Nashville faces record number of property appraisal appeals

The big picture: Small business owners, especially in the downtown area and the hospitality industry, are bracing for the crunch because their lease payments are set to skyrocket.

• Some are sounding the alarm that the rising costs could shutter mom-and-pop bars, restaurants and music venues.

Catch up quick: During the most recent reappraisal process, which concluded this spring, property values jumped by a median countywide increase of 45%.

• Appraisals reflecting increases higher than the median percentage generate massively larger tax bills.
• That dynamic was especially intense in the city's honky-tonk district on Lower Broad, where increases of 300% were common.

Flashback: The 26.64% property tax rate increase approved this year by Mayor Freddie O'Connell and Metro Council pushed bills higher, too.

By the numbers: Davidson County property owners have filed appeals for 15,278 parcels, according to the Property Assessor's Office.

• By comparison, there were 7,525 total appeals of the 2021 reappraisal process.

Inside the appeals process

The Board of Equalization has issued decisions for 7,270 appeals as of last month. Of those decisions, 4,252 resulted in an adjustment.

How it works: The board is holding approximately two meetings per day, four days a week.

• Each appeal is an intricate mix of spreadsheets, real estate data and technical jargon, with a Property Assessor employee and a representative for the property owner pleading their case to a small committee of board members.
• At a recent hearing, Nadeen's Diner in Hermitage lost its appeal and had its appraisal upheld, while a retail and office center in the Nations saw its appraised value reduced from $28 million to $26.13 million.
• The board makes complicated and expensive decisions rather quickly, with dozens of such appeals on each meeting's agenda.

Downtown businesses say they are pushed to the brink

Some of the most complex appeals involve hospitality businesses located downtown or its nearby neighborhoods.

Between the lines: A few entertainment businesses own their own buildings, but the vast majority of bars and music venues are renters. Retail tenants typically sign triple-net leases, which make them responsible for paying the property tax bill.

For example: A downtown bar might make a small profit, but the value of its building is likely increasing exponentially because of the influx of nearby hotels and condo towers.

• If the bar rents its space, it likely shoulders all of the tax burden while missing out on the added equity that comes with higher appraisals.

Case in point: Lauren Morales, co-owner of the Acme Feed & Seed on Lower Broad, tells Axios her tax bill is set to go up exponentially.

What she's saying: "Acme cannot afford our new property tax bill," she says. "Our property taxes went from $120,000 per year to $600,000 per year. We're a small, family-owned restaurant in a triple-net lease in our 12th year."

• "A $600,000 property tax bill was not part of our business model in 2013. We're a very viable business, and we're doing great otherwise, but are not doing so well as to suddenly make up that gap."

Zoom out: Recent sales on Lower Broadway complicate the issue of figuring out the appraised value. The Margaritaville building sold for $75 million last year.

• A minuscule 0.05 acre parking lot went for $16.25 million to out-of-town investors.
• Stakeholders say Lower Broad is a high-profile case-in-point of the situation, but the same dynamic is at play on 8th Avenue south of downtown, where businesses like Arnold's Country Kitchen and the Baked on 8th bakery are facing much higher tax bills.

"It's a broken system," Morales says. "I don't think the creators of the system intended that. But, if the best use economically of every piece of property in Nashville is going to be a 30-story hotel, we can't be a city of 30-story hotels. There have to be restaurants, meat-and-threes and places to go see a show at independent venues."

• "You know, the highest and best possible use of Station Inn's property (in the touristy Gulch district) might not be a Bluegrass venue, but at some point, your hotels aren't even valuable."

What's next: Property owners with pending appeals are faced with the prospect of paying their higher bills before their appeals are considered.

• In that scenario, an owner can make a good-faith payment of what they think their bill should be before the February deadline. If the appeal is unsuccessful, the property owner pays the difference, plus interest.
• Acme's appeal won't be heard until later in 2026.

Appraisals draw state attention

The skyrocketing downtown appraisals have caught the attention of House Speaker Cameron Sexton.

• As a result of Sexton's concerns, the state Comptroller is "currently in the process of reviewing properties that are primarily located in the Lower Broadway central business district," a spokesperson for the department tells Axios. There's no timeline for completing that review.
• The Metro Audit Committee also commissioned an audit of the Property Assessor Vivian Wilhoite's Office, the Nashville Banner reports.

The other side: Wilhoite said in a press release in October that she welcomed the reviews.

• She pointed out that her office follows the state law, which requires a mass-appraisal approach. Instead of examining each parcel on its own, broader appraisals are conducted for a section of the county.
• She said the scheduling of hearings into 2026 isn't really a backlog for a volunteer committee like the Board of Equalization.
• "With the oversight of the State of Tennessee, our office operates with fairness, equity, and transparency, and we have always proactively encouraged property owners, both residential and commercial, to appeal in a timely manner if they disagree with their property value or their property classification," she said.

Of note: Many stakeholders told Axios the situation isn't the result of poor work by Vilhoite's office, but rather the natural fallout of the first appraisal that took place following the post-pandemic real estate boom.

Behind the curtain: Trade groups that represent the hospitality industry are considering pushing policy changes, including implementing more specialized appraisals for properties in the downtown area.

• Another idea is property tax freezes — or capped increases — for independent music venues and restaurants.

The Metro Council recently signed off on bumping the next appraisal up one year to 2028. The hope is that more frequent appraisals will mean smaller and more manageable increases in values, which in turn bring fewer appeals. After 2028, the city may switch to an every-other-year appraisal process from every four years.

The bottom line: Morales says more needs to be done before the hospitality industry takes a major hit.

• "My bigger message and what I've been pounding the table about, and this isn't just a Nashville tax issue," she says. "It's about preserving the spaces and culture of the city that have value that are attracting the big money to the city. Without change, we will wake up one day soon and all of that will be gone and we'll be a shell of the city."