A Study of
Metro Nashville/Davidson
County Finances
Conducted for
Nashville Area Chamber of Commerce
and Greater Nashville REALTORS®
by Elliott Davis
Table of Contents
Executive Summary from Nashville Area Chamber of Commerce and the
Greater Nashville REALTORS®
Report Sections
Study Overview ............................................................................................... 3
Peer Cities Selection ....................................................................................... 4
Financial Position and Trends ......................................................................... 6
Financial Forecast ......................................................................................... 20
OPEB ............................................................................................................ 26
Tax and Fee Burden ..................................................................................... 31
Transit ........................................................................................................... 33
Affordable Housing ....................................................................................... 35
Technology Investment Opportunities and Challenges ................................ 37
Observations ................................................................................................. 41
Appendix A ........................................................................................................ 45
Appendix B ........................................................................................................ 46
1
Executive Summary
Prepared by the Nashville Area Chamber of Commerce
and the Greater Nashville REALTORS®
The Boards of Directors of the Nashville Area Chamber of Commerce and Greater Nashville
REALTORS® (collectively “the boards”) engaged Elliott Davis, an independent consultant
group, to conduct a study of the finances of Metro Nashville/Davidson County government. The
primary objective of the study was to provide information to the boards for their consideration in
shaping boards’ response to budgeting and financial decisions of Metro Nashville.
The study is based on an evaluation of publicly available financial information including
Nashville’s recent Comprehensive Annual Financial Reports (CAFRs) and annual budgets. This
study analyzed funding issues, identified trends in financial results and compared the city’s
overall financial condition to other peer cities.
The consultants approached this study by assisting with the following:
• Understanding historical financial information as reported in recently issued
Comprehensive Annual Financial Reports (CAFRs) of Nashville.
• Assessing the overall financial condition of Nashville based on information presented in
the CAFRs.
• Comparing certain historical information of Nashville to that of select peer cities.
• Forecasting general fund revenues and expenditures of Nashville based on historical
trends and the application of specific assumptions.
Study Components
Financial Position and Trends - Financial information as reported in Nashville’s CAFRs was
analyzed to highlight funding and expense issues, identify trends in financial results, and to
compare the City’s overall financial position to that of its peers.
Financial Forecast - The Study includes a forecast of general fund revenues and expenditures
of Nashville for a five-year period and presents several scenarios for potential increases in
revenue as required to fund certain investment initiatives and to achieve assumed fund balance
goals.
Tax and Fee Burden - The Study also includes an overview of taxes and fees incurred by
residents of Nashville with a comparison to that of the Peer Cities. To facilitate comparability,
various rates and assessments for the respective municipalities were applied to a representative
Nashville household having certain characteristics related to home prices, annual income and
spending, and utility consumption.
Other Areas - Finally, the Study considers three of the most significant challenges currently
faced by growing municipalities across the US: 1.) availability of affordable housing; 2.)
developing and maintaining an effective transit system; and 3.) navigating the opportunities and
risks presented by technology and automation.
Peer Cities - Six municipal governments were identified as “Peer Cities” of Nashville for the
purpose of comparing certain financial metrics including debt levels, the status or fund balance
and trends in revenues and expenses. The comparison also considered the implementation of
2
major initiatives such as those related to transit systems, affordable housing and the use of
technology to improve efficiency in government.
This executive summary was prepared by staff of the boards. The remainder of the report is the
original work of Elliott Davis.
3
Study Overview
The Study is based on the evaluation of certain publicly available financial information including
Nashville’s recent CAFR’s and annual budgets. We also evaluated planning studies and
committee reports available on Nashville’s website, as well as media accounts discussing
Nashville’s recent budgeting decisions and financial condition. In conducting the Study we did
not have access to Nashville’s finance team or other members of Nashville’s management. As a
result, we were not able to conduct interviews and inquiries with current City personnel for the
purpose of corroborating and adding context to our observations and recommendations.
Six municipal governments were identified as “Peer Cities” of Nashville for the purpose of
comparing certain financial metrics including debt levels, the status of fund balance, and trends
in revenues and expenses. The comparison also considered the implementation of major
initiatives such as those related to transit systems and affordable housing.
In evaluating Nashville’s financial position and performance trends, we analyzed elements of the
government-wide financial statements as reported in the CAFR’s of Nashville and the Peer Cities
for the fiscal years from 2009 through 2018. For purposes of comparability among municipalities,
we deemed the government-wide financial statements to be more effective than fund financial
statements as they alleviate the need to mix and match different fund structures and funding
approaches. In addition, government-wide financial statements largely reduce the effect of
transfers between funds, as they are limited to the less significant transactions occurring between
governmental and business-type activities. While Nashville’s 2019 CAFR became available to us
as the Study was being completed, it was only utilized for certain portions of the Study as the
2019 CAFR’s were not yet published for most of the Peer Cities. Therefore, analysis involving
the Peer Cities is limited to information obtained from CAFR’s issued for fiscal year 2018.
The Study included the development of a five-year financial forecast of Nashville’s general fund.
The objective of the forecast is to estimate the future trajectory of Nashville’s available fund
balance based on certain assumptions and historical trends in revenues and expenditures ranging
from five to ten years. Assumptions incorporated into the forecast include growth rates for major
revenue categories, and inflation factors for major costs such as healthcare benefits, capital
spending, and professional services. The forecast also presents several scenarios reflecting
potential increases in revenue as required to fund certain investment initiatives and to achieve
assumed fund balance goals.
An overview of taxes and fees incurred by residents of Nashville and the Peer Cities was
developed to illustrate a significant portion of the average household’s burden to fund operations
of state and local government. To facilitate comparability, various rates and assessments for the
respective municipalities were applied to a representative Nashville-household having certain
characteristics related to home price, annual income and spending, and utility consumption.
The Study also considers three of the most significant challenges currently faced by growing
municipalities across the US: 1.) availability of affordable housing; 2.) developing and maintaining
an effective transit system; and 3.) navigating the opportunities and risks presented by technology
and automation. This section includes initiatives being developed and implemented by several
US cities, and strategies for funding these initiatives.
The final section of the Study identifies best practices to enhance Nashville’s processes
surrounding financial operations and budgetary decision-making.
4
Peer Cities Selection
The Peer Cities that were selected for the Study were deemed to be similar to Nashville in terms
of current population, growth rate, and organizational structure. The Boards initially identified nine
such municipalities, several of which also possessed certain characteristics considered desirable
by the Boards in terms of future objectives for Nashville. This list of cities included:
• Atlanta
• Charlotte
• Raleigh
• Austin
• Louisville
• Jacksonville
• Indianapolis
• Salt Lake City
• Denver
From the above list of nine cities, six were considered to be most beneficial for inclusion in the
analysis. The following criteria were applied to arrive at the final list:
• Having a similar population to Nashville as reported in the respective 2018 CAFR of each
city
• Being the dominant city in the area, making up most of the urban region
• Having a consolidated city/county government
• Being a state capital
• Being a growing city with a healthy economy
Based on the above criteria, the following six cities were selected with the major factors
weighing in favor of their selection as described below:
Charlotte - A growing city, dominant in its area with a similar population to Nashville
(859,035) and while not a consolidated city, sharing many services with its county.
Louisville - A consolidated city/county government with a similar population
(771,158) and status as the main city in the region, an expanding population, and
strong economic growth.
Jacksonville - Consolidated with Duval County, the city has a comparable
population (952,861) and a healthy economy.
Indianapolis - Another city with a consolidated government, it is also the state
capital, dominant in its region, and has a growing population (867,125).
Austin – As the state capital, the city dominates its immediate region and is growing
in population (963,797) and economic influence.
Denver - This is another consolidated city/county government that is a state capital
and is expanding both in terms of population (716,492) and economic growth.
Not selected were:
5
Raleigh - While this city is growing and is a state capital, it is much smaller than
Nashville (469,298) and makes up a much smaller part of the regional area as the
Cities of Durham, Cary and Chapel Hill exert major influence on the Research
Triangle area.
Atlanta - This city is also similar to Raleigh as a state capital but with a smaller
population (486,290) relative to the Nashville area.
Salt Lake City - This city is a state capital, but it is smaller in population (200,544)
and is not a consolidated city/county government.
Certain financial aspects of the selected cities were compared, including financial health as
measured by fund balance reserves, bond ratings, debt service requirements, OPEB costs, and
the level of taxes and fees imposed.
6
Financial Position and Trends
Debt and Fund Balance Metrics
Figure 1 below presents metrics which highlight the overall financial position of Nashville in
comparison to the Peer Cities with an emphasis on the amount of governmental debt, the level of
unrestricted general fund reserves (fund balance), and the credit rating applied to its general
obligation bonds. While Nashville utilizes multiple funds, our consideration of unrestricted fund
balance in the table below focuses on the general fund only as it typically generates over 40% of
the City’s total revenues in any given fiscal year and reports the largest portion of its available
fund balance.
Sources of information for this comparison were drawn primarily from the 2018 CAFR’s, budget
documents, and other publicly available financial reports of the respective Peer Cities:
Austin Charlotte Denver Indianapolis Jacksonville Louisville
Population 692,587 963,797 875,318 716,492 867,125 952,861 771,158
Bond ratings
(Moody's, S&P)
Aa2, AA Aaa, AAA Aaa, AAA Aaa, AAA Aaa, AA+ A2, AA Aa1, AA+
Governmental
fund debt
$2.8
billion
$1.5
billion
$0.8
billion
$1.4
billion
$124
million
$2.2
billion
$0.5
billion
Governmental
fund debt per
capita
4,104$ 1,587$ 880$ 2,003$ 126$ 2,267$ 697$
Debt service ratio 10.0% 12.5% 16.8% 10.7% 12.9% 12.1% 9.5%
Combined debt
(Governmental
and Proprietary
funds)
$3.9
billion
$6.5
billion
$4.6
billion
$8.1
billion
$1.3
billion
$2.6
billion
$0.5
billion
Combined debt
per capita
5,644$ 6,761$ 5,293$ 11,328$ 1,455$ 2,689$ 732$
General fund -
unrestricted fund
balance
$75.8
million
$210.9
million
$120.4
million
$304.2
million
$188.6
million
$260.4
million
$101.8
million
General fund -
months of
expenditures in
fund balance
0.95 2.51 2.38 2.92 3.16 3.24 1.91
Debt and Fund Balance Metrics - Fig. 1
Metric
Nashville
Peer Cities
According to the 2018 CAFR, Nashville has governmental fund debt outstanding of $2.8 billion.
At $4,104 per capita, this represents a higher governmental debt per capita than the Peer Cities.
When both governmental and proprietary fund indebtedness are combined, Nashville compares
more favorably with its peers. This in part reflects major enterprise activities being undertaken in
the Peer Cities (e.g., Denver Airport). However, it also reflects the deferral of capital
improvements to Nashville’s water and sewer infrastructure.
7
Another significant metric for evaluating a government’s debt burden is the debt service ratio - the
percentage of governmental fund expenditures attributable to debt service. In Nashville’s case,
while a debt service ratio of 10% compares favorably with that of the Peer Cities, it also reflects
Nashville’s overall growth in non-debt service general fund expenditures.
