Month: June 2018

I’m a ‘no’ for the Donelson TOD

Tomorrow, the proposed Donelson transit-oriented redevelopment district is back before the Metro Planning Commission. I have been working for many months to see whether the legislation could be improved so that I can support it. I don’t think I am going to get there and I want to explain why.

There’s not much time left before the Planning Commission meeting tomorrow…so I’ll do this in bullet points:

  • Here’s my April 16 update about the Donelson TOD. At that point, I was feeling good about the general direction of the legislation. Since then, Metro has been through the budget process. The final budget the Council passed on June 19 has Metro relying on selling one-time assets, repealing an employee pay plan, and shortchanging schools on their requested budget.
  • I have also now seen the financial assumptions supporting the proposed Donelson TOD. My thoughts about those assumptions are here. In summary, there’s no question that, in the early years of a Donelson TOD, there would not be any new revenue for Metro to cover the new operating expenses that would go along with a few hundred million dollars in new buildings. Given the current budget crunch, I cannot see how it is a good idea to voluntarily take on new budget requirements where there is no offsetting revenue to Metro.
  • Since the last Planning Commission meeting on May 24, the Planning staff has conducted a review of the affordability of the area immediately surrounding the proposed Donelson TOD. According to the staff, of the housing units in the area currently, “90% are affordable at 100% of [Area Median Income, or “AMI”], 75.4% are affordable to moderate income (80% of AMI) households and nearly 62% are affordable to low income (60% of AMI) households.” In other words, the Planning Department believes that the area is currently relatively affordable. We can expect that concentrating government incentivized large scale development will erode the affordability of the area.
  • One of the main arguments in favor of transit-oriented development is that it provides options to include affordable housing. However, surely Nashville won’t want to create a transit-oriented development district in order to provide affordable housing to replace the affordable housing that will be lost due to transit-oriented development?
  • The legislation being reviewed by the Planning Commission tomorrow would allow MDHA to set affordable housing goals in the district. I believe those goals should be set by the Mayor’s office in consultation with the Council. Also, the goals for affordable units to be preserved and built in the district should be established before the Donelson TOD is passed into law. No goals have been set at this time.
  • The legislation being reviewed by the Planning Commission tomorrow would allow the “design review committee” to be selected, in part, by the Mayor. As I understand it, MDHA wants to have the exclusive ability to appoint the members of the design review committee. This issue is currently unresolved.

Councilmember Jeff Syracuse has worked tremendously hard to balance all of the competing interests. I certainly appreciate all of his hard work. But for now, I have to respectfully choose to be a ‘no’ on the Donelson TOD legislation. I don’t think Metro can afford to take on new operating expenses with no revenue in return. The area is currently relatively affordable. There is no goal proposed for preserving or adding to affordability in the area. There is no pressing time concern. To me, this just isn’t the right time for this district.

 

Financial assumptions behind Donelson TOD

This is the first of two posts about the proposed Donelson Transit-Oriented Redevelopment District. I have been working for many months to see whether the legislation could be improved so that I can support it. I don’t think I am going to get there and I want to explain why.

This post will talk about some of the nerdy financial assumptions behind the plan. First, the proposed plan asserts that $300 million of new appraised real estate value will be added as a result of the plan. The proposed plan further asserts that only 30 percent of the anticipated new property tax revenue from the district will be needed to pay for a proposed $30 million in new tax increment financing loans.

The MDHA financial assumptions behind the claim that only 30 percent of the expected new tax revenue will be needed to support the proposed $30 million in TIF loans is here. The claim that only 30 percent of anticipated new revenue will be needed to support the TIF loans is critical. The argument is that the proposed Donelson TOD will create enough value to not only pay the TIF loans, but also provide a lot of money for Metro to provide other important government services.

I question the assumptions. First of all, the entire spreadsheet is built around the idea that tax revenue will increase in direct proportion to increases in property value. However, Nashville just learned the hard way during the budget season that this is demonstrably false. Property tax revenue does not track directly with appraised property values.

