Category: Uncategorized

State Legislature + Confirmation =

This was inspired by the combination of two events today: (1) the unjust actions of our State legislature; and (2) my 8th grade daughter asking, as part of her preparation to receive her Confirmation in a few weeks, “Why is Justice important?” Here’s my answer:

 
Justice is important because it serves as the foundation for civil and social fairness in human society.

The Church teaches that every person has a right to life and to the necessities of life. When our nation was founded, this core principle was written into the Declaration of Independence with the famous words:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and pursuit of Happiness.”

In this way, “Justice” is the bedrock principle of our faith and our country.

With our faith, Jesus calls on us to act with justice and fairness in every interaction we have with others. In Matthew 7:12, Jesus said, “So always treat others as you would like them to treat you.” In Luke 6:29, Jesus said, “To anyone who slaps you on one cheek, present the other cheek as well.” And, in Luke 9:48, Jesus said, “The least among you all is the one who is the greatest.” The lesson is that, to lead a just life, you must always give others every benefit of the doubt, and you must love others the way you would like to be loved.

Our country is built on the same principles. For example, in the Fifth and Sixth Amendment to the United States Constitution, people who are accused of crimes — often, these are the least among us — are entitled to a fair trial where they are presumed innocent, are entitled to an effective legal defense, are entitled to a jury of their peers, are entitled to see and hear all of the evidence against them, and are protected from being tried more than once for the same charges. In the First Amendment, our rights to express ourselves freely are protected, as well as our right to religious freedom. In the Fourth Amendment, everyone (including people who are not citizens) is protected from arrest without probable cause.

Justice is more than a lofty goal. Justice is a work-in-progress. We know that the Bible teaches that we are imperfect creatures. We are called to make a daily effort at the hard work of living the Gospel truly and authentically. Our civil society is also a work-in-progress. When our Constitution was enacted in 1789, women could not vote and slaves were considered property to be owned and sold. Our country is still working today to overcome these and other historic injustices. Just as we must work every day to personally lead a more just life, as citizens we need to know that our work as a society is not done either.

Update From 4/5 Council Meeting

I passed my first ordinance last night. I am probably over-happy about that. I’ve written about it before here and here. This ordinance changes the way Metro handles tax increment financing in three key ways – Metro will get its property tax revenue back more quickly, Metro will have more say in what projects get tax increment financing, and there will be greater transparency to show us how our tax revenues are being used by MDHA. The ordinance also authorizes MDHA to use the proceeds from the sale of 3 parcels of property in the Rutledge Hill Redevelopment District as part of the Cayce Place Redevelopment Plan.

Here are the other items of interest from the meeting:

Planning Commission Nominees: The Rules Committee was 10 minutes late for our 6:30PM Council start time because we asked so many questions of the Planning Commission nominees, Brenda Diaz-Flores and Brian Tibbs. I found both nominees to be well-informed and articulate about a wide range of planning, development, and housing issues.

For Ms. Diaz-Flores, we asked about her relationship with the Planning Department, where she used to work. We wanted to know whether she’d be able to transition to possibly voting against things that her former employer, the Planning Dept., was recommending. She was able to walk us through some specific positions that the Planning Dept. had taken while she was an employee that she would have voted against as a Commissioner. I liked that show of independence.

For Mr. Tibbs, who is an architect, we asked about the types of clients his architecture firm represents. He told us that his firm sometimes represents developers with matters before the Commission, and also does work for MDHA. Mr. Tibbs told us that he would recuse himself from votes where he or his employer had a financial interest in a project, or where his firm does work for an applicant before the Planning Commission. The Committee told Mr. Tibbs that we appreciated that he was sensitive to this issue. I’m glad he committed to recuse himself when he or his firm has an interest.

Though we had to run late to do it, the Rules Committee recommended approving both nominees. The Council approved both.

BL2016-133 (Inclusionary Zoning): This was on first reading. The Council deferred first reading for two meetings, to May 3. From my perspective, the two main camps – the housing advocate community and the development community – are engaged in the classic negotiating tactic called anchoring. That’s where you stake out an extreme position in the hopes of pulling the ultimate compromise position closer to you than to the other side.

On the housing advocate side, there is a significant subset that are arguing hard to just kill the inclusionary zoning bill and start over again. This is counter-intuitive, of course, since the same groups are the ones who initially pushed for inclusionary zoning last year. The “anchor” they have dropped is to argue that the current bill is so weak that it should just be trashed and, instead, the city should focus on creating a comprehensive affordable housing plan. We’ll see how this pans out. In my law practice, when you decide to anchor, you should be willing to accept the risk that everyone else comes to believe that you’ll never compromise and they choose to continue the conversation about compromise without you.

To me, the way forward is not an “either/or” situation. We can and should commit to have Nashville create a comprehensive affordable housing plan. But I think that we should also go ahead and pass some of the legislative pieces that we know we’ll need once a full plan is crafted.

The next step is that the Planning Dept.’s consultant is working on refining his proposals for the financial incentives that are need to make inclusionary zoning work. And, the Council’s Affordable Housing Committee has meetings set, I believe, on April 18 and 25.

RS2015-76 (Fairgrounds and Firearms I): CM Glover had a resolution that would have asked the Fairgrounds Board to rescind its decision to not have gun shows past 2016, and would have forced Metro to cut-off all capital projects funding for the Fairgrounds if the Board didn’t comply. CM Glover has said several times previously that his goal was to keep Metro from getting sued.

Unfortunately, about 30 minutes before Council Committee meetings started, a gun show vendor did sue Metro. I didn’t see a point to passing a resolution that was supposed to prevent litigation that now has already started. The Codes, Fairgrounds, and Farmer’s Market Committee saw things the same way and voted 3-2 to indefinitely defer the resolution.  That was Coleman, Shulman, and Rosenberg in favor of indefinite deferral, and Huezo and Swope against.

BL2016-161 (Fairgrounds and Firearms II): This was CM Glover’s bill that would have required the Fairgrounds Board to set aside 17 weekend days in 2017 for gun shows. This was deferred indefinitely at our last meeting.  For this meeting, CM Glover was using his one-time right to ask for the Council to place his bill back on the agenda. We voted against that – so that bill is now permanently defeated. For better or worse, the Davidson County Chancery Court is now going to be where the next chapters of this story unfold.

