Author: 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.

Schedule for Council budget process (as of Feb. 13)

This morning, the Mayor’s office is holding a briefing session for media about the Mayor’s portion of the budget process, which is already underway.

The Council’s Budget & Finance Committee will soon be working on the budget too. Here’s the most current information about the Council’s budget process:

  • In late February and early March, there will be six community budget meetings held at different locations around the county. 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. More details about dates, times, and locations here.
  • After the Mayor releases his budget on March 31, the Council Budget & Finance Committee will have public budget hearings with Metro’s largest departments. The tentative schedule for those hearing is here.
  • Here is a planned schedule for the full Council budget process, including the target date to pass the budget of May 19.

This schedule is subject to change as we get further into the budget process. This is the best information that is available today.

Soccer standoff

As the standoff between the Mayor and the soccer team persists, I find myself wanting to be in favor of beginning stadium construction immediately. I’m not 100% there, but absent some new details about what’s going on behind closed doors, that’s my strong inclination.

Let me start by saying that I think it is fair to say that the Mayor has a mandate to change the way Metro does economic development. It is also fair to say that people expect a balance where change happens in a way that furthers the city’s success. To put it another way, you can’t make growth more equitable if you shut down growth.

Sometimes, when a party has a lot of leverage in a negotiation, one of the challenges is to know when and how to win. When you have backed someone into a corner, is it your intent to leave them a way out or is it your intent to force them to fight so you have the opportunity to crush them? If you leave them a way out, you risk being perceived as having left value on the table. If you force them to fight, anything can happen. You might crush them, but often everyone does worse. This is where I see the Mayor and team right now – at a decision point where the Mayor either can push the team further into a corner and risk a fight, or leave them a realistic path away from the confrontation.

The majority of Nashville would prefer that the stadium be built. In a very public process, the city already approved the stadium financing and the related 10 acres of development in September 2018. Since the recent election, the Mayor has said there are new facts to consider – more costs, a potential racing deal, and a need for open space. While those aren’t all new facts, the Mayor has exercised his leverage on the team and they’ve put more money on the table.

It’s less clear where things go from here. We don’t know how close the Mayor is to hitting the tipping point where the team feels forced to fight.

My sense from the sidelines is that the negotiations are very close or already at that tipping point. On paper, “Parcel 8C,” which is the several acres still in dispute, is appraised to be worth about five million dollars. Why would either side blow the deal over this parcel? Each side presented their arguments last week in a public exchange of letters. But those don’t give the rest of us a clear picture of why each side cares so very much about Parcel 8C.

With this imperfect information, we are left trying to map the current deal onto the city’s goals and make a guess about whether it’s time to keep pushing or to accept a final deal.

While some might argue about how to balance individual goals, I think there is consensus about the goals for Nashville:

  • Bring major league soccer to Nashville;
  • Fully honor historic Fairgrounds uses, including auto racing;
  • The stadium should pay for itself;
  • Be fair – don’t give away things to wealthy insiders;
  • Be fair – make sure the landmark community benefits agreement succeeds; and
  • Be fair – protect Nashville’s reputation as a reliable business partner.

Again, as of September 2018, the city democratically weighed all of these factors and approved the deal. At that time, everyone knew what the site layout was, including Parcel 8C. Everyone knew that the racetrack needs improvements. The only new factor that we know about is the added infrastructure cost, and the team has committed more money for that. This feels like enough of a win on all goals that the city should not be risking a fight, or risking its reputation as a fair, reliable business partner.

Maybe there are more facts that aren’t public yet that would change the calculus for me. Absent that, any reasonable resolution close to what has been publicly disclosed is better for the city than a fight. Finish the new deal or tell us why this needs to be pushed to a fight.


P.S.  The idea of Nashville being a fair, reliable business partner is a big deal. The city can’t be a ‘no’ on all the economic development deals that were underway at the time of the election. I support the Mayor’s desire to change the ground rules for how economic development works in Nashville. I have long argued that the city needs to do a better job of explaining what it wants to incentivize and how it is going to measure incentives. Last term, I appreciated unanimous Council support for my incentive reform legislation. That said, it would be bad to be perceived as immediately switching with no lead time to a new set of ground rules for economic development in Nashville.

Metro should not force feed immediate change. Residents and businesses groups should not be surprised or left guessing about what’s to come. Above all, business craves predictability. To keep the economy thriving and new businesses interested in coming to Nashville, they have to feel the vibe that, although economic development and incentive standards may change, it will be manageable and they’ll be given time to react.

I suspect that part of the difficulty with negotiating over Parcel 8C is that it looks like there is nothing new to know about this. Every argument about that parcel could have been made, and was made, in 2018. And then there was a vote. I think there will be a connection between who gets this parcel now and whether Metro is viewed as trustworthy and reliable.


Previous post about soccer stadium: Protect the community benefits agreement.

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.

Body worn cameras — what’s the status?

There is confusion about the status of deploying body worn cameras in Nashville. Samantha Max at WPLN had a good story earlier this week that lays out the history of delays. Other media also have reported extensively about the evolving time line and cost. Before I get into my perspective about what has happened, I should explain some context for my perspective.

