Category: Uncategorized

Transit thoughts (10/28/17 edition)

The Mayor outlined her transit plan on October 17, 2017. So far, only high level summary bullet point, pictograph, and animated information is available about the plan. I am not expecting to see the detailed financial assumptions and modeling behind the plan until December. Because the details are important, this post is only a set of preliminary thoughts.

First, a reminder about the process…earlier this year, the state legislature passed the IMPROVE Act allowing cities to add a tax surcharge to help pay for mass transit. Under the IMPROVE Act, Metro can impose a local tax surcharge if: (1) A CPA firm approves Metro’s transit plan — this basically requires the CPA firm to agree that the revenue from the proposed new tax surcharge is sufficient to pay for the proposed improvements; (2) the State Comptroller also has to confirm that the numbers add up; (3) if the Metro Council approves the plan, it is placed on a referendum; and (4) if the referendum passes, the local tax surcharge goes into effect.

As of today, none of these steps have taken place. The Mayor has announced the plan and an accounting firm (Kraft CPAs) is reviewing the plan. I believe the administration expects to get Kraft’s approval and the Comptroller’s approval before the end of the year. Then, the Council will be asked to approve the plan by early February in time for the scheduled local primary election on May 1, 2018.

In August, I laid out what I would need to see in the plan in order to vote in favor of placing it on the ballot. I listed five things:

  1. A description of what the new taxes would be: This has been accomplished. Well over 95% of the new funds will be from a local sales tax surcharge. This will likely continue to generate discussion straight through the referendum because it will leave Nashville with the highest sales tax in the country — tied with Chicago.
  2. A description of how the Gallatin Pike rail line will cross the river: I haven’t seen it in any administration materials, but the Nashville Business Journal has reported that the existing James Robertson Parkway bridge over the Cumberland River will be replaced with a wider bridge to accommodate two rail tracks.
  3. A description of how transit riders will get around downtown: This one has been answered too. The plan recommends building a $936 million tunnel under 5th Avenue downtown. The tunnel would have stops at Music City Central, Broadway, and somewhere in SoBro.
  4. A description of how riders will get around downtown: This one has been answered. With three stops in the proposed tunnel, most everywhere in downtown would be fairly accessible on foot.
  5. A description of how future operating losses would be funded: Until we see the financial assumptions and modeling, it is not possible to have an opinion about this factor.

In addition to these, the summary information provided so far raised several new questions:

  1. The tunnel: Until news of a proposed tunnel starting leaking out in late August, I hadn’t considered this at all. On the one hand, it is audacious and makes a lot of people wonder whether it is feasible. On the other, I know that NES successfully built a substantial tunnel near downtown in the last decade. I think the administration is going to have to provide a lot more information and experts on this part of the plan. Voters owe it to Nashville to take a hard look at this. (I want to be clear…I am NOT saying it’s a good or bad idea. But I am saying that a 2 mile $936 million tunnel through limestone that is less than a half mile from a major navigable river deserves some scrutiny before the referendum.)
  2. The sales tax: A lot of people are going to complain about using sales tax for transit at all. I am going to leave that issue alone for now, and focus on a different question. As far as I can tell, every major transit project in the history of the world ended up costing more than projected. When this project ends up costing more, will we raise the sales tax again? Property taxes? I think it is fair to work through where the next round of money comes from, and when that might happen. I suspect the administration’s perspective is that their financial model is so conservative that this is not a concern. When we all see the financial model, we’ll get to form our own opinions about that.
  3. Three rail lines were shortened since nMotion’s original recommendations: When nMotion made its recommendations in 2016, it suggested the Charlotte rail line should run to River West, the Gallatin rail line should run to Rivergate, and the Murfreesboro rail line should run to Bell Road. When Metro’s consultant put out its report in August 2017, these lines got split into two phases, and in the Mayor’s plan Charlotte ends at 440, Gallatin ends at Briley Parkway, and Murfreesboro ends at the airport. The Tennessean talked to the Mayor’s office about these shortened lines and reported that a spokesman said building these rail lines as originally planned would mean “increasing taxes to a rate that the mayor’s office has determined unreasonable.” Before people vote on the referendum, they should think through whether these abbreviated rail lines make sense. Will people drive from Murfreesboro or Antioch to the airport to catch a train the rest of the way into town, for example? Also, if it is not possible to pay for the originally envisioned lines now, will that change in the future?

More thoughts to come after the financial assumptions and modeling are made available.

New Pedal Tavern Lawsuit

Here’s a copy of the pedal tavern lawsuit filed last week.

A rider has sued a pedal tavern company and the driver after her foot slipped off the pedal. The lawsuit alleges that the rider was injured when her foot was dragged after she slipped.

