Nashville judge strikes down anti-tax referendum

By: - November 3, 2020 5:55 pm
(Photo: Getty Images)

(Photo: Getty Images)

A Nashville judge ruled on Tuesday that an anti-tax referendum can’t go forward because it is facially unconstitutional.

The referendum generated enough petitions to make it on the ballot, but questions arose about the proposal’s legality when the Davidson County Election Commission met to consider putting the measure on the ballot.

The referendum would give voters the power to undo the 34 percent property tax increase passed by the Metro Council and Mayor John Cooper earlier this year. It would also curb future increases to no more than 2 percent without voter approval.

The referendum also took aim at the fairgrounds soccer stadium project, with several provisions regarding bond issuances and transfer of property rights. It was the question about bonds that many observers thought didn’t pass legal muster.

The Election Commission asked a judge to determine if the referendum was constitutional before taking action on the proposal

That left Chancellor Ellen Hobbs Lyle to weigh whether the referendum should be allowed to go forward. If the matter had gone to a referendum, Metro was faced with the prospect of plugging a budget gap of up to $320 million.

Under obvious circumstances such as were shown at trial to exist in this case of clear, basic defects in form, facial unconstitutionality and that there is no chance of the (proposed referendum) being upheld in court in a post-election challenge, Tennessee law provides a remedy to the Election Commission to seek, pre-election, a court ruling on the validity of the (proposed referendum) before undergoing: the expense and effort of an election, and before Metro loses at least $332,000,000 in budgeted property tax revenue for the current fiscal year which will cause Metro’s budget to be unbalanced in violation of state and local law, and which will have the immediate effect of putting Metro in breach of financial covenants, leases, and other agreement,” Lyle said in her ruling.

Lyle’s ruling certainly creates the possibility for appeals in Tennessee’s conservative court of appeals system.

Funding for the petitions that were mailed to thousands of registered voters was funded by the anti-tax Americans for Prosperity.

To combat the referendum, some of Nashville’s most influential business leaders, lobbyists and political operatives held meetings to build a campaign team in advance of the special election, which would have been held in December.

The ruling by Lyle, though subject to appeal, is a critical political win for Cooper, whose administration was forced to prepare for budgetary contingencies if the tax increase was rolled back and the city was confronted with a massive budget shortfall. The administration indicated emergency response times would have been slower and even the schools’ budget would be subject to cuts if the measure had gone forward.

Critics of the referendum worried that the mere prospect of eliminating the tax increase would have motivated some property owners to hold off on paying their tax bills.

Following the ruling, Cooper said he is thankful the city won’t need to spend between $800,000 and $1 million to hold the special election in December.

“Today’s decision is great news for our city,” Cooper said in a press release. “It reflects the widely held view that this referendum was just not legal enough to be up to a vote. The Chancellor’s thoughtful ruling calls out a misguided effort. It clearly shows why it was the wrong choice for a stronger Nashville.

“We are the lowest-taxed city in one of the lowest-taxed states, even after the property tax increase. We can have the lowest tax rate and fix our finances, pay teachers more, build schools, and invest in neighborhoods.”

The Beacon Center, a nonprofit libertarian think tank, said the large tax increase passed by Metro this year is an example of why state law should be amended to allow for voters to weigh in on such hikes.

“Taxpayers deserve a say when it comes to property taxes,” Beacon CEO Justin Owen said. “Cities like Nashville and Murfreesboro have spent irresponsibly for years and forced taxpayers to swallow the cost with huge property tax increases. Tennessee is one of only four states in the country without some type of property tax limitation, and it is well past time that we protect Tennessee homeowners and taxpayers. This isn’t a partisan issue, as 91 percent of Tennesseans believe they should have direct input on property tax hikes, compared to just 2 percent who oppose it.”

In addition to completely overhauling the way Metro handles the property tax rate, the referendum would have had serious legal implications for the soccer stadium project at the fairgrounds. Jim Roberts, the lead attorney for 4 Good Government, also was the lead attorney in a lawsuit that sought to block the soccer stadium and surrounding mixed-use development. Roberts’ appeal in the latter lawsuit is on its last legs.

The referendum sought to require voter approval for transfer of property and for certain kinds of bond issuances.

As a demonstration of how the soccer stadium project would be hypothetically impacted, lobbyist Mark Cate and political strategist Jeff Eller were among the operatives gameplanning how to defeat the referendum if the special election had gone forward.

But. Lyle said, unlike other states, Tennessee’s constitution doesn’t allow for referendums to steer such local government decisions. 

“Part of the defect of the Proposed Act is that Tennessee is not like California, Arizona, Colorado or Michigan where citizens can enact laws by a direct ballot initiative,” Lyle said in her order. “Tennessee does not have this form of government. With a few limited exceptions concerning referendums, in Tennessee it is the legislature/Metro Council who enacts laws, “legislation/ordinances” and the voters’ recourse is to vote for or against the office holder when up for reelection.”

Nashville attorney Jamie Hollin, an Metro charter expert who frequently works on city government related legal issues, said Lyle’s order was emphatic. 

“As orders go, this is a slam dunk win for the Election Commission and the Metropolitan government,” Hollin said. “As was obvious to anyone, especially the court, it was poorly conceived, poorly written and poorly executed. The petition signers were sold a bill of goods that wouldn’t hold up under any scrutiny.”

 

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Nate Rau
Nate Rau

Nate Rau has a granular knowledge of Nashville’s government and power brokers, having spent more than a decade with the Tennessean, navigating the ins and outs of government deals as an investigative reporter. During his career at The Tennessean and The City Paper, he covered the music industry and Metro government and won praise for hard-hitting series on concussions in youth sports and deaths at a Tennessee drug rehabilitation center. In a state of Titans and Vols fans, Nate is an unabashed Green Bay Packers and Chicago Cubs fan.

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