RS2016-172 (Supplemental Appropriations): This is a request for about $3.3 million in supplemental appropriations. At the Budget & Finance Committee meeting yesterday, it was clear that some of the supplemental appropriation requests are fully reasonable and are needed for positive, good reasons. And, some others are needed because there is a department or component unit of Metro that really isn’t performing financially as expected. This has been deferred to the next meeting in order for the Council to get more information about which supplemental appropriations require us to exercise additional oversight of a struggling department or unit.

RS2016-170 (Starbuck’s on West End where traffic backs up): Nashville is at the front end of multiple Starbuck’s locations seeking permission to sell beer. We approved one in Green Hills at the last meeting, and two more were up this time – including the one on West End near Vanderbilt across from Bricktops. If you are familiar with the location, that’s where there are always cars spilled out onto West End waiting to get in the drive-thru and often blocking buses and other traffic. This was deferred indefinitely to allow the store to work with Traffic & Parking to improve how that drive-thru interacts with traffic.

BL2016-140 and 141 (Carrolton Station, Men of Valor): With these two bills in CM Vercher’s district, the Planning Commission disapproved the changes to infrastructure and zoning that were being proposed. Metro Legal and Mike Jameson both advised that these two bills would be completely unenforceable if passed. Metro Legal had already advised Codes to disregard the bills if they were passed. Despite these strong legal admonishments, I think the whole Council really, really wanted to pass CM Vercher’s bills because they address serious traffic and density problems in this neighborhood. Because they were disapproved by the Planning Commission, these would have needed a two-thirds majority to pass. That didn’t happen and the bills failed despite CM Vercher’s strong, tenacious efforts.

I did not vote for either of these bills. I truly appreciate and agree with what CM Vercher was trying to accomplish, but with Metro Legal and Mike Jameson advising that the bills were simply not enforceable, I couldn’t vote in favor. It’s a longer story for another day, but the problem with this situation (and with CM Hagar’s quarry situation) is that the State of Tennessee changed the law about “vesting” property rights in January 2015. Nashville is going to have to figure out a way to adapt to that change in the state law, which allows property rights to be vested sooner than was possible previously.

That’s it. If you made it this far, thanks for reading. I appreciate it!

 

Bob

Update From 3/15 Council Meeting

My TIF ordinance passed 2nd reading last night. Two veteran Councilmembers told me (nicely) that I made a rookie mistake by not taking the opportunity to talk about the ordinance so that constituents in the audience and watching on tv would have a better idea of what the new law will do.  My bad – I’ll try to talk more…

At the March 1 meeting, the Rules & Confirmation Committee deferred the appointment of Dr. Feng Li as the County Medical Examiner. The main issue was that he didn’t live in Davidson County, and the Committee wanted to know more about the efforts to recruit a qualified doctor who would live in Nashville. After the March 1 meeting, Dr. Li decided to move into Davidson County. The Committee was pleased with this commitment and approved his appointment yesterday.

At yesterday’s meeting, the Rules & Confirmation Committee deferred two nominees for the Planning Commission for one meeting. These might be the most important appointments that we consider all year, and they deserve careful consideration. I expect the nominees to appear before the Committee at our next meeting. If anyone has questions they’d like us to ask the Planning Commission nominees, please let me know.

The media covered two bills.  One was CM Glover’s ordinance that would have required the Fair Board to reserve 17 weekend dates per year for gun shows until there is either a court ruling or Attorney General’s opinion about whether the Fair Board legally can stop having gun shows.  This ordinance got indefinitely deferred under the Council’s new “Rule 24.”  Under this rule, a committee can indefinitely defer a bill – this effectively kills a bill (with a one-time chance to bring it back to life.)  To bring it back, CM Glover would need to make a written request of the Clerk to place it back on the agenda.  If he gets a majority of CMs to vote at the next meeting to bring it back, it goes back on the agenda for further consideration.

Honestly, I was surprised that the indefinite deferral procedure was used. Practically, I am not sure it makes much difference. If there hadn’t been an indefinite deferral, CM Glover would have needed a majority vote to pass the bill on 3rd reading.  And, now that it has been indefinitely deferred, it still needs a majority vote to bring it back to life.  Either way, if a majority of CMs like it, it will become law.  But setting aside the practicality, using the procedure yesterday definitely stirred up some raw feelings. I’m not sure we need that…still processing…

The other bill that got media coverage was the Lifeway incentive package.  Other than the headline, I think the Scene did a nice job of capturing the difference in perspectives.  CM Cooper was pretty bothered by the developer getting paid to provide additional park space.  His view was that Metro is paying the developer for what is essentially an amenity park largely for their future residential owners.  CM O’Connell, who represents downtown, felt strongly that the incentives were appropriate and that downtown needs green space badly. I liked what CM O’Connell said in the Scene about the Council needing to focus on long term strategy because that will create more change in the long run that trying to re-negotiate individual deals that the Mayor’s office has already made.

(The Scene headline said that this measure “sailed through Council.” I bet the folks pushing for the incentives didn’t feel that way. There was a specially called Budget & Finance Committee meeting about this on March 7 to address a list of concerns raised by multiple CMs in addition to CM Cooper. And, there was also a Council site visit on March 11 to see the site of the proposed park land purchase.)

I voted in favor of this package. It had a $2.5 incentive that went to benefit Lifeway, a 125 year fixture in Nashville that provides lots of high quality jobs and is a good corporate citizen. Compared to what Metro has done for other significant corporate moves, this is not a large incentive.  And, regarding the additional $990,000 to the developer for the park land – it has been reported that the developer told everyone, “We already gave Metro more than an acre of land for green space…we are selling this additional land to Metro at a discount because Metro has asked to get more land…we will not donate it.”  Given this, the Council either could approve the purchase of discounted park land, or play a game of chicken with the developer to find out if the developer would donate the land even though they said they wouldn’t.  I didn’t think daring them to not sell the land for a downtown park was the right choice.  This whole analysis brings me back to what CM O’Connell said in the Scene.  Citizens win the incentives game by setting the long term ground rules, and not by haggling over individual deals that have already been negotiated.

I typed this update pretty late in the evening…please forgive any typos…

“Debt Service Taxes” In Proposed TIF Ordinance

I was approached this week by a lawyer who told me he is working with one of the bidders on MDHA’s Rolling Mill Hill property. He wanted to talk about how one aspect of my proposed TIF ordinance would work. You can read more about the proposed ordinance here.