The context

The information I am relying on has been gathered over the last few years. It comes from some who are new to government, and many who have been in government through three or more mayors. It comes from multiple departments. I don’t think I am relying on any one person for any information I lay out today.

My purpose in writing this is not to assign blame. I have guesses about the (mostly good) personal motivations of the individuals involved, but that doesn’t matter. What matters is moving forward. And we’ve reached the point where I don’t think the government or the public will be able to effectively move forward on body cameras without a broad understanding about what has happened.

While I don’t seek to assign blame, some will want to draw conclusions about blame. I am trying my hardest to not worry about the intent of anyone involved. First, to move forward, the city needs a process that is bigger and better than any one person’s intent. Second, I have a hard time looking into another person’s soul to decide intent. I’ll use a sports metaphor to make this point.

If there is a point guard in basketball who shoots a lot more than he passes, the team will almost always be bad. From the outside, it looks like an intent to hurt the team. And sometimes, the point guard is selfish and doesn’t care much about the team. But other times, the point guard genuinely thinks that every shot is an awesome shot and he just can’t help himself but to launch the ball without passing every time down the court. For me, when I see a point guard doing that, I’m not sure I care whether he’s fundamentally a jerk or just thinks every shot is a good shot. Either way, I know the coaching stinks. The problem can always be solved by some combination of benching the player or coaching the player. Bottom line — I’m not getting into intent or blame today, but I will talk about the coaching.

So, what happened?

The inability to deploy body cameras in Nashville before now is another fundamental failure of leadership. The dynamics behind this failure are similar to the reasons why the budget is a mess. It’s easy to have press releases and talking points. It is more difficult to build and guide a functioning team to accomplish needed change. From my seat in the Metro Council, it is easy to feel like “leadership” means the full-time Mayor with full-time staff. But, I know that from the public perspective, “leadership” means all of us who are at the top of the organization chart.

I believe that, at this moment, MNPD has spent a portion of the capital money that it was appropriated (mostly on servers, storage, and other IT infrastructure) and wants to move forward with more purchases (mostly of cameras), but many of the other parties involved are concerned whether MNPD may be throwing good money after bad. There are concerns about whether the infrastructure that MNPD has built will work, whether it is the correct infrastructure for the job, and that there is not an adequate plan about how the infrastructure will work with other departments. There is also significant concern that the new operating costs of a complete deployment are not known and are not feasible given the current budget crunch. It appears that MNPD may have a preference for pointing to the budget issues for the current delay. Others would point to the other concerns I have mentioned as the reasons for the current delay.  I think the Mayor’s Office is working very hard, aggressively even, to get a reasonable, effective deployment in the field as soon as humanly possible.

Let me get into some of this in more detail.

It seems clear to me that there has not been effective teamwork among the Mayor’s Office (over the last few years), MNPD, the DA, the PD, and the courts. MNPD has what appears to be its own game plan and has been executing it. The DA has been louder than most of the others in letting us know that he has important questions about process and cost. The others have raised similar issues, but more quietly. I have heard some say that there has been no coaching or central control or team captain for this process. I have heard others say that MNPD has been in charge. Either way you look at it, the teamwork has been poor. And the result is that MNPD has moved in a direction that the others have questions about.

I’m told by multiple sources that the technical architecture of the system is unique. The federal government and others use cloud storage. MNPD has purchased physical servers. Those servers are subject to laws that don’t allow non-law enforcement people to use them. That means there is no current way for defense lawyers to review information on the system that is being built. I could go on, but you get it. MNPD believes they are building a better mouse trap. Others are less sure. Either way, the system is apparently unique and never been tested in real-time. I think this factor alone would make a large scale immediate deployment foolish. Before MNPD moves forward with purchasing the thousands of vehicle mounted and body worn cameras that it wants to buy, the other departments in the system need to have some confidence that it will work and that they will be able to interface with what MNPD has designed and built.

The poor teamwork has created other problems too. I believe that, as of today, there is no plan for where and how defense lawyers would review video. There are also multiple approaches around the country for how to deal with redacting personal information or the images of minors in households. There are pros and cons for each approach. But there has been very little conversation in Nashville about what approach to take. The answers to these and other open questions will in large part drive the new annual operating costs of the system. In fact, the main reason why nobody can tell us what the ongoing operating costs will be is because the poor teamwork has prevented these issues from getting anywhere close to solutions.

This narrative gets to the core of several key question…here’s the summary:

Where’s the money? MNPD has spent capital dollars so far mostly on servers and storage. I think they want to move forward with purchasing a large number of cameras. Others aren’t sure MNPD’s system will work without sufficient real-time testing.

Where do we go from here? Nashville is good at implementing whatever its 2 or 3 most important projects are. The poor teamwork that has plagued this project has to stop. There needs to be a coach who is calling the plays, and the players need to run the plays. If we (the public, the media, the Council) are not really clear about who is calling the plays, then we know that nobody is and this ineffectiveness will continue.

