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.

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.

I’m a ‘no’ for the Donelson TOD

Tomorrow, the proposed Donelson transit-oriented redevelopment district is back before the Metro Planning Commission. I have been working for many months to see whether the legislation could be improved so that I can support it. I don’t think I am going to get there and I want to explain why.

There’s not much time left before the Planning Commission meeting tomorrow…so I’ll do this in bullet points:

  • Here’s my April 16 update about the Donelson TOD. At that point, I was feeling good about the general direction of the legislation. Since then, Metro has been through the budget process. The final budget the Council passed on June 19 has Metro relying on selling one-time assets, repealing an employee pay plan, and shortchanging schools on their requested budget.
  • I have also now seen the financial assumptions supporting the proposed Donelson TOD. My thoughts about those assumptions are here. In summary, there’s no question that, in the early years of a Donelson TOD, there would not be any new revenue for Metro to cover the new operating expenses that would go along with a few hundred million dollars in new buildings. Given the current budget crunch, I cannot see how it is a good idea to voluntarily take on new budget requirements where there is no offsetting revenue to Metro.
  • Since the last Planning Commission meeting on May 24, the Planning staff has conducted a review of the affordability of the area immediately surrounding the proposed Donelson TOD. According to the staff, of the housing units in the area currently, “90% are affordable at 100% of [Area Median Income, or “AMI”], 75.4% are affordable to moderate income (80% of AMI) households and nearly 62% are affordable to low income (60% of AMI) households.” In other words, the Planning Department believes that the area is currently relatively affordable. We can expect that concentrating government incentivized large scale development will erode the affordability of the area.
  • One of the main arguments in favor of transit-oriented development is that it provides options to include affordable housing. However, surely Nashville won’t want to create a transit-oriented development district in order to provide affordable housing to replace the affordable housing that will be lost due to transit-oriented development?
  • The legislation being reviewed by the Planning Commission tomorrow would allow MDHA to set affordable housing goals in the district. I believe those goals should be set by the Mayor’s office in consultation with the Council. Also, the goals for affordable units to be preserved and built in the district should be established before the Donelson TOD is passed into law. No goals have been set at this time.
  • The legislation being reviewed by the Planning Commission tomorrow would allow the “design review committee” to be selected, in part, by the Mayor. As I understand it, MDHA wants to have the exclusive ability to appoint the members of the design review committee. This issue is currently unresolved.

Councilmember Jeff Syracuse has worked tremendously hard to balance all of the competing interests. I certainly appreciate all of his hard work. But for now, I have to respectfully choose to be a ‘no’ on the Donelson TOD legislation. I don’t think Metro can afford to take on new operating expenses with no revenue in return. The area is currently relatively affordable. There is no goal proposed for preserving or adding to affordability in the area. There is no pressing time concern. To me, this just isn’t the right time for this district.

 

Financial assumptions behind Donelson TOD

This is the first of two posts about the proposed Donelson Transit-Oriented Redevelopment District. I have been working for many months to see whether the legislation could be improved so that I can support it. I don’t think I am going to get there and I want to explain why.

This post will talk about some of the nerdy financial assumptions behind the plan. First, the proposed plan asserts that $300 million of new appraised real estate value will be added as a result of the plan. The proposed plan further asserts that only 30 percent of the anticipated new property tax revenue from the district will be needed to pay for a proposed $30 million in new tax increment financing loans.

The MDHA financial assumptions behind the claim that only 30 percent of the expected new tax revenue will be needed to support the proposed $30 million in TIF loans is here. The claim that only 30 percent of anticipated new revenue will be needed to support the TIF loans is critical. The argument is that the proposed Donelson TOD will create enough value to not only pay the TIF loans, but also provide a lot of money for Metro to provide other important government services.

I question the assumptions. First of all, the entire spreadsheet is built around the idea that tax revenue will increase in direct proportion to increases in property value. However, Nashville just learned the hard way during the budget season that this is demonstrably false. Property tax revenue does not track directly with appraised property values.

In fact, I picked four parcels in the proposed Donelson TOD district at random and checked on the taxes they paid in 2014 compared to this year. Two parcels had their taxes go down, and two had their taxes go up. One parcel had its appraised value go up by 40% since 2014 while the tax bill went down by 1.6%. Another property had its appraised value go up by 24% since 2014 while the tax bill went down by 13%. For these properties, the appraised value skyrocketed in just a few years, but there was no corresponding increase in tax revenue.

