Broadcasting live from Music Row Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – Leahy was joined on the phone by all-star panelist Crom Carmichael.
During the second hour, Carmicheal gave his take on Nashville Mayor John Cooper’s recent State of the Metro Address where he announced that there would be a “sharp” increase in property taxes on the horizon. Carmichael felt that to set a burden on citizens who’ve already suffered a hardship with the recent tornado and then the coronavirus would be unjust.
He added that the real problem the mayor has yet to address is the healthcare benefits fund issues facing Tennesseans and insisted that the government should be held accountable as any private sector entity would.
Leahy: We are joined now by the original all-star panelist my good friend for many years Crom Carmichael. Good morning Crom.
Carmichael: Micheal. How are you, sir?
Leahy: Good. Are you sheltering safely at home?
Carmichael: So far. So far so good.
Leahy: I wanted to talk a little bit about Mayor John Cooper of Nashville’s announcement yesterday during his State of the Metro Address that he plans to sharply increase the cities property tax rates. He said that the Nashville Finance Department predicts that revenue from sales taxes and other activities will be down between 200 million and 300 million dollars because of the coronavirus pandemic. Now that statement is probably true.
But Crom, I’m looking at this and Nashville was already on the ropes fiscally and then it got hit by the tornadoes. And now its hit by this sharp decline in revenues from the pandemic which means no travel and no tourists for a period of time. Clearly revenue is needed but what will the consequences be? Can you walk us through the consequences of a proposed sharp increase in the city of Nashville and Davidson County’s property tax rate?
Carmichael: I have two comments. One is if the mayor and the council don’t address the unfunded liability of healthcare benefits to retirees which is unfunded. When they passed and gave that benefit, unlike the pension benefit which is supposed to be funded. And until this drop in the stock market, we were somewhere in the neighborhood of 95% funded for the pensions.
On the long term benefits and didn’t set aside any money to fund it. So now we have a four billion dollar hole in the healthcare benefits. If that is not addressed than what the mayor and the council are doing is irresponsible. He can make the claim which is accurate about the tornado and the coronavirus.
Federal money is going to come in and help with the coronavirus on the city and state level. A big part of the hole that he cites, the two to 300 million dollars short falling of sales tax revenue will be made up by the federal government.
But if he doesn’t address this healthcare problem, he knows it exists. If he doesn’t address that then he’s being derelict in his duty based on what he said when he was running. It would be extremely disappointing if the mayor and the council don’t address the single biggest fiscal problem that this city has.
Leahy: Well a couple of comments on that. I see no indication that either the mayor or the city council intended to address that Crom.
Carmichael: I’m saying if they don’t then all the things that the mayor said he wanted to fix when he was running just go up in smoke. He’ll end up being no better than David Briley.
Leahy: What recommendation would you have for him to fix that unfunded healthcare liability problem that exists?
Carmichael: You could adjust it for all new employees. You could also sit down with the employees and have a cap on it so that it doesn’t just keep rising and rising and rising.
Carmichael: So that the city employees have a stake. Right now the city employees don’t have a stake in healthcare benefits because they had this wonderful golden package when they retired. That really is terrible public policy.
Leahy: The other question I have for you, Crom on this is you look at individual behavior based upon financial incentives. What do you think will happen the residency levels of Metro Nashville-Davidson County as well as small businesses with a sharp increase in the city property tax rate? What is likely to happen over the next year or so if that is implemented?
Carmichael: I can’t tell from the article, I think the voters passed a referendum to put a limit on how much property taxes could go up without first going to the voters for their approval. I think that law still exists. So there is a limit to how much they can raise it.
But as we know, if you raise property tax rates you decrease the value of the property because it simply costs more to own the property. Therefore there will be an adjustment in the retail value of the property. Now, having said that, I still think Nashville is in a good position but I’m really more concerned about the long term problem of this giant hole in our budget.
It’s about 70-80 million dollars a year which represents at this point three to four percent of our budget that we are spending on something where we get no current benefit. Nothing. It’s just for people who are no longer working for the government.
And I’m not mad at them, I’m mad at previous administrations and previous councils for passing a benefit and not funding it. That’s just a gross dereliction of duty. And it’s a shame if somebody did this in the private sector they’d go to prison. If you made this kind of promise it would be considered fraud.
Leahy: Your thinking long term. I wonder though it looks to me like which is obviously very important, it looks to me like the city of Nashville and Metro Davidson County is in the midst of a current cash crisis. Will enough federal money come in? There are so many demands on federal money will enough federal money come in to have cash available to Metro Nashville-Davidson County for basic operating functions?
Carmichael: Well I don’t know the answer to that. But the government itself should not be immune to the same types of issues that the private sector has. The government gets its money from the private sector. And if the private sector has a catastrophic event, it doesn’t mean the government gets to slide along and feel no impact from it.
I think the city may need to consider short term pay cuts of 60-90 days if the federal dollars don’t materialize. And I think there is going to be a fourth package which will include infrastructure and money for cities and states.
Leahy: The president mentioned infrastructure as a possibility for another package. You made a very good point. I haven’t seen anything from the mayor. The private sector all over the country is either laying people off or cutting salaries dramatically. 20%. 30%. Some even 40%. I didn’t see anything in the mayor’s statement saying he was going to cut any of the payrolls of the Metro-Davidson County. Did you? I didn’t see that.
Carmichael: I didn’t see it. I’m not going to say it’s not fair. I’m responding to what you’re question was and what should be done. And we have a hole. We have to fix the problem. But you don’t turn the private sector that’s already getting killed by this coronavirus and say I’m going to jack your property taxes up to solve my problem. That’s not a good solution.
And it’s especially not a good solution when you’re not addressing the single biggest problem the city has. He says we have a two to three hundred million dollar sales tax problem because of the coronavirus. But we have an 80 million dollar problem and growing every year from the unfunded liability. So from five years from now, it will be up to 100 to 120 million dollars. And he hasn’t fixed it.
I’m not sure that the assumption that raising the taxes will actually increase revenues because I think there is going to be a lot of people that say, well you’re raising my property taxes, I’m leaving. I’m not going to conduct my business when the economy comes back. I think that will be a possibility. I don’t know if they’ve thought about that.
Carmichael: It will decrease the property values modestly. That’s for sure. It will do that. And at this particular time, that’s not a good thing either. The mayor and the council need to bite the bullet here and resolve this long term problem. And there are different ways to address the short term problem.
Leahy: My guess is whats going to happen with this increase of property tax if its put into effect is you’re going to see significantly higher default and probably the expected revenue won’t be anywhere near what they think.
Listen to the full second hour:
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