For last four years, the Budget & Finance Committee chair announced his or her budget just a few days before third and final reading. I committed this year to getting information out sooner than that so that the public and my colleagues would have my thoughts heading into the public hearing. With six days still until the Council’s June 2 public hearing on the budget, it’s time to talk through the options. (Here’s a link to the operating budget process schedule leading up to third reading on June 16.)

As of today, I have it narrowed down to two choices — submit a substitute budget that keeps the Mayor’s $1.00 rate increase with some different spending, or submit a substitute budget with a $1.066 total rate increase.

Here is a one-pager that shows the key differences between Mayor Cooper’s proposed budget, the $1.00 option, and the $1.066 option. If you want to get in the weeds, keep reading.

Challenges

The challenges this budget season are bigger than ever. Here are some of the challenges unique to this year:

• Even before the virus, Metro was going to end the current fiscal year with literally the worst-in-America savings among big cities. The virus-related cash hemorrhage has been reported on thoroughly. It is severe. It is ongoing. The full extent of revenue loss probably won’t be known until a treatment or a vaccine is identified. Any revenue projections for FY 21 are educated guesses, at best.

• Because Metro has waited so long to adjust its tax rate (once since 2005), fixing it was always going to be painful for those who are least able to afford an increase. With the current crisis, these same people will either be hurt by an increase in tax rate, or a loss of services, or both. It will be difficult to insulate our most marginalized neighbors from the rate change and the loss of services. With the country experiencing the worst unemployment rate since the Great Depression, this is a very real problem for too many.

• The best bet to take the sting out of a rate increase for those who can afford it the least would be to use the $121 million in federal CARES Act relief funds to help. Metro already has this money in a bank account. It has to be spent by December 30, 2020, or be returned to the federal government. So far, there is no known process for deciding how to invest these funds.

• The last two budget cycles were during boom times. For political reasons, the former-Mayor squeezed employees on pay and constituents on services. Employee pay is already thin in Metro. And because departments have made ends meet during this “belt tightening” by leaving vacant positions open, there just isn’t fat to cut in most departments.

• Because of social distancing requirements, face-to-face engagements are nonexistent. This makes it hard for the Council to interact with the public, the administration, or each other. This is a significant problem.

Any of these would be hard to work through. Together, the situation is intimidating.

Guiding Principles

In deciding on a path forward, it’s good to have a set of guiding principles.

My first one is that, unlike private companies, government must succeed. Government must provide basic services. Good times will come back and Nashville will need its government and all of its services intact. In these bad times, city government should be fully committed to helping everyone get through these times and thrive to their fullest potential. This is the purpose of local government.

Next, no matter how painful, Metro must pass a budget that sets aside some minimal amount of savings. The current year shows the risk of having no savings. And since FY 21 revenue projections are a best guess, there must be at least some money built in the budget for savings. Note that Mayor Cooper’s proposed $100 million in “savings” would take a full year to build up having about 15 days of funds balance for Metro!! From this perspective, Cooper is proposing to build Metro up to the equivalent of living paycheck-to-paycheck. I will oppose any effort to reduce the $100 million.

Spending the $121 million in CARES Act relief funds must happen in a transparent, inclusive, and fast way. By the end of the budget process in June, there must to be a process in place to accomplish this.

The tax rate increase must be no more than necessary to accomplish these goals.

These goals should be balanced. They must all be achieved as much as possible.

Things I want to see in any budget that gets passed

If Mayor Cooper has not fully established a transparent, inclusive, and fast process for dealing with the $121 million in CARES Act relief funding by mid-June at the latest, the Council should include a process in the budget ordinance.

The budget ordinance should also include a requirement for the Finance Director to present a written update of the FY 21 revenue projection to the Council no later than August 15. Property tax bills will go out in October as required by state law.

By setting August 15 as the deadline for a revenue projection update, Metro can wait as long as possible to learn about any changes to state or federal law and wait as long as possible to collect data about tax revenue. Then, if there is a big change in the projections, the Council could decide to call special meetings in late August and change the tax rate if that’s what makes sense then.

I will also ask for the budget ordinance to require the administration to provide the Council with a written report by July 31 of the feasibility of selling the District Energy System and the feasibility of hiring a third-parking parking enforcement vendor.

My budget options

To help with public dialogue for the June 2 public hearing, I have prepared two budget options — one accepts the Mayor’s proposed $1.00 rate increase, and the other pushes it slightly higher but does a lot more for those that need it most.

1. Substitute budget with the Mayor’s $1.00 increase, but some different spending

It weighs heavy that dialogue and public interaction is severely limited during this crisis. Before the Mayor proposed his budget, I knew this was going to be a problem. I concluded then that, if the Mayor’s budget was anywhere near a decent path forward, it might be best for the city to let his budget proposal move forward.

I dislike that the Mayor seems to have arbitrarily decided on a nice round number like $1.00 when just a little bit more would have done a lot more for the most marginalized Nashvillians. But when I check against my guiding principles, there’s an argument that the Mayor’s budget is at least “okay.”

If I propose a substitute that keeps the Mayor’s $1.00 rate increase, I would require Metro Finance to cut just over $4 million from the general government and spend that money on:

• “Step” increases for Metro employees. This is critically important. A known problem with Metro pay is that salaries are very compressed and leave little room for advancement. This happened because step increases were skipped several times during the last downturn. Metro must avoid further salary compression. It is too hard to keep talented employees when they spend years with basically no raises.

• Approximately $387,500 more than the Mayor’s budget in additional spending on non-profits, education initiatives, and the arts, which translates directly into helping kids and preserving jobs (including $300,000 more for Metro Arts than in the Mayor’s budget)

• $262,000 for the Planning Department to implement plans to enforce “SP” zoning, which is needed especially in gentrifying neighborhoods.

The benefit of this option would be that it addresses the guiding principles about keeping the Metro government intact through this crisis. It is important to acknowledge how important Metro’s employees are in keeping government functioning with more than words. It also is important to support the non-profits, education initiatives, and arts organizations that help with jobs and basic quality of life in Nashville. While it would only be moving around $4 million, this option would help.

2. Substitute budget with total rate increase of $1.066

The other option would be a $1.033 increase in the GSD rate and a $0.033 increase in the USD rate for a total increase of $1.066. Here’s a summary of how that would work:

• $7.6 million with no restrictions to MNPS

• An additional $4.9 million to MNPS on the condition that they raise all employees’ wages to at least $15/hour. This will impact more than 1500 employees

• The step increases, plus 1% COLA increase for Metro employees

• Approximately $2.2 million more than the Mayor’s budget in additional spending on non-profits, education initiatives, and the arts, which translates directly into helping kids and preserving jobs (including $1 million more for Metro Arts than in the Mayor’s budget)

• $85,000 for the Juvenile Court Clerk’s office to enhance their ability to move toward holding Court remotely

• $262,000 for the Planning Department to implement plans to enforce “SP” zoning, which is desperately needed especially in gentrifying neighborhoods.

• Require targeted savings of $4 million to the general government and $2,300,000 to MNPS.

For a $250,000 home, this proposal is less than $3.50 per month more than what the Mayor proposed. This option shows the interaction between the pain of a tax rate increase and the pain of cutting services. Instead of holding the rate increase arbitrarily to a nice round number, this option focuses on trying to get help to the people who need it the most.

Conclusion

By narrowing this to two options, I hope this at least helps people know my current thoughts. Feel free to email me any comments to bob.mendes@nashville.gov. Please participate in the public hearing on June 2. Let the Council know what you think.