State considers funding tool for proposed convention center

Friday, June 19, 2009 at 3:24am

The state Department of Finance and Administration is in the process of reviewing Metro’s Tourism Development Zone application, which was submitted May 20 in hopes of creating a critical funding tool for the proposed Music City Center.

The voluminous application designates the borders of the TDZ, which is a rough three-square-mile circle around the site of the proposed Music City Center. The proposed convention center TDZ begins in the north along Jefferson Street, is bordered in the east and south by the I-24/I-40 interstate loop, includes the Midtown bars and restaurant area in the south west and then works its way in northeasterly chunks back up to Jefferson Street.

Along with the tourism taxes and fees enabled by state legislation and passed by Metro Council, the TDZ is another funding tool for the estimated $635 million Music City Center. The approval process for the state typically takes three to four months and the TDZ would also need approval of the state Building Commission.

A TDZ shifts sales tax revenue generated by a massive public project to service debt issued for the project. The TDZ sets a baseline year (in this case 2008) and then returns the sales taxes collected above annual countywide growth. For instance, if the TDZ is approved and sales tax collections rise 3 percent throughout Davidson County in 2009 and rise 5 percent within the TDZ, then the remaining 2 percent would be returned to service the debt.

In a letter accompanying the application, Mayor Karl Dean spelled out the need for the TDZ to finance the project.

“The new convention center project will be both the catalyst for revitalization of the (SoBro) area and will beneficially impact the surrounding downtown and midtown areas from the first day the convention center opens,” Dean’s letter states. “In addition, the areas on the edge of the Tourism Development Zone will experience growth and development due to this investment by our city as the energy created in the core of downtown Nashville spreads throughout the whole zone.”

Not included in Metro’s extensive application were sales tax collection numbers for businesses within the TDZ. The Metro Finance Department has preliminary collection numbers, but is still waiting for more specific data. The state does not require that sales tax projections be included in its application, but Metro will have to pass the information along to the state Department of Revenue.

Although Metro has already approved the TDZ, some Council members have been publicly skeptical about the sheer size of the zone. They questioned whether Metro was trying to squeeze out too much revenue, despite the fact some of the businesses wouldn’t seem to benefit from a new convention center.

Some, like District 6 Councilman Mike Jameson, have worried that Metro is sacrificing its own education dollars by expanding the TDZ so far around the project. Two-thirds of all local option sales tax collections go to Metro Nashville Public Schools. But schools will not collect incremental increases within the zone once the TDZ is established.

The Music City Center project is still waiting for a financing deal to be presented by Dean’s administration and approved by Council before it gets the green light. Already Council has appropriated $75 million in tourism taxes to begin land acquisition for the project.

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10 Comments on this post:

By: idgaf on 6/19/09 at 4:19

These people are INSANE.

By: JeffF on 6/19/09 at 7:25

Yeah the folks way out on Jefferson will really see a boom in business. I know personally that there are millions of conventioneers wanting to skip their meetings and rush out to spend the day at a farmers market. Never mind that there are no hotels anywhere close to these areas.

By: dnewton on 6/19/09 at 9:42

This avoids the discussion of the viability of the project. The state, if it is really a good project, should get off of its 7 cents on the dollar and throw in some money. The state is going to be the biggest tax benefactor. The only risk that will be taken is that the businesses in the zone that have nothing or little to do with the convention business may decide to leave the state or go out of business.

The fact that the state does not see enough value in this enterprise to risk its own money and only wants to facilitate the rape of Davidson County should be a warning. All of that BS about the money multiplying and the cornucopia created by convention centers is a way to fill in dead time at the Chamber of Commerce but it is not universally bought as a law of economics.

By: govskeptic on 6/19/09 at 12:02

How many Nashville Taxpayers know the taxes collected in this special TDZ area going for the Convention Center/Hotel will not be available to go for schools? In addition to those dollars, those tourism dollars now paying for other items within the city will also not be available. These cost they are funding will not just go away, but will be picked up thru additional property taxes and other numerous fees this city is so glad to add onto.

I suggest a small portion of the lost revenue be picked up by discountining the $600.000.00 given annually to the Chamber of Commerce by the council.

By: producer2 on 6/19/09 at 12:53

It would help if you read the article:

A TDZ shifts sales tax revenue generated by a massive public project to service debt issued for the project. The TDZ sets a baseline year (in this case 2008) and then returns the sales taxes collected above annual countywide growth. For instance, if the TDZ is approved and sales tax collections rise 3 percent throughout Davidson County in 2009 and rise 5 percent within the TDZ, then the remaining 2 percent would be returned to service the debt."

What part of "over the average" don't you get?

By: Dragon on 6/19/09 at 1:34

So, the city gets ZERO revenue until the beast is fully paid for? And, any additional sales tax, like the hugh hotel, are diverted 100%.

I believe this is what is known as a "self-eating watermelon".

By: Dragon on 6/19/09 at 1:35

s/h/b: huge

By: producer2 on 6/19/09 at 2:01

Actually if it is written in English I interpret it to say that the only funds that go to service the debt (the MCC) would be anything OVER the countywide average. Kinda like would they have that increase without the facility....

By: govskeptic on 6/20/09 at 8:57

producer2 seems to be on the case for this cause on a daily basis. English like Law is whatever the writer seems to want it to be especially when spoken or written by politicos.

By: producer2 on 6/20/09 at 9:13

I was just pointing out how the actual proposal to law is written. If you are that skeptical you have other issues....