WEBVTT 00:00.000 --> 00:03.364 (Female Announcer) This is a production of WKNO Memphis. 00:03.364 --> 00:06.531 Production funding for "Behind the Headlines" is made possible 00:06.531 --> 00:09.598 in part by the WKNO Production Fund, 00:09.598 --> 00:14.064 the WKNO Endowment Fund and by viewers like you. 00:14.064 --> 00:15.931 Thank you. 00:15.931 --> 00:18.931 Pension and benefit reform, the state of the Memphis airport 00:18.931 --> 00:21.564 and more tonight on "Behind the Headlines." 00:21.564 --> 00:38.564 ♪♪♪ 00:38.564 --> 00:39.964 I'm Eric Barnes, publisher of the Memphis Daily News, 00:39.964 --> 00:40.964 thanks for joining us. 00:40.964 --> 00:42.964 We're joined tonight by a number of people to speak about 00:42.964 --> 00:43.964 the state of the airport. 00:43.964 --> 00:46.298 Later we will be joined by some folks talking about 00:46.298 --> 00:48.131 pension reform and local government. 00:48.131 --> 00:50.031 But let me first introduce Kemp Conrad, 00:50.031 --> 00:52.364 Memphis City Council, thank you for being here. 00:52.364 --> 00:53.464 Thanks for having me. 00:53.464 --> 00:57.298 Charlie Goforth from the Memphis Chamber and the Aerotropolis 00:57.298 --> 00:58.898 Initiative, thank you for being here. 00:58.898 --> 00:59.964 Good to be here. 00:59.964 --> 01:02.698 Jack Sammons, Chairman of the Airport Authority, 01:02.698 --> 01:03.698 thank you for being here. 01:03.698 --> 01:04.698 Glad to be here, Eric. 01:04.698 --> 01:05.698 Thank you. 01:05.698 --> 01:07.898 And Bill Dries, Senior Reporter with the Memphis Daily News. 01:07.898 --> 01:10.064 Let's start with there's lots to talk about with the airport. 01:10.064 --> 01:11.064 I'm going to put you on the spot, 01:11.064 --> 01:11.731 Jack, you're relatively new into the Chairman job. 01:11.731 --> 01:14.731 Right. 01:14.731 --> 01:17.131 The big headline has been for, what, 01:17.131 --> 01:20.131 a year and a half now the decreased air traffic. 01:20.131 --> 01:20.964 Especially from Delta. 01:20.964 --> 01:21.964 SAMMONS: Right. 01:21.964 --> 01:23.998 Do you have any sense of how much farther that's going to 01:23.998 --> 01:26.831 fall before it bottoms out or is it just going to keep falling? 01:26.831 --> 01:29.764 Well, I don't have a crystal ball. 01:29.764 --> 01:32.764 I can't tell you who's going to win the NCAA either but I think 01:32.764 --> 01:36.831 we're approaching sort of a leveling off. 01:36.831 --> 01:39.131 I actually have a meeting next week with the CEO 01:39.131 --> 01:42.698 of Delta Airlines to discuss Memphis' future, 01:42.698 --> 01:46.564 just he and I headed down to Atlanta. 01:46.564 --> 01:50.331 But, umm, the domestic airline business in America has been 01:50.331 --> 01:52.498 contracting for some time. 01:52.498 --> 01:56.264 That the legacy carriers are focusing on the international 01:56.264 --> 02:00.431 trade going across the ponds in the Atlantic and Pacific. 02:00.431 --> 02:03.231 The low-cost carriers, on the other hand, 02:03.231 --> 02:09.431 Southwest, Allegiant, Spirit and those type of airlines that tend 02:09.431 --> 02:13.764 to focus on fares have had explosive growth in the last 02:13.764 --> 02:15.064 decade, since 9/11. 02:15.064 --> 02:18.231 As one door closes another door opens. 02:18.231 --> 02:22.864 We've been a primary hub for Delta and Northwest before that, 02:22.864 --> 02:25.464 Republic before that for a generation. 02:25.464 --> 02:29.331 The world is changing and our airport is in the middle 02:29.331 --> 02:30.331 of that dynamic. 02:30.331 --> 02:34.764 So it's allowed us and opportunity to attract 02:34.764 --> 02:36.831 companies like Southwest which is coming August 11. 02:36.831 --> 02:37.831 BARNES: Right. 02:37.831 --> 02:38.831 And we'll come back to Southwest. 02:38.831 --> 02:39.831 SAMMONS: Sure. 02:39.831 --> 02:40.831 Because that's good news and people have asked for that as 02:40.831 --> 02:41.831 long as I've been in Memphis some fifteen, 02:41.831 --> 02:42.864 twenty years now. 02:42.864 --> 02:43.864 SAMMONS: Sure. 02:43.864 --> 02:45.864 But on the Delta front there, you know, 02:45.864 --> 02:48.498 people really have visceral reactions to Delta, 02:48.498 --> 02:49.498 you know. 02:49.498 --> 02:50.164 SAMMONS: Sure. 02:50.164 --> 02:52.931 Be it the businesses who are paying $800 for flights 02:52.931 --> 02:54.531 or a family who wants to go see a loved one and they're paying 02:54.531 --> 02:56.564 these, what they feel like are ridiculous fees. 02:56.564 --> 02:57.564 SAMMONS: Right. 02:57.564 --> 03:00.564 And you hear people Delta's out to get Memphis, 03:00.564 --> 03:03.431 Delta doesn't like Memphis, Delta moved Pinnacle 03:03.431 --> 03:04.431 in that bankruptcy situation. 03:04.431 --> 03:04.764 SAMMONS: Yeah. 03:04.764 --> 03:06.431 The subsidiary regional airline out of Memphis. 03:06.431 --> 03:09.098 Is that your experience in terms of dealing with executives 03:09.098 --> 03:09.431 at Delta? 03:09.431 --> 03:10.098 SAMMONS: No. 03:10.098 --> 03:10.998 That they don't care about Memphis? 03:10.998 --> 03:11.564 SAMMONS: Yeah, no, not at all. 03:11.564 --> 03:12.064 BARNES: Ok. 03:12.064 --> 03:14.764 I mean, at the end of the day, you know, 03:14.764 --> 03:18.998 at my company we say we are not a not-for-profit company 03:18.998 --> 03:20.231 intentionally, you know. 03:20.231 --> 03:23.664 And Delta is a for-profit public company that's responsible to 03:23.664 --> 03:27.731 their shareholders and when the economy collapsed in '08 03:27.731 --> 03:30.231 they had to, all the airlines had to reflect 03:30.231 --> 03:32.564 as they were bleeding money left and right. 