Metro's two-tiered revenue system raises taxing questions

Sunday, November 21, 2010 at 11:00pm

When Carole Bucy, professor of history at Volunteer State Community College, talks about Nashville in the 1950s, it sounds like Boston in the 1770s: an unlikely collection of renaissance-level thinkers.

“You know, it was a fascinating little window of history that had opened up where this could take place,” Bucy said. “To me, the whole story has to do with a group of key people who all happened to be in Nashville right after World War II … They were talking about the future of Nashville and what we could do … And so, you’ve got this whole cast of characters talking about what problems Nashville had. And you’ve got, above all, some people who are willing to think completely beyond anything that has ever been done before.”

The thing that had never been done before is a thing that can sound rather dull and prosaic to a contemporary audience: city-county consolidation, enacted in 1963. But not to Bucy, who in the 1980s and ’90s researched newspapers, read leftover municipal documents and interviewed every living consolidator to compile the largest history available on the topic.

“I got very interested in this several years ago,” she said. “I had known Carmack Cochran, who was the chair of the first and second charter commission, and had a great fondness for him. I was always very interested in this whole topic.”

Consequently, Bucy knows the full mechanics of Metro government better than a surprising number of city employees. But beyond that, in studying the political wrangling that led to the charter, she knows why certain things are the way they are, even things that have since become unquestioned parts of local government’s DNA, things like Nashville’s two-tiered tax-and-service system. 

Known in the charter as the Urban and General Services districts, this geographic designation system, as everyone knows, is basically a service availability map (view map here). The whole county is the GSD, the older parts of it are the USD. People in the USD pay slightly higher tax rates and, in return, get government-provided streetlights, garbage and recycling pickup, a higher police presence and sewers. (When the charter was first approved, GSD services excluded the fire department. Metro fire services are now countywide.)

At first, the USD only included the old City of Nashville, 72 square miles extending from East Nashville to a bit west of The Nations. The charter allowed for expansion, and it now includes Antioch, Bordeaux, Inglewood, Donelson, Hillwood and West Meade. Until they were annexed, those communities, while part of Metro Nashville, did not receive the same level of service as Nashville’s urban center. Many would not for nearly 30 more years. As Bucy explained last week, the reasoning behind the layered districts was political.

“I think the fear in the county was that they were going to have their taxes raised. ‘We’re going to be paying for all these poor people who live in the city,’ ” Bucy said.

And they might, if Nashville were created with a monolithic tax system.

“At the point in time when the merger happened, when Metro happened, there were areas, you can anticipate, that were more urban, and there were areas that were more rural. Rural areas didn’t need, and didn’t want to pay for, those services,” said Rick Bernhardt, executive director of the Metro Department of Planning. “Things that were not assumed to be a part of a rural community. So what they did was create a second level of services called the Urban Services District, and the people that were getting more services were paying extra. The people in the rural areas were not having to subsidize those services that they weren’t getting.”

On top of paying taxes for services they weren’t receiving, ruralites might also have been burdened with the city’s crippling $50 million debt, much of which had come from the recent $11 million construction of the Central Wastewater Treatment Plant, “built to anticipate sewer needs of the ‘septic tank suburbia,’ ” according to a 1958 article in the Nashville Banner. The Metropolitan Charter Commission recognized, as it prepared what would become the 1958 charter, the city’s first, that that wouldn’t fly.

“It’s the whole Scots Irish, ‘We don’t want too much government. We don’t want to pay too many taxes,’ ” Bucy said. “Nope, not going to happen. Not going to work. Not fair.”

Even so, the June 1958 vote on a consolidated charter suggested some big philosophical differences between city and county. Nashville voters cast 7,797 ballots for Metro and 4,804 against. Davidson County voters were 13,794 in favor of and 19,234 opposed to the experiment. After the vote, Nashville still had money problems, and the county still had service gaps. So Mayor Ben West began a wholesale annexation of areas that bordered Nashville. And, as if that weren’t enough of a slap in the face, he imposed a city wheel tax, the infamous “green sticker tax.” By the next consolidation vote in 1963, the USD-GSD split seemed a better alternative.