Unfunded OPEB liability to cross $3B mark this year

I have written before about Metro’s pension and OPEB (Other Post-Employment Benefits — e.g. health insurance) liability. This is brief update.

Metro’s Finance Director gave the Council an update about these liabilities today.

The pension fund is in good shape with more than 98% of the pension liability funded.

Metro’s future OPEB liability is not funded at all. Instead Metro pays its annual costs out-of-pocket each year. However, the unfunded accrued future liability has been growing faster than the annual budget for some time. The latest data out today shows that the combined accrued OPEB liability for Metro and Metro Schools is approximately $2.9 billion. We can expect this to cross over $3 billion during the current fiscal year.

Soccer thoughts (October 8 edition)

Let me start by saying that soccer is exciting. It is the most popular sport on the planet. I would love to see Nashville get a top-level soccer franchise. That said, voters elected the Council to be good stewards of public resources. We are obligated to thoroughly examine, scrutinize, and question the new soccer stadium proposal.

The administration publicly disclosed its soccer stadium plans last week on October 2. The $300 million proposal includes up to $225 million in Sports Authority revenue bonds for stadium construction costs, a $25 million contribution by team owners for stadium construction costs, $25 million in Metro general obligation bonds for infrastructure related to the stadium, and $25 million in Metro general obligation bonds for other Fairgrounds improvements.

Major League Soccer is supposed to make a decision about new expansion teams in early December. MSL has said that for bidders to be considered seriously for a new team franchise, they must have a commitment from their cities for a stadium. Because this deadline is approaching fast, the administration is asking the Council to approve the Resolution for this funding very quickly — either on October 17, or at our November 7 meeting at the latest.

Whether the Council votes on October 17 or November 7, this process will move fast. I plan to let my thought process be as public as possible. In this post, I am going to run through the factors I had in mind before getting the actual proposal last week, some analysis about what is in the proposal and the related risks and rewards, and then a discussion about how I feel today about the stadium plan.

What was the yardstick coming into this process?

Knowing the Council would be given a compressed time frame, I gathered my thoughts about what I would want to see in the proposal in advance. In my August 9 post, I described these questions:

  • What is the total expected price tag? Does the stated price include any expected infrastructure, parks, greenways, or other improvements that might get folded into the project?
  • How much will Metro pay?
  • When there are overruns (like with the Sounds stadium and most large projects), who will pay for the overruns?
  • What is the source of funding for the Metro part?  In the budget process a few months ago, this project was listed to be supported with revenue bonds. In turn, this suggests using sales tax revenue from tickets and stadium concession sales to pay for Metro’s portion of the cost. The details will matter, but this revenue seems like it might not be enough to pay the cost of the debt. If not, what will the annual losses be, and how will we pay for that?
  • How are nearby neighborhood groups going to interact with the stadium for parking and noise, especially for night games.

What is in the proposal?

In my law practice, sometimes people ask me to analyze a potential investment. The goal is to review the technical legal documents, describe the formal structure of the proposed investment, and identify strengths and risks. The idea is to blend technically accurate legal details (by pointing out all the pros and cons) with common sense or business sense (by trying to point out any standout risks or rewards). I try to give clients enough information about proposed deals so that they can decide whether to invest their time, energy, and money.

I decided to apply that process to the soccer proposal. This weekend, I prepared an analysis as if a client had asked me to review the financing Resolution that the Council is being asked to consider.

Here’s that analysis. You’ll see it’s lengthy. If you are in a pinch for time, I’d recommend just reading the first 4 pages.

How does it measure against the yardstick?

My first factor was whether we are being given a total price tag. After the baseball stadium project ended up costing more than $90 million instead of the originally projected $65 million, it is important that we understand the full project price tag before we approve it.

My sense is that the $300 million being discussed might be close to complete, but that it is probably not quite there yet. For example, there is very little (maybe no?) information about parking. There is no parking shown on the drawings we have seen. The Resolution calls for $25 million in general obligation bonds for infrastructure related to the stadium — but we don’t know what that includes. Also, there is no greenway connection shown in the drawings we have seen. We know that the Fairgrounds is an essential part of Nashville’s long-term greenways plan, and that’s not shown or been discussed. I’ll need to learn more about whether the disclosed total project cost includes everything.

My second and third factors were about how much Metro will pay, and who will pay for construction overruns. My fourth factor was about who will pay for operating costs, and operating losses. These factors are all about managing various risks.

