2020-21 Budget Preview

(updated 6/14/2020)

Where does the money in Metro’s budget come from?

For Fiscal Year 2020, which ends in June, the budget called for funds to come from the following sources:

  • 45.7% property taxes
  • 20.6% local option sales tax
  • 18.3% grants and contributions
  • 15.1% fees and other taxes
  • 0.3% fund balance

Where does the money in Metro’s budget go?

For Fiscal Year 2020, which ends in June, the budget called for funds to go to the following areas:

  • 39% education
  • 21% public safety
  • 14% debt service (schools and general)
  • 11% general government
  • 5% infrastructure and transportation
  • 4% recreation and culture
  • 4% health and social services
  • 2% other

What is the issue with Nashville’s Fiscal Year 2021 budget?

Nashville is facing a series of challenges leading into discussions of the Fiscal Year 2021 budget:

  • A FY2020 budget dependent on one-time salesThe budget counted on one-time revenues and unrealized revenues, like the ill-fated parking privatization plan. This led to the further draw-down of the rainy day fund.
  • The March 3 tornadoTornado response and recovery cost Nashville approximately $40 million.
  • COVID-19It is estimated that the pandemic will cost Nashville $192 million in lost revenues in the current quarter and $280 million in the next fiscal year.

This all leads to a $566 million FY2021 budget gap as follows:

  • FY2020 Adjustment: $70 million to replace one-time sales and fund balance
  • FY2020 Adjustment: $192 million in missing Q4 revenue
  • FY2021 Effect: $280 million in missing revenue
  • FY2021 Effect: $16 million to handle “continuity of service” obligations
  • FY2021 Effect: $8 million in needed cash reserves

So what is being proposed?

A lot of changes, but the most-publicized part of the budget presented by Mayor Cooper is a property tax rate increase of $1.00, which is the equivalent of $63/month on a $300,000 home.

Can’t we cut spending instead?

We can cut spending. “Instead” is where things get tricky.

Over the past two years as property tax revenue dipped due to a record low rate (our rate was cut by $1.17 in 2016), Nashville made several rounds of departmental cuts, froze hiring, and skipped cost of living adjustments and other pay raises for first responders, teachers, and our other employees.

More recently, departments located $12 million in targeted savings, Mayor Cooper executed a corrective action plan that resulted in $42 million in savings, Metro pursued and anticipates receiving $40 million in tornado relief, Metro froze travel and hiring and reduced spending by another $13 million, and Metro Schools’ hiring freeze and closed schools saved $35 million.

All told, management actions since Mayor Cooper took office have resulted in $234 million in savings, reducing the budget hole from $566 million to $332 million.

How about other options?

Several other suggestions have been offered. Among them:

  • Acquire recovery funding from the federal governmentTwo rounds of relief for have been approved at the federal level. Unfortunately, the first round (grants) does not allow money to go to local governments to offset lost revenue. The second round (loans) are only for cities of over one million people.
  • Charge impact fees to developersThere was legislation in the Tennessee General Assembly to allow us to charge big developers for the extra strain their development puts on Nashville’s roads, schools, and public safety functions (like Williamson County charges). Disappointingly, legislators from outside Nashville killed the bill in committee.
  • Shift more of the property tax to large businessesThis is controlled by state law, meaning we can’t ask the skyscrapers to pay a larger share of property taxes. (Currently, businesses pay a higher rate and account for about 50 percent of collections.)
  • Draw more tax dollars from touristsNashville can only levy taxes directly authorized by the state. Furthermore, state law directs a lot of the downtown spending by tourists to the Music City Center rather than the general fund.
  • Charge developers higher fees and levy higher finesState law only allows us to charge fees equaling the cost of providing the service. Fines are maxed out at $50 by the state Constitution.
  • Seek adequate state funding for educationAs the state has backed off funding public education, placing us near the bottom nationally, Nashville has had to pay a larger and larger portion of the Metro Schools budget.
  • Increase the sales taxNashville’s sales tax is lower than most counties in Tennessee, but we are only authorized to raise it another half cent. In a boom year, increasing this would generate about $100 million, but with sales tax revenues currently tanking, it is unknown what kind of revenue this would generate.
  • Declare bankruptcyCourts typically refuse applications from cities to enter bankruptcy because cities have the ability to pay their creditors by taxing. Even if the courts backed entrance into bankruptcy, it would only delay payments to creditors while the city made payment arrangements. Nashville’s issue is not crushing debt but a large dip in recent revenue.
  • Cut out the soccer stadiumSeveral years ago, Metro agreed to pay $25 million toward bonds on the professional soccer stadium at the Fairgrounds. However, the impact on the FY2021 budget is $0.

