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.

General thoughts about Metro’s internal audit function

I’ll warn you right now…this post will be hard to keep interesting. But as Metro’s Internal Audit function has been more in the forefront on issues like Collier Engineering, various MNPS allegations, and looking into the former mayor, I need to get some thoughts out. In this post, I’m going to cover some basic information about Metro’s internal audit function, what traits I think make for successful internal audit, and then some areas of possible improvement. If I have time today, I plan to work on a second post about the ongoing Collier and MNPS investigations being conducted by the Internal Auditor.

Here are some basics:

  • The Metro Auditor is set up under the Charter to be independent. The Auditor serves an 8 year term. I believe (but am not sure) that the current term runs through 2022. The Auditor reports to but is not controlled by the Metro Audit Committee.
  • The Metro Audit Committee has 6 members, who are the Director of Finance, the Vice Mayor, two Council members selected by the Council, a person chosen by the Nashville Area Chamber of Commerce, and a person chosen by the Nashville Chapter of the Tennessee Society of Certified Public Accountants. Council Member John Cooper and I are the two CM’s picked by the Council to be on the Audit Committee.
  • There are three key functions for internal audit — work with the external third-party auditors in preparing Metro’s annual financial audit, conduct periodic internal audits of Metro’s key functions, and conduct investigations as necessary of allegations of wrongdoing that impact Metro’s finances.
  • Two of these functions are predictable. Working with external auditors on the annual financial audit and conducting periodic internal audits of each department can be scheduled easily at least a year in advance.
  • The third main function — handling investigations of alleged wrongdoing — is not predictable. Sometimes, there’s not a lot of this. Sometimes, there is a lot to do.

What does it take to be a good internal auditor?

My basic description is that you want someone who has good accounting experience, a very practical operational understanding of the government, and a willingness to call out bad acts when necessary. It’s critical to be well-balanced with these traits to be successful. For example, without a solid, practical operational understanding, internal audit findings tend toward being over-careful and unworkable. And then departments will just ignore findings and recommendations. Also, without a willingness to call out bad acts, then internal audit tends toward just moving paper around and not ever improving government.

For an additional data point, here’s a brief article summarizing a report from the Institute of Internal Auditor’s Audit Executive Center. The article indicates that when internal auditors are hired business acumen and critical thinking are valued substantially more than traditional audit and accounting skills. This matches my impression that, yes of course, you need your internal auditor to be good at debits and credits. But more importantly, understanding operations and being able to think through what is an operational snafu that can be redesigned and what is a bad act is critical to a good internal audit function.

Areas of improvement

In my 3+ years on the Audit Committee, here are some of the areas of improvement that I have noticed. Some have improved. Some are a work in progress.

  • Enterprise Risk Management:
    • This is an industry term to describe having a formal process for an organization to identify all areas of risk, and then grade those risks. Once this is done, the result is used to decide where to allocate your internal audit resources.
    • To make up an exaggerated example…if Metro were to have a single, unbacked-up computer that stored all of its information about property assessments and property tax collections, the risk of losing that information would be graded as very high. In theory, that would mean that the processes around collecting and storing that data would be at the top of the list for an internal audit.
    • Many organizations build a ground up ERM assessment annually to inform the internal audit plan for the next year. Metro doesn’t do this. Metro relies on industry publications and studies, and experience/anecdotal evidence, to build a risk assessment. Metro would need to invest in an ERM software package to improve this.
  • Follow-up on findings:
    • There should be long-term follow-up on any findings from an internal report. When I joined the Audit Committee in 2015, that wasn’t happening.
    • So prior to 2015, an audit report could have a finding, the department could promise to fix the issue, and if the department then ignored the issue, there was never any follow-up or further reporting.
    • At the request of the Audit Committee, we now get reports twice a year (I think it is twice??) on audit items that are unresolved or where the department has pushed back an implementation date. This provides dramatically more oversight.
  • Rejected findings:
    • From previous experience, I expect that departments will accept the internal auditor’s recommendations and promise an implementation date for the fix. When I joined the Audit Committee in 2015, there were way too many recommendations that were being rejected by the department or where no implementation date was promised.
    • To me, that meant that departments probably didn’t have respect for that “business acumen” component of the internal audit function. Rejected findings likely meant that the department was basically saying that internal audit didn’t know what it was talking about.
    • At the request of the Audit Committee, all findings now have an implementation date for the fix. That’s good.
    • Also, departments are rejecting audit findings less often now. To accomplish this, in late 2015 or early 2016, the Audit Committee started asking the Auditor and the department heads to talk more and work out their differences, if possible. As word got around Metro that rejected findings were going to get more attention from the Audit Committee, more of these differences got ironed out.
  • Reports not timely online: Over the last several years, the Audit Committee has leaned on the Auditor to more promptly and more completely get all reports online. To be perfectly honest, my experience has been that mundane reports get posted quickly and controversial ones do not. As recently as last month, a series of reports were issued within days of each other. The most controversial one was the only one to not be posted when I checked. I had to ask about it before it was posted. This is better than it used to be, but not where I’d like it.

What does it all mean?

This Audit Committee work is drudgery. But it is critically important. My work to push for a better enterprise risk management assessment, to force more communication and problem-solving, to require follow-up reporting on unresolved findings, and to get all reports online quickly is the highest value, lowest attention work I’ve done during this term. You should know that David Briley (when he was on the committee as Vice Mayor) and John Cooper (who is the other CM on the committee) have been strong, reliable allies in this work.

This post is to provide background context for my next post about the current ongoing investigations. What I would like you to takeaway is that, in my opinion, there is some evidence that the Metro departments don’t always have a great opinion about the practical business acumen of the internal audit function. There is also some evidence that the audit function has typically shied away from controversy. I think these observations are important context for understanding the current investigations.

Council Feb 5 Agenda

The Council has a full agenda on February 5. It includes several items that are guarantied to make someone mad. Here’s what I am looking at (in the order they appear on the agenda):

Public Hearing

Murphy Road developmentBL -1357 and -58: This is the proposed development on Murphy Road near West End. I believe the developers have met with the neighbors and that discussions are ongoing. I understand that CM Kindall will defer the public hearing again.

Resolutions

NES round-up, RS -1508: NES has a program where customers may opt-in to rounding their monthly bill up to the nearest dollar and allowing NES to use the extra cents to fund its low-income weatherization program, Home Energy Uplift. This non-binding resolution would ask NES’s board to consider transitioning to an opt-out program instead. If NES switched to an opt-out program, all bills would be rounded up to the nearest dollar unless the customer opted-out. This is consistent with other large cities in Tennessee. Supporters argue that this is a relatively harmless way to fund an important program. Detractors feel like it a bit like taxing people without them realizing it. Since the program would come with the ability to opt-out and, by definition, it involved less than $12 per year, I’ll vote in favor of this.

Surplussing property to new community land trust, RS-1570: This resolution would send surplus Metro property to our new community land trust (CLT) for future use as affordable housing. This is a tremendous step forward — and a lot better than selling off Metro’s valuable property to make ends meet temporarily. But this is the first surplussing for the CLT and I’ll have some questions at our committee meetings. I’ll want to make sure I understand the process, how long any units built will be affordable, and how these properties interact with our short-term rental laws. Depending on the information we get in committee meetings, I may vote in favor or to defer one meeting to make sure everyone understands this new process of getting properties into the CLT.