In terms of financial credit ratings, Nashville has relatively strong ratings of Aa2 (Moody’s) and
AA (S&P) which may be attributed to a robust economy and a very modest property tax rate.
However, Nashville’s ratings are the lowest among the Peer Cities except for Jacksonville which
lags slightly behind Nashville with ratings of A2 (Moody’s) and AA (S&P). While a number of
factors can affect a government’s credit rating, Nashville’s lower ratings compared to its peers are
likely due in part to a significant long-term decrease in net position (see Figure 3 at page 13) and
a rapidly growing OPEB liability.
For the 2018 fiscal year Nashville reported an unrestricted balance in the general fund of
approximately $75.8 million. Unrestricted fund balance represents the portion of fund balance
that is spendable and has not been restricted by externally imposed requirements such as those
reflected in debt agreements or enabling legislation. Unrestricted fund balance is calculated by
taking the sum of the fund balance amounts reported in the financial statements as “committed”,
“assigned”, and “unassigned”.
As a result, it generally serves as a reserve to be used for any other legal purpose as required for
the continued operation of the government.
According to the Government Finance Officers Association (the GFOA): “It is essential that
governments maintain adequate levels of fund balance to mitigate current and future risks (e.g.,
revenue shortfalls and unanticipated expenditures) and to ensure stable tax rates.” The GFOA
recommends that at a minimum, a general purpose government should maintain in their general
fund an unrestricted fund balance of no less than two months of regular general fund operating
revenues or regular general fund operating expenditures. However, the GFOA stipulates that this
should only be considered a general “rule of thumb” and further recommends the following:
“The adequacy of unrestricted fund balance in the general fund should take into
account each government’s own unique circumstances. For example,
governments that may be vulnerable to natural disasters, more dependent on a
volatile revenue source, or potentially subject to cuts in state aid and/or federal
grants may need to maintain a higher level in the unrestricted fund
balance. Furthermore, a government’s particular situation often may require a
level of unrestricted fund balance in the general fund significantly in excess of this
recommended minimum level. In any case, such measures should be applied
within the context of long-term forecasting, thereby avoiding the risk of placing too
much emphasis upon the level of unrestricted fund balance in the general fund at
any one time.”
As reflected in Figure 1, as of the end of the 2018 fiscal year, Nashville maintained less than one
month of general fund expenditures in unrestricted fund balance. This is significantly less than
both the GFOA-recommended minimum of two months and the range of 1.91 months to 3.24
months for the Peer Cities. Figure 2 below presents a further comparison of months of
expenditures in unrestricted fund balance. In computing 10-year and 5-year averages, Nashville
trails all of the Peer Cities in the number of months of expenditures held as reserves in unrestricted
fund balance.
8
Government-wide Analysis
We also considered Nashville’s overall financial position and performance as indicated by its
government-wide financial statements, including a comparison of certain metrics to those of the
Peer Cities. The government-wide financial statements are designed to provide readers with a
broad overview of the Government's finances, in a manner similar to a private-sector business.
The two government-wide financial statements are, as follows:
The Statement of Net Position presents information on all of the Government's
assets, deferred outflows of resources, liabilities, and deferred inflows of resources,
with the difference reported as net position. In short, government’s net position
reflects the amount by which its assets (or financial resources) exceed or fall short
of its liabilities (or financial obligations) at the end of any given fiscal year. Over
time, increases or decreases in net position may serve as a useful indicator of
whether the financial position of the Government is improving or deteriorating.
The Statement of Activities presents information showing how the Government's
net position changed during the most recent fiscal year. All changes in net position
are reported on an accrual basis as soon as the underlying event giving rise to the
change occurs, regardless of the timing of related cash flows. Thus, revenues and
expenses are reported in this statement for some items that will only result in cash
flows in future fiscal periods (e.g., uncollected taxes, compensated absences, etc.).
Both of the government-wide financial statements distinguish functions of the government that
are principally supported by taxes and intergovernmental revenues (governmental activities) from
other functions that are intended to recover all or a significant portion of their costs through user
fees and charges (business-type activities).
The governmental activities of a municipality typically include categories such as general
government; administration; public safety; community development; public health and welfare;
1.38
1.79
2.22
2.28
2.52
2.77
4.05
1.63
1.86
2.60
2.36
2.47
3.41
3.35
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Months
Months of General Fund Expenditures in
Unrestricted Fund Balance (Fig.2)
10-yr Average 5-yr Average
9
culture and recreation; and public works. Nashville’s governmental activities also include a
significant allocation to education.
Nashville’s Net Position – As reported in its annual audited statement of net position, over the
ten-year period from 2010 through 2019, Nashville’s total net position has steadily declined to the
point that beginning in fiscal year 2015, liabilities began to significantly exceed assets.
Noteworthy in Figure 3 is the pronounced reduction that occurred in fiscal year 2018. This drop
was largely driven by the implementation of Government Accounting Standard No. 75 Accounting
and Financial Reporting for Postemployment Benefits Other Than Pensions (GASB 75), which
required governments to report their total unfunded liability related to retiree health care.
However, despite the implementation of GASB 75, Figure 3 illustrates that Nashville’s total net
position had begun to deteriorate at a rapid pace well before the total unfunded obligation for
other post-employment benefits (OPEB) was required to be recognized as a liability in the
financial statements.
As reported in this latest CAFR, net position decreased by an additional $242 million to a deficit
position of $3.433 billion. This decrease was driven in large part by a $673 million increase in
Nashville’s OPEB liability from $3.889 billion in 2018 to $4.562 billion in 2019. A significant portion
of the increase in 2019 was the result of a change in assumptions as applied by the City’s actuary.
(3,433,178)
(3,191,627)
(713,753)
(472,480)
(322,672)
87,113
209,936
331,048
500,076
757,334
(4,000,000)
(3,500,000)
(3,000,000)
(2,500,000)
(2,000,000)
(1,500,000)
(1,000,000)
(500,000)
-
500,000
1,000,000
Amounts in 000's
Nashville Total Net Position (Fig. 3)
10
Total net position as presented above is comprised of three categories:
• Net investment in capital assets consists of capital assets, net of accumulated
depreciation and reduced by outstanding debt that is attributable to the acquisition,
construction and improvement of those assets. Nashville’s capital assets include all of its
property and equipment, land, infrastructure, and major construction projects in progress.
The net investment in these assets is essentially calculated as their total cost, less:
o the cumulative amount that the assets have depreciated since being put in service,
and
o the outstanding debt that was incurred to finance their acquisition and construction.
The net investment amount should also be increased for debt proceeds on hand that have
not yet been spent on acquisition or construction.
• Restricted net position consists of restricted assets reduced by liabilities and deferred
inflows of resources related to those assets. The restricted category is typically the result
of externally imposed factors such as debt covenants or enabling legislation that requires
the government to maintain certain reserves. Examples of such restrictions include:
o Debt agreements that may require that a government hold a specific amount of
future principal and interest payments in reserve.
o Legislation adopted by states that require local governments to maintain reserves
for the stabilization of tax or utility rates in the event of volatile economic conditions
or catastrophic events.
• Unrestricted net position consists of net position which does not meet the definition of the
two preceding categories. As such, the unrestricted category is a primary indicator of the
extent to which the government’s financial strength is fortified in excess of resources that
have been either invested in capital assets or are required for compliance with externally
imposed restrictions.
11
While Nashville managed to maintain a positive total net position during the fiscal years from 2010
through 2014, a positive unrestricted net position has not been reported since prior to fiscal year
2009 as reflected in Figure 4 below:
Figure 4 illustrates that by excluding those portions of total net position that have been invested
in capital assets or that must be maintained by externally imposed requirements, unrestricted net
position has decreased at an average of over $179 million annually prior to a $2.4 billion drop in
2018.
The ability of a government to sustain itself is dependent on the extent to which it can generate
revenues in the form of taxes, fees, grants, and contributions to fund the cost of efficiently
providing required services and performing essential functions. Because the primary motive of
government is sustainability for the purpose of serving constituents versus profitability,
maximizing the excess of revenues over expenses is not a priority. However, generating sufficient
revenues to at least cover the expense of operations is imperative.
As reflected in Figure 5 below, Nashville’s expenses have exceeded its revenues for each of the
fiscal years for the period from 2010 through 2019. This recurring deficiency in revenues
compared to expenses has driven the decreases in total and unrestricted net positions described
above.
(4,500,000)
(4,000,000)
(3,500,000)
(3,000,000)
(2,500,000)
(2,000,000)
(1,500,000)
(1,000,000)
(500,000)
-
Amounts in 000's
Nashville Unrestricted Net Position (Fig. 4)
12
Figure 6 below presents a comparison of the average change in total net position as a percent of
total revenues among Nashville and the Peer Cities for the ten-year period from 2009 through
2018. As a result of Nashville incurring expenses in excess of revenues for each of the ten years
in the period, it has reported an average decrease in total position as a percent of total revenues
of 9%. This exceeds the average decreases of the other three Peer Cities with negative averages,
and reflects significant underperformance compared to those Peer Cities reporting positive
changes in total net position.
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
2019201820172016201520142013201220112010
Amounts in 000's
Nashville Comparison of Revenue to Expense (Fig. 5)
Revenue Expense
11%
6%
2%
-2%
-3%
-5%
-9%
-10%
-5%
0%
5%
10%
15%
Ten year average (2009 - 2018)
Increase (decrease) in Net Position as a % of Revenue
(Fig.6)
13
Figure 7 below presents a comparison of the average ratio of revenues-to-expenses among
Nashville and the Peer Cities for the same ten-year period. As would be expected, Nashville and
those Peer Cities reporting average decreases in total net position as reflected in Figure 6 are the
same entities for which the ratio of revenue-to-expenses are less than 1.0.
Tax Revenue
While strong growth in sales taxes, accommodations taxes and hospitality taxes reflect the
significant expansion in Nashville’s tourism industry, these sources are a relatively small portion
of City's overall revenue mix. Property tax, the City’s largest revenue source, has grown more
modestly especially in comparison to the growth in property values. This is in large part because
the property tax rate has not been increased since 2012.
Property Taxes - Property taxes comprise the largest source of revenue within the general fund,
accounting for approximately 53% of total general fund revenues for fiscal year 2018. Other major
revenue sources within the general fund and their percent of total general fund revenue for fiscal
year 2018 include:
• Local option sales tax (13.2%)
• Other taxes, licenses and permits (15.0%)
• Revenues from other governmental agencies (11.6%)
Within the general fund, property tax revenues and total revenues have grown at average rates
of 2.83% and 4.47%, respectively during the five-year period from 2014 through 2018.
Property tax growth has not kept pace with property values, particularly in recent fiscal years.
