Month: January 2020

Protect the community benefits agreement

As last year’s city election season turned into fall and now into a new year, the inability to move forward on building the soccer stadium is beginning to take its toll. When the city passed legislation approving the stadium financing in 2018, there was also a landmark consensual community benefits agreement between Nashville Soccer Holdings and Stand Up Nashville.

Months before Metro approved the stadium financing, team representatives met with many Council members. When they asked me what I thought was important, I talked mostly about three issues. The first two were that Metro’s cost to build the stadium had to be capped and the team had to commit to genuinely respect the historic racing and expo activities at the Fairgrounds.

The third issue was that I challenged them to look forward ten years to when groups from other cities would come to visit Nashville and learn from us. Would they be taken on just another generic stadium tour? Or would Nashville be able to show off an integrated live-work-play community with true economic and social diversity? I suggested that the real win would be in setting a precedent for a generation of smart, inclusive community development in Nashville.

Many others – but especially Stand Up Nashville and Nashville Soccer Holdings – worked hard to make this vision a reality. The community benefits agreement is a first in the State of Tennessee. It is a voluntary contract where Nashville Soccer Holdings agreed to make 20% of the housing affordable, including a commitment to provide badly needed three bedroom units. The team also agreed to directly hire stadium workers and pay them at least $15.50 per hour. They agreed to build an on-site childcare facility that will operate with sliding scale fees. These are just some of the team’s commitments in the comprehensive agreement.

Some will argue that these benefits are a small price for the team to pay to get the significant benefit of using the Fairgrounds for a stadium and substantial development. Perhaps, but on the other side of the ledger, Stand Up Nashville drove a hard bargain too with unprecedented benefits for workers and families in Nashville.

Nearly one and a half years after Metro approved the stadium financing, we can’t get to “yes.” Instead, the administration and the team seem to be mired in an extended renegotiation. What limited information is available in the media suggests they are talking about additional infrastructure costs, the planned mixed-use development next to the stadium, and possibly the racetrack. Beyond this, details are sketchy and there is no known timeline to begin stadium construction.

With this dynamic, I wonder who’s looking out for the community benefits agreement. Stand Up Nashville hasn’t been invited to the ongoing discussions. Unfortunately, the rule in a multi-party negotiation is that if you don’t know who’s losing, it’s probably you.

Dollars and cents are important in the soccer stadium deal. But we need to remember that working Nashvillians were one of the parties to the deal. Some of the value in the soccer stadium deal is supposed to go to the people of Nashville. The community benefits agreement requires this. Whatever final result comes together in the coming days or weeks, the community benefits agreement must be honored and protected.

Community Budget Meeting Schedule

This is a follow-up to my earlier post introducing a tentative schedule for this year’s Council budget process. As part of the process, Budget Committee Vice Chair Toombs and I will conduct six community budget meetings around the county.

Here’s the schedule for the community budget meetings:

February 25, 6:00 to 7:30 PM: Northwest Family YMCA, 3700 Ashland City Highway, Nashville, TN 37218

February 26, 6:30 to 8:00 PM: Smith Springs Community Center, 2801 Smith Springs Road, Nashville, TN 37217

March 4, 6:00 to 7:30 PM: Studio 615, 272 Broadmoor Drive, Nashville, TN 37207

March 9, 6:00 to 7:30 PM: Church of Christ in Green Hills, 3805 Granny White Pike, Nashville, TN 37204

March 10, 6:00 to 7:30 PM: Nashville Public Library Bellevue Branch, 720 Baugh Road, Nashville, TN 37221

March 12, 6:00 to 7:30 PM: Nashville Public Library Hermitage Branch, 3700 James Kay Lane, Hermitage, TN 37076

The idea behind these meetings is to give the public an opportunity to see and hear the budget information that the Council has seen and heard over the last 90 days. During that time, the Council heard from the Comptroller for the State of Tennessee and Metro Finance Director Crumbo about the size and scope of the city’s budget problems and the types of solutions that are available. We want to make sure the public has this same information and an opportunity to talk about it before Mayor Cooper presents his budget on March 31, 2020.

Please share the schedule for these meetings and make plans to attend.

UPDATED: January 27, 2020, to add final date and location for the March 12 meeting.

Tentative schedule for Council budget process

Mayor Cooper and Finance Director Crumbo announced recently that they would like to move Metro’s typical budget process forward one month. Instead of the Council working to pass a budget by the end of June, they propose that we pass a budget by the end of May.

My position has been that as long as the public and the Council have the same two months we usually get to consider the Mayor’s proposed budget, I will try my best to accommodate the faster timeline.