03:32.564 --> 03:36.764 And they tend to run back to their primary hubs. 03:36.764 --> 03:40.631 FedEx does the same thing when markets shrink they might reduce 03:40.631 --> 03:44.231 Greensboro and Indianapolis and other hubs that they have. 03:44.231 --> 03:48.764 So there are a number of victims along the line like St. Louis, 03:48.764 --> 03:51.764 Pittsburgh, could be Phoenix coming with the US Air-American 03:51.764 --> 03:52.698 merger. 03:52.698 --> 03:53.864 Cincinnati got hit pretty hard I believe. 03:53.864 --> 03:54.864 Cincinnati got clobbered. 03:54.864 --> 03:55.864 Yeah. 03:55.864 --> 03:58.731 They went from 600 flights a day to less than what we have in 03:58.731 --> 03:59.731 Memphis today. 03:59.731 --> 04:00.798 Right. 04:00.798 --> 04:01.798 Right. 04:01.798 --> 04:02.798 And Nashville went through, people will say, 04:02.798 --> 04:04.464 Nashville went through it ten years ago when American left 04:04.464 --> 04:05.464 there. 04:05.464 --> 04:06.464 Yeah, American left. 04:06.464 --> 04:07.698 American used to have daily flights to London. 04:07.698 --> 04:08.698 BARNES: Yeah. 04:08.698 --> 04:11.464 All that left overnight and they had a brand new airport 04:11.464 --> 04:12.464 that was empty. 04:12.464 --> 04:13.464 BARNES: Ok. 04:13.464 --> 04:14.464 But they've come back with Southwest and others. 04:14.464 --> 04:15.464 BARNES: Yeah. 04:15.464 --> 04:16.464 And that's what we'll do. 04:16.464 --> 04:17.464 You mentioned Southwest again. 04:17.464 --> 04:18.498 Just, you know, they've introduced- Sure. 04:18.498 --> 04:20.931 For people who aren't familiar, AirTran bought by Southwest. 04:20.931 --> 04:21.931 SAMMONS: Right. 04:21.931 --> 04:23.064 They're rebranding, I think, in the fall. 04:23.064 --> 04:24.064 SAMMONS: Right. 04:24.064 --> 04:25.064 Bit by bit. 04:25.064 --> 04:26.064 Sort of scene by scene. 04:26.064 --> 04:28.664 SAMMONS: Well they're in the middle of that now. 04:28.664 --> 04:30.098 They're painting airplanes as fast as they can. 04:30.098 --> 04:32.098 BARNES: Right. 04:32.098 --> 04:33.498 And they have leased their 717s, their smaller jets, 04:33.498 --> 04:33.564 to Delta. 04:33.564 --> 04:36.564 And Delta will replace the CRJs, 04:36.564 --> 04:39.931 which is the 50 seat beer can I call it. 04:39.931 --> 04:40.931 BARNES: Right. 04:40.931 --> 04:41.931 You're sitting there like this. 04:41.931 --> 04:42.931 BARNES: Right. 04:42.931 --> 04:43.931 The regional jets. 04:43.931 --> 04:46.431 You don't have enough seats to spread that fuel cost over to 04:46.431 --> 04:47.631 make those things efficient. 04:47.631 --> 04:49.931 So they're going to be sent to the desert of converted 04:49.931 --> 04:51.264 to private jets. 04:51.264 --> 04:55.964 Southwest, the beauty of their model is they fly one airplane, 04:55.964 --> 05:01.098 the Boeing 737 and there are different models of it 05:01.098 --> 05:02.098 that get larger. 05:02.098 --> 05:05.964 But the 717s that AirTran has typically flown will be out of 05:05.964 --> 05:08.064 here probably in the next six months and you'll see 05:08.064 --> 05:09.064 that Southwest. 05:09.064 --> 05:10.064 BARNES: Right. 05:10.064 --> 05:11.764 The bad news is there's no first class on Southwest, 05:11.764 --> 05:12.798 there is on AirTran. 05:12.798 --> 05:14.298 BARNES: Right. 05:14.298 --> 05:17.898 Any sense of how quickly or if at all 05:17.898 --> 05:18.898 that Southwest will ramp up service here? 05:18.898 --> 05:19.898 I mean, again, there are a lot of folks who are sort of 05:19.898 --> 05:32.064 chomping at the bit that they will come in with reasonable 05:32.064 --> 05:32.398 fares and relatively extensive service. 05:32.398 --> 05:33.064 Yeah. 05:33.064 --> 05:34.064 Do you have a sense of how quickly it might ramp up? 05:34.064 --> 05:35.064 I do. 05:35.064 --> 05:36.064 Their CEO told me rather abruptly one night at dinner he 05:36.064 --> 05:37.064 said the more you take the more you'll get. 05:37.064 --> 05:39.298 And so it's all about whether or not this community, one, enrolls 05:39.298 --> 05:42.531 in their rapid rewards program, which is their frequent flyer. 05:42.531 --> 05:43.531 BARNES: Ok. 05:43.531 --> 05:46.698 And their Chase Bank Visa card which is an important revenue 05:46.698 --> 05:47.764 producer for them. 05:47.764 --> 05:48.764 Right. 05:48.764 --> 05:52.564 Everybody in Memphis has got a Delta AmEx and now we need- 05:52.564 --> 05:55.764 Keep your AmEx but get you a Visa card from Chase 05:55.764 --> 05:56.798 with Southwest brand on them. 05:56.798 --> 05:58.764 We've never mentioned so many credit cards on the show. 05:58.764 --> 05:59.898 This is a watershed moment. 05:59.898 --> 06:01.098 [guests laughing] 06:01.098 --> 06:02.064 Bill Dries. 06:02.064 --> 06:05.364 Well let's talk about something that is not strictly 06:05.364 --> 06:07.164 the airport. 06:07.164 --> 06:08.998 The aerotropolis conference. 06:08.998 --> 06:13.664 Or concept, I should say. 06:13.664 --> 06:17.031 Kemp, the city council got a look at where that plan is going 06:17.031 --> 06:21.231 in terms of formulation this week and it got kind of a mixed 06:21.231 --> 06:23.598 reception from the council. 06:23.598 --> 06:27.598 So where do you think we are on putting some specifics, 06:27.598 --> 06:30.364 some meat on the bones, of the aerotropolis concept? 06:30.364 --> 06:31.964 Well I think it's making a lot of progress. 06:31.964 --> 06:33.631 I think there are a lot of people working hard on it. 06:33.631 --> 06:36.064 I mean, this, we talked a lot about passenger service. 