From 2016 to 2018, the estimated actual value of the General Services District (GSD) taxable
property increased by over 47%. Despite a reassessment that resulted in a comparable increase
1.17
1.07
1.04
0.98
0.98
0.92
0.88
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Charlotte Denver Jacksonville Indianapolis Louisville Nashville Austin
Ratio of Revenue-to-Expense - 10 yr Average: 2009-
2018 (Fig. 7)
14
in total assessed values, property tax rates were rolled back for the Urban Services District (USD)
and the GSD as follows:
• USD – rates were rolled back from $4.516 per $100 of assessed value in 2017 to $3.155
per $100 of assessed value in 2018
• GSD - rates were rolled back from $3.294 per $100 of assessed value in 2017 to $2.755
per $100 of assessed value in 2018
While the above rollbacks were intended to result in a state-required revenue-neutral effect on
property taxes, Nashville did not anticipate extensive taxpayer appeals. As a result, despite
unprecedented increases in assessed values, property taxes for 2018 increased by less than 3%
and fell short of budgeted amounts.
Figures 8 and 9 below present comparisons of growth rates in assessed values to growth rates
in property tax revenue for each of the Peer Cities. The growth rates reflect 10-year averages for
the period from 2009 through 2018 and 5-year averages for the period from 2014 through 2018.
For the 10-year averages, growth in property tax revenues have exceeded the growth in assessed
values for each of the Peer Cities. However, Nashville’s property tax revenue growth of 2.8% has
significantly trailed the City’s 8.1% increase in assessed values. In the 5-year presentation, recent
robust economic conditions resulted in assessed values outpacing revenues for all the cities
except for Jacksonville and Charlotte. Nashville’s lag in revenue growth compared to assessed
values is much more pronounced compared to the 10-year presentation as the thriving economy
combines with Nashville’s 2017 rollback to widen the gap by an additional 5 percentage points.
-0.2%
-0.6%
0.7%
7.5%
2.9%
5.6%
8.1%
2.9%
1.5%
2.3%
8.7%
3.7%
5.8%
2.8%
-2%
0%
2%
4%
6%
8%
10%
10-yr Average Growth Rates - Assessed Value vs Property Tax
Revenue (Fig. 8)
Assessed value Property tax revenue
15
It is noteworthy that Tennessee law requires local governments that undergo a reassessment to
calculate a revenue neutral rate or “Certified Tax Rate”. However, a higher rate may be adopted
if Council takes the following required actions: 1) hold a public hearing regarding the “Certified
Tax Rate” versus the higher rate, and 2) adopt an ordinance or resolution establishing a tax rate
that exceeds the “Certified Tax Rate”. There is precedent for adopting a higher rate in cases
where a revenue neutral rate would produce an unbalanced budget due to expenditures out-
pacing revenue growth. According to web page of Nashville’s Property Assessor: “to date, this
was done (5) five times, but not during the prior three 2009, 2013 and 2017 reappraisals.” The
last increase in the property tax was in 2012 when the tax rate was increased $.53 or about 13%.
Reluctance to take such action was likely a contributing factor in diminishing Nashville’s
unrestricted fund balance significantly below those balances reported by the Peer Cities and the
level recommended by the GFOA.
Tax Growth Factors - In addition to property taxes, Nashville generates sales taxes,
accommodations taxes, and hospitality taxes as major revenue sources. These three categories
of tax revenue grew at the following average rates during the period from 2015 through 2019:
• Sales taxes 7.38%
• Accommodations taxes 12.53%
• Hospitality taxes 10.18%
Growth rates for these taxes have been driven largely by significant increases in population,
tourism, and overall spending.
According to the US Census Bureau, Nashville’s population grew by 10.9% during the period from
2010 to 2018, adding more than 60,000 people.
The Nashville Convention and Visitors Corporation (CVC), has reported that the number of visitors
to the City grew from 14.5 million in 2017 to 15.2 million in 2018, and increased to 16.1 million in
2019. The CVC also estimates that direct spending by visitors for the City’s New Year’s Eve
4.0%
2.7%
3.4%
10.7%
1.2%
10.2%
12.5%
7.2%
2.4%
2.6%
8.0%
3.6%
7.5%
2.1%
0%
2%
4%
6%
8%
10%
12%
14%
Jacksonville Indianapolis Louisville Austin Charlotte Denver Nashville
5-yr Average Growth Rates - Assessed Value vs Property Tax
Revenue (Fig. 9)
Assessed value Property tax revenue
16
event increased from $22.3 million in 2017 to $23 million in 2018, and generated $23 million again
in 2019.
Accommodations and hospitality tax revenues specifically have grown as a result of the City
recently adding hotels and restaurants at a rapid pace. The CVC reports that for the period from
2013 to 2018 the number of hotel rooms increased by 16.6% from 26,175 to 30,509. At the time
of this report, it was estimated that an additional 20 hotels were expected to open in 2019. The
CVC also reports that the City added 113 new restaurants in 2017 and 133 in 2018.
Expense Analysis
This portion of the expense analysis compares growth rates in total expenses among Nashville
and the Peer Cities for the period from 2014 through 2018. It also evaluates expense trends for
Nashville during the period from 2015 through 2019 using the most recently issued 2019 CAFR.
Figure 10 below reflects 5-year average growth rates in total expenses for Nashville and the Peer
Cities ranging from 1.3% for Indianapolis, to 6.8% for Denver. At 4.3%, Nashville’s average rate
of growth in total expenses falls squarely in the median of the respective average growth rates for
the Peer Cities. These growth rates refer to expenses as reported on the full accrual basis in the
government-wide section of the respective CAFR’s of each city. Therefore, they largely consist
of operating costs and do not include investments in infrastructure or other capital expenditures.
The table below summarizes total expenses for the primary government including both
governmental and business-type activities. Total expenses grew from $2.553 billion in 2015 to
$3.167 billion in 2019, a 24% increase. Over the five-year period, growth rates for education, law
enforcement, fire department and code regulation and inspection expenditures were similar to the
overall growth rate. Public Works and Water and Sewer Services grew at significantly different
rates; Public Works expenditures grew at a much higher rate of 47.4% and Water and Sewer
expenditures grew at a much slower rate of 12.3%.
1.3%
2.7%
4.3%
4.7%
6.2%
6.2%
6.8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Total Expenses - 5-yr Average Growth Rates for fiscal years
2014 -2018 (Fig. 10)
17
$
%
Education - MNPS 907,504
$
1,124,977
$
217,473
$
23.96%
Law enforcement - MNPD 353,933
421,429 67,496 19.07%
Fire - MNFD 152,045 183,783 31,738 20.87%
Public works 191,499
282,226
90,727
47.38%
Regulation and Inspection
11,216
13,878
2,662
23.73%
Water and sewer 213,926
240,195
26,269 12.28%
All other categories 722,817 900,017 177,200 24.52%
Total primary government 2,552,940$ 3,166,505$ 613,565$ 24.03%
Expense Growth 2015 - 2019
(Fig. 11)
(amounts in 000's)
2015
2019
Increase
During the period from 2015 to 2019, an expansion in Public Works led to an increase in full time
employees (FTE’s) from 388 to 434, a growth rate of 12%. Water and Sewer employment grew
at a much more modest rate of 2%. Other line items were kept in check due to revenue
constraints. The expenditure trends are depicted in the following table:
# %
Education - MNPS 9,294 9,854 560 6.03%
Law enforcement - MNPD 2,898 3,067 169 5.83%
Fire - MNFD 1,206 1,252 46 3.81%
Public works 388 434 46 11.86%
Internal services
Fleet 95 106 11 11.58%
Technology 130 148 18 13.85%
Regulation and Inspection 111 118 7 6.31%
Water and sewer 713 727 14 1.96%
All other categories 3,459 3,644 185 5.35%
Total primary government 18,294 19,350 1,056 5.77%
Employment Growth 2015 - 2019 (Fig. 12)
(amounts in FTE's)
2015
2019
Increase
A major contributing factor to the growth in primary government expenses was the annual
budgetary practice of allocating funds for pay raises for Nashville employees. Consistently, pay
raises were allocated in annual budgets for cost of living adjustments, as well as range and step
increases. Since municipal government operations are labor intensive, particularly for the largest
departments (education and public safety functions), the annual pay adjustments are a significant
inflation factor on the total budget.
The other major contributing factor in the growth was the opening of new facilities, primarily
schools, and the expansion of services and programs. In order to staff the new facilities and
expand services from 2015 through 2019, a total of 1,056 new FTE’s were added to the Nashville
workforce. This represents a 5.87% increase in total FTE’s.
18
The following table highlights the driving factors for service increases for the period from 2015
through 2019:
2015
2016 2017 2018 2019
Education - MNPS
Operating costs
associated with three
new charter schools
and additional pre-K
classrooms
Operating cost
associated with
seven new charter
schools and two
new district schools,
100 new employees,
and investments in
“Reading Recovery”
the literacy program
Operating costs
associated with
one new charter
school and two
new district
schools, start-up
costs for English
language and
literacy initiatives,
and 250 new
positions,
including teachers,
bus monitors, and
special education
bus drivers
Further expansion of
the literacy and
English language
progra ms
Law enforcement - MNPD
Operating costs
associated with a new
Midtown Hills Precinct,
special events policing,
accreditation of the
crime laboratory, and
another $1 million for
the domestic violence
progra m
Additional special
events funding and
full year funding of
the accredited crime
lab
Six new officers for
domestic violence
programming and
seven additional
employees for
crime lab, special
events and youth
services
$3.7 million for
seventy new officers
Two new positions
for the secondary
employment unit.
Fire - MNFD
Four additional
paramedics
$1.9 million for
fourteen new fire and
inspection positions
Public works
$1.3 million for an
expansion of
cleaning crews
$1.7 million increase,
including additional
trans portation
planning and the
glass recycling
initiative
$2.3 million to
extend services to
areas of Davidson
County annexed into
the Urban Service
District
Regulation and Inspection
Three new
positions added
Summary of Explanations for Expense Growth by Fiscal Year
(Fig. 13)
19
As is the case with each of the Peer Cities, Nashville dedicates a significant portion of the City’s
budget to public safety and law enforcement. The FBI compiles an annual survey of local law
enforcement staffing metrics for US cities with jurisdictions exceeding 500,000 citizens. Based
on the survey conducted for 2016, Figure 14 below reflects a comparison of the number of police
officers and other department personnel comprising the police department staffs of Nashville and
each of the Peer Cities. The metrics are presented on a per capita basis of staff per 10,000
citizens. The comparison excludes Louisville as they did not submit a response to the survey.
As indicated by the table, the number of police officers and total personnel for Nashville is
consistent with the national median for all jurisdictions with over 500,000 people. It is also fairly
consistent with the Peer Cities. The somewhat lower numbers of officers per capita in Indianapolis
and Austin is likely driven by the specific demographics, income, and education levels existing
within those cities.
Nashville 20.9 25.5
Denver 21.9 25.7
Indianapolis 18.6 20.8
Jacksonville 20.0 33.5
Charlotte 19.4 25.7
Austin 18.9 24.7
Median for Cities >500K People 20.7 26.8
Law Enforcement Personnel per 10,000 Citizens (Fig. 14)
Officers
Total
personnel
It should be noted that recruiting officers is typically a challenge for medium to large U.S. cities. A
2019 article in The Tennessean described Nashville having experienced this issue based on a
Grand Jury study in which only 1,380 law enforcement positions were filled out of 1,511 that were
authorized.
