The third way

Sunday, May 2, 2010 at 10:45pm

Even Karl Dean’s skeptics would acknowledge the mayor’s been dealt an unenviable hand when it comes to the economy.

Dean’s two-and-a-half-year run as head of the city has coincided with the nation’s well-documented economic downturn, a reality that has rippled through Metro government with the continued decline of sales tax revenue.

Fewer tax dollars has meant a leaner government since his arrival, as Dean has remained unwavering in his campaign pledge not to raise property taxes. This year’s cuts, unveiled Thursday, represent a 1 to 2 percent reduction from the previous fiscal year. Still, if the Metro Council approves the $1.52 billion budget, the government will have shrunk by some $52 million since his inauguration in 2007.

Dean’s predecessors left office with established reputations. Former Mayor Phil Bredesen was known for his big ideas and initiatives — he brought the Tennessee Titans here. His successor, Bill Purcell, was tagged as the “neighborhood mayor” for his focus on smaller-scale projects.

Listen between the lines when he speaks and you’ll hear that Dean would probably like his legacy to be as the mayor who helped turn around Metro’s public schools, or the leader who revitalized downtown with a new $585 million convention center.

In the meantime, the first term of Dean’s tenure could be judged by how he navigates city government through the nation’s historic economic lows, whether he keeps departments operating smoothly through tough times. So far, the reviews have generally been positive.

At the State of Metro address last week, Dean said he’s “optimistic” about the city’s future, but he also cautioned more tough budget years are probably in store.

“Hopefully we will be reaching the end soon,” Dean said of the troubled economy. “But we, as a government, are still feeling its effects … Even as our economy recovers, it will likely not be the same as it was before the recession. And we will need to be prepared to operate our government on a leaner, more efficient budget not only this year, but for the foreseeable future.”

The third way

Dean and his administration reviewed three ways to make up the plummeting sales tax revenue in this year’s budget.

The first could have been to raise property taxes. Dean ruled it out because “keeping taxes low” is a priority, he said, especially during the bad economy. “In recent history, most Nashville mayors have raised property taxes during their first few years in office,” Dean pointed out. “We are going to break that tradition.”

Another option could have been to implement some draconian, across-the-board cuts that would have affected all of Metro. However, he cited maintaining essential public services as a principle. “Every city has managed through this recession in it own ways,” Dean said. “Some have had to take drastic measures — laying off police officers, closing libraries, community centers, parks and schools. This is something we’ve been able to avoid.”

That left one option, an approach some have called a “third way.” If all works as planned, it could allow Metro to function virtually at the same capacity as last year.

The idea is to restructure a portion of the city’s debt, which is accrued over time through city bonds, as a way to provide financial relief for the next few years.

“We can do this and still protect our city’s finances in the long run,” Dean said, “because we will take advantage of the historically low interest rates that have come about as a result of the current economy.”

The approach is not all that unique. According to Dean, the governments of Dallas, New York City, Chicago and Fulton County, Ga., have all restructured debt in some form to accommodate lost revenue.

“There’s no free lunch,” Metro Finance Director Richard Riebeling said. “Everything has a price to it, but the cost of this is relatively small.”

Given that a 7.5 percent across-the-board cut had been discussed, this “third way” — which will generate about $70 million for the bottom line — has received high marks from most Metro Council members who have been asked to sign off on it.

Councilman Jim Forkum complimented the administration on what he called “creative thinking.” The council’s Budget and Finance Chair Ronnie Steine congratulated Dean and Riebeling for discovering an option that’s “more palatable for this city.” And councilwoman Erica Gilmore lauded Dean for “making the best of times out of the worst of times.”

Despite the overwhelming support, Dean’s move to restructure the city’s debt hasn’t gone without criticism.

“What you’re essentially doing is financing your house to pay your electric bill,” Councilwoman Emily Evans said. “The problem is, you’ve got debt you need to pay off, but you want to do other things, too, so you refinance it. You push it out further for other councils and other mayors to deal with.”

Future financial risk aside, Dean has bolstered his case for upholding the three principles he’s cited relentlessly from day one: education, public safety and economic development.

The $633 million budget requested by Director of Schools Jesse Register is fully funded, including a $25 million gap the school district had established after depleting its rainy-day funds. In terms of public safety, the budget implements only minor cuts to the police and fire departments, and protects all positions within both. In addition, the mayor pledged to hand Metro employees a 2 percent, one-year bonus and to restore longevity pay for employees.

As Dean puts it, restructuring the city’s debt would keep it moving forward.

Nonetheless, it’s hard to ignore the $52 million there three years ago, now vanished during the economic downturn.

“Sure, there are things that I would like to do that I’m not doing,” Dean said of the challenge of balancing initiatives and savings. “I have all sorts of things that I think about that I’d like to do, but at the same time, we are making this city a more livable city for families.”  

1 Comment on this post:

By: EDUNITED on 5/4/10 at 8:05

Why is a 1-2% reduction a 7% cut? Only in government are departments entitled to yearly increases. Why does the budget increase 5% with inflation at 3%? I would like to have my personal spending increase without regard to earnings!
Ed vanVoorhees
www.EvVMgt.com