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Why $135 million isn’t that much…

January 9, 2010

At a recent public meeting on the proposed Music City Center I heard Nashville’s economic development office Alexia Poe suggest that a justification for the construction and operation of the project was the expansion of the tax base. She suggested that the hope of raising taxes in Nashville is minimal and that our only hope for increased revenue is by expanding the tax base through creating new revenues, something that the MCC will due.

This past week, the Mayor’s Office released the HVS analysis which states that by 2017, the MCC will add $135 million to the Nashville economy. Almost $90 million of this will be in direct spending, with the rest coming from “trickle down” spending from businesses and employees receiving the benefit of that direct spending.

$135 million sounds like a lot of money, and frankly I wouldn’t turn it down if someone offered me some of it. But I’m not sure it really is enough to expand our tax base to the point where we can address the severe financial cuts ahead of us.

Remember now that the Metro Nashville tax rate is 2.25% (the other 7% of our 9.25% rate goes to the state). Assuming that 100% of that $135 million is taxable, the take for Metro government is just over $3 million dollars. Of course, that may be a faulty assumption for a big portion of that $90 million in direct costs will be spent in the Tourist Economic Zone, with increases in sales taxes above current levels going to pay off the MCC debt. For the sake of argument however, let’s give the project a positive spin and assume that it will lead to an additional $3 million for the city.

What will $3 million get us? It won’t cover the $7 million dollars a year we have to pay for the Nashville arena. It won’t come close to covering the shortfall that Metro General Hospital will see next year if the TennCare proposals of our Governor passes the legislature. $3 million is better than nothing (that is, if we truly get $3 million) but it doesn’t represent a wide spread expansion of the tax base. We could ask each citizen of Nashville to pay an extra $10 a year and raise double that amount of money.

Is it really worth spending a billion bucks total (project cost with interest) to gain an extra $3 million to our tax base? Really? What am I missing in this equation?

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