20
Financial Forecast
Overview
This portion of the Study illustrates potential options for Nashville to generate additional property
tax and/or sales tax revenues for the purpose of decreasing City’s future reliance on one-time
revenues, while also building adequate fund balance reserves.
As a fiscal management tool, a well-developed forecast presents estimates of revenues,
expenditures and fund balances based upon past, current, and projected financial conditions.
Financial forecasts help identify trends such as structural imbalances between revenue and
expenditure growth, over-reliance on non-recurring revenues, and retention of reserves (fund
balance) within desired parameters. An effective forecast contributes to improved budgeting,
fiscal discipline and enhanced delivery of essential services.
Financial forecasting is an acknowledged best practice by the GFOA which recommends “that
governments at all levels forecast major revenues and expenditures. The forecast, along with its
underlying assumptions and methodology, should be clearly stated and made available to
stakeholders in the budget process. It should also be concisely presented in the final budget
document. The forecast should be regularly monitored and periodically updated.”
The Study incorporates a hybrid method of forecasting involving extrapolation and
regression/econometrics. Extrapolation uses historical data to predict future outcomes by
projecting historical outcomes forward, while regression/econometrics assumes a linear
relationship between independent variables such as cost drivers or inflationary factors and future
expenditures. A five-year forecast was developed, projecting forward from actual revenues,
expenditures, and changes in fund balance as reported in fiscal year 2019 CAFR.
Forecast Assumptions
The forecast estimates five years of general fund revenues, expenditures, and fund balances.
The forecast does not include Nashville’s other governmental funds, proprietary funds (e.g.
enterprise funds and internal service funds), fiduciary funds (e.g. pension trust funds), or the funds
of component units (e.g. Sports Authority Fund).
Revenues – Forecasted revenues are based on a five-year historical trend as reported for the
fiscal years from 2015 through 2019. Historical average growth rates by major revenue category
were applied to future periods to estimate revenues for fiscal years 2020 through 2024. Major
revenue categories include property taxes, sales tax, other taxes, license and permits,
intergovernmental revenues, and charges for current services.
Nashville’s recently announced amendments for the fiscal year 2020 budget include revenue
expected to be generated in the form of payments in lieu of taxes (PILOT) from the following
sources: 1.) water and sewer services and 2.) convention and tourism revenue. These revenue
estimates were not available at the time of the Study, and therefore are not included in the
forecasted revenues. Also, while Nashville has scheduled a property reassessment to occur in
2021, the baseline estimates presented in the forecast assumes no significant revenue changes
will occur (i.e. a revenue neutral tax rate is assumed).
Expenditures - Assumptions for future growth in spending categories were based on 1.) five-year
historical growth trends or 2.) common cost drivers such as health care trend rates, and cost of
21
living adjustments as measured by the consumer price index. The estimated rate of growth
assumed for each of the major expenditure categories is provided in Figure 15 below:
Personal services 4.50%
Utilities 2.50%
Professional services 2.50%
Travel, tuition, dues 2.50%
Communications 5.00%
Repairs and maintenance 4.50%
Internal service fees 4.50%
Other expenses 3.25%
Retiree benefits 9.00%
Miscellaneous 6.27%
Capital spending 4.00%
Expenditure Assumed Growth Rates ( Fig. 15)
Net transfers from the general fund of $109 million accounted for a significant portion of the
reduction in fund balance in 2019. Transfers represent amounts that a government may move
from one fund to another typically to cover expenditures in excess of revenues for a given fund.
For the 10-year period from 2010 through 2019, net transfers from the general fund increased
annually at an average rate of 14.7%. However, due to the extent that management controls
transfers, for purposes of the forecast, net transfers from the general fund were assumed to
remain unchanged for each of the five forecasted periods.
Recurring cost impact from projects included in the Capital Spending Plan for fiscal years 2020
and 2021 were added to the expenditure forecasts and estimated to grow by 4% in fiscal years
2022-2024.
General Fund Forecast
The results of the five-year forecast of Nashville’s General Fund revenues and expenditures are
summarized in Figure 16 below.
Actual
2019 2020 2021 2022 2023 2024
Revenues 1,075$ 1,122$ 1,162$ 1,215$ 1,272$ 1,331$
Expenditures 951 1,009 1,070 1,124 1,181 1,240
Revenues over
(under)
expenditures
124
113 92 91 91 91
Net transfers
out
(109) (109)
(109) (109) (109) (109)
Net change in
fund balance
15 4 (17) (18) (18) (18)
Beginning fund
balance
76 91 95
78 60 42
Ending fund
balance
91$ 95$ 78$ 60$ 42$ 24$
Forecasted
Amounts in
millions
Forecasted General Fund Condensed Statement of Revenues, Expenditures, and
Changes in Fund Balance for the Years ended June 30, (Fig. 16)
22
Growth rates for property taxes and sales taxes, as driven by recent trends in economic
development, are assumed to continue as they have in the previous five fiscal years. However,
as reflected in historical trends, forecasted expenditure growth is assumed to out-pace the
forecasted growth in revenue. Key pressures on recurring expenditures include employee
compensation, pension, OPEB, debt service requirements, and operating costs associated with
the completion of capital improvements. The above forecast anticipates a fundamental structural
imbalance between recurring revenues and recurring expenses, and it indicates the need for
policy steps to protect and strengthen fund balance reserves in the general fund.
Forecast Scenarios
Three scenarios are presented below which incorporate certain assumptions as applied to the
“baseline” forecast reflected in Figure 16 above. An underlying assumption common to all three
scenarios is that Nashville’s anticipated decrease in fund balance beginning in fiscal year 2021 is
driven primarily by the need for additional revenues versus a significant reduction in expenditures.
And further, that the source of additional revenue is in the form of increased property taxes and/or
sales taxes.
The following scenarios illustrate the potential impact of property tax and/or sales tax increases
required to 1.) achieve targeted “unrestricted fund balance” reserves (as defined by the GFOA
and calculated as a percentage of estimated annual expenditures), 2.) provide additional funding
for affordable housing initiatives, and 3.) prevent future decreases in fund balance. For purposes
of the scenarios, the unrestricted fund balance percentages are based on the GFOA’s
recommended minimum of two months of expenditures in unrestricted fund balance:
• Scenario One– Determine the level of property tax increase required to:
o Eliminate the forecasted negative “net change in fund balance” as reflected in Figure 16
above for each of the four years 2021, 2022, 2023, and 2024, and
o Implement a property tax rate increase as required to achieve an unrestricted fund
balance reserve of 10% of expenditures in 2021, 12% in 2022, 14% in 2023, and 16.7%
in 2024.
As reflected in the baseline forecast at Figure 16, the excess of expenditures and net transfers
over revenues depletes fund balance to $24 million by 2024. Scenario One (Figure 17) assumes
that property tax rates are adopted which increase revenues compared to the amounts reflected
in the baseline forecast by 5%; 7.5%; 7.5%; and 9% for the respective fiscal years 2021; 2022;
2023; and 2024
1
. This increase in property taxes serves to eliminate the annual negative change
in fund balance and reach the targeted fund balance percentages.
1
These percentages are not property rate increases, but represent increases in property tax revenue generated
from an assumed increase in rates.
23
Actual
2019 2020 2021 2022 2023 2024
Revenues (as
originally
forecasted)
1,075$ 1,122$ 1,162$ 1,215$ 1,272$ 1,331$
Property tax
increase
- - 30 45 48 59
Adjusted
revenues
1,075 1,122 1,192 1,260 1,320 1,390
Expenditures 951 1,009 1,070 1,124 1,181 1,240
Revenues over
(under)
expenditures
124 113 122 136 139 150
Net transfers out (109) (109) (109) (109) (109) (109)
Net change in
fund balance
15 4 13 27 30 41
Beginning fund
balance
77 92 96 109 136 166
Ending total fund
balance
92$ 96$ 109$ 136$ 166$ 207$
Scenario One - Forecasted General Fund Condensed Statement of Revenues, Expenditures,
and Changes in Fund Balance for the Years ended June 30, ( Fig. 17)
Amounts in
millions
Forecasted
• Scenario Two – Reflect the impact of the following:
o Implement a quarter cent sales tax increase to be allocated between the General Fund
and Metro Nashville Public Schools (MNPS), and
o Implement a property tax rate increase as required to achieve the same unrestricted
fund balance reserve of 10% of expenditures in 2021, 12% in 2022, 14% in 2023, and
16.7% in 2024.
Under Scenario Two (Figure 18) a quarter-cent sales tax rate increase is assumed to be effective
beginning in fiscal year 2021. Proceeds from the increased sales tax would be divided equally
between the General fund and MNPS. Also assumed is the adoption of property tax rates to
increase annual revenues compared to the amounts reflected in the baseline forecast by 0.5%;
2.5%; 2.5%; and 4%, for the respective fiscal years 2021; 2022; 2023; and 2024
1
.
2
The
combined increases in rates for property tax and sales tax serve to eliminate the annual negative
change in fund balance and reach the targeted fund balance percentages.
1
These percentages are not property rate increases, but represent increases in property tax revenue generated
from an assumed increase in rates.
24
Actual
2019 2020 2021 2022
2023 2024
Revenues (as
originally
forecasted)
1,075
$ 1,122
$ 1,162$ 1,215$ 1,272$ 1,331$
Sales tax increase
-
- 28 30 32 34
Property tax
increase
- -
2 15 16 25
Adjusted
revenues 1,075
1,122 1,192 1,260 1,320 1,390
Expenditures
951
1,009 1,070 1,124 1,181 1,240
Revenues over
(under)
expenditures
124
113
122 136 139 150
Net transfers out
(109) (109) (109) (109) (109) (109)
Net change in
fund balance
15
4
13 27 30 41
Beginning fund
balance
77 92 96 109 136 166
Ending fund
balance
92$ 96$ 109$ 136$ 166$ 207$
Scenario Two - Forecasted General Fund Condensed Statement of Revenues, Expenditures,
and Changes in Fund Balance for the Years ended June 30, (
Fig. 18)
Amounts in
millions
Forecasted
• Scenario Three – Reflect the impact of the following:
o Implement a quarter cent sales tax increase to be allocated between the general fund
and MNPS,
o Appropriate an additional $10 million for affordable housing, and
o Implement a property tax rate increase as required to achieve the same unrestricted
fund balance reserve of 10% of expenditures in 2021, 12% in 2022, 14% in 2023, and
16.7% in 2024.
Under Scenario Three (Figure 19) a quarter-cent sales tax rate increase continues to be
assumed with proceeds divided equally between the general fund and MNPS as required by
State law. Also assumed is the adoption of property tax rates to increase annual revenues
compared to the amounts reflected in the baseline forecast by 2%; 4%; 4%; and 5.5%, for the
respective fiscal years 2021; 2022; 2023; and 2024
13
.Finally, Scenario Three assumes an annual
$10 million appropriation for affordable housing, which has been reflected as an increase in
expenditures in Figure 19. The increases in rates for property tax and sales tax combined provide
the additional $10 million in appropriations, eliminate the annual negative change in fund
balance, and reach the targeted fund balance percentages.
1
These percentages are not property rate increases, but represent increases in property tax revenue generated
from an assumed increase in rates.