06:36.064 --> 06:39.364 But, you know, the airport is the economic engine not only of 06:39.364 --> 06:41.631 this community but really of the region. 06:41.631 --> 06:43.064 You know, two thirds of our, you know, 06:43.064 --> 06:45.898 call it GCP, gross community product, 06:45.898 --> 06:48.364 all economic development, come from our airport. 06:48.364 --> 06:49.998 A lot of it driven by FedEx. 06:49.998 --> 06:51.064 Two thirds of the jobs. 06:51.064 --> 06:52.498 So we've got to get this right. 06:52.498 --> 06:55.398 It's a competitive advantage that our community has but it's 06:55.398 --> 06:57.398 kinda been underutilized, underappreciated, 06:57.398 --> 06:59.698 and there's never really been a strategy for it. 06:59.698 --> 07:02.164 And so, I think a lot of work's been done. 07:02.164 --> 07:04.831 I think some of the frustration from the council was there's 07:04.831 --> 07:07.764 some council members where the airport is in their district and 07:07.764 --> 07:09.598 those folks haven't been consulted. 07:09.598 --> 07:11.398 You know, there was a neighborhood meeting and I think 07:11.398 --> 07:14.231 that the council members, such as Councilman Collins who's very 07:14.231 --> 07:15.764 integral to his community, you know, 07:15.764 --> 07:18.598 can help get the message right and take that plan to the 07:18.598 --> 07:19.598 neighbors. 07:19.598 --> 07:21.031 The thing that frustrated me was just there was no mention about 07:21.031 --> 07:23.864 jobs in that plan and everything we need to be focused on in this 07:23.864 --> 07:25.664 community, especially around the airport, 07:25.664 --> 07:26.664 is about jobs. 07:26.664 --> 07:28.864 I was talking to someone from the chamber the other night and 07:28.864 --> 07:32.064 they said we're not just getting cut from corporate headquarters 07:32.064 --> 07:33.831 we're not even in the hunt because of the air service. 07:33.831 --> 07:36.098 So I'm thankful of the leadership of Mr. Sammons. 07:36.098 --> 07:39.731 I can't imagine a better person to lead this airport from where 07:39.731 --> 07:40.731 we've been. 07:40.731 --> 07:41.731 We've had a lot of air service. 07:41.731 --> 07:44.831 We've been over served from a community our size and how we go 07:44.831 --> 07:47.464 through this transformation and continue to get more air 07:47.464 --> 07:48.464 service. 07:48.464 --> 07:49.464 Charlie, let's bring you in. 07:49.464 --> 07:50.631 I mean, Councilman Conrad said that, 07:50.631 --> 07:52.598 you know, he didn't hear jobs mentioned with aerotropolis. 07:52.598 --> 07:54.731 You're a planning consultant with aerotropolis. 07:54.731 --> 07:55.898 What about jobs? 07:55.898 --> 08:00.098 Well I think that based on a lot of what the council said they 08:00.098 --> 08:03.998 did include jobs information in the presentation that was 08:03.998 --> 08:07.064 presented at White Haven High School last night 08:07.064 --> 08:10.864 in fact, talked about if this plan was accomplished based on what 08:10.864 --> 08:13.664 they were talking about it would generate about 900 additional 08:13.664 --> 08:16.664 jobs per year over a twenty year period. 08:16.664 --> 08:20.364 So that starts to add up pretty quickly to about 16000 over the 08:20.364 --> 08:23.531 twenty year period and I think that's a big part of the 08:23.531 --> 08:25.364 process. 08:25.364 --> 08:28.464 What we need to do, we've been losing some industries to Desoto 08:28.464 --> 08:31.831 County and a lot of it is because they've gone through the 08:31.831 --> 08:36.031 tax incentives here and are no longer eligible for them so they 08:36.031 --> 08:38.564 moved to where they can get additional tax incentives. 08:38.564 --> 08:41.931 Another part of it is available, usable land and that's something 08:41.931 --> 08:43.331 we're looking at too. 08:43.331 --> 08:46.331 It's kind of a comprehensive project to find places for 08:46.331 --> 08:49.598 additional industrial land, remove blight and get other 08:49.598 --> 08:52.731 businesses interested in moving back to the area. 08:52.731 --> 08:54.964 So it's a comprehensive plan. 08:54.964 --> 08:57.764 Jobs are a big part of it but stabilizing neighborhoods like 08:57.764 --> 09:00.164 the Whitehaven neighborhood and Hickory Hill neighborhood are a 09:00.164 --> 09:01.431 big part of it also. 09:01.431 --> 09:04.231 Kemp, you wanted to comment? 09:04.231 --> 09:05.998 No, no. 09:05.998 --> 09:07.398 [Eric laughing] 09:07.398 --> 09:08.598 That's great and I think hat there was a lot 09:08.598 --> 09:09.364 presented to the council and I think, 09:09.364 --> 09:10.664 you know, after the comments I think the focus, 09:10.664 --> 09:11.931 because that is the focus. 09:11.931 --> 09:14.231 I think all, all the things that's in the plan, 09:14.231 --> 09:16.731 which is good, really builds up to how do we create more 09:16.731 --> 09:18.531 good-paying jobs for our community. 09:18.531 --> 09:19.531 BARNES: Right. 09:19.531 --> 09:21.731 So, so, how much have the readjustment, 09:21.731 --> 09:25.698 the reconfiguration of the airline industry, 09:25.698 --> 09:32.464 how much has that affected our aerotropolis planning? 09:32.464 --> 09:36.898 You know, the airlines obviously impact the area and what happens 09:36.898 --> 09:38.098 at the airport. 09:38.098 --> 09:41.364 I think the big part of what the aerotropolis is looking at is 09:41.364 --> 09:44.364 the business side of what businesses are located in there. 09:44.364 --> 09:48.064 Quite frankly, if we have more businesses in the aerotropolis 09:48.064 --> 09:50.298 area we will have more people using the airport. 09:50.298 --> 09:51.298 BARNES: Right. 