Month: January 2018

Where to start?

This evening, Mayor Barry acknowledged publicly that she had an extramarital affair with her now former security detail leader. It’s shocking news.

As an At-Large member of the Metro Council, I think it’s my job to communicate the feelings of the county as I understand them. Because the news is so new, maybe tonight’s sentiments will be wrong and won’t stand the test of time (or even a few days). But I don’t think it does any good to remain silent.

My first reaction was to think about the various people and families involved. There must be pain and difficulty all around this evening. That’s a shame. I feel bad for the families that are involved.

Beyond that, the two things people are talking to me about are whether this impacts how we should think about the Mayor as a person, and whether this impacts how we should think of her as the city’s leader.

First, as a person, I don’t know the circumstances of the private lives (to the extent they are private) of the people involved. I can’t judge them.

I do want to mention the reactions from my 14 and 16 year old daughters about the news. Of course, due to other world social media skills, kids these days know everything at least as quickly as adults do. One said, “I’m mad. I liked her.” The other said, “Odd. Surprising.” I counseled them to not judge. The bottom line is that a role model was diminished today.

As for the Mayor’s ability to lead, I think that’s going to be complicated. As she noted in her comments to the media today, there are probably more bad days ahead on this.

I think the idea that the travel was totally okay because she needed security anyway is not very satisfying without knowing more. As a friend of mine texted me earlier this evening, “The misuse of tax funds and trust issues are big. Two consenting adults or not.” I don’t know enough yet to comment on whether there was any misuse of tax funds. But the Mayor has already acknowledged that the situation shows poor judgment — she said, “I knew my actions could cause damage to my office and the ones I loved, but I did it anyway.” And her press statement also explained that she’s disappointed in herself. We’re disappointed too.

More broadly, the question is about what this significant example of admitted poor judgment means for Nashville? For transit? For soccer? I have heard a few argue that the merits of the projects remain unchanged…so there should be no impact. Many more feel that the city’s trust and confidence in her is deeply tied into her administration’s objectives.

Just yesterday, for example, Joey Garrison posted a short video clip of the Mayor responding to a question about whether the city should be committing to the full transit price tag before knowing the details about exactly what will be built and when. The Mayor’s response, and I am paraphrasing some of this, was that, yes, it is a lot of money and there are details to work out later, but everyone will have to make a “little leap of faith.” Well, that answer yesterday captures the issue. Will questions about trust and confidence keep people from making that leap of faith? Will the Mayor be able to repair the trust relationship with voters before a transit referendum takes place? Will the Mayor be able to continue to be the face of the pro-transit advocacy efforts?

There are also a lot of questions about the use of government resources. Citizens will also want to know “who knew?” Did the rest of her security detail know? These are all fair and expected questions. At the press conference today, the Mayor apparently said that her office would make all records available. I expect multiple people in government and in media will take her up on that. As one of two Council members on the Metro Audit Committee, I think it is appropriate for Metro Audit to be involved in this process. This evening, I asked the Metro Audit Department to review today’s media reports and propose a scope of inquiry about the expense questions that are being raised. I imagine the Mayor is expecting this to happen.

I am definitely asking questions more than I am giving answers. But again, for tonight, I just want to express what I am hearing from our neighbors. I am sure this situation will continue to develop in the coming days.

Finally, to comment more specifically on transit…the Council will vote on February 6 about whether to put the transit referendum on the ballot on May 1, or not. I assume that the very well funded PACs behind the referendum push are going to do some quick polling before next Tuesday’s vote to get some sense of what it means when the face of your campaign has this sort of news about 70 days before early voting. I don’t know the answer. But I would urge that, if the polling looks weak, don’t hide that fact. Act on it. Share the information.

I’ll update my thoughts if necessary. Thanks, everyone. This hasn’t been a great day, but we’ll be okay. Nashville is stronger than the news of any one day.

The $5.4B is for new rail AND bus capital costs

This week, I have been trying to clean up some discrepancies and debates that are going on about the proposed transit plan. My earlier posts are here and here.