As an aside, let me say that it is usually easy to draft legal documents that say what will happen if everything goes as expected. The challenge is to describe what will happen if things go wildly well or horribly wrong. It is critical to know who will suffer the monetary loss in the unfortunate event that things go poorly. To discuss these issues isn’t bad-mouthing the deal. Instead it is having an adult conversation about who will lose money in various situations that hopefully will never happen.

I’ll start with the “everything goes great” situation. If everything goes well with the plan as proposed, after 30 years have gone by and the bonds are paid off, Metro will have spent $25 million on infrastructure improvements for the stadium, spent $25 million on other Fairgrounds improvements, possibly have paid anywhere from $0 to $35 million to prop up ticket sales in the first 10 years of the team, paid for all capital improvements at the stadium, succeeded in keeping all historic uses of the Fairgrounds in place, have a privately-owned mixed use development (meaning housing and presumably restaurants and bars) within a 5 minute walk of the stadium, and have a successful MLS franchise. For this scenario, I have two objections at this point — nobody has projected the cost of the ongoing capital upkeep requirements and delivering the 10 acres for private development on Fairgrounds land does not make sense to me.

What about the various risks…

What if the stadium is over budget? The proposed Resolution says the team pays this. This is good.

What if the stadium-related infrastructure costs are over budget? The Resolution does not require the team to cover this. This would be Metro’s obligation. I think the guaranties Metro receives should be changed to cover cost overruns on the related infrastructure costs also.

What if the other Fairgrounds improvements costs are over budget? The Resolution does not require the team to cover this. This would be Metro’s obligation. It would create some challenges to word it just right, but if there are cost overruns on other Fairgrounds improvements that are caused by the stadium construction, then the team guaranties should be modified to cover these costs.

What if there are operating losses? The proposed Resolution says the team pays for this. This is good.

What if the league folds or the team moves? The Resolution says that Metro will receive a team owner guaranty, but there simply aren’t enough details available to know whether the proposed guaranty is valuable or not. We need to know who, or what entities, will provide guaranties. Metro must determine the credit worthiness of the guarantors and/or obtain typical commercially reasonable security such as a letter of credit from the guarantors or team.

For my second, third, and fourth factors, it is definitely a mixed bag. Having protection on stadium cost overruns and operating losses is good — something we’ve not had with other stadium development deals. But this still leaves Metro exposed for stadium infrastructure and Fairgrounds improvements overruns. And this still leaves Metro exposed on paying the bond debt if the league folds or the team moves.

My fourth factor had to do with neighborhood concerns such as parking, noise, and traffic. The proposal on these points is basically, “We’ve got time pressure because of the MLS bid timeline — we’ll get to the finish line on these issues later.” I think we’ll need to hear more before the Council votes.

Seeing the proposal last week prompted some additional concerns:

  • For now at least, I think the 10 acres of Fairgrounds land for private mixed use development is a non-starter. It doesn’t feel right. Even if we were going to think about that, I would need to know what the land will be worth after any zoning changes. Without that, there is no way to decide how it fits economically in the deal. (Also, I am going to predict that the “underutilized land” given to the team owners would end up being multiple corners around the “Supporter March” intersection shown on the drawings…think 3 or 4 corners with bars and restaurants at street level with housing above.)
  • I mentioned the guaranties, but I will repeat: Before voting, I would need to know the identity of the guarantors. I would need to know that they are “good for it” or that they are providing adequate security. I would need to see the guaranty cover stadium overruns, infrastructure cost overruns, Fairgrounds improvements overruns to the extent caused by stadium construction, and all bond debt shortfalls if the team doesn’t meet its obligations.
  • I think the conditions listed in the Resolution to be completed before the Sports Authority may issue bonds should be beefed up. I have a list of suggestions in the analysis I linked to earlier.
  • There are some other smaller but still important issues that I outline in the analysis. These include details about how the sales tax set aside works, about whether competition with the Bridgestone Arena will indirectly increase Metro’s obligation for that facility, and making sure that both the Sports Authority and the Fairgrounds Board are on the same page about how their new very close relationship is going to work.

These are the things on my mind at this point.

I have seen the team owners’ public presentation several times now. One of their early points is about how soccer for Nashville has been a full year in the making. On the other hand, the Council will have only a few weeks to absorb a year’s worth of a game plan and financial details. On top of this, we expect to hear the first financial details about a possible transit referendum before the end of October. The administration is also bringing back the idea of a $125 million flood wall — the first meeting on that is October 10. The Ft. Negley Park development ideas are still alive too. That’s a lot. I’ll do my best to provide updates as I can about all of these.

Recovery Court Audit

The General Sessions Recovery Court was audited in the aftermath of former Judge Casey Moreland’s indictment. As a member of the Metro Audit Committee, I received the audit report when it was issued last Friday. It usually takes several days for Metro to get it posted online. As of this afternoon, it wasn’t posted yet…so I am posting it here.