09:51.298 --> 09:52.498 And that's the key. 09:52.498 --> 09:53.798 We have lost businesses. 09:53.798 --> 09:57.831 We need to engage and bring new businesses in that will then use 09:57.831 --> 09:58.831 the airport. 09:58.831 --> 10:01.698 One of the things that is a really a growth industry and 10:01.698 --> 10:05.664 can't move out of the Memphis are the things that FedEx says 10:05.664 --> 10:07.998 they need right at the end of the runway and that's that 10:07.998 --> 10:11.864 same-day source stuff like the veterinarian facility that 10:11.864 --> 10:13.164 brings samples in. 10:13.164 --> 10:16.031 They're pulled off early in the morning and sent back out on the 10:16.031 --> 10:17.264 plane the same day. 10:17.264 --> 10:19.264 Yeah, and I don't know if it's a question for you. 10:19.264 --> 10:20.264 No. 10:20.264 --> 10:21.264 I'll put you on the spot with this with FedEx. 10:21.264 --> 10:22.264 Sure. 10:22.264 --> 10:24.798 I mean, they, their quarterly earnings came out recently, 10:24.798 --> 10:25.798 way off. 10:25.798 --> 10:27.198 But that's part of the restructuring plan to some 10:27.198 --> 10:28.198 extent. 10:28.198 --> 10:30.898 And when the big plan with cutbacks and so on came out, 10:30.898 --> 10:34.198 what, six months ago, a lot of what they talked about is how 10:34.198 --> 10:38.864 they have growth area in ground and they are declining in their 10:38.864 --> 10:39.864 air business. 10:39.864 --> 10:41.831 Does that concern you as head of the Airport Authority? 10:41.831 --> 10:45.964 Well, it... there are dynamics in any business environment. 10:45.964 --> 10:47.631 FedEx is a well-managed company. 10:47.631 --> 10:51.664 I think any progressive company today every five or six years or 10:51.664 --> 10:53.364 so will prune the trees. 10:53.364 --> 10:57.131 And I was in Washington this week and they're talking about 10:57.131 --> 10:58.831 the three percent sequester and I'm like, 10:58.831 --> 11:01.831 you can't find three percent to cut in this place you've lost 11:01.831 --> 11:02.831 your mind. 11:02.831 --> 11:07.064 And corporate entities like FedEx have to do the same thing. 11:07.064 --> 11:10.831 It's important to note that FedEx pays 80% of the landing 11:10.831 --> 11:13.664 fees at the Memphis International Airport which 11:13.664 --> 11:17.664 makes it very conducive for passenger flights to come in 11:17.664 --> 11:19.464 here because of the low cost. 11:19.464 --> 11:22.464 What they tell us is you look at your demographics, 11:22.464 --> 11:26.098 do you have enough people who can sustain the high level of 11:26.098 --> 11:28.798 flights that you had when you were a Delta hub? 11:28.798 --> 11:30.064 And, frankly, that's no. 11:30.064 --> 11:33.264 But it's good news for Osceola when they get a steel plant 11:33.264 --> 11:35.364 because those folks are going to fly out of Memphis. 11:35.364 --> 11:38.098 What good for North Mississippi will be good for Memphis. 11:38.098 --> 11:40.964 Certainly we need to do what we can and Kemp's worked hard on 11:40.964 --> 11:43.964 this at the City Council to try to create and economic 11:43.964 --> 11:47.198 environment where companies will want to come to Memphis and 11:47.198 --> 11:48.198 grow. 11:48.198 --> 11:49.564 And that's, it's a chicken and the egg. 11:49.564 --> 11:51.998 You're not going to have flights until you have passengers and 11:51.998 --> 11:53.664 you're not, the other way around. 11:53.664 --> 11:57.064 Yeah, one thing that in the middle of these cutbacks with 11:57.064 --> 12:00.198 Delta ground was broken on, I may have my timing off slightly, 12:00.198 --> 12:02.931 the ground transportation center. 12:02.931 --> 12:03.931 Right. 12:03.931 --> 12:04.931 Certainly. 12:04.931 --> 12:05.931 The big garage that people see. 12:05.931 --> 12:06.931 Sure. 12:06.931 --> 12:09.398 The rental cars are going in there. 12:09.398 --> 12:11.498 Right. 12:11.498 --> 12:13.198 That has just recently opened, I believe. 12:13.198 --> 12:14.198 Right. 12:14.198 --> 12:16.364 I haven't flown in lately so I haven't seen it in person. 12:16.364 --> 12:17.364 Right. 12:17.364 --> 12:18.364 Yeah. 12:18.364 --> 12:19.364 And there was some concern or even criticism that, 12:19.364 --> 12:21.431 hey, we've just built this big multi-million dollar garage and 12:21.431 --> 12:22.664 we're losing all this service. 12:22.664 --> 12:23.664 Mhmm. 12:23.664 --> 12:25.331 Is, is, do the economics of that garage still work? 12:25.331 --> 12:26.331 Right. 12:26.331 --> 12:28.464 Well the number of people who are flying out of Memphis has 12:28.464 --> 12:29.464 not decreased. 12:29.464 --> 12:31.631 And the people that we call O&D, they originate in Memphis, 12:31.631 --> 12:33.564 they still need to park their car somewhere. 12:33.564 --> 12:36.231 There are three primary areas of revenue for an airport: landing 12:36.231 --> 12:37.664 fees, terminal rent and non-airline revenue, 12:37.664 --> 12:38.898 which is parking and concessions. 12:38.898 --> 12:40.164 It's a three-legged stool. 12:40.164 --> 12:44.098 That's a huge piece of the profits that are made by, 12:44.098 --> 12:46.064 or the revenue that's made by and airport. 12:46.064 --> 12:49.264 Six dollars a day you can park in that parking garage, 12:49.264 --> 12:51.598 the ground transportation center as we call it. 12:51.598 --> 12:55.031 We also moved all the rental car companies from Democrat Road all 12:55.031 --> 12:59.098 the way to the airport now so you don't have to get on a 12:59.098 --> 13:02.398 smelly bus and pollute the air and ride over to Democrat. 13:02.398 --> 13:03.531 What does that do? 13:03.531 --> 13:07.931 It creates hundreds of acres of potential expansion for FedEx 13:07.931 --> 13:08.931 for the future. 