Op-eds that rock: "every dollar doled out to a local corporation is one that can't be spent on something far more valuable"

If you have read this blog long enough, you know that I completely agree with these two local attorneys who take to the Tennessean to list the sweetheart corporate welfare deals--including First Tennessee Ballpark in the North Capitol area--that Metro under the Dean administration has brokered.

Daniel Horwitz and Mike Jameson go slow to explain the problem clearly to those who confuse willful self-ignorance with bliss:

The trope that Nashville's seemingly endless supply of tax abatements and economic development grants (two euphemisms for "corporate welfare") will ultimately "pay for themselves" is laughable.

Proof of that will come by 2016, when our next mayor — whoever that is — is forced to institute the largest property tax hike in Metro history just to cover the impending budget shortfall. When that happens, how many voters will look back upon our city's recent "investments" without regret?

Moreover, with local politicians clamoring to hand over public dollars to any business that even whispers about leaving town, why on earth wouldn't every other corporation in Nashville make the same threat? ....

Simply handing cash over to local corporations, however, can hardly be described as a "public investment." It's not. It also reeks of cronyism and incentivizes corruption. If Bridgestone ends up repaying Metro's current officeholders in campaign contributions a few years from now, will anyone really be surprised?

Rather than being real in their campaigning so far, nearly every mayoral candidate I've heard seems to act like they are in denial of gathering budgetary storm clouds. Each talks as if she or he would be a better Dean than Dean himself. In fact, they keep arguing that they will continue Karl Dean's insane corporate subsidies AND devote more money to neighborhoods and infrastructure. It is pure snake-oil, friends. Believe them at your own peril.

The chickens are eventually going to come home to roost for property owners and taxpayers. Someone is going to have to eventually pay for the bills Hizzoner is running up to keep his rave going. We may continue to join in the foolishness today if we wish, but the hangover is only going to be that much harder to deal with tomorrow.

Bridgestone subsidiary hired an African warlord to "squeeze out" profits as Bridgestone lost money

Jim Cooper and Megan Barry at Karl Dean's Bridgestone announcement.

On top of all of his other government handouts to corporations, sports teams and TV shows, Mayor Karl Dean plans to give the Bridgestone company $50 million keep its headquarters in Nashville. There is no promise of new jobs, but only that 1,100 existing positions in Nashville and 600 in other states would be relocated downtown. In exchange, Bridgestone does not have to pay property taxes for 20 years (even though politicians are fond of saying that relocating business mean more property taxes to pay for Metro services).

Got it? There is no requirement that new jobs be created, although the Tennessean gushed that Bridgestone is "welcome" to create some.

Thanks to Mayor Dean (and Republican Governor Bill Haslam) the international auto parts manufacturer will be squeezing profits out of this Nashville deal (after the compliant Metro Council approves) for the next 20 years, obligation-free.

My concerns about how we're going to pay for vital infrastructure in the future while Hizzoner hands out free candy to corporations is strictly a first world problem; although it is a problem that falls disproportionately on working class people. Bridgestone also has a significant third world problem: the company does not have a clean past on the human rights front.

In the 1990s, their subsidiary Firestone had financial arrangements with rebel forces in Africa lead by Charles Taylor who would eventually be convicted for crimes and imprisoned for crimes against humanity. ProPublica has a podcast on the "secret history" of Firestone's dealings. Here is an exerpt:

During this time Bridgestone is purchasing Firestone in a big corporate merger back in the United States. It's a disaster by many accounts, and Bridgestone was losing money. So, they're trying to squeeze profits out of anywhere they can, and if you're the manager of the branch that holds Firestone, you're looking to save wherever you can. And so, Firestone is now this plantation ... making no money at all. Losing money. And so, you want to get it to become this profit-making enterprise again. And you have this connection ... with the people of Liberia that you don't want to break .... After months of negotiation they reach a deal in January of 1992 .... It's a memorandum of understanding between Firestone and Charles Taylor's government .... Firestone says, "We'll come back and we'll start paying taxes ... to Charles Taylor. In return, Charles Taylor will provide them with security. Now keep in mind that Charles Taylor is running a rebel army. This is not a state. So, essentially, Firestone is hiring a guerrilla army to protect their investments and they are paying money to a guerrilla army, which is trying to take over a country .... At the bottom line, money gets moved around, and Firestone was contributing to the war chest of Charles Taylor.

