Wrapping up the mayor’s budget hearing with the Metro Public Works department, the city’s finance director Rich Riebeling had just one more question. Could officials discuss their hopes for future street-paving, sidewalk and bike-lane projects?
“There’s some big needs in the department capital-wise,” Riebeling explained at the event last month, turning to the other two members of Metro’s Big Three, Mayor Karl Dean himself and Deputy Mayor Greg Hinote.
Minutes earlier, Billy Lynch, the loyal head of the public works department, told Dean’s administration, “We understand tight times.” Almost valiantly, he exuded a take-one-for-the-team attitude. “We can do our job with what we have.”
Riebeling, of course, knew the picture Lynch would paint when pressed. The finance director is fully aware that a fall report showed nearly half of Davidson County’s streets are in poor condition, in need of repair following a historic flood two years ago and inadequate funding. Roads, essential to any community, are deteriorating in Nashville.
Sure enough, Lynch, the grizzled Metro veteran, went down a litany of needs in striking detail.
His department, similar to previous years, has a wish list for $20 million to construct sidewalks at 73 locations across 26 Metro Council districts and repair sidewalks at 107 stretches; $4 million to build 20 miles of new bike lanes at 18 locations; $10 million to address bridge needs; $7 million for traffic signals; $1.4 million to revamp the downtown Fifth Avenue Arts District; and an additional $20 million to re-pave those 278 miles of rundown roadways.
“Paving next year is going to be really important to us,” Lynch interjected as he covered his capital list. He then moved on to other budget needs.
These annual hearings — a weeklong exercise in which directors of departments as small as the Transportation Licensing Commission and as large as Metro Nashville Public Schools sit across the mayor’s administration to discuss financing — often seem like an adherence to process more than actual number-crunching.
Nonetheless, a crystal-clear narrative has formed as Dean prepares to unveil a proposed budget for the next fiscal year, 2012-13: Financial needs across all Metro departments have accumulated after four years of tightened government operations that coincided with the nation’s worst economic downturn since the Great Depression. Accordingly, departments are working with less. Scrapped by budget constraints, Metro operates with 670 fewer employees today than it did just five years ago; some 125 fewer in public works alone.
Tied to this financial reality are the whispers from the Metro chattering class centered on one big question: Is this the year Dean proposes a property tax increase — the first in Davidson County since 2005?
For the mayor’s part, Dean has remained tight-lipped on the issue. After each day of hearings came the recurrent question from reporters on whether a tax hike is forthcoming. He’s stayed disciplined.
“The process is, we present the budget in May, and that’s the way we’ll do it,” Dean said on one occasion, noncommittal to the end.
Yet the vast majority of Metro observers — The City Paper spoke to several for this story — are anticipating Dean’s administration will soon ask to raise the current property tax rate above the current rate of $4.13 for property owners in the city’s Urban Services District. Some believe the plan is to tap out as high as $4.69, the maximum level allowed without triggering a public referendum on the matter.
The city’s General Services District property tax rate $3.56. In Metro, property owners pay these tax rates on every $100 of assessed value, which for residential property is 25 percent of the appraised value. The assessed value for commercial and industrial property is 40 percent of the appraised value.
Property taxes generate approximately half of Metro’s revenue to fund its operating budget, which is $1.59 billion for the current year.
Each penny added to the tax rate boosts revenues by approximately $1.8 million to $2 million, knowledgeable sources say, which would total more than $100 million in this particular scenario. Presumably, these dollars could bridge a potential budget shortfall, shore up core services and deliver a robust capital-spending plan for infrastructure and facility construction — Dean’s capital-spending plans have been modest in some years, nonexistent in others due to budget constraints.
Prognosticators could be proven wrong. Until Dean announces his move, the property tax question is but a guessing game.
Still, many are already sizing up the politics of a tax hike, surmising that Dean would no doubt be tested on at least two fronts: Convincing the public that additional tax revenue is a necessity and building a coalition of Metro Council members to assure the measure passes.