13:08.931 --> 13:12.264 Right now they're landlocked by Democrat Road but sometime, 13:12.264 --> 13:16.264 a generation from now perhaps, that road can close and FedEx 13:16.264 --> 13:19.264 can go all the way to the creek which is a huge opportunity for 13:19.264 --> 13:20.264 this community. 13:20.264 --> 13:22.264 And FedEx, you know, they're planning, 13:22.264 --> 13:25.131 FedEx if planning for generations away and we have to 13:25.131 --> 13:26.698 do the same, Charlie, in this community. 13:26.698 --> 13:27.698 Alright. 13:27.698 --> 13:28.698 Well we're going to leave it there for this topic, 13:28.698 --> 13:29.698 at least. 13:29.698 --> 13:30.698 Yeah. 13:30.698 --> 13:31.698 Jack Sammons, thank you for being here. 13:31.698 --> 13:32.698 Thank you. 13:32.698 --> 13:33.698 We appreciate your time. 13:33.698 --> 13:34.698 Charlie Goforth, also, thank you for being here. 13:34.698 --> 13:35.831 And when we come back, a conversation about pension and 13:35.831 --> 13:38.564 benefit reform and unfunded liabilities at the city and 13:38.564 --> 13:42.798 county level coming up next. 13:49.564 --> 13:52.698 We're joined now by Joe Saino from the watchdog group Memphis 13:52.698 --> 13:53.698 Shelby Inform. 13:53.698 --> 13:54.698 Thank you for joining us again. 13:54.698 --> 13:55.831 Thank you inviting me. 13:55.831 --> 13:58.031 And Kemp Conrad has stayed around to talk about pensions 13:58.031 --> 14:00.664 and benefits and compensation and all those issues of local 14:00.664 --> 14:01.664 government. 14:01.664 --> 14:04.864 We'll talk about the city, the county and MLGW. 14:04.864 --> 14:06.664 Those are some hot button issues for you Joe. 14:06.664 --> 14:09.698 Let me as a real simple question. 14:09.698 --> 14:14.498 Are the pension obligations just too much for the city to handle? 14:14.498 --> 14:16.198 I think so at the present time. 14:16.198 --> 14:22.331 I mean, we're talking OPEB at $1.2 billion and then we've got 14:22.331 --> 14:25.898 an unfunded liability on the pension plan of six hundred 14:25.898 --> 14:30.498 forty-something million close to $2 billion. 14:30.498 --> 14:34.831 And the county has like four hundred million so five times 14:34.831 --> 14:37.898 the county with the same, basically the same number of 14:37.898 --> 14:43.931 employees that the city has, one fifth of the obligation of 14:43.931 --> 14:44.931 the city. 14:44.931 --> 14:48.031 Is that all pension money or is that pension and healthcare 14:48.031 --> 14:49.331 benefits rolled together? 14:49.331 --> 14:52.064 Well that's, the two billion is the.. 14:52.064 --> 14:52.998 Is together. 14:52.998 --> 14:53.998 Yeah. 14:53.998 --> 14:54.998 And that's OPEB. 14:54.998 --> 14:56.531 OPEB stands for, OPEB is? 14:56.531 --> 14:58.198 All the post-employment benefits. 14:58.198 --> 14:59.864 Basically healthcare for retirees. 14:59.864 --> 15:00.931 Ok. 15:00.931 --> 15:04.098 And Kemp, how you've been on the City Council for however many 15:04.098 --> 15:06.598 years now, I mean, your take on this problem? 15:06.598 --> 15:10.731 Some people nationally have talked about how pensions are a 15:10.731 --> 15:13.264 ticking time bomb for state, local, 15:13.264 --> 15:14.264 county government. 15:14.264 --> 15:15.664 The main feeling is frustration. 15:15.664 --> 15:17.064 Because the facts on this are so, 15:17.064 --> 15:19.864 so clear what we're doing now is not good for our city. 15:19.864 --> 15:21.698 It's not good for the tax payers and, 15:21.698 --> 15:25.331 frankly, it's not good for our employees and retirees who think 15:25.331 --> 15:27.698 that this pension plan and the healthcare plan is going to be 15:27.698 --> 15:29.098 there for em in the future. 15:29.098 --> 15:31.831 It's not, under the present course. 15:31.831 --> 15:35.031 And people that want to do the responsible thing get attacked 15:35.031 --> 15:39.764 for trying to set this up so it makes it right by everybody. 15:39.764 --> 15:42.631 To put this into context, our annual budget's about 15:42.631 --> 15:44.264 $600 million, ok? 15:44.264 --> 15:46.964 So our unfunded liability basically promises that have 15:46.964 --> 15:51.098 been made by past politicians and union bosses that can't be 15:51.098 --> 15:55.198 kept is three times the size of our total annual budget. 15:55.198 --> 15:59.064 The last three years we have underfunded the pension plan by 15:59.064 --> 16:02.931 more than $50 million dollars, ok? 16:02.931 --> 16:06.531 So almost ten percent of our entire budget. 16:06.531 --> 16:09.631 And, it borders on criminal. 16:09.631 --> 16:12.764 And so, we tried to make these reforms last year which would 16:12.764 --> 16:13.764 have done a lot of this. 16:13.764 --> 16:16.298 One of the things, a minimum retirement age, 16:16.298 --> 16:18.164 where you can't retire... 16:18.164 --> 16:20.531 You can't go to work at twenty and work for twenty-five years 16:20.531 --> 16:21.664 and retire at forty-five. 16:21.664 --> 16:24.331 Putting a minimum retirement age. 16:24.331 --> 16:26.764 The administration caved, unfortunately, 16:26.764 --> 16:28.398 under the pressure of the unions. 16:28.398 --> 16:31.098 So those changes were only for new employees, 16:31.098 --> 16:32.898 not employees ten years or less. 16:32.898 --> 16:35.198 Listen, I don't like going to employees that have been here 16:35.198 --> 16:36.931 ten years and saying your plan's going to change. 16:36.931 --> 16:38.998 But I'm willing to do that if it's going to make the plan 16:38.998 --> 16:40.198 solvent in the future. 