25
Actual
2019 2020 2021
2022
2023 2024
Revenues (as
originally
forecasted)
1,075$ 1,122
$
1,162$
1,215
$
1,272
$
1,331
$
Sales tax increase
-
-
28
30
32
34
Property tax
increase
-
-
13
26
26
35
Adjusted revenues
1,075
1,122
1,203
1,271
1,330
1,400
Expenditures 951 1,009
1,080
1,134
1,191
1,250
Revenues over
(under)
expenditures
124
113
123
137
139
150
Net transfers out
(109)
(109)
(109)
(109)
(109)
(109)
Net change in fund
balance
15
4
14
28
30
41
Beginning fund
balance
77
92
96
110
138
168
Ending fund
balance
92$
96$
110$
138$
168$
209$
Scenario Three - Forecasted General Fund Condensed Statement of Revenues, Expenditures,
and Changes in Fund Balance for the Years ended June 30, (
Fig. 19)
Amounts in
millions
Forecasted
26
Other Post-Employment Benefits
As reflected in Figure 20 below, as of June 30, 2019, Nashville carried an OPEB liability of
approximately $4.6 billion which is an increase of $673 million over 2018. While new accounting
requirements (as summarized in the next section) resulted in a spike in fiscal year 2018, the City’s
OPEB liability had already been growing at an average annual rate of 34% from 2009 through
2017.
GASB 75
Beginning in the fiscal year ending June 30, 2018, a new accounting and reporting standard
became effective that required municipalities sponsoring OPEB plans to recognize the unfunded
liabilities of those plans in their statements of net position. OPEB plans provide retirement benefits
other than pensions, and usually consist of health coverage, but may also include life insurance
or other benefits.
The new reporting requirements were established by Statement Number 75 of the Government
Accounting Standards Board (GASB 75). Prior to 2018 and the implementation of GASB 75,
rather than reporting the full unfunded obligation related to their OPEB plans, municipalities were
only required to report a liability to the extent that it did not fulfill its annual required contribution
(ARC) as calculated by an actuary. In other words, in comparing the OPEB obligation to a
mortgage, the reported liability was basically limited to the total of any missed mortgage payments
versus the full outstanding mortgage balance.
GASB 75 significantly changed how the OPEB liability is calculated and reported, as
municipalities now must report the entire unfunded liability in their statements of net position. This
change has driven drastic increases in OPEB liabilities being reported in the statements of net
position for nearly all municipalities sponsoring defined benefit retiree health plans. As a result,
the unrestricted net position for many municipalities has been substantially decreased if not
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
20192018201720162015201420132012201120102009
Amounts in 000's
Fiscal years
Nashville's OPEB Liability (Fig. 20)
27
reduced to a negative balance. The effect for Nashville was even more pronounced as it had
been reporting negative unrestricted net position for each of the nine years preceding
implementing of GASB 75 (see Figure 4 at page 15).
It should be noted that GASB 75 applies only to an entity’s government-wide financial statements
and not to the governmental fund financial statements. As such, while the OPEB liability reduces
net position it does not directly affect fund balance beyond annual payments that are reported in
the governmental funds to cover benefits that have come due, or as assets placed in trust to fund
future benefits.
Funding
Figure 21 below presents a comparison of OPEB liabilities among Nashville and the Peer Cities.
As of June 30, 2018, Nashville’s OPEB liability amounted to 48% of total liabilities reported in its
governmental activities, exceeded only by Austin at 56%. Compared to the other five Peer Cities,
the OPEB liabilities of Austin and Nashville are significantly greater in terms of both in dollar
amount and as a percentage of total liabilities.
While there are a number of factors that affect the size and growth of an entity’s OPEB obligation,
the decision of whether or not to pre-fund the liability by setting assets aside for the payment of
future benefits is key. GASB 75 does not require that a municipality fund its OPEB liability.
However, it does stipulate that in terms of funding OPEB costs the liability as reported can only
be reduced through assets that are placed in a qualified trust established strictly for the purpose
of paying future benefits. As a result, once placed in the trust, assets are required to be used for
the payment of future benefits and cannot be accessed for any other purpose.
Nashville does not currently pre-fund its OPEB liability but rather uses the pay-as-you-go (or “pay-
go”) option in which benefits are only paid when they become due, versus as they are earned.
While most municipalities continue to use the pay-go method, a growing number are beginning to
contribute assets to qualified trusts in an effort to manage their OPEB liabilities. This is largely
56% 48% 20% 16% 9% 5% 3%
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
Austin Nashville Charlotte Louisville Indianapolis Denver Jacksonville
OPEB Obligation as a % of Total Debt - Fiscal Year
2018 (Fig. 21)
Total liabilites OPEB obligation
28
driven by the fact that the ongoing use of the pay-go method results in continued rapid growth of
an entity’s OPEB liability. Ever-increasing OPEB obligations have caused great concern among
stakeholders including taxpayers, investors, and unions. Unions for example, are highly
protective of their members’ retirement benefits, and therefore have a distinct interest in a
government’s ability as an employer to pay those benefits well into the future. Most notably, large
OPEB liabilities that are not being adequately managed have become a point of emphasis for
stakeholders including each of the credit rating agencies. As municipalities have become
increasingly aware of this, developing and implementing a plan to reduce their OPEB liabilities
has become a priority in order to mitigate the risk of a credit downgrade and the resulting increase
in the cost of borrowed funds.
Comparison of Peer City Liabilities and Benefits
The difference in the level of OPEB liabilities among Nashville and the Peer Cities is the result
several factors including funding methods, benefits provided, and required employee
contributions. Figure 22 below reflects key metrics for Nashville and each of the Peer Cities.
Austi n Charl otte Denver Indianapolis Jacksonville Louisville
Total OPEB liability
$3.889
billion
$2.525
billion
$605
million
$285
million
$233
million
$188
million
$345
million
Fiduciary net
position
$ - $ -
$89.3
million
$73.8
million
$11.9
million
$ - $ -
Net OPEB Liability
$3.889
billion
$2.525
billion
$516
million
$211
million
$221
million
$188
million
$345
million
Covered pa yrol l
$878
million
$968
million
$402
million
$542
million
$312
million
$379
million
$305
million
Annual OPEB
expens e
$243
million
$213
million
$26
million
$16
million
$18
million
$9.8
million
$47
million
Net OPEB liability as
a % of
covered-empl oyee
payroll
443% 261% 134% 39% 71% 49% 113%
Nashville
Peer Cities
OPEB Metrics Comparison ( Fig. 22)
For fiscal year 2018, three of the Peer Cities (Charlotte, Denver, and Indianapolis) had established
an irrevocable trust for purposes of pre-funding their respective OPEB liabilities. This is indicated
by the reporting of a “fiduciary net position” which serves to offset the total OPEB obligation and
results in a reduced “net” liability. As would be expected based on the size of their liabilities,
Nashville and Austin incurred the greatest annual expense of $243 million and $213 million,
respectively.
The total liability for each municipality is also presented relative to its “covered payroll” which
represents the compensation paid to employees who are active in the plan. At 443%, Nashville’s
net liability is over four times its covered payroll. This far exceeds Austin’s 261%, which itself is
significantly greater than the percentages of the other five Peer Cities. This is further pronounced
29
by the fact that both Nashville and Austin report traditional compensation paid to covered
employees that is roughly 2 to 3 times that of the other Peer Cities.
Noteworthy is the significantly reduced annual expense reported by the other five Peer Cities
compared to that of Nashville and Austin. While the decision to pre-fund future benefits on the
part of Charlotte, Denver, and Indianapolis contributes in part to this difference, it is also largely
due to the variance in benefits offered, and the extent to which employee contributions are
required. The following is a summary of the primary characteristics of each municipality’s
respective plans:
Nashville - Nashville provides insurance to both retirees and eligible family
members. Those retirees who were hired prior to 2013, can participate in the
Medical, Dental and Vision programs with the same subsidized premium rates as
offered to employees (the City contributes 75% and the retiree contributes 25%).
The plan for those over 65 requires that the employee must apply for Medicare
which acts as the primary insurer with the Nashville insurance secondary.
Those retirees hired after 2013 can also participate in the insurance program but
have a sliding scale for medical premiums as described below. A survivor of a
service pensioner or active employee with less than 10 years of service are not
eligible to participate
• 10 years, but less than 15 years Nashville 25%, Retiree 75%
• Between 15 – 16 years Nashville 50%, Retiree 50%
• Between 16 – 17 years Nashville 55%, Retiree 45%
• Between 17 – 18 years Nashville 60%, Retiree 40%
• Between 18 – 19 years Nashville 65%, Retiree 35%
• Between 19 – 20 years Nashville 70%, Retiree 30%
• 20 years or more Nashville 75%, Retiree 25%
While Nashville’s benefits are provided on a sliding scale, the percentages are more favorable to
employees than those of the Peer Cities. In addition, Nashville has based required employee
contributions on projected “pay-go” financing requirements which means contributions are at a
level sufficient only to cover benefits as they come due. Therefore Nashville’s liability continues
to grow at a rapid pace as employees accrue service time at a much faster rate than they
contribute.
Louisville – Louisville participates in a cost sharing plan operated by the State of
Kentucky Retirement System (KRS). All employees are eligible to participate, and
membership may be extended to certain beneficiaries under specific
circumstances. Health plan benefits are determined by length of service and the
type of retirement system in which the employee is enrolled. There is a sliding
scale for the portion paid by KRS. The scale ranges from 100% for over 20 years
of service to zero for less than 4 years of service in the case of those individuals
who enter after 2003. The City contributes 4.7% for each employee in the plan.
Plan members are required to contribute 1% of salary for the retirement insurance.
Louisville’s plan costs are significantly less than Nashville due largely to the fact that it is
participating in a cost-sharing plan in which the State funds much of the benefits.
30
Indianapolis -The City offers the retirees the option of enrolling in the City’s
medical plan but the retiree must pay both the employee and City share of the
premium. While there is no direct subsidy of the insurance premium, there is an
implicit subsidy since the older population would have a higher cost to provide
health care.
Because Indianapolis requires the employees to fund 100% of premiums, the City’s obligation is
limited to an implicit rate subsidy which results in a significantly smaller liability then if traditional
employer contributions were required.
Charlotte - The City has established an Employee Benefit Trust Plan in which
employees are offered a health plan with a sliding scale for premiums. A 20 year
employee pays nothing for a pre-Medicare policy and $176 for a Medicare
supplement plan. However the sliding scale results in employee premiums that
increase significantly as individuals are further from reaching 20 years of service.
Charlotte’s smaller liability compared to Nashville is driven primarily by a less-generous
sliding scale and the decision to fund future benefits by placing assets in trust.
Austin - As a matter of policy, the City Council determines the OPEB Benefits
annually. There is an Employee Benefit Fund that pays for any benefits provided.
Retirees have access to medical, Dental and Vision Insurance. For retirees under
the age of 65 with 20 years of services, the City pays the following:
• 80% of the retirees medical premium plus 80% for a Medicare supplement
• 50% of the premiums for retiree dependents, and
• 70% for surviving spouses.
There is a sliding scale of premium rates depending on years of service, with those
of less than 5 years of service receiving a 16% subsidy.