An answer to the tax question could come on or near May 1, when Dean is set to deliver his annual “State of Metro” address at the newly opened Cumberland Park on the east bank of the river. This special day, one designated for Metro government fanfare, is also when the mayor will unveil next year’s proposed budget. Each year, the mayor’s budget goes before the council for final approval before June 1. Once the budget is approved, the council is tasked with leveling an annual tax on real and personal property.
Historically, a property tax bump often occurs after property values are reappraised, which occurs every four years. The next reappraisal is set for 2013, but many are convinced the tax hike will come this spring instead.
For now, there is only speculation. But recent history underpins this speculation.
Two years ago, Dean and the council dodged draconian department budget cuts by electing to restructure the city’s debt, effectively pushing back the city’s debt payment obligation. But the two-year refinancing option has expired, and conventional wisdom suggests that’s no longer an option.
On that point, David Manning, the former finance director under Dean’s predecessor Bill Purcell, made a case for a property tax hike when he asked to forecast Metro’s tax future at a November seminar. “The debt service option has pretty much already been used, so the only thing left, really, is cuts,” Manning said at the time, absent a tax increase, of course.
A tip came in January when The City Paper was the first to report about a phone survey, commissioned by Dean’s campaign committee, which tested Nashvillians’ mood on a potential tax hike. The poll asked respondents whether they would support or oppose raising the current $4.13 property tax rate by 50 cents. With separate questions on using additional revenue to “fully fund” schools, maintain roads or bankroll big capital projects, the poll was no doubt an attempt to determine how best to frame and justify a tax increase.
Underlying it all are historical trends. Davidson County’s most recent tax increase, totaling 67 cents on the rate, occurred seven years ago in 2005. Even Dean himself has reminded reporters that he’s the “first mayor in ages” who went a full term without raising property taxes.
“If you look at the history of our community, we’ve had — until recent times — a property tax increase about once every four years,” said At-large Councilman Ronnie Steine, a Dean ally. “The reason for that is that property taxes don’t adjust for inflation, and they’re such a major part of how government functions. Costs go up and revenues don’t.
“Because of the economic downturn, this administration has put [a property tax increase] off, but it looks to me that we’re at a point in time where we’ve got to consider it or face dramatic cuts in services,” Steine said.
Since entering office 2007, Dean has remained steadfast in reminding Nashvillians about his three core principles: public education, public safety and economic development. The calculus his administration is surely making between now and May 1 is whether continuing to prioritize those items is contingent on ramping up tax revenue.
Dean has spoken highly of the work of the Metro Police department, pointing to fact that Nashville had only 51 murders in 2011, its lowest since 1966. Never have there been more sworn police officers patrolling Nashville’s streets.
But, as Metro police Chief Steve Anderson told Dean during budget hearings, a two-year federal stimulus grant that paved the way for 50 additional cops is set to expire. The hope is to retain those officers. In addition, the department is looking to hire 20 crime lab scientists to staff the city’s new DNA crime lab, set to open in Madison. In all, the police department has outlined $8.7 million in additional budget needs.
Above all, Dean has called public education his No. 1 priority. But demands are even greater there.
Metro Director of Schools Jesse Register and the nine-member school board are seeking a $723 million schools budget, a massive $49.8 million, 7.3 percent increase over the current fiscal year. At his annual “State of Metro Schools” address in March, usually a speech relegated to ongoing education initiatives, Register tried to make the case for substantial education investments.
Leading his requests is a proposal to raise Metro’s starting teachers’ salaries to $40,000 to compete with surrounding counties for high-quality educators. Davidson County currently ranks 27th in the state, according to Register, in starting salary pay. Recruiting and retaining top-tier teachers in Nashville is a project on which the superintendent and mayor have collaborated.
Register has spoken on the need to address $180 million-plus in backlogged capital projects. Schools such as Julia Green Elementary Schools in Green Hills are overcrowded. Portable classrooms are used across the county. Aging buses need replacement. IT equipment and basic infrastructure such as air-conditioning units are in need of an update.
Purcell capped off his last 22 months in office with a so-called “get ’er done” tour, a huge capital-spending spree to build sidewalks, a new public square courthouse square, and launch more sophisticated departmental online databases, among other initiatives. But Dean hasn’t had the resources to do the same, and the condition of some school buildings has worsened.