Today, I am releasing a tentative schedule for the Council’s Budget & Finance Committee for the budget process.

You will see that there will be a series of community meetings in late February and early March. The logistics for these are still being planned and more details will follow. The idea behind these meetings is to give the public an opportunity to see and hear the budget information that the Council has seen and heard over the last 90 days. During that time, the Council heard from the Comptroller and Finance Director Crumbo about the size and scope of the city’s budget problems and the types of solutions that are available. I want to make sure the public has this same information and an opportunity to talk about it before Mayor Cooper presents his budget on March 31, 2020.

Metro’s audited financials for FY19

Metro’s audited financials — or Comprehensive Annual Financial Report (CAFR) — are usually done and posted online in December. I took a few minutes today looking at the CAFR for the fiscal year ending June 30, 2019. Here are a few quick notes:

  • The outside auditors provided a “clean” opinion. That means that they believe that Metro’s financials give a fair assessment of Metro’s financial results. This is good. It means that we can rely on the accuracy of the numbers in the financials.
  • For the second year in a row, there is no “going concern” opinion about the Hospital Authority. This is also good. As recently as FY2017, the auditors included a going concern note about the Hospital Authority. That’s the accounting world’s way of expressing “substantial doubt” about the ability of an entity to continue into the future. With all the other rough financial news around Metro, there is at least some good news in knowing that Metro has (for two years) figured out how to honestly and accurately fund Nashville General Hospital.
  • People are usually interested in the cost of economic incentives. As I mention a few details, please keep in mind that the scale of dollars that Metro needs to get back on track financially.  For example, just to get off the addiction of selling one-time assets each year will require about $40 million in new revenue. And MNPS has suggested that getting a reasonable pay plan would cost an additional $100 million in new revenue. I could go on, but you get the point — even if you wanted to kill off every economic incentive (which would be a bad idea), it wouldn’t fix Metro’s budget.
    • Spending on economic incentive job credits climbed from $500,000 in FY18 to $1.64 million in FY19. (See page B-103 of FY19 CAFR, and page B-104 of FY18 CAFR.)
    • Economic incentive property tax abatements climbed from $6.6 million in FY18 to $8.8 million in FY19. (See page B-110 of FY19 CAFR, and page B-112 of FY18 CAFR.)
    • Though it is reported separately, I’ll go ahead and give the last two years of reported numbers on property tax revenue used for tax increment financing (TIF). These numbers are reported annually by MDHA. In 2016, the property tax revenue used for TIF loans was $23.3 million. For 2017, it was $28.5 million. If you want to look at MDHA TIF reports, they are here.

Let me talk at more length about Metro’s unfunded retiree benefit obligations, also called “OPEB.” I have written about this before. See here and here and here. The first time I wrote about OPEB was in December 2015. Then, I said:

To find the fine print on the OPEB obligations, look for Note 8, which is at pages B-95 to 97 of the CAFR. You will see that the actuarial accrued liability for Metro retirees’ OPEB benefits is $2.16 billion, and there is an additional $473 million liability for MNPS retirees, for a total of $2.633 billion. This means that the expected cost to Metro to fully honor its post-retirement health, dental, and life insurance promises to retirees is $2.633 billion. This is funded at 0% — Metro has no money set aside for this obligation.

Here, I’ll update the language for the FY19 CAFR:

To find the fine print on the OPEB obligations, look for Note 8, which is at pages B-89 to 92 95 to 97 of the CAFR. You will see that the actuarial accrued liability for Metro retirees’ OPEB benefits is $3.48 2.16 billion, and there is an additional $1.08 billion 473 million liability for MNPS retirees, for a total of $4.56 2.633 billion. This means that the expected cost to Metro to fully honor its post-retirement health, dental, and life insurance promises to retirees is $4.56 2.633 billion. This is funded at 0% — Metro has no money set aside for this obligation.

This means that in four fiscal years the total unfunded retiree health care obligation reported on Metro’s financials went up by $1.93 billion, from $2.63 to $4.56 billion.

This puts Metro’s unfunded OPEB obligation higher than over half the States in the U.S. See this report about each State’s unfunded OPEB.

In fairness, there was a national accounting rule change between the FY17 CAFR and the FY18 CAFR that increased the reported obligation by $820 million. But even if you wanted to ignore the accounting change as confusing, there was still more than a BILLION DOLLAR increase in this liability in four years. Once the operating budget is fixed (or on its way to being fixed), this OPEB will have to be addressed.