De-Annexation Process

De-Annexation Process

Phase III

January 31, 2019

Strategic Footprint

The Task Force asked to identify areas that:• Are low density• Are challenging to deliver municipal

level of service• Areas that specifically asked for De-

annexation

Joint Task ForceCharge to the

Administration

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RIGHT-SIZE PROGRESS TO DATE: PHASES I & II3

RIGHT-SIZE PROPOSED NEXT STEPS: PHASE III

DEANNEX

RETAIN

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Impact• As a result of deannexation, the City of Memphis will reallocate

resources that serve the deannexed areas to other areas of the city

resulting in better service to the rest of the city. This transition will start

on Jan 2020 and be complete by Jan 2021.

• As a result of the South Cordova deannexation, the City of Memphis

will gradually forgo ad valorem revenue from deannexed areas in

2023.

• First positive operational impact Jan 2020

• First fiscal impact Jan 2023

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Ordinance approval process

Method: ORDINANCE

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Notice and public hearing

Majority of City Council approves of deannexation

Tenn. Code Ann. § 6-51-201(b)

Method: ORDINANCE

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• Voters residing WITHIN THE AREA TO BEDEANNEXED can oppose

• Concurrence by a majority of voters will be presumed

• UNLESS a petition objecting to deannexation is signedby 10% of registered voters residing within the areaproposed to be deannexed

• Must be recorded with the City Comptrollerwithin 75 days after final reading of thedeannexation ordinance

Method: ORDINANCE

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• If a proper Petition is filed and recorded, areferendum must be held at the next generalelection

• The ballot has to include a spot for voters to vote for oragainst deannexation

• If a majority of those voting in the referendum voteagainst deannexation, the ordinance becomes void andmay not be considered again for two (2) years

• If a majority of those voting in the referendum vote fordeannexation, the ordinance becomes effective uponcertification of the result of the referendum

Proposed Process• Administration prepares ordinance and calculates any impact

• Administration prepares initial estimate of General Obligation Debt and Unfunded Pension/OPEB liabilities that must be repaid

• November 6, 2018: City Council Committee Presentation

• November 20, 2018: 1st reading

• December 4, 2018: 2nd reading

• December 18, 2018: Public notice setting 3rd reading

• January 31, 2019: Informational Public Meeting

• February 19, 2019: 3rd Reading of Ordinance

• 75 days: Public opportunity to file objection; without objection, deannexation approved

• July 2020: Administration will calculate supplemental tax bill and recovery period

• Effective date December 31, 2020 23:59 PM (January 1, 2021)

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Action Items• Coordinate Service Transition City to County

• Calculating Fair Share of Debt and unfunded pension obligation and method of collection

[TCA 6-51-204: “The municipality may continue to levy and collect taxes on property in the excluded

territory to pay the excluded territory's proportion of any debt contracted prior to the exclusion”]

• City will levy and collect property taxes within the deannexed areas after the deannexation date to cover

each property’s Deannexation Obligation

• The City will send a letter to the property owners at the end of 2020 notifying them of the Deannexation

Obligation on the property

• Property owners will receive an annual tax bill from the City until the obligation is satisfied

• This tax bill may look noticeably different from the City’s normal tax bill and include information regarding

its purpose to address questions property owners may have

• If parcels are consolidated or split, the new parcels will be assessed their pro rata share of the outstanding

Deannexation Obligation

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South Cordova Tax Bill

For a property with an appraised value of $150,000

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Provided as an illustration. Actual rates will be calculated in 2020 prior to the effective date of deannexation.

Tax Year

County

Tax Bill

City Tax

Bill

City

Supplemental

Tax Bill Total

Present - 2020 1,541$ 1,227$ -$ 2,768$

2021 -2022 1,541 - 1,227 2,768

2023 1,541 - 491 2,032

2024 1,541 - - 1,541

Book Value of Tax Supported Debt

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As of Respective DeAnnexation Dates

Notes: Assumes $75 million in CP issued annually.