16:40.198 --> 16:43.398 This is a huge problem, the facts are clear and it's 16:43.398 --> 16:46.798 unbelievable to me the absolute lack of leadership that we can't 16:46.798 --> 16:47.798 get this right. 16:47.798 --> 16:50.364 And the chance of, let's go back through some of the details 16:50.364 --> 16:51.364 there. 16:51.364 --> 16:53.764 The changes that were made is employees are who, 16:53.764 --> 16:56.598 new employees, they will have to work till what age? 16:56.598 --> 17:00.131 I believe it's fifty, uhh, sixty for, 17:00.131 --> 17:02.364 fifty-five for public service or fifty-two and a half for public 17:02.364 --> 17:05.031 service and maybe fifty-five or sixty for, 17:05.031 --> 17:06.198 you know, people that have desk jobs. 17:06.198 --> 17:07.198 BARNES: Ok. 17:07.198 --> 17:08.198 It's something like that. 17:08.198 --> 17:09.198 Where before there was none. 17:09.198 --> 17:10.698 One thing we're working on right now I'm going to introduce in 17:10.698 --> 17:13.498 the next thirty days is a eliminating double-dipping. 17:13.498 --> 17:15.464 So you can't have someone that retires from the City of 17:15.464 --> 17:18.064 Memphis, gets a full pension, then goes to work for Shelby 17:18.064 --> 17:19.698 County or MLGW. 17:19.698 --> 17:23.664 So you have the same pull of tax payers paying a full pension 17:23.664 --> 17:24.698 while someone's making, you know, 17:24.698 --> 17:25.831 one hundred thousand plus a year. 17:25.831 --> 17:28.298 I think that perverts the spirit of the pension plan. 17:28.298 --> 17:28.698 BARNES: And- 17:28.698 --> 17:29.898 If could say one other thing. 17:29.898 --> 17:30.898 Yeah, please. 17:30.898 --> 17:34.164 A long time ago, people in government did make less. 17:34.164 --> 17:35.964 Thus, healthcare and pensions, the benefits, 17:35.964 --> 17:37.064 kinda made up. 17:37.064 --> 17:40.698 What happens now, if you look at the average salary or what an 17:40.698 --> 17:43.864 average city employee makes it's well, 17:43.864 --> 17:46.464 much higher than what the average Memphis makes. 17:46.464 --> 17:49.931 So now you've got, you know, these rich benefit pools and 17:49.931 --> 17:51.231 people making more money. 17:51.231 --> 17:54.498 And we need to just really restructure it and get it right 17:54.498 --> 17:56.298 and then we can focus on the other part of the city 17:56.298 --> 17:57.298 government. 17:57.298 --> 17:58.798 And what about, I guess I'll turn to you and get you in here. 17:58.798 --> 18:00.298 What about the people who say, look, 18:00.298 --> 18:02.298 you're talking about city government as if they were 18:02.298 --> 18:04.764 these, you know, sort of bureaucrats in a dark room in a 18:04.764 --> 18:06.131 basement somewhere with a filing cabinet, 18:06.131 --> 18:07.131 you know. 18:07.131 --> 18:08.131 The sort of the evil bureaucrat. 18:08.131 --> 18:09.131 Maybe they exist. 18:09.131 --> 18:11.098 But what about the police officers, 18:11.098 --> 18:13.664 the firefighters, EMTs, first responders? 18:13.664 --> 18:16.698 I mean, you know, we weren't able to get some other opposing 18:16.698 --> 18:18.631 views here but let me play that role for a second. 18:18.631 --> 18:20.298 Those people put their life on the line for the City of 18:20.298 --> 18:23.031 Memphis, they save people, they do this for a whole, 18:23.031 --> 18:24.031 you know, life. 18:24.031 --> 18:29.798 Don't they deserve, umm, a if not rich but at least good 18:29.798 --> 18:31.364 pension and retirement plan? 18:31.364 --> 18:32.364 RAINO: Absolutely. 18:32.364 --> 18:35.364 I mean, we need the firemen and we need the police. 18:35.364 --> 18:37.831 But what you're seeing, of course, 18:37.831 --> 18:40.464 over all in other cities like Detroit, 18:40.464 --> 18:44.498 Chicago and things the pensions, over all pensions, 18:44.498 --> 18:47.831 are eating into everything else. 18:47.831 --> 18:53.098 Street maintenance, all kinds of things that because of the 18:53.098 --> 18:57.831 pensions and the exorbitant pension in many cases, 18:57.831 --> 19:00.198 I don't think Memphis is that way but, 19:00.198 --> 19:06.064 the exorbitant pensions in these cities are eating the budget out 19:06.064 --> 19:07.064 everywhere else. 19:07.064 --> 19:09.664 And, of course, the last thing they cut is the police and 19:09.664 --> 19:10.664 firemen. 19:10.664 --> 19:12.664 But even that, like in Detroit they're cutting that. 19:12.664 --> 19:14.764 Can I say, your question is right on. 19:14.764 --> 19:17.864 That's absolutely what I'm so passionate about this. 19:17.864 --> 19:21.331 Is we owe it, especially to first responders and the police 19:21.331 --> 19:23.998 and the firefighters who are putting their lives on the line, 19:23.998 --> 19:25.364 who have a very hard job. 19:25.364 --> 19:29.164 We owe it to them to be honest with them and make this right 19:29.164 --> 19:30.898 them and their families long-term. 19:30.898 --> 19:33.631 The way we're doing it now it's unsolvent. 19:33.631 --> 19:36.898 We'd have to increase taxes just to meet our pension, 19:36.898 --> 19:40.064 annual required contribution, we'd have to increase taxes 19:40.064 --> 19:43.498 fifty cents to do that. 19:43.498 --> 19:44.498 BARNES: Right. 19:44.498 --> 19:46.231 If we did that we'd really have flight out of here. 19:46.231 --> 19:48.531 And that's not even, that doesn't even cover the other 19:48.531 --> 19:50.664 structural gab in city government which is about twenty 19:50.664 --> 19:53.998 to thirty million dollars where current expenses outpace current 19:53.998 --> 19:54.998 revenues. 19:54.998 --> 19:55.998 BARNES: Right. 