Among other things, the report found that the Recovery Court paid some travel expense for the staff of non-Metropolitan Nashville Government entities. The report says: “Specifically, airline fares for employees of the Davison County Drug Court Foundation were paid for by the General Sessions Recovery Court. The Davidson County Drug Court Foundation subsequently reimbursed $1,780 to the Metropolitan Nashville Government for these expenditures.” Another $8,868 was not reimbursed until recently.

I have asked Metro Audit if they have a schedule of the names of the people for whom travel was paid, the company/entity with which they were affiliated, the destination, and the dates of travel. Metro Audit is checking with Metro Legal to see if those work papers may be released. I think it is important for Metro to continue to take a lead role in shining a light on how these funds were used, and how the Davidson County Drug Court Foundation interacted financially with the General Sessions Recovery Court while under the watch of Judge Moreland.

Tried to condemn white supremacy this evening…

After the events in Charlottesville over the weekend, I submitted a late-filed resolution condemning white supremacy.  You can see it here.  Multiple additional Council members signed on as co-sponsors.

Under our Council rules, because it was late-filed, I had to move to suspend our rules in order to consider the resolution tonight.  Under the rules, if two members object, the rules cannot be suspended.

When I moved to suspend the rules, Council members Pardue and Vercher objected. So the Council could not consider the resolution tonight. Immediately after this, two other late-filed resolutions were considered — including one to honor the birthday of Jerry Lee Lewis. Both of these other late-filed resolutions were allowed to proceed and they were passed by the Council.

I plan to file the resolution for consideration at our next meeting. I am not going to let this just go away. It is too important.

 

UPDATE (August 24, 2017):

34 of 39 Council members have come together to denounce white supremacy. We issued a press release today, and a matching resolution will be on our September 5 agenda.

 

After Charlottesville…

Words are failing me after Charlottesville. There are too many emotions and thoughts to make sense of. I know this post doesn’t cover it all, but this is where I am today…

A core American strength is our marketplace of ideas. A robust freedom of expression allows room for passionate, open debate with the best ideas rising to the top. A core American weakness is our long history of racism and slavery. The founders of our country couldn’t resolve the tension between these and had to settle on the three-fifths compromise where enslaved people were only counted as three-fifths of a non-enslaved person. Eighty years after that, we fought the Civil War, with the Civil Rights Movement coming another century later. Is America cleansed of our original sin — our history of racism?

The answer is no, and we didn’t need the weekend’s violence in Charlottesville to prove it. Racism and so-called “white supremacy” persist. It is reprehensible. It is intellectually and morally bankrupt.

I remain optimistic, however. Society continues to make progress, even if it is painfully slow. I believe that it is America’s strength — a robust freedom of expression — that keeps the arc of the moral universe bending toward justice for all.

I am bothered by the idea threaded into some of the coverage on the violence in Charlottesville that this is a problem that happened somewhere else. We should be careful with that. Nationalism tinged with racism, and a willingness to overtly threaten people, exists here in Tennessee too.

When I was pursuing immigration-related legislation in June, I experienced some hate firsthand. I decided to not talk publicly about the level of hate then because the legislation wasn’t about me. But I think I should share my experience now.

I received one clear death threat that included my home address, one more generalized threat about having a target on my back, and lots of emails from angry people talking about their rights as citizens and how they think I am a traitor. I know that an immigrant-rights advocate also received a death threat while the bill was pending. In July, I also had someone throw a brick through my office window.  To sleep comfortably without worrying about loved ones and co-workers has required concluding that the email senders would not act on their threats, and that the brick thrower was a random vandal.

To be clear, I am not complaining. I signed up to be a public figure. I choose to take positions that I know make some people angry. I choose to keep talking and acting after receiving these few threats. None of this is noteworthy compared to the daily struggle by minority groups in America who live their lives being the “other,” and having to fight, scratch, and claw for success.

In our modern American society, racism and bigotry continue to roil. Issues like poverty, housing segregation, and policing bubble and churn on or just below the surface of our culture. Just a few weeks ago, I wanted to view the few threats I and others experienced as exceptions and not noteworthy. Now I see them as twitching on a seismograph; a warning of what might be coming. Was Charlottesville the eruption, or just a bigger bounce on the seismograph? Will there be a bigger eruption, or will we find our way again and force that arc to keep bending toward justice.

I can’t know for sure. But my faith is in America. My faith is in our freedom of expression, and in our belief that all people are created equal. In all of our major faith traditions, faith without action is meaningless. The same goes for our great American experiment. Each in our own ways, we must act in support of our faith in America. When we exercise our rights, knowledge and ideas and debate beat hate.

