Nashville’s budget is broken because we have the lowest property tax rate in the history of Davidson County at a time when the demand on public services couldn’t be higher. In 2017, city leaders irresponsibly cut the property tax rate. We need to restore the tax rate to an appropriate level.
We got a tax cut in 2017? Why didn’t I notice? How does all this work?
Every four years, the Assessor of Property calculates the value of every property in Nashville. State law says that following those calculations, the property tax rate must be changed to be “revenue neutral” so the city can’t make money from the process of appraising the property values. At the last assessment, the value of property went up because Nashville is booming. Therefore, the percentage tax on property – the tax rate — was lowered by $1.36 per $100 of assessed value, a 30% decrease in the rate.
The job of the mayor and council is to decide what property tax rate generates enough revenue to fund the city. In both 2009 and 2017, Mayor Dean and then Mayor Barry accepted the tax rate that kept revenues neutral without debating the impact on the city budget. Both times, the Metro Council agreed. Our elected officials collectively refused to make the politically difficult decisions we need them to make as leaders of our city. They made an irresponsible choice to lower the rate, which cost our city vital revenues and disproportionately benefited developers and commercial properties. This broke the budget. In 2010, the Dean administration restructured the city debt, pushing payments into the future. Much of our budget is paying for that debt now instead of our schools and other public institutions.
Another way to think about this is that Mayor Barry proposed a $394 million/year tax cut, and the Council accepted. Technically we did not “lose” revenues because the appraisal has to be revenue neutral, but we did lose out on $1.5 billion in potential revenue over 4 years.
Even though the rate dropped, people in gentrifying areas saw tax increases. In already-affluent areas (where property values are stable), taxes were cut. Taxes also went down dramatically for many big commercial properties and developers.
What About Appeals?
Appeals always happen and when property values go up as much as they did in 2017. The Barry administration’s decision to accept a revenue neutral rate became even more of a catastrophic error because it didn’t account for the appeals that were sure to come.
What about Tax Incentives (“TIF”), the Soccer Stadium and Amazon?
First, the Soccer Stadium and Amazon are future costs that have no impact whatsoever on the current budget, so they do not explain the problem. Second, if you total up all of the current Amazon-like incentives, they don’t even amount to half of the cost of a 1% raise for teachers and staff, let alone all Metro employees.
Tax Increment Financing (TIF) deals from the past take $30 million from the budget. Even though that is a great deal of money, TIF is not the core problem. Existing TIF deals can’t be undone, and eliminating them wouldn’t solve the problem anyway. The budget shortfall is over $100 million when you factor in the one-time asset sales, and TIF deals are 30-year contracts we can’t change. Metro Council has stopped new TIF deals for now and is re-evaluating how they can be used, so the city is making progress on preventing future problems. But even if we could undo every TIF deal (and we can’t, by the way), we would still need to find another $75 million every year.
Didn’t Metro Council try to raise the rate last year? How much would it cost me if that had passed?
If you own a home worth $150,000, it would have cost you about $187/year. If your home is worth $300,000, you would pay an additional $375/year. That’s about $1/day. A commercial property like Opry Mills would pay $600,000 more per year. This is what it will take to fund our schools. This tax is paid by homeowners and commercial property owners only.
How will this help fix the city budget?
Each penny of property tax rate generates about $3 million in revenues. So last year’s $.50 proposed increase would have given us an additional $150,000,000. The Board of Education’s current budget is asking for $76,000,000.
Is there waste at MNPS that can be cut in order to fund teacher raises?
MNPS is a chronically underfunded school system. While there may be disagreements about school budget priorities, you can’t cut an underfunded system into being fully funded. Our schools need more money, not less.
What about the state’s responsibility for funding the schools?
The state funding formula (called BEP) is based on many factors, including on potential property tax revenue from local districts, not actual revenue. So, because Nashville’s property values are high, the state formula calculates the potential revenue the city would have to fund the schools and adds in the rest. The problem is that our tax rate is so low, the state greatly overestimates the city’s contribution. A low tax rate ends up causing underfunding at both the local and state levels.
What can I do to help?
Email or call your Metro Council representative and ask them to support a property tax adjustment that gives our schools and other public institutions the funds they need to truly serve our city.
Thanks to Red4Ed for content.