Wednesday, April 17, 2013

Moral hazard in Metro's purchasing past

One definition of "moral hazard" is taking undue risks with resources acquired when incentives exist to do so. I'm wondering whether the Mayor's Office, the police department, and Metro Council (34 members) realized that definition in 2009 when purchasing the old Frensley car dealership in order to flip it into the West MNPD Precinct.

Neighborhood leaders were skeptical and challenged Karl Dean's budget man Rich Riebeling and former police chief Ronal Serpas. They wondered if the cost was fair market. They wondered about the site's flood-proneness. They wondered about the political patronage behind the deal.

CM Buddy Baker, a buddy of Bob Frensley, spearheaded the effort even though the car dealership was not in his district. An ethics complaint was filed against Mr. Baker for allegedly concealing the information that the former police commander of the West Precinct was a trustee for Bob Frensley. Mr. Riebeling pushed the deal through without a detailed site plan, and he was surly and arrogant toward concerned neighborhoods, acting like he was going to put down $4+ million on a cheaper property simply because he could with or without public support.

The incentives for moral hazard were there.

Then came the Great Flood of 2010 that proved community leaders were exactly right to be skeptical of the risk Metro Nashville was willing to take for the West Precinct plan. So then, extra money was needed for flood mitigation of a HQ on a flood plain at a time when Metro was tearing down buildings on other flood plain. But Metro could not or would not spare enough money to provide a large enough community meeting space to allow public meetings for many to attend.

The flood was revealing of the undue risks Riebeling et al. were willing to take with public funds to ignore planning and to patronize the circle of good old boys built up around Bob Frensley through the years. Yet, it was also incentive to continue to take risks to mitigate the costs of keeping MNPD on Charlotte Ave flood plain and stay callous toward the community.

Jump forward to 2013, property reappraisal time.

If you are a property owner, you have likely received your tax appraisal from Metro in the past week. Mike Peden looked at a tax appraisal for a property near to the West Precinct and emailed me this morning:

The tax appraisal for the property next door to the West Precinct on Charlotte went down from $3,816,900 to $3,452,100. (5330 Charlotte Ave)

That seems strange since the tax appraisal on the land metro purchased was $2.88 million and they paid $4.2 million. I thought the justification for that was that the property was under appraised.

In a separate email, Mike wrote that the appraisal of Wendell's Restaurant (5300 Charlotte)--where CM Baker like to hold court occasionally--dropped 6% ($437,200 to $411,900).

Smells to me like moral hazard drove the Frensley dealership deal.

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