One argument people are having is about whether the $5.4 billion listed in the referendum language refers to light rail capital costs only, or to light rail AND bus capital costs. This debate arises from page 49 of the Transit Improvement Program.

On page 49, there are two different numbers that are both close to $5.4 billion. You’ll see that there are two columns…the first shows the present value of expenses in 2017 dollars, and the second shows the amounts to be spent in the “YOE” or “year of expenditure.” So, for example, in the “Music City Star” row, it says $30 million in the first column and $40 million in the second. This means that, after taking expected inflation into account, the total amount of checks to be written for the Music City Star over 15 years will be $40 million. But, in today’s money, this is only $30 million.

Here’s where the confusion starts. The cost of rail corridor improvements in the “YOE” column is $5.475B (which would actually round to $5.5B).  And separately, the present value of the cost of both rail and bus improvements in the “$ 2017” column is $5.354B (which rounds to $5.4B). Both of these numbers are very close to $5.4B and have created confusion.

The referendum language uses $5.354B, which represents the present value in 2017 dollars of both the rail and bus capital improvements.

One of the talking points filtering around social media and also in some live conversations I have had is that the $5.4B number in the referendum is supposedly misleading because it only includes the rail improvements and not the bus system improvements. I think this talking point started innocently from confusion over two numbers that are coincidentally similar. But, the referendum’s use of $5.354B is accurate and definitely refers to the present value of rail and bus capital improvements.

Getting to the bottom of the debate over $5.4B versus $8.9B

There has been some debate about whether the upcoming transit referendum language should include just the capital cost of the transit plan in 2017 dollars ($5,354,000,000) or also include additional information. In particular, one Council member has suggested adding language to the referendum stating that the “total cost for the transit system” is $8,951,062,000. The debate over this is slipping into a bit of name-calling. Here’s my take.

Before getting into the meat of this, there are three things to consider while you read this. First, debt is not inherently bad. Debt that can be reasonably managed to buy an asset you need is good. Debt incurred at exorbitant rates from a loan shark for a luxury item is bad. There are lots of shades of gray in between. Deciding on whether debt is good or bad requires balancing how badly you need the asset, the cost of paying the debt over time, and whether you can afford it once you consider all your other annual/monthly obligations. In nearly any situation, focusing on either the initial purchase price or the total amount of checks you will write over time to pay the debt is distracting. The question is about need, the cost to service the debt, and how that fits in with your budget.

Second, keep in mind that the 15 year length of the proposed transit plan is somewhat arbitrary. The State IMPROVE Act requires Metro to have the Comptroller and an independent CPA agree that the math in our transit plan adds up correctly. I understand that the Comptroller dictated to Metro that 15 years was the amount of information to present and get approved by the CPA firm. To be clear, the transit system will NOT be paid for in 15 years. The plan anticipates paying revenue bonds all the way through 2060.

Third, the State IMPROVE Act is also very clear that the referendum language has to be 250 words or less, and it must include the initial cost of the plan, as well as the recurring cost. This is pretty precise — it requires disclosing the initial capital investment and the expected annual operating losses. (Remember literally all transit systems lose money annually — that’s why it is important to disclose the expected recurring costs.)

Also, check out my post last night about transit. Especially the parts about financing provide context for thinking about this issue.

Okay — back to the $5.4B versus $8.9B argument…

To start, nobody has hid the ball on either number. Both numbers are in the Transit Improvement Program. You can read pages 46 to 55 of the Transit Improvement Program…you’ll see both discussed in detail. (I would concede to transit critics that the glossy pitch materials focus on the $5.4B number. But, the $8.9B number is clearly presented in the financial information in the Transit Improvement Program.)

Also, aside from not being part of what is required by the State IMPROVE Act, the proposed language saying that the total cost of the transit plan will be $8.9B is not accurate. It would be accurate to say that the total amount of checks that will be written by the end of 2032 will be $8.9B. But that’s not the same as the total cost of the transit plan. To get the total on the amount of checks that will be written to pay for the proposed transit plan, you’d have to include all of the principal and interest payments on the revenue bonds through 2060. And, then you’d have to decide whether you also wanted to keep including annual operating expenses for this additional 28 years. I’m not going to do the math, but that “total amount of checks we’ll write” number gets bigger over time through 2060.