What about all the new construction? Shouldn’t that generate the revenue we need?

Setting aside for a moment that new residents bring new expenses like schools and other infrastructure, here are the calculations at the root of the question.

In the past two years, Nashville’s total assessed property went from $29,693,024,881 to $30,648,469,915, an increase of $955,445,034.

Of that increase, $335,736,217 is assessed at the state-mandated residential and farm rate (25%), and $619,708,817 is assessed at the state-mandated commercial and industrial rate (40%).

That’s an increase in collections of between $9.8 million and $10.2 million. That covers only a small portion of the budget hole.

How do our current and proposed property tax rates compare to what the rate has been in the past?

Here are rates in the general services district (GSD), which includes Bellevue:

2021 (proposed)

How does our property tax compare to surrounding cities and Tennessee’s big cities?

Here are some rates:

Nashville GSD
Nashville GSD (proposed)

Okay, how does that translate to the property tax owed on a $300,000 home?

Nashville GSD
$2,066 ($172/month)
Nashville GSD (proposed)
$2,816 ($235/month)

What about the property tax owed on the average home in each of these cities?

Nashville GSD
Nashville GSD (proposed)

(based on the median home value in each city’s county)

What happens if you try to compare Nashville to peer cities on total taxes and fees – property tax, income tax, sales tax, utility fees…?

Nashville (proposed)

What kind of property tax relief is available?

  • Property Tax Freeze ProgramThis program allows qualifying homeowners to continue paying the same total tax they are currently paying, regardless of whether the tax rate changes. Homeowners age 65 or older with a household income below approximately $45,000 are eligible. The deadline to apply is July 1. Learn more here.
  • Property Tax Relief ProgramThis program provides qualifying homeowners with a voucher to cover a portion of their tax due. It is available to certain homeowners age 65 or older, disabled homeowners, disabled veterans, and widow(er)s of disabled veterans who meet other qualifications. The deadline to apply is July 1. Learn more here.
  • Property Tax Deferral ProgramThis program allows qualifying homeowners to defer payment on their taxes until they die or sell their property. It is available to homeowners age 65 or older or disabled homeowners with a household income below $25,000. The deadline to apply is December 31. Learn more here.

These programs are specifically authorized by state law, and Metro cannot change the parameters.

Who pays property taxes?

Property taxes are split almost 50/50 between businesses and residences.

What about calls to “defund the police”?

As of late, the Council has received countless calls to defund the police, which has ranged from those calling for some police services to be handled by community-based entities to those wishing to see a complete reimagining of our police department. Focusing only on the budgetary piece of the conversation around policing, 1) I support the demilitarization of our police department; 2) I support ramping up services that would replace the need for as much police spending (e.g., greater social services, mental health services, etc.); and 3) I oppose paying privatized prisons and cosponsored legislation earlier this year that move Nashville away from them. Until we can make those transitions, I will vote to maintain our police funding.

Can I read the budget and look at other documents?


What’s next?

Here’s the current budget calendar:

  • Monday, June 15: Budget Committee meeting
  • Tuesday, June 16: Third and final reading of budget ordinance
  • Thursday, June 18: Budget Committee meeting (if budget is deferred)
  • Tuesday, June 23: Budget Committee meeting (if budget is deferred)
  • Tuesday, June 23: Third and final reading of budget ordinance (if budget is deferred)

What are the budget options?

Four separate budgets are being submitted: Mayor Cooper’s, Councilman Mendes’s, Councilman Freddie O’Connell’s, and Councilman Steve Glover’s. The Cooper and Mendes budgets can be amended on the floor, while the O’Connell and Glover budgets will face an up-or-down vote.