Asking Jill Speering for an apology, RS -1597: This one is guarantied to make a lot of people mad. You can read the Tennessean’s coverage of the back story here. The problem, from my perspective, is that there are some people who have been raising legitimate questions about MNPS and Dr. Joseph’s leadership, and then there are others who tend to not talk about the merits and instead talk about Dr. Joseph being “scary” or “intimidating” or having a “crew” to enforce his will. The second group of critics, to my ear, have helped to inject a race element that’s damaging into the dialogue.

Almost a month ago, I called out the second group as being out of bounds:

Back to the pending resolution…with all respect to those defending Ms. Speering’s text message statement, the intent to the statement is beside the point. In the context where some are raising well thought out concerns backed by evidence, but others are using rhetoric that rings of stereotypes, her statement was wrong. And, as I understand it, Ms. Speering has not publicly expressed any regret for the statement or how it has been interpreted.

Having said all that, I don’t know yet how I’ll vote. I’ll abstain because I’m not that interested in opening the door to a lot of future apology seeking, or I’ll vote in favor because my personal opinion is that some public expression of regret would be appropriate.

Censure the former mayor? RS -1598: This is another one that will make some people mad whichever way it goes. Opponents of this resolution say the Council is beating a dead horse and suggest that the former mayor has suffered enough for what she did. Let me try to get the debate framed by facts.

First, the Metro Board of Ethical Conduct received a complaint while she was still Mayor. In December 2018, that complaint was resolved by the Ethics Board and it recommended that the Council censure her. Under Metro’s laws, once the Ethics Board makes a recommendation, the Chair of the Council Rules Committee “shall” file a resolution for the Council to consider the recommendation. Hence, we have the current resolution.

Now, there are some (perhaps including Metro Legal) who feel that the Ethics Board lost jurisdiction once she resigned, and that the complaint should’ve been dropped at that time. Remember, Metro Legal had a conflict of interest and the Ethics Board used outside legal counsel. That outside legal counsel recommended that the Ethics Board continued to have jurisdiction to make a decision after she resigned. What should we make of the fact that Metro Legal probably thinks there was no jurisdiction and outside counsel thinks that there was? Well, I’ve read Metro’s ordinances on this and, wearing my lawyer hat, my expert opinion is that the drafting of the ordinance was crap. I think the best reading is that there is continuing jurisdiction to consider a complaint after someone resigns, but it was poorly drafted and could use clarifying one way or another.

The fact is that the Ethics Board did make a recommendation and under Metro law the Council “shall” consider it. We can either vote no (either because you think the Ethics Board should have dropped it after she quit or because you don’t think she should be censured) or vote yes (because you think admitting a felony also warrants a censure). Either way, this ridiculous episode will finally be over. I’ll keep listening to my colleagues. But for now, I plan to vote to adopt this resolution.

2nd Reading

Match affordable housing funding to job credit funding, BL -1472: This bill would require setting aside $1 of affordable housing spending for every $1 of job credit spending. In particular, this is aimed at the upcoming legislation to approve job credits for Alliance Bernstein and Amazon. For several reasons, I’m opposed to this. To start, I have been consistently opposed to what I call silo-izing Metro’s budget. I think that slicing and dicing the budget with a ton of required micro-spending cuts into the city’s ability to be flexible and match the needs of a particular year. Beyond that, this is really just disguised opposition to the job credits, I think. From my perspective, if you don’t like the job credits, just vote ‘no’ on them. But passing this bill would just make the job credits literally twice as expensive to the city AND cut down on flexibility in future years.

I don’t know how I’ll vote on the Alliance Bernstein or Amazon job credits — we’ve not seen that legislation yet. But I don’t think doubling the cost of the job credits is the right direction. I think I’ll vote against this bill.

Surplussing $5.4 million of real estate for schools budget, BL -1476, -1477, -1478, -1479: Folks, this is part of the “belt-tightening” that Mayor Briley told us about last year. Instead of properly funding the government from its tax base, the proposal is to sell off one-time assets to make money to balance the budget for the year. The Council can either vote in favor and participate in unloading valuable assets that will never be recovered, or we can vote against and help put a bigger hole in the MNPS budget. Both options are bad.

Among the many reasons why this is a bad way to run a city are: (1) all potential buyers know Metro is in a hurry to sell (which tends to drive price down); (2) at least one of the parcels would benefit from  more dense zoning, but it’s not clear whether Metro has time to do that (which may tend to drive price down); (3) nobody is making more land — once these are sold, they are gone forever; and (4) Metro is losing an opportunity to discuss whether affordable housing would be appropriate on these parcels.

Honestly, I don’t know yet whether I’ll vote ‘no’ to protest this method of balancing the budget or vote ‘yes’ to make sure MNPS’s minimal budget this year gets funded.

3rd Reading

Nashville Yards participation agreement, BL -1442 (as amended): This bill would approve Metro paying for approximately $15 million of the proposed $80+ million in infrastructure improvements related to the former Lifeway campus. This bill has gotten some push back because it is downtown and because Amazon will move there in a few years.

My perspective starts with “This isn’t tax increment financing.” Instead of giving away all new property tax revenue for up to 30 years, Metro will make the upfront investment and keep all of the property tax revenue going forward. There should be more agreements like this where Metro and developer share in the infrastructure costs, especially downtown. These agreements allow Metro to get long-sought after infrastructure improvements without Metro having to pay the full cost.

Also, keep in mind that these agreements are not limited to downtown. For example, in Antioch where I-24 and Hickory Hollow Parkway meet, Metro has agreed to pay half ($12 million of $24 million) to improve the interstate exchange. Like with Nashville Yards, that interstate exchange participation agreement was a once-in-a-generation opportunity to dramatically improve the infrastructure in the area for everyone. I’ll vote in favor of this cost-sharing participation agreement.

 

Mendes – what is that?

Through my life, I’ve been asked a lot about my last name. What is Mendes? Where is Mendes from? What are you? Mendes – what is that?

Sometimes people ask right away. Sometimes they wait until we know each other better. Not always, but often the person asking is looking for help in figuring out a category to put me in.

When I ran for office in 2015, I answered the question dozens of times. My typical answer was that my family doesn’t really know the history of my last name, and that I am a little bit of a lot of nationalities — just like Nashville.

Since then, I’ve learned more about my paternal grandfather. I’d like to share the story with you.

The official family story

Growing up, one thing was clear about the family name. There wasn’t a whole lot to know or discuss. My dad’s father was Pierre Monteil Mendes. He was French. He left my grandmother when my dad was an infant. Despite my grandmother’s best efforts, Pierre was never heard from again. That was the whole story.

My other three grandparents were much easier to figure out. My dad’s mother is Clare. She was raised in Preston, Minnesota, the county seat for Fillmore County. Her father ran the railroad station in Preston. Her family traces its roots to mid-1600s settlers from England (to Maryland) and the Netherlands (to New York). Her great grandfather, George Washington Dean, was in General Grant’s Army of the Tennessee during the Civil War. George, a Private in the 21st Iowa Volunteer Infantry Regiment, died from wounds sustained at the Battle of the Big Black River Bridge on May 17, 1863, in the Vicksburg campaign. Two generations earlier, another of Clare’s  ancestors, John Dolson from Orange County, New York, was a Private in the 1st Pennsylvania Regiment of the Continental Army. Dolson’s unit saw action at the Battle of Trenton when Washington crossed the Delaware.

