By Peter White
NASHVILLE, TN – Pretty soon it adds up to real money. The Metro Council is going to vote on three expensive projects City Hall wants but which will add $2.9 billion in debt to a city that is already shouldering $250 million in debt service payments. By 2024 those payments will increase $100 million to $350 million, according to the 2018 Treasurer’s Report.
Missing from these calculations is a $1.5 billion backlog of capital spending already approved and waiting to be added to the city’s current reported debt of about $3 billion. City debt is actually closer to $5 billion.
With $2.9 billion in new spending in the wings, the city’s annual debt service is going to increase above $350 million but by how much is hard to predict.
Two Kinds of Debt
General obligation debt pays for things like schools, sidewalks, libraries and parks. Property taxes and all city assets back it. Revenue bonds pay for things like a new soccer stadium and that debt is defrayed by income from lease payments and ticket sales’ taxes. However, if revenues don’t cover debt payments, then the General Obligation Fund picks up the remaining cost as a guarantor of the revenue bonds.
When that happens, taxpayers foot the bill like they did for the $30 million cost overrun on the new Sounds stadium.
“We are living beyond our means,” says At-Large Councilman John Cooper.
A $300 million deal to build a pro soccer stadium at the State Fairgrounds, a $5.2 billion regional transit plan, and a $125 million floodwall to protect downtown Nashville would add almost $3 billion to the city’s debt and that would increase the amount of debt service payments it has to make every year.
The Barry administration says much of the costs of things on its wish list would be paid from various tax increases and state and federal funds to finance a regional mass transit system.
“It’s all smoke and mirrors,” says Hermitage Councilman Steve Glover. “None of the numbers work. I don’t care which numbers you use, none of them work.”
At a budget and finance committee hearing about the proposed soccer stadium last week, Nashville Chief Operating Officer Rich Riebeling promised Glover some numbers in writing but Glover says he has yet to receive them.
“The key here is to remember under the state law you are able to capture all of the state sales tax that is collected from the games which is a unique feature of state law so that makes up the difference and gets you closer to that $4 million number,” Riebeling told Glover.
“There is no hard copy of anything the administration has shared with anyone on council. When I am running the numbers I’m basing it on what’s spewing out of their mouths,” he said. Glover said the brochure that had his name on it describing the soccer stadium deal was taken back at the end of last week’s hearing.
It described a deal that would require the city to pay $4 million of a $13 million yearly debt on the stadium. The team owner would pay $9 million. The city would collect $1.75 per ticket and nearly filling the 30,000-seat stadium for all seventeen season matches would yield $785,625.
If you tack on a surcharge of .50 per ticket that would bring in another $216,750. That totals just $1 million of the $4 million the city needs to pay each year for the stadium. It would take taxes on a lot of hotdogs and beer to make up the $3 million difference.
What Glover fears is that the city council will act like kids at Christmas who are happy with lots of nice new toys but don’t think about the credit card bill that comes due in January.
“What else is going to be added to the pot?” Glover wonders. It could be 10 acres somewhere along Walsh Road between the racetrack and Nolensville Rd. that the team would lease at no cost for 99 years and would develop, as it likes.
Councilman at Large Bob Mendes doesn’t think the financial guarantees in the soccer deal protect the city well enough.
“As proposed, I think Metro pays for anything that is considered a capital improvement,” Mendes wrote. He said a team spokesperson described the additional 10 acres the team would develop as a “critical” part of the deal. Mendes says it’s a deal-breaker.
“I think the 10 acres is largely about the team controlling the entertainment experience before and after the game in addition to inside the stadium.
Are bars and restaurants an acceptable use for the state fairgrounds that we control? And, is it appropriate for the team to get control of these additional entertainment venues on public land, or should there be some sort of bidding or proposal process?” he asks.
Although the Mayor’s plan calls for a soccer stadium at the Fairgrounds, other locations in Bordeaux, Antioch, or the old Greer Stadium are possible alternatives.
Mayor’s New Sidewalks
Mayor Megan Barry is a big booster of the “It” city. Her management style in the trenches of city politics, however, is rife with bid and switch manipulations. And according to Glover, the Mayor takes a carrot and stick approach when dealing with the City Council.
“We hadn’t even finished last year’s budget and she promised everybody a raise for the next two years. That is $77 million in additional cost over the current year’s operational budget of 2.2 billion. Now you take another $4 million for the soccer stadium. We haven’t given any money to schools, any increases to anything in the city, but we’ve already spent $81 million,” Glover groused.
“I’m not saying the sky is falling, but it’s not quite as sunny as we think it is,” he warns.
“Right after Megan Barry gets elected mayor, a couple months later, they say we have mysteriously found money to build sidewalks.
They took the money from the police HQ we approved in the last budget. We had $25 million sitting there and they “found” $18 million to build sidewalks.”
Glover said that when the council got to the next budget season they found out the city had already spent the money out of the Police Department that went to build sidewalks.
“When the mayor’s office decides they want a project done, they will take money and they will move it. They will move it from a given project that we think we have voted on in the council,” Glover said.
Glover says city revenues have fallen from 2008 to 2016 and nobody is really paying attention.
“It’s a constantly moving target. This week it’s the soccer stadium, then it will be Fort Negley,” he said.
“We are piecemealing it. We are bringing on a little section at a time and asking the council to vote on that without us being able to step back and say ‘What is the big picture?’”
“What are we doing to the people of Nashville that is basic to the overall financial health and welfare of our city? We aren’t doing that,” he said.
Glover said council members want things for their districts and playing nice with the mayor is a way to get them.
As Debt Grows the
Hole Gets Deeper
The median debt per capita in the top 50 largest U.S. cities is $1,567. Nashville is the third-most indebted American city at $4,306 debt for every man, woman, and child in Davidson County. Only New York and Washington DC have higher per capita debt. Chicago is fourth with $3,997 per person.
Administration officials are quick to point out that Nashville is not like other metropolitan areas because it is a city and a county and so its debt is skewed higher than other cities that do not count debt from the counties where they are located.
Even so, the city’s debt was not always so high. Nashville’s debt was $2.2 billion in 2008. If the city decides to spend another $3 billion, then the debt will grow to $8 billion. To keep pace paying off its debt, Metro would have to increase its revenues by 24%. Glover says that’s about as likely as the Titans winning the Super Bowl. Taxpayers subsidized the Titans $4.3 million this year.
Some members of the city council are beginning to wonder if the proposed soccer stadium is just throwing good money after bad. Numerous studies have shown professional sports teams do not bring the jobs and economic growth they promise to cities that foot the bills to build fancy new stadiums.
The city council may vote on the stadium deal November 7. If the vote is delayed for some reason, the vote on a new soccer stadium will take place November 21.