In fact, I picked four parcels in the proposed Donelson TOD district at random and checked on the taxes they paid in 2014 compared to this year. Two parcels had their taxes go down, and two had their taxes go up. One parcel had its appraised value go up by 40% since 2014 while the tax bill went down by 1.6%. Another property had its appraised value go up by 24% since 2014 while the tax bill went down by 13%. For these properties, the appraised value skyrocketed in just a few years, but there was no corresponding increase in tax revenue.

If Nashville sticks to its current practice (i.e., property value reassessments every 4 years which drive the tax rate down, but only one offsetting rate increase since 2006), the spreadsheet supporting the Donelson TOD is completely busted and, frankly, entirely speculative.

There are other assumptions that seem odd to me. For example, columns (c) through (g) are all about tax revenue from existing buildings. The chart suggests that 2019 revenue will be higher than 2018 for existing buildings, and that the revenue will go up again each year after that. Again, during the budget process, we just got done seeing that, for existing buildings, revenue for 2019 (and probably 2020) will be the same as in 2018. So, column (g) should not be going up for 2019 or 2020. And for the years after that, it is guesswork.

The bottom line for me is that, during the early years of the proposed Donelson TOD, I don’t think the district will generate enough new tax revenue to pay the new TIF loans. And for the first 3-5 years at least, there will not be any extra revenue going to Metro for additional police, fire, school, or infrastructure costs. If Nashville were to decide to create the Donelson TOD, we would be signing up to take on more operational costs for the city without getting any corresponding income to pay for it.

As always, I am happy to entertain counter-arguments. And I would acknowledge that, on a 20 or 30 year time horizon, Metro might be able to recoup these costs assuming the city figures out again how to periodically set its property tax rate correctly. But, there’s no question that, in the early years of a Donelson TOD, there definitely would not be any new revenue for Metro to cover the new operating expenses that would go along with a few hundred million dollars in new buildings.

Updated FAQs about proposed 50 cent rate correction

As we get into the last few weeks of the Metro budget process, I have updated my frequently asked question list. You can see it here.

Also, for a longer discussion of the budget, check out the Nashville Sounding Board interview that Council member Tanaka Vercher and I gave a few days ago.

The new FAQs list is pretty thorough, but if you want to read my previous posts about the budget process, they are here:

um…about the budget… (May 11)

Out of step with historic practice (May 18)

The budget problem and the proposal (May 18)

 

 

I’m going to keep doing my job

With David Briley’s win on May 24, he has formally resigned as Vice Mayor. The vacancy will be filled in the scheduled August 2, 2018 election (perhaps followed by a runoff five weeks after that).

I want to thank the many supporters who have encouraged me to run for Vice Mayor. I have taken a hard look at it, but have decided to stay where I am and finish my term as an At-Large Council Member.

In thinking through it, the biggest draw was that in these chaotic times the Council needs a steady hand with a countywide perspective in the big chair. Done well, the Vice Mayor proactively sets the tone for the body. I think I would do a good job. But the opportunity has costs. I’d lose my vote except in a rare tie. In turn, losing a vote might mean losing the ability to be a direct participant in forming legislation.

In the end, I feel that I have more to offer by continuing to be in the trenches on legislation. My focus has been on inclusiveness and equity, transparency and accountability, and livability. Here’s a partial list of legislation I have drafted, sponsored, or materially amended.

There is so much more work to do on all of these. The community is angry — and rightfully so — that we have a budget crunch when the city is booming. It is not acceptable that city leaders are giving themselves a high five for a historically low unemployment rate at the same time that Nashville is reneging on promised employee cost of living increases, and not fully funding our schools, and selling valuable real estate just to make ends meet. The best place for me to work on these issues is where I am today, as an At-Large Council Member.

Several of my Council colleagues likely will be running for Vice Mayor. It may be awkward to have multiple colleagues running for the same office, but that seems unavoidable. My view is that Nashville needs someone with an established countywide perspective to help guide the Council and the city through these chaotic times. The best candidate should have a track record of supporting a path that reflects the values of the entire community.