Dean proposes 53-cent property tax hike in State of Metro address

Update at 3:40 p.m.

 

Painting a dire picture of “draconian” cuts as the undesirable alterative, Mayor Karl Dean Tuesday proposed a 53-cent property tax increase above the current $4.13 tax rate in what would be the city’s first tax hike in seven years.

Dean, tasked with selling his plan to both the public and the Metro Council in the weeks ahead, delivered the proposal at his annual State of Metro address Tuesday morning, declaring that the decision is one that allows Nashville to “continue our momentum forward.”

“No mayor wants to stand up and talk about raising taxes,” Dean told a crowd in sweltering heat gathered at the newly opened Cumberland Park. “But we’re not Washington. We can’t run a deficit and we can’t print money.

“The easy answer, the political answer to our situation would be to let the city go backwards, make draconian cuts and frame the answer with some anti-tax mantra,” he said. “But the reason that cities exist in the first place is to provide services individuals can’t provide on their own.”

Using data from the Greater Nashville Association of Realtors, which says the median Davidson County home is valued at $145,000, the tax increase would increase the average Nashville property owners’ property tax payments by $192 annually, $16 per month. 

A property tax hike, a scenario The City Paper addressed last week [1], has been the subject of chatter for months leading up to the mayor’s budget for the 2012-13 fiscal year. On Tuesday, Dean finally shared the details. 

Outlined in a forthcoming ordinance that will be subject to Metro Council approval, the tax increase would generate an additional $100 million in revenues for Metro to support Dean’s proposed $1.71 billion budget for the next fiscal year, which is a $124 million increase over the current year’s budget. The mayor also plans to unveil a $300 million capital-spending plan later this month. 

Above all, Dean maintained in his speech Tuesday, the tax increase would allow the city to avoid severe cuts — scenarios, he said, such as laying off 200 police officers, 200 firefighters, closing four community centers and shutting down five libraries.

Since Dean took office in 2007, Metro’s operating budget has decreased by $59.2 million, which accounts for the loss of 688 city employees. Even with the tax increase, some departments would see reductions in Dean’s budget.

“After four years,” Dean said, “there is little fat left. To make significant budget reductions this year would mean cutting into muscle.”

Dean’s tax hike — which he called a “tax rate adjustment” in his 45-minute speech Tuesday — is likely to split the council into familiar factions: those who’ve been there to sign off on the mayor’s initiatives in the past, and those who haven’t, a coalition that includes the council’s few conservatives.  

Metro’s last tax increase came under then-Mayor Bill Purcell in 2005. Only a handful of the city’s 40 council members have ever voted on a change to the city’s tax rate.

Conservative Councilman Tony Tenpenny said a tax increase is “something [the council] should really take a look at first” before approving. “Until that happens, I’m not in favor of a tax hike. I’m just not.”

But At-large Councilman Jerry Maynard, who backed Dean’s key first-term initiatives, said he would support Dean’s tax plan to “move Nashville forward.” He even urged his colleagues to consider raising it higher to cover other potential shortfalls. “If there are still cuts there that impact our community, we may need to look at adjusting it even more … .” 

By May 15, as part of the mayor’s proposal, Dean intends to unveil a $300 million capital-spending plan, by far the largest ever put forth by his administration and most robust since the 1990s. If Tuesday’s speech was an indicator, Dean will highlight many of these investments to try to sell his tax plan to Davidson County residents. 

A quarter of the capital-spending plan, some $75 million, would be devoted to Metro Nashville Public Schools infrastructure. This includes: $20 million in upgrades to Stratford High School; a long-awaited new gym at Hume-Fogg Academic Magnet High School; an $8.4 million expansion of Rose Park Middle School; a $6.9 million expansion of Joelton Middle School; and plans to purchase property to expand Julia Green Elementary School in Green Hills.

Dean, who produced budgets without raising taxes during his first four years in office, will have less than two months to make the case for a tax hike before the council votes on his proposal by the end of June.

A challenge for the mayor will be eliminating any perception that the city’s new $585 million Music City Center — his signature project that he successfully pushed through the council two years ago — is somehow connected to the tax increase. As Dean stressed in his address, tourist-targeted hotel tax revenue — which is unrelated to Metro’s operating budget — is bankrolling the still-under-construction convention center.

By raising the tax rate by 53 cents to $4.66, the tax hike would be three cents shy of triggering a public referendum on the issue. Dean repeatedly pointed out Tuesday that the new actual tax rate would be less than the $4.69 rate when he took office.

Dean said he plans to extend the city’s option on a state tax relief program for the elderly, disabled and military veterans.

Twenty-three cents of the proposed 53-cent tax increase would be devoted to Metro schools, including a plan to increase the starting salaries of teachers from $35,000 to $40,000. Nashville currently ranks 30th in teacher pay. The increase would make Metro third in Tennessee in that category.

Dean said the property tax increase would also allow the city to retain 50 police officers that came to Metro two years ago as a result of a federal stimulus grant that is set to expire this year. In addition, Dean has planned a 4 percent increase for the pay of Metro workers.

For the past two years, Dean’s administration has gotten by without a tax increase by refinancing the city’s debt, which effectively delayed the city’s debt payments. The mayor’s office and the council also elected to use $25 million in rainy-day funds last year, revenue that would be replenished via the tax increase.

Handcuffed by a struggling economy, Dean’s capital spending was minimal during his first term, even on basic infrastructure such as roads and sidewalks. That would change with Dean’s capital-spending plan.

Besides the substantial school-infrastructure spending, the plan includes dollars for street and sidewalk paving projects; a new bus rapid transit line on Murfreesboro Pike, a new Bellevue library, improvements to Shelby and Centennial parks, and continued work on the city’s riverfront redevelopment.

“All of these infrastructure investments are important to remain competitive as a place where both people and businesses want to be,” Dean said.