What’s in the Mayor’s proposed budget
I’ll update this information as we go through the FY22 operating budget process, but here is some early information.
A word about process first…the operating budget will be on first reading on May 18. Our public hearing (and second reading) will be on June 1 at the Music City Center starting at 6:30 PM. Come on down if you would like share your thoughts. Third and final reading will be on June 15. Sometimes that final reading gets pushed back for a week or 10 days. But the plan is for final reading to be on June 15. If approved then, that will set the city’s operating budget and property tax rate for FY22, which is July 1, 2021 to June 30, 2022.
Also, before I get going, I know that it is easy for the every-four-year property reappraisal required under state law to get confused with the budget process. If you are interested in how the property reappraisal process works, here’s a short video that gives a very general description and here’s the video of Assessor of Property Vivian Wilhoite’s visit to the Council on April 22 to discuss the process. You can skim through the video and you’ll see that Assessor Wilhoite gives a PowerPoint about how the reappraisal process works.
On to the budget…
For most of the details about what the Mayor has proposed, I can’t improve on the Finance Department’s presentation yesterday. Here’s a link to that.
The Mayor’s proposed budget ordinance is here.
In my comments below, I’ll reference pages in the Finance Dept.’s presentation or the budget ordinance.
The Mayor is proposing that we stick with the certified tax rate resulting from the reappraisal. For most of the city, this will mean a tax rate of $3.288 per $100 of assessed value. The outer edges of the city will have a slightly lower rate. As discussed in the reappraisal materials, this is a “revenue neutral” rate for the city. While some owners in very rapidly appreciating parts of town will pay more tax and owners in other areas will pay less tax, the Mayor is proposing for Metro to have the same total revenue from existing properties in the upcoming budget year. (Presentation, Slide 19)
The proposed budget includes $2.65 billion in spending. That’s up about 7% ($180.3 million) over the current year. It is important to understand that only $52.2 million of this growth is “organic” from the city becoming larger. The other $128.1 million is simply resetting revenue expectations post-COVID. This detail is important because when we look to future years, we should not expect to have additional years of growing the budget by $180 million. (Presentation, Slides 10, 12, 17)
The proposed budget maintains cash balances ($306 million) and accounting Fund Balances ($314 million) through the upcoming year. This is good. I would prefer to see them continue to grow — the Fund Balance will still be below the two months of expenses recommended by the Government Finance Officers Association. I would also prefer to see Metro invest in a true rainy day fund like the state has. But considering we are just coming out of COVID, I’m okay with maintaining the proposed balances. I would have objected to spending these balances down in the FY22 budget. (Presentation, Slides 21, 23)
Total debt service is only increasing by $6.1 million, up to a total of $360.1 million. As a percent of our operating budget, the debt service is going down from 14.35% to 13.61%. This is the first decrease since I was elected in 2015. I’m glad to see this; it’s been a goal of mine to see that percentage go down. (Presentation, Slides 27, 28)
A few more points about this debt service increase. The increase of $6.1 million is substantially lower than expected a year or two ago. We had penciled in to expect debt service to go up by as much as $40 million. The reason it is only up by $6.1 million is because of the extensive bond refinancing program that Finance Director Crumbo has overseen since last summer. All of the bond refinancing deals this year have lowered interest rates without pushing out any maturity dates. It is hard to overstate how good this is for the city. In many ways, the Mayor’s proposed investment in fixing the school compensation structure is only possible because of the savings from these bond refinancings. That we could do this without stretching out bond due dates is a benefit the city will feel for years.
For the budget ordinance, I’ll try to avoid repeating information that is in the Finance Dept. presentation and only include other observations:
Last year, in the text portion of the ordinance, the Council added a transparent process for deciding how to spend the $121 million in federal COVID relief dollars that the city had to spend by December 31, 2020. The Mayor’s budget does not propose any process for how the city will figure out how to spend the next round of $260+ million of federal relief money. I hope Budget Committee Chair Toombs adds a transparent process for this next round of relief funds to her Substitute Budget in June.
The budget proposes $1 million to study how the tax rate is balanced between the GSD and the USD. This is a complex topic that Council members hear about from time-to-time. The basic deal is that there are a few services like street lights and garbage pick-up that are not provided by Metro in some of the outer areas of the county. They pay a slightly lower tax rate. Some claim that the difference is too small and that people paying the lower rate are slightly over-paying compared to the services they receive. I think the Finance Department acknowledges that they are using very, very rough estimates in deciding the difference in the rates. They intend to work on getting more precision in the numbers. Whether people are slightly over-paying or slightly under-paying, I predict the difference will end up being slight either way. But the work hasn’t been done in a while, so we should do it. (Ordinance, page 13)
The budget proposes spending $25,000 on a “TIF Study.” This is the continuing impact of the tax increment financing reform passed in 2016 and 2019. Basically, all of the current MDHA economic redevelopment districts will become ineligible to make new TIF loans on June 30, 2022, unless there is a study to show the benefits and the costs of the existing districts and unless MDHA and the Council agree on a new set of goals for each district. This study will move the ball forward on these requirements. (Ordinance, page 15)
For public safety, the police budget is proposed to increase from $210 million to $226 million. (Ordinance, page 14) I know that a large chunk of this increase relates to the new police precinct in Southeast. I don’t have additional details yet about everything that goes into this increase.
Barnes Fund, up from $10 million to $12.5 million. The Mayor talked about $30 million of affordable housing spending next year. The Mayor said that he plans to recommend using federal relief dollars to bring the budgeted $12.5 million up to the $30 million he mentioned. (Ordinance, page 15)
The funding for the Nashville Area Chamber of Commerce is being maintained at $175,000. (Ordinance, page 15) There were four specialty Chambers of Commerce that have each received $25,000 for the last few years. It looks these have been removed from the budget, but maybe I just missed it?
Parks, up from $42.6 million to $46.3 million. (Ordinance, page 16)
Arts Commission, up from $3.4 million to $3.9 million. (Ordinance, page 16)
WeGo transit, up about $25 million. This is mostly to put the agency back to where it was pre-COVID. Last year, the city was able to get by with less funding because of some one-time federal money. The increase now will largely restore WeGo to how it was funded before COVID. (Ordinance, page 16)
The Mayor proposes creating a new Emergency Response Fund of $5 million. After the tornado, derecho, bombing, and flood, it’s hard to complain about setting aside some cash that can be readily available when things go boom. (Ordinance, page 16)
The entire schools budget, as always, is a single line item. This year, the Mayor proposes $1,014,661,600. Metro has no line item spending control over MNPS. So they get just one line in the budget for their operating dollars. (Ordinance, page 21)
There will be more to talk about in the next six weeks. I just wanted to share my notes from a first pass through the presentation and the ordinance. There will be time for us to talk about the values and goals baked into the proposed budget. Step 1 is to understand what is being proposed. Feel free to email me at bob.mendes@nashville.gov with any questions or comments.
(Please forgive any typos…I put this together quickly…thanks!)