An overwhelming majority of Nashvillians voted “Yes” Tuesday to Metro Charter Amendment 1, changing the Metro charter by capping the property tax rate and throwing a monkey wrench into the system by which it is raised. That monkey wrench is the voters of Davidson County. Right now, it works like this: the mayor creates a budget, the Metro Council deliberates and either amends it, passes it or creates its own. If this charter amendment is deemed constitutional—and that’s not at all clear—the mayor and council would have to get approval from Davidson County voters via referendum to increase the current Metro property tax rate. On its face, this seems like the ultimate form of local government beholden to its constituency. It takes the “No taxation without representation” plea to a new level (i.e. forget the representation, we’ll decide on the taxation ourselves.) But this amendment is problematic in some critical ways. The first of these is Davidson County’s bond rating. Cities issue municipal bonds so that they can raise money for things like capital projects, bridges or schools. Bonds receive ratings from independent analysts. The higher a city’s bond rating, the more likely the city is a safe investment. Part of what makes a municipal bond a good bet is the fact that cities always have a safe and uninterrupted stream of revenue. Who in the class can guess where that revenue comes from? That’s right, taxes. And not just any taxes. More than half of Metro’s budget comes from property taxes. If bond analysts think that Nashville’s property tax rate can’t be raised without an expensive, contentious and drawn out election process, the status of our fair city’s bonds could be downgraded. This would make the bonds less attractive to investors and the business of borrowing more expensive for Metro. The Fitch Group, a bond rating agency with offices in New York and London, recently warned that Nashville’s bond rating could be downgraded with 1’s passage. Last month, the agency announced in a press release that “a restriction on revenue-raising ability would likely further erode” Metro’s bond rating. Former Metro Council member Stewart Clifton, who opposed the amendment, says trying to communicate all that to voters was just too big a hurdle. “Unless you have an awful lot of money to do in-depth mailings and grassroots organizing, you don’t have people’s attention,” he says. “It doesn’t fit on the back of a bumper sticker. It’s hard to explain to people about how bond ratings work.” Meanwhile, this charter amendment faces the hurdle of constitutionality. The Tennessee Constitution does not give voters the power to determine property taxes. Metro Law Director Karl Dean says that that a memo has been circulating in his department that “pointed out some issues” with the proposed amendment, but that his office hasn’t issued a formal opinion. Though the amendment may soon face a legal challenge, one of its biggest backers, Ben Cunningham of the group Tennessee Tax Revolt, is sanguine in victory. While sipping a beer at Brown’s Diner in Hillsboro Village, he says he’s not worried about the amendment’s constitutionality. He cites a recent Supreme Court decision reinforcing “the right to self determination” of voters who live in charter cities. For now, he says, he’s enjoying the moment and “looking forward to the ratification of the amendment.”