So…the factually accurate statements would be:

  • “The capital cost of the program is estimated to have a present day value of $5,354,000,000” — this is what is in the referendum.
  • “The total amount of checks to write through 2032 for the transit system is $8,951,062,000” — this would make clear that we were only talking about the first 15 years.
  • “The total amount of checks to write through 2060 for the transit system is <<<I’m not going to do the math, but it’s bigger that $8.9B>>>” — again, this would make clear what timeline we were talking about.

I strongly feel that we should leave the referendum with its current language (option #1). Having the referendum say $5.4B for capital costs in today’s dollars is consistent with the IMPROVE Act. Also, when deciding whether debt is “good” or “bad”, it just isn’t helpful to add up the total amount of checks you’ll write over time. The focus should be on need and annual affordability (and as discussed in last night’s post, how to pay for a next phase of construction). And finally, looking at the total amount of checks to write over a 15 year period is certainly not helpful in deciding whether to take on debt for the proposed transit system.

There are legitimate questions that people are asking in trying to understand the proposed sales tax structure and about affordability. My suggestion though is that focusing on the total amount of checks to write over many years is not how people typically think about whether debt is a useful tool.

Transit thoughts – 1/23/18

Last August, I put out a list of questions I would need answered in order to vote to put the transit initiative on the May 1 ballot. The proposed Transit Improvement Program answered all of these questions and more. So, I am voting to put the referendum on the ballot. Tonight we approved the referendum on 2nd reading. The 3rd and final reading will be on February 6.

I would like to go through some important details that haven’t been discussed thoroughly in public yet. I am going to start with some relatively simple details and then move to more complex funding issues:

  • Nomenclature: When the state enacted the IMPROVE Act, it authorized counties to create certain tax surcharges to fund an approved “Transit Improvement Program.” The 55 page document I link to above is Metro’s proposed Transit Improvement Program. That is the technical document that would be funded by the proposed set of new tax surcharges. From my perspective, the “Let’s Move Nashville” web site includes lots of interesting and necessary explanations, graphs, and details. But, technically, the only information that matters is the Transit Improvement Program. If you want to know what you are voting to fund, that 55 page document is what you should read.
  • What about federal funding?: Many people have asked what happens if the anticipated federal funding is not available. The first answer to this is that the proposed transit program assumes federal funding that is consistent with historic levels. If that level of funding is not available, we will have to find alternative funding (unlikely), or parts of the system could be scrapped (probably unlikely), or the system will take longer than the anticipated 15 years to build (most likely).
  • Are we locked into the plan or can it change?: Plans can change as years unfold. The question is to ask what approvals will be necessary to make changes. The best advice at this time is that relatively small changes (like the sequence rail lines are built) probably require little formal approval outside of annual budgeting hearings. At the other end of the spectrum, major additions or changes to the system described in the Transit Improvement Program will probably require an additional ballot referendum. In the middle, there might be gray area changes where it is not clear today what authority will be needed. For example, if a new rail line were proposed, but it was not going to use the new tax surcharges as a funding source, then that might not trigger an additional ballot referendum.
  • No general obligations bonds are anticipated: Multiple people have asked me whether Metro can afford the additional $3 billion in bond debt anticipated in the transit improvement program. People need to know that only revenue bonds supported by the new tax surcharge revenue are planned. No general obligation bonds are part of the transit improvement program.
  • The details about the revenue bonds are important: During the 15 year transit improvement program, the plan is to issue $3 billion in revenue bonds supported by the new tax surcharges. At the end of the 15 years, we will have only paid interest on these bonds. The full $3 billion in principal will still be due when the construction plan is complete in 2032. From 2032 to 2039, the amount of annual payments will increase from $166 million (2032) to $224 million (2039). Then from 2040 to 2060, the program calls for level principal and interest payments of $226 million per year.
  • Why do the revenue bond payments ratchet up through the 2030s and not level off until 2040?: The short answer is the revenue from the new tax surcharges is not expected to be high enough to support the full principal and interest payments on the $3 billion in revenue bonds until 2040. The revenue bond repayments will be “sculpted” to fit the expected tax revenue stream. If you have wondered why Metro isn’t building the light rail lines out to the county line from the start, this financial modeling about the expected tax revenue is the key to the answer. Please understand that I am not presenting this feature of the economics as “good” or “bad.” It is however something that informed voters should know about.
  • What happens when we want to expand the transit system?: First, it is important to know that the system is meant to be successful as designed. That said, it is also important to consider what happens if we want to expand the light rail system out to the county line in any direction. All of the previous four bullet points are important for this question — the big issues are about what it would take to approve a major addition to the system, and about whether there will be funds available to pay for a major addition. Here are the basic options to pay for a major additional line or a rail extension to the county line: (1) wait until the late 2030s when our growing city will generate enough sales tax revenue to pay for additional major capital transit improvements; (2) find a new funding source beyond what will be on the referendum in 2018; and (3) further “sculpt” new revenue bond issues to have payments more backloaded instead of having level principal and interest payments from 2040 to 2060.
  • How is Metro integrating transit planning with other important government functions?: If funded, the transit improvements over the next 15 years will be monumental. There are a lot of question about how transit development will impact affordable housing, small business, neighborhoods, sidewalks, parks, and greenways. To get a jump on this, the Mayor appointed a taskforce to look at issues related to transit and affordability. The taskforce delivered its recommendations to the Mayor on January 10. You can see a copy here.

