Wednesday, August 25, 2021

An Epidemic of Bad Budgeting. Nashville’s budget woes predate the pandemic.

by Steven Malanga, City Journal, Summer 2021 -The past year has been a fiscal nightmare for Nashville. Covid-19 helped punch a $332 million hole in the city’s $2.46 billion budget. Tennessee state comptroller Justin Wilson warned that, without drastic action, the state might take over management of Nashville’s affairs. In response, the city council raised property taxes 34 percent, spurring a citizen revolt in the form of a ballot initiative to overturn the tax hike. Without the extra revenue, however, Mayor John Cooper’s administration said that drastic cuts would be unavoidable: “Few corners of the Metro government, including emergency services and schools, would be spared significant reductions or eliminations.”

Nashville’s budget woes predate the pandemic: the city began borrowing money to cover deficits after the Great Recession of 2008–09. City leaders, at the same time, went into heavy debt to build new government-owned attractions, offered workers health retirement benefits that they haven’t funded, and deep-sixed pension reforms that saved the state billions of dollars. In fact, back in December 2019, the state comptroller issued a similar warning to Nashville about its shaky finances. 

Nashville has been a boomtown over the last decade, its population up 12 percent, the local economy growing by some 300,000 new jobs, and its tax revenues expanding 50 percent. Yet in the familiar pattern, at the first sign of economic slowdown a decade ago, city leaders chose not to restrain budget growth but instead engineered a notorious “scoop-and-toss” financing scheme—issuing bonds to make payments on current debt (thus, scooping up current obligations and tossing them into the future). 

At the same time, aspiring to be a world-class city, Nashville borrowed hundreds of millions of dollars to build tourist attractions, from the Music City Center to a minor-league baseball stadium to an amphitheater. The city’s debt payments have thus rocketed from about $80 million in 2011 to $330 million last year. Nashville is also on the hook for $110 million in annual payments to fund its expensive pension system—this, after city leaders refused several years ago to sign on to a pension-reform agenda that Tennessee enacted, which has dramatically slowed the growth of state retirement debt. (Read the full article at this link.)

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