Like Nashville, Austin reports a covered payroll amount that is much greater than the Peer Cities,
indicating a larger city workforce and significantly more individuals receiving benefits. In addition,
the City’s plan is generous in its coverage of dependents and surviving spouses.
Jacksonville - The City has a self-insured health plan in which a retiree pays $593
per month for health insurance and a retiree and spouse pay $1,219 per month.
Jacksonville has maintained the smallest liability compared to other Peer Cities due primarily to
high employee premiums that are comparable to those paid in private employer health plans.
Denver - The City provides a health plan for retirees. The City’s monthly
contribution on behalf of the employee for the plan is $6.25 per year of service for
Medicare-eligible members ($125/month for a 20-year employee) and $12.50 per
year of service for members who are not yet Medicare-eligible ($250/month for a
20-year employee) .
Denver’s OPEB program includes multiple employers which share the cost of administering
several plans with the City, each with varying limits for entrants after specified dates. In addition
the City has begun placing assets in trust to offset the growth in its OPEB liability.
31
Tax and Fee Burden
This portion of the Study considers the estimated total cost of taxes and fees paid by residents
for key services and functions provided by state and local governments. Each of the Peer Cities
funds its operations differently depending on their individual structures and relationships to their
respective state governments. For example, some cities rely more heavily on property taxes
versus sales taxes that are often collected and disbursed by the states. In addition, the extent to
which charges for services are imposed to supplement tax revenues varies from city to city.
Therefore, in order to facilitate comparability of tax and fee burdens by city the various rates and
assessments imposed by each of the Peer Cities were applied to a representative Nashville
household having the following assumed characteristics:
• A two-person household in a $250,000 house (Based on data from Clear Capital and
reported by Kiplinger)
• Household income of $64,000 (Avg. Nashville household income per 2018 American
Community Survey)
• Annual spending on food, clothing and other items subject to sales tax, $25,000 (Estimate
derived from US Bureau of Labor Statistics)
• Consumption of water, 9000 gallons per month (Based on USGS website - average per
person consumption of 100 gallons per day and outside use of 100 gallons per day)
• Sewer use of 9000 gallons or sewer per month (based on water usage above)
• Electricity, 800 kWh per month (According to the US Energy Information Administration)
• Solid waste service (Based on standard residential service)
• Wastewater (Based on one equivalent residential unit)
Total taxes and fees per household were estimated for each municipality as reflected in the table
below. The taxes and fees selected for comparison were limited to those imposed by state and
local governments with the exception of certain electrical utilities operated by co-ops or other
privately owned entities. Under the above assumptions, Nashville’s combined burden for the
above taxes and fees ranges from 16% to 53% less than all of the Peer Cities. This suggests
that Nashville would not be at a competitive disadvantage with the Peer Cities, even if one or
more of these taxes or fees were to substantially increase.
Austin Charlotte Denver Indianapolis Jacksonville Louisville
Property tax 1,972$ 5,508$ 2,413$ 1,393$ 7,772$ 4,466$ 3,540$
Income tax
(1)
- - 3,360 2,969 1,293 - 4,608
Sales tax
(1), (2)
2,313 2,063 1,853 2,238 1,830 1,830 1,540
Water
(3)
497 1,120 772 636 635 472 490
Wastewater
(3)
1,282 1,353 1,032 698 1,008 819 597
Solid Waste 149 176 58 144 204 152 93
Electricity
(3)
1,249 680 1,005 792 1,169 1,219 1,053
Total 7,462$ 10,900$ 10,493$ 8,870$ 13,911$ 8,958$ 11,921$
(1) - Includes both state and local taxes
(2) - Includes hospitality taxes
(3) - Includes both base and volume charges
Nashville
Peer Cities
Tax/fee
Combined Tax and Fee Burden Comparison ( Fig. 23)
32
The primary inputs to estimate the amounts reflected in Figure 23 consist of individual rates,
fees and charges imposed by each of the Peer Cities and/or their respective state governments.
A summary of these inputs is presented in Appendix A.
33
Transit
An overview of the funding for Nashville’s transit system was performed to include a comparison
to transit funding of the Peer Cities. As an in-depth assessment of Nashville’s transit system was
beyond the scope of this Study, the focus was on the level and sources of funding, and the nature
of the transit services provided by the respective systems.
Nashville’s current transit system is comprised primarily of a basic network of bus routes and one
commuter rail line. In 2018 a major transit plan was presented via referendum. The plan
envisioned a major expansion of bus service, a light rail system and commuter rail routes.
However, the referendum was rejected by voters. The plan would have cost approximately $5.4
billion and would have funded five light rail lines, bus rapid transit lines, commuter rail and more
than a dozen transit centers. The plan was to be funded by dedicated sources, including an
expansion of the local option sales tax, an additional levy of hotel/motel tax, an increase in the
tax on rental cars and a surcharge on an existing business and excise tax. Geographically, the
plan focused on the urban core area of the County. Support in the central part of the County was
the strongest but the suburban areas were heavily opposed to the plan.
It is common for transit referendums in US cities to fail multiple times prior to being adopted. For
example, transit funding referendums introduced by the City of Seattle failed in 1968, 1970 and
1995, before passing in 1996 and 2016. The 2016 plan, which upon completion will cost in
excess of $50 billion, includes the largest rail building program in the country. It will encompass
approximately 116 miles of light rail, in addition to commuter rail and bus rapid transit lines. The
delay in starting the light rail building program increased costs due to both the inflation in
construction costs and a rise in land values brought on by more intense development.
In recent years there has been a relatively high level of success for transit referendums in the
United States. A study entitled, Successful Transit Tax Referendums (Leadership APTA Class
of 2014), reported that of 144 transit tax referendums introduced in 25 states between 2009 and
2014, 76% were successful.
While there are many considerations for effective transit funding, establishing a dedicated funding
source enhances the probability of a successful program. Noteworthy is that unlike Nashville,
each of the Peer Cities has a dedicated funding source for investment in their respective transit
systems. The most common dedicated source of funding is a local option sales tax. Other
sources include a portion of an existing gas tax or a tax on wages. These sources will generally
require a voter referendum. Voter approval appears to be more likely with a planned system of
transit enhancements that appeals to a broad demographic and geographic spectrum within the
community. In addition, galvanizing the support and engagement of a wide array of interest
groups is beneficial for the campaign.
Development and implementation of transit system initiatives for the Peer Cities are summarized
as follows:
Charlotte - Transit service is provided in Charlotte by the Charlotte Area Transit
System (CATS), which is a department within the City of Charlotte. CATS was
created in 2000 after a successful public referendum in 1998 to fund the program
from passenger fares and local, state and federal grants. The North Carolina
General Assembly passed enabling legislation in 1998 to allow the citizens of
Mecklenburg County to enact a local sales tax dedicated to public transit. In 1998,
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the citizens voted by a margin of 58 percent to 42 percent to enact a half-cent sales
tax dedicated to funding public transit initiatives. The citizens reaffirmed this
dedicated tax in November 2007 by a 70 percent to 30 percent margin on a
referendum that generates in excess of $70 million annually. In addition to funding
an expanded bus service, Charlotte has built a light rail system.
Indianapolis - The City/County governing Indianapolis has instituted a .25%
income tax to fund transit. This is projected to raise $54 million per year. It will
fund bus system operations including a relatively aggressive Bus Rapid Transit
System for the county.
Jacksonville - Duval County has a ½ cent sales tax and a local option gas tax of
which a portion is dedicated to specific transit initiatives including a bus system
and the downtown monorail “people mover”, The Skyway. The County is planning
a transition of The Skyway into what they call the Ultimate Urban Circulator, an
autonomous vehicle network which will serve an expanded area. An extended bus
rapid transit system is also in operation with more miles of service planned.
Denver - Denver voters in an eight-county area approved a .4% increase in sales
tax to fund commuter rail, light rail and express bus service. This system was
expected to generate $4.7 billion, but revenues dropped to $4.1 billion and the
initial cost increased to $6.5 billion. Thus far 58.5 miles of light rail and 40 miles of
commuter rail has been built, among other projects.
Louisville – A Local Occupational Tax provides more than 60% of the transit
funding for a region that includes Louisville. The tax is levied on business income
generated in Nashville Louisville at a rate of 2.2%. A portion of the tax is
designated for the Transit Authority of River City and is typically in excess of $50
million annually.
Austin - Capital Metro is the regional transit agency serving the Austin area. It is
funded primarily by a 1% sales tax that generates approximately $250 million
annually. The agency is currently in the planning process for a major transit system
expansion which would include a light rail network. The expansion is estimated to
cost close to $10 billion is likely to go before voters in the spring of 2020.
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Affordable Housing
Nashville’s success in economic development has driven sustained population growth and
significant increases in home prices and rents. It is commonly cited that housing costs for any
given household should be limited to no more than 30% of individual household income. The
Housing Nashville report finalized in May 2017 indicates that nearly 25% of all homeowners are
using more than 30% of household income on housing costs. The report also states that the rate
of Nashville households using more than 30% of income for housing costs jumps to almost 50%
for renters.
This challenge is not unique to Nashville as many U.S. cities are facing shortages in affordable
housing. The issue will become more severe for Nashville as it continues to experience strong
population growth. The Housing Nashville report states that from 2005 to 2015, Nashville’s
population increased by almost 25% while housing stocks increased by only 5% during the same
period. Moreover, the report states that since the year 2000 Nashville has lost more than 20%
of housing units deemed “affordable”. The report also states that in 2015 Nashville’s shortage in
affordable rental homes was at 18,000 units, and it anticipates that this shortage will increase to
approximately 31,000 units by 2025.
US cities have implemented a number of different strategies to address affordable housing
shortages including tapping state and federal grant funds, implementing public-private
partnerships, utilizing tax credits and PILOT programs, and leveraging debt funding. The 2018
report Housing Charlotte: A Framework for Building and Expanding Access to Opportunity
through Housing Investments details the use of such strategies to increase the availability of
affordable housing. Metropolitan Housing and Development Agency (MHDA) and the Tennessee
Housing Development Agency (THDA) as well as non-profits and for-profit housing builders have
been engaged in a number of such efforts including the following:
• $25 million general obligation bonds to construct and maintain affordable units
• A tax abatement program for assisting with affordable housing
• The Veterans Assisted Supportive Housing (VASH) vouchers
• Emergency Shelter Grants (ESG)
• Housing Opportunities for Persons with AIDS (HOPWA)
• Low Income Housing Tax Credits (LIHTC)
• Payment in lieu of taxes (PILOT) for LIHTC developments
• Property Tax Freeze Relief Program
• Barnes Fund for Affordable Housing
• Providing Nashville infill lots
• HOME Investment Partnership (HOME) for acquisition, rehabilitation and new
construction
• Using Community Development Block Grants (CDBG) for housing rehabilitation
• Using the Community Investment Tax Credit (CITC)
• Housing Incentives Pilot Program (HIPP)
Other initiatives available to Nashville to increase the supply of affordable housing include the
following:
• Increasing funding for the Barnes Fund for Housing, along with changes in the scope of
the effort
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• Expanding the Housing Incentives Pilot Program
• Work with State and Federal agencies to maximize the use of available funding
The Housing Nashville report describes the following funding initiatives under which Nashville
could add 1,750 affordable housing units per year with an annual investment of approximately
$10 million beyond what Nashville is currently spending:
• Barnes Fund – Increase annual funding by $5 million to $15 million to generate
approximately 750 additional units per year. This annual growth in the number of units
would also require increasing the capacity of those entities constructing the additional
units as well as expanding the targeted group of constituents to be served by the new
units.
