Apr 1, 2024 - News

Nashville leaders face a tough budget cycle

Illustration of a person holding a really tiny dollar bill.

Illustration: Allie Carl/Axios

Nashville Mayor Freddie O'Connell and the Metro Council are embarking on a difficult budget cycle with essentially flat revenue projections and no appetite to raise property taxes.

Why it matters: O'Connell is dedicating his political capital to the November transportation referendum and has already said a property tax increase won't be in his upcoming budget.

  • That's good news for taxpayers, but priorities like pay increases for city workers will be a challenge.

State of play: Metro and the state of Tennessee are in similar financial positions this budget cycle. Flattening tax revenues painted Gov. Bill Lee into a corner as he crafted his budget earlier this year.

  • O'Connell alluded to the tight budget year at his media availability on March 22, when he said revenue projections would make it tough to increase funding for arts grants.

Zoom in: Metro Finance Director Kevin Crumbo provided more details in an interview with Axios last week.

  • "For our planning purposes, we've been planning for our revenues to be flat."
  • Metro's budget has three primary funding sources: property taxes, sales taxes and federal funding. Property taxes and federal money are steady, but sales tax collections are more in flux.
  • The city and state both rely on the University of Tennessee's economics department for advice on economic trends.

By the numbers: Not even the pandemic could slow the booming economic growth Nashville has enjoyed over the past decade.

  • The 2020 fiscal year budget was $2.33 billion. As the economy grew, the city's budget expanded to $3.22 billion this year.

Reality check: "I wouldn't characterize myself as worried, but I'm simply aware of what that economic trend is," Crumbo says.

  • "Big picture, we're starting to see our economy normalize. It seems to put us back in a spot that maybe we would have been a few years ago [before the pandemic]. We can't really sustain that level of growth year after year after year."

What we're watching: This may turn out to be a low-key budget cycle, but it's logical to speculate about a property tax increase a year from now.

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