After a late-night legislative session on Wednesday, members of the Nashville Metropolitan Council voted 38-0 to approve a fiscal year 2024 budget that matches the $3.2 billion size and most substance of Mayor John Cooper’s May budget plan, preserving his signature proposal for a pay increase for public employees, while shifting some funds to do so.
The plan marks a 6.2% increase over fiscal 2023 spending and allocates $1.6 billion, around half the budget, to the city’s general operating fund and $1.2 billion towards education, a $96.4 million bump from last year.
The budget allocates $409 million to general obligation debt service, with $250 million allocated for the city’s general purpose bonds and associated refinancings and $150 million towards obligations due on school improvement bonds.
Bloomberg News
Nashville has $3.3 billion in outstanding GO debt rated Aa2 by Moody’s Investors Service, AA by S&P Global Ratings, and AA-plus by the Kroll Bond Rating Agency.
The council budget makes some shifts to the mayor’s funding proposal to cover an increase in public employee salaries.
Both budgets adopt a 4% cost-of-living-adjustment and 3% merit increase for city workers, including public school teachers, firefighters, and other first responders, that officials said is the largest such single raise in the city’s history.
Under the council’s plan, part of the costs will be covered by reducing distributions to a scattershot of smaller projects and proposals while redirecting part of the mayor’s proposed allocation to one of the city’s rainy day accounts.
Dubbed the 4% Fund as local law requires that no less than 4% of the city’s general fund be deposited into it annually, the council budget allocates $54 million to those reserves.
At 4.5% of general fund revenue, that’s above the legally required rate, but $3 million short of what Cooper wanted, marking the most significant funding difference between the two proposals. It is also below a 5% rate requirement some local lawmakers have been calling for in the face of increasing equipment and material costs.
Like the mayor’s plan, the council budget uses part of fiscal 2023’s $125.7 million surplus to beef up a different reserve account to record levels.
City Councilmember Bob Mendes said those “dramatically increased” reserves, along with steady revenue from a property tax rate hike instituted in 2020, allowed the city to shoulder the year-by-year increases in costs associated with the improved employee pay plan.
The spending plan includes $55 million to costs associated with public employee benefits including the new pay bump.
In a recent budget report, officials said expect to see a cool down in tax revenue intake into the new year and possibly beyond; the city will see a 3.1% increase in revenue from its business taxes, 4.9% from sales taxes, and 7.3% from the Alcohol and Beverage Tax, the report said, marking a steep decline from the double-digit increases seen in some revenue streams over the last two years.
However, officials also said in that report that years of fiscally conservative practices and strong reserves gave the city stability “in the event of unforeseen emergencies or economic downturns.”