Monday, June 1, 2015

Speak out now against a future tax increase. 2015-2016 Operating budget on public hearing Tuesday June 2nd.

The first two items on the Council agenda on Tuesday night June 2nd are hearings on the budget.  There are two hearings: the first is the hearing on the operating budget  (BILL NO. BL2015-1122) and the second is the hearing on the capital improvements budget for FY 2015-16 - 2020-21 (.BILL NO. BL2015-1142 )  The capital improvements budget is not really a budget and it does not authorize any spending. It is a prioritized wish list of what projects the city would like to build and how the project will be financed. It is very important however; if one wants to have something build then it must be in the CIB or to stop something, it needs to be taken out of the CIB. I discuss in more detail the importance of the CIB and how the public hearing on it may be an opportunity to kill the relocation of the jail to southeast Davidson County. Follow this link to learn more.

The operating budget funds the day-to-day operation of the city.  Big projects are usually funded by borrowing in the form of bonds. Some bonds may be revenue bonds, meaning the revenue generated from the project pays off the bonds for the project and others are general obligation bonds, meaning public funds will pay for the bonds.  There is not a hard and fast rule of what should be paid for out of current tax revenue and what should be paid for our of borrowed money.  As a general rule, things should not be financed for a period that is longer than the thing we are financing will last. The debt service is the amount of money that is in the operating budget that it takes to make the payments on the borrowed money. The debt service is part of the operating budget.

In addition to the operating budget, some money is set aside to fund repairs and fund other things that were not included in the operating budget. This set aside is 4 percent of the anticipated revenue of the city and this money is referred to as the "4% fund." For a real understanding where the money to operate metro government comes from and where it goes, follow this link: A Citizens Guide to Metro Budget.  Also, for a better understanding of the budget and to know more than even most councilmember will know, actually read the budget at this link. For a good summary of the budget, see the metro council staff analysis on page 2, 3, and 4 at this link.

 It is unfortunate, but it seems the only time conservative activist speak out against excessive government spending is when faced with a tax increase but liberals constantly speak in favor of more spending every year. At Tuesday night's meeting there will be people asking for more spending for sidewalks, more spending for schools, more for parks, more for mass transit, more hours for the libraries to be open, universal pre-K, pay increases for employees and any number of other things.  I will be very surprised if anyone is speaking asking the city to spend less.

The way the charter is written, the advocates of more spending have a structural advantage. Many times candidates for council will say they will oppose tax increases or elected council members will even claim they voted against a tax increase, when in fact they did not. Here is the way the Metro budget process works: The mayor proposes a budget and if the council fails to pass the budget, the budget become law without a council vote. So what usually happens when the mayor proposes a tax increase is that the Council comes up with a compromise alternative budget and it is passed. The mayor's budget, as an example, may call for a 35 cent increase in the property tax rate and the Council substitutes the mayors budget for a budget that calls for only a 25 cent increase. Some members of the Council who want no tax increase will vote "no" on the 25 cent increase that is before the Council.  The effect of this "no" vote is a vote for the mayor's larger budget rather than the Council's budget with a lower tax increase. I have heard members of the Council say, "I voted against that tax increase."  They are either lying or don't understand the effect of their vote.

While a tax increase is not before us now, it would still be beneficial if opponents of a future tax increase appear at the public hearing and speak out for more government efficiency and less spending. This would be a good opportunity for candidates for Council to show that they truly have an understanding of the budget process and if they oppose future tax increase, this would be a good opportunity to show they know what they are talking about.

At the public hearing these are some suggested talking points:

(1) If you know of a specific government waste or inefficiency point it out.
(2) Explain the charter provision that makes it almost impossible to oppose a tax increases and call for a future charter amendment to correct that.
(3) Call for outsourcing and privatization. The purpose of government should not be to provide employment for government workers, but to provide services efficiently when the private sector cannot. The city saved $7 million a year by outsourcing school janitorial service. At one time, the city picked up garbage and it cost much more than contracting with the private sector to pick up our garbage as we do now. We should constantly be on the lookout for opportunities to outsource and privatize.
(4) The city has a large unfunded and growing pension obligation. Long ago most private employers switched from a defined benefit plan to a defined contribution plan. It is time for Metro to make the switch.
(5)  The city needs an outside consultant to do a top-to-bottom evaluation looking for waste and inefficiently. In the private sector there is competition that keeps companies efficient; the government has no such force to keep government efficient. Government official get used to doing things a certain way and often do not examine why they are doing them. An outside consultant can compare Nashville to best practices and will not be afraid of stepping on toes.
(6) While many of us are concerned about affordable housing, high taxes can make housing unaffordable.  Low taxes helps keep homes affordable.

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