Late in the podcast, the ProPublica reporter talks about the long-term consequences of Firestone's financial arrangement with the African warlord:

One of the most shocking things about Liberia, is that there is not a single person who has ever been convicted of crimes against Liberians in a war that left 200,000 people dead [from 1989 to 1996]. Where there was thousands and thousands of child soldiers. Where there was cannibalism and people were eaten alive, burned, raped. An entire generation essentially erased, and no one has been held responsible for that .... You can't make a direct connection between what Firestone did in the 1990s and the Ebola crisis today. What is true is that the Liberian civil war ... led largely by Charles Taylor absolutely destroys the country. And afterwards, the people who helped in that destruction ... are never held accountable. So, now they're running the country. So, the very people who destroyed the country are no in charge of rebuilding it .... Liberia received tons and tons of aid after the civil war ended. Where has that gone? Why hasn't the health system improved? .... It's very easy to make a link between the civil war and Liberia's current horrible disease situation with Ebola.

ProPublica makes it clear that Charles Taylor relied on the money he received from Firestone to build an empire that waged war on its own people. That war destroyed infrastructure and created deadly social conditions, which made the Ebola cataclysm inevitable.

Since Mayor Karl Dean is proposing that Nashville taxpayers subsidize Bridgestone's new skyscraper headquarters with public dollars, the company should be held accountable for political conditions it generates with subsidized wealth at home and abroad. We should be more circumspect before gushing about how good Bridgestone is for people and jumping on their bandwagon.

Nashville's most whipped, domesticated Metro Council ever

The Metro Council passed the Mayor's plan for an $18 million Gulch sidewalk on second reading tonight without a lick of the resistance they showed last winter when the proposal was expressed to them in other terms.

Besides the $2 million spending gap, there is little difference between plan 1 and plan 2. In plan 1, Mayor Karl Dean was going to give his friends in the downtown business class $16 million from everyone else's infrastructure funds to build the Gulch bridge. After council members pointed out that they need their sidewalk funds because they don't have enough sidewalks, Hizzoner came back with plan 2 a few weeks ago: $18 million collected from Gulch businesses would pay for the bridge, meaning that the money would sheltered from broad use (like to defray the cost of sidewalks in other neighborhoods). As I said before, it's a shell game played with tax money that belongs to all of us, not just to downtown businesses.

Either way, Karl Dean reserved his preferential option for the rich at the expense of the working classes who generate the wealth Davidson County enjoys.

He threw the challengers in the Metro Council some bones, trotting out his Finance Director to say that they had put more money for sidewalks elsewhere in the Mayor's budget. and would do so until the Mayor's last term is over.

His term is over a year from now. How many sidewalks can he build us in a year? And how many will not be built that could have been built in the past 8 years?

Mayor Dean bristled last April at suggestions that he might be a lame duck. Just to prove it he dangled a few sidewalks in front of this council that he should have built years ago, Naturally, they folded like a cheap suit. Maybe there was arm twisting. Who knows? I doubt it took much pain to get this project through this compliant council.

It was remarkable to watch tonight. Much like the passage of ballpark proposal a few months ago: moving quickly to minimize questions and to steamroll any attempts to even express "no" by recorded vote. Vice Mayor Diane Neighbors, ever Karl Dean's catalyst, asked only for a voice vote, which does not register no votes.

Only a handful of CMs made their opinions clear, and one was mayoral candidate, Megan Barry. In unrelated events, Ms. Barry got in touch with her inner populist last month and declined to attend a campaign debate due to its posh price tag:

I was disappointed to learn yesterday that this forum will be a high-dollar fundraiser for the Nashville Business Coalition PAC instead of being an open forum with a diverse
audience. While I understand the need to cover costs of the event, I believe that Nashville needs to be an inclusive city where our community can join with business leaders to openly discuss the issues that matter to everyone.