When I look at all of these factors together, I believe that the best approach would be to buy just enough cameras to have a meaningful test of the technical infrastructure that has been built. That would get the apparently novel storage infrastructural operational. An initial deployment would also give the various other departments involved a chance to work through the unresolved issues without grinding the gears of justice to a halt. It would also provide real information about any new operating costs.

I may get criticized for parts of this analysis from multiple angles. If that happens, so be it. I’m trying to wear my problem solving hat today. At this point, ideas about how to make the system perfect are less important than getting the beginning of a good system fielded absolutely as soon as possible.

MNPS 3% for Jan. 1 — what just happened?

This morning, the Mayor announced that he had identified a mechanism to pay MNPS employees the 3% raise that Mayor Briley promised them would start on January 1, 2020. Before I explain how it is being funded, some background:

  • The Briley announcement happened in July right AFTER the budget was finalized. He claimed that there would be recurring revenue of $7.5 million per year and that it wouldn’t need Council approval. The source was going to be a re-financing of some MDHA tax increment financing loans with Regions Bank. The announcement was criticized widely as a campaign gimmick. Even inside Metro, nobody understood how it was going to be recurring and nobody understood how to get all $7.5 million to MNPS.
  • This entire conversation about a post-budget, no Council approval, supposedly recurring mid-year raise for MNPS happened only because the Metro government has systematically short-changed employees on pay for many years now.

What was Briley’s plan?

Briley’s administration announced that the $7.5 million would come for an MDHA TIF loan restructuring. I wrote about the details of this funding mechanism in July. There were two things that weren’t known at the time — was it really recurring, and how would MDHA get all of the refinancing proceeds.

About the “recurring” issue, the current administration tells me (and the Mayor said this morning) that this is not recurring. Even back in July, MDHA acknowledged that this funding would require an annual waiver by Regions of its rights to keep the $7.5 million themselves. At best, both in July and now, you could say that you expect that it will continue to happen. But there is no legal right for Metro to get the $7.5 million in future years. That is up to the discretion of the bank, I am told.

About the “how does MNPS get the full $7.5 million” issue…this is complicated. This $7.5 million is property tax money. To understand why the prior administration’s assertion that all $7.5 million would go to MNPS was questionable, you have to understand how property tax money flows through the operating budget. Boring stuff. But important here.

I wrote a TIF step-by-step post in 2018 that explains the process. In summary though, all property tax revenue is automatically divided between Metro’s six “Funds.” Focus on the word “automatically.” Upon receipt of property tax revenue, the money is automatically divided among the six Funds. So the Briley idea that all $7.5 million would go to one of the six Funds — the School Fund — was inconsistent with the way Metro handles property tax revenue.

Under the current operating budget, the School Fund gets about 31.5% of all property tax revenue — so roughly one-third of property tax revenue. Under the Briley plan, nobody ever explained how the other two-thirds that would be allocated automatically to the other five Metro Funds would make its way over to MNPS — especially without Council approval as had been suggested.

What is Cooper’s plan?

At the press conference today, the administration explained that there are two sources to pay for the $7.5 million needed for the January 1 MNPS raise — the MDHA TIF refinancing and “Fund Balance” money.

They told us that $2.5 million would come from the MDHA loan deal with Regions Bank. This matches up with how the automatic allocation of property tax revenue works. That means that the waiver from Regions was worth $7.5 million and, of that amount, approximately one-third ($2.5 million) was allocated to MNPS.

(We should pay attention to the other $5 million that went to other Funds. I believe this means that the city just got $5 million closer to closing the $41.5 million gap in the current year operating budget.)

The administration also told us today that the rest of the $7.5 million is coming from Fund Balance money. The Fund Balance is basically money that has been appropriated in prior years but is unspent. It is typically impossible to get a budget to be spent precisely to the dollar. For obvious reasons, it is better for a department to come in better than budget rather than over budget. When a department ends a year without having spent all the money it was appropriated, the unused money is called “Fund Balance.” Ideally, you would have the Fund Balance accumulate slowly over time.

The Comptroller had two slides that referred to MNPS’s Fund Balance. Like the rest of Metro’s operating budget, for several years now, we have making ends meet at MNPS by using up the accumulated Fund Balance. The audited numbers show that, as of June 30, 2016, the MNPS Fund Balance was about $74 million. Two years later, as of June 30, 2018, the MNPS Fund Balance had eroded to about $35 million. Mayor’s Cooper’s plan is to use Fund Balance money to pay for the rest of the January 1 raises.

Handling the raise this way will require both school board and Council approval in December 2019.

What does it all mean?

Mayor Cooper was clear today that these are not recurring revenues. He committed to work with MNPS and the Council to find recurring revenue in the next full year budget to make this pay increase permanent.

The threshold question we are all facing is whether the city will honor Mayor Briley’s promise to provide the January 1 raises to MNPS. There are nothing but bad answers here — we can either disregard the promise as a flawed gimmick and further push MNPS morale in a bad direction, or we can pay for it with non-recurring revenue (coupled with a verbal promise to make it recurring in the next budget).

I support the decision to fund this. As a city, we have to start on the road to repairing employee compensation somewhere. They deserve this and more.

