Amend the Rutledge Hill Redevelopment Plan

Last week, I filed an ordinance along with co-sponsor Councilmember Erica Gilmore to amend the Rutledge Hill Redevelopment Plan. The Metro Council passed this redevelopment plan in 1980, and has amended it periodically since then. The new ordinance would make four changes to the redevelopment plan. It would clarify Metro’s intent to have MDHA reinvest any land sale proceeds back into the district, or return the proceeds to Metro. The ordinance would also clarify that tax increment financing can only be used in the Rutledge Hill district, add some annual TIF reporting requirements for MDHA, and correct a typo in the 2014 amendment to the plan.

If you want to see a quick summary of the reasons for the proposed changes to this redevelopment plan, you can look at these slidesHere’s the longer explanation…

FIRST, SOME BACKGROUND

Under state law, housing authorities like MDHA have two distinct jobs – housing and economic development. There is one statute that grants MDHA broad powers in connection with housing (TCA Section 13-20-104). For housing, MDHA has the unilateral power to investigate housing conditions, create and implement plans to improve low income housing, and to buy and sell land for these purposes.

There is a different statute section that describes MDHA’s powers for economic redevelopment (TCA Section 13-20-202). This statute gives MDHA certain powers to carry out a “redevelopment project.” These powers are expressly limited to the goal of carrying out the redevelopment project. Unlike with housing (where MDHA can make and execute its own plan), MDHA may not start a redevelopment project unless the local governing body, the Metro Council, first approves a “redevelopment plan” that complies with state law.

Because of these state laws, MDHA never engages in economic development unless the Metro Council first passes a redevelopment plan. MDHA’s powers in connection with redevelopment may only be to further the “redevelopment project” that is described in a properly approved “redevelopment plan.”

In 1980, the Council passed an ordinance creating the Rutledge Hill Redevelopment Plan, which roughly covers the area going south of Broadway for about a half mile and east of Fourth Avenue. Rolling Mill Hill and the Trolley Barns are in the district. Metro’s redevelopment plan has been amended multiple times over the years, most recently in 2014. Under the terms of the plan, MDHA has the power to engage in tax increment financing in this district.

To get the ball rolling when the district was created in 1980, Metro gave real estate to MDHA. The original 1980 redevelopment plan explained that, “to provide MDHA with a substantial land resource with which to begin…” redeveloping the area, Metro gave the property once used as Howell Park and the property that was once a portion of South Park to MDHA at no cost.

WHY ASK FOR ANOTHER AMENDMENT?

In November 2015, I heard that MDHA had started the process to sell one of the parking lots north of the Trolley Barns. MDHA owns this parking lot as part of its economic development role – it is part of the Rutledge Hill Redevelopment District. At the time, the complaint I heard from some was that MDHA’s request for proposals from developers did not require any affordable housing. I asked MDHA about it.

MDHA said that it needs to sell this property for maximum dollar in order for MDHA to be able to make a required equity contribution for its upcoming Envision Cayce project. (Think about when you buy a house – you need to put some money down; you can’t borrow 100% of the cost – MDHA is saying it needs cash quickly so it can put some money down for Envision Cayce.) While I like the concept of Envision Cayce, when I heard this explanation, my reaction was to wonder if it is okay to move land sale proceeds from one redevelopment district to another.

My understanding was that Metro approves a redevelopment plan for a blighted area, and MDHA is supposed to execute the plan. To help that process along, MDHA is often granted the power to use tax increment financing to encourage economic development. MDHA then collects the tax increment until it has paid for anything it borrowed or financed to accomplish the economic development. It seemed odd to me for MDHA to sell property in a presumably incomplete redevelopment district where it continues to collect the tax increment, and use the land sale proceeds outside of the district.

I am new to government. I figured I was mistaken; and that I was missing some piece of the puzzle. So, I asked MDHA to explain the legal authority. Here’s their letter back to Mike Jameson. Despite the letter, my sense is that, when it comes to redevelopment districts, MDHA may only act in furtherance of the redevelopment plan passed by Metro.

WHAT ARE THE PROPOSED CHANGES?

There are four proposed changes. The first would clarify Metro’s intent that any land sale proceeds must be reinvested in the redevelopment district, or returned to Metro.

When I read the original 1980 ordinance, and all of the amendments, I found that the original Rutledge Hill Redevelopment Plan expressly required all proceeds from selling land to be reinvested in the district, or returned to Metro’s General Fund. In the 1986 amendment, this language was deleted and not replaced with any different direction. None of the other amendments have given any direction to MDHA about what it must do with land sale proceeds. My proposed amendment would clarify Metro’s original intent – reinvest land sale proceeds in the district, or return the proceeds to Metro.