My mom’s parents spent their entire lives in Chicago. They were the children and grandchildren of European immigrants who settled there. Their ancestry was German, Irish, Swedish, and probably one or two more nationalities. The rich history from my other three grandparents always stood in contrast to the lack of information about Pierre Monteil Mendes.

My early research about Pierre

Before online ancestry research was readily available, I obtained a copy of my dad’s birth certificate. It says that his father Pierre was born in Brazil. That’s inconsistent with his being French because Brazil was a Portuguese colony. However, many Portuguese surnames have an ‘s’ at the end instead of a ‘z’ — so maybe that explained the name “Mendes”? But it wasn’t much of a clue to know the guy named Pierre was from Brazil.

Then, I was an early customer of Ancestry.com. Over the years, more and more information has become available about Pierre. But not enough to tell a full story.

My grandmother Clare was a badass. She was a nurse and, by the time I was a kid in the 70s, she was running a large nursing home in Evanston, Illinois. Her nursing training was in the late 1930s.

Pierre and Clare lived in Minneapolis, but their marriage license is from Kansas City, Missouri. The marriage license was issued by Jackson County, Missouri, on Tuesday, December 5, 1939, and they were married in a civil ceremony the next day. Clare, born in 1916, was 23 years old. Pierre, born in 1910, was 29 years old.

My uncle Peter was born Pierre Rene Mendes in July 1941 in St. Paul. My dad was born in May 1943 in Lanesboro, Minnesota. According to family, Lanesboro had the only hospital in Clare’s home Fillmore county. With the stories of marital trouble, one imagines that she went home to have her second child.

A 1942 Minneapolis city directory says that Clare was working as a nurse at the University of Minnesota and that Pierre was a salesman for the Pittsburgh Coal Company.

After that, there is more evidence suggesting marital trouble. The 1944 directory has nurse Clare living at one address, and Pierre (now a language teacher) at another. Also, in Arizona death records, we see that “Baby Boy Mendes” was stillborn on January 6, 1944, to another woman at the Navajo Medical Center in Ft. Defiance, Arizona. The mother was from Northfield, Minnesota, near Minneapolis. Pierre Mendes (listed as being born in Seville, Spain) was the father. When I mentioned this to my mom, she confirmed that the rumor was that Pierre got another girl pregnant and then took off.

Later in 1944, Pierre enlisted. In fact, he enlisted on D-Day, June 6, 1994, at Ft. Snelling in Minneapolis. The enlistment papers confirm his 1910 date of birth and that he was a teacher. But he told the Army that he was born in Hawaii. Maybe this reflected discomfort with being a foreigner at a time of war? Interestingly, Hawaii has something of a Portuguese immigrant population and it is one of the few places in the United States where the last name “Mendes” is somewhat common. The war ended before Pierre was deployed and he was soon discharged from the military. Between the evidence of Brazil and then Hawaii, there was a period of time when I guessed the name was Portuguese — but the “Pierre” and the “Seville, Spain” data points never worked with that.

After the war, Pierre became a U.S. citizen in 1946. In that paperwork, Pierre said that he had been born in Sevilla, Andaluers, Spain. After this, his trail goes cold. The next information I have is that he died in 1967 after suffering a heart attack. He died at Brooke General Hospital at Ft. Sam Houston in San Antonio, Texas. He’s buried at Ft. Sam Houston National Cemetery.

With the exception of Pierre’s death records, I have never been able to find out anything about him before 1939 or after 1946. And the several paragraphs of information I have here took about 15 years to compile. As the years unfolded, I reached two conclusions. First, the mystery around Pierre Monteil Mendes was getting deeper. It was odd to have evidence of him being from France, Spain, Brazil, and Hawaii. It was very unlikely that all of it was true. And, second, between 1946 and his death in 1967, Pierre was living a low-profile life for one reason or another.

The break

Over the years of research, I made friends with one of my dad’s cousins who lives in Wisconsin. While going through some old family photos, he ran across a wedding announcement from the Preston newspaper, and a few photos and honeymoon postcards, from when Pierre and Clare got married. Here’s the clipping:

The newspaper clipping is from December 1939 and confirmed that Clare had already graduated from nursing school and was working for the “University.” There are also tidbits that contradict other information. The announcement said that Senor Pierre Mendes was from Colombia, South America, and that the two had been married the previous Tuesday at Our Lady of Guadalupe Church in St. Paul, Minnesota. The church’s web site today tells us that “Our Lady of Guadalupe Church was founded in 1931 by a small group of Mexican immigrants from the local community.” In any event, we know from other records that Clare and Pierre got married in a civil ceremony in Kansas City on December 6, 1939.

The wedding announcement also tells us that Pierre attended the University of Wisconsin. More about that later.

The announcement also tells us that the newlyweds will take an “extended wedding trip to Mexico City.” My dad’s cousin send me several postcards that Clare sent to her parents and siblings from Mexico City. There is also a picture of Pierre from 1940. This is the only known photo of Pierre:

Back to the University of Wisconsin…I know that some universities keep academic records more or less forever. I reached out to the University of Wisconsin for any records about Pierre Monteil Mendes from the late 1930s. The university got back to me. They had no record of Pierre Monteil Mendes. However, there was a Pedro Montiel Mendez who attended in the fall of 1938. They sent his transcript.

Things started to make more sense…

What’s Pedro’s story?

Armed with the name “Pedro Montiel Mendez,” new investigation paths opened.

First of all, Pedro did really poorly at University of Wisconsin. In one semester, he earned three Fs and a D. He was dropped from the school in February 1939. The transcript also tells us that Pedro’s secondary education was at St. Anthony’s Apostolic School in San Antonio, Texas, which is the same city as where Pierre later died and was buried.

The transcript provided a home address in Madison, Wisconsin – 317 Huntington Court. This address was confirmed by the 1939 Madison city directory. Pedro M Mendez, student, was listed at the Huntington Court address. The surprise was that Pedro is shown in the directory as married to Mildred L. Mendez. That’s not my grandma!

Moving beyond the transcript, I quickly found that Pedro married Mildred L. Crowley in 1931. They had two children in the mid-1930s. In their marriage license, Pedro is shown as being born in 1907, which is three years older than Pierre is supposed to have been.

Most notably, while Pedro Montiel Mendez left these multiple bread crumbs in the 1930s, his trail goes cold after the 1939 Madison city directory. I cannot find any information about Pedro after that. Mildred moved on, got re-married, and moved with her two children to a different part of the country.

Pedro shows up in a few publicly-available family trees on Ancestry.com. In each, he’s a dead end after 1939. Each agrees that he was born in Mexico. There is conflicting information in these other family trees about where in Mexico. I think the most compelling evidence is that he was from Mexico City. That evidence suggests that Pedro entered the U.S. at Laredo in 1929 at age 22. When entering, he reported having been in the U.S. previously from 1926 to 1928. The handwritten signature on the border crossing document appears similar to the signature on the 1931 marriage license with Mildred.

