Nashville Debt Limit Charter Amendment

Nashville Debt Limit Charter Amendment

Frequently Asked Questions

What does this amendment accomplish?

The Nashville Debt Limit Charter Amendment is a proposed amendment to the Nashville-Davidson County Charter which protects Nashville Taxpayers by stopping the growth of debt before it becomes dangerously high and burdensome. The amendment prohibits the issuance of new long term bonds when total debt service exceeds 15% of the operating budget of Metro Nashville.

Why is it necessary now?

When Moody’s debt rating service downgraded Metro Nashville’s debt rating in 2014 they specifically cited: “Above average debt burden.”

The recent trend is alarming. In 2011 total debt service was 9% of the operating budget. In 2018 it was over 13% of the budget. See graph below from a recent presentation to the Metro Council.

Does the amendment Limit any other kinds of debt?

Glad you asked, YES, it does. Here is a little background: Many cities and states are in big, big trouble because of what are called "unfunded liabilities" associated with pensions and benefits payable to employees at retirement. These "unfunded liabilities" are not listed as debt and only recently have local governments even been required to acknowledge them. BUT, they are most certainly debt and taxpayers must ultimately pay them just like any other debt.

This amendment will require metro government to create trust funds to begin funding future employee benefits, known by the acronym OPEB or Other Post Employment Benefits. The current unfunded liability for these OPEB benefits is $2.7 billion. The amendment would require metro to begin funding trust funds at the rate of 2% of the unfunded liability per year or approx $50 million. This is far less than is required by GASB rules but it begins the process of creating a fund for these benefits.

MOST IMPORTANTLY, Metro Nashville taxpayers will not be hit by huge payments in the future because we failed to set aside money for payment.

A front page article in the Tennessean from April 10, 2007 referred to this unfunded OPEB liability as “a financial hurricane bearing down on Metro Government...” According to the Tennessee Comptroller’s office 36 local governments and entities have already created trust funds to fund future OPEB liabilities. This amendment requires Metro Government to address this “financial hurricane.”

The charter already requires an “actuarially sound” trust fund to fund the pensions of Metro employees however there are currently no provisions for trust funds for post employment benefits. This amendment begins the process of creating and funding such trust funds.

Has an amendment like this been proposed before via the petition process?

The Metro Nashville Charter is the primary governing document for Metro Nashville Government. The charter may be amended by 1-the Metro Council voting to place a charter amendment on the ballot or 2-the citizens may propose an amendment by petition.

In 2006 grassroots activists successfully placed a Nashville charter amendment on the ballot to put a ceiling or cap on property tax rates and allow an increase in those maximum rates ONLY if approved by voters in a referendum. This charter amendment was overwhelmingly approved by a 77% vote and was passed by a majority in all 172 precincts. Davidson County is the only county in Tennessee with such a provision.