On February 6, it is almost a certainty that the Metro Council will vote to put the Transit Improvement Program referendum on the May 1 ballot. I hope voters take the time to look at the full program. If you have any questions or comments, let me know at bob.mendes@nashville.gov.

STR transparency…

In the last few hours, I started getting this form email urging, for the first time, that Council members abstain on Bill -608. To be clear, it is very likely that any form email that we get opposing Bill -608 is drafted and spread primarily by industry lobbyists.

The email says there was a four hour meeting on Friday afternoon where new compromise proposals were floated. If that happened, the potential compromises haven’t been shared with the Council generally. I don’t know any more than what is in the form email.

Also, the form email calls -608 a ban on short-term rentals. The truth is that, if -608 were to pass, there would still be unlimited owner-occupied short term rentals, unlimited investor-owned short term rentals in buildings with 3 or more units, unlimited short term rentals downtown, and unlimited short term rentals in the Gulch. Yes, with -608, investor-owned short term rentals in traditional 1 and 2 unit homes in family neighborhoods would be phased out. But there is simply no way to call this a ban. Under -608, there would still be many, many short term rentals in Nashville.

For almost a year now, my position has been that I intend to support whatever short term rental bill the majority of district council members support. By definition, the district council members are closer to day-to-day short term rental issues than I am as At-Large member of the Council.

I believe that the majority of district council members support -608. My plan is to attend the Council Planning and Zoning Committee meeting tomorrow to get a better feel about this before deciding for sure how I’ll vote.

I’m posting this new industry form email this afternoon because it is irresponsible. While the form email is wrong in claiming that -608 is a ban, both sides of this issue have engaged in hyperbole. Maybe that’s just the way it goes with tough issues. My real objection is that the form industry email runs the risk of creating a self-fulfilling prophecy about state preemption. Under any view of the world, a law that allows unlimited short term rentals in owner occupied homes, high rise buildings, any building with 3 or more units, all through downtown, and the entire Gulch is not a ban. If it passes, it will reflect a family-friendly compromise that I would ask the state to respect and honor. This topic is hard enough without the industry going out of its way to invite state intervention.

Nashville General Hospital – 1/14/18 thoughts

Here are my Nov. 29, 2017 thoughts about NGH. My main thought then was that there were too many people with firm, preconceived ideas about the hospital’s future and not enough working together. I said:

There are too many chefs in the kitchen. I’ve been trying to stay relatively quiet about the hospital because there are already a whole lot of people who are actively pushing various  ideas about how to “save” the hospital. Unfortunately, most of the efforts are uncoordinated and there is not a basic agreement about what “save” means.

and

I don’t want to add to the “too many chefs” dynamic. That said, my number one wish this evening is that the Hospital Authority and the administration would find a way to be teammates. If they don’t, I’m concerned that we’re going to end up watching a fiery wreck.