If Nashville sticks to its current practice (i.e., property value reassessments every 4 years which drive the tax rate down, but only one offsetting rate increase since 2006), the spreadsheet supporting the Donelson TOD is completely busted and, frankly, entirely speculative.

There are other assumptions that seem odd to me. For example, columns (c) through (g) are all about tax revenue from existing buildings. The chart suggests that 2019 revenue will be higher than 2018 for existing buildings, and that the revenue will go up again each year after that. Again, during the budget process, we just got done seeing that, for existing buildings, revenue for 2019 (and probably 2020) will be the same as in 2018. So, column (g) should not be going up for 2019 or 2020. And for the years after that, it is guesswork.

The bottom line for me is that, during the early years of the proposed Donelson TOD, I don’t think the district will generate enough new tax revenue to pay the new TIF loans. And for the first 3-5 years at least, there will not be any extra revenue going to Metro for additional police, fire, school, or infrastructure costs. If Nashville were to decide to create the Donelson TOD, we would be signing up to take on more operational costs for the city without getting any corresponding income to pay for it.

As always, I am happy to entertain counter-arguments. And I would acknowledge that, on a 20 or 30 year time horizon, Metro might be able to recoup these costs assuming the city figures out again how to periodically set its property tax rate correctly. But, there’s no question that, in the early years of a Donelson TOD, there definitely would not be any new revenue for Metro to cover the new operating expenses that would go along with a few hundred million dollars in new buildings.

Updated FAQs about proposed 50 cent rate correction

As we get into the last few weeks of the Metro budget process, I have updated my frequently asked question list. You can see it here.

Also, for a longer discussion of the budget, check out the Nashville Sounding Board interview that Council member Tanaka Vercher and I gave a few days ago.

The new FAQs list is pretty thorough, but if you want to read my previous posts about the budget process, they are here:

um…about the budget… (May 11)

Out of step with historic practice (May 18)

The budget problem and the proposal (May 18)

 

 

I’m going to keep doing my job

With David Briley’s win on May 24, he has formally resigned as Vice Mayor. The vacancy will be filled in the scheduled August 2, 2018 election (perhaps followed by a runoff five weeks after that).

I want to thank the many supporters who have encouraged me to run for Vice Mayor. I have taken a hard look at it, but have decided to stay where I am and finish my term as an At-Large Council Member.

In thinking through it, the biggest draw was that in these chaotic times the Council needs a steady hand with a countywide perspective in the big chair. Done well, the Vice Mayor proactively sets the tone for the body. I think I would do a good job. But the opportunity has costs. I’d lose my vote except in a rare tie. In turn, losing a vote might mean losing the ability to be a direct participant in forming legislation.

In the end, I feel that I have more to offer by continuing to be in the trenches on legislation. My focus has been on inclusiveness and equity, transparency and accountability, and livability. Here’s a partial list of legislation I have drafted, sponsored, or materially amended.

There is so much more work to do on all of these. The community is angry — and rightfully so — that we have a budget crunch when the city is booming. It is not acceptable that city leaders are giving themselves a high five for a historically low unemployment rate at the same time that Nashville is reneging on promised employee cost of living increases, and not fully funding our schools, and selling valuable real estate just to make ends meet. The best place for me to work on these issues is where I am today, as an At-Large Council Member.

Several of my Council colleagues likely will be running for Vice Mayor. It may be awkward to have multiple colleagues running for the same office, but that seems unavoidable. My view is that Nashville needs someone with an established countywide perspective to help guide the Council and the city through these chaotic times. The best candidate should have a track record of supporting a path that reflects the values of the entire community.

What was in the soccer stadium bond resolution?

It looks like the Council has a new ordinance to consider on first reading next week that is aimed at removing the 10 acres of development from the soccer stadium deal.

When thinking about this latest effort to remove the 10 acres, I think it is worth reviewing what the Council actually passed last year.

Here’s what passed: Substitute RS2017-910. Everything that is underlined was added due to negotiations between the administration and Council members.