The developer’s lawyer was asking whether the “debt service taxes” part of the ordinance would be an inappropriate “curtailment” of tax increment financing. I told him no – there is no “curtailment.” This is a slight adjustment that allows Metro to better meet its own debt obligations.

What is TIF again?

To see how slight the adjustment is, we need a brief recap of how TIF works.

A developer proposes a project. Typically, the developer will tell MDHA, “We have a great project, and we can almost make the financing work, but not quite…can you help us with some tax increment financing?” If TIF is provided, MDHA will borrow money from a bank, and the developer uses the money for the project. Once the project is built, it creates new, additional property tax revenue.  The new, additional property tax is the “increment.”  The developer (or owner) then pays the full property tax bill to Metro each year.

When the Metropolitan Trustee collects the property taxes, Metro gets an amount equal to the pre-development taxes, and MDHA gets the increment.  MDHA then pays the bank loan. If there is a shortfall, and the increment is not enough to make the loan payments, it is typically the developer who will pay the shortfall; the bank that made the loan will usually demand a guaranty from the developer.

What is this new “debt service taxes” provision?

One of the knocks on Nashville’s use of TIF over the years is that, by paying all of the increment to support a small number of developments, Metro is cutting into the tax revenue that would otherwise be available to pay its own long term debt obligations. As a reference point, about 15% of what Metro collects in property taxes is used to pay Metro’s own debt. Up until now, when there has been a TIF loan, that 15% goes to pay the TIF loan instead of paying Metro’s own debt.

You can see how, if Nashville were directing a high enough amount of property taxes into paying TIF loans, it would impact the amount of revenue available to pay Metro’s own debt. We don’t have to debate whether the impact is large of small – it is undeniable that using property taxes to support TIF loans means there is less revenue available to pay Metro’s own debt.

The new “debt service taxes” provision would allow Metro to keep the portion of the increment that is ordinarily used to pay Metro’s debt. The language require that, “All TIF loans authorized by [MDHA] after the effective date of [the law] shall include provisions stating that the debt service taxes shall be retained by the metropolitan government…” At our current Metro debt service levels, this means that after the new ordinance is passed the first 15% of increment will be retained by Metro on new TIF loans.

Does this matter?

There are two perspectives to look at.  From Metro’s perspective, I think that this new provision should reduce or eliminate the potential risk that paying for TIF loans could ever erode Metro’s ability to service its own debt. We’ll be setting aside the proper portion of the increment to pay Metro’s debt. This is fiscally responsible and, in the long run, will support a strong bond rating for Metro.

It is important to look at it from the developer’s perspective too. This will include a lot of numbers – I’m sorry about that. I’m going to use the project that lawyer called me about. In the call, he suggested it would be a $400 million project. I also know that the total amount of TIF that remains available in the Rolling Mill Hill redevelopment district is approximately $31 million. Let’s assume that MDHA were to decide to use the entire $31 million for this project.  (I can’t imagine that they would ever use ALL available TIF dollars on one project…but let’s pretend.)

In order for the developer (who will have to guaranty the loan) to want that large a TIF loan, the developer would have to feel like the expected property tax increment after the project is built will be large enough to make payments on a $31 million loan. When the lawyer who called me suggested my ordinance is a “curtailment”, he was making the point that, because we’ll now set aside the first 15% of the increment to pay Metro’s own debt, there will be less money to pay that TIF loan. There’s no question that this is correct.  But if there is 15% less increment to pay the TIF loan, logic tells us that the size of the loan the tax increment can support should also be 15% less.

That would mean that instead of the increment supporting our hypothetical $31 million loan, the increment might only support a loan that is 15% smaller, or $26.35 million.  This decrease of $4.65 million would lower the overall size of the project from $400 million to $395.35 million. I think we can agree that a 1% decrease in the size of the project shouldn’t kill any deal worth doing.

Remember, I’ve used outlandish numbers and assumed MDHA would put all of its Rolling Mill Hill TIF dollars into one project. More realistically, this wouldn’t happen. My guess is that, by choosing to pay Metro’s own debt first, we are making the choice that a $400 million project might have to get done on $397 or $398 million.

For me, TIF loans are a critically important tool for redevelopment. The proposed ordinance accomplishes two important goals – we are still committed to using tax increment financing for redevelopment, while also making the choice to be sure to pay Metro’s own debt obligations first.

CORRECTION (03/10/2016): An earlier version of this post said that the Tax Assessor collects property taxes. That’s not right. The Tax Assessor assesses the amount of taxes, and then they are collected by the Metropolitan Trustee.

Notes from 3/1 Council Meeting

I want to share three things from this week’s Council meeting.

County Medical Examiner Appointment: The Rules Committee was asked to consider the appointment of Dr. Feng Li as County Medical Examiner. The Committee voted to defer its decision for one meeting. The issue was that, while Dr. Li seems highly qualified, he does not live in Davidson County.

Metro has a contract with Forensic Medical Management Services, PLC, to provide forensic pathology services for Davidson County. Dr. Li is the CEO of FMMS, and they apparently do not have any employee pathologists who both live in Davidson County and are qualified for the County Medical Examiner position. State law allows for a doctor outside the county to serve in this position if it is “not possible” to find someone in the county to accept the position.

FMMS ran a job opening announcement for 22 days on the leading national medical examiner organization’s web site, and was unable to find an interested, qualified candidate.

The Committee voted to defer because it wanted to learn more about the search for a qualified candidate who lives in the county. Also, since Dr. Li is the CEO of FMMS, I am asking for Dr. Li to comment on the April 2015 Metro internal audit of the Medical Examiner’s office. I expect that Dr. Li’s appointment will most likely be approved by the Council, but these are questions that should be answered first.

BL2016-149: Infrastructure for Lifeway Project:  This ordinance would obligate Metro to spend up to $3,490,000 for the construction of public infrastructure improvements in the area around a new Lifeway building in the North Gulch area. As part of the deal, Metro will get a 1+ acre park that is supposed to connect to our greenway system. You can see more details in the Council Agenda Analysis, at pp. 10-11. This ordinance passed on second reading after an extensive discussion.

On the one hand, I think there was widespread agreement that Lifeway is a wonderful 125 year citizen of Nashville. We were told that Lifeway provides 1,100 jobs that have an average annual compensation of $53,000, and that Lifeway generates tens of thousands of room nights of hotel bookings each year. So, this isn’t like Dell swooping into town with no track record here. Lifeway is a legit long-time interested and engaged Nashville employer.