I support this mechanism for funding the January 1 raise. Briley came up with a mechanism that was not recurring and that was inconsistent with how Metro’s finances work. Cooper has a mechanism that he is transparently saying is not recurring, but at least makes sense within the framework of Metro’s finances.

Do I wish this raise had been funded in the June 2018 budget process? Yes.

Do I wish this raise had been funded in the June 2019 budget process? Yes.

Do I wish the former Mayor hadn’t unilaterally volunteered a raise that wasn’t covered in his own budget? Yes.

Is it good to continue to spend down Fund Balance money? No, not really.

But we are where we are — the promise was made. Employees have counted on it. My decision is that I’d rather pay for these raises and deal with finding recurring revenue in the next full year budget than yet again have Metro renege on a pay promise to employees.

Optimism AND reality

I am optimistic about Metro fixing its finance problems. It also is important that we be realistic too.

For each of the last two years, I and others in the Council have proposed a 50 cent property tax rate increase. I said each time and will repeat now — a 50 cent increase would not have paid for any new government services whatsoever.

Instead, the 50 cents — which would have generated about $162 million per year — was to stop Metro’s financial slide backwards. That new revenue would have provided money to fund promised pay raises for Metro employees, fund our schools, pay known and anticipated debt, replenish Metro’s 5% fund savings, and cover basic minimal inflation. Again, the 50 cent increase would not have paid for any additional sidewalk funding or extra employee or new anything.

So far, the known new revenue found since the election is $12.6 million from the Music City Center. I completely agree with Mayor Cooper’s goal of finding as much new revenue as possible and eliminating inefficiency in government. But, you can see that it will be difficult to find enough revenue or cut enough expenses to equal the $162 million per year that the 50 cent rate increase would generated.

I have pushed so hard for a rate change — including in an election year — because I have believed for some time that we would need one rate change to stop the city’s finances from sliding backwards and a second to start moving forward in providing needed new services for our growing city.

In these situations, it is always a challenge to find the right path forward. Often, footing shifts, and you have to change paths. Finding just the right mix of things to carve back and things to expand, old things to end and new things to start, is a challenge.

For now, my general ground rules are:

  • Any new significant spending for the operating budget is not practical. To be blunt, as an example, assuming the city could get rid of CoreCivic from the jail on Harding Place, there is no way to pay for the additional cost at this time. We need to see the city paying raises for employees, funding our schools, paying known and anticipated debt, replenishing Metro’s 5% fund savings, and covering basic minimal inflation before we can consider any new net costs in the operating budget.
  • The same goes for capital spending that comes with recurring new operating costs. So rebuilding a bridge is okay. But buying things that would require new employees to operate is not practical today.
  • Capital spending on necessary infrastructure must continue. Capital spending is supported by bond debt over 20 to 30 years. This makes the cost of roads and bridges and buildings get spread out over a long time. It’s affordable that way. Also, delaying needed capital improvements just ends up costing more money. (Your water heater costs less to replace before it breaks and causes water damage in your house…the same works for government…normal capital replacement costs less than running things until they fail.) It is very important to maintain scheduled infrastructure capital spending.
  • Economic development is a difficult, mixed bag.
    • I have criticized that this city does not have any written or unwritten policy about what economic development we want to support and where. Without that, Metro gets the widespread criticism that there is now.
    • Very few people think that there should be zero economic incentives. Most everyone would agree that there should be some economic development incentives so long as we have civic agreement about what we are investing in.
    • We have seen the city’s reputation with employees get trashed over the last few years when Metro reneged on its promised pay raises. Do we want to export that reputation outside of Nashville by backing away from deals we have already made with different businesses? I don’t think so. The most difficult developing story is the fact that there seem to be extra costs and handshake deal parts of various ongoing development projects. I think the city is going to struggle with how to honor its word in situations where only a few people in a former administration really understood what Metro was promising.
  • Over the last three operating budgets, Metro departments have already found over $30 million of recurring savings. As much as this stings some departments, I believe that the Cooper administration should keep pushing the departments for more. I am hopeful that Cooper’s team will find some transformative changes that will save money.
  • Some argue that Metro has mismanaged money and can’t be trusted with ANY new revenue until ALL mismanagement has been purged. To them, I would acknowledge that all government including Metro has waste. The fact that the various departments have squeezed more than $30 million of cuts out over the last several years is some evidence of that. But, this is a BOTH problem and not an EITHER/OR problem. I am all in favor of cutting fat and mismanagement. At the same time, revenue has been choked back also over the last decade and not allowed to keep pace with our growing city. That has to be fixed.
  • I have heard a few people appear to argue for an all-at-once $1.50 rate increase. I don’t think this is realistic. I believe that letting the property tax rate remain artificially low has been terrible for Nashvillians. It has overheated how attractive we are for out-of-town residential real estate investors, which fuels gentrification. But it would be unfair to Nashville’s taxpayers to force the full rate correction into one year. The better approach is to do the hard work of stabilizing the city’s finances first and then assess what additional services the city wants to invest in after that.

