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- The new head of the Downtown Memphis Commission on economic development in Memphis.

Tonight, on Behind the Headlines.

[intense orchestral music] - I'm Eric Barnes with The Daily Memphian and thanks for joining us.

We are joined tonight by Paul Young, the recently appointed CEO and President of the Downtown Memphis Commission.

Paul, thanks for joining us again.

- Thank you for having me.

- Along with Bill Dries, reporter with The Daily Memphian.

Paul, so you walk into the Downtown Memphis Commission Presidency/CEO at a strange time, obviously, right?

I mean, we are coming off a pandemic.

We hope, it seems like we're coming off that, that created just tremendous economic disruptions.

And, on the one hand, we've got some billions of dollars in proposed developments Downtown that many of which started before the pandemic but some started during.

We'll walk through some of those projects.

We have hotels under construction, we have more proposals coming in, but also Downtown, you've got an office market that was okay before the pandemic, but has taken nationally, let alone internationally, huge, huge hits and huge question marks about how many people will come back Downtown.

That has peripheral effects on restaurants and retail, which all took huge hits on every possible level through the pandemic.

And last part, setting up this strange, bifurcated economy, you've got some people who did find through the the recession, if they could work from home.

Some people who actually honestly did well during the pandemic, I should say.

And many other people who didn't obviously.

With all of that in front of you, what is the DMC's approach to this, again, bifurcated economic and uncertain economic situation?

- Yeah, it's definitely an interesting time period.

And one, in which many businesses, particularly Downtown, have suffered over the past year.

They lost population, they lost clients, and we've been hearing from them that they want people back Downtown.

That's one of the things that we want to make happen.

We want to see people come back Downtown and safely, enjoy all of the businesses, which we believe they are amenities to our community.

And so our goal is to try to figure out what resources and programs we can put in place to provide resources and funding for them, but also think about what activities and activations can we present as an agency to ensure that Downtown is a place where people want to continue to come.

- Are there any of the projects that were proposed and that includes everything from what was known as Union Row and changed it's name to the Walk on Union, all the development in the Snuff District, just more hotels, a tremendous number of projects, have any, at least that DMC is involved in, and you're involved in a lot of them with incentives or just guidance or some way or another, have any of them pulled out?

- No, and that's the amazing thing.

And the blessing for our community is that those major projects that have been on the horizon for quite some time, they are still looking to advance and move forward.

Some of them may have been a little bit delayed as a result of the pandemic, but they are still looking to advance.

And so, we're really excited about that projects like the Walk, looking at breaking ground sometime this summer.

We see the Hyatt Centric, which just opened up Downtown when they did a groundbreaking for the next hotel over there.

And so, we're really excited about the prospects of what's happening Downtown.

I think as the vaccine proliferates throughout the community, and we get back to some form of a new normal, I think Downtown is going to be very strong.

- One more thing before I go to Bill, just a quick background, you were formerly- actually, as we tape this on Thursday, this is your last day, right, as the head of the Housing and Community Development for Memphis.

Prior to that, you were at the Office of Planning and Development for Memphis/Shelby County.

Is that right?

- Yeah.

Yeah.

Yeah.

So, I served in the Office of Sustainability and obviously recently I served as the Director of Housing and Community Development up until tomorrow, Friday, April 30th.

- And then just last thing, and I think I've got this right, Downtown Memphis Commission is actually made up of five entities and they include the Downtown Memphis Commission, the Center City Revenue Development Corporation which does loans and grants to businesses of all kinds of sizes, Center City Revenue Corporation, which does PILOTs and I think some of the really big tax incentives, also some tax freezes.

Downtown Mobility Authority, which owns parking lots and garages Downtown.

I think I have that right.

And then the Design Review Board which oversees projects that are being built Downtown.

Did I hit that, right?

I see you nodding.

So, let me go to Bill.

- Absolutely right, absolutely correct.

- All right, let's get Bill in there.

- All right, Paul, what has happened with capital, with private investment money during all of this?

This has to be something that would make those folks very nervous or at least more tentative than they were before?

- Well, from my understanding, capital is still flowing.

All of the developers that we've been working with and talking to, they still have access to capital.

I do believe that the capital providers have a keen eye to look at how some of the projects are going to perform post-pandemic.

So, they're thinking about how strong retail will be, what types of retail.

This is something that we've experienced not just Downtown but even at projects like the Fairgrounds, which obviously I've been involved with through Housing and Community Development but the capital providers are still interested in investing programs like opportunity zones, some of which are Downtown.

Obviously, the Fairgrounds is in one as well.

Those programs are still an incentive for investors.

And so, our hope and our belief is that we're still going to see capital flow in this market.