Also, there is no tax increment financing. Metro’s obligation would be to build water, street, and other infrastructure.

On the other hand, there was several Councilmembers who expressed frustration over why this particular infrastructure project should have priority over other projects, and over why building this new park should have priority over other new parks around the city. There were also questions about whether Lifeway would really move out of the city if Nashville were to decline to pay for this infrastructure.

These are all good and fair questions, and I’m glad that Lifeway and the administration promised answers to all of them before this ordinance gets to third reading.

As I see it, there are really two issues going on here.  One issue is a completely legitimate long-term complaint – you really can’t find a prioritized list of water infrastructure projects, or park projects, anywhere. So, for example, if any district councilmember has a piece of land in her district that has been acquired to become a park, she really has no earthly idea whether it will be actually built into a park in 2017 or 2018 or 2019 or whenever.

Coincidently, at a Budget & Finance Committee meeting this week, the administration described how they intend to create such a prioritized list that would address this problem. They described that it will take maybe as long as two or three budget cycles to turn what is currently a wish list of projects into a prioritized list that will reliably let people know when a project will happen.  For now, until Metro develops this prioritized list, we will be subject to criticism whenever a new project seems to just pop up.

The second issue is whether Nashville thinks it is a good idea to pay for this infrastructure.  Is Lifeway a good investment for Nashville? Is paying for this infrastructure a better use of $3+ million than something else? I plan to keep an open mind as we receive the rest of the promised information, but my instinct is that this is a really nice opportunity to get needed infrastructure at the base of our important Charlotte corridor, obtain an important greenway connection that otherwise will not be available to us, and help build the inevitable connection between the North Gulch and Germantown.

I think there will be another long discussion about this on third reading on March 15.

BL2016-157: Tax Increment Financing:  This is the ordinance that Councilmember Gilmore and I filed to change the ground rules for tax increment financing. (previous post here)  This passed first reading yesterday. Second reading will be on March 15. I’m thankful that the feedback on this has been very positive, and that we have more than 20 co-sponsors. I’m looking forward to seeing become law.

New TIF Ordinance

The new TIF ordinance that Councilmember Erica Gilmore and I filed will be considered by the Council for first reading on March 1, 2016. Both MDHA and Metro Legal agreed on the text of the ordinance before it was filed. If passed by the Council, the ordinance would change the ground rules for tax increment financing in Davidson County in three important ways, and also allow MDHA’s Envision Cayce plan to proceed as scheduled.  The three changes are that Metro will get its tax revenue back more quickly, Metro will have more say in what projects get tax increment financing, and there will be greater transparency to show us how our tax revenues are being used by MDHA.

Metro will get tax revenue back more quickly

There are three provisions that will help Metro get its property tax revenue back more quickly.  First, going forward, for every TIF loan, MDHA will no longer receive the tax increment for the property after the loan is paid. Instead the tax increment will go to Metro after the loan is paid.  Second, for any new TIF loans going forward, Metro will be able to retain the portion of property tax revenue that is meant to pay Metro’s own bond debt obligations.  I think that this should reduce or eliminate the potential risk that TIF financing could ever erode Metro’s ability to service its own debt.  Third, if MDHA refinances a TIF loan to reduce its loan payments, the amount of tax increment funds it receives will also decrease – with any excess tax increment going back to Metro.

Metro will have more say in tax increment projects

There are three provisions that will allow Metro to have more control over some types of projects funded by tax increment dollars.  First, going forward, tax increment funds may not be used to support projects outside of the specific redevelopment district where the property is located without prior Council approval.  Second, going forward, if MDHA is selling land it owns in a redevelopment district, and it got that land from Metro (as opposed to federal funds), absent Council approval, the land sale proceeds must be used in the same redevelopment district or returned to Metro.  The third change is technical.  For redevelopment districts created after 2006 (i.e., Cayce Place, and Bordeaux), MDHA currently has the power under state law to collect tax increment funds for every parcel of property in the entire district.  MDHA has never exercised this power.  The ordinance would establish that Metro will only allow tax increment funds to be used by MDHA for properties that actually are being redeveloped (as opposed to all properties in the district regardless of whether they are redeveloped).

We’ll have greater transparency

Under this ordinance, MDHA will provide annual reporting about each TIF loan, including the current loan balance, the estimated maturity date, the amount paid in the last year on the loan, the parcels whose tax revenues are pledged to support the loan, and the amount of tax increment funds received by MDHA from each of those parcels.  The first report would be due 90 days after the ordinance is passed.

The ordinance will approve the Rutledge Hill land sale

In the ordinance, the Council would be specifically approving that MDHA may use the proceeds from the sale of 3 parcels in the Rutledge Hill Redevelopment District as part of the Cayce Place Redevelopment Plan.

During the mayoral and council campaigns last summer, people all over the county wanted to talk about tax increment financing, and whether it has been used fairly, or if it has been a giveaway to developers. My response was always that I didn’t think we, as citizens, had enough visibility into how our property tax dollars have been used for individual economic redevelopment projects.  My sense from the start has been that I might not have any complaint about the vast majority of Nashville’s economic redevelopment decisions over the last ten years – but I simply couldn’t tell because there hasn’t been enough readily available information for a reasonably well-informed citizen to make sense of what has been happening.  My goals with this ordinance are to help Metro get its tax revenue dollars back sooner, to give voters (through their directly-elected Metro Council representatives) more authority regarding tax increment projects, and to create thorough annual reporting about how these property tax dollars are being spent.

I want to thank the Mayor’s office, Councilmember Gilmore, the more than 20 Councilmembers that have agreed to co-sponsor this ordinance, Jim Harbison from MDHA, and Jim’s leadership team for being willing to not only talk about these issues, but agree on all of these important changes.  I am hopeful that the Council supports this ordinance.

 

Mayor’s press release (Feb. 24, 2106)

Tennessean (Feb. 25, 2016)

Nashville Business Journal (Feb. 25, 2016)

Coverage on WTVF-News Channel 5 (Feb. 24, 2016)

Last Week’s $10 Million For Metro General

I keep thinking about the $10 million supplemental appropriation the Council approved for Metro General Hospital on February 2.  Keep in mind that this is a huge budget miss – more than 10% of the hospital’s annual budget.