19:55.998 --> 19:59.998 And the really frustrating thing is we've been here now with this 19:59.998 --> 20:00.998 mayor and this council for years. 20:00.998 --> 20:03.998 We own this and it's frustrating that we cannot get it right. 20:03.998 --> 20:04.998 Bill? 20:04.998 --> 20:09.864 How much has the change in accounting for those liabilities 20:09.864 --> 20:13.664 and those liabilities being on the books and having to have 20:13.664 --> 20:15.031 some level of funding for it. 20:15.031 --> 20:18.031 How much has it intensified, do you think, 20:18.031 --> 20:21.798 the question about reforming pensions, 20:21.798 --> 20:26.398 reforming OPEB, reforming these benefit packages, 20:26.398 --> 20:27.398 Kemp? 20:27.398 --> 20:29.098 Well I think it has but I think all it did was it made 20:29.098 --> 20:31.398 government have to play by the same rules as everybody else. 20:31.398 --> 20:33.531 Saying that if you're gonna accrue these liabilities you 20:33.531 --> 20:35.964 have to account for it, be honest and transparent about it 20:35.964 --> 20:37.898 so people that are buying your bonds, 20:37.898 --> 20:40.031 that are investing in your city so to speak, 20:40.031 --> 20:42.598 understand, you know, what kind of balance sheet you have. 20:42.598 --> 20:43.598 Mhmm. 20:43.598 --> 20:46.631 And so, and I think the financial collapse of 2008 kinda 20:46.631 --> 20:49.798 of laid all this to, you know, it made it all very real and it 20:49.798 --> 20:54.698 really exposed how fragile this system is. 20:54.698 --> 20:58.864 So Joe, how much of this then, in your view, 20:58.864 --> 21:02.964 is saying, well realistically we think this many people will 21:02.964 --> 21:07.398 retire, will need these benefits as opposed to here's the hard 21:07.398 --> 21:08.964 number we have to meet? 21:08.964 --> 21:12.331 Because some people aren't meeting what the obligations 21:12.331 --> 21:13.331 are. 21:13.331 --> 21:14.564 That they're providing some of it. 21:14.564 --> 21:17.164 Well, this, you have to contrast, 21:17.164 --> 21:21.931 I mean, they, I don't know all the answers but the, 21:21.931 --> 21:24.198 you have to contrast the city and the county. 21:24.198 --> 21:28.998 How did the city get five times as expensive as the county? 21:28.998 --> 21:31.098 That goes back a number of years. 21:31.098 --> 21:35.298 The January 2001 pension resolution at the city that 21:35.298 --> 21:39.531 allowed elected and appointed officials to retire after twelve 21:39.531 --> 21:40.531 years. 21:40.531 --> 21:43.064 We're talking hundreds of people that added to, 21:43.064 --> 21:49.331 then you've got the line of duty disability which is ten times as 21:49.331 --> 21:51.464 high as the county and the light, 21:51.464 --> 21:52.531 gas and water. 21:52.531 --> 21:53.864 That needs to be reformed. 21:53.864 --> 21:57.964 So that's two obvious answers of why you've got more expense at 21:57.964 --> 22:02.264 the city than the county but somebody needs to come in and I 22:02.264 --> 22:05.231 don't know all the answers but somebody like Jim Martin whose 22:05.231 --> 22:09.064 retired from the county he's an expert on pensions. 22:09.064 --> 22:12.231 We need to get somebody like that to come in and say, 22:12.231 --> 22:17.464 why is the city five times as expensive as the county and goes 22:17.464 --> 22:20.364 back into history and goes back into OPEB. 22:20.364 --> 22:27.298 For instance, January 2007 the county stopped letting retirees 22:27.298 --> 22:33.164 who were receiving social security to be on the healthcare 22:33.164 --> 22:34.164 system. 22:34.164 --> 22:37.064 So a lot of these things, you know, 22:37.064 --> 22:39.598 county made the right decision the city didn't. 22:39.598 --> 22:41.264 Here are some numbers here I pulled, 22:41.264 --> 22:42.764 that you pulled from the city and county, 22:42.764 --> 22:44.298 Joe, that are on your website. 22:44.298 --> 22:47.064 But, you know, the number of retired people as of summer of 22:47.064 --> 22:48.464 last year in the City of Memphis, 22:48.464 --> 22:50.798 4900 for the city. 22:50.798 --> 22:52.664 Shelby County, 3400. 22:52.664 --> 22:53.664 SAINO: Right. 22:53.664 --> 22:56.598 Just so people think well the city's much bigger and they're 22:56.598 --> 22:59.531 comparable number or retirees but the benefits are just that 22:59.531 --> 23:03.031 much richer or higher or farther in funding. 23:03.031 --> 23:04.031 Well they're comparable numbers. 23:04.031 --> 23:05.031 BARNES: That's right. 23:05.031 --> 23:06.031 Well, I mean, the comparable number of active employees. 23:06.031 --> 23:07.031 BARNES: Yeah. 23:07.031 --> 23:08.031 But the retirees are much less at the county. 23:08.031 --> 23:09.031 BARNES: Right. 23:09.031 --> 23:11.164 Less in number and also less in average pensions. 23:11.164 --> 23:12.164 BARNES: Right. 23:12.164 --> 23:13.164 Go ahead Bill. 23:13.164 --> 23:16.831 Kemp, when the City Council gets into budget season here in less 23:16.831 --> 23:21.031 than a month, how much of the discussion is going to be 23:21.031 --> 23:24.898 meeting the obligation you have to meet and meeting what you 23:24.898 --> 23:27.698 think you have to meet of the obligation? 23:27.698 --> 23:29.964 Or can realistically or politically do? 23:29.964 --> 23:31.331 I think it's going to be a lot of it. 23:31.331 --> 23:32.998 I mean, this is one of the bigger issues. 23:32.998 --> 23:35.264 I think the challenge is, you know, 23:35.264 --> 23:39.064 this issue really outlasts the kinda average politician's 23:39.064 --> 23:40.064 shelf life. 23:40.064 --> 23:41.064 This is a generational issue. 