Regretfully, I must decline to attend this event unless an effort is made to make the forum more accessible to the hard-working men and women who have helped to grow our economy and enabled our businesses to thrive.

I find it outstanding that CM Barry is finally standing up to the Nashville Business Coalition rather than appearing before them at beck-and-call as she did during her council campaigns. However, declining an appearance at a PAC's forum demands little risk. Candidates decline to appear at forums all the time. Where is the risk?

If Megan Barry truly intended to lay it on the line against Nashville's exclusive elites, she could have spoken against and voted against at least one of Mayor Karl Dean's big-ticket capital projects. But to the very end she refuses to do so. From the convention center to stormwater fee structure to Fairgrounds redevelopment, Megan Barry has persisted in her support of the wealthy over "hard-working men and women." (And the wording of her letter above is troubling: working people do not simply "help" someone else grow the economy. Their labor is the primary cause of the wealth that gives people like Karl Dean more power.) She did not depart from that path regarding the Gulch bridge.

So, how did Megan Barry justify an $18 million sidewalk this evening? By saying that "connecting Nashville" (Mayor Dean's slogan to generate public support for the bill) is a "necessity". Well, of course, connecting our communities is a necessity, but the Gulch bridge does not do that. It connects niche luxury hotels in the Gulch to tourist venues downtown with terraced seating and lots of plants. It is another tourist stop in a city of tourist stops. In places far from stylized downtown chic, parents have to walk their kids to and from school without sidewalks dangerously close to auto traffic. So, excuse me if I do not shed a tear over out-of-towners forced to cross the Gulch on Demonbreun Street's existing sidewalks. Excuse me if I do not buy bogus claims that a lone $18 million Gulch sidewalk helps Madison families. Megan Barry's insinuation that the Gulch bridge meets the pedestrian needs for more transit options across Nashville is false. To call it a piece of a larger "transportation policy" is not grounded in the reality of Nashville politics.

Her claims sound a lot like the Mayor's justification for building bus rapid transit only for west and east Nashville, while promising that neighborhoods north and south would one day--in some great, gettin' up morning--win their own BRT. And we believe that snake oil, don't we, North Nashville? Likewise, why should we ever believe that a new pedestrian bridge for the Gulch would serve anyone but the people who can afford to live and to lodge there?

As long as she rejects any resistance to Karl Dean's policies, Megan Barry's claims to aim for a more inclusive city will never materialize. She has tied her fortunes to his.

In the larger picture, CM Barry's vocal support for Karl Dean is symbolic of this docile Metro Council, which looks pathetic as a representative body at times. They do not act boldly. They do not take chances. They never ever lay it all on the line at the risk of great loss. So now we're going to get a token number of sidewalks that Mayor Dean should have built (and more) since day 1 of his first term.

Promising sidewalks to the council was the right thing to do years ago. Now it just looks cynical. And the council along with it. For the inconvenience, we are getting an $18 million bridge that most of us cannot enjoy unless we actually buy the con that downtown belongs to and benefits us "inclusively". Thus, the bridge is already built on a trickle-down lie.


UPDATE:  Megan Barry has been voted "Best Current Council Member" at the Nashville Scene. Maybe there is some pride in being the best member of one of the worst representative bodies Nashville has had.

Study: the jobs "created" by big municipal projects were never really "created" at all

Recently I cited a bunch of evidence that debunked the urban myth that building new ballparks results in net gains for economic development in neighborhoods. The prospect of economic development is one of the rationalizations used by Karl Dean's office to defend Metro's support of First Tennessee Park in its Jefferson Street location.

Another prominent rationalization used to defend Metro's financial support of the park--that subsidies create jobs for North Nashville--is open to debate in the wake of a study that finds that subsidizing capital projects does not do anything of the sort:

a recent study by the Kauffman Foundation suggests that the money [from public subsidies and tax breaks] only shifts jobs from one state to another and doesn't necessarily create them. State and local incentives rarely target the new and young businesses that actually do create jobs.