The second change fixes a typo. The Tax Increment section of the plan has always been “Section H.” In the 2014 amendment to the plan, it was misidentified as “Section G.” We should fix the typo while we are updating the plan.

The third change also corrects what originally seemed to me like an error in the 2014 amendment. That amendment added new language that would permit the $60 million in tax increment financing allowed under the plan to be used for development in any redevelopment district anywhere in Nashville. This was new language that had never been in the plan before 2014. It says: “Activities or improvements eligible for tax increment financing shall include…other structures or public improvements necessary for carrying out the Rutledge Hill Redevelopment Plan, or other adopted and approved redevelopment plans.”

I thought that this could not be right. But, I have since been told that one of the purposes of the 2014 amendment was to authorize using some tax increment funds from the Rutledge Hill district to finance the new baseball stadium. I believe that we should amend the plan to clarify that tax increment funds from properties in the Rutledge Hill Redevelopment Plan may only be used for projects in that district.

The fourth change would add a requirement for MDHA to give a reasonable annual report to Metro about its tax increment financing activities in the district. You can read the ordinance for the details, but the idea would be for MDHA to report annually on the details of money MDHA has borrowed, financing MDHA has provided for projects in the district, and the amount of tax increment it received.

WHAT ABOUT ENVISION CAYCE?

I anticipate that MDHA will say that this ordinance will undercut its ability to follow through with the Envision Cayce project. I don’t know if that’s true or not. But if it is true, then we need to have a public conversation about it.

When the Cayce Place Redevelopment Plan was passed by the Council last summer, it included a section that described the sources of revenue to finance the costs of the project. (Under TCA Section 13-20-205(b)(1)(B), this is a mandatory requirement for any redevelopment plan that authorizes tax increment financing.) This section did not explain that multiple MDHA properties from another redevelopment district would be sold to pay for the project.

I am not against the project. My position on Envision Cayce has been and remains that I am all for it – depending on whether we as a city can be sure that the low-income housing will be maintained permanently.

Before I filed this ordinance, I spent a lot of time thinking about the fundamental human dignity of public housing residents. In the end, my goal is to have a public conversation about how land in economic redevelopment districts is being sold, and how the proceeds will be used outside the district. No matter how righteous the proposed end use of the cash, we need to think about what it means if the value of any publicly owned property in any economic redevelopment district can be used for any purpose that MDHA deems appropriate anywhere in the city.

LATE UPDATE

Since I filed this ordinance, Jim Harbison from MDHA asked to meet to discuss this. He stated his willingness to ask MDHA’s Commissioners to authorize seeking amendments to both the Cayce Place and Rutledge Hill redevelopment plans to clarify their request to use land sale proceeds from one district in another, and to use tax increment funds from Rutledge Hill outside of the district area. Mr. Harbison also told me about ongoing dialogue between MDHA and Metro about creating a robust annual TIF reporting requirement. I look forward to seeing these efforts move forward.  I told Mr. Harbison that, pending seeing what they draft, my ordinance will continue to move forward.

My goal remains to see a public conversation about whether MDHA land sale proceeds can be used outside of a redevelopment district, about whether tax increment funds can be used outside of a redevelopment district, and what annual reporting would be appropriate to give the public more insight into how tax increment funds are being used.

 

Thoughts?  Email me at bob.mendes@nashville.gov.

Bob Mendes represents all of Nashville as a Council-At-Large member of Nashville’s Metro Council. He is Chair of the Council’s Charter Revision Committee, a member of the Metropolitan Audit Committee, and a member of the Council’s Budget & Finance Committee, Rules & Confirmations Committee, and Ad Hoc Affordable Housing Committee. Bob also practices business law at Waypoint Law PLLC. Bob’s complete bio is here. You can follow Bob @mendesbob.

 

Bob Mendes

Bob Mendes represents all of Nashville as a Council-At-Large member of Nashville’s Metro Council. He is Chair of the Council’s Charter Revision Committee, a member of the Metropolitan Audit Committee, and a member of the Council’s Budget & Finance Committee, Rules & Confirmations Committee, and Ad Hoc Affordable Housing Committee. Bob also practices business law at Waypoint Law PLLC. Bob’s complete bio is here. You can follow Bob @mendesbob.