 

 

Soccer Stadium

Over the next six months, the Council will be asked to take positions on several important issues. Before these debates come to a head, I want to share my current thoughts about each of them. This post is about the potential soccer stadium. I have also posted separately about the possibility of a transit referendum and the commercial development proposed for Ft. Negley Park.

Here’s what I think I know (all based on second or third hand information I have heard):

  • I think the proposal will be to build the stadium on the hill at the Fairgrounds where most of current buildings are. I think it will have one or two restaurants and build in some conference and office space (that would presumably be operated by the Fairgrounds Board??).
  • I think the MLS bid team would like Vanderbilt to play its football games there. That implies a stadium with seating for at least 35,000 to 40,000. And the project cost amounts I hear range from $150 to 200 million. I hear that Vanderbilt hasn’t decided yet what to do, but I am not confident about that one way or another. If Vanderbilt declines, I assume the stadium will be smaller and I don’t know what that would do to the price.

Here’s what I don’t know:

  • What is the total expected price tag? Does the stated price include any expected infrastructure, parks, greenways, or other improvements that might get folded into the project?
  • How much will Metro pay?
  • When there are overruns (like with the Sounds stadium and most large projects), who will pay for the overruns?
  • What is the source of funding for the Metro part?  In the budget process a few months ago, this project was listed to be supported with revenue bonds. In turn, this suggests using sales tax revenue from tickets and stadium concession sales to pay for Metro’s portion of the cost. The details will matter, but this revenue seems like it might not be enough to pay the cost of the debt. If not, what will the annual losses be, and how will we pay for that?
  • How are nearby neighborhood groups going to interact with the stadium for parking and noise, especially for night games.

My position on Metro contributing to build a soccer stadium will depend largely on the economics of the deal.

Transit Referendum

Over the next six months, the Council will be asked to take positions on several important issues. Before these debates come to a head, I want to share my current thoughts about each of them. This post is about the potential transit referendum. I have also posted separately about the possibility of a soccer stadium and the commercial development proposed for Ft. Negley Park.

Here’s what I think I know:

  • The Mayor has proposed a Gallatin Pike light rail line into downtown.
  • There is talk around the courthouse of a referendum to approve a dedicated funding source for transit-related development and infrastructure as early as the May 1, 2018, local primary election.  That is less than 9 months from now.
  • Any referendum would need to be approved by the Council before going on the ballot. I don’t know what the exact deadline is for getting Council approval, but there is talk around the courthouse that the Council decision could be as late as January 2018 for a May referendum. It is really up the administration to decide when they want to present this to the Council.  I have assumed that the administration will seek approval for funding a soccer stadium before approaching us about the transit referendum…but that’s just a guess.
  • Elements of the business community are organizing a group to lobby the Nashville community to vote yes on the referendum.  I don’t know exactly who is involved, but I hear that the organized private effort to support the referendum will launch after Labor Day. And I imagine there will be an organized campaign against the referendum, but I don’t have any visibility into those efforts.

Here’s what I don’t know:

  • What tax, and in what amount, will be proposed? I am also curious to see exactly which Metro agency will be proposed to spend the money, and to approve specific plans.
  • How will a Gallatin Pike rail line cross the Cumberland River? The word I hear is that it will be on the center, reversible lane on the James Robertson Bridge.  But that’s rumor as far as I can tell.
  • Where will the rail line drop riders off  downtown? Again according to rumor, it will be somewhere on the north side of downtown, but not at the existing MTA bus station.
  • How will riders get around downtown? This is important to me. I would argue that the lack of a circulation system with dedicated lanes for people to get around downtown is what holds back the Music City Star ridership. This is a tough problem because our streets are so narrow downtown. But to me, this issue isn’t going away. No matter how many train lines we run into downtown, if people have to walk a half mile up hill in the heat or the cold, I think we’ll have ridership problems. I am hoping that this first rail line proposes something bold about how to get people around downtown better.  (And for the love of all that is good in the world, don’t say ‘golf carts.’)
  • There is a golden rule with transit systems — the bigger they are, the more money they lose. Sometimes people shy away from saying that. I’m not one of those people. The transit system itself will always lose money and the bigger it gets, the more it will lose. The question is about what other gains will be realized. What level of property tax increases are expected around new train stations, for example? Someone needs to model out what the expected losses will be from our new bigger transit system, talk about how to fund these increased operating losses, and predict what the related revenue gains will be.

I am supportive of building a better transit system. I will need to get reasonably good answers to these questions in order to support putting a transit referendum on the ballot.