This is a difficult balance — but it boils down to keep attacking fat and inefficiency, find as much new revenue as possible before a rate increase, no new operating expenses for now, maintain infrastructure capital improvement spending, judge every existing economic development project based on whether it uses operating dollars (bad), capital dollars (better), or revenue bond dollars (best), and judge every potential new economic development project based on goals and policy (none known to exist today). Every budget season for the next several years, all of these should be plugged into a cash forecast (I believe the Finance Department is working on one) and let it tell you what the city’s cash needs are. From there, we need the political will to move the property tax rate toward meeting those needs.

This approach has something for everyone to dislike. No new operating expenses is hard for a growing city. Cutting is hard. Big projects — whether infrastructure or economic development projects that have already started — feel scary or dangerous. Raising the property tax rate costs people money. I’m optimistic because I know Nashville can do this (and because of the Comptroller’s watchful eye, we have to do it). The realities I have laid out are also reason for optimism. We have options. We don’t unlimited paths forward, yet there are clear steps to take and guidelines to follow to get Metro’s finances in better shape to serve all our neighbors.

Statement about Comptroller’s presentation today

Today, the Metro Council has heard presentations from Metro Water Services about expected water rate increases and from the Comptroller for the State of Tennessee about the city government’s financial condition. (Comptroller presentation here.)

The Comptroller has given us the basic facts. Over nearly a decade, Metro has spent more money than it has earned. The city has balanced its budget by spending down savings and selling one-time assets — all while dropping the property tax rate lower than any other city in the State. This can’t continue. It’s that simple. We know it must change.

It would be easy to be intimidated by the size of the challenge. In these situations, there will be a few who will deny or minimize the issues, and there will be a few who say drastic cuts are necessary. The rest of us — most of us — will want to keep a level head. It took years to get here and it will take years to get out.

While it is fair for people to wonder whether we can fix this, the answer is yes. Nashville has many blessings. We are in the middle of an ongoing economic boom with a growing population, low unemployment, and a historically low property tax rate. We have the tools to balance the budget and rebuild reserves. Nearly any city in America would gladly trade their problems for our struggle to keep up with growth.

It is important that everyone hears the hard and direct facts that the Comptroller delivered today. Then after we have absorbed that information, we will still have the reality that Nashville is strong. Our citizens are strong. Our economy is strong.

At its best, a city government helps people live their best lives. That means safety, education, and jobs. Our challenge isn’t our city, its people, or its economy — it is whether our elected leaders can bring this shared vision to life — and whether we can provide the discipline, honesty, and effort, to have Nashville move together to a brighter future. I think we will.

Next steps

We don’t have a date yet, but the new Director of Finance has told me that he is willing to come back to the Council in December to lay out the framework for a plan of action for Metro’s finances. The administration has been on the job for less than 6 weeks. I expect that the response will continue to be a work-in-progress for some time. But it will be good to hear a preliminary game plan from the administration.



Reading list for Nov. 13 Comptroller presentation

The Comptroller for the State of Tennessee will make a presentation to the Metro Council on November 13, 2019, about Metro’s finances. In advance of that, I went back and read some of my blog posts about the city’s finances:

Pre-Budget Process Thoughts (May 1, 2016): This was my first budget-related post. I questioned why the portion of the budget being spent on debt was increasing during boom times. I said, “You would like to think that if you absolutely kill it on the revenue side, the percentage of your budget that goes toward debt might go down?  If one were a cynic, one would observe that record-breaking revenue increases can’t go on forever, and ask whether we will be able to anticipate when our revenue increases inevitably recede well enough to also pull back on large increases in new long-term debt.”

Math is Hard (April 27, 2017): I noted that from year to year, Metro kept using different numbers to describe what portion of the budget was going to pay debt. I am still not sure why this was happening. But by 2017, there was no consistent way to measure how much of the budget was going toward paying long-term debt.

Unfunded OPEB liability to cross $3B mark this year (October 9, 2017): This is one of several posts over the year making the point that Metro’s completely unfunded obligation for retiree health benefits has consistently grown more rapidly than the city’s budget. That’s a problem.

Storm has been brewing for a while… (May 5, 2018): After the transition to Mayor Briley, the Council was presented with a bad budget. This was the budget that reneged on employee raises and was called “belt-tightening” by the Mayor. This post talks about how it took multiple years to build up to this bad budget.

um…about the budget… (May 11, 2018): I started this post by saying, “The proposed FY19 Metro budget has been out for ten days now…and it’s not good…and this is just the first year of a multi-year problem.” In response, the administration doubled down on its “there’s no problem” campaign. I and the other Council members who tried to address the problems were painted as alarmists.

No Free Lunch (August 19, 2018): After having lost the 2018 budget battle by one vote, this post tried to show the city’s increasing debt problem along side the city’s increasing unfunded retiree benefit obligations.

Metro Debt Dashboard (September 15, 2018): Like the last post, this one tried to collect data to show how out of bounds Metro’s finances had gotten. This post created some back-and-forth between the mayor and me. Briley told the Tennessean, “And I’m even more surprised that Bob Mendes would put out these numbers about our debt and debt service that are just so fundamentally wrong.” This exchange is relevant only to understand how powerful it is when the mayor’s office with its full-time professional finance and communications staff dismiss facts. In large measure, as recently as one year ago, everything that is now considered “fact” about Metro’s finances was dismissed by the Metropolitan Government as “fundamentally wrong.” That aggressive denial is part of why the city’s finances are where they are now.