DNA?

In late 2017, I had my DNA tested by a commercial provider. Approximately 73% of my DNA was reported as British & Irish, French & German, Scandinavian, and Broadly Northwestern European. This matches what one would expect from my other three grandparents.

That might suggest that the remaining approximate quarter of my DNA would be attributable to my fourth grandparent?? According to 23andme.com, the last quarter of my DNA is just more than a third “Native American” and nearly all the rest is European.

The bottom line from 23andme.com is to describe my DNA as 90% “European” and 9.2% “East Asian & Native American.” The rest was 0.2% “Broadly Sub-Saharan African” and 0.6% “Unassigned.”

What does this all mean?

To start, I believe that Pedro is Pierre. Pedro leaves a trail until 1939, but not after that. Pierre first appears in 1939. Pedro’s middle and last names are Montiel Mendez. Pierre’s are Monteil Mendes. Pedro went to high school in San Antonio. Pierre is buried there. Pedro may have been born in Mexico City. Pierre honeymooned there. Pedro attended the University of Wisconsin in late 1938. Pierre is reported in late 1939 as having attended the same school.

Once you blend in the serial marriages and children, and the mystery around whether Pierre was from France, Spain, Colombia, Brazil, or Hawaii, it seems clear that Pedro is Pierre. So I’ve declared my personal quest to figure out the origin of my surname over. It’s figured out.

That would make my grandfather Pedro Montiel Mendez, born in Mexico, in the early 1900s.

It feels weird to have an answer to the question now. Saying that I don’t know the history of my name isn’t true any more. But I haven’t gotten used to saying, “It’s from my grandfather, Pedro Mendez, who I believe was born in Mexico City.” I mean, that’s a factually correct statement, but it stumbles into how race works in America.

Pierre, the story went, was from France. Although perhaps silly and naive given the contradictory evidence that has piled up over the years, I was raised with our family self-identifying as white people of European descent.

Now that I have learned what I have learned, I’m not going to hide the history of the name most likely being from Mexico. As for 9+% of my DNA being reported as native to the Americas (and presumably from south of the U.S. border), I’m not going hide that either. But while I’m not going to hide or deny the reported DNA results, I also am not going to claim or co-opt a cultural Latino heritage that I wasn’t raised with and that I have not participated in.

I am super-proud of my badass grandmother Clare. Whether she was completely in the dark or knew everything, by mid-1944, she was a 28 year old nurse with a 3 year old and 1 year old. She struck out to make a life for herself in Chicago and made it work. Good for her.

Thanks for listening to my story. I’ll leave you with this undated photo of Clare. I believe it is from the 1930s.

Metro’s Audited Financials as of 6/30/2018

Metro’s Audited Financials for Fiscal Year 2018 were posted online yesterday. This post will run through the top dozen or so things I look at in the audited financials. I’m not going to do a lot of commenting. I’m just trying to lay out where to find accurate technical information for some of the financial topics that get a lot of attention.

The audited financials for FY18 are here. When I make page references, they are to this document.

The auditors gave a “clean” opinion. That’s typical for Metro, reflects well on Metro Finance, and is a good thing.

Balance Sheet. Don’t freak out until you read this full section. The city’s balance sheet, or “Government’s Net Position” is sort of ugly looking this year — with liabilities exceeding assets for government activities by $3.2 billion. That’s nearly $2.5 billion worse than the previous year. It is critically important to understand that there was a change in accounting rules this year which account for nearly all of this change. This year, for the first time, Metro (like all government entities) is required to include its entire retirement benefit obligation on its balance sheet. So that mammoth-looking decrease in net position is because the city’s known retiree benefit obligation must now be shown on the balance sheet.

There is no practical impact on Metro because of this accounting rule change. Auditors and cities and bond rating agencies have known for several years that this accounting rule was coming. Think of this as requiring a different and more accurate presentation of city finances…but there is no change in the underlying information and no day-to-day impact on Metro.

This balance sheet summary is at page A-3:

What happened with revenue in 2018There is a formal description of what caused Metro’s revenue shortfall in FY2018 on page A-9:

There is perhaps a teaser for the upcoming budget season in this description. At the end, the note says that actual expenses for FY18 came in $54 million under budget due to “targeted savings” achieved by Metro. This suggests that Metro’s departments were successful in cutting back on expenses in the second half of FY18. We’ll see if that translates into Metro being able to give promises employee raises in FY20.

Debt.  There is a summary of changes in long-term debt in FY18 at page A-1:

There is also more detailed information about changes in Metro’s general obligation bond debt in FY18 at page A-11:

And there is also a description of the commercial paper program liabilities on page A-11:

Pension and OPEB. Metro’s pensions are well-funded. For example, the biggest of Metro’s several pension funds has $3.117 billion in assets to cover $3.196 billion is liabilities. That’s 97.45% funded. See page B-80. For all of Metro’s pension funds together, the unfunded net pension liability is about $212 million. See page B-76. That page also has a “sensitivity analysis” to show what the net pension liability would be in the actuarial assumptions are off by 1%:

The retiree healthcare benefit obligation (or OPEB) situation is dramatically worse. Metro’s total OPEB liability is $3.9 billion. That’s really big. Here’s the summary at page B-91:

Like with the pension, the audit notes include a sensitivity analysis to see what the OPEB liability might be if certain healthcare costs assumptions are wrong by 1%. This chart shows a range of potential unfunded OPEB obligations as of June 30, 2018. That range is $3.3 billion to $4.6 billion. Here’s the chart:

Folks — at the high end of this range, Metro’s unfunded retiree benefit obligation is now approximately two times the city’s annual operating budget. That is way too high.

Convention Center Authority. There are two tidbits tucked away in the audit notes that are worth remembering. First, the Convention Center Authority can absolutely return some of its enormous dedicated tax funding to Metro if it wants to. This city has somehow managed to give a huge amount of money to a non-elected body and there’s almost nothing we can do as a city to un-ring that bell unless whoever sits in the Mayor’s office renegotiates the deal with the Convention Center Authority. At page B-16, here’s the language that makes it clear the Convention Center Authority can return money to Metro if it wants to:

And, second, what is the Convention Center Authority doing with its money? Among other things, it bought a parking lot at 719 4th Avenue South for $3.9 million. Allegedly, according to page B-113, this is to “be used as a marshalling yard for events and additional parking to supplement the garage as the Music City Center.” However, this property is precisely where the southern end of the downtown tunnel would have been if the transit plan had passed. For people interested in good government, is it a coincidence that the Convention Center Authority (which the Council can’t control at all) bought property in August 2018 that could someday be used for a transit tunnel? Would that expenditure have been approved by the Council?

Here’s the language:

Other interesting stuff.