The charter passed, and then sometime after that, 47 years passed. We still have these two districts, even though the system seems dated. Other city-county consolidations, like Louisville’s in 2003, use the same model. And cities have considered it — including Memphis, where citizens voted consolidation down a few months ago. The measure lost due to overwhelming suburban opposition, like the 1958 Nashville initiative.

Why do we still do it this way?

Knowing why USD-GSD was enacted, however, fails to answer the question of why it still exists.

According to Bernhardt, what happened has rendered it antiquated in some ways.

“In theory, what was supposed to happen is that over time as areas urbanized, they would pick up those services, join the Urban Services District and pay those taxes,” he said. “What has happened in reality is that as areas urbanized, they were not incorporated into the Urban Services District and so, in effect, they began to receive those services. Especially fire and police protection. I don’t think there’s anywhere in the county, if you talk to fire and police, that gets any different level in terms of service.”

That appears to be true, at least, of the most recent USD annexation. Sponsored by council members Eric Crafton and Emily Evans, the annexation consisted of a stretch of Old Hickory Boulevard between Interstate 40 and Highway 70S in Bellevue.

A Metro Council analysis found that the property already had USD-level police, fire, water and sewer, and street cleaning service. It did not have garbage or lighting, which will cost Metro $258,000 for setup and $41,900 annually. For that, the area’s taxpayers will pay back $781,000 per year, starting after it passed, but mostly for services it had already been receiving.

“The concept probably doesn’t make as much sense now as it did originally,” Bernhardt said.

He said that recent annexations, such as the Bellevue one, have concentrated on areas that border established parts of the USD, where it’s efficient to deliver services.

“What is happening now is people in the Urban Services District are subsidizing people who are living outside of the Urban Services District,” Bernhardt said. “With the exception of garbage collection and lights, you have almost no difference between these districts. The idea of expanding services countywide, which we probably should do, doesn’t make sense because we have sort of a sprawl pattern in some of these outlying areas. It’s just not efficient to deliver services out there.”


Earlier this year, a Census-based study conducted by CEOs For Cities, a so-called “civic lab of today’s urban leaders,” found that Nashville commuters spend more time in rush-hour traffic than anywhere else in the country. The average was 250 hours per year, the last 100 of which were attributed to “longer travel distances.” Naturally then, CEOs For Cities put the blame on sprawl.

It’s a familiar, even hackneyed, criticism, although it’s not entirely without merit. Census figures from 2000 put the Nashville-Davidson balance (which encompasses the consolidated government’s reach) at about 545,000 people spread over 500 square miles, or about 1,100 people per square mile. Compare that with similarly sized Denver or Milwaukee, both with more than 6,000 per square mile. Even comparable Southern cities (which are frequently larger in area and less dense than northern cities) Memphis or Charlotte, N.C., are nearly twice as dense.

On its surface, it appears that the two-tiered system on which the consolidated government is built may have contributed to the phenomenon. Incorporating a new area into the USD, of course, guarantees that it will get Metro sewers, trash pickup, streetlights and enhanced police protection. When it’s pushed past developed boundaries, it creates tracts of undeveloped, inexpensive land that receive the same level of service as the city’s core, without which major projects would not have been salable to prospective tenants or buyers.

The USD was 72 square miles in 1963. USD annexations did not begin until the early 1970s, when Metro’s population was 447,000, according to Census figures. Now, after 20 additions, the USD is 184 square miles, more than one third of Metro government’s domain. That represents a 155 percent increase in full urban services availability while, at the same time, Metro population increased only about 35 percent, a pattern that seems to follow commercial developer speculation more than actual growth.

“I think that’s probably a very accurate assessment,” Bucy said. “I think it’s no big secret that we are a pro-business community, but keep in mind we would never have thought of consolidating, the charter itself, the notion, the idea was in and of itself pro-business.”

Concerns about anything recently fashionable in planning circles — long drives, obesity, creative-class retention — were not much on the minds of the framers of the charter. They were mostly going in the opposite direction. Press coverage of consolidation from the late ’50s and early ’60s frequently visits the same theme: There wasn’t enough land for large-scale industrial and retail projects in the city, but the county had few services. No fire, no garbage pickup and, most heavily reported at the time, no sewers.