One of the things I do for a living is to help companies in financial distress find solutions.  Over the years, I have worked on lots financial restructurings and, regardless of industry and regardless of whether it is for-profit or not, there is a rhythm to how these things go.  Here’s how I figure the hospital’s fiscal year has gone so far based on what I read into the numbers and what the Council got told last week.

From July through the end of the summer, they must have known that their revenue was underperforming. With as little cash as they have, they must be looking at the bank account and the pile of unpaid bills every single day.  They must have known their revenue was off.

Then the fall came, and the Joint Commission accrediting people gave them $2.4mm of new problems. So, it was October-ish and they were tracking to miss the budget by $3.8mm (about 4%) for the fiscal year from these two issues alone.

Apart from these two items, they were choosing to spend money on new, completely unbudgeted strategic initiatives that will cost another $2.4mm for the fiscal year.  All of these things had to be known by October…early November at the latest.  By then, they must have been tracking to be at least $6mm short of their budget for the fiscal year.

At the Council meetings last week, we heard that the hospital approached Metro Finance just before the end-of-year holidays about the need for a special appropriation.  That tells me that, for 4-8 weeks, there likely was handwringing at the hospital about what to do about not being able to make it through this fiscal year.  When you are insolvent, time is precious and cash is king.  When management delays sharing bad news until they are a matter of weeks from missing a payroll, stakeholders end up with no choices except to pay whatever it takes, or let it shut down.

In my law practice, when a delay like this happens, it causes the people around the company to wonder whether management is capable of accurate cash forecasting.  If they are not, that is the first issue to be addressed.  If they are capable of accurate cash forecasting, then the inquiry shifts to whether the reason for keeping quiet until the last minute was a good one, or a bad one.  A typical “bad” reason might be something like spending money outside of approved budgets.  A typical “good” reason might be something like management’s extreme optimism made them think that they were about to turn a corner for the better.  Here, I’m not close enough to what happened to have a conclusion, but I suspect some of both.

I voted last week in favor of the special $10mm appropriation because having employees not get paid, or having an unplanned reduction in services, are not legitimate options.

That said, someone needs to figure out whether the hospital is capable of accurate budgeting and forecasting.  If not, they need to fix that.  If so, then someone needs to convey that it simply isn’t appropriate to run their operation this way.  Having a noble mission does not give you permission to start unbudgeted projects that are nearly 3% of year budget, or to keep quiet about dramatic budget holes until the last minute.

Metro General Hospital is an important part of the fabric of Nashville’s healthcare system. At the Council meeting last week, many of my colleagues spoke passionately about giving Dr. Webb’s new management team a chance to succeed.  I am absolutely in favor of giving them a chance to succeed – but that has to include operating within a budget, being able to predict what cash flow will look like more than a handful of weeks in advance, and not getting surprised by Joint Commission reports.  I’m looking forward to having the management team report back to the Council a few meetings from now so we can learn more about the direction they are headed.

 

CM Greene

This afternoon, I had a chance to read the full Motion to Revoke, Increase, or Alter Bail filed by the DA’s office yesterday.  The statements in that motion are very disturbed. There are several parts of the statements attributed to CM Greene that are troubling, but for me, the worst of it is the apparent effort to “shut down” the victim and to tell her that the only way “everybody is gonna be okay” is if she backs down.  If those were CM Greene’s statements, they are deplorable.

Violence against women is a chronic problem in our country. Nashville should stand against intimidating victims. We can’t allow guilting victims into recanting.  It is wrong to make “m*******, I am the system” threats to victims.

I think CM Greene should consider whether he is able to properly represent his district.

Amend the Rutledge Hill Redevelopment Plan

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

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

FIRST, SOME BACKGROUND

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

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

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

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

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

WHY ASK FOR ANOTHER AMENDMENT?

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

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

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

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

WHAT ARE THE PROPOSED CHANGES?

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

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

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

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

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

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

WHAT ABOUT ENVISION CAYCE?

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

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

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

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

LATE UPDATE

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

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

 

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

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

 

With all of the focus recently on affordable housing…

With all of the focus recently on affordable housing in Nashville, I woke up this morning thinking about my first trial, back in 1991.

For my legal career, it was an awesome experience. I worked in my law school’s legal aid clinic between 1st and 2nd year. One day in my first few weeks, I did intake interviews for two women, Ms. Turner and Ms. Donner, who lived in different Chicago Housing Authority high-rise projects. They did not know each other, but they both told the same story about being evicted from their CHA apartments because of the actions of their adult sons who no longer lived with them. Ms. Turner and Ms. Donner ended up being the named plaintiffs in a class action lawsuit that the legal aid clinic filed against CHA.  Over the course of the next two years, I got to work on the class certification process, take depositions, win a partial summary judgment, and try a case in U.S. District Court a month before graduation. At the trial, I handled several witnesses, and did the closing argument. We won the case. The court enjoined CHA from evicting tenants due to the actions of people who did not live with them. To be able to do all of that before I picked up my diploma made for perhaps the best legal aid clinic experience for any law student ever.

The case also taught me about being ‘all in’ for your clients.  I mentioned that Ms. Turner and Ms. Donner did not know each other. But they were strikingly similar.  At the time, they were both in their early 40s and had spent their lives in public housing.  That means they were post-war children who lived in the projects when they were new and there was promise of the American Dream.  But as the 1950s turned into the 1990s, they found themselves jobless, poorly educated, living in very dangerous high-rise public housing, and taking care of their grandbabies. They were smart, caring, proud women.  They also each had adult sons who had problems with the law.  Each had a son that no longer lived in the projects, but who got arrested in the projects.  At the time, if you got arrested on CHA property, but didn’t live there, you got charged with trespassing in addition to whatever else you were getting charged with. So, each son gave their mom’s address when they got arrested to avoid the extra criminal charge.  In turn, CHA reviewed arrest (not conviction) records and moved to evict any tenant whose address appeared on an arrest report.  The result was that mom was getting evicted for something her son allegedly did a half mile away.  I don’t recall the exact number, but I want to remember that our class of plaintiffs included several hundred tenants – mostly moms getting evicted for the actions of their adult sons who no longer lived with them.

It was easy to get fully invested in trying to help the plaintiffs, but especially Ms. Turner and Ms. Donner, who had the courage to stand up to CHA.  Between their willingness to stand their ground, and a U.S. District Court Judge, we were able to preserve their place to live.

