Comptroller warns Nashville about takeover, again, as Metro faces potential shortfall if property tax hike repealed – Tennessean

Comptroller warns Nashville about takeover, again, as Metro faces potential shortfall if property tax hike repealed  Tennessean

For the second time in less than a year, state Comptroller Justin Wilson made a visit to Nashville council chambers to say the city could be at risk of a state takeover if Metro doesn’t have a balanced budget. 

The warning was delivered Tuesday as the city faces a referendum that could repeal the new 34% property tax increase — resulting in a $332 million budget shortfall mid-year. 

“There is a dangerous curve ahead,” Wilson said, urging council members to act quickly, starting with Tuesday night’s council meeting, by delaying spending and preserving cash. 

His job, he said, is not to give judgement on the referendum or the city’s property tax rate, but to ensure the city as a balanced budget — as required by state law. As “last resort,” he will step in and make financial decisions for the city. 

“Metro will be kind of like a teenager coming to their parent asking for $20 to go to the movies,” Wilson said. “You do not want that … The cuts would be deep and painful.” 

Wilson’s visit comes as Mayor John Cooper took an oppositional stance this week against the referendum, after weeks of evasive comments as the was effort underway. 

The tax repeal, if approved by voters in a possible special election on Dec. 5, would be a blow to city services and could result in severe cuts to public safety personnel as well as a nearly a 25% slash to the school district’s budget, which Cooper outlined in a press release Monday.

The city will be “unrecognizable,” he said to Metro Council Tuesday, warning of the lack of public safety protection, teachers leaving to work in surrounding counties and infrastructure needs languishing. The city’s credit rating will go down, while borrowing costs go up. 

“Our progress as a great city will end,” he said, addressing Metro Council Tuesday. “It takes the problem of financial weakness and makes it chronic and permanent.” 

The city, he said, will “have our backs,” if Metro acts with “responsibility and stewardship.”

“It is for them, we serve,” he said. “It is for them we make hard choices and fix problems.”

City’s cash flow at risk

Regardless of the legal or financial arguments surrounding the referendum, Metro Finance Director Kevin Crumbo is warning public confusion alone could put the city in a “dangerously low” cash position, if they wait to pay their property tax bill to see if the tax rate will be adjusted. 

Property tax bills are mailed the first week of October each year and are due by the end of February. Typically, about one-third of people pay their bill in December, according to the city.

It’s about $450 million the city could historically expect, that Metro would not see until possibly February if people decide to delay paying. 

“That’s a big number we plan on every year. To move some big portion of that, would strain our cash flow,” Crumbo told The Tennessean Tuesday. 

Metro’s fund balance is currently hovering around its minimum policy of 5% of the budget — which is $120 million of the the city’s $2.4 billion total budget. 

“Nashville cannot fail. This train cannot derail. It must have a balanced budget. It must have some money available for emergencies. It must pay its bills. Anything short of those fundamentals is a great risk to this city, and frankly to our state,” Wilson said. 

A hit to cash flow would impact the city’s financial ratings as rating agencies look at the city’s general financial stability and if it can make its payments. 

Uncertainty surrounding the city’s finances has already meant Crumbo is postponing plans to refinance city debt that would have saved the city $9 million this fiscal year and $40 million over its lifetime. 

“People are already watching what’s happening in Nashville. Just even talking about this whole ballot initiative catches the attention of the bond rating agencies. And let me assure you that they’re not the only ones watching,” Wilson said. 

Special election under consideration

The petition, verified by the Metro Election Commission on Friday, if successful, would also limit annual property tax increases to 2% without voter approval and require bonds for city projects totaling more than $15 million to go before voters.

Though not yet noticed, the Election Commission is expected to meet Friday to determine whether the Dec. 5 special election must be held. 

The Cooper administration has not said if it will be challenging the petition, but legal analysis by Metro Council’s attorney says several of the provisions would likely violate state law. That gives council the authority to set tax levies and does not place a limit. 

Metro Council will consider its own charter amendments brought forth by At-Large council members Bob Mendes and Steve Glover Tuesday night. 

Mendes’ amendment, if placed on the ballot, would effectively override the petition initiative and reinforce the city’s existing limits on property tax increases, approved by voters in 2006, and its ability to issue bonds without going to voters. 

The Metro Charter Revision Commission unanimously supported recommendation for Mendes’ amendment last week, while unanimously rejecting new amendments put forth by Glover. 

Glover iis looking to place a 12% property tax hike limit over a two-year period, increase the opportunity for a public referendum for every year instead of every two years and curb the authority of the mayor to declare emergency health orders. 

Each amendment would need to get 27 votes in council Tuesday night to be placed on the ballot. 

This is a developing story. Check back for updates.

Yihyun Jeong covers politics in Nashville for USA TODAY NETWORK – TENNESSEE. Reach her at yjeong@tennessean.com and follow her on Twitter @yihyun_jeong. 

Published 9:01 PM EDT Sep 15, 2020