• PILOT program for income tax credits – Increase annual amount of reduction in property
tax allowed from $2.5 million to $5 million to generate approximately 1,000 additional units
per year. This would require a ramping up of the number of units produced by developers.
• Housing Incentives Pilot Program – Increase annual funding by $2.5 million to $3.0 million
to generate approximately 500 additional units. Since this is an annual subsidy, it would
not produce an additional 500 units each year.
These expanded initiatives would create the opportunity to increase the amount of affordable
housing by 2,250 units in the first year and 1,750 units per year after that. While these initiatives
alone will not solve Nashville’s affordable housing shortage, the increased investments would
allow for substantive progress towards meeting the need of 31,000 additional units by 2025 and
would serve as a significant supplement to other ongoing affordable housing programs.
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Technology Investment
Opportunities and Challenges
Background
Similar to public transportation, health insurance, and public utilities, technology in public
infrastructure has recently developed as a separate sector credit factor within the municipal bond
market. The current top eight tech categories are helping local governments advance in major
functions, including financial transparency, mobility, public safety and overall public engagement.
The top eight tech categories are hardware, software, data, systems, apps, sensors, blockchain
and fiber optic broadband. Each of these categories can be seen enhancing operations and
improving services provided by local governments in all major US cities.
Technological solutions on the part of local governments are crucial in forming and implementing
public policy to address rapidly developing economic, demographic, environmental and
technological changes. They lay the groundwork to be ready for next-generation infrastructure,
ensure better educational outcomes, offer greater economic opportunity and output, and provide
improved healthcare. Local governments that fail to embrace technology are at risk of facing
weakened financial performance, declining credit quality, increased borrowing costs, and
potential diminished access to financing.
The Study includes a review of Nashville’s strategy for implementing digital transformation and
applying technology and innovation to solve local challenges, as described in the 2018 Connected
Nashville plan. The plan reports the results of an eighteen-month, inclusive public/private process
to research best practices in education, transportation, environment, governance, livability and
economy. Coincidently, three of the Peer Cities included in the Study (Austin, Denver, and
Indianapolis), were also recognized for best practices in the Connected Nashville plan. The Study
also considers available ITS Strategic roadmaps with action plans through fiscal year 2020 and
compares the action plans with benchmark information available from the Peer Cities.
In summary, Nashville has engaged in planning efforts to investigate best practices and to devise
local strategies, thereby positioning itself to make significant strides in the future. However,
substantive implementation of such plans has not occurred. Converting plans to sound
technology investments is crucial for any local government, and typically requires sustained
cultural changes within the organization as well as the adjustment of spending priorities in
upcoming annual budgets.
Best Practices
The 2018 Digital Cities competition, of which three of the Peer Cities - Louisville, Denver, and
Charlotte – placed in the top five of organizations serving populations of 500,000 or more, offers
best practices in the following categories:
• Expedited plan review and inspections
• Mobility Investments
• Transparency and civic technology
• Data management and cloud migration
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Expedited Plan Review and Inspections – Development activity is at an all-time high in
Nashville, both in terms of the number of permits and the dollar value of the permits. Efficiently
processing development plan review and inspection requests, without compromising quality and
safety standards, can shorten development timetables and hasten occupancy. This in turn
accelerates growth of the tax rolls, job growth and overall economic impact.
An example of such an approach is Austin Smart Start, a partnership between Austin’s
Economic Development Services and Economic Development agencies. The partnership helps
new small business owners navigate development review, permitting and inspections. Smart Start
is a municipal application that guides users through each of the major steps in the development
process, answering questions along the way, informing them about regulations and connecting
them with resources.
Nashville’s fast-paced development warrants considering the investment required for the
additional staff and modernization to implement such an approach, thus allowing for the
automation of plan submittals, permit tracking and inspection scheduling. Increased plan and
permit fees could serve as a dedicated funding source to cover additional operating costs.
Expediting the permitting and inspection process would accelerate growth in Nashville’s tax base
and enhance its five-year financial outlook. It should also be noted that annual development fees
generated by Nashville appear to be more than twice the amount spent each year on staff
processing and development.
Mobility Investments - The Annual Urban Mobility Scorecard and TRIP Report analyze the time
and resources forfeited by Nashville and other municipalities due to traffic congestion. Effectively
addressing mobility issues requires the use of state-of-the-art technology. Nashville should
consider the following technology-based practices and investments that have been implemented
by other cities to improve transportation corridors and overall mobility:
The Indianapolis Smart Corridors initiative includes automation of bus rapid transit
and car share routes, intelligent infrastructure and traffic management systems, and
real-time data and dynamic modeling to manage travel demand. The city has also
established a set of multi-modal corridor and space design guidelines to enable
digital planning.
Go Denver as cited in the Connected Nashville report is an application for mobile
phones that allows users to select preferred transport, plan trips, compare results
and track trips over time. The application is also designed to accumulate insights
based on user preferences and activities in order to improve the design of Denver’s
transportation system. While Go Denver as an application is most beneficial to
the transit rider, it also demonstrates how technological innovation can be used to
better serve the citizenry, improve mobility, and produce a better return for capital
investment in the transportation infrastructure.
San Francisco’s SFpark system was also identified as a best practice in the
Connected Nashville plan. Smart parking strategies facilitate more efficient use of
limited public parking in Central Business Districts including serving as a platform
for mobile applications that allow drivers to find available parking and reserve it in-
real time.
Transparency/Civic Technology – Nashville has invested in a program to enhance its efficiency
and responsiveness in providing non-emergency services and information to the ever-growing
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tech-savvy population. Nashville’s Citizen Relationship Management program (CRM) is based
on the popular Salesforce platform. It facilitates timely, two-way communication between citizens
and their local government, as well as between departments and agencies engaged in delivering
services. However, the significant influx of new residents will continue to put a strain on the City’s
ability to deliver services with the same number of staff. A forward-thinking technology program
with an emphasis on innovation should be central to Nashville’s efforts to bridge the gap. Recent
initiatives by the Peer City of Louisville should be considered for implementation by Nashville.
Louisville’s Department of Information Technology (DoIT) and the Office of Civic Innovation (OCI)
have worked with City leadership to ensure that technology is sufficiently addressed in the City’s
20-year plan. The plan emphasizes resident input consistent with Louisville’s strong digital
inclusion efforts. To address the digital divide, DoIT and OCI have strived to:
• Sign up low-income residents for low-cost Internet,
• Add Wi-Fi hot spots throughout the city, and
• Build more than 100 miles of new fiber-optic backbone for smart city technologies.
Louisville's goal is to be a truly smart city by the end of 2022, which includes plans to build a new
smart transportation corridor over the next couple of years. The City has an array of civic
engagement offerings, including an ever-evolving website and 131 social media accounts.
Additionally, Louisville launched a new online portal for citizen reporting. In terms of
cybersecurity, Louisville has adopted a hybrid cloud approach that gives staff protections beyond
City premises. In a single month more than 9 million threats were identified and blocked. And in
an aggressive move to solve IT workforce issues, DoIT added a position to the agency dedicated
to working on recruitment, retention and training.
Data Management and Cloud Migration – Nashville is expanding on the data available on the
Open Data Portal, and now offers Wi-Fi internet at a growing number of facilities including
primarily public libraries. In addition, the hubNashville mobile application is now available for
making non-emergency service requests. Nashville has also emphasized securing the
governmental systems from data breaches.
Planning for police body-worn cameras is ongoing, with major capital and recurring operating
expenses anticipated, but currently unfunded. Nashville ITS appears to recognize the widespread
acceptance of cloud services that employees and citizens use every day, along with the potential
for positive financial impact and increasingly effective cloud vendor security. As such cloud
services appear to be a viable future direction. The 2020 action plan of Nashville ITS includes a
12-month study of best practices for cloud database administration, to be submitted to the
Executive Leadership Team. Also, the 2021 action plan includes a study of options for a cloud-
based ERP full functionality to avoid continual multi-million-dollar upgrade cycles.
Initiatives and programs implemented by the Peer Cities regarding data management and cloud
migration include the following:
Denver has recently deployed an Enterprise Data Management (EDM) system,
which collects real-time information on weather, environmental health,
transportation and freight, giving the City baseline data it can use to test tech-
driven innovations. More than half of Denver’s organization-wide applications are
now in the cloud. This was made possible by recent investments in platforms from
Microsoft, Workday, Accela and Salesforce. These investments were realized as
the result of a dedicated funding stream for technology innovations. As a result,
40
an increasing number of the City’s workforce can now do their jobs from the field,
saving the time and expense of more manual workflows. At the same time, digital
access to citizen services is expanded thus providing residents and business
owners with many of the same conveniences afforded to members of the City
workforce.
Charlotte’s Innovation and Technology Department has brought a data-focused
mindset to many of the City’s initiatives. One example is the North End Smart
District project, which has incorporated citizen feedback into efforts to improve the
northern part of the city. Residents have lowered utility bills using weatherization
and smart home technology, and the City has gathered data from those efforts to
demonstrate cost savings. The Office of Data and Analytics (ODA) has improved
its open data portal by increasing the number of data sets from 48 to 121, and
creating a function that allows departments to tell stories using their data. ODA has
set up 15 peer-led training courses for other city employees to learn how to use
data, and the City’s IT staff has built a dynamic, smart cybersecurity paradigm.
Artificial intelligence engines scan traffic for threats in ways that used to require
staff. An outside vendor will perform audits, compliance checks and penetration
tests regularly. In addition, an effort underway is to set up geographically dispersed
servers to render denial-of-service attacks ineffective.
Austin Body Camera Implementation – Austin police began issuing body-worn
cameras to officers in 2016, starting with those working in the downtown area. As
of April 2019, cameras have been issued to nearly all of the roughly 1,900 Austin
police officers, and about 2 million videos have been recorded. Officers are
required to use the cameras when they are responding to calls or making arrests.
The cameras automatically activate via Bluetooth when officers exit a vehicle. It is
up to the officers to deactivate the cameras when an incident has finished or when
they go off duty. When videos are uploaded, officers are expected to properly
categorize them. The first city audit of the Austin bodycam program found several
shortcomings in how the Police Department reviews and keeps track of footage.
However, Austin leadership were generally pleased with the relatively few number
of issues which resulted primarily from human error. According to a 2018 report by
the Department of Justice, 47% of the more than 15,000 law enforcement agencies
in the country had implemented bodycam programs in 2016. Many of those
agencies, including the Austin Police Department, have relied upon federal funding
to implement these programs.
