Optimism AND reality

I am optimistic about Metro fixing its finance problems. It also is important that we be realistic too.

For each of the last two years, I and others in the Council have proposed a 50 cent property tax rate increase. I said each time and will repeat now — a 50 cent increase would not have paid for any new government services whatsoever.

Instead, the 50 cents — which would have generated about $162 million per year — was to stop Metro’s financial slide backwards. That new revenue would have provided money to fund promised pay raises for Metro employees, fund our schools, pay known and anticipated debt, replenish Metro’s 5% fund savings, and cover basic minimal inflation. Again, the 50 cent increase would not have paid for any additional sidewalk funding or extra employee or new anything.

So far, the known new revenue found since the election is $12.6 million from the Music City Center. I completely agree with Mayor Cooper’s goal of finding as much new revenue as possible and eliminating inefficiency in government. But, you can see that it will be difficult to find enough revenue or cut enough expenses to equal the $162 million per year that the 50 cent rate increase would generated.

I have pushed so hard for a rate change — including in an election year — because I have believed for some time that we would need one rate change to stop the city’s finances from sliding backwards and a second to start moving forward in providing needed new services for our growing city.

In these situations, it is always a challenge to find the right path forward. Often, footing shifts, and you have to change paths. Finding just the right mix of things to carve back and things to expand, old things to end and new things to start, is a challenge.

For now, my general ground rules are:

  • Any new significant spending for the operating budget is not practical. To be blunt, as an example, assuming the city could get rid of CoreCivic from the jail on Harding Place, there is no way to pay for the additional cost at this time. We need to see the city paying raises for employees, funding our schools, paying known and anticipated debt, replenishing Metro’s 5% fund savings, and covering basic minimal inflation before we can consider any new net costs in the operating budget.
  • The same goes for capital spending that comes with recurring new operating costs. So rebuilding a bridge is okay. But buying things that would require new employees to operate is not practical today.
  • Capital spending on necessary infrastructure must continue. Capital spending is supported by bond debt over 20 to 30 years. This makes the cost of roads and bridges and buildings get spread out over a long time. It’s affordable that way. Also, delaying needed capital improvements just ends up costing more money. (Your water heater costs less to replace before it breaks and causes water damage in your house…the same works for government…normal capital replacement costs less than running things until they fail.) It is very important to maintain scheduled infrastructure capital spending.
  • Economic development is a difficult, mixed bag.
    • I have criticized that this city does not have any written or unwritten policy about what economic development we want to support and where. Without that, Metro gets the widespread criticism that there is now.
    • Very few people think that there should be zero economic incentives. Most everyone would agree that there should be some economic development incentives so long as we have civic agreement about what we are investing in.
    • We have seen the city’s reputation with employees get trashed over the last few years when Metro reneged on its promised pay raises. Do we want to export that reputation outside of Nashville by backing away from deals we have already made with different businesses? I don’t think so. The most difficult developing story is the fact that there seem to be extra costs and handshake deal parts of various ongoing development projects. I think the city is going to struggle with how to honor its word in situations where only a few people in a former administration really understood what Metro was promising.
  • Over the last three operating budgets, Metro departments have already found over $30 million of recurring savings. As much as this stings some departments, I believe that the Cooper administration should keep pushing the departments for more. I am hopeful that Cooper’s team will find some transformative changes that will save money.
  • Some argue that Metro has mismanaged money and can’t be trusted with ANY new revenue until ALL mismanagement has been purged. To them, I would acknowledge that all government including Metro has waste. The fact that the various departments have squeezed more than $30 million of cuts out over the last several years is some evidence of that. But, this is a BOTH problem and not an EITHER/OR problem. I am all in favor of cutting fat and mismanagement. At the same time, revenue has been choked back also over the last decade and not allowed to keep pace with our growing city. That has to be fixed.
  • I have heard a few people appear to argue for an all-at-once $1.50 rate increase. I don’t think this is realistic. I believe that letting the property tax rate remain artificially low has been terrible for Nashvillians. It has overheated how attractive we are for out-of-town residential real estate investors, which fuels gentrification. But it would be unfair to Nashville’s taxpayers to force the full rate correction into one year. The better approach is to do the hard work of stabilizing the city’s finances first and then assess what additional services the city wants to invest in after that.

This is a difficult balance — but it boils down to keep attacking fat and inefficiency, find as much new revenue as possible before a rate increase, no new operating expenses for now, maintain infrastructure capital improvement spending, judge every existing economic development project based on whether it uses operating dollars (bad), capital dollars (better), or revenue bond dollars (best), and judge every potential new economic development project based on goals and policy (none known to exist today). Every budget season for the next several years, all of these should be plugged into a cash forecast (I believe the Finance Department is working on one) and let it tell you what the city’s cash needs are. From there, we need the political will to move the property tax rate toward meeting those needs.

This approach has something for everyone to dislike. No new operating expenses is hard for a growing city. Cutting is hard. Big projects — whether infrastructure or economic development projects that have already started — feel scary or dangerous. Raising the property tax rate costs people money. I’m optimistic because I know Nashville can do this (and because of the Comptroller’s watchful eye, we have to do it). The realities I have laid out are also reason for optimism. We have options. We don’t unlimited paths forward, yet there are clear steps to take and guidelines to follow to get Metro’s finances in better shape to serve all our neighbors.

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.