- The other strange thing that happened is that sales tax revenue in general for local governments was expected to take a big hit.

And it didn't.

Some of the numbers that I've seen as we start budget season on the city and county side is that, overall, sales tax revenue was above where it was a year ago, but the sales tax revenue flow into the Tourism Development Zone Downtown did take a hit.

- Yeah, that's absolutely correct.

- Am I on the mark with that?

- Yeah, that's absolutely correct.

So, we did see an increase in overall taxes during the pandemic.

Sales taxes, rather, during the pandemic.

We think that most of it was driven by some of the big box retailers, the home improvement stores, the grocery stores.

Those were still very strong during the pandemic but places like Downtown, where it's much more walkable and it's driven by tourism, we did see a decrease in the amount of sales taxes collected Downtown which has a dramatic impact on the TDZ.

So, those are things that we're still ironing out.

We haven't seen what the final numbers would look like for this year.

But we do know that last year for the Downtown TDZ, we saw about a $5 million hit on the revenues.

And so, that was just from March to June of that fiscal year.

And so, we're still interested to see what that impact is going to look like for this current fiscal year that we're in right now.

- The latest stimulus package that has been approved, not the one that's on the table that has a longer term economic goals, but the one that has passed.

Did that allow local governments to make up some of that revenue?

- Yeah.

So, I think the administration is still making the final determination on how those funds will be used.

But I do know that, as a part of the rules, it allows for local governments to replace lost revenue.

So, I do believe that that is something that can be replaced as a part of it.

And that's something that I know the administration is still talking about.

- All right, before I send it back to Eric, let me ask you, we mentioned the Hyatt Centric, which is part of the 1 Beale project on the south end of Downtown.

And it has two other hotels proposed as part of it, construction on one about to start, but that came together as the second convention center hotel site by Loews across from City Hall seemed to be stuck.

What's the status with Loews and how has it fared during the pandemic?

- Well, they're definitely still exploring Memphis.

They're still doing their due diligence.

So, we've had conversations with them shortly after I started.

So, it was early part of April.

And so, I know that they are still doubling down on Memphis.

So, we're excited that they are still looking at our city and they're finalizing all of their projections and their financials, but we're still very, very optimistic that that will move forward.

- When you look- I mean, again DMC is involved through its various entities in everything from office to tourism.

Obviously, a lot of residential, retail of various types, which also gets into, I think, tourism, I may have said that.

Even maybe a little bit of industrial and warehousing, I'm not 100% sure on that one, but you touch a lot of things.

Is there a five-year plan the DMC has or a 10-year or 25-year plan of where you all hope and want Downtown to be and how DMC's role might change over that time?

And some of that gets into both the vision for Downtown And the question sometimes people ask of, when do we have to stop doing so many incentives to continue the level of development we've seen?

- Yeah.

That's something that we've been talking about.

Certainly, there are plans that are on the books and during Jennifer's time here over the past couple of years, I know that there have been master plans for Downtown completed.

Obviously, Memphis 3.0 was recently completed but we've recently been talking about, what is the threshold for which an incentive is necessary?

And our PILOTs, which is the primary incentive that most people talk about, our PILOT is a real estate PILOT.

It's not a PILOT that's based on the number of jobs created.

It's a PILOT that's based on remediating blight and it's remediating that blight and it provides that financial incentive because in many instances, the economics for the deal is just not there.

So, the rents that are able to be charged in that structure are too low to recoup all of the investment necessary to get that building up to par.

So, their PILOT is necessary to reduce those operating costs.

As rents in Downtown Memphis increase, there is a threshold where there is no incentive necessary.

And so, those are the types of things that we are going to be looking at over the next few months is determining what is that threshold?

We have to do a lot of financial analysis to determine what that looks like and it still has to be done on a case by case basis but some deals are much more complicated than others but those are certainly things that we are exploring.

- And you mentioned Jennifer.

Jennifer as in Jennifer Oswald, the outgoing-- - Yes, sorry, Jennifer Oswald.

- No, that's okay.

You mentioned the TDZ and the $5 million hit.

I mean, at what point is a hit to the revenue that goes into the Tourism Development Zone, a real problem?

I mean, no one wants to see a $5 million hit, but is there a problem of meeting the obligations that DMC has?

Was it that much of a hit?

- Yeah, well, it can be, if we continue to see those types of hits.

We don't expect that to happen, and DMC doesn't manage the TDZ.

It's more HCD but I just happen to know quite a bit about it.

And so, the TDZ, pre-pandemic, was bringing in somewhere between 21 to $23 million a year.

And our debt that's connected to the TDZ is somewhere around 15 to 16.

So, we had about a 5 to $7 million surplus each year.

That's what we were using to fund various projects.

