No Free Lunch

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

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

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

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

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

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

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

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

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

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

Bob Mendes

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