Metro’s Audited Financials as of 6/30/2018 (December 15, 2018): This one is long…maybe skip it. But if you want to see the latest about the retiree benefit obligations, read it.

Maybe hold back on the high fives for now?? (March 19, 2019): I wrote this post after the administration announced pay raises for employees and was attempting to portray that like the budget was back on track.

The myth that “belt tightening” could fix the budget (May 4, 2019): The title is self-explanatory.

FAQs – FY20 Better Budget (June 6, 2019): This post collects all of my several posts about the budget Nashville is currently operating under.

Met with Comptroller and Mayor today… (October 3, 2019): This one is my last post related to the budget and what the I expect the Comptroller to discuss on November 13.

As a final note, I want to remind everyone that, while it is easy to focus on Metro’s budget problems, these issues are mostly about growing pains. Nashville has an awesome economy. To fix the city government’s budget, it will take discipline, honesty, and effort. We can do this.

Follow-up on reallocating the Gulch bridge dollars

This is a follow-up on yesterday’s post about Mayor Cooper’s announcement to reallocate $17.95 million of capital spending from the stalled Gulch pedestrian bridge to other infrastructure projects around the city. Here’s my post from yesterday. Here’s a good story that WPLN’s Tony Gonzalez put out today.

As the day ended yesterday, I had several open questions. I can report that the Cooper administration has pinned down the details for me.

The first question was about what had been spent already on the bridge project out of the originally approved $18 million. I’m told that it was about $15,000 for engineering and planning, about $21,000 for appraisal services, about $9,000 to a contractor for repairs and maintenance, and about $2,000 for a right of way easement. That leaves approximately $17.95 million of the original $18 million.

On this first question, I also wanted to know how a $2.66 million payment for additional easements fit in the mix. I’ll be really blunt about this. How the $2.66 million was handled in 2016 is complete crap and an example of why people have a hard time trusting the government. On September 27, 2016, the administration sent an email to the Metro Council with a memo that said the money was coming out of the $18 million approved for the bridge. The memo said, “One key fact is that this legislation [to spend $2.66 million on an easement] does NOT appropriate additional funding for the project. Funding was approved by the Council through RS2013-710 which authorized $18 million in G.O. Bonds.”

In reliance of this memo and its representations about the source of the money, the Council passed the legislation in mid-October 2016. But then when the city paid the money a short time later on December 8, 2016, it took the money from another account. That’s why there is still $17.95 out of the original $18 million left for the bridge funding even though there was a $2.66 million payment for an easement in 2016. This is the Mickey Mouse shell game financing nonsense that drove the mayor’s campaign to a 70% win. I hope this administration does better.

The second question was whether there is $17.95 million sitting in a bank account somewhere, or whether this is approved debt that has not yet actually been borrowed by Metro. The answer is that this is approved debt that hasn’t been actually borrowed yet by Metro. Given the strong need for the various infrastructure projects, I don’t expect this to create much or any objection in the Council.

The third question was whether Council approval is necessary to reallocate money to the new proposed projects. To the administration’s credit, when I requested that we sidestep the debate and just err on the side of bringing this to the Council for approval, they agreed. WPLN quoted a spokesperson saying, “in the interest of full transparency and out of respect for the Council process,” they would bring the spending changes to the Council.

In the end, I think most people are only going to think about this in terms of whether they like the infrastructure projects that will be built. I think almost everyone will like them. But these details about how it works are important.



About reallocated capital spending dollars

(UPDATED: Oct. 31, 2019 at 4:00 PM, updates are underlined)


Mayor Cooper announced today that he will reallocate approximately $18 million of capital spending dollars approved during the Dean administration for a Gulch pedestrian bridge to other infrastructure spending around the county. I’m getting a lot of questions about the mechanics of how this works and whether Council approval is needed. The short answer is “No Council approval is required as long as the new proposed spending was included somewhere in the 2013 enabling legislation. Some of the smaller proposed spending items (traffic calming, garbage cans, street lighting) may not fit into a category that was authorized in the 2013 legislation and therefore might have to come to the Council for approval. This is an open question for me as of Oct. 31 at 4PM.

This will necessarily get in the weeds.

The conventional wisdom is that the $18 million for the pedestrian bridge was approved by a Capital Spending Plan in June 2013 by RS2013-710. However, the legislation does not actually ever mention a pedestrian bridge. It simply approved $300 million worth of general obligation bonds that could be spent on a long list of types of projects listed in Section 1 of the resolution.

At the time, the practice was that the Finance Department would issue a memo describing how the money would be spent. Here’s the May 29, 2013, memo that relates to RS2013-710. This memo is where $18 million for “Bridges” was listed. (Even this never mentioned the Gulch pedestrian bridge specifically…just “Bridges.”) This memo and its itemized list of how to spend the money was NOT ever made part of the legislation. I wasn’t in the Council at the time. I’m told that the Council trusted that the administration would spend the $300 million formally approved in the resolution on the things listed in the separate side memo.