Many of you know that I negotiate and litigate complicated contracts for a living…most of the changed/added language came from me and was supported by my Council colleagues. I mention this only because I am very clear that my central goal in the negotiations was to beef up the conditions required to take place before any bonds could be issued to build a stadium. In particular, it was clear that the legislation was going to be approved (it passed 31-6). And just like what I would recommend for a private paying client, if you are going to do a deal, you want the “conditions precedent” to you spending money to be clear, robust, and meaningful.

The final legislation added many new conditions. Some of them are:

  • Added the requirement of a signed development agreement absolutely limiting Metro’s obligations to $225 million with cost overruns to be paid by the team.
  • To protect the historic uses of the Fairgrounds like the popular flea market, added a requirement that the team’s lease includes a reasonable mechanism for resolving scheduling disputes for the facilities and parking.
  • Added a guaranty requirement if a controlling interest in the team is transferred to someone new.
  • Added a requirement that the Fair Board approve the demolition of the structures at the Fairgrounds necessary to construct the stadium.
  • Added a requirement that the Council approve an ordinance with 3 readings and with 27 votes authorizing the demolition of structures at the Fairgrounds necessary to construct the stadium.
  • Added language clarifying that the Council would need to approve the zoning and the site plan for the 10 acres.

Especially with these last two bullet points, the Council already negotiated for itself the absolute right to refuse to allow the current structures from being torn down, to refuse to approve whatever new zoning will be sought, and to refuse to approve any site plan for the 10 acres.

This saga is going to unfold in the next few months. The team is trying really hard to be a good neighbor, including working on a meaningful community benefits agreement. Yet there continues to be opposition to the 10 acre development.

The team and the administration are going to be trying to meet these conditions over the next several months. Each Council member will have to weigh the perceived benefits and costs of having a soccer team in Nashville. My advice would be for the Council to rely on the protections we already negotiated for ourselves in the original resolution rather than attempting to make the process more chaotic with new after-the-fact conditions.

What is the opposite of land banking?

The purpose of a land bank is to save surplus real estate to be available for future affordable housing developments. Since the cost of land in Nashville is what makes affordability difficult, land banking is an important tool for affordable housing.

Affordable housing advocates in Nashville have been asking the city to form a land bank for some time. And most recently, Mayor Barry’s Transit & Affordability Taskforce recommended in its final report that Metro should “Use community land banks…to obtain and hold property for affordable housing needs.”

Unfortunately, the proposed Metro budget seems to be going in the opposite direction. Instead of saving surplus land for future development, the budget presented to the Council would sell $23 million of prime surplus property. This May 7 letter to the Council has all of the details that are currently available.

The three properties to be sold are Murrell School in Edgehill, the Green Hills Fire Station, and 3800 Charlotte. As you can tell from the projected $23 million sales price, this is desirable real estate in desirable locations. Instead of saving this land for future Metro needs or for future affordable housing developments, Metro is proposing to have a one-time sale to prop up its operating budget for the next fiscal year.

It is terrible policy to be selling surplus real estate to make ends meet for an annual operating budget. Just terrible.

Beyond this generally bad policy, there is some dark irony in the proposed budget for affordable housing advocates. According to page 22 of the Budget Presentation, the $10 million for the Barnes Fund this year will come from the one-time property sales proceeds!!! This means that the very surplus property in desirable locations that would be perfect to be banked for future use is being sold off to fund the Barnes Fund this year. So, no land banking and the Barnes Fund funding is contingent on one-time, non-recurring real estate sale proceeds. There’s no way to consider this as anything but a step backwards in Nashville’s commitment to affordable housing.

 

NOTE: Some will read this post along and conclude that I am an irresponsible tax and spend guy. Not so. As I have said in another post, in addition to properly funding the revenue side of its budget:

“I am confident that the Metro Council is going to reassess how economic incentives are judged and awarded. Most citizens believe that downtown has enough momentum to be self-sustaining and they would like to see more tax dollars spent in communities outside of downtown. Unfortunately, any reassessment and realignment like this won’t happen overnight or in a single year.

“In the short-term then, we must look at revenue and expenses and how to make ends meet while also honoring obligations to schools and employees.

“On the expense side, I expect that the Council will be proposing many cuts to many items in the upcoming budget. We are too early in the process for me to have an idea of what those cuts will be. However, I am certain that there is not enough fat in the budget to cut that would allow Metro to honor its school and employee obligations. We have to look at the revenue also. This has been true historically, and it is true now.”