  • Nashville General Hospital did not get a “going concern” note this year. A “going concern” note is bad. Removing that from Metro’s audit this year doesn’t mean that the hospital’s problems are solved in any way. It does mean that the hospital’s books and records were reliable, accurately reflected their finances, and that the auditors expect that the hospital can operate within its current funding budget from Metro.
  • Most of Metro’s economic incentives are listed in Note 13(G) on pages B-103 to 106. This list does not include economic incentives that might be listed in the separate audits of Metro’s component units (like MDHA). I’ve asked for all of the economic incentives to be described in next year’s audit. I think that will happen.
  • Many of Metro’s tax abatements are listed in Note 16 on pages B-111 and 112. Like the last point, this note doesn’t include information about tax abatements that are included in MDHA’s financials. Again, I think next year, we’ll get all of Metro’s tax abatements listed in this single audit note.
  • Finally, take a look at Section H toward the end of the audit. That’s the statistical section and it shows 10 year financial trends.

Let me know any questions at bob.mendes@nashville.gov or @mendesbob.

 

…more on the proposed AMZN incentive…

At the Council Budget & Finance Committee yesterday, the administration gave an extended description of how beneficial Amazon will be for Metro. The numbers were flying so fast, and (so far) not supported by any documentation, and it was hard to keep up. But the gist of the administration’s argument is that there will be many tens of millions of dollars of financial benefit to Metro because Amazon is coming to town and, therefore, the $500 per job proposed incentive is a no-brainer.

I pushed back on that…and that got some twitter coverage:

I’m going to try to give more nuance to my argument on this.

For context, remember during transit when the core foundation of the argument in favor of the referendum was “a gazillion people are going to move here in the next 20 years…so we better do whatever it takes to accommodate them.” Compare that to now when 5,000 of those gazillion are in fact going to move here in the next 2 to 7 years. Now, the argument is “these 5,000 people are going to create a huge amount of new property tax, sales tax, and personalty tax revenue that we really need and want, so let’s pay them an incentive.”

I view the claim that the 5,000 will create enormous new revenue that Nashville could never otherwise obtain to be false, or at least a half-truth. If someone wants to make the argument that Amazon is bringing Nashville a certain amount of new revenue more quickly than we would otherwise get it, I am all ears. But when you figure the value of them moving here, you just can’t count ALL of the revenue they create — we should only be counting revenue that we would not get in some other way.

As an example, let’s talk about property tax revenue. I feel confident that the owners of Nashville Yards fully intended to build a building on the Amazon site sometime in the next 5-7 years, at the latest. Now with Amazon coming to town, the building might be built in 3 years. So, I am open to a discussion about the value to Nashville to getting the property tax revenue for those extra 2-4 years. But don’t tell me that ALL the property tax revenue for the rest of time is due to Amazon coming to town.

Like most everyone, I’m glad that Amazon has chosen Nashville. We need a fully honest discussion of the economic benefit. Not pie in the sky overblown statistics.

Some things I think…

For a brief moment, I think there is no complicated legislation pending before the Council. Soccer, transit, transit oriented development, freezing tax increment financing, and an anemic operating budget are all in the rear view mirror. Amazon, the Church Street Park land swap, and next year’s more anemic budget aren’t here yet.

I know this lull won’t last. I’ll take this chance to throw out some quick thoughts about several topics:

  • The “no economic incentives for Amazon until employees get their raise” resolution before the Council on December 4 is a sideshow. If you’re against the Amazon incentive, just vote against it when it comes before the Council. The current fiscal year is nearly half over. Employees didn’t get their cost of living increase. I worked hard for a different result…but it’s too late to do anything about it until the next budget season. Again, my advice is to handle budget issues in the budget. And, if you can’t vote for the Amazon incentive, just vote ‘no’ whenever it comes before us.
  • In an ironic twist, I hear through the grapevine that the administration might not resist this resolution because Amazon wouldn’t get any money for a few years (i.e., not until after the 2019 Metro elections), and by then employees would have gotten a cost of living increase. It’s ironic because it is hard to imagine the cost of living increases happening without an increase in the property tax rate. So, if they say “no big deal, the COLAs will happen before Amazon gets money,” it will essentially acknowledge an intent to raise the property tax rate after August 2019 but before they pay Amazon an incentive.
  • If my colleagues want something in exchange for approving the Amazon incentive, they ought to have their eyes on the enormous amount of sales tax revenue being collected out of the Council’s control at the Convention Center Authority. Last summer, the administration raided this stockpile to the tune of $10 million per year. There’s more to be had there…and that would be a more meaningful and long-lasting win.
  • Metro’s annual audited financials will be released in a few weeks. State law allows an ongoing audit to be discussed in an audit committee executive session. So, as a member of the Metro Audit Committee, I’ve seen a draft of the audit in an executive session. Due to a change in accounting rules, Metro’s unfunded retiree benefits obligation has to be restated this year. I’ve already been talking for a while about this completely unfunded obligation going over $3B this year. With the new accounting rules, the number in the audit is going to be around $3.9 billion. That means Metro is going to cruise straight through the $3 billion range and cross over $4 billion in 2019.  That’s a lot of unfunded retiree benefits.
  • About the ongoing Tax Increment Financing Study Group, I think we are on track to recommend some meaningful changes. We’ve got a robust web page up. Follow the link there to “TIF Committee Document Library” and you’ll find just about anything you could want to know about TIF generally and also about how it is used here in Nashville. Here’s a video of our November 20 meeting.
  • While we work on the TIF study group, I think deeper changes are needed at MDHA. The Tennessean’s Nov. 21 reporting about conflicts of interest was pretty brutal. I think they need re-invention and not incremental change.
  • I get lots of people asking me who will run for Mayor in 2019. I only know rumors, which means I don’t know anything. As reported in the Scene in September, here’s what I am looking for in a candidate for Mayor:

“We Nashvillians are an optimistic bunch, and for good reason,” says Mendes. “But we need a dose of honesty injected into our politics — honesty about inequalities that hold us back and honesty about deals that move Nashville forward. I’ll be looking for a candidate who believes in a better Nashville and who believes that citizens truly are partners in government. Partial truths and con jobs need to end.”

I hope everyone has a happy holiday season!

 

Bob

Church Street Park Appraisal(s)

Metro has posted an updated appraisal of Church Street Park dated October 12, 2018 here.

The cover page of this update refers to a September 12 revision also. I asked for that. It’s not on a Metro web site. But I’ve posted it here. The values are different — about $5.5 million in the September version and about $4.6 million in the October version.

I have more thoughts about this…but I’m short on time today. So just three quick notes:

First, there is an assumption baked into the appraisal that I think a lot of people would disagree with. The appraiser suggests that there is not a demand for park space downtown. The comment is:

“…the current demand for public green space is unknown in the Central Business District. It would be nice but, other than for a select few, the park is underutilized.”

Aside from this questionable assumption about the need for park space downtown, I think we have to assume that “select few” is a really bad choice of words in referring people who are experiencing homelessness.

Second, I believe there is an error in the appraisal that impacts the appraiser’s conclusion. This needs to be fixed.

Page 32 of the most recent version looks at some comparable sales — two of them are 805 Lea and 421/425 5th Avenue South. You can see the sale dates for the two properties listed in the chart on page 32. It says 805 Lea was sold in 2016 and 421/415 5th Ave S was sold in 2018:

The same two properties are listed in another chart on page 37 with the sales dates reversed from the first chart:

Online property records suggest that the chart on page 37 is correct:

This should be corrected.