Then Mayor Barry and a new Council were elected in August and September 2015. One of Mayor Barry’s early wins was that she found $15 million for sidewalks projects in November 2015. The mechanism was that previous bond resolutions had (like RS2013-710) simply approved a sum of money without specifying in the legislation what exactly would be purchased with the money. This allowed the new mayor to legally shift some previously approved capital spending from what had originally been described in a side memo to sidewalks instead.

In June 2016, when the new Council was considering its first capital spending plan resolution, we wanted to tighten up this process. The idea of shifting money around to whatever capital projects the Mayor wants seemed too loose to us. I asked to have the contents of the traditional side memo to be included with the 2016 legislation. And then-Councilmember Cooper and I worked on adding specific language to the resolution to not allow reallocating funds from one listed category of spending to another without further Council approval.

And then in the most recent capital spending plan resolution that the Council passed in October 2018, I added a further amendment to list out the specific projects that were being funded.

The takeaways are:

  • For capital spending plan resolutions approved before 2016, the mayor has broad legal authority to spend the authorized funds on any project in the city’s approved Capital Improvements Budget and authorized generally by the resolution without regard for what was listed in the side memo that accompanied the legislation. Politically, Mayor Barry caught a little heat for doing this, but spending the “found” money on sidewalks was broadly popular. I’d expect that Mayor Cooper’s announcement today will similarly receive widespread support.
  • For capital spending plan resolutions approved in 2016 and later, reallocating funds would be more difficult. Since the side memo itemization is now part of the legislation, shifting spending could only happen if the new spending were to fit within the same listed category as the originally intended project.
  • Since today’s announcement relates to $18 million approved as part of RS2013-710, I believe that the Mayor has the power without further Council approval to spend whatever is left unspent from that $18 million an any project listed in the City’s Capital Improvements Budget and authorized generally by the resolution. Basically, he can spend whatever is left of that $18 million on pretty much any capital project he wants as long as the general category of spending was included in Section 1 of RS2013-710.

Separate from this analysis, I am still working on learning more about two things:

  • The press release from the Mayor’s office today says there is $17.95 million of the original $18 million left. I’m asking for an itemization of what was spent and what it was spent on. In particular, there was reportedly $2.66 million paid for land easements in 2016 — I’d like to know how that fits into the mix.
  • I’d like to understand whether $18 million of bonds already were issued for this and there is still $17.95 million sitting today in a Metro bank account somewhere, or if this is $17.95 million of approved debt that has not yet actually been borrowed by Metro.
  • Does all of the new proposed spending fit into a category listed in Section 1 of RS2013-710. In particular, does traffic calming ($1.5 million), garbage cans ($500,000), and lighting ($500,000) fit into a category? If not, those new spending items may need to come before the Council.

I expect I’ll get answers to these additional questions soon enough. But I wanted to get this update posted because I am getting a lot of questions about the mechanics of this and whether Council approval is needed…and it is not needed for the majority of the spending, but may be needed for a few of the smaller dollar items.

Please pardon typos. I wrote this quickly.


Sheriff decides to no longer house ICE detainees

Today, Sheriff Hall announced that Nashville’s jail will no longer house ICE detainees. This is a welcome change. Thank you, Sheriff Hall.

Our goal is for every one of Nashville’s residents to have faith and trust in their ability to fully interact with city government, whether that’s through schools, the health department or the justice system. Sheriff Hall’s announcement moves our city closer to that goal.

I have been working with Tennessee Immigrant & Refugee Rights Coalition toward the goal of no longer housing ICE detainees in Nashville’s jail for several years. In 2017, I and seven co-sponsors introduced BL2017-743, but that was deferred after first reading. After ICE’s well-publicized actions in Nashville this summer, I approached Sheriff Hall again about this. Under Tennessee law and the Metro Charter, the sheriff has the final say over who is housed in Nashville’s jail.

I along with fifteen co-sponsors were prepared to introduce legislation asking Metro to terminate the contract by which Metro gets paid to house ICE detainees. With Sheriff Hall’s announcement that the jail will no longer house ICE detainees, there is no need for the legislation.

While this important policy change won’t solve all of the immigration concerns in Nashville, today, we can celebrate our city’s commitment to focus first and foremost on the work of local government and making Nashville a safer place for all our neighbors.

