There’s a tax increment financing reform bill (BL2018-1319) on 3rd and final reading next week. The bill is here. Council Director Jameson’s analysis is here. My prior posts about -1319 are here and here. It might also be useful to read this about the issues from the proposed Donelson transit-oriented development that fell just a few votes short of passing in August.
The summary is that -1319 would re-balance how much of new property tax revenue from redevelopment districts is used to pay development loans versus how much is used for Metro’s operating budget. In 2016, the Council passed a bill to have Metro withhold “debt services taxes” from new TIF loans. So, since 2016, for new TIF loans, Metro has been required to set aside about 15% of property tax revenues from the new TIF projects to pay for Metro’s own long term debt. This has left the other 85% of new tax revenue being available to pay development loans. I know everyone would agree that this 2016 law hasn’t created the slightest speed bump to Nashville’s economy. Now, -1319 would expand on this principle so that Metro would also keep “schools fund taxes” for new TIF properties. This would expand the hold back from 15% to about 46% — with the other 54% still being available to pay development loans.
As Metro continues to look hard at radically expanding the use of tax increment financing in transit oriented development all across the city, it is critical that we have a balance between supporting development and paying for basic government functions.
Before -1319 passed unanimously on 2nd reading last week, two Council members asked why -1319 can’t wait until the recently passed tax increment financing study group completes its work (which should be late spring 2019). I responded by saying that, no matter what the study group comes up with, it will be important to re-balance how the new tax dollars are split between development loans and the operating budget. I still feel this way, but wanted to explore the objections of my two colleagues.
As a result, I negotiated with MDHA (through a lawyer they have working on this) for a TIF moratorium through June 30, 2019. We agreed that for that time there would be no new TIF loans (unless Council, MDHA, and the Mayor all agreed) and there would be no new redevelopment district legislation introduced. From my perspective, if I was being asked by some to hold off on -1319 while the study group does its work, then I would want to know that everyone’s pencils would be down and there would be no new loans and no new TIF district legislation while the study group does its work. MDHA agreed. But the Mayor’s office would not.
The clear implication is that there are plans in the works to introduce a new redevelopment district between now and June 30. Presumably, the intent is for this new redevelopment district to exist for decades into the future under today’s ground rules rather than a new set of ground rules. As a result of the Mayor’s office saying no, I expect:
- MDHA will likely fall in line with the Mayor’s office and work against -1319 even though I had a compromise worked out with MDHA.
- Some will argue that “well, this won’t actually get any more money for schools.” I haven’t yet figured out how this can possibly be. If you specifically hold back money for schools instead of development loans, then how can it not result in more money for schools??
- Some will argue that -1391 will kill tax increment financing as a useful development tool. For those people, I’d note that taking out the 15% for debt services taxes a few years ago didn’t slow down the economy at all. And if -1319 passes, a majority of the tax revenue from new TIF properties would still be available for development loans. This isn’t anti-development by any means.
I will pursue passage of -1319 next week.
(written in a hurry…please excuse typos…)