Hume-Fogg Academic Magnet High School, historically one of Metro’s highest achieving schools, lacks a functional gym, though the school district has requested one for years. East Nashville’s Stratford High School is in need of $20 million to update its crumbling building. That school fields a championship-caliber track and field team, but the team doesn’t have an actual track on which to train.
“I would acknowledge that just from my visits there, something needs to be done,” Dean said of Stratford’s dilapidated condition. “And the situation where Hume-Fogg students don’t have a gym, and haven’t had one for years but have been asking for one for years, is pretty pressing.”
If Dean were to put forth a tax hike, some observers believe he has a pretty reasonable case.
Over the final four years of Purcell’s tenure, Metro’s overall operating budget increased by more than $210 million, a spike enabled by the 2005 tax increase. Since Dean arrived in office, however, Metro’s budget has remained largely stagnant, even decreasing from fiscal year 2009-10 to fiscal year 2010-11. Overall, the budget has increased by just slightly more than $15 million over the past four years. In short, Dean hasn’t exactly exploded the size of Metro government. In fact, an argument can be made for just the opposite.
The economic depression, understandably, took a toll on the level of revenue at Metro’s disposal. Between 2005 and 2008, Metro’s overall tax revenues grew by approximately 20 percent. But over the last three years, Metro has experienced only a 2 percent overall growth in revenues. On property taxes, revenue increased by $140 million between 2005 and 2008. Since 2009, revenue from property taxes has jumped only $20 million.
Throughout the nation’s economic bad times, Dean has taken satisfaction that Nashville isn’t like the scores of municipalities, highlighted by the press, that were forced to lay off hundreds of teachers, close libraries or cut services like trash pick-up. Budget cuts have hit the periphery of Metro government, while core public services have largely continued. But would keeping the tax rate the same mean Metro would finally be forced to engineer sweeping cuts? Dean’s administration is presumably making that calculation.
If a property tax increase is the course, Dean’s administration may have a major public relations battle involving Music City Center, the city’s $585 million new convention center, set to open in 2013. Bankrolling its construction is revenue generated from tourist-targeted hotel taxes, funds that are separate from operating budget revenue. Nonetheless, the general public may not grasp that nuance, and the visual of the most expensive municipal project in Tennessee history, coupled with a tax increase, could be problematic.
A potential tax hike would likely split the 40-member council into familiar factions. The mayor’s office would presumably have a camp of at least 15 members ready to sign off on the measure. Ten members, perhaps fewer, would be automatic no-votes. The battle would be for those in the middle, folks who historically, in the end, support the mayor’s initiatives.
Two council members seeking state legislative offices would have particularly difficult decisions. Councilmen Darren Jernigan and Bo Mitchell, solid supporters of Dean’s policies over the years, are both running as Democrats for state House seats. On his campaign website, Mitchell proudly states that he helped “balance the Metro budget with no property tax increases.” Voting for a tax increases before elections in November would be red meat for his Republican opponent.
“I can’t support or oppose something that’s not even a proposal yet,” Mitchell told The City Paper. “Proponents of a tax [increase] could have ample ammunition to say we need it. And I think people who oppose it could say, ‘Well, we’ve gotten by OK over the last four years without it.’ ”
Mitchell’s correct, of course. There is no proposal, only hearsay. Still, that hasn’t stopped some Davidson County citizens — many representing various right-wing organizations — from bombarding the email inboxes of council members in recent weeks decrying the thought of raising their taxes.
Council members themselves are even bracing for their worst fears.
Robert Duvall, the conservative Antioch-area councilman, who would likely lead the council’s opposition to a tax increase, fired off a letter to Dean earlier this month demanding the mayor “stop the media noise” on raising taxes. “In this economic environment, a property tax increase is the last thing the citizens of Davidson County would support,” Duvall wrote.
“I say we tighten our belts and cut back what we’re not supposed to be anyway,” Duvall told The City Paper. “There’s a lot of projects and other things that we do in Davidson County that we don’t absolutely have to do.”