Nashville parking deal, other asset sales questioned by state comptroller

Metro is facing increased scrutiny from the state about its finances, particularly the planned sale of city assets in order to balance its budget.

Nashville Mayor David Briley’s budget banks on $34 million as part of the upfront payment in a private parking deal and $11.5 million in the sale of Metro’s District Energy System. 

The city attracted the attention to its finances because of the budget practice of interfund loans to pay for operating expenses. For years, Metro would use funds from one government account to pay bills for another.

Such interfund loans are not controversial, experts say, as long as they are documented correctly and the tax revenue comes in as expected to cover the interfund loans — which the state Comptroller of the Treasury says the city isn't doing properly.  

Earlier this year the comptroller asked Metro to request tax anticipation notes (TANs) in the future. Metro Council responded by requesting approval from the comptroller for a combined $300 million worth of tax anticipation notes.

The comptroller gave conditional approval of the requests contingent upon receiving updated cash flow forecasts for all borrowing and lending funds. Comptroller Justin Wilson’s office also wanted more information on the proposed parking and energy system deals.

Those proposals, especially the parking deal, have faced immense pushback from stakeholders. Briley included those transactions in the operating budget that took effect July 1. The mayor's budget was adopted by default when an alternate budget from the Metro Council that called for a nearly 16% property tax increase was rejected by one vote. 

It was initially anticipated that last year’s fiscal year budget would use a one-time $15 million payment from a potential parking deal. But the deal was delayed when a rival company challenged the procurement process and a judge’s order for the city to stop contract talks while the issue played out. 

Then, Briley announced the deal to hand over the city’s on-street parking management to a private company was on “pause,” so that it could be considered by the Metro Council after the election season in a “comprehensive discussion." 

So instead, Metro filled that budget hole last year with the city’s fund balance that closed “higher than expected,” according to the city. Yet, the Briley administration included an anticipated parking deal and the sale of the energy system in its $2.33 billion budget for the current fiscal year.

Wilson said he wanted “a summary that explains the impact of the sale of assets, including property and parking rights, on the fiscal year 2020 budget in addition to the actual status of these deals” by Sept. 20. The mayoral runoff election is Sept. 12.

In response to questions raised by the comptroller, Briley released a statement through his spokesman. “The letter from the Comptroller’s Office underscores the very real budget challenges I’ve been working to resolve in my first year as mayor," Briley said. 

Briley, Cooper weigh in 

The administration criticized the city's budget "realities" that were set up in 2017 when a budget passed by the council  "failed to set the property tax at the correct rate."

"It also resulted in the city reneging on promised cost-of-living raises for Metro workers, first responders and teachers in 2018," Briley said in his statement.

He touted his current operating budget.

“While I wish we could have completely recovered from this in one year, it will take some time. I am proud that we have made great progress,” Briley said. “Based on projections of $100 million in new revenue, my FY20 budget provided cost-of-living and step increases for all Metro workers, raised starting police pay 6.4%, gave teachers their highest cost-of-living adjustment in a decade, and brought all Metro workers on the pay plan to $15 an hour or more.

"We are on the right track, but we have more work to do – and we are up to the challenge.”

But the questions raised by the comptroller have sparked concern among some city leaders, including At-Large Councilmember John Cooper, who is Briley’s rival in the mayoral election. 

“The Comptroller’s letter highlights serious problems with how the Briley administration has managed our budget,” Cooper said. “This administration has amassed unprecedented levels of debt. It has tried to privatize parking meters and sell our parks in order to close an operating budget. This is irresponsible and wrong.”

Cooper said the city needs a mayor who balances the budget without selling parking meters and parks.

“During my time on the council and throughout this campaign, I have opposed bad deals and proposed solutions to the challenges we face,” Cooper said. “Restoring trust and fiscal responsibility will be one of my first orders of business as mayor.”

Metro Councilmember Bob Mendes, who championed the proposal to raise property taxes in order to increase city revenues, echoed Cooper’s concerns. Mendes called the letter from Wilson “unusual.”

In addition to questioning the asset sales, Wilson demanded that the Metro Council pass a cash management policy by Nov. 20.

“The concerns don’t surprise me,” said Mendes, who has not endorsed a candidate in the mayor's race. “It is fundamentally irresponsible to base a budget on hypothetical one-time sales and to run Metro’s savings account into the ground. That’s what we’ve doing for a few years and now it’s drawn the Comptroller’s attention. Whoever wins the mayoral runoff will need to deal immediately with this new scrutiny."

In a letter to Vice Mayor Jim Shulman and council members on Aug. 16, Metro Finance Director Talia Lomax-O’dneal said her office would keep the council up to date on developing a new cash management policy.

Regarding the comptroller’s questions about the parking deal, Lomax-O’dneal also said through a spokesman that "all options are being evaluated in accordance with the letter and the findings will be returned on deadline.”

Reach Nate Rau at 615-259-8094 and nrau@tennessean.com. Follow on Twitter @tnnaterau.

Yihyun Jeong covers politics in Nashville for The Tennessean. Reach her at yjeong@tennessean.com and follow her on Twitter @yihyun_jeong.