And so, last year it came in, and I'm using rough numbers so don't quote me on this.

- Sure.

- But last year, the numbers came in somewhere around 15 to 16 million, and we had a little bit in reserves.

So, we were able to cover the debt service.

But if we see significantly lower numbers from the TDZ, meaning we start to receive around 10 million or 11 million, then we are negative with regards to what it would take to cover all of our debt obligations for the TDZ.

So, not only could we not advance some of the projects that we have in the pipeline but our debt service would begin to suffer and the City would have to cover that from other revenues which we don't necessarily want to do.

- Okay.

Thank you.

The map behind you, I believe, is the Downtown Memphis Commission, the footprint of where you are and a part of that over your left shoulder, this is the awkwardness of Zoom and such, but we're all used to it at this point, includes into Midtown, right?

And includes, I believe the Medical District.

Just in the last couple of weeks, Henry Turley Company have announced a big mixed-use development in the medical district.

What happens next there?

What do you see Downtown Memphis Commission's role in development in the Medical District?

- Certainly, we partner very closely with the Medical District Collaborative, and I hadn't been deeply involved in what Mr. Turley has proposed.

I'm sure we'll have some discussions as they think about what their financial structure looks like but it's really important that the Medical District and that part of Midtown is connected to Downtown.

We believe that it's the core of our city, it's the economic lifeblood of our city.

And so, as development deals are proposed in those areas, we certainly want to help assist when needed.

And certainly, the Medical District Collaborative will provide the programs and incentives that they can provide to those developments to make sure that we're creating holistic development.

- Yeah.

Let me go back to Bill.

- Let's talk about 100 North Main.

First of all, is that deal closed in terms of the city's purchase of it?

And are you at a point where you start taking formal offers from folks interested in it?

- Yes, the deal is closed.

So, we're proud owners of 100 North Main building and the structures that are adjacent to it on that block.

We are working on putting together an RFP right now for developers.

We think that there'll be a release somewhere around June 15th, somewhere in that timeframe, is when we will issue that RFP for developers.

And so, we welcome the opportunity to speak with developers that are interested in developing that building.

It's a really important site, obviously it's immediately adjacent to our Civic Plaza with the county building, the city buildings, the federal building, actual DMC office is directly across the street.

And so, it's a structure that we don't want to see vacant for too much longer.

We want to see some activity happening on that site.

We can't afford to let it be one of those structures that's vacant for the next 20 years.

And so, collectively with the City, we wanted to make sure we were taking aggressive action to get that done.

- Does the possibility of the Loews Convention Center hotel as part of the Civic Center Plaza, I take that will have a lot to do with the nature of some of the proposals that you see?

- Yeah.

I'm sure that all of the developers that are proposing will factor that into the equation.

Our hope is that we get some proposals that have mixed-use using the lower floor to activate it along that Main Street corridor and then the upper floors actually have the opportunity for apartments, housing, offices, hotels.

There's a lot of opportunity in that building.

And so we just want to see something that's creative and we want to see what the developers bring us.

- The City has mentioned that demolition is not out of the question, but it sounds like from what you're saying, that you really want to see some proposals here that are going to work with what they've got there on the site already.

- Memphis is a city where we've done a great job preserving our historical character.

We've seen some significant wins with projects like Crosstown, Tennessee Brewery, Historic Melrose which is getting ready to take place.

There are so many projects where we able to preserve older buildings.

It would be great to be able to preserve it but we also understand that in some instances, it's financially not feasible to preserve.

And so, we're not ruling it out but we certainly are encouraging those that propose to preserve the building if possible.

- Okay.

Before I send it back to Eric, it looks as if we have enough projects on the books now that there is a synergy among them, to use an overused word, but how much of what is coming up in proposals that you see now is a result of someone saying, "Well, there's something going on over there, I want to connect up to that."

- A lot of it.

Memphis, as the mayor has said, prior to the pandemic, we had momentum and there's so much happening.

And those things just build upon each other.

It creates a narrative out in the development community and we want to welcome those developers.

We want to ensure that we are getting diverse participation with development, not only on the construction side but we're also starting to think about how can we encourage more minority participation on the developer side where we're having minorities participating on that back-end capital, that long-term capital, which we know is what's going to help build wealth in our community and ultimately be something that's going to benefit all.

- In your, I think some five years plus at Housing Community Development with the City, you were involved in some of the big, big projects that HCD was involved in that the City is seeing, where there's major change.

So, Raleigh Town Center, which is known by something else now, South City, which is a massive redevelopment of the last of the legacy housing projects in Memphis and connecting down into Downtown and bringing that development and really transforming that neighborhood.