(In a May 1958 “Let’s Face the Facts” column titled “Dr. Lentz Sees Health Hinged to Metro Plan,” Nashville Banner reporter-columnist Dick Battle featured Dr. John Lentz, “the diminutive, dynamic director of health for Davidson County,” in a sensationalistic tirade about what a no-vote on consolidation would mean for residents’ health. Quoth Lentz: “Septic tanks are expedient means of sewage disposal at best. Raw sewage on top of the ground — in your front yard — constitutes a menace to the health of every man, woman and child in Davidson County … Of course I’m for it. I’d be a plain, ------ fool if I WASN’T for it.” The series of dashes appears to substitute for a profanity.)

Some press reports suggest that the original intent was, in fact, to eventually spread the USD countywide. A 1957 Tennessean article explains the system with the following: “The overall taxing district is the General Services District which gets basic services. The other taxing district is the smaller urban services area which expands as the new government becomes able to expand metropolitan services — a basic point of the whole business.”

That the USD would continue to grow was taken for granted at the time, Bucy said.

“They were assuming the population was going to grow at such a rate that it would become necessary,” she said. “It was going to be gradual, but it was going to be continuous.”

USD expansion could explain, in part, why in 1975 a newly formed business interest called Hickory Hollow Mall Inc. began work on a shopping center precisely where it did — the far southeastern edge of a 1973 USD annexation, surrounded on three sides by what Metro government then categorized as non-urban land. (A tiny tract of land south of Bell Road, which now includes several mall-adjacent shopping centers, was annexed in 1981. Most of the rest of Antioch and the area around Nashville International Airport were later included in 1988.)

In a more recent example, the developers of May Town Center, the $4 billion multi-use complex that had been planned for Bells Bend, had applied for the land to be annexed into the USD. The Metro Planning Commission, in its June 2009 analysis of May Town, insisted that the application for USD status be included in the plan. (Note that USD status would have boosted May Town’s property tax rates from $4.04 to $4.69 per $100 of value and, once the project was completed, would create more than $46 million (2009 dollars) in annual revenue, according to a report by the University of Tennessee’s Center for Business and Economic Research.)

Bucy acknowledged that a proposal as controversial as the May Town Center might not have even been considered for the Bells Bend location if the system that allows such malleable services expansions weren’t in place. But she takes a broad view. If not for the split, the charter wouldn’t have worked, schools would have suffered and sprawl gotten worse.

“One thing we haven’t talked about is the school system. The merger of the city school system and the county school system I think has prevented to some degree what is traditionally known as white flight,” she said.

There is some historical evidence from other cities that supports this possibility. In Detroit, for example, a failing city school system is often cited as a major factor in the loss of more than 1 million people between 1950 and 2000.

In any case, Bucy said, another thing Metro government created, in the form of a large council representing small areas, was access.

“[The May Town proposal] may not have happened, sure, if not for this system,” she said. “But, if it had, people wouldn’t have been able to stop it. When people get their dander up, they can stop something like this. People here enjoy tremendous access to their elected officials. And while we like to think that there’s a conspiracy — that coziness between government and real estate developers — the fact is that when one of these council members gets enough angry phone calls about something like this, they’re not going to think it’s such a good deal anymore.” 

3 Comments on this post:

By: govskeptic on 11/22/10 at 5:46

Sounds like those outside the current USD needs to look out
for more of an upcoming tax increase than the rest of us. One
correction if I might: While the consolidation that passed may
have slowed a little of the "White flight" within Davidson County's
school system, it certainly didn't stop massive outflow to
surrounding counties! Thanks for an interesting article.

By: on 11/22/10 at 9:23

Forty-seven years should have provided enough time for the city-county government to consolidate fully, rather than in name only.

City-county arrangements make sense, both in terms of efficiency and cost.

While it is going to be necessary to raise both USD and GSD taxes soon, that is a separate issue than how long it will take for the Metropolitan Government will include all its residents equally. Equal in terms of services, but also equally in terms of taxation.

By: caluttc on 11/22/10 at 9:27

If Mr. Maldonado were to ask me to rewrite the lead sentence for the article, it would be:' Mayor Dean and his good ole lower Broad boys plan to move people into the empty condo buildings and build the train system to transport them".