The subsidy escalation that states have entered has become a zero-sum game in which a largely fixed set of jobs shift from one state to another as companies search for the highest bidder. And even when new jobs are created, companies would likely have needed to add them anyway, and the cost per position to taxpayers can be astronomical.

The 2011 embarrassment of the failed move of IQT Solutions that Karl Dean went through a few years ago drove the point home that the "creation" of jobs in Nashville would cost Canadian workers their jobs if the company had not eventually gone bankrupt. To a certain extent common sense should tell us that the relocation of companies often comes at great cost to the places they leave. But studies help reinforce the point.

If you build it, they will relocate.

At last year's community meeting on the ballpark proposal, Dean's Director of Finance, Rich Riebeling admitted (perhaps in a moment of candor?) that Metro is subsidizing the project because that is how other cities do it. But otherwise, the refrain from ballpark supporters is that transferring money to private companies "creates" jobs; as if those companies do not use the money for purposes other than creating jobs.

How many livable wage jobs (I'm not talking about construction jobs, which end in a few months when the building is erected) are going to be created by First Tennessee Park? The latest research indicates that we will not see enough jobs to equal the $65 million investment that we are dumping into the development.

Suburbanization is a failing development model in Tennessee

Charles Marohn describes how a city like Memphis got itself into a bind by relying on subsidized suburbanization as an answer to the ills of industrialization. Now with "soft defaults" (vs. hard defaults in Detroit) the chickens are coming home to roost:

Relying on the automobile to facilitate growth by horizontally expanding the city, Memphis shifted away from the traditional pattern of neighborhood development and played its part in building the American Dream of large yards, easy driving, and free parking.

Suburbanization, sold as a way to cure blight and promote prosperity, was radically new and untested. It was also irresistible. Driven by federal programs and financial incentives, Memphis – like most American cities – built highways through the middle of the city, annexed property and extended public utilities outward.

In the process, core neighborhoods were destroyed and residents relocated to neighborhoods built in the new, experimental style. Streetcars were abandoned and the economic activity at the old stops shifted to new commercial corridors. Old buildings were torn down to provide parking and millions of tax dollars were spent widening streets to accommodate the automobiles now necessary for daily life.

Eventually, the vitality of the city was inverted from its traditional historic pattern of a strong core surrounded by incrementally growing neighborhoods to one where most economic activity took place on the edge. While this shift left many people behind and devastated the historic neighborhoods of Memphis, the result was seen largely as a social problem, not an economic one. Easy growth on the periphery – where land is cheap, the development community is ready, and all the government incentives are in place – was then, and remains today, the community’s default strategy for economic improvement.

Somewhat unhindered by the levels of industrialization borne by Memphis, Nashville is no less exposed by its overreliance on exurban expansion and what Mayor Karl Dean embraces as "regionwide growth". Nashville recently depends on gimmicky baubles like the new Music City Center, a "We Are Nashville Promenade" and an east-west rapid transit connector ("The Amp") in order to spike short-term economic activity without reference to long-term viability in the city for its inhabitants.

Marohn warns of "new massive gambles" undertaken by sprawling metros to keep heads above water: convention centers and retail complexes driven by municipal debt and tax breaks for already wealthy corporations. Likewise these conditions also apply to Nashville, where it feels like we are mortgaging our future sometimes to fund huge new capital projects that enable the Dean brand more than aid Nashville proper. We are definitely sacrificing urban services, from which the Mayor perennially demands cuts, in order to bankroll the diversions.

In the end, an emphasis on regionwide growth seems like warmed-over, evangelical suburbanism. It constitutes a doubling down on failing economic policies that hurt both Memphis and Nashville in the long run. Once the smoke-and-mirrors floor show of the Dean administration ends, what will be left with?

Do ballpark "partnerships" shelter developers from meeting their public obligations?