Third, the whole point of my legislation a few months ago about getting an updated appraisal was to have it take into account any changes to zoning and entitlements that the developer will seek (and get). I’m told that this information is not available at this time and that I should go ask the developer.

I probably won’t do that. Instead, I think I’ll wait for legislation to come to the Council (next year, I’m told). At that point, as required by the law the Council passed in August, I’ll look to receive an updated appraisal that reflects the zoning and entitlement improvements being sought for the developer.

The Other Charter Amendments

With early voting starting, I am getting a lot of questions about the other Charter amendments — Numbers 2 through 6.

The text of the proposed amendments is here.

A good round-up by Tony Gonzalez at WPLN is here.

(I’ve already posted about Amendment #1 on community oversight. I am voting FOR #1. My previous post is here.)

My thoughts on #2 through #6 are:

#2 — This amendment adds a new provision about what would happen if both the Mayor and Vice Mayor were unable to serve. Currently, the Charter is silent about what would happen. This is definitely a very low-probability event, but earlier this year, it became clear that if David Briley had been unable or unwilling to serve as Mayor for any reason, the seat would have remained vacant until the next election. This amendment fills the hole. If passed, the new provision would have the Council choose a temporary mayor. The person selected would not be allowed to run for the office. This is supposed to keep the Council from getting too bogged down in the politics of trying to figure who would get a head start in an election. I am voting FOR #2.

#3 — This amendment talks about when a special election will take place when various seats are vacant. Most of this amendment is just clarifying language. The biggest change in this one is about when to hold a special election for a vacant district council seat. Currently, if a vacancy will be less then 12 months, there is no special election. The amendment would change this threshold to 8 months. There are pros and cons both ways. With the current 12 months, an individual district may suffer from having no leadership for up to a year. The problem with shortening it up to 8 months is that there could be scenarios where a Council member might resign with 8 months and a day until the next scheduled election. Under the new language, that would trigger a special election. The special election would take about 70 days to organize, and then another few weeks for the Election Commission to certify the result. In that case, the winner would be getting sworn in with just about 5 months until the next election (and therefore immediately begin campaigning). On this one, I am close to indifferent and may let “if it ain’t broke, don’t fix it” guide me to vote AGAINST #3.

#4 — This amendment would change the oath of office for Metro positions to include a promise to uphold the Metro Charter. I am very indifferent on this because we are obligated to uphold the Charter whether it is in the oath of office or not. That said, I believe I will vote FOR #4.

#5 — This amendment would extend term limits for Council members from 2 terms to 3 terms. The argument behind this one is that term limits are said by some to have further watered down the power of the Metro Council and tilted our form of government even more in favor of the Mayor. I have two reasons why I’ll vote against this one. First, voters in Davidson County reject the idea of extending term limits every chance they get and I want to be responsive to that. Second, I suspect that Council members would not gain much more skill or influence or knowledge in years 9 to 12 than they do in years 5 to 8 in the Council. I’ll vote AGAINST #5.

#6 — This amendment would update the Charter to use gender neutral terms throughout. If you read the Charter now, it is striking how dated the terminology is. I will for FOR #6.

Update on BL -1319 about tax increment financing…

There’s a tax increment financing reform bill (BL2018-1319) on 3rd and final reading next week. The bill is here. Council Director Jameson’s analysis is here. My prior posts about -1319 are here and here. It might also be useful to read this about the issues from the proposed Donelson transit-oriented development that fell just a few votes short of passing in August.

The summary is that -1319 would re-balance how much of new property tax revenue from redevelopment districts is used to pay development loans versus how much is used for Metro’s operating budget. In 2016, the Council passed a bill to have Metro withhold “debt services taxes” from new TIF loans. So, since 2016, for new TIF loans, Metro has been required to set aside about 15% of property tax revenues from the new TIF projects to pay for Metro’s own long term debt. This has left the other 85% of new tax revenue being available to pay development loans. I know everyone would agree that this 2016 law hasn’t created the slightest speed bump to Nashville’s economy. Now, -1319 would expand on this principle so that Metro would also keep “schools fund taxes” for new TIF properties. This would expand the hold back from 15% to about 46% — with the other 54% still being available to pay development loans.

As Metro continues to look hard at radically expanding the use of tax increment financing in transit oriented development all across the city, it is critical that we have a balance between supporting development and paying for basic government functions.

Before -1319 passed unanimously on 2nd reading last week, two Council members asked why -1319 can’t wait until the recently passed tax increment financing study group completes its work (which should be late spring 2019). I responded by saying that, no matter what the  study group comes up with, it will be important to re-balance how the new tax dollars are split between development loans and the operating budget. I still feel this way, but wanted to explore the objections of my two colleagues.

As a result, I negotiated with MDHA (through a lawyer they have working on this) for a TIF moratorium through June 30, 2019. We agreed that for that time there would be no new TIF loans (unless Council, MDHA, and the Mayor all agreed) and there would be no new redevelopment district legislation introduced. From my perspective, if I was being asked by some to hold off on -1319 while the study group does its work, then I would want to know that everyone’s pencils would be down and there would be no new loans and no new TIF district legislation while the study group does its work. MDHA agreed. But the Mayor’s office would not.

The clear implication is that there are plans in the works to introduce a new redevelopment district between now and June 30. Presumably, the intent is for this new redevelopment district to exist for decades into the future under today’s ground rules rather than a new set of ground rules. As a result of the Mayor’s office saying no, I expect:

  1. MDHA will likely fall in line with the Mayor’s office and work against -1319 even though I had a compromise worked out with MDHA.
  2. Some will argue that “well, this won’t actually get any more money for schools.” I haven’t yet figured out how this can possibly be. If you specifically hold back money for schools instead of development loans, then how can it not result in more money for schools??
  3. Some will argue that -1391 will kill tax increment financing as a useful development tool. For those people, I’d note that taking out the 15% for debt services taxes a few years ago didn’t slow down the economy at all. And if -1319 passes, a majority of the tax revenue from new TIF properties would still be available for development loans. This isn’t anti-development by any means.

I will pursue passage of -1319 next week.

(written in a hurry…please excuse typos…)

Metro Debt Dashboard

From time-to-time, I hunt around for precise numbers about Metro’s long term debt. I decided to collect the stats in one place. Here’s my Metro Debt Dashboard.

I know some of you like to look at source documents. For the six charts on the dashboard, here are the source documents:

  1. General Obligation Bond Debt
  2. Revenue Bond Debt
    • For Water & Sewer revenue bond debt, see FY2019 Treasurer’s Report presentation (link above), at slide 8.
    • For Convention Center Authority revenue bond debt, see FY2019 Treasurer’s Report presentation (link above), at slide 10.
    • For Sports Authority revenue bond debt, see FY2019 Treasurer’s Report presentation (link above), at slide 10.
    • For Sports Authority soccer stadium debt, see RS2017-910.
  3. Savings as % of budget
    • FY2019 operating budget ordinance, BL2018-1184, at page 4.
  4. Debt per capita among 50 largest cities
  5. Debt service as % of operating budget
    • For this one, Metro Finance hasn’t always calculated the statistic the same way, and the statistic has not been published for all fiscal years.
    • I calculate this statistic by looking at the operating budget ordinance and dividing “Debt Services Funds” by “Net Appropriation By District.” For some years, this matches Metro Finance’s published number precisely. But for some, my calculation is a few tenths of a percent different than Metro Finance’s.
    • For FY13 and FY19, the number is my calculation.
    • For FY14 to FY18, the number is from slide 35 of the FY18 budget presentation by Metro Finance.
  6. Retiree benefit obligations

 

About TIF reform

In getting my thoughts together about my upcoming tax increment financing reform legislation, I put together a memo about how TIF works, how our 2016 reform impacted TIF, and how some of my proposed 2018 reform would work.

