I have two tax increment financing (TIF) bills I am trying to pass before the Council term ends in August. Both bills are up for the 2nd of three readings tonight. I am expecting that they should be approved on 3rd reading on August 6, 2019. Here’s what the two bills do:
BL2019-1645: This bill would amend the TIF provisions of 8 existing redevelopment plans. The key amendments would be: (1) a new requirement to have a periodic (every 7 to 10 years) reassessment by MDHA and the Metro Council of the impact and goals for TIF loan investments in each redevelopment area; (2) new language that would let the Council initiate TIF plan amendments in the future; and (3) a new requirement that the standard amount of tax increment to be used on new loans will be 75%.
BL2019-1630: This bill would create certain requirements for any new or amended TIF districts passed in the future. The requirements would match the changes to existing TIF plans made in BL2019-1645. This is to make sure that the terms of any future new TIF districts will match the changes we make to existing districts now.
For more information about the path that led to this point, here’s a timeline:
- April 2016: The Council passed a first round of TIF legislation described here. This reform created an annual TIF reporting requirement. It also required Metro to hold back money from new property tax revenue to pay its own bond debt instead of using all of the revenue to pay development loans. It also required that TIF property taxes be returned fully to Metro after the first development loan is paid. This was meant to address the situation where, for example, the AT&T building’s taxes are still being used to pay other development loans some 30 years after construction was complete.
- August 2018: Legislation to create a Donelson Transit-Oriented Development District failed in the Council. To many, it felt like the city’s approach to creating new TIF districts needed to be updated before moving forward.
- September 2018: I introduced three pieces of legislation to start the conversation about updating the city’s approach to TIF districts. Here’s a brief description of this 2018 proposed legislation.
- October 2018: MDHA, the Mayor’s Office, and I agreed that all efforts to make new TIF loans or create new TIF districts would be frozen until June 30, 2019, while a TIF Study Committee did its work. More info about that here.
- May 2019: The TIF Study Committee releases its unanimous report. More here. The committee gave a presentation to the Council about its findings and recommendations.
- May 2019: To implement the committee’s recommendations, I filed four pieces of legislation.
- June 2019: Two of these bills (-1644 and -1613) passed and became law.
- July 16, 2019: The other two bills (-1630 and -1645) are set for 2nd of three readings. Here is the handout I have provided to Council members for this evening’s meeting.
- August 6, 2019: Hopefully, this is when the two remaining bills are approved by the Council on 3rd and final reading.
Let me know any thoughts or questions you have.
I’ve been working on getting the details of the TIF loan restructuring that is going to allow another $7.5 million for MNPS salaries.
MDHA has been very helpful in giving me details this week. I’m going to give you an incomplete update just so I can get it out before the holiday weekend. I’ll correct or update further once I know more.
Here’s what I know and think about the restructuring:
- This involves four loans — three related to the Omni Hotel, and the last one related to the Sounds Stadium.
- As I understand these loans, Regions Bank is entitled to receive 100% of the tax increment from about 22 properties in and around downtown. Regions deposits all of these tax increment funds in a reserve account from which its loans get paid.
- Media reports say that the most recent annual amount of tax increment collected for these properties was $11.2 million. When I look at MDHA’s most recent annual TIF report, I see $12.2 million instead. I’m still trying to figure out that discrepancy. (MDHA’s annual TIF report describes what happened the year before…so the discrepancy might be a matter of timing between the backward looking reports and real-time actual numbers.)
- Up until now, Regions has applied the full amount of the tax increment dollars to the loan balances. This has resulted in very rapid principal pay down. Before this week, I was guessing for example that the Omni loans might be paid in full by 2021, or 2022 at the latest. More details here. From MDHA’s reporting, I’m guessing that the Regions stadium loan was on track to be paid in full by 2023 or 2024.
- The deal announced this week will have Regions returning $7.5 million to Metro (for Metro to give to MNPS) instead of Regions keeping the full amount it collects.
- MDHA has let me know that Regions will be keeping about $3.88 million to pay toward the four loans — that’s roughly $3.09 million to principal and $790,000 to interest. I don’t know enough details yet to be sure, but I think that would extend the pay off period for the loans from a few years to around 8 years.
- Another way to look at this is to think about the percent of the tax increment dollars being used to pay the development loans compared to the percent being kept by Metro. Up until now, 100% of the tax increment was used to pay the development loans. Under this new arrangement, the bank would be keeping about 35% of the tax increment and the remaining 65% will be going to Metro.
- Shifting gears a little, there has been some tension this week between the fact that the Mayor’s press release called this a “recurring” arrangement while MDHA has told the media that Regions is providing a one year “waiver.” I tend to believe it is a one year waiver, but that it is highly likely that Regions will continue to provide the waiver in future years. Since Regions has the right to collect the entire $11+ million per year in tax increment, Regions is in a very desirable position. With that very high level of collateral, I’m guessing they’ll be happy to continue to earn interest for more years.
- About whether this deal is “good” or “bad”…
- I need to wait to learn the rest of the details before I decide for sure.
- That said, I have argued for a year now that we need a more equitable sharing of development dollars between TIF loans and Metro’s own needs. This new initiative implements something that I was the first to suggest. I can’t complain much about that!!
- Legislation I proposed last August would have required new TIF loans to leave about 45% of tax increment available for Metro. At the time, the administration argued that this would make TIF deals extinct because taking 45% of the tax increment off the table supposedly would be too limiting.
- The legislation I currently have pending would require new TIF loans to leave 25% of tax increment available to Metro.
- With me having previously suggested that Metro keep either 45% or 25%, at first glance, the idea that Metro would be keeping a whopping 65% of these tax increment dollars is striking. A few days ago, I worried whether keeping such a high percentage for Metro would string out the loan payoff dates too far into the future. But if my guess above about the loans still being paid in full in about 8 years is correct, that wouldn’t bother me.
- On balance, I am leaning toward thinking it’s a “good” deal for Nashville — even if the roll-out was poorly communicated and oddly timed.
As I learn more, I’ll update this information.