Mayor John Cooper falsely claims Nashville is in receivership at Lipscomb event

Yihyun Jeong | The Tennessean

Show Caption Hide Caption Nashville's budget crisis: Here's what you need to know State Comptroller Justin Wilson issued a dire warning, saying he would take over the city's checkbook if changes weren't made.

Mayor John Cooper falsely claimed Tuesday morning that Nashville is in receivership before his office quickly walked back his remarks, saying the mayor was simply illustrating the "urgent nature" of the city's finances.

Cooper gave a presentation on Nashville's dire financial situation at the Nashville Business Breakfast, hosted by Lipscomb University and the Nashville Business Journal.

In his remarks, Cooper said multiple times the city is in receivership, meaning the state has taken over city finances, according to a report by the Nashville Business Journal.

"(W)e have to fix our finances and we are as a city — and this is a bit embarrassing — are in receivership right now," Cooper said at the event. "The state of Tennessee, which has to approve our budget, did not approve our budget. No council member voted for this budget … For the first time in city history, (the comptroller’s office) did not approve the city’s budget."

"My goal is to move the city beyond receivership and create the platform for the long-terms needed for us to succeed," Cooper said, according to the report.

Nashville is not under receivership.

"The mayor mentioned receivership to illustrate the urgent nature of our city’s financial position and the state’s authority to take over our finances if we do not balance the budget," Cooper's spokesperson Chris Song said in a statement.

Overspending flagged by comptroller

Nashville is overspending. While Nashville’s revenues have grown by 32% since 2013, the city’s spending has grown by more than 38%.

The city's current budget relies on an estimated $41.5 million from a private parking deal and the sale of a downtown energy system, both plans pursued by former Mayor David Briley. But the parking deal is dead and the sale of the energy system is in limbo, which means the city must find other ways to balance its budget by the end of the fiscal year on June 30, as required by state law.

As a result, the state has become increasingly concerned about Nashville's finances. During a presentation to Metro Council last month, state Comptroller Justin Wilson urged the city to change course or risk the state stepping in deciding how money is spent.

"For gosh sakes, please act!" Wilson said.

The state has authority to take financial control of Nashville now because Metro's current budget will not be approved by the state, since the city has not yet found a way to overcome the budget shortfall.

The Metro Council did not technically vote in favor or the current budget. But when the council failed, by one vote, to pass an alternate budget that called for a nearly 16% property tax increase, it meant the budget that includes the parking deal and energy system sale was approved.

Cooper did not propose a budget but voted against the property tax increase, saying he is “convinced that we can fund our real priorities with a strong and realistic management approach.”

Recognizing that Nashville in September voted in a new mayor and a council in which nearly half of the members are new, the state has given the city a chance to make changes to balance this year's budget.

New revenue to fill 75% of budget gap

Cooper's presentation Tuesday came as a surprise to some city leaders who are expecting to hear from Finance Director Kevin Crumbo on Wednesday regarding the city's plan to address its finances.

"I’m astonished that this mayor would exclusively present a corrective action plan to the very business community he excoriated after promising a new era of transparency with Metro Council," Council member Freddie O'Connell said.

O'Connell also said Cooper saying Nashville is in receivership is "extremely troubling."

"If he was trying to mislead, that’s problematic. If he was simply wrong, that’s also problematic for someone who campaigned on a platform of sound financial management. It’s a terrible signal to send to the business community both in and beyond Nashville," he said.

The mayor largely campaigned on getting the city's fiscal house in order and not raising the property tax rate, saying the city doesn't have a revenue problem but a management problem.

With the city failing to adjust its property tax rate after a reappraisal in 2017, it hasn’t captured the extra revenue from the growth it has seen in recent years. As a result, Nashville has relied on one-time revenue through asset sales to pay recurring costs, and continues to tap into its reserves.

Though Cooper's spokesperson did not respond to a question from The Tennessean about whether the mayor remains opposed to a property tax increase, Cooper doubled down on the issue Tuesday, according to the Nashville Business Journal.

He said raising property taxes would hurt those in less-affluent areas.

"To raise taxes on the people of Belle Meade really means to raise taxes on the backs of poor people in Nashville," he said.

But Cooper's administration has said a sales tax increase — which is widely considered more regressive than a property tax increase — is on the table.

The city will fill 75% of the budget gap with new revenue, according to a copy of Cooper's presentation. The presentation lists a recent deal Cooper struck with Music City Center as an example.

Soon after taking office, the mayor announced a deal with the convention center to give Metro $12.6 million each year in a payment-in-lieu-of-taxes program. As Nashville's budget already factored in the $10 million Music City Center agreed to give the city this year under a deal with Briley, the additional $12.6 million will go toward the budget gap.

Crumbo previously told The Tennessean Metro's Chief Operations Officer Kristin Wilson is leading the effort in the mayor's office to identify additional PILOT programs with entities that are already present in the city, and those that don't have a home yet in Nashville.

Tuesday's presentation also noted the "program delay" of the Barnes Fund for Affordable Housing. Cooper announced last week that he will slash half of the funding it sends annually to the fund, citing the budget crunch.

Instead of $9.5 million, the city has only granted $5 million. The remaining funds will be reimbursed in next year's budget or in possibly in the spring with "excess" dollars.

Yihyun Jeong covers politics in Nashville for USA TODAY NETWORK - TENNESSEE. Reach her at yjeong@tennessean.com and follow her on Twitter @yihyun_jeong.