Nashville Finance Chief Clamps Down On Spending Ahead Of Possible Tax Referendum

Nashville taxpayers will miss out on more than $9 million in bond refinancing, according to Metro’s director of finance — money that could have been spent on infrastructure projects.

That’s one of several immediate consequences identified in a memo released Thursday, written in response to a potential referendum that would cancel an upcoming property tax increase.

Kevin Crumbo says as long as the referendum is on the table, Nashville will be ineligible for refinancing with low interest rates.

Simply having the referendum on a ballot would ding the city’s credit score, which would increase borrowing costs and limit the city’s ability to complete major transactions, officials say.

“When we take on capital projects like building new schools, fire stations, etc. and make infrastructure improvements like sidewalks, we finance those large projects with debt. Those projects do not come out of our operating budget,” Council Budget and Finance chair Kyontze Toombs told WPLN News in an email. “If the city cannot borrow money at favorable rates due to a poor bond rating, then it will be difficult to finance the capital projects that residents need and want.

Memo from Finance Director re spending reductions in response to possible referendum pic.twitter.com/9aryLLwTtx

— Kyonzte Toombs (@toombsfortwo) September 24, 2020

The looming referendum has short-term consequences too, Crumbo says: He’s instructed the Metro Oversight Financial Committee to save the remaining $27 million CARES Act money, as it could be used to plug a hole in the city’s operating budget. The federal money is meant to be used in response to the pandemic, so the city would use it for public health and safety workers.

He also notes that a midyear budget cut is disruptive, since it isn’t spread throughout the year. Residents typically pay their property taxes in December, but if people wait to see how things pan out with the referendum, it would harm the city’s cash flow.

To try to cushion the blow, the city is moving now to freeze most hiring, reduce operational spending and extend a freeze on non-essential capital spending.

“Few corners of the Metro government, including emergency services and schools, would be spared significant reductions or eliminations,” Crumbo wrote in the memo.

The referendum would offset the budget, which the state requires.

The Election Commission will meet on Friday to determine if the tax referendum meets state law and can be placed on a ballot.