Wednesday, June 08, 2005

Metro Budget Notes

As you probably all know, the Metro Council approved the Mayor's budget on first reading last night. The "honkies" (my name for the Tennessee Tax Revolt) were out in small force outside the council encouraging passing motorists to honk their horns as a profound and articulate show of opposition. TTR is not in favor of much; they are merely oppositional; not much staying power over the long-term. One of the reputations they will have to live down is being against all government services, including neighborhood development and maintaining public schools.

The Chamber of Commerce is supporting the Mayor's budget, including both of his proposed increases in property and sales taxes. I have previously supported the idea of a property tax increase and opposed the idea of a sales tax increase. (BTW, I also oppose Council Member Diane Neighbor's call for an increase in the wheel tax. Like the sales tax, the wheel tax is regressive and places the greatest economic burden on low and middle income drivers).

With the Council's initial approval on first reading, we're already starting to get those sky-is-falling opponents who oversimplify the problem of raising taxes. They warn that raising taxes will encourage people to leave Davidson County for suburbs like the Republican stronghold of Williamson County. This is a distortion for several reasons:
  • People leaving cities is not news. It has been a post-Depression, post-WWII phenomenon that was most appropriately entitled, "White Flight."Race was the first cause of our overly Caucasian suburban growth. Granted it is less of a reason now, thanks to the Civil Rights Movement.
  • Now people leaving urban areas for suburbs give various rationales for doing so. Some include taxes, some don't. Reasons include: 1) better schools, which will require higher taxes as outmigration increases size; 2) lower crime, which also requires revenue influx to maintain; and 3) the ability to buy more property for the same money. That last one is the cost-benefit trade-off for outmigration. Land in all urban areas, not just Nashville (which is considered one of the most competitive urban markets in the country), is more expensive than in the suburbs and in the ex-urbs. It stands to reason that you can buy more land the farther you are willing to commute. The cost-benefit trade-off for moving closer in is paying less money and personal time for transportation costs.
  • The growth of the suburban counties around Davidson is no different than the growth of suburbia everywhere, because of greater demand and higher density closer in. According to market principles, if there is a massive flight away from Downtown Nashville, then urban real estate prices should go down, not up, as demand weakens. Yet, urban real estate prices continue to trend up (a builder in Salemtown told me that he thinks people moving into our neighborhood are willing to pay 12-13% more than we did nearly a year ago). That makes it tougher for lower class residents who are squeezed by higher sales taxes, higher wheel taxes, and their inability, unlike upper middle class Nashvillians, to move to outlying suburbs.
  • Lower class residents stand less of a chance moving to a Franklin suburb than they do surviving in Davidson County. Don't let conservatives convince you that lower class residents are moving out in droves for lower taxes. That's just their worst nightmare.
  • If people are moving to surrounding counties from the Metropolitan areas, then greater demand will be placed on government services in those areas, which in turn would call for higher taxes. The logic is self-defeating. I already intimated this point, but it needs to be iterated.
  • There are other variables that critics ignore in their attack on taxes. Population growth leads to upper middle and upper class "overflow" from urban into suburban areas. Gentrification and its sibling, "in-filling," are exploding in Davidson County like in other metropolitan areas. These are almost exclusively middle class processes of revitalization of urban neighborhoods. If the middle class were not returning or staying in Davidson County, then these processes would not occur at all, let alone proliferate.
Word from the Tennessean (if you want to give reporter Diane Long the benefit of the doubt this time) is that the School Board is going to ignore the Mayor's cut to their proposed budget and make an appeal directly to Metro Council. In my opinion, that strengthens the Mayor's hand and weakens the School Board's case. It makes the School Board look insensitive to budget constraints; it makes the Mayor's request more moderate and realistic.

It is shaping up to be an interesting budget approval process.

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