4/30/2002 Pre-1973 12/31/2013 7/2/1990 7/1/2012

Debt Obligation Date of Issuance Eads Riverbottoms

Southwind-

Windyke Rocky Point South Cordova

1 Comm. Paper FY 2019 75,000,000$ 75,000,000$ 150,000,000$ 150,000,000$ 150,000,000$

2 Series 2018 05/01/2018 127,788,085 127,788,085 120,449,894 120,449,894 120,449,894

3 Series 2016 06/30/2016 67,813,241 67,813,241 65,371,576 65,371,576 65,371,576

4 Series 2015C 05/19/2015 74,664,038 74,664,038 74,340,161 74,340,161 74,340,161

5 Series 2014B 03/25/2014 134,266,402 134,266,402 130,843,568 130,843,568 130,843,568

6 Series 2012A 03/29/2012 7,948,137 7,948,137 - 6,766,356 6,766,356

7 Series 2012B 03/29/2012 1,414,240 1,414,240 - 1,147,846 1,147,846

8 Series 2011 06/14/2011 55,368,207 55,368,207 - 50,525,214 -

9 Series 2010F 06/29/2010 11,160,000 11,160,000 - 11,160,000 -

10 Series 2010C 06/29/2010 62,550,000 62,550,000 - 58,965,000 -

11 Series 2010B 05/04/2010 39,950,000 39,950,000 - 39,950,000 -

12 Series 2010A 05/04/2010 7,836,621 7,836,621 - 4,282,579 -

13 Series 2009 06/02/2009 51,074,909 51,074,909 - 46,854,294 -

14 Series 2008 05/01/2008 60,412,335 60,412,335 - 54,771,781 -

15 Series 2007A 05/01/2007 65,689,463 65,689,463 - 58,652,752 -

16 Series 2006A 02/28/2006 54,804,896 54,804,896 - 49,632,864 -

17 Series 2004 11/09/2004 44,971,220 44,971,220 - 36,756,495 -

18 Series 2003 05/07/2003 21,236,430 21,236,430 - 14,485,154 -

19 Series 2002 06/18/2002 48,732,766 48,732,766 - 37,459,282 -

20 Series 2000 04/25/2000 11,027,027 - - -

1,012,680,990$ 1,023,708,016$ 541,005,198$ 1,012,414,814$ 548,919,399$

Unfunded Pension/OPEB Obligation

13Notes: Southwind’s FY2014 deficiencies are prorated. Unfunded OPEB liability not available prior to FY2009. Data for fiscal years 2018-2021 are estimated.

4/30/2002 Pre-1973 12/31/2013 7/2/1990 7/1/2012

Fiscal Year ARC/ADC Contribution Deficiency Eads Riverbottoms

Southwind-

Windyke Rocky Point

South

Cordova

1999 5,156,000$ 3,988$ 5,152,012.0$ -$ 5,152,012$ -$ 5,152,012$ -$

2000 - - - - - - - -

2001 10,227,000 1,086 10,225,914 - 10,225,914 - 10,225,914 -

2002 - - - - - - - -

2003 - - - - - - - -

2004 2,203,000 19,320 2,183,680 2,183,680 2,183,680 - 2,183,680 -

2005 3,036,000 6,117 3,029,883 3,029,883 3,029,883 - 3,029,883 -

2006 11,893,000 1,176 11,891,824 11,891,824 11,891,824 - 11,891,824 -

2007 22,674,000 619 22,673,381 22,673,381 22,673,381 - 22,673,381 -

2008 24,072,000 606 24,071,394 24,071,394 24,071,394 - 24,071,394 -

2009 87,481,000 38,159,763 49,321,237 49,321,237 49,321,237 - 49,321,237 -

2010 151,924,000 35,674,244 116,249,756 116,249,756 116,249,756 - 116,249,756 -

2011 176,729,000 36,089,423 140,639,577 140,639,577 140,639,577 - 140,639,577 -

2012 176,337,000 35,813,425 140,523,575 140,523,575 140,523,575 - 140,523,575 -

2013 176,720,000 45,705,000 131,015,000 131,015,000 131,015,000 - 131,015,000 131,015,000

2014 132,087,000 40,443,000 91,644,000 91,644,000 91,644,000 45,822,000 91,644,000 91,644,000

2015 116,001,000 37,979,000 78,022,000 78,022,000 78,022,000 78,022,000 78,022,000 78,022,000

2016 111,425,000 21,336,000 90,089,000 90,089,000 90,089,000 90,089,000 90,089,000 90,089,000

2017 59,143,000 56,544,000 2,599,000 2,599,000 2,599,000 2,599,000 2,599,000 2,599,000

2018 63,390,000 56,024,000 7,366,000 7,366,000 7,366,000 7,366,000 7,366,000 7,366,000

2019 - - 7,366,000 7,366,000 7,366,000 7,366,000 7,366,000 7,366,000

2020 - - - - - - - -

2021 - - - - - - - -

Total 934,063,233$ 918,685,307$ 934,063,233$ 231,264,000$ 934,063,233$ 408,101,000$

Assessed Valuations

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Current Assessed Value

South Cordova’s Assessed Value as a Percentage of City’s Assessed Value

0.76227104%

Notes: City assessed value includes real, personal, and state assessed properties.Assessed values of De-Annexed area includes only the assessed value of properties that will be de-annexed and does not necessarily reflect the value of all properties inthe area.