23:41.064 --> 23:43.364 It took a long time to dig this hole 23:43.364 --> 23:45.598 and, you know, most politicians are focused on the short term. 23:45.598 --> 23:47.064 They're focused on the next project, 23:47.064 --> 23:48.164 what they're going to do for the district, 23:48.164 --> 23:49.764 how they're going to get re-elected. 23:49.764 --> 23:51.531 And this is something that, you know, 23:51.531 --> 23:52.531 it's a tough issue. 23:52.531 --> 23:55.131 It's about people's retirements and but what we've got to get it 23:55.131 --> 23:57.698 right because we're digging a hole deeper and deeper. 23:57.698 --> 24:00.564 So I think it'll be a big part of it and the real issue is 24:00.564 --> 24:03.431 there are some very commonsense sensible reforms, 24:03.431 --> 24:07.264 they're not draconian, they were proposed last year and most of 24:07.264 --> 24:08.731 them were stripped out, it was watered down. 24:08.731 --> 24:09.731 So guess what? 24:09.731 --> 24:11.998 We're right back in this same situation and we're going to 24:11.998 --> 24:15.998 continue to be until we fix the problem once and for all and 24:15.998 --> 24:19.764 meet the obligations to our tax payers and to the folks that are 24:19.764 --> 24:21.298 relying on these in the future. 24:21.298 --> 24:25.464 Can the City Council or should the City Council try to restore 24:25.464 --> 24:29.131 the 4.6% pay cut that city employees took? 24:29.131 --> 24:30.131 Absolutely. 24:30.131 --> 24:32.464 I think we absolutely have to do that. 24:32.464 --> 24:35.064 I also think we have to for once and for all restructure and 24:35.064 --> 24:38.031 reform city government so those employees can have some real 24:38.031 --> 24:39.564 wage growth into the future. 24:39.564 --> 24:41.964 But it's hard to do that when we have all these legacy issues 24:41.964 --> 24:43.431 that we fail to address. 24:43.431 --> 24:45.064 One of them is trash collection. 24:45.064 --> 24:47.564 We learned again Tuesday, we got an update on this. 24:47.564 --> 24:50.431 We can save from twelve to twenty plus million dollars a 24:50.431 --> 24:53.431 year recurring, our employees can make more money than they do 24:53.431 --> 24:56.331 now and they can ride in automatic trucks and we're 24:56.331 --> 24:58.464 still, you know, nothing's happened on that. 24:58.464 --> 25:00.664 That's the administrations' job to work that out 25:00.664 --> 25:01.664 and bring us a plan. 25:01.664 --> 25:03.531 The council put a plan together they didn't implement it. 25:03.531 --> 25:06.364 So it's these kinds of problems where the business 25:06.364 --> 25:08.564 of city government is not focused on enough by 25:08.564 --> 25:09.564 the Wharton Administration. 25:09.564 --> 25:12.098 They're focused on this pie-in-the-sky all this plan. 25:12.098 --> 25:15.598 The city, business of city government is still broken. 25:15.598 --> 25:18.831 It's easily fixable but we gotta have some leadership to do it 25:18.831 --> 25:21.198 and I think we could get a supermajority of the council 25:21.198 --> 25:23.664 to come together and then we could move this city forward 25:23.664 --> 25:24.664 over the next generation. 25:24.664 --> 25:26.164 But if we don't we're gonna end up like Detroit. 25:26.164 --> 25:28.164 And if you look at what's going on there it's not pretty. 25:28.164 --> 25:30.498 They just appointed a receiver, 25:30.498 --> 25:31.498 people are going to lose their pensions. 25:31.498 --> 25:32.531 Look at Stockton, California. 25:32.531 --> 25:34.864 In Detroit they're basically closing down blocks of the city 25:34.864 --> 25:36.464 cause they can't provide services. 25:36.464 --> 25:39.498 That is where we're going to be in a generation if we don't deal 25:39.498 --> 25:41.098 with the issue right now. 25:41.098 --> 25:43.164 And you've talked before on the show about really, 25:43.164 --> 25:45.564 and other City Council folks, talk about wanting to lower the 25:45.564 --> 25:47.364 tax rate in the City of Memphis. 25:47.364 --> 25:48.931 That, to make it more competitive, 25:48.931 --> 25:49.998 so it's more competitive. 25:49.998 --> 25:52.598 So, you've got those two tensions. 25:52.598 --> 25:53.598 Yeah. 25:53.598 --> 25:54.598 Well, you do. 25:54.598 --> 25:57.031 Hey, listen, if we could just keep our tax rate flat and not 25:57.031 --> 25:58.531 have a Ponzi scheme government, I'd be fine with that. 25:58.531 --> 26:02.064 I mean, I don't want an artificially low tax rate when 26:02.064 --> 26:03.731 we're robbing from our pension plan. 26:03.731 --> 26:04.464 Right. 26:04.464 --> 26:06.131 Look at how we balanced the budget last year, 26:06.131 --> 26:06.998 if I could real quickly. 26:06.998 --> 26:07.598 BARNES: Ten seconds. 26:07.598 --> 26:10.498 We took $10 million that was supposed to go to EDGE to fund 26:10.498 --> 26:12.098 economic development. 26:12.098 --> 26:14.498 We had put a massive twenty million dollars against this 26:14.498 --> 26:15.931 $1.2 billion liability. 26:15.931 --> 26:16.531 Right. 26:16.531 --> 26:17.964 Twenty million dollars. 26:17.964 --> 26:20.331 We stole that to balance the budget gap and then we didn't 26:20.331 --> 26:22.864 pay the pension deal and I think we took some money from the 26:22.864 --> 26:23.764 reserves. 26:23.764 --> 26:25.164 That's how we balanced the budget last year and people 26:25.164 --> 26:26.531 thought that was a good thing. 26:26.531 --> 26:27.631 It's a joke. 26:27.631 --> 26:29.031 Alright. Thank you for being here. 26:29.031 --> 26:31.331 Thank you for having me. 26:31.331 --> 26:32.298 Thank you for joining us. Join us again next week. 26:32.298 --> 26:36.298 Good night.