Ft. Negley Park (aka “the post you can’t even name without taking sides”)

Over the next six months, the Council will be asked to take positions on several important issues. Before these debates come to a head, I want to share my current thoughts about each of them. This post is about the commercial development proposed for Ft. Negley Park. I have also posted separately about the possibility of a soccer stadium and a transit referendum.

There is ongoing debate about what should happen with Greer Stadium. This is one of those debates where no side is willing to even agree to the language used to describe the problem.

Saying “Ft. Negley Park” instantly suggests that you are opposed to any commercial development on the site of Greer Stadium, which is physically located in Ft. Negley Park. Or, it at least says that you don’t want development to happen as currently proposed.

Using “St. Cloud Hill” or more frequently “Cloud Hill” instantly says you are refusing to use the word “Negley” in an effort to deflect from the historical significance of the fort on top of the hill and/or the encampments and potential graves on the southerly slopes of the hill.

I am using “Ft. Negley Park” because I had to choose one. And, that is the name of the property. And, I do oppose the development happening as proposed.

I have looked at period drawings and photos. I have looked at topographical maps of the hill and surrounding slopes. It seems clear to me that one of two things is true — either the remains of a Civil War-era African American encampment and possibly graves are under some portion of the stadium and its parking lots, or those remains were removed when the stadium and parking lots were first built.

I think figuring this out is too historically and culturally sensitive to outsource. Metro should do the archeology itself to figure out what physical or human remains exist before signing any contracts for what happens with this site.

I am not dead set against any development on the site. It has after all already been a baseball stadium for decades. However, Nashville deserves a clear, complete answer about what is on the site before making any decisions about a planned 99 year lease.

Finally, for your information, here is the letter the five At-Large Council members sent to the Mayor about this issue last month. And here is her response to us.

Knowles Assisted Living Facility Audit

On July 18, 2017, Metro’s Internal Audit department published its report about the Bordeaux LongTerm Care and J. B. Knowles Assisted Living facilities. The audit covered the period after Metro privatized day-to-day operations of these facilities. In 2013, the management of the Knowles facility was taken over by a private operator, Autumn Assisted Living Partners, Inc.  In January 2017, Metro removed Autumn due to poor performance and its inability to pay the operating expenses or maintain the facility. Several Council members asked Metro Internal Audit to examine what happened.

You can see the full report here.

It is worth reading, but the important takeaways are:

  • Internal Audit forwarded the report to the DA and to the State Comptroller. I’ve been on the Metro Audit Committee for almost two years and this is the first referral like this that I recall.
  • The report summarizes: “Management of Autumn Assisted Living Partners, Inc. mismanaged the fiscal affairs of the former J. B. Knowles Assisted Living facility. Vendors were not paid timely, financial reports were not prepared, resident trust fund accounts were not maintained, and corporate and 1099 tax returns were not filed.”
  • The summary continues: “Contract performance oversight was lacking by the Metropolitan Nashville Hospital Authority and Metropolitan Nashville Government.”

I think it was a reasonable decision to privatize the day-to-day management of these facilities, but the execution went really, really badly for the Knowles facility. The private operator wasn’t up to the task, and Metro didn’t maintain enough oversight.

I have no idea whether the poor management by Autumn rises to the level of criminal activity. But it is noteworthy that the Metro Auditor Mark Swann felt required to provide a copy of the report to the DA and to the Comptroller. Regardless of how this shakes out, Metro must do better if it is going to outsource a job that impacts the health and lives of our citizens.

“City Heights”

There was an article today in the Tennessean about gentrification inside of 440 and north of Charlotte.  The addresses in the article are a few minutes walk from Swett’s and barely a mile from Meharry and Nashville General Hospital.

I have written before about the hospital. From the perspective of my day job as a lawyer where I often help companies and non-profits work their way through financial distress, I have long-thought there are three basic possible solutions for the hospital’s financial problems — go big, go home, or kick the can down the road.  For at least a decade, Nashville has chosen to “kick the can down the road” by chronically under-capitalizing the hospital both for day-to-day operations and long-term improvements. The “go home” solution would be to close the hospital. I’m definitely not arguing for that; I’m just saying that’s what the “go home” solution would be.

The “go big” solution, in my mind, would be to team up with Meharry and leverage the inevitable development coming out along Charlotte from one direction and out Jefferson from Germantown from another direction.

The collective needs (NOT in order of importance) as I see them include: helping to preserve the cultural importance of Meharry and it medical school for Nashville, the practical need for Meharry to have a teaching hospital, honoring and respecting the unique historical importance of North Nashville as an African American community, the need to act now to make sure that current residents can afford to stay in the neighborhood as the inevitable development gets closer, and help find a way to put a cap on Metro’s annual investment in the hospital.