City South Cordova

$ 12,688,001,705 $ 96,716,963

De-Annexation Obligation

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The City of Memphis will realign resources effective 1 Jan 2021.The City of Memphis will not see any change in Ad Valorem revenue collection from this action until January 2023.

South Cordova

Debt Obligation 548,919,399$

Pension/OPEB Obligation 408,101,000

Total 957,020,399$

Projected Assessed Value

As of Percentage of City 0.76227104%

De-Annexation Obligation 7,295,089$

Current Year Taxes 3,091,062$

Years to Retire Obligation 2.4 years

Projected Effect on Property Tax Collections

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Estimated

Fiscal Year Tax Year

Property Tax

Collections(1)

Annual Growth

%(1)

Annual Growth

($) Eads(2)(3) Riverbottoms(2)(3)

Southwind/

Windyke(2)(3) Rocky Point(2)(3)

South

Cordova(2)(3)

Net Estimated

Property Tax

Adjusted Net

Annual Growth

2020 2019 391,900,000$ 1.6% 6,300,000$ -$ -$ -$ -$ -$ 391,900,000$ 6,300,000$

2021 2020 398,200,000 1.6% 6,300,000 - - - - - 398,200,000 6,300,000

2022 2021 404,600,000 1.6% 6,400,000 - - - - - 404,600,000 6,400,000

2023 2022 410,900,000 1.5% 6,300,000 - - (248,332) - - 410,651,668 6,051,668

2024 2023 417,200,000 1.5% 6,300,000 - - (2,483,319) - (1,854,637) 412,862,044 2,210,376

2025 2024 423,600,000 1.5% 6,400,000 - - (2,483,319) - (3,091,062) 418,025,619 5,163,575

2026 2025 429,900,000 1.5% 6,300,000 (378,427) (14,812) (2,483,319) (154,140) (3,091,062) 423,778,240 5,752,621

2027 2026 436,200,000 1.5% 6,300,000 (420,474) (16,458) (2,483,319) (770,699) (3,091,062) 429,417,988 5,639,748

Eads Riverbottoms

Southwind/

Windyke Rocky Point South Cordova

1/1/2020 1/1/2020 1/1/2021 1/1/2021 1/1/2021

420,474$ 16,458$ 2,483,319$ 770,699$ 3,091,062$

5.1 5.1 1.9 4.8 2.4

(1)

Source: Forecasts for Largest Revenue Sources for the City of Memphis dated August 8, 2018; assumes a flat, historic economic growth rate.

(3)Deannexing these areas avoids $9M+ of 5-year capital road and sewer investment.

Deannexation Date

Current Year Taxes

Years to Retire Obligation

(2)Assumes current year's tax rate is held constant through fiscal year 2027.

Area D-3South Cordova

The South Cordova study area is located south of Walnut Grove Road in the vicinity of SangaRoad and Forest Hill Road, extending south to theWolf River.

The South Cordova Study area is nearly fully developedwith a mixture of single family housing types. A substantial portion of the area south of the residential subdivisions is located in the Wolf River floodplain and has been frequently flooded in the past few years.

Fire and Police Divisions currently serve this area.The Memphis Fire and Police Divisions over the past year have reported an average number of service calls to the area consistent with other residential areas of Cordova. The area is readily served by existing city police and fire services. Over 99% of the parcels have access to sewer. Some floodplain land does not have access.

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Area D-3South Cordova

Summary: The City of Memphis would forgo about $2.9 millionper year net revenue. The City will save on all future capitalexpenses of maintaining 42.3 lane miles of roads and associatedrights of way. Excluding the floodplain, this area is nearly fullydeveloped so additional growth is not expected.

Population Housing Sq. Miles Density

4146 1806 2.3 1810 P/SM

Foregone Revenues Cost SavingsNet Fiscal Impact Positive/(Negative)

Area D-3 South Cordova Total

ForegoneRevenues

Operating and Debt ServiceSavings

Net Fiscal Impact Positive/(Negative)

FY 2020 $3,327,802 $410,446 -$2,917,356

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Outcome

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• Deannexation of these areas continue themeasured approach to right sizing our city

• Provides City and County the opportunity tocoordinate transition of services

• Provides manageable sample size for determiningdebt obligation and collection methodology

• Reduces size of City by 2.3 Sq. Mi., populationreduction of 0.6%

Questions?

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Thank you

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Appendix

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Memphis 2000 Policy Plan

• “Memphis 2000” Policy Plan, a guide for physical, economic, and

social development, was adopted jointly by City Council and Shelby

County Commission in 1981 and clearly communicated the growth

plan for the City of Memphis for the next 20 years.

• “Annexations by the City of Memphis will be coordinated with the

extension of facilities; the extension of facilities to an unincorporated

area will give residents notice of the City’s intent to annex.”

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