A few weeks ago, in my year end wrap-up post, I added that I think it will take an outside expert to guide the parties to a great solution:

If I were allowed to choose a path forward I would want to re-boot whatever process is currently underway. My strong sense is that a whole lot of people have preconceived and conflicting notions about what the proper end-game should be for the hospital. What’s needed is an independent third-party subject matter expert (probably from outside of town). This person would need to have expertise in solving hospital financial problems AND also have the ability to act as a mediator. The person would need truly to have an open mind about where we will end up, and the person would need to be trusted enough to engage in shuttle diplomacy among the many groups. If the hospital is going to end up in a place where all or most of the constituent groups are going to be happy, I think it will need to be an outside person who guides us there.

Since then, the Mayor has sent a letter to the Metro Council saying that she wants to “reset” the process and find a solution by the end of 2018. This is a good first step…but doesn’t guaranty success. Here are some of the ingredients that I think it would take to find a good win-win for indigent medical care in Nashville, Meharry, NGH, and the broader community:

  • Everyone must keep an open mind about what a solution looks like. Everyone must keep an open mind. That’s not “everyone else”…it’s “everyone.”
  • I don’t believe a process led by the administration will succeed. I don’t believe a process led by an administration consultant will succeed. I don’t believe a process led by Meharry will succeed. I don’t believe a process led by NGH will succeed. At this point, I think the right person is an independent third-party subject matter expert (probably from outside of town) with expertise in solving hospital financial problems AND also have the ability to act as a mediator.
  • When both the administration and the majority of Council members voted last summer to keep the hospital’s annual operating budget at $35 million, Meharry prudently interpreted that as a shot over its bow that NGH was becoming even less stable. Remember, some Council members pushed to fund the full $55 million requested budget. That effort failed. As a backstop, I tried to get another $5 million added to the budget. That effort failed. In this context, Meharry is entitled to have self-interest as one of its many motivations. Also, expect Meharry to push hard for more control about what happens in the hospital (a building that Meharry owns with a lease to Metro that is ending in another 6 years). They can’t be faulted for this.
  • On the issue how public the process is, I think that there simply isn’t a way to get this to the finish line with a good result and have the entire process be public in real time. And there is no legal requirement for this. Certainly, the Hospital Authority and Council members are required to deliberate publicly. My sense is that parts of a successful process would have to include private conversations with the non-government parties that are involved. Obviously, this has to be balanced with having full transparency as required by law when government officials are involved.
  • I have mentioned to multiple parties involved that I think there is another possible ingredient to a long term solution. Significant development is knocking on the door of the Meharry/Fisk neighborhood. If there were ever a place for a traditional economic redevelopment district, it is in the immediate neighborhood of the hospital. I think there is a way to make sure the universities are the primary beneficiaries from the rise in real estate values that is coming soon to the area.
  • The final ingredient I will mention is about process. Whatever process evolves to find a solution will need to be one that is trusted so that not every single party feels like they have to personally participate. Just from the Council, there are at least 5 or 6 perspectives about how to approach hospital issues. The Hospital Authority has at least 2, maybe 3, distinct perspectives. This is why I think it will take an independent person or group with no preconceived strategy to guide us all to a true win-win. With the right person and process, this might get down to being an 8 to 10 party negotiation instead of a 50 party negotiation.

I feel somewhat more optimistic (or less pessimistic??) about the prospects for the hospital now that we are hitting the reset button. If we start to see some of these other ingredients, we’ll be on a good path.

TVAR Greer Stadium Report

You can see the full report by Tennessee Valley Archaeological Research here.

There’s a lot to read in the lengthy report. However, toward the end, “TVAR recommends that a portion of the project area be protected…, with no land alterations taking place.” (Report, p. 109) TVAR provides a map at page 110 of the report showing the recommended protected area.

The PDF of the report is locked and I can’t extract the map. You’ll have to check it our yourself. But the protected area includes the west parking lot area (closest to the fort), the playing field (but not stadium area), and the edges around the site.