Responsible fiscal behavior is not an issue that gets our attention until we are shown, clearly, that our government’s finances are not being handled properly. The financial report delivered to the Metro Council in October makes us think that it’s time to pay very close attention to how much money our city owes — how much we owe.
Nashville faces the highest debt level we’ve had in more than a decade. Our debt, nearly $4 billion, is nearly twice Metro’s projected fiscal year 2019 revenue of $2.23 billion. Metro paid more than $250 million in interest on that debt in 2018.
Metro’s annual report shows our debt is thousands of dollars per each Nashville resident.
Our government gets revenue from many sources, including fees for services, and transfers from state and federal funds. But a large portion of the revenue Metro gets each year comes from our property taxes and the local portion of the sales tax. We citizens don’t personally carry that debt on our balance sheets, but make no mistake, we are the ones who are paying down the debt.
When a Nashvillian buys groceries, a portion of the sales tax goes straight to Metro’s coffers. When you buy new tires or a new mattress or put a new roof on your house, the sales tax portion earmarked for Metro is going to pay for civic services. So if our debt grows out of control, it will be you and I who must shoulder the burden.
In our fiscal budget for the 2017-18 fiscal year, $251.8 million went toward paying our debt. That’s more than 10 percent of the city’s revenue, and too much of our city budget. And it’s only growing larger. In the FY 2019 budget, 13 percent of our entire budget will be carved off to make debt payments. That’s the equivalent of $1 out of every $7.69 going to pay off debt. This is a real problem.
We aren’t even making the sound fiscal decision to knock out as much debt as possible without impacting necessary services, which would be an admirable goal. Not too many years ago, on the heels of the recession, Metro restructured the debt and began making a series of interest-only payments and refinanced a significant portion. So the chunk of our budget that goes straight to debt payments isn’t making a big dent in the overall debt. It’s not that different from paying the minimum amount due on a credit card. We all know how long it takes to pay off debt if you’re barely scratching the surface each month.
Nashville has real civic needs that must come first, but our debt payments are clearly making it difficult to stay on sound financial footing. We only have to look back at the painful budget tightening for this year to see. Many departments had to take it on the chin to make sure we could keep the lights on. We paid out nearly double in debt payments last year than the entire 2018-19 budget for the Metro Fire Department, set at $129 million. In fact, that debt payment was more than the entire 2017-18 departmental budgets for Public Works, the Health Department, Parks and Recreation and many other departments combined!
Interestingly enough, we hold back only 4 percent of our civic income for our reserve fund, which sat at $31.4 million in FY 2017-18. For our annual debt payments to be almost exactly 800 percent of our reserve fund is something every financial expert would say is a troubling indicator. Credit-rating business Moody’s Investors Service lowered our bond rating in 2014 from Aa1 to Aa2 because of our growing debt burden. We often hear these days that we have a great bond rating, but we hung our heads in shame almost five years ago when it was lowered. Our bond rating hasn’t changed a bit since then. In fact, the only thing that has changed is our debt burden, which is growing every year.
It’s the elephant in the room, and we need to address this urgent issue. The hole is getting deeper, and the climb out is getting steeper.
Something’s got to change.
Bill Freeman
Bill Freeman is the co-owner of FW Publishing, the publishing company that produces the Nashville Scene, Nfocus and the Nashville Post, and Home Page Media Group in Williamson County.
