Mayor Freddie O’Connell filed the third budget of his first term, a fiscal year 2027 budget that prioritizes affordability by reducing the local grocery tax and making the city’s largest-ever investment into housing.
“Reducing our grocery tax doesn’t just change a line on a receipt; it acknowledges that feeding your family shouldn’t be treated like a luxury, and putting nearly twice as much funding toward housing reflects our serious commitment to making our city more affordable,” said Mayor O’Connell. “It’s also right to take care of our Metro workers and that’s why we’re fully funding our employee pay plan. To do these things in the face of flat revenues means Metro will need to tighten its belt, and I think it’s the right thing to do for all of us. Being good stewards of our city’s growth, means being a good steward of government’s growth as well.”
The proposed $3.8 billion budget reflects a balanced effort to address core operational needs and key mayoral priorities, while positioning Metro for continued long-term stability. Departments are tasked with exercising increased fiscal discipline, carefully evaluating their budgets, and making modest reductions to expenditures considering the current financial conditions.
The budget takes into account the uncertain economic picture facing Nashville and the United States. That includes volatility in the financial markets, increased fuel costs, inflation, the end of federal Covid relief funding, continued instability in federal funding outlooks, flat property tax revenues, and relatively flat sales tax revenues following the grocery tax cut.
“This proposed budget reflects our commitment to maintaining essential services, supporting employees, and preserving Metro’s strong financial foundation while responding to the realities of the current fiscal environment,” said Department of Finance Director Jenneen Reed. “Importantly, we are continuing to maintain a healthy fund balance which is critical to maintaining our highest-ever bond ratings – which allows our tax dollars to stretch farther.”
Grocery Tax Cut
Mayor O’Connell’s budget proposes reducing the grocery tax by a half-cent to bring some financial relief to Nashvillians. The proposal would drop the local option sales tax rate on groceries to 1.75%. The current local option sales tax is 2.25%. The average family of four in Nashville spends about $1,200 per month on groceries, so the rate reduction means that family would pay one-quarter less tax (22.2%) than they pay currently. Over five years, this family will save $360 on their grocery bills. That is equivalent to receiving more than an entire year’s worth of tax-free groceries compared to what they pay now.
Housing
The largest household cost for most Nashvillians is housing. To improve housing affordability, the mayor’s budget invests a total of $69 million into the Unified Housing Strategy (UHS), one and a half times the mayor’s first-year investment into the UHS. The mayor’s budget also includes the largest-ever allocation of $22 million from the city’s general fund into the Barnes Affordable Housing Trust Fund which has previously benefited heavily from federal emergency relief funding.
The mayor’s budget also includes a new tool to finance affordable housing. The $7 million included in Mayor O’Connell’s FY2027 budget for the subordinate debt pilot creates a revolving loan program that will build the foundation needed to initiate a durable affordable housing bond. Funds from the pilot program will act as critical financing needed to make affordable housing projects financially viable when available debt and equity aren’t enough to cover total construction costs. Unlike a grant, funds loaned from the pilot program are repaid, allowing the city to recycle the dollars into future affordable housing projects. This tool serves as an important next step in advancing the strategies outlined in Metro’s UHS.
The budget supports housing programs originally funded with federal Covid relief dollars through new local general fund investments, including $150,000 for a home sharing program, $1.5 million to fund 15 full-time employees supporting programs to house people experiencing homelessness, and $2.4 million for eviction right-to-counsel.
The budget also continues to support anti-displacement strategies ($1.75 million), permanent supportive housing ($1.25 million), and rapid rehousing ($2 million). It also includes $23 million from MDHA’s PILOT (payment in lieu of taxes) program, which will add a new permanent supportive housing PILOT this year.
Schools, Services, Safety
As with the previous budget, Mayor O’Connell is continuing to invest in the core components of his Community Improvement Program: quality schools, reliable services, and neighborhood safety.
Metro Schools will receive an additional $55.9 million for FY2027, a 4% increase over the last fiscal year. The increase will fund pay restructuring for teachers, support new school start times, and make-up some funding lost from declining state support for schools.
The budget transitions $385,000 for the Office of Family Safety’s partnership with the Nashville Children’s Alliance from federal Covid funding to local dollars. The Nashville Children’s Alliance is the only authorized provider of forensic interviews for children who experience abuse and the entity providing therapy to severely abused children. The Office of Family Safety will also receive local funding to continue employing four high-risk case managers which are currently funded through grants. These positions support victims experiencing the most severe forms of interpersonal violence, including strangulation, and threats with — or actual use of — deadly weapons. This work is critical at a time when the city is seeing an increase in domestic violence-related incidents.
The Metro Public Health Department’s Nashville Strong Babies program will receive an additional $250,000 to support the successful Doula program. Since countywide expansion, the Nashville Strong Babies program, which supports mom and baby from pregnancy through the first 18 months of life, hasn’t lost a single mother or child. The MPHD budget also includes $396,000 for the Mental Health Cooperative to support REACH, Partners-In-Care, and crisis services for people experiencing a mental or behavioral health crisis.
To continue improving safety in Nashville neighborhoods, the budget maintains funding for the Nashville Fire Department, MNPD, and Department of Emergency Communications. It increases funding for the Office of Emergency Management by $423,000 (16%) to support warning sirens maintenance and critical emergency preparedness positions.
The budget also includes $8.5 million for the Davidson County Sheriff’s Office to address an increased numbers of inmates. The administration recently filed a motion in court related to the state’s lack of compliance with court orders to assume custody of certain inmates. Metro estimates the indefinite housing of these inmates has cost the city more than $5 million. Metro is currently considering filing separate legal action to recoup the funding.
Savings
The mayor’s budget reflects the economic realities of the local, state, and national economic environments. Locally, revenues into the city’s general fund are flat. The FY2027 budget acknowledges these uncertainties and reflects a proactive effort to protect Metro taxpayers with careful financial management practices such as maintaining healthy fund balances and strengthening financial reserves. These proactive safeguards allow the mayor to preserve operational stability, protect essential services, and position the government to respond effectively and responsibly to future economic uncertainties and fiscal pressures.
The FY2027 budget ordinance was filed on Friday, May 1, and the Council will begin their budget process with a presentation from the Director of Finance on Wednesday, May 6.
