Mayor Cooper’s FY 21 Budget-What you need to know!
Last night Mayor Cooper presented highlights of the FY21 budget to the Council. While many cities and counties are feeling the impact of the COVID-19 virus, many can tap into their fund balance (i.e. rainy day funds) to see them through. Unfortunately, Metro has no fund balance. Below are highlights from the Mayor’s presentation on our current situation and the proposed path forward.
Highlights from the Mayor’s Budget
- Metro Finance was in a bad state prior to the start of this budget season. Fund balance at the end of FY20 is projected at an abysmal $12M (the average fund balance for the past 5 years have been (100M). See here for my blog on why and how we got here – https://zulfatsuara.com/the-current-state-of-metro-finances/
- This poor financial situation is now compounded by the tornado and COVID-19
- Loss of revenue as a result of COVID-19 is estimated at $192M for the last quarter of FY20 and $280M for FY21
Property Tax Increase
As indicated above, the projected sales tax revenue loss as a result of COVID for FY 21 is $280M. The administration was able to identify new revenues totaling $64M for a net loss of $216M. In addition, the goal is to replenish cash by increasing the cash balance at the end of FY 21 to $100M plus an additional $16M in FY21 operating need. This adds up a total need of $332M to balance FY 21 budget. In order to meet this goal, the administration is proposing a $1.00 increase in property tax rate.
How much will I pay in taxes based on the new rate?
If you live in the Urban Services District – Your current property tax rate is 3.155. Based on the proposal, your new rate will be $4.155. For the General Service District residents, the current property tax rate is 2.755 while the proposed rate is 3.755. Assuming your property value is $200,000, your calculation will be as follows:
*Assessed value is your property value divided by 4.
Easy DIY calculation: To figure out how much more, you will be paying, divide your assessed value by 100. If your assessed value is $25,000, your increase will be $250 ($25,000/100).
Other Proposed Solutions
In addition to the $1 increase in property tax, the Mayor’s budget also include the following additional solutions:
- Reduce Capital Spending- thereby reducing and extending debt payments
- No longevity pay
- No layoffs
- Cut departmental budget by $12M
- Cut discretionary funding (Not for profit funding) by 50%
What about federal assistance?
Unfortunately, the current federal assistance (CARES ACT) has restrictions on its spending. It is limited to COVID-19 related expenses. It can not be used to replace loss of revenues or to replace items already in our current budget.
Councilmember Porterfield filed a resolution urging our US Senators and Congressmen to work on releasing the restrictions on the funds. The National League of Cities is also working on this at the national level with the hope that making funds unrestricted will go a long way in helping cities and municipalities.
I highly recommend calling Senators Alexander and Blackburn and Congressman Cooper to urge them to do so. I believe this will help tremendously. Here is how you can contact them:
Alexander – 202-224-4944 (DC); 615-736-5129
Blackburn – 202-224-3344 (DC); 629-800-6600
Cooper – 202-225-4311 (DC); 615-736-5295
The Metro Council will receive the full budget in a day or two. Needless to say that we have our work cut out for us. We have until June 30 to review and approve the budget or have a substitute. During that time, the budget and finance committee will be conducting department hearings and work sessions. There will also be a public hearing. See here for the full budget committee calendar. The Finance Department’s website also has good resources for constituents. The Citizen’s Guide to the Metro Budget can be accessed here.
While I believe in a marginal increase in property taxes is needed, I do not believe it has to be this high. Thus, we must look at all possible alternatives that will enable us to reduce this burden on Nashville residents during these trying times. Such alternatives include but are not limited to:
- Working with federal legislators to release restrictions on federal funding
- Reviewing the estimated revenue loss for the fourth quarter prior to final vote for any possible savings
- Considering metro’s ability to participate in the federal municipal liquidity facility- a program that will now allow counties and cities to be eligible for selling their short-term debt directly to the Fed and the U.S. Treasury.
No one could have predicted that this would be our new reality. Please know that the situation is fluid and there are other factors that could impact the final budget. We will be considering all of our options and possibilities when debating the budget.
I have put together a team of 5 top finance experts in our community to assist me in looking at the budget in detail and offer advice. I will also be hosting a Facebook live event every Saturday from 3pm-4pm to take your comments and answer your questions. You can join via my Facebook page here:
I ran on a platform of seeking your input in the budget process, I therefore welcome your emails and your suggestions. While I cannot guarantee what the result will be, I can promise to listen and to leave no stone unturned.
We are a resilient city and together, we will come out better on the other side. I pray for guidance and discernment for my colleagues and I, that we may make the best decision for all Nashvillians.