graceland special district tax
Elvis Presley died 39 years ago yesterday. When the announcement was made on August 16, 1977, I was lounging in front of the television feeling salty, sandy, sunburned, and tired after a long day at the beach. I jumped up and ran to share the news with my parents and brother. They didn’t believe me.

That moment is one of my clearest memories from childhood, so I thought it fitting to mark the anniversary of Elvis’ death this year. But a vigil at Graceland isn’t my style. Instead, I looked into how sales tax could be contributing to the legacy of Elvis.

Graceland

Graceland, the home Elvis purchased at the tender age of 22, remains a pilgrimage site for generations of Elvis fans. But with more than 600,000 people visiting annually since it opened to the public in 1982, it needs some tender loving care. Improvements and a $250 million expansion project have been underway since 2014. Nearby “undesirable” buildings are being demolished and neighboring areas rezoned. A $45 million entertainment complex that will include an automobile museum, soundstage, and museum dedicated to Elvis the Entertainer is under construction. A new resort hotel is slated to open at the end of October, and when it does, the Heartbreak Hotel will formally close. We can only hope the streets will be less lonely then.

To help pay for all this, a new tourist development zone (TDZ) was created: all retail sales made within the 120-acre zone are subject to a 5% surcharge, or special tax. In addition, a portion of the sales tax collected at Graceland funds the project. One way of looking at this: people who visit the current, unimproved Graceland are helping to fund the future, improved version.

The surcharge is collected by the City of Memphis, which then remits all but a small portion of the revenue (to cover administrative costs) to the Economic Development Growth Engine Industrial Development Board of the City of Memphis and Shelby County, or “EDGE”. The project is expected to “ensure the continued success of Graceland,” which “will have a significant impact on the tourism industry and other related industries in the City of Memphis” (Ordinance 5583). At least that’s the plan.

In addition to the TDZ, there’s the Graceland Tax Increment Financing District (TIF). Under it, 50% of real property tax revenue generated in the district “support

[s] redevelopment,” and 50% is “distributed to the local governments” (Tennessee Comptroller).  EDGE expects the renovation and expansion project “to create more than $50 million in new tax revenue for Memphis and Shelby County” over 15 years, and approximately 500 new jobs.

Special tax districts

Taxpayers may not realize they live or shop in a special tax district. Many are created when the land is raw, so if a special tax must be approved by vote, the landowners are the only eligible voters. This can backfire when the area is already inhabited, as it did when a little gerrymandering went awry in Columbia, Missouri. However, it often works and the special sales tax or property tax is in place before people or businesses move into the district.

The surcharge in effect at Graceland is a little different. Since it only applies to purchases made within the 120-acre site, it’s unlikely to affect locals unless they just can’t get enough of Elvis. It’s easier to tax tourists, who are unlikely to change their plans over a surcharge once they’re in town.

Businesses generally do pay attention to special tax districts because they can benefit from them. The National Association of Home Builders has published An Overview of Special Purpose Taxing Districts, which explains, “A more efficient and effective way to fund public improvements in advance of growth, while at the same time ensuring that new growth pays for the improvements, is through the use of Special Districts.” The report points out that “sales taxes, various excise taxes and/or user fees can also be utilized to support Special District revenue bond financing.” Bonds provide more long-term financing than traditional construction financing, thereby giving builders and developers more flexibility and time. They’re a tool.

At the government level, special districts often fly under the radar because many states don’t track data about them (learn about some especially unusual special tax districts here). In fact, the office of the Tennessee Comptroller of the Treasury admitted in December 2014 that statewide data about TIFs was unavailable “because counties weren’t required to file TIF data with the state until 2012.” There was no state oversight, no consistent reporting requirements; revenues were unknown. Oversight has been increasing since a new law was enacted in 2012; now, for example, excess taxes collected under a TIF may “revert back to the taxing agency general fund” (TCA § 9-23-103(a)(2)(B)).

The Graceland TDZ is expected to generate $1.9 million for the City of Memphis during FY2017, the TIF some $50 million over 15 years. If the overall project comes to fruition as expected, it will be appreciated by Elvis fans for generations to come. I think the King would have liked that.