If Nashville goes forward with no meaningful plan in place for the area, the neighborhoods surrounding Meharry and Fisk will gentrify. And I mean “gentrify” in the worst sense of the word. A grievous sin was committed against North Nashville when the interstate cut the Jefferson Street corridor in half. I think there is a moral obligation for Nashville to preserve this historically African American neighborhood.

So what would the “go big” solution actually look like? First, I think Meharry (and Fisk) need to be put in a position to get as much benefit as possible from the coming increase in real estate values. Maybe this means a redevelopment district and tax increment financing around the universities. If done right, the hospital would become better and more competitive. That would shore up Meharry’s long term need for a teaching hospital. The objective would be to help Meharry capture some of the economic value of its neighborhood the way Vanderbilt does the same in its neighborhood.

The “go big” solution also would certainly mean comprehensively canvasing the area and having a rock solid commitment to making sure that every version of the future has as much or more “workforce” and “affordable” housing as there is now. The area is already getting more diverse (i.e., less African American). There has to be a firm commitment to maintaining or better yet growing the African American population in the area. Neighbors who live there now deserve the opportunity to stay, and have their families stay, there for the very long term.

Some will say that I am dreaming an impossible dream. But here’s the deal — right now, the market is transforming the Charlotte corridor out to 440. It is happening before our eyes. The time to help Meharry, help the hospital, preserve North Nashville’s African American heritage, and protect the ability of long-time to residents stay in their neighborhood is now.

Immigration Bills in line with State and Federal Law – would not create “Sanctuary City” status

Along with co-lead sponsor Colby Sledge and a growing list of additional co-sponsors, I have submitted two bills to guide Metro’s role in federal immigration enforcement. First reading will be on June 6.

This afternoon, the Tennessean put up a story about the two bills, and describes a letter I wrote to Sheriff Hall to give him a heads up about the legislation and to explain the bills. This post is to provide more information about the two bills.

Here’s the letter I sent this morning. Here, here, and here are three other letters we exchanged in March. We also met in early April. Our exchanges on this topic have been cordial and professional. I don’t know what his position, if any, will be about the two bills. I am providing these letters because they provide a detailed explanation of the issues.

One of the bills would require Metro to immediately exercise its rights to terminate a 1996 contract with the U.S. Marshals Service, and also require Metro to use its best efforts to negotiate a replacement contract subject to the approval of the Council. Under the 1996 contract as written, and as approved by the Council, Metro has authority to hold unsentenced adult males and females charged with federal crimes or who are federal material witnesses in exchange for a daily fee. That contract expressly excludes people who already have been sentenced for crimes, juveniles, and “aliens” (which means non-citizens).

In practice, the Davidson County jail is being used as a regional ICE holding facility for non-citizens (or “aliens,” as described in the contract) who are not charged with any state or federal criminal offense. This contract has been in place for 21 years with no legislative oversight. The new legislation would require Metro to exercise its rights to terminate the contract, and negotiate new terms subject to Council approval.

The only principled push back I have heard so far about this bill is that the contract also allows Metro to house people who are charged with federal crimes. The argument is that we shouldn’t want to undercut Metro’s ability to house citizens charged with federal crimes. My response to this is simple: it has been 21 years since this contract was reviewed. Going that long without review is bad policy and bad practice. It is time for the terms of the 1996 contract to be reviewed by the Council. Otherwise, would this contract really just go on forever?

The other ordinance is intended to facilitate compliance with federal immigration laws within the limited resources of our local government. This ordinance would require that, unless required by federal or state law or a court order, Metro may not use its money, resources, or facilities to assist in enforcing federal immigration laws, or to share information about a person’s custody status or court dates. This ordinance would also prohibit Metro from requesting information about a person’s immigration or citizenship status. Finally, this ordinance would prohibit Metro from honoring an immigration-related voluntary detention request unless it is accompanied by a federal criminal warrant.

Everyone rightly should be concerned about how this ordinance fits with other existing law. First, this ordinance does not make Nashville a “sanctuary city.” Earlier this week on May 22, the Department of Justice issued a memo specifically defining what it means to be a “sanctuary jurisdiction.” There is nothing in the new ordinance that triggers the DOJ’s definition. As an additional precaution, the new ordinance expressly requires Metro to follow all federal law, state law, and court orders including federal criminal warrants.

I have heard through the courthouse rumor mill that there are a few objections floating around. I’ll go ahead and address those here.

