After Metro Nashville Council passes $2.6B budget, focus turns to Chancellor Perkins’ ruling in referendum lawsuit

After three years of bruising budget fights, Metro Council breezily passed a $2.6 billion opening budget on Tuesday night.

The unanimous vote was a far cry from the contentious council meetings in recent years when property tax hikes were debated. In both 2018 and 2019, the margin for rejecting the proposed property tax increases came down to just a few votes.

Last year, the council passed a 34 percent property tax increase with 32 votes in favor. When the pandemic economy didn’t take the turn for the worse that most predicted, it gave Mayor John Cooper and the council an unexpected opportunity for a major investment budget this year. Between last year’s tax increase—the city’s first in 10 years—better-than-expected sales tax collections and an influx of federal stimulus dollars, the Cooper administration found itself flush with cash.

Cooper took advantage of the opportunity and committed funds for the largest teacher pay raise in city history, as well as the largest ever capital spending commitment to Metro Nashville Public Schools.

“After a year of crisis, Nashville is finally entering an era of investment,” said Mayor John Cooper. “And with this budget, we’re laying the foundation to build a city that truly works for everyone with historic investments in our schools, transportation, community safety, and affordable housing. 

“We’re making these essential investments with a tax rate that is more than a dollar less than our average rate over the past quarter century – the third lowest in Metro history. I’m grateful to the Metro Council for working with us to fix and protect our finances, which has made this year’s investment budget possible. Today, there’s no city in America better positioned for the years ahead than Nashville.”

The budget, which passed with a voice vote in anticlimactic fashion, also represents a notable win for the young political career of Metro Councilwoman Kyonzte Toombs, who chaired the budget and finance committee in just her second year in the legislative body. Toombs got accolades for how she led the process during the pandemic.

“This year has been nothing like the last few years in terms of the overall stress that came with debating the budget,” said second-term Metro Councilman Dave Rosenberg, who represents the Bellevue area.

Now the question is whether a proposed Metro charter amendment, currently slated to be on the ballot for a July 27 referendum, will send the Cooper administration and the council back to square one in the budget process.

The charter amendment proposal seeks to reset the property tax rate to its level prior to last year’s increase.

The residential property tax rate for most residents prior to the increase was $3.155 per $100 of assessed value.

Because Davidson County is in a reappraisal year, the property tax rate was already going to be reset as part of the upcoming Metro operating budget process. State law blocks local governments from making a windfall as the result of the reappraisal.

That means the property tax rate is reduced proportional to the average countywide increase. The new tax rate under Nashville Mayor John Cooper’s proposed budget would be $3.28 per every $100 of assessed value. If the charter amendment is approved, that would amount to a reduction of just 3.8 percent on the typical homeowner’s tax bill.

It would create a gap of just under $50 million for the Cooper administration and council to navigate, roughly the same amount of cash as the city committed to the teacher raises.

But, the effect of the referendum on the city’s budget would be much more impactful. Future increases would be limited to no more than 3 percent, unless approved by voters in a special referendum – a California-style of government that takes taxing power away from elected officials and puts it in the hands of voters.

Lawyers for the city and for a business group called the Nashville Business Coalition say the charter amendment proposal is unconstitutional.

It sets the stage for one of the most crucial judicial rulings in the recent history of local government. Davidson County Chancellor Russell Perkins is expected to rule by the end of this week on a pre-election challenge to the charter amendment proposal brought forth by the anti-tax group 4 Good Government, and litigated by right-leaning attorneys handpicked by the Republican-controlled Davidson County Election Commission.

If Perkins rejects the city’s challenge to the referendum and allows the July 27 election to go forward, then the Cooper administration’s budget victory will be short-lived. Cooper and his aides will have to determine what cuts to propose to balance this year’s budget in case voters approve the referendum.