I considered working in public interest law after graduation because I found that case so gratifying. At the time, though, one of the legal aid clinic professors suggested to me that the better path might be a big firm job in order to get good experience (and pay off my loans). She argued that I’d me more useful for public interest work after getting quality training at a firm.  With that, I went on to a 200 lawyer firm in Chicago.  I met Sue, and we moved to Nashville in 1995.  It’s been 25 years since winning that trial for Ms. Turner and Ms. Donner.

I never talked about it on the campaign trail, and I am not sure it occurred to me since so much time has passed. But that lawsuit – and getting to know Ms. Turner and Ms. Donner – showed how proper housing is a matter of human dignity. Nashville needs to keep pushing forward in figuring out how to encourage and maintain economically diverse neighborhoods where all our neighbors can thrive.

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

Where Are We On Affordable Housing?

Last summer, the Metro Council passed an ordinance requiring the Planning Department to submit an inclusionary zoning law back to the Council within 6 months.  On January 14, the Planning Commission rejected the Planning Department’s proposed incentive-based affordable housing zoning changes. To comply with the 6 month deadline in the ordinance, the Planning Department filed its proposal (separated into two ordinances) with the Clerk’s office earlier this week.

According to the Council rules, however, unless a Council member signs on as a sponsor, the department’s proposals would not ever go to the Council for consideration.  I think some Council members will sign on to the Planning Department’s proposals as sponsors.  I will ask to be a co-sponsor.

Why would I sign onto a proposal that everyone spoke against at the Planning Commission?  The main reason is because I don’t want to see the momentum behind doing something about affordable housing in Nashville go to waste.  The public discussion needs to continue.

One of the things we are grappling with is that the “affordable housing” discussion is really a handful or more of interrelated issues. Unfortunately, it is hard to talk about any one issue without people who are passionate about another issue saying, “no, no, no, you’ve got it all wrong…we should focus on this instead of that.” The Planning Department’s proposal is a good example.

In my view, the current proposal focuses on trying to get more housing in the core of the city and along major traffic corridors for individuals and families in the range of 60-100% of the area’s adjusted median income. It doesn’t help people who have no home, or the typical MDHA resident. It doesn’t help preserve existing affordable housing stock from being torn down.  It doesn’t do much to slow down gentrification concerns. And, so, there is an appropriate tendency for people who are passionate about other parts of the problem, or who want to see a full set of solutions now, to want to cry foul.

We have to keep moving forward. Housing is a complex issue. We are challenged by layers of problems. We will need to find layers of solutions.  The next step is to move the public discussion forward.  That’s why I’ll sign on as a co-sponsor for the Planning Department’s proposal.  It most likely won’t pass as drafted, but the conversation must go on.

CAFR FYE 6/30/15 (a.k.a. “The 2015 Metro Audit Is Out”)

On December 8, 2015, the Department of Finance released the Consolidated Annual Financial Report for the year ended June 30, 2015. In accounting-ese, that’s the CAFR FYE 6/30/15. For the rest of us, that means Metro’s latest audited financial statements are out. You can find the full CAFR document here.

There was also a Metro Nashville Audit Committee meeting on December 8, 2015. The newly-released CAFR was on the agenda and Metro’s external auditors, Crosslin & Associates, were there to answer questions.

I am writing this post to help me remember some of what was discussed, and to share information with the public. The entire CAFR is more than 300 pages long. I am not trying to cover everything – just some of the things I found most important.

IF YOU DON’T WANT TO READ THE WHOLE THING…

Financial statements are boring.  Talking about financial statements is boring.  If you don’t want to read all of this, you should know that because of changes to accounting rules, all of Metro’s pension liability is included in the 2015 financial statements.  The result is that Metro’s liabilities for its core government operations are $323 million more than its assets.  In 2017 and 2018, further accounting rules changes will require Metro to include its enormous unfunded retirement insurance benefit obligations on its financial statements.  This will dramatically increase the amount of red ink on Metro’s balance sheet.

The amount of these pension and retirement benefit obligations hasn’t changed overnight, but the new accounting rules are forcing some very large liabilities onto Metro’s financial statements.  As we go forward over the next few years, we will need to pay attention to what real world consequences there will be from showing this much red ink.

SOME LINGO FIRST

The most interesting things in the CAFR are being driven by the Governmental Accounting Standards Board, or GASB, which is the independent organization that establishes standards of accounting and financial reporting for U.S. state and local governments. GASB issues statements about how governments like Metro must present financial information. GASB typically issues new statements several years in advance in order to give the accounting profession and governments time to adjust to the new standards.

Fiscal year 2015 is the first time financial statements are required to comply with GASB Statement No. 68, which is designed to improve the financial reporting for pension obligations. Basically, instead of discussing long-term pension liability in the written notes at the end of the financial statements, this year Metro was required to show its pension liability directly on its financial statements.

In fiscal years 2017 and 2018, GASB Statement Nos. 74 and 75 will require Metro’s Other Post-Employment Benefit, or OPEB, liability also to be added to the financial statements. The OBEP liability is the amount that Metro is obligated to pay for health, dental, and life insurance for retirees. Also, in 2017, GASB Statement No. 77 will require Metro to include additional information about tax abatements.

I will also mention a “Statement of Net Position.” This is the balance sheet for a government. Private sector companies have balance sheets that balance – this means that the company’s assets always equal its liabilities plus how much equity the owners have. It always balances, by definition. A government doesn’t have owners. Instead of a balance sheet, a government has a statement of net position – this means the assets minus the liabilities equals the “net position.” You hope your government has more assets than liabilities, and therefore a positive net position.

The last bit of lingo is to mention “going concern” disclosures. With private sector companies, if auditors make a “going concern” disclosure, it means that there is legitimate doubt about whether the company will continue to exist for the next year. I am admittedly not well-versed with the exact implication of a “going concern” disclosure in a government setting. But, for auditors, where there is severe financial distress, their guidelines require them to insist upon a specific “going concern” disclosure. More about that later.

PENSION

I mentioned that 2015 is the first year where GASB 68 is mandatory. To comply, Metro has added its long-term pension liability to its financial statements. Adding this large obligation to its financial statements means that Metro’s net position has decreased compared to previous years.

