Local government observers know that Emily Evans’ antenna is raised particularly high when it comes to the matter of money.
The wonky Metro Council member, currently serving her second full term, has often been a polarizing figure, with fellow council members, and political insiders, reacting quite differently to the deployment of her knowledge on the subject — largely the result of 25 years in the financial industry, dealing primarily in municipal bonds — depending on which side they find themselves during a particular dispute.
One thing is certain, though: She thinks about this stuff more than most.
As Mayor Karl Dean’s administration prepares to roll out a new budget, The City Paper sat down with Evans to shoot the financial breeze. For nearly an hour, she chatted with ease about national trends in municipal finance, budget issues and debt management. When urged by a reporter to explain her thoughts on these matters as if she were speaking with a child, she obliged.
“Let’s start with the view from 50,000 feet,” she said, with the smile of someone who actually finds these things exciting.
In short, Evans described that view like this: After decades of seeing things go pretty much the way you’d hope — with government revenues keeping up with or exceeding growing government expenses — most local governments are currently experiencing a period of slow, if not completely stagnant, growth. But rather than adapting to a new environment, she said, many governments have approached these economic times like they would a passing storm; just hold on a bit longer, and we’ll come out the other side.
“That has been the guiding philosophy for this government, and most governments, really, since October of 2007,” she said. “And it is appearing, increasingly, to be a flawed view. Because we’re not bouncing back. We’re slowly and steadily crawling out of the hole. But we’re not doing any of this rocket ship stuff that we’ve done in the past.”
Evans has found herself at odds with the Dean administration on numerous occasions, most notably when she strongly opposed the financing for the $585 million Music City Center. She lost that fight, and the new convention center will open in May. Now that it’s here, she has said that city leaders have to find a way to make it successful. But she points to it as a project pursued with the flawed idea that the good ol’ days are soon returning.
Based on that premise, she said, Metro and other local governments have turned to a number of financial “parlor tricks” to keep things moving until everything gets better. On her list of such tricks is a set of bond issues recently approved by the council. Her opposition to three resolutions approving the issuance of more than $1 billion in bonds, to finance building and infrastructure projects, placed her again among a small minority of council members opposing a Dean administration proposal.
All three resolutions passed with a vote of 29 to 4. (Council members Bruce Stanley, Tony Tenpenny, and Sheri Weiner joined Evans in opposition to all three.)
Evans said the resolutions deviated from Metro’s debt management policy in two primary ways. First, they allow Metro to pay interest only on the debt for seven years.
“So what we are, in terms of capital projects — and keep in mind I’m a huge fan of capital, I think it is the lifeblood of every government — but in terms of capital projects, what we are doing is sort of living in 2005, but with 2013’s income,” she explained. “So we’re trying to maintain our lifestyle, if you will, with respect to capital projects. So what we do is we do an interest-only loan for seven years. That allows us to live today as we lived yesterday, but still get our candy. And our cupcakes in the afternoon.”
Secondly, the bonds will be sold through negotiated sales, as opposed to competitive bidding.
“The time-proven, academically researched, quantitatively supported evidence is that competitive bond sales yield lower interest costs and lower fees to governments,” she said. “That’s what the SEC says, that’s what every academic paper out there says. In a stable market, not October of 2007, in a stable market like today, there’s no reason not to do a competitive sale.”
The Dean administration, obviously, takes a different view. Metro Finance Director Rich Riebeling explained why they feel the move was justified.
“It is impossible to look at one series of bonds when considering the City’s overall debt requirements,” he told The City Paper in an email. “Our job is to manage the City’s debt and make sure we have sufficient revenues to meet our obligations and sufficient funding for the services we provide to our citizens. We amortize our debt on a very aggressive basis and will continue to do so while balancing the overall needs of the government. It should be pointed out that we have seen our outstanding bond rating reaffirmed by Moody’s and S&P as they reviewed our financing plans that recently were approved by the Metro Council.”
As for the consensus on whether competitive bond sales are better for governments than negotiated sales, Riebeling offers a competing analysis.
“Finally, I would point out that The Bond Buyer, the industry’s newspaper, recently published information that showed negotiated sales had lower costs than competitively bid bond sales in 2012,” he said. “We engage an excellent financial advisor with strong market knowledge to make sure we receive competitive pricing on the bonds we sell.”
Evans maintained that deferring financial obligations to avoid challenges in the short term is a mistake that can, in the most extreme cases, lead to financial ruin. Continuing down the list, Evans said the city will probably borrow from its rainy day fund next year, if not sooner. She also points to state legislation that would allow the city to issue bonds, put the money from those bonds in the pension fund, and invest it.
“Which is uniformly a bad idea,” she said. “But that’s what we’re going to do, because the state legislature is going to let us. And, as I told the comptroller, ‘Why would you let us do that?’ He said, ‘Well, it’s not our business, Emily, to be telling these local governments what to do.’ I said, ‘The hell it isn’t.’ ”
The state legislation is still pending. What these sorts of maneuvers actually accomplish, Evans said, is keeping things stable enough until the next round of officials is in office to deal with them.
“That is not traditionally how we’ve done things,” she said. “One of my favorite state senators is Douglas Henry, and he says something that I love, which is, ‘I want to leave Tennessee better than I found it.’ And that’s my view. I want to leave Nashville better than I found it. And I’m not sure I’m going to do that.”
But Evans didn’t just offer criticism. In the face of slow growth, she said, local governments need to find new ways to operate, adopting new practices that are more efficient — a point Dean emphasized in recent budget hearings. And in some areas, Evans said, Metro has done that.
She did include the recent buyout program for Metro employees as a policy deployed to mitigate the effects of lagging revenue, but doesn’t consider that a parlor trick. In fact, she said, it was a “good decision” and a practice that should probably occur regularly.
She was also full of praise for Nancy Whittemore, Metro’s director of General Services.
“We have facilities, [and] managing your operations, your facilities, your buildings, is one of the more expensive things government does,” she said. “And it doesn’t deliver, necessarily, greater service, but you have to do it. We’re really good at that. And we’re really good at that because we have a really good director of General Services who’s constantly looking for ways to save money. That’s a place where we’ve innovated. In other places, we haven’t.”
One of those places, she said, is Metro Nashville Public Schools. While Whittemore keeps a smaller staff and uses contractors for a lot of the maintenance needs at Metro facilities, Evans said MNPS is still using an older model, keeping full-time plumbers, electricians and the like on staff. With the number of buildings and square footage that MNPS manages — quite a bit more than the rest of Metro government — she said that’s just not an efficient way to operate, and she expects it to come up during this year’s budget discussions.
Going back to the bond resolutions, Evans insisted, with a grin, that she objected to the proposals “in the most gentle way.” Indeed, her opposition — whether to a deviation from debt management policy, or a corporate tax incentive — is not always voiced as loudly as during the convention center debate. But she will always be sure to register it, she said.
“I like to preserve my ability to criticize things later.”