Metro Director of Finance Kevin Crumbo addresses Special Meeting of the Budget & Finance Committee on December 11, 2019.
NASHVILLE, TN – Nashville has dodged a bullet by balancing its 2019-2020 budget. Director of Finance, Kevin Crumbo, filled a $41.5 million hole by stealing from Peter to pay Paul.
In a December 11th letter to State Comptroller Justin Wilson, Crumbo underlined the Debt Service Fund deficit and then listed seven sources of revenues to fill the gap.
The last two items are $2.6 million of savings and deferrals and $5 million was taken out of the Barnes Fund, which builds low-income housing.
“It should be noted the proposed actions are no cure for Metro’s long-term budget concerns but are responsive to immediate financial issues,” wrote Wilson.
He told Crumbo that Metro’s 2021 budget must be balanced, provide for orderly bond repayment, long-term retirement funds for Metro employees, and “begin the process of developing adequate reserves and provisions for your significant long-term obligations”.
While Crumbo managed to patch the hole in the city’s pocketbook for now, the same thing will happen again next year unless the city learns to live within its means.
The city handles its money like filling a bathtub without a stopper so water is constantly flowing out the bottom. This year Nashville must pay $337 million to service its general obligation bond debt and that is $337 million down the drain.
That money could have bought new textbooks for every student in Metro schools. It could have hired 100 more teachers. It could have given every Metro employee a 10% raise. It could open city community centers on weekends and hire people to staff them. It could put 100 more body-cams on the street. It could hire more public defenders. It could increase bus lines, pave more sidewalks, crosswalks, and make more bike lanes, and so on.
Nashville’s debt has been growing steadily since 2010 when Metro refinanced $190 million in debt during the Dean administration. The plan was to pay it off and $47 million in interest by next year.
But the city kept borrowing money to pay for high-priced things like First Tennessee Park and the Ascend Amphitheater. As the debt kept growing, the interest payments on the bonds kept rising. Metro now has $4.6 billion in general obligation bond debt. That is more than 24 times the original $190 million.
Mayor Cooper, Finance Director Crumbo, and members of the City Council have pledged to work together to meet the fiscal crisis. Cooper is still resisting a tax increase, arguing that it will fall more heavily on the less affluent.
We are about to enter the new budget season. That will be a difficult time and a difficult process. Without raising taxes, it is not clear if the city will have the resources to meet its current needs much less its long-term ones like employee pensions.
Metro is not likely to grow itself out its debt burden either. Nashville’s much ballyhooed growth has done little to set city finances on a sound footing. In fact, the building boom of the last decade has coincided with the city’s rapid descent into debt. Metro could levy higher taxes on all new construction but that’s about as likely as the Titans winning the Super Bowl.
When cities go bust, and many have with less debt than Nashville, either they get taken over by the state or the stakeholders sit down with a bankruptcy judge to figure out a way forward.
Bankruptcy is a bloody painful operation. Fire stations and schools close, the police force and other departments lay people off, social services are cut, roads stopped getting paved, etc.
We are not there yet. But we could be soon unless drastic changes are made to bring city revenues in line with expenditures and Nashville figures out ways to pay off its mountain of debt. Taking on any more debt is a road to perdition.