There are two parts of this to look at. First, in order to provide accurate year-over-year comparisons, last year’s CAFR numbers had to be restated to reflect what they would have looked like if the pension liability had been on the financials last year. If you look at the 2014 CAFR, it showed a net position for Metro due to governmental activities of $87,113,535. After last year’s liabilities were restated to include the pension liability, Metro’s net position went down to a negative $241,742,450. (You can see this restatement at Note 2, at page B-47 of the CAFR.)

Then, what happened this year? The net position for governmental activities slid another $80,929,233 to the negative. (CAFR, B-5) And so Metro’s net position (that’s assets minus liabilities) as of June 30, 2015, was in the red by $322,671,683.

I want to be clear. Nothing about Metro’s cash flow changed. Nothing about Metro’s pension obligation changed. Nothing here changes the fact that everyone seems to agree that Metro’s pension obligations are pretty well funded. The only thing that happened was that Metro’s long-term pension obligations were promoted, if you will, from the written-in-words fine print in the Notes up to the actual financial statements with the rest of the numbers. That said, a large negative net position is striking, and it is new for Metro.

If you want to see all of the detail on how the pension liability numbers add up, look at Note 7, at pages B-75 to 94 of the CAFR.

OPEB

For the 2015 CAFR, the OPEB obligations are still in the written-in-words fine print in the Notes. In 2017 and 2018, these obligations will get moved up to the financial statements with the rest of the numbers.

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

The current GASB rules do require Metro to include a portion of this liability on its financial statements. The 2015 statements include a liability equal to the payment that would be required this year in order to get the OPEB obligations fully funded in 30 years. (Think about it this way – if you had a baby in 2015 and you wanted to have tuition money in 18 years – how much would the first year of an 18 year savings plan cost you?) The amount Metro would need to pay this year to have the OPEB fully funded in 30 years is $1.192 billion. Since Metro is NOT making that payment, the $1.192 billion shows up as a liability on the financial statements. You can see that number on page B-8 of the CAFR. And this means that the financials already show a billion dollar chunk of the OBEP obligation.

I can’t figure out all the math, or predict where things will stand in a few years, but it is clear that Metro should expect its “net position” to get pushed much, much farther into the red once the unfunded OPEB liability is placed entirely on the financial statements in a few years.

Finally, because the plan is unfunded, Metro makes all payments due for retiree OPEB benefits as they become due. You can see on page B-95 that Metro paid about $72 million this fiscal year to honor obligations for Metro and MNPS employee insurance benefits. This number has been climbing steadily over the years. You get the logic – people live longer, insurance costs more, there are more retirees, and none of it is pre-funded – so of course, the annual cost increases over time.

TAX ABATEMENTS

The external auditors, Crosslin, shared with the audit committee that GASB 77 will require some additional disclosures about tax abatements no later than 2017. Crosslin said that Metro probably will not have to make many changes to implement this rule. The audit committee will need to learn more about this over the next few years.

GOING CONCERN?

In addition to describing the finances of the core Metro government, the CAFR also includes a compilation of the finances of Metro’s “component units.” The “component units” are eleven separate organizations in Metro like MTA, MDHA, and the Convention Center Authority. These units have separate audits that are not individually included in the CAFR. Typically, you would need to go to each of the units to obtain a copy of its full individual audit. You can see a list of these units at B-39 and 40.

One of the units, the Hospital Authority, has a “going concern” note in its audit. According to page 2 of Crosslin’s opinion in the CAFR, financial conditions related to General Hospital and Bordeaux Long Term Care “raise substantial doubt about the Hospital Authority’s ability to continue as a going concern.” I guess this probably isn’t a surprise?

But, going back to the 2017/18 requirements to add the full OPEB liability to Metro’s financial statements, the audit committee asked Crosslin if that will create a risk of Metro requiring a “going concern” disclosure. The basic answer was that Crosslin would have to assess the situation at the time. After further questioning, my sense was that there are several things that could make a difference. First, Metro might take steps to limit, or change, or fund, its OPEB obligations between now and 2018. Second, the accounting industry may change or update its thinking about what circumstances warrant a going concern note for a government. Third, investment market conditions can make a dramatic impact (positive or negative) on how long-term OPEB obligations are calculated. These factors could influence whether adding the full OPEB obligations to the financials will create the risk of a going concern disclosure

For me, the important takeaway was that they didn’t say “no – don’t worry about it.” Instead, they said that it depends. In my day job as a lawyer, where I sometimes help companies deal with financial distress, when auditors say that a going concern note is a possibility, it is a sign that something important and fundamental needs to be addressed.

WRAP UP

I would like to compliment Metro’s finance department and Metro’s departments, commissions, and agencies who help put the audited financials together. I know it is a significant group effort to get the financial statements together and compiled for the CAFR. Thanks to everyone involved.

If anyone has questions or comments about any of this, please feel free to email me at bob.mendes@nashville.gov

Fairgrounds

I am getting lots of questions today about the Fairgrounds board decision this week about gun shows.  Also, I understand that Councilman Glover filed a resolution today for consideration on December 15 on this topic.  I wanted to share some thoughts quickly before the weekend, and solicit opinions from the public.  (A few people have told me that it is really dumb to talk about this subject at all because I’ll make a lot of people mad no matter what I say.  But, when I campaigned, I promised to have opinions about the important issues of the day…so I am trying to live up to that promise.)

First, I still haven’t seen anything in writing from Metro or the Fairgrounds board about what the board actually decided.  I have seen media accounts, and I have heard from a few others that were present. The wording of each version is somewhat different.  So I don’t know exactly what was decided.  For this reason, there is no way for me to have a set-in-stone opinion about any of this right now.

More to the point, I would like to know whether the Fairground board is seeking to prohibit legal or illegal activity with this decision.  From what I have heard so far, I suspect that they were intending to make a policy decision that, although a gun show is a completely legal activity, the Fairgrounds board decided that it no longer wants to allow that lawful activity to use the Fairgrounds.

If my suspicion is wrong, and the board is really trying to curb some illegal activity, then the obvious question is whether there might be some less restrictive way to eliminate the illegal acts.  Or maybe the board has some specific public safety concern that they think needs to be addressed before there can be more gun shows.  But based on what I have been able to learn so far, I don’t know the answer to these questions either.