You mentioned the Fairgrounds and Melrose, which is part of really an extension of the Fairgrounds project but whenever you came on the show, you were always quick to try to emphasize some of the work HCD was doing at a really micro level, ten homes, five apartments, a small cul-de-sac that was being transformed.

Are there opportunities like that?

I mean, we in the media, we tend to focus on the billion dollar potential of Union Row, or the hundreds of millions of dollars in this or that project.

Are there small scale projects that you also want to emphasize at DMC?

- Yeah, absolutely.

And I think that's really, really important.

I'm glad that you pointed that out because I think that people do get lost in the large projects and sometimes, and I'm guilty of this.

I didn't even realize before I moved over and I really started meeting with the team and got informed that those larger projects really do help DMC do the on-the-ground work to help those smaller projects.

And what I mean by that is, if you have a project that is closing on a PILOT, and it's a $10 million project- Well, they have a million dollar fee, let's say they have a million dollar fee for their project, that whole fee goes towards capitalizing grants and loans for the Center City Development Corporation.

So, it doesn't cover any other DMC staff.

It pays for all of the grants and loans that we provide to those small, many of them, minority businesses.

And so, you see Façade Improvement Programs with restaurants like Alcenia's, an amazing restaurant just to the North of the Civic Plaza and the Convention Center or you see projects like the renovation of the WLOK building.

All of those things are funded by these larger activities.

And those are the types of things that really are game changers for Downtown.

It helps the small businesses and ensures that we create a Downtown for everybody.

We want to make sure that this is a place that reflects the character of Memphis, the culture of Memphis, the people of Memphis.

We want it to remain diverse.

And those larger projects actually help finance the programs that allow us to do that.

- Let me go back to Bill.

- In the process, the map of Downtown and the Downtown area as defined by what the DMC covers, it's different types of development in different places.

I mean, I think we've all been surprised or initially were surprised at the scale of residential in the South Main area, which has just exploded with that and looks to be crossing Crump Boulevard any day now.

- Yeah.

There are a number of distinct areas in Downtown Memphis.

Obviously, the South Main residential area is one that is home to many people right now, it's a diverse area.

We have the entertainment district, where there's vibrancy, and obviously, it's probably been hit the hardest during the pandemic.

And every weekend, since the past two months, we're seeing more and more people come back Downtown.

So, we're really excited about that.

And they are wearing their masks and doing all the things that are necessary to stay safe.

But the businesses now have that activity that we really need to ensure that our community thrives.

And so, with all of the diverse areas of Downtown, we believe that we have something for everybody in our community.

- At some point, does DMC maybe break off parts of this in the future?

- When you say break off parts, I'm assuming you mean parts of the community?

- I mean, is there maybe a separate body that does South Main versus one that does the Convention Center area versus one that works with the Medical District?

- Yeah, well, that's not something that we've talked about.

Obviously, nothing is out of the question, but right now, I think DMC is well poised to handle the diverse range of projects and issues that are represented in Downtown.

So, I don't envision that happening in the short term but obviously anything could happen.

One of the things that I wanted to point out is just the importance of Downtown to the whole city and region.

Downtown really is the living room for our community.

It is the space that if you're bringing in people from out of town to visit, to tour, or if somebody is just driving around and they want to figure out the economic vitality of our city, Downtown is the place that they're going to look at.

So, it's really important that we continue to invest, that we continue to work on cleaning up the blight 'cause there's still quite a bit of work to do with all the momentum we have and all of the great projects, we still have work to do.

And DMC is around to take care of that work.

- As different as the projects are, the mechanics of getting them done still remains pretty basic, doesn't it?

- Yeah.

I mean, it's revenue.

I mean, there has to be a financial structure that works in order to get the investment to take place.

And regardless of where the project is located, whether it's Downtown or other parts of the city or anywhere in the country, it always comes down to the numbers.

And so, our goal is to try to get deals to work in our community.

- Really briefly, when you look back at your time at HCD, is there a project or projects that you're most proud of being a part of?

- So many of them but Historic Melrose, that's one that's really, really close to my heart, we worked really hard with the community on that one.

Tillman Cove is one that is on the horizon, that we really listened to the community and we solved a problem.

The Fairgrounds obviously is one that we put a lot of time and effort into, and we're looking at those bonds closing in July, and then all of the programs around down payment assistance, the Housing Trust Fund, the Emergency Rental Program that's underway right now.

There's so much great work that has been done with HCD and I'm proud to see the team with Ashley Cash, and Mari Albertson at the helm taking that to the next level.

- All right.

Paul Young, thank you for joining us.

That is all the time we have this week.

Remember you can get past episodes of the show at wkno.org or the full podcast of the show on The Daily Memphian site, iTunes, Spotify or wherever you get your podcasts.

We'll see you next week.

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