Analysis: A $710 million spending puzzle confronts Nashville leaders

By: - April 26, 2021 4:00 am
Historic Nashville Courthouse. (Photo: Nashville.gov)

Historic Nashville Courthouse and Public Square. (Photo: Nashville.gov)

The last time the Metro government had an influx of funds the likes of which it will see over the next two years thanks to an influx of federal stimulus money was 2009.

After years of very public debate, intense media scrutiny and approvals by multiple government agencies, the city allocated a set of newly created tourism taxes and fees to build the $623 million Music City Center.

That project, and the prospect of spending so much taxpayer money, was followed so closely by regular citizens that public debates between skeptics and proponents filled auditoriums and created front page news. In one debate, Nashville convention and tourism chief Butch Spyridon squared off against convention hall critic Heywood Sanders at a Vanderbilt University event. In another, the Tennessean hosted an online debate between then-Metro Councilwoman Emily Evans and convention center champion Ron Samuels.

Simpler times: the last time Nashville had so much money was 2009 and city leaders were arguing over a convention center. (Photo: Music City Center)
Simpler times: the last time Nashville had so much money was 2009 and city leaders were arguing over a convention center. (Photo: Music City Center)

Well, a lot’s changed since then.

Between the school district and other city agencies, Metro is in the midst of receiving federal stimulus funds surpassing the price tag of Music City Center: $710 million. That’s on top of the money Metro received from last year’s CARES Act.

Here’s a breakdown of the funds: 

$123 million already received by MNPS from the stimulus package passed in the final days of President Donald Trump’s term.

*$275 million for MNPS from the American Rescue Plan signed into law by President Joe Biden in March.

*$267 million for Metro over two years from the American Rescue Plan.

*$45 million to the Nashville Metropolitan Transit Authority

In comparison to the robust conversation around financing the convention center, there’s been precious little debate, political scrutiny or media coverage of the influx of federal dollars. Part of the reason is that Mayor John Cooper’s administration is still working to understand how the American Rescue Plan funds can be spent. But there are also less strings attached than last year’s CARES Act, which limited spending to direct pandemic response expenses and economic relief.

The first inkling of how Metro may use the money could come this week when Cooper delivers the state of Metro address and unveils his operating budget proposal. Guidance from the Government Finance Officers Association advised cities to take their time in spending the funds correctly, and it can be expected the Cooper administration will take a careful approach. Critically for Metro, the funds cannot offset tax reductions or delay a tax increase. The Tennessean’s Metro beat reporter Yihyun Jeong reported earlier this month that the federal money won’t have much of an impact on the upcoming operating budget.

The education funds come with more specific guidelines, including addressing learning loss and preparation for more students returning to the classroom in the fall.

The influx of $710 million is a double-edged sword for the city government.

Most stakeholders agree the school system was chronically underfunded before the pandemic ever created a learning-loss crisis and a drastic enrollment drop. On the heels of the pandemic, the tornado, the lower Broadway bombing and the recent flooding, Metro could use the cash.

But the city surprisingly finds itself in a much better financial position than anticipated a year ago when it raised property taxes 34 percent. Since then, sales tax collections came in substantially better than projected by both the city and the state. We knew property values have skyrocketed since the last reappraisal in 2017, but the numbers went up even more than expected, according to this year’s assessment. The countywide average increase was 34 percent, according to data shared by Assessor Vivian Wilhoite’s office last week.

The threat of a charter amendment — though it appears to be a longshot to survive serious legal challenges — still hangs over the government. The anti-tax 4GoodGovernment group wants to unwind last year’s property tax increase and give voters the power to approve future property tax increases of more than 3 percent.

Cooper’s odd round of television interviews earlier this month, in which he said the property tax rate would be going down as if he was taking a policy victory lap instead of a legally mandated rate-setting process, has added to confusion.

Between the better-than-expected sales tax collections, the influx of federal money and the threat of the referendum, it wouldn’t be surprising to see Cooper propose a modest property tax reduction — beyond the automatic decrease.

State law requires cities to reduce the property tax rate following reappraisals to prevent local governments from collecting a windfall in tax collections. But if your part of town saw values go up more than the countywide average, you’ll pay more in taxes next year.

Seeing your taxes increase in back-to-back years is hard to swallow. And Cooper’s odd round of television interviews earlier this month, in which he said the property tax rate would be going down as if he was taking a policy victory lap instead of a legally mandated rate-setting process, only added to the confusion.

Residents need candor and clarity not political spin from the government.

In many ways, Cooper is the perfect mayor to navigate the new federal money. Being a stickler for details, Cooper is criticized at times for spending too much time on the minutiae of governing. Setting priorities for such large, unexpected funds demands the sort of approach.

Cooper told me a year ago that his budget presentation explaining the city’s precarious financial situation was perhaps his proudest accomplishment as a public official. The city would benefit from the version of Cooper that shows a close attention to detail in deciding how to spend its federal funds, as opposed to the version that gave the confusing TV interviews about the tax rate a few weeks ago.

The sting of last year’s increase lingers for many citizens in a city where affordability is increasingly an urgent issue. Many residents will see their property taxes go up again, since several council districts saw property values increase at a rate greater than the countywide average. Small business owners who clung on and stayed open will especially be looking to see if the federal funds will help them as the economy reopens.

Regardless of what next year’s budget looks like, how the city spends its $710 million in federal funds over the next two years is setting up to be the most important financial question since Metro Council approved financing of Music City Center.

 

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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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