What I’m watching for in the Mayor’s budget
I had to be at a court hearing for a law client this morning and missed most of the State of Metro address. I’ve watched the whole thing now. If you missed it, the Mayor’s press release covers all his main points. Here are a few of the things I’ll be looking for in the budget ordinance when it comes out in a few days:
Based on the enormous amount of new spending announced during the State of Metro address, the increase in the size of the budget will be large. My very rough math tells me that size of the budget may grow by more than $200 million dollars…maybe by closer to $250 million?
I want to emphasize this heavily. THAT GROWTH IS NOT ALL ORGANIC GROWTH AND SHOULD BE CONSIDERED LOPSIDED AND UNEVEN THIS YEAR. For each of the last two years, Finance Director Kevin Crumbo was appropriately cautious on revenue projections due to the ongoing COVID crisis. With the uncertainty of COVID, it made sense to be cautious on revenue projections. Whatever the growth is for this upcoming budget, it should be seen as a return to more precise revenue projections instead of Metro being forced by uncertainty to be cautious. In other words, whatever the increase is for this year — don’t assume that it’s the new normal.
There’s still a heavy reliance on one-time spending. We were told today that the $50 million program to fight homelessness will be funded by one-time federal COVID relief dollars. It is disheartening to have Metro’s homelessness professionals get chased out of government service and then the fix is going to be one-time money. We’ll have to see the details, but this seems like it will be a reactionary, chaotic, and not sustainable proposal from the Mayor. There are other places where Metro is using the one-time money as a crutch. In the budget a year from now, all of those items will have to be reabsorbed into the Metro operating budget. Hopefully, there is some amount of the new revenue being set aside to plan for that a year from now.
I will be watching to see what the long term debt service numbers will be, and what the fund balance and/or reserve numbers are. These are all related because presumably the Mayor is beginning to plan for the expected costs of non-stadium East Bank infrastructure. That is rumored to require more than $500 million in general obligation bonds. Because every possible version of a stadium deal absolutely requires using a whole bunch of Metro and state sales tax dollars, there will be strong pressure to get the East Bank built quickly. In turn, that will require new debt and new debt service. Hopefully, there is a big chunk of the new revenue being set aside in anticipation of future debt needs.
The employee cost of living increases will be important to watch. I believe the Mayor said today that the proposed new schools spending would include a 4% cost of living increase. I’m not sure, but I think the Metro Civil Service Commission recommended 5%. I want to learn more about this.
WeGo has relied in part on federal COVID relief dollars in the last few years. I believe they need an increase of $6-7 million to maintain the current level of service.
I always make a point of noting that it is impossible to fully analyze an operating budget without answering the question, “How long do you anticipate going without raising the property tax rate?” Unfortunately after the 2008 downturn, that stopped being a part of the analysis in Nashville. The rhythm of a tax rate cycle should be — raise rate, reap large reserves, whittle down reserves as you hold tax rate steady for some number of years, raise rate, repeat. Ideally, a mayor would have an idea of how long that cycle is. Ideally, a mayor would be transparent with how long they plan that cycle to be. I’ll ask the question again this year. With the reactionary mindset, I suspect that I’ll get a canned answer like, “We’re experiencing strong growth right now due to our wonderful financial stewardship. We believe we can meet the needs of our growing city very well at this time. We’ll monitor this in future years.” I’d like to think everyone would recognize this as a junk response, and that of course the property tax rate will go up at some point, and that an actual plan for the timing is better than no plan. We’ll see what they say.
Will the Mayor fund the Chamber of Commerce. Whether you love them or hate them, the Chamber does perform an important role in economic development under an annual contract with the city. As I have discussed previously, my sense is that the relationship between the Chamber and Mayor’s office is at an a historic low. When my brother and I used to fight, my mom didn’t care who started it - we were both in trouble. That’s my view here. A bad relationship between the Mayor and the Chamber doesn’t help anyone. Unfortunately, the conventional wisdom around the courthouse is that the Council might vote the contract out of the budget. I’m curious whether the Mayor and the Chamber decide to find common ground in agreeing to not renew the contract, or if we are headed toward a sideshow over that line item in the budget.
Many of the program and staff expansions proposed by the Mayor in his speech today are much needed and appropriate. Too much of it though is a reaction rather than part of a vision for the future.
The next step is get the budget ordinance so we can see whether the spending is sustainable in light of the needs of our growing city. I’ll try to get more information out after I see the ordinance, which should be on Friday or Monday.
(Please excuse typos. I worked on this quickly.)