Mayor Karl Dean loves him some public-private partnerships. He touts them consistently when he is speaking from the stump. No less about the new Sulphur Dell ballpark "partnership":

I think the great thing about this is, because this is a public-private partnership — and it truly is a public-private partnership — you have two public entities, the state and the city government, along with two private entities involved. And because of the revenue generated and because of the contributions made by the Sounds and because of some different payments that we're already making that will go away, that will largely cover the cost of issuing the bonds.

Given his perennial commitment to them, I just always assumed he believed that all of those emerging on his watch were "truly public-private partnerships."

But for all of the positive spin of public-private partnerships, they have a dark side, which is rarely expressed in the media until after damage is done. Partnerships usually are not representative of or accountable to constituents since they rely on executive fiat behind closed doors to happen. By the time they get to legislative branches where constituents have more influence they are full-steam juggernauts. Sympathetic and loyal legislators run interference for the execs and kill most chances for public vetting.

Sports venue projects, even minor league baseball parks, are allowed to operate under the security of public-private partnerships, especially when they are run as non-profits, especially when they are overseen by tax-exempt governmental agencies. In Reno, Nevada the triple-A baseball team has a new ballpark, but the county government has been unsuccessful collecting unpaid taxes from the ballpark developer because of the partnership:

The “available legal remedies” for collecting the debt, however, are limited because of the public-private partnership involved in the ballpark’s construction, according to Assistant District Attorney Paul Lipparelli.

Typically, if a property owner stops paying taxes, the county can file a lien, auction off the building and use the proceeds to collect on the back taxes. But in this case, the Reno Redevelopment Agency — a tax exempt governmental entity — owns the ballpark. The agency leases the ballpark back to the developers for $1 a year.

Because the developers are using the tax exempt property for a profit-making enterprise, they owe property taxes....But the county can’t just file a lien, it would need to file a lawsuit to collect the back taxes.

At the heart of the tax dispute are the terms of the original deal the developers has with the Reno Redevelopment Agency to build the ballpark. Under that agreement, the developers expected up to $50 million in property tax revenue generated by growing tax collections within the redevelopment district to repay the construction loan. But property values tanked in the recession, leaving the agency in severe financial distress and with no way to make the payments to the developers.

In lieu of not receiving that money, Nevada Land LLC simply stopped paying property taxes on the ballpark.

So, the speculated wealth, guaranteed by ballpark boosters to come back to the local community when they were drumming up support, failed to come back. The maze the returns on investments have to run is more convoluted than ballpark supporters divulge. The money has to negotiate quagmires caused by turns in the economy, make its way through minefields of legal stipulations and contract disputes and avoid obstacles put up by partnerships that do more to protect the partners than the constituents who may or may not enjoy benefits that trickle out.

Because of the speed and secrecy of the Sulphur Dell deal, because of the work of Karl Dean's loyalists on the council, we still are learning about the details of the arrangement. I do not know whether a foundation will oversee the for-profit activities of the Nashville Sounds or the developers. I do not know what sort of oversight Mayor's Office of Economic and Community Development will have over the development. For better or worse, we will eventually catch wind of the details, wherein the devils lie.

But the unpleasantness in Reno makes me wonder if Nashville is set up to lose a few shirts in the Sulphur Dell deal as well.

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.

Memphis raises taxes to subsidize privatized schools

Shelby County is raising taxes on the backs of its most vulnerable so that charter school operators are subsidized to ply their trade in Memphis:

The County solution: raise the sales tax another penny, which will push this most regressive tax (which includes taxing food) to over 10% (TN is #1 in the nation for highest sales tax).  Oh yes, and in the meantime, reduce property taxes so that the immeasurably unfair tax on the poor will be even more so.

Projected take?  About $54 million, which would cover the annual amount estimated by the State to cover the loss of revenue to fund the new charters.  Meanwhile, the charters under the new State Recovery School District (RSD) (think NOLA) will get to take over the school buildings that are being closed to create charters.

The corporations that run these charters, then, will have huge advantages over non-RSD schools, so the State, in effect will be the ultimate decider on which of these "market-based solutions" get to thrive as the 21st Century solution to the "white man's burden" in Memphis.