If my suspicion is correct and this is a policy decision to deny use of the Fairgrounds for an activity that is allowed by law, I think that might be a problem.  I want to be clear that I think gun violence in America is horrible beyond belief and that I would be in favor of greater federal restrictions to limit the ability of criminals to have access to dangerous weapons.   But even for the strongest gun control advocates, trying to ban a legal gun show from the Fairgrounds seems like it would be hard to do.  The best argument that I could imagine is if the shows simply aren’t profitable for the Fairgrounds and therefore it would be better to rent to some other type of use.  Here too, I haven’t heard any information about the relative profitability of different uses.

I would like to see exactly what the board decided this week. I would like to know whether the board’s goal was to eliminate legal or illegal activities. I would like to know if the Fairgrounds makes money on these shows.  I will reserve judgment until I can get this additional information.  But, if this turns out to be a policy decision to eliminate a legal activity that helps finance the Fairgrounds, I think it will be hard to enforce.  The better path for the board in this situation would be to look for alternative vendors that are more profitable.  And, if they can’t find alternative legal uses that earn more dollars, I am not sure how the government can turn down a vendor conducting a legally allowed business (no matter how much the board might wish that the business weren’t legally allowed).

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

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

For Affordable Housing We Need To Think Big

I went to the Planning Department’s Second Stakeholders Group meeting on November 10. The consultant hired by the department to help formulate inclusionary zoning regulations was there. David Schwartz from Economic & Planning Systems in Denver gave an extended presentation to the group. You can see his slides here.

I continue to have faith that the process is going to lead us to a countywide, consistent approach to affordable housing. But there were parts of the presentation that have left me wondering whether we are going to see proposals that are big and bold enough for the affordable housing challenges that Nashville faces.

My sense is that Mr. Schwartz is going to tell us that our affordable housing issues are localized, not widespread, and certainly not countywide. I think this view is too narrow. And, if this is his perspective, I think the solutions he will propose also will be too narrow.

So, why do I think he’s going to tell us our problems are localized, not widespread, and not countywide?

Mr. Schwartz uses the term “central County.” I haven’t heard that defined precisely yet. But it is obvious that he means to refer to downtown and areas that are very close to downtown. To him, “central County” means the area at the center of Nashville that is approximately 4% of the county’s land mass.

Affordable Housing (2) - Nashville Inclusionary Zoning Feasibility Study

I am concerned that when we get Mr. Schwartz’s recommendations about affordable housing policies, they are going to be limited to apply only to his concept of the “central County.” If you were to ask people who attended the presentation, I think you would find general agreement that Mr. Schwartz repeatedly made reference to the “core” being different, and that different policies should apply to areas with different characteristics.

It isn’t just this definition. When Mr. Schwartz moved into presenting his data, it also showed too narrow a view of our affordable housing struggles.

The data presentation started by suggesting that real property values are appreciating at above average rates pretty much only in his “central County” area. You can see his slide below. In his map, Mr. Schwartz shows rapid price appreciation to be limited to the area from the Gulch across downtown and through lower East Nashville.

Affordable Housing (1) - Nashville Inclusionary Zoning Feasibility Study

But notice how this chart includes data from 2000 to 2015. By including the years before and during the height of the recession, the results on this map are skewed to show generally lower price appreciation. To me, this map fails to capture the rate that price appreciation is changing now…this year…in 2015.

The small area in his “central County” that shows the most aggressive price appreciation is surrounded by Wedgewood-Houston, the Nations, Jefferson Street, Madison, Inglewood, Donelson, and Woodbine. Each of these areas is shown on Mr. Schwartz’s map as having average, or only slightly above average, price appreciation over the last 15 years. But, c’mon…for those of us who live here, we know that these neighborhoods are the current front lines of advancing rapid price appreciation. Intuitively, we know that, if you limited the data to the last several years, the map about price appreciation would look very different. It would show a much larger area with well-above average price appreciation.

To test this theory, I went to the web site for our Assessor of Property. There is a tool there that lets you draw a border around an area, and it will give you housing sales data. When I drew a box around Woodbine (which is shown on Mr. Schwartz’s map as having average appreciation of 4.1% or less over 15 years), I saw that the median home sale price went from $127,450 in the beginning of 2013 to $158,000 in the third quarter of 2015.

Affordable Housing (2) - Sales Charts

So, if the map in the presentation had been limited to the last three years, Woodbine would have been colored two shades darker than on Mr. Schwartz’s map. I got the same result for Donelson ($141,500 in 1Q 2013 to $170,000 in 3Q 2015). This shows appreciation that is nearly twice the pace that is shown in the consultant’s 15 year data map:

Affordable Housing (3) - Sales Charts

I could keep going, but you get the picture. (Try it for yourself at http://davidson.tn.my-pii.com/)

The bottom line is that the map in the presentation does not show the full area that is currently experiencing high price appreciation. To me, this means that the areas that need affordable housing solutions are being understated.

Listen, I know that you can make data say anything, and I know that this process with Mr. Schwartz is very much a work-in-progress. And, the presentation was already more than an hour long and had 38 slides. It is possible, or maybe probable, that the concerns I am sharing are fully on his radar. That would be great, and I am definitely keeping an open mind about his data and ultimate proposals.

But, for today, after hearing the presentation this week, I think it is fair to say that the idea of limiting affordable housing solutions to the “central County” would be too narrow. It is fair to say that showing price appreciation data over 15 years instead of the last 3 years might be used to (incorrectly) support a conclusion that our affordable housing problems are limited to the “central County.” It is fair to say that, if the policies that end up being recommended are based on this approach, we would be thinking too small for the challenges we face.

Mendes Campaign Debuts TV Commercial

Nashville, Tenn. – July 3, 2015 – Metro Council-At-Large candidate Bob Mendes will release his campaign’s first TV commercial on Monday, July 6th.

The 30-second spot is called “Who is Bob Mendes?” and focuses on Mendes’s dedication to finding solutions for Nashville’s biggest issues, such as affordable housing and transit.

The commercial will run until Election Day on broadcast and cable.

Mendes has lived in Nashville for 20 years. In 2014, he launched his own law firm, Waypoint Law, which handles transactions, litigation and insolvency cases. Prior to launching Waypoint, Mendes was a member at Frost Brown Todd, a full-service law firm serving some of America’s top corporations and emerging companies. He currently is the chair of the board of Nashville Electric Service, and the chair of the finance committee for Father Ryan High School. He was a member of Leadership Nashville’s class of 2013, and served as president of the Nashville Bar Association in 2011. He and his wife Sue live in the Hillsboro-West End neighborhood with their two daughters.

CLICK HERE TO VIEW.