What power does the state comptroller have over Nashville’s finances? A lot, actually. Here’s why – The Tennessean
Despite painting a dire picture of Nashville’s financial status while appearing before the Metro Council on Wednesday, Tennessee’s comptroller remains optimistic.
“The scope of the problem is not at all beyond the capacity to handle,” Justin Wilson, the state’s 34th comptroller of the Treasury, told The Tennessean on Thursday afternoon.
Wilson’s comments came just hours after he told members of Metro Council the city needed to straighten out its fiscal house. Unless Nashville’s financial situation improves, the comptroller’s office will be forced to utilize a drastic, rarely used maneuver: a takeover.
State law allows such a move, which Wilson said is one of many powers granted to the comptroller’s office.
Nashville’s budget crisis: What you need to know
The agency is typically known for its audits of local governments and state departments. But among its other functions, the comptroller’s office must also sign off on the budgets from all 342 municipalities in Tennessee.
Such oversight comes as part of the symbiotic relationship between local governments and the state. Wilson noted local governments across Tennessee are creations of the state and the legislature.
As a result, they are “subject to the state’s supervision,” he said.
Comptroller has power to put city checks in lockbox
The comptroller’s office offers periodic reminders to local governments to keep their financial houses in order, with Nashville being the most recent case.
Other Tennessee cities have been in similar financial situations in the past. Last year, the comptroller’s office praised the finances of Jellico, a tiny town roughly 60 miles north of Knoxville along the border with Kentucky.
But just a few years earlier, the comptroller’s office took over the town’s finances, doing everything from signing off on purchases to developing a balanced budget.
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When the comptroller took over Jellico, which is hard to compare to Nashville given the drastically different circumstances and size of government, the agency brought in security and purchased a lockbox off Amazon to keep the municipality’s checks safe.
The takeover was possible thanks to a provision in state law that says: “The comptroller of the treasury or the comptroller’s designee shall have the power and authority to direct the governing body of the local government to adjust its estimates or to make additional tax levies sufficient to comply with this chapter.”
While the provision in state law gives the comptroller broad authority to take over a municipality’s finances, it can largely occur if a municipality fails to pass a budget on time, approves an unbalanced budget or if the local government were to default on its debt.
Before Jellico, John Dunn, the comptroller’s spokesman, said another takeover occurred in Polk County in the 1970s.
At other times, the comptroller has sent strongly worded letters to local municipalities to straighten out their finances. The Memphis City Council received two such letters in 2013. More recently Cannon County received a letter in 2017 calling for officials to control their spending. In both cases, a takeover was unnecessary.
Deputy Comptroller Jason Mumpower said in recent years, multiple counties in East, Middle and West Tennessee have been strongly urged to pass budgets on time and to keep themselves out of a financial ditch.
The financial strength of Tennessee’s municipalities is not just of interest to the comptroller’s office. Mumpower said when state officials travel to New York each year to appear in front of bond ratings agencies, the agencies are interested in the state’s fiscal status, as well as finances of local governments.
“They had … numerous questions about the financial conditions of local governments and how they look at the health of the part as being key to the health (of the state) as a whole,” he said.
According to a recent Standard & Poor’s document, provided by the comptroller’s office, Tennessee was one of just three states — along with Maryland and North Carolina — the bond agency found had “very strong” ratings for both its cities and counties.
Who makes the final call for a state takeover?
The decision on whether to take over a city’s finances comes down to one person — the comptroller.
“In Tennessee, municipalities can’t declare bankruptcy, but going under the comptroller’s authority is as close to being in receivership as you can imagine,” Mumpower said.
Wilson said after his Wednesday appearance in front of Metro officials, he felt better.
“The amounts we’re talking about, given the prosperity of Nashville, is clearly doable,” he said. “The issue … is political will.”
Nashville’s current budget includes an estimated $41.5 million from a private parking deal and the sale of the city’s downtown energy system, both one-time sources of money. But the parking deal is dead and the energy system sale is in limbo.
As a result, the city must find other ways to balance its budget by the end of the fiscal year on June 30, as required by state law.
Wilson said he thinks Mayor John Cooper, Metro Finance Director Kevin Crumbo and At-large council member Bob Mendes, Metro’s budget chair, understand the issue. But Wilson said he was not sure how the council would react to his assessment.
“After (Wednesday), my perception is they understand that this needs to be done,” he said.
Overall, Wilson said he is hopeful Nashville can address the financial issues before a takeover becomes necessary.
“We recognize that a good, healthy Nashville financially is really important for the health of Tennessee, and we want to do all we can to be sure that that happens,” he said.
In terms of timing, the comptroller said he would like to see city officials shore up their finances no later than the early months of 2020.
“If we get past February, we’ve got some real serious problems,” he said.
Reach Joel Ebert at jebert@tennessean.com or 615-772-1681 and on Twitter @joelebert29.
About Tennessee’s comptroller
- Justin P. Wilson is Tennessee’s 34th comptroller of the Treasury.
- He is in the midst of his sixth two-year term and was first elected by the Tennessee General Assembly in 2009.
- The office has more than 500 employees.
- Before being elected comptroller, Wilson was a partner at Waller Lansden Dortch & Davis.
- Wilson has degrees from Stanford University, Vanderbilt University and New York University.
- Wilson’s daughter-in-law, Kristin Wilson, serves as Nashville Mayor John Cooper’s chief of operations and performance.
Published 8:00 AM EST Nov 17, 2019
