Could schools get a slice of funds going to Nashville developers? Three bills coming before Metro Council
An influential Nashville councilman has proposed a series of bills that could reshape how the city government awards developers lucrative subsidies.
In one proposal, at-large Councilman Bob Mendes wants to set aside a large portion of redevelopment tax dollars to be used exclusively by Metro Nashville Public Schools.
That bill and two others would bring more scrutiny to the Metropolitan Development and Housing Agency, a powerful agency that gives multi-million dollar incentives to developers with little oversight.
Mendes, a long-time skeptic of incentives, is focusing on tax-increment financing, which since 1978 has resulted in $355.8 million of subsidies to projects in Nashville.
The legislation is on Tuesday’s council meeting agenda; some of the votes will be just procedural.
“In communities all over the city, when MDHA comes up in conversation, people say that all it does is give corporate giveaways to developers,” Mendes said. “I think there is definitely a place for [tax-increment financing] in how we develop the city, but most people think there’s something shadowy and secretive about it, and we have to address that.”
His legislation would set up a committee to study tax-increment financing, or TIF, a tool that has been credited with spurring redevelopment of The Gulch and other downtown areas. The committee would recommend how the deals could be conducted in a “more transparent, equitable, effective and understandable manner.” It would consist of seven people, appointed by MDHA, the mayor and the council.
MDHA officials pointed to the benefits of redevelopment funding and say they look forward to the broader discussion.
“TIF investments in downtown have enabled multiple historic buildings to be salvaged and put to adaptive residential reuse,” spokeswoman Jamie Berry said in a statement. “Metro Government now has substantial tax income growth from the numerous businesses which developed in these areas.”
Here’s how TIF works today: The Metro Council first designates an area for redevelopment. Then MDHA awards funds to a developer to help with land acquisition, parking, infrastructure or some other limited uses. Future property tax revenue generated at that site is then diverted to pay down the balance of the loan.
Since Nashville schools are funded with property taxes, some of their potential revenue is instead given to developers. If Mendes’ bill passes, projects in all future redevelopment districts would have to pay their portion of school taxes. That’s about 40 cents of every Metro property tax dollar, Mendes said.
In fiscal 2018, which ended June 30, MDHA diverted $9.8 million of property taxes that would have otherwise gone to the school district.
“We’re talking about the equivalent of an almost 2% pay raise for every schools employee that is today going to MDHA and these developers,” said MNPS Director of Government Relations Mark North.
Critics of TIF say the city no longer needs to stimulate development in some of the districts that are already thriving, like The Gulch. But proponents say MDHA only awards TIF to worthy projects that absolutely need the money to succeed.
“This perception that anybody can wander into MDHA and come out with a wheelbarrow full of money is ludicrous,” said James Weaver, a lobbyist who represents developers. “None of these projects would occur, in theory, without the incentive.
“Bob’s proposal dramatically reduces the amount of money available for this city to incentiize projects,” Weaver continued. “It deserves a whole lot more debate than it’s going to get over the next month.”
While the broader school tax proposal would apply to future redevelopment districts, Mendes has proposed using it for a current area as well — the Rutledge Hill district, which is under development just south of downtown. Any individual projects already approved by MDHA would not be subject to the new bill.
In 2016, Mendes successfully introduced another proposal that forced MDHA to create an annual report of its TIF projects. It also carved out a portion of redevelopment tax revenue for the city’s debt payments, and required that a project’s extra TIF dollars — beyond what’s needed to pay off its loan — stay in the Metro general fund.