We’re a month into the new term…

We are headed into the second month of the new Council term. There’s a lot brewing. Today I’ll talk about some of the money and budget issues facing Metro, but let me start with a handful of the more significant non-money issues:

Non-money issues

  1. New Mayor, New Finance Director, New Legal Director: We have a Mayor who ran on change and now the top three positions on the first floor of the Courthouse have a cumulative six weeks of experience in Metro’s executive branch. They are highly skilled, diving in, and working hard. I assume that we may see some learning curve issues for a while??
  2. Transit: From conversations I’m having with people all over the county (not just the core), I think there’s some appetite to get back to transit sooner rather than later. I continue to believe that a focus on comprehensively good bus service along with substantial gains in sidewalks and bike lanes would be a winning place to start the conversation. I also think that Metro should pick out the worst traffic snarls in the outer third of the county and fix them. For the most part, these are formerly rural roads carrying too much volume and need to be upgraded no matter what the city does with transit.
  3. Policing: The Community Oversight Board has not been effectively established yet. My assessment is that it will take the Mayor’s office making it a priority if the city is going to properly implement the board. On top of this, there is confusion about the game plan for body cameras. And, there has been no public indication yet about what the relationship will be between Mayor Cooper and Chief Anderson. I won’t be pessimistic just a few weeks into this new term…but this topic has me worried.
  4. Sidewalks: Last term, Metro’s sidewalk program got bogged down with allegations of procurement irregularities and free sports tickets from vendors. The resulting Metro audit work is not done yet. We’ll be looking to the new administration to find a way to get these issues resolved and get more sidewalks built a lot faster than last term.
  5. Soccer, Fairgrounds, and the 10 acres: This topic has the feel of two fighter circling and sizing each other up. I don’t know whether we are going to end up with a genuine fight or a handshake. For now, here’s what I think is going on:

Mayor Cooper and his team are trying (I think) to come up with a total price tag for all work out done to date at the Fairgrounds, and a total expected price tag, and to compare that to the original projections.

Apparently, the development team for the 10 acres can’t get financing for their new building due to the “Freeman Amendment.” This was added to one of the soccer stadium bills. The Freeman Amendment requires the 10 acres to be returned to Metro if there is no professional soccer on the site for any 24 month period during the first 30 years of the 99 year lease. Will the Mayor agree to fix this to allow the financing to go forward? Will the Mayor want a price to be paid for this? Will a Council member file legislation to fix this without the Mayor agreeing to it? All open questions.

There’s also some talk that the cost of non-stadium work on the site is over-budget. I have no idea whether this is correct or not. So far, it’s just a rumor.

As we get through the end of 2019, I imagine we’re going to learn a lot more about whether these issues will turn into a fight or an agreed path forward.

Money issues

  1. Comptroller: Here’s my October 3, 2019, post about meeting with the State Comptroller. The Comptroller will be in the Metro Council Chamber on November 13, 2019, from 4:30 to 6:30 PM to give a presentation and answer Council questions about Metro’s finances. I’ll provide more analysis after the presentation. For now, I’ll repeat that it took years to get to where we are today. Fixing it is very doable, and it will take several years of discipline, honesty, and effort. Not austerity. Not squeezing constituents on services or employees on pay — just discipline, honesty, and effort.
  2. Water rates: In the next several weeks, the State of Tennessee will order Metro to raise its water rates. It is embarrassing that the State has to order Metro to get its act together. Metro Water Services will also be present at the November 13 meeting to make a presentation about what is happening and why. On this one, in addition to the inevitable finger pointing about “how did this happen,” I think a lot of Council members are going to be upset about the fact that the Council never got told that the city was getting in trouble with the State. I and several co-sponsors will be introducing legislation to increase the Council’s annual oversight with Metro Water to make sure no future Council is kept in the dark like this.
  3. Mayor’s efforts to find more money downtown: A few weeks ago, the Mayor and Convention Center Authority (CCA) announced that the CCA will begin to make large annual payments that are the equivalent of property taxes on the Music City Center. Today, that is $12.6 million per year. There are still open questions about how this relates to the current $10 million per year that the CCA is paying Metro under a Memorandum of Understanding. Once that MOU expires in a year, I think the CCA and the Mayor will need to talk about whether the CCA will keep paying the $10 million to Metro each year (in addition to the $12.6 million property tax equivalent payment), or whether the CCA will pay some other amount, or if the CCA will instead start paying for capital improvements around downtown.
  4. Other places to find money: The rumor mill in Metro is going full speed about other ways the Mayor might find money. Some of the rumors could potentially make sense. Others sound outlandish. Since I really can’t tell what is potentially true and what is completely made up, I won’t spread these rumors. My point is that a central effort in the Mayor’s office these days is to honor his campaign promise to look for additional sources of revenue before talking about property tax rates.
  5. Under One Roof: Mayor Briley had announced that, if he won the election, he would propose spending hundreds of millions of dollars on the MDHA Envision projects. This “Under One Roof” program was never fully-baked and no funding for it was ever requested or approved. Now Mayor Cooper has announced that he is not going to pursue that plan. I agree with this approach. It is critically important that Nashville have high-quality low-income housing. If we spend hundreds of millions, we all need first to understand the expected cost of the Envision projects, what the total investment would be, and how the cost is calculated. None of that has been done yet. I think we will learn more in the coming months.
  6. MNPS: The needs of the school systems aren’t going away. As reported in the media in the last few weeks, MNPS may need more than $100 million per year in new operating funds to modernize their pay structure.

Again, this is a partial list of issues. Our election lull in the Council is about over. Though there is a lot of hard work to do, these are high class problems. Nashville is a dynamic, growing city. We will work through these issues and build a better future.