View a budget comparison >>

Here’s the difference between the mayor’s budget and the others:

The Mendes budget:

  • Changes the GSD rate by an additional 3.3 cents in the GSD, which means a Bellevue resident with a home assessed at $300,000 would pay $2/month more than under the Cooper budget
  • Sends an additional $12 million to Metro Schools, nearing the $15 million sought in the MNPS budget
  • Preserves Community Education and about $1 million in other educational programs
  • Fully implements body cameras and sets the MNPD budget at the same it was last year
  • Opens community centers on Saturday mornings and adds three positions in courts/diversity
  • Guarantees 1% cost-of-living adjustments (COLAs) and step pay increases for Metro workers
  • Restores $1.5 million in arts funding, economic grants, and zoning enforcement

The O’Connell budget:

  • Depends on $230 million in federal grants that are not currently available
  • Calls for a total tax rate increase of $0.37
  • Reduces cash reserves by $30 million
  • Sends an additional $33 million to schools, including step increases
  • Preserves Community Education and about $3 million in other educational programs
  • Restores $1.2 million in arts funding
  • Adds $12.7 million in Metro employee longevity pay and step pay increases
  • Fully implements body cameras

The Glover budget :

  • Calls for a total tax rate increase of $0.68
  • Calls for an increase in the annual car registration fee from $55 to $115 for personal vehicles and from $66 to $181 for commercial vehicles
  • Cuts $1m from Codes, $850k from the DA, $6m from courts, $4m from Public Health, $3m from Metro Action, $4m from Parks, $790k from the Public Defender, $3m from Libraries, $4m from Public Works, $20m from MTA, $5m from General Hospital, $10m from Affordable Housing, and $5m from the Reserve Fund, plus other cuts
  • Adds $4m for employee step pay increases

What impact would deferring the budget have?

The deadline for passage of a budget besides the mayor’s is June 30. The mayor can also veto bills up to ten days after bill passage, and then Council must wait 48 hours before holding a meeting to override (due to the fact that public meetings require advance notice). That means to be able to override any mayoral veto, the budget must be passed by June 18.

The argument that the budget should be deferred until June 23 to “look for alternatives” has been put forth by a councilmember who has spent months trying unsuccessfully to put together a balanced budget. Further, alternatives have been investigated for months. One member’s inability to assemble a budget and the lack of alternatives to the proposals that have been brought forth do not warrant the danger of delaying a vote, but if it is clear that there are additional reasons to delay the budget for further discussion, I will not ignore those.

What if the Metro Council can’t agree on a budget?

If an alternative budget does not get 21 votes, the mayor’s budget automatically becomes law on June 30. This is what happened last year when the alternative budget failed by one vote.

So how are you going to vote?

There are four budgets available for consideration, each includes a tax increase, and if we don’t vote for one of them, then the mayor’s budget will become the budget. So there’s no such thing as not voting for a tax increase; voting them all down still brings one.

The O’Connell budget as it stands would not be approved due to its dependence on borrowing and because it does not adequately replenish cash reserves is a no-go.

This leaves us with the Cooper budget ($1.000), the Mendes budget ($1.033), and the Glover budget ($0.68+wheel tax increase). For a $300,000 home with two personal vehicles, the increase would be $62.50/month under Cooper, $64.50/month under Mendes, and $52.50/month under Glover. For the $2/month more the average household would pay (versus Cooper) under the Mendes budget, schools would protected from some of the cuts they already face, community centers would open, and our Metro workers who (alongside MNPS employees) have borne the brunt of tight budgets the past two years would receive nominal COLAs. For the $10/month less the average household would pay under Glover, we would see the tax burden shifted heavily away from business and we would see severe cuts to public works, public health, criminal justice, transportation, affordable housing, and more.

The feedback I’ve received thus far from within the district has focused on sustaining schools more than anything else. I’ve received many calls and emails in opposition to a tax increase as well, but even the budgets by Councilmember Glover calls for a substantial tax increase.

I will continue to evaluate feedback from constituents and review the budget amendments to determine the most responsible course of action.