal developed by the Joanne Massey led EDGE staff to the Al Bright chaired EDGE Board, the granting of $600K, for improving a private garage, to incent the development of the not-so-great Sterick Building, as well as a $4.2M garage purchase. Memphians are supposed to believe that the Sterick building is this great development opportunity. But it cant be that great if it requires public subsidies that consist of another parking garage grant, historic tax credits, a PILOT and C-Pacer considerations. Sure, some of the former are in order, but all of them?

Stuart Harris, representing the Sterick development team, was recently quoted as saying, “We appreciate the EDGE board's consideration of an arrangement that will allow us to continue making progress and will prevent these properties from being acquired by non-local entities who may not share our vision for a thriving, active, and prosperous district." The quote asserts local developers and corporate interests having been sound public custodians. Just not so.

EDGE-Sterick Consideration

While being locally reported as a garage lease, this consideration will effectively turn into another downtown private developer parking garage grant. Reading the EDGE term sheet closely, the EDGE Board will consider allowing a lease negotiation to occur within certain parameters. One of those parameters involves an OPTION to purchase the garage from EDGE for EDGE’s purchase price of $4.2M + 4% interest, for up to five years, from EDGE’s purchase. The option to purchase will be extended first to the Sterick Building owner and then to the owner of the Hotel where the garage resides.

With only two potential buyers, full market potential cannot be realized, for the benefit of taxpayers. So, what if neither the owners of the Sterick nor Hotel exercise their option to purchase the garage? It is unlikely that the Sterick or Hotel owners will agree to the $4.2M + 4% interest costs purchase price.

Why? Because the high-end corporate parking space market is set with AutoZone’s agreement to pay $120 per month in the brand new $40M “Garage Mahal” Mobility Center. Using those numbers, a maximum current value for a renovated Downtown Memphis parking garage can be derived. The maximum annual revenue potential for 350 spaces is $504K. Assuming the former produces a generous net cash flow of 50%, that results in $252K per year, discounted at 10%, the current value of the 350-space garage is $2.5M.

As far as rent proceeds, per the term sheet and prior to the end of the 5 yr. term, there will be no or minimal operating income. So that is a nothingburger. Given this, if approved, EDGE will be granting a minimum of $1.7M+$600k for a total of $2.3M today, for another downtown private development.

More of the Same

What is going on here is continued indirect public disinvestment in Downtown Memphis, away from greater inner city needs. More of the same systemic public disinvestment points to a primary cause of sluggish local economic development and corresponding spikes in crime rates. When will the insanity end?