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Observations
Affordable Housing
Nashville’s shortage in affordable housing will require a combination of forward-thinking solutions
as strong population growth is expected to continue. The Housing Nashville report puts forth a
number of initiatives similar to those that have been effective across the US and in the Peer Cities
including the following:
• Increasing funding for the Barnes Fund for Housing
• Expanding the payment in lieu of taxes (PILOT) program for low income tax credits
• Further developing and implementing the Housing Incentives Pilot Program (HIPP)
• Work with State and Federal agencies to maximize the use of available funding
Transit
Nashville’s rapid growth will also require increased commitment to investment in public transit.
Each of the Peer Cities have developed robust transit systems supported by a dedicated funding
source. The lack of a dedicated funding source presents an obstacle for the development of an
effective transit system that will keep pace with Nashville’s growth. Local sales taxes have been
the most frequently used source of dedicated funding for the capital investment and operating
budget required to develop and sustain a comprehensive transit system.
While successful transit referendums have been a challenge in municipalities across the country,
a number of communities have overcome opposition by presenting a plan and funding package
that addresses overall mobility, thus capturing a broader public acceptance of investment in
transit.
Investment in Technology
Many of the challenges discussed in the Study will need to be addressed either directly or
indirectly by significant advancements in technology and automation. Cyber threats alone pose
a huge challenge, as they have become commonplace and leave local governments vulnerable
to significant risk of loss in terms of financial resources and public confidence. As constituents
observe and experience the benefits of technology and innovation in the private sector and in
their personal lives, there is a growing expectation that government will incorporate similar
advancements in executing major functions and providing key services. This will require
continued investment in technology-based initiatives including:
• Automating paper-based functions
• Enhancing the use of cloud services including data base management and security
measures
• Acquiring and implementing body cameras for police officers
• Expanding online services for citizens and businesses
• Investing in state-of-the-art traffic management and improving management of public
rights of way
• Assessing risk of vulnerability to cyber-attacks and development and execution of a plan
to sufficiently mitigate such risks.
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Financial Best Practices
Cash Management - Well run local governments benefit from formal cash management plans
that clearly lay out the cash flow requirements for operations and debt service and identify the
timed availability of funds to meet those obligations. The GFOA recommends that local
governments adopt a formal process for forecasting cash sources and uses with the following
characteristics:
• Ongoing forecasting to ensure sufficient liquidity to meet disbursement requirements and
limit idle cash. The cash forecast period should be at least a 12-month rolling period, as
opposed to a fiscal year basis. The forecast within this rolling period should be divided up
in at least monthly sections for most governments, or weekly or daily for larger and more
complex governments. Nashville should consider monthly postings of reports on-line
within thirty days after each month end.
• The forecast should be based on conservative assumptions about both the cash receipts
and disbursement portions of the analysis. These assumptions should be reviewed and
updated regularly, as well as after any major changes in operations (e.g., a new debt
issuance, new taxes, etc.).
• An appropriate tool for conducting the cash forecast should be selected; most
governments can complete a forecast using simple spreadsheet software, while
organizations that require more complex modeling can use commercially available analytic
or business intelligence systems, or modules found within common enterprise resource
planning (ERP) or financial management systems.
• Finally, the forecast should be updated periodically by staff to ensure sufficient liquidity
and actual cash flow results should be compared with the cash forecast projections. The
cash forecast report should be frequently reviewed by finance management and a
summarized report could be included in the periodic investment report.
Financial Transparency – Nashville should consider enhancing the clarity of financial
information displayed on its website to where it can be more readily understood by the general
public. This can be achieved by developing a straight-forward presentation of revenues and
expenditures that allows constituents to review and understand major revenue and expenditure
amounts such as property taxes and personnel costs. Proposed actions to eliminate deficits and
strengthen Nashville’s overall financial position should also be summarized in a concise manner.
Financial Planning – Nashville’s financial planning process should include a long-range
assessment that incorporates assumptions for investments and funding strategies over multiple
fiscal years. Development of a five-year financial forecast to include operating revenues and
expenditures as well as anticipated capital expenditures and debt service requirements should be
considered. Forecasted amounts would be based on historical trends of revenues and
expenditures adjusted for known factors that will increase or decrease those trend lines. Such a
forecast would estimate the future impact of planned capital improvement projects or expected
employee costs and would complement the recent proposal - acted upon by the Metro Nashville
Council - to require detailed estimates for proposed capital projects.
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Financial Reporting – Based on publicly available information, it is not evident that Nashville
provides regular financial reports to the Council. To enhance transparency and ensure that the
legislative body is well-informed regarding all of Nashville’s major financial transactions, trends,
and initiatives, a fiscal report to Council is recommended on at least a quarterly basis. The report
should include a summarized presentation of revenues and expenditures for all major funds and
a comparison of budget to actual with explanations for significant variances. The report should
also include a budget-to-actual update for all major capital projects, and the status of respective
funding sources for each project such as debt balances, the collection of special assessment
taxes, or remaining committed/restricted internal reserves.
Performance Measurement - Nashville should consider developing a set of measurements that
provides the public an insight into the results of its key services and functions. This is often
achieved by establishing an outcome-based performance measurement system that would allow
Nashville to assess the progress of its initiatives against pre-set goals and expectations. Such a
system typically involves defining key performance indicators (KPIs) and setting targets to
measure desired outcomes. The KPIs should be developed in consultation with major
stakeholders to ensure overall alignment. In addition, each major department within the local
government should provide input for defining KPI’s that are relevant to department-specific
objectives. These objectives would then be aggregated on the local government level. In an
effort to enhance transparency measurement results can be reported on a monthly or quarterly
basis via the government’s website.
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45
APPENDIX A
Nashville Austin Charlotte Denver Indianapolis Jacksonville Louisville
Taxes
Total tax burden by state 6.28% 8.18% 8.38% 8.15% 8.22% 6.56% 8.77%
Property tax rate (Per $100 of assessed value) $ 3.15500 $ 2.20320 $ 0.96500 $ 7.73650 $ 3.10890 $ 1.78653 $ 1.41600
Property tax, ratio of assessment to market value - Personal 25.00% 100.00% 100.00% 7.20% 100.00% 100.00% 100.00%
Property tax, ratio of assessment to market value - Commercial 40.00% 100.00% 100.00% 29.00% 100.00% 100.00% 100.00%
Effective PT Personal 0.789% 2.203% 0.965% 0.557% 3.109% 1.787% 1.416%
Effective PT Commercial 1.262% 2.203% 0.965% 2.244% 3.109% 1.787% 1.416%
Property tax, county average
$1,764.00 $4,505.00 $2,256.00 $1,662.00 $ 1,307.00 $ 1,519.00 $1,478.00
Income tax - State 0.00% 0.00% 5.25% 4.63% 3.23% 0.00% 5.00%
Income Tax - Local
0.00% 0.00% 0.00% $ 5.75 2.02% 0.00% 2.20%
Sales Tax-State 7.00% 6.25% 4.75% 2.90% 7.00% 7.00% 6.00%
Sales Tax-Local
2.25% 2.00% 2.50% 5.41% 0.00% 0.00% 0.00%
Sales Tax - State and Local 9.25% 8.25% 7.25% 8.31% 7.00% 7.00% 6.00%
Hospitality tax
0.00% 0.00% 1.00% 4.00% 2.00% 2.00% 1.00%
Hotel/motel tax 6.00% 6.75% 8.00% 7.44% 10.00% 6.00% 8.50%
Water Base Charge
$ - $ 1.25 $ 4.73 $ 15.94 $ 8.68 $ 12.60 $ 18.99
Water Volume Charge $ 3.13
$ 8.34 $ 4.85 $ 4.12 $ 3.67 $ 2.97 $ 5.47
Water Impact/Capacity Fee Charge
$ 250.00 $4,700.00 $4,006.00 $3,030.00 $ 1,485.00 $ 339.50 $1,650.00
Water Any Bulk Rate (Tap Fee) $ 430.00 $ 292.89 $ 690.00 $ 200.00
Sewer Base Charge 10% $ 10.30 $ 4.73 $ 12.32 $ 21.25 $ 14.10 $ 9.34
Sewer Volume Charge $ 7.62 $ 9.94 $ 4.99 $ 4.51 $ 7.98 $ 6.39 $ 4.82
Sewer Impact/Capacity Fee $ 750.00 $2,500.00 $7,576.00 $ 2,739.00 $ 1,274.00 $ 3.03
Sewer Any Bulk Rate (Tap Fee) $ 860.00
Stormwater (Monthly) $ 1.50 17.29 7.57 $ 57.20 $ 2.60 $ 5.00 $ 10.58
Solid Waste Base Charge 12.455 $ 14.70 $ 4.84 $ 11.99 $ 0.10 $ 12.65 $ 7.74
Solid Waste Volume Charge $ 0.16
Residential - Base Charge $ 23.11 10.00$ 14.00$ 7.71$ 17.00$ 5.50$ 13.50$
Residential - Average $ 0.10 $ 0.06 $ 0.09 $ 0.06 $ 0.11 $ 0.10 $ 0.09
Commercial - Base Charge 28.00$ Range $ 19.39 10.41$ 18.50$ 9.25$ 32.24$
Commercial - Average $ 10.32 $ 8.75 $ 7.96 $ 9.16 $ 10.08 $ 12.85 $ 8.34
Schools
0.994 1.192 1.5032 0.615 0.736
Parks 0.0509
Police
0.1781 0.1117
Fire 0.0667 0.2931
Debt Per Capita $4,104.00 $6,761.00 $5,293.00 $ 960.00 $ 1,455.00 $ 2,347.00 $ 666.00
GO Bond Rating as of 12/2/2019 Aa2 Aaa Aaa Aaa Aaa A2 Aa1
Note: The above represents raw data gathered to serve as input for a comprehensive analysis. The rates, percentages, and fees were scheduled per various state and
local government websites and other online sources. The correctness of this data is limited to the accuracy of those respective sources and should be independently
verified by anyone using this table. Each of the above municipalites are subject to differing state and local tax, fee, and rate structures. Therefore, the data is not
comparable among the municipalities without further analysis.
Water
Wastewater
Solid Waste
Electricity
Specific Millages (per $100 of assessed value)
Debt metrics
46
APPENDIX B - GLOSSARY OF KEY ACRONYMS
AICPA - American Institute of Certified Public Accountants
APTA – America Public Transit Association
ARC – Annual Required Contribution
CAFR - Comprehensive Annual Financial Report
CRM – Citizen Relationship Management
EDM – Enterprise Data Management
ERP – Enterprise Resource Planning
FTE – Full Time Employees
GASB – Governmental Accounting Standards Board
GFOA – Government Finance Officers Association
GO Bond – General Obligation Bond
GSD – General Service District
ITS – Information Technology Services
KPI – Key Performance Indicator
MNFD – Metro Nashville Fire Department
MNPD – Metro Nashville Police Department
MNPS – Metro Nashville Public Schools
NCVC – Nashville Convention and Visitors Corporation
NHDA – Nashville Housing and Development Agency
OPEB - Other Post-Employment Benefits
PILOT – Payment in Lieu of Taxes
SSARS - Statements on Standards for Accounting and Review Services
THDA – Tennessee Housing and Development Agency
TIF – Tax Increment Financing
TRIP – A National Transportation Research Nonprofit
USD – Urban Service District
USGS – United States Geological Survey
