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Mayor John Cooper, Music City Center announce deal to boost budget by $12.6 million
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Mayor John Cooper announced a new deal with the Music City Center to transfer $12.6 million in payment in lieu of property taxes annually to the Metro Nashville general fund on Thursday morning.
The new tax donation will be used to close “holes in the budget,” he said.
“This is recurring revenue and can be the basis for pay increases (for Metro staff),” Cooper said. “It is recurring revenue based on the same general tax rate that exists in Nashville."
He said the funds will be used for a variety of purposes but said Thursday the money might be initially used to balance this year's budget because planned asset sales might not happen.
Former Mayor David Briley's budget included $30 million from an upfront payment in a deal to privatize Nashville's on-street parking and $11.5 million from the sale of Metro’s District Energy System.
A Nashville judge recently ruled the parking deal must be reversed and Cooper pledged not to pursue a new deal. He said he is studying the energy system sale, which is currently facing a procurement challenge.
"We got some one-time sale problems to clean up. We're working on that," Cooper said Thursday, when making the announcement at Music City Center. "There are a lot of holes in the budget."
But long term, the recurring revenue could be used for Nashville schools. On the campaign trail, Cooper said he would spend half of all new revenue on the school district.
"During the campaign I talked about the need for tourist dollars to serve residents and today we are receiving a welcome dividend on our biggest investment in downtown," Cooper said.
Metro Council will have to approve how the money is spent. The MCC board plans to ratify the agreement during a November meeting.
Nashville Electric Service similarly remits a payment in lieu of property taxes.
MCC surplus helped Metro before
This isn't the first time MCC has helped Metro with its tight finances.
Metro has received $10 million for two consecutive years from the convention center under an agreement made with Briley to shoulder the costs of police overtime and other tourism-related expenses.
This is the second and final year of that payment. When the new agreement is approved, the city will receive a total of $22.6 million from MCC for this year's fiscal budget.
MCC President and Chief Executive Officer Charles Stark said MCC waited until after the election to work with the city to create a formal financing structure officials can rely on in the future.
Conversations, he said, began soon after Cooper was sworn-in on Sept. 28.
"This plan will give Metro something to count on that is recurring every year" Stark said. "We're always open to ideas that we think will benefit our conventioneers, the tourism community and that in many cases, benefit to citizens in Nashville."
The $12.6 million figure is not locked down in the new agreement. If the property tax rate changes, the funding from MCC to the city will fluctuate.
"I think what's helpful about this is, you know, the payment in lieu will track what it looks like from a property tax standpoint," said Charles Robert Bone, the general counsel for MCC. "The city will get the benefit that if the tax rate changes, and or this building continues to appraise for more over time, and or expansion.
As the convention center prospers and the city prospers, Bone said, the payment will also increase with a piece of that.
At-large Council member Bob Mendes said he studied MCC's budget and believes it could contribute up to $15 million more to Metro's budget than what the group is offering in the new agreement.
The center captures a significant share of tourism dollars downtown. The reserve fund for Music City Center was more than $175 million as of last year. After approved capital projects, minimum cash reserves and money committed to Metro, $43.5 million remains, according to data provided by the Convention Center Authority.
"If you really wanted to push the convention center authority, there's another $10 million to $15 million," Mendes said. "The convention center is limited on what they can spend money on because there's a high stack of bond payments and they've got hotel and motel taxes that (can only be spent in certain ways)."
Not a solution, but a 'great step'
Council member Tanaka Vercher, who previously served as Metro Council's budget chair, said Thursday's announcement is "not a solution," but it helps Metro's general fund.
"I think it speaks to just the Music City Center and their role and wanting to ensure and understand the importance of the fiscal volatility of the city, that they have to contribute also," she said. "Anyone that's willing to come forward, when they're sitting on a surplus and wants to add to the general fund, I'm all for that."
Vercher said her priority for the money would be "without a doubt" to address Nashville's public issues, specifically helping Metro Nashville Police Department recruit new officers.
"We have to get public safety and education both right," she said.
Council member Emily Benedict said while the new funding is not enough to solve the city's financial issues, she called it a "great first step.
"We need significantly more but I certainly encourage (Cooper) and support him in any efforts that he can can do to find more to fill a budget gap from both from the parking deal as well as from our one-time assets that we continue to sell as a city," Benedict said.
She said she would like to see the new money fund Nashville schools, as well as Metro and public safety employees.
"They deserve raises," Benedict said. "The cost-of-living in Nashville has, as we all know, exploded. We've got to find a way for those who serve us, to get a livable wage for the city."