Here’s the memo.

The abbreviated version is…tax increment financing diverts property tax revenue from some property mostly in the downtown area. Absent diverting the funds, that money would ordinarily be divvied up among Metro’s several operating “Funds” (e.g., the “General Fund,” the “Schools Fund,” etc…). Instead, the property tax revenue from these TIF properties is used to pay for development loans. I don’t think this is inherently good or bad. It is a tool that can be used well or poorly.

In 2016, the Council passed a law that, for new TIF loans, required Metro to retain about 15% of these tax funds instead of diverting all of the funds to pay development loans. Metro will now have to keep that 15% and use it to pay long term bond debt.

The current legislation would expand this concept and require Metro to also retain the “Schools Fund” portion of the taxes from new TIF properties (about 31% of the property tax revenue). Metro would keep the 15% to pay bond debt and the 31% to fund our schools. After this, the majority of the tax funds from new TIF properties would still be available to pay for development loans.

I won’t go into detail here, but this isn’t a crazy concept. All over the country, cities and counties are reassessing whether tax increment financing should use all of the new tax money from development or leave some meat on the bone for an operating budget. Here’s one article from a few days ago to get you started.

No Free Lunch

Is it possible to have A+ top-notch civic services and amenities AND a super-low property tax rate (both historically & compared to other Tennessee cities) AND no income tax?

There are two potential answers: “Of course not! That doesn’t make sense.” and “I don’t know. Maybe it works with enough tourism money and people moving to town??” The Metro government by its choices is going with the second of these and trying to make it work.

I think the lesson we’re learning is that “there’s no such thing as a free lunch.” The city does keep adding top-notch amenities and the tax rate is super-low. But, this is not free by any means. Let’s look at the evidence.

Metro has had to renege on pay plan promises to employees:

The city’s debt as a percent of its budget keeps growing even during a boom time:

Metro’s FY19 Treasurer’s Report disclosed that Metro’s long term debt per capita has risen to be the second highest of any big city in America:

Meanwhile, Metro’s unfunded retiree benefit obligation (OPEB) keeps growing. This is now a $3 billion obligation that is NOT included in the long-term debt numbers:

For comparison, the State of Tennessee has an operating budget more than a dozen times bigger than Metro’s budget, while the State’s unfunded retiree benefit obligation is smaller than Metro’s (at $2.6B):

People will continue to argue about whether to blame a low tax rate, economic incentives, or both. But for now, does it matter? The Metro government already has chosen by its actions to have very tight revenue for at least the next few years. I believe that any new discretionary spending must give Metro a reasonably good short term financial return. Otherwise, I don’t see how Metro can rationalize spending the money.

Let me wrap up by reminding everyone that Nashville has a broadly booming economy. This situation comes with a lot of opportunity. The city must reassess and fix economic incentives and the tax rate. Both need to be right-sized so that the city government can excel at providing schools, police and fire protection, and other basic government services.

I’ll vote in favor of the community oversight referendum

The Election Commission voted today to put the Community Oversight Board referendum on the upcoming November 6 ballot. I’ll vote in favor of the referendum.

Nationally, community oversight and advisory boards comes in many shapes and sizes. All have strengths and weaknesses. There probably are not any examples that make everyone happy.

If you want to learn about the different approaches and models, and their pros and cons, you can start with this PBS Frontline article from 2016. From there, just google something like “community oversight board strengths and weaknesses” or “civilian review board effectiveness,” and you’ll zero in on the basic arguments for and against the several predominant models. I think this is useful background information for everyone to have in thinking about the referendum.

It is important to me that there is broad consensus that Nashville should have some kind of civilian community board. On November 8, 2017, in an email to Council members, the FOP told us: “The Fraternal Order of Police is not opposed to some manner of an advisory board that is compliant with current law.” At a major NOAH event on October 29, 2017, Mayor Barry also said that she would support a community oversight board if it resulted from a discussion among all interested groups. And now Mayor Briley has also supported the concept in general.

Of course, now we have a specific proposal and it will be on the ballot. The language is here.

Is the referendum compliant with current law? I guess we will find out if a lawsuit is filed, but I think it is. This referendum language fixes several previous legal objections. For example, a complaint made about the legislation that was before the Council last year was that the scope of the subpoena power was unlawfully broad. The current referendum language definitely defeats this objection. The referendum does this by making the power to compel evidence and testimony a part of the Metro Charter. And advocates also are now armed with a Tennessee Attorney General Opinion from March 2018 that suggests the referendum language about compelling evidence is legal.

There was a second significant legal objection to the prior legislative version. The bill the Council considered last year would have required in some instances that the police department follow the direction of the oversight board. This was potentially in conflict with the Metro Charter, which gives the police chief wide discretion and authority to run the police department. To address this concern, the referendum would only allow the proposed oversight board to issue recommendations and reports. Under the referendum, the police department would not be required to accept the oversight board’s recommendations.

There are a few other factors to keep in mind. Civilian oversight of our protectors – locally or at the state or federal level – is a core principle of democracy. Metro already has civilian oversight of the police department. While the police chief has wide latitude under the Charter to run his department how he wants, that power is limited by civilian control. The Charter explains that the police chief “…shall make regulations, with the approval of the mayor and in conformity with applicable ordinances, concerning the operation of the department, the conduct of the officers and employees thereof, their uniforms, arms and other equipment for their training.” Nashville has about doubled in population since the Charter was drafted. It’s not unreasonable or anti-police to add another layer of formality to the existing civilian oversight of the police department. To the contrary, we should all be able to agree that sunlight, transparency, oversight, and checks and balances lead to better results.

Finally, it is Dr. King’s Letter from Birmingham Jail that most compels me to vote for the referendum. His words have as much meaning today as they did in 1963. Here’s the key point:

I must confess that over the last few years I have been gravely disappointed with the white moderate. I have almost reached the regrettable conclusion that the Negro’s great stumbling block in the stride toward freedom is not the White Citizens Councillor or the Ku Klux Klanner but the white moderate who is more devoted to order than to justice; who prefers a negative peace which is the absence of tension to a positive peace which is the presence of justice; who constantly says, “I agree with you in the goal you seek, but I can’t agree with your methods of direct action”; who paternalistically feels that he can set the timetable for another man’s freedom; who lives by the myth of time; and who constantly advises the Negro to wait until a “more convenient season.” Shallow understanding from people of good will is more frustrating than absolute misunderstanding from people of ill will. Lukewarm acceptance is much more bewildering than outright rejection.

Any “yeah, but…” argument that the referendum language could be better just furthers the “myth of time” that Dr. King exposed in his letter. The better path is to embrace modernizing Nashville’s civilian oversight as an important step forward for the city.

