Feb 2, 2022 - News

Sales taxes smash expectations

Data: Metro Finance Department. Note: FY2022 through Nov. 30, 2021. Chart: Sara Wise/Axios

Nashville has blown past sales tax projections despite the pandemic, raking in over the last 18 months $174 million more than anticipated.

  • For the fiscal year ending June 30, 2021, the city collected $481 million in sales taxes after projecting to collect $352 million.
  • Through November 30, when the most recent data is available, collections are up nearly $45 million.

Why it matters: Metro leaders who feared the pandemic would thrust the city into financial turmoil have been able instead to rebuild rainy day funds.

  • Metro councilmember Burkley Allen, who chairs the budget and finance committee, says the city's sales tax projections have often been conservative.
  • Allen says the council will ponder possible mid-year appropriations after the December collections come in.

What they're saying: Metro finance director Kelly Flannery tells Axios that three factors have fueled the strong tax collections.

  • Federal stimulus packages by the Trump and Biden administrations "encouraged consumer spending and helped prevent a recession."
  • Nashville has maintained a strong job market, with the seventh-lowest unemployment rate among large metro areas, according to Flannery.
  • And the hospitality and tourism industries "bounced back quicker than forecasted thanks to a variety of offerings and sustained national interest in Nashville."

Between the lines: Flannery cautioned that the robust sales tax collections do not mean Metro should plunge headlong into a mid-year spending spree. Powered by the 34% property tax hike in 2020, Mayor John Cooper's administration has worked to build up the city's reserves.

  • "Mid-year appropriations to address needs that arise are typical, but significantly spending down fund balances would be a mistake," Flannery says, adding Nashville is only now beginning to reach fund balance levels commensurate with peer cities.
  • The good news on collections is also tempered by rising costs for cities to do business due to supply chain issues and inflation, Flannery says.

Context: Nashville's tax collections match the trend statewide. Tax collections overall in Tennessee are up 26% over projections, or $1.6 billion, according to data from the Sycamore Institute.

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