One argument claims that this legislation will be harmful to immigrants. I recommend that anyone wanting to explore this argument go locate some immigrants in our community and ask what they think. I am confident that Nashville’s immigrant population will be strongly in favor of this bill.

Another argument is that Metro doesn’t have the power under state law to tell the Sheriff’s employees what to do about anything. I have only heard this objection in the last few hours, and I don’t know who is making the objection. But my initial reaction is that I believe it is long settled law that the Sheriff is bound by the functional, budgetary, purchasing, and personnel provisions of the Metro Charter. So I don’t understand this objection.

Another argument is that this will somehow impact public safety. This argument doesn’t make sense. The bill would require Metro to honor all existing federal and state law. Metro simply would have to stop holding non-citizens unless they are charged with a criminal offense.

In the coming days and weeks, I’ll provide more information about the moral imperative behind these bills. All of Nashville’s residents add their own note of individuality and spark to who we are. When our immigrant neighbors are silenced or muted by fear, Music City is out of tune. These bills will help us celebrate all our voices.

 

 

 

 

Unfunded OPEB Obligation Going Over $3B in 2018?

Between now and the end of June, the Metro Council will approve our budget for the 2018 fiscal year. Before we get too deep into that process, it is worth remembering where Metro stands on its financial obligations to Metro retirees.

The financial obligations to retirees have two components – pension obligations and what is called “Other Post-Employment Benefits” or “OPEB.” The OPEB component is the health insurance coverage that Metro retirees have.

Metro has never set aside any money for the OPEB obligation. Instead, each year, Metro pays for the post-retirement healthcare obligations out of operating funds for that year. At the end of FY16, actuaries calculated Metro’s total unfunded OPEB obligation at $2.79 billion. There are several points to make about the unfunded OPEB obligation.

First, it is an enormous number. In fact, it was 1.4 times the entire Metro budget for 2016.

Second, this number has been growing rapidly. Back in FY12, the unfunded OPEB obligation was $2.23 billion. This means that, during Nashville’s historic growth from 2012 to 2016, the unfunded OPEB obligation grew by just over a half billion dollars ($560 million).

Third, there has been predictability in these numbers for the last 5 years. In both FY12 and FY16, the unfunded OPEB obligation was 1.4 times the Metro budget. The main takeaway is that, for every $100 Nashville has been able to grow its revenue/budget over the last 5 years, our unfunded OPEB obligation has grown $140. This is probably Metro’s worst financial statistic.

Here is a chart that shows Metro’s budget, unfunded OPEB obligation, and the OPEB obligation as a percent of the budget for 2012 to 2016.

I did the same analysis for the pension obligation. Here’s the chart for that. For the pension, there is money set aside already, although not enough to cover all future obligations. For the pension, the accountants calculate the “net pension obligation.” To do this, they look at how much money is set aside and then make some assumptions about inflation and how much money Metro will earn on the invested funds. Based on this data and assumptions, they calculate how much the shortfall will be over the long run. And that “net pension obligation” is how much Metro should anticipate having to pay for all current and former employees in addition to what is already set aside.

The good news is that the net pension obligation numbers are much smaller. For FY16, the net pension obligation was $401 million (or 20% of the FY16 Metro budget). That’s a big number, but manageable compared to the $2.79 billion unfunded OPEB obligation.

On the chart, you’ll see that it looks like the net pension liability quadrupled from FY13 to 14. But there was a complex accounting rules changes that went into effect that year, which forced the net pension obligation to be calculated differently. Since the rules change, the net pension obligation has ranged from 14 to 20% of the Metro budget.  So for every $100 that Nashville has grown its revenue/budget over the last 3 years, the net pension obligation increased by just under $20.

It is hard to put just the right context on numbers this large — especially the $2.79 billion unfunded OPEB obligation. I mean, panic isn’t the right response. But, Metro does need a serious plan for addressing the trend lines. The Mayor just proposed a $2.21 billion budget for FY18. If that 1.4 multiple holds true, the unfunded OPEB obligation will go over $3 billion in 2018.

Math is hard

For the 2017 fiscal year, Metro’s general obligation bond debt service was either 10.1%, 10.85%, or 11.35% of the budget — depending on what document you look at.

According to the 2017 Budget Presentation given a year ago, it was 10.85%. See page 17.

According to the 2018 Budget Presentation given a few days ago, it was 11.35%. See page 35.

According to the Council Director’s analysis for our meeting two weeks ago, it was 10.1%. See page 2.

It seems like there are different methodologies being used to calculate a single metric. These numbers really aren’t too terribly different, but there is a roughly 10% swag factor depending on which of these is correct. I’m working with the various Metro folks involved trying to understand the differences.