Statement about shooting video

The video released today of the officer-involved fatal shooting of Mr. Hambrick is troubling. The video appears to show Mr. Hambrick being fatally shot in the back while running away from the officer. I will reserve final judgment until the investigation is complete and all of the evidence is released. But, this video suggests that MNPD’s active interdiction policies led to a traffic stop for “erratic driving” which in turn led to a fatal shooting in the back.

Nashville prides itself on coming together as a community to solve difficult problems. I call on Mayor Briley and Chief Anderson to not just conduct a policy review, but to immediately, openly, and transparently examine whether MNPD’s interdiction policies are having a racially discriminatory impact in Nashville. I call on Mayor Briley and Chief Anderson to immediately support the creation of a community board to participate lawfully in police policy-making and in reviewing officer discipline matters.

America is an experiment in democracy. America strives to be a more perfect union. Nashville has been and remains an active part of the experiment. Just as America wrote slavery into her Constitution, Nashville from the beginning was built on the backs of enslaved people. In the 1800s, the institutions of Nashville’s government allowed enslaved people to be sold on its public grounds and to be hung from its bridges. From the Hermitage to Belle Meade to Ft. Negley to the State Capitol, forced labor, bondage, and slavery literally built Nashville.

When the Civil War ended slavery, prejudice held fast. We know it took another 100 years before Congress passed the Voting Rights Act and the Civil Rights Act. Did legal desegregation end all systemic government discrimination? We know intuitively that it did not.

Beyond intuition, we know that the 2016 Gideon’s Army report documented that African Americans in Nashville are pulled over for traffic stops more frequently than white drivers. The claim by some is that this difference is entirely due to policing strategies that focus on high crime areas. But talk to black Nashvillians. I won’t recount their stories here, but know that they get pulled over more often and in more places than I do.

This is a difficult topic. For black citizens, it is husbands and sons, and wives and daughters, being pulled over. For officers, the perceived implication that there might be intentional bias is insulting. For all, it is intensely personal and further evidence of a need to unite everyone by creating just policies and review.

Everyone agrees that active discrimination must be rooted out and eliminated. The real challenge is how to talk about implicit, unconscious bias. And unfortunately, while MNPD trains its officers about implicit bias, its highest leadership previously has denied that officers or policies ever exhibit any implicit bias. This approach is confusing. MNPD leadership acknowledges that unconscious racially discriminatory bias exists generally in our society, but has denied it exists in MNPD.

There are strong historical and current reasons to want to ask whether there is a racial bias either in setting policing strategies in Nashville, or in the impact those policies have. As a city, Nashville must insist on asking where and how bias and prejudice may be baked into our institutions. Does the policy choice to create flex units or task forces that intentionally seek confrontation as a strategy to interdict crime have a racially discriminatory and deadly impact? Asking and answering these questions is required if we want a more perfect union.

This is not an academic question. Twice in 18 months in Nashville, these interdiction policies led to traffic stops where white officers shot and killed black men. At the highest levels, the city must examine whether policy choices are a contributing cause of these shootings, and the city must examine whether the impact is racially discriminatory. Confronting these issues head on  will lead to a more just Nashville for all of us.

Will the Council get the Donelson TOD right?

I’m prepping for the Council meeting this week and see the proposed Donelson transit-oriented development district up for 3rd reading again.

I’ve worked hard trying to make this legislation better over the last half year or so. I have decided however to vote against it. I hastily put together two posts about this before the 4th of July holiday. One critiques the financial assumptions underlying the plan, and the other explains why I’ll vote against it. The summary is that this legislation would intentionally spur $300 million of development over a decade without Metro getting any revenue for important services in return. I think this would be irresponsible. A few weeks later, I’m still a ‘no’ on this…but I want to take another crack at talking about how weak the financial assumptions are.

This Metro Council and prior Councils are often accused of too easily letting tax revenue get side-tracked into development dollars. This Council and prior ones also are accused of just going along to get along – especially on complicated financial matters. This legislation is a good example of what successive Councils have passed. A year ago, I think this Council would’ve passed this too. I hope we go a different path now.

To get projects like this created, you start with a great goal. Here, Donelson understandably and deservedly wants a library and coherent development for its historic downtown area. That is a great goal. And then you present the Council with a 22 page single space plan that has lots of details and looks very official. From there, momentum is gathered and legislation is passed.

But let’s look at the financial assumptions behind the proposed plan

This proposed tax increment district will capture ALL new property tax revenue in the district. This is true for existing buildings and new construction in the district. All increases in tax revenue will be side-tracked and none can be used for Metro’s operating expenses until development loans get paid off. This is a new way to do tax increment financing in Nashville. Every other TIF district in Nashville only captures new revenue from individual properties that have TIF loans on them. In calculating the revenue from this new approach, MDHA has assumed that tax revenue will grow by 6% per year for each of the first 10 years, and then 5% per year for the remaining 20 years of the proposed plan. These assumptions are wrong.

(Please be careful to distinguish between appraised property values and tax revenue…they are not the same thing…the former is the value of the property if it gets sold, and the latter is how much tax revenue Metro gets from the property each year…)

First, common sense and our recent collective experience tells us that 5-6% compounding annual growth in tax revenue for every property is not realistic. Metro’s operating budget crunch has been caused in large part by property tax revenue for existing buildings being lower this year than last year. Metro has increased its tax rate only once in a dozen years. Intuitively, it doesn’t make sense to assume 5-6% tax revenue growth compounding year after year for 30 years.

Second, just for a data point, I took a look at the tax records for One Nashville Place, the R2D2 high rise office building downtown at 4th and Commerce. Built in the mid-1980s, its total appraised value in 1990 was $33,299,200.00. With the tax rate at the time of $4.81, the property tax revenue should’ve been $640,677 for 1990.

In 2018, the building’s total appraisal value was $89,245,284.00. Higher for sure, but with the tax rate now at $3.155, the property tax revenue is 2018 was $1,126,275.

In the dead center of downtown Nashville, over these 28 years, this would mean that the appraised value of One Nashville Place increased by about 3.6% per year while tax revenue increased about 2.0% per year. If this is what nearly 30 years of explosive growth downtown gets us, assuming 5 or 6% per year of compounding property tax revenue growth just doesn’t makes sense.

You may ask, “So what? Who cares if some sheet of numbers is wrong?” Here’s why – once you use more realistic tax revenue growth assumptions, there is no new money for Metro’s operating expenses coming from this area for many, many years – probably more than a decade I estimate. This project would intentionally spur $300 million of new development over the next decade and generate no new money for Metro to provide basic government services like schools, police, or fire protection. This would be irresponsible. When coupled with a poorly set property tax rate, this is how Nashville gets A+ gleaming development and has to renege on employee raises.

Finally, remember that these districts are beyond the Council’s control once they are created. If we pass this legislation, the Council will never be consulted on a single TIF loan in the district. If we pass the legislation, the Council can never make changes to the Donelson transit-oriented development plan unless MDHA also agrees to the change. Because of these factors, this legislation has more permanence that most of what the Council does.

I appreciate all of the hard work that has gone into this legislation, but I can’t support it.