Bill Gates and Tennessee Stand for Children also had a hand in Shelby County's raising of taxes for resegregating schools as orchestrated by red-state Tennessee. Things are getting ugly in Memphis.

Cancelled conventions at Music City Center cost Nashville

Nashville is already shelling out $678,000 in taxpayer dollars to cover the losses of two conventions originally booked for the new, historically expensive Music City Center. Crane Watchdog culls the details:

Two associations, the Hearth, Patio & Barbecue Association (HPBA) and the Technology & Maintenance Council of the American Trucking Association (ATA) were scheduled to hold conferences at the center more than a month before the building was scheduled to open ....

Now the associations have made the decision to relocate upon news that construction will not be fully completed before their events. Of the two shows, one will remain in the area while the other has relocated to Florida. Aside from the tourism loss ... that the government is paying "more than $678,000 in taxpayer dollars to make restitution" to the two associations.

The payout approval is also documented in the July 12, 2012 Convention Center Authority meeting minutes. The minutes confirm the payment amount demonstrating that the Authority will pay the ATA $110,000 and also reduce the rent for future convention in the years 2015-2017 from $35,000 per year to $0.00 per year. In addition, the minutes show the Authority must pay $568,153 to the HPBA. All of these fees cover a cancellation fee, assist the groups with other expenses necessary for relocation, and cover additional expenses that would not have been necessary if the events had remained at the Music City Center.

However, convention center spokesperson Holly McCall essentially puts the blame on the Metro Council for the unplanned expenses:

The Music City Center isn't scheduled to open before May 2013, so why did the center agree to book them a month before?

"These shows were booked back in June of 2009," said McCall. "That's when metro council originally looked at voting on the convention center. They ended up not voting on the convention center until January 2010, which set us back 7 months."

So, it's Metro Council's fault that convention center planners and schedulers took council approval for granted even though popular opinion was not strongly in favor of building it? According to the Metro Charter, council approval is part of the procedure for approving capital projects. It is not something that unexpectedly pops out of left field.

Rather than blaming the Metro Council, perhaps Ms. McCall should have pointed to the failures of the agency she represents for not planning some cushion for the probability that delays might occur in the council approval process.  The convention center authority should own the missteps in the timeline that caused them to fail to account for the messiness of public process. My guess is that the convention center leaders in 2009 were willing to risk the loss of individual conventions and public money for the immediate PR projection of inevitability that the claim "Conventions are already being booked!" was giving them.

The Metro Council can be ineffectual enough, but for convention center leaders to make them scapegoats for their own wasteful messes is cowardly and shameful.

A familiar ring in this politics of non-profits

I have been reflecting on an interesting parallel, which I assume is purely coincidental, between the question of whether Moving Nashville Forward is a non-profit or a political action committee and confusion expressed here in 2011 over Stand for Children's (a non-profit) endorsing Karl Dean for Mayor.

According to MNF leader Erik Cole, his group is pursuing non-profit status that would permit them to keep the $26,000 that "Dean for Mayor" donated to their efforts to market Karl Dean's budget proposal in the run-up to the Metro Council vote earlier this summer. Cole told reporter Joey Garrison yesterday that his organization is listed as a 501(c)(4). Garrison could not find confirming evidence of MNF's non-profit certification. A source told me that according to the Tennessee Secretary of State's records, Moving Nashville Forward is not certified here as a 501(c)(4).

501(c)(4) is exactly the non-profit status that permitted Stand for Children to endorse Karl Dean for Mayor in the last election. Last year readers were wondering how a non-profit can endorse political candidate and keep its tax exempt status. SFC does it by maintaining two organizations under one roof: their 501(c)(3) cannot campaign; their 501(c)(4) can.

Incidentally, Moving Nashville Forward's co-principal, Francie Hunt, is the former Nashville Director at Stand for Children.


UPDATE: I cannot find Moving Nashville Forward listed in the Internal Revenue Service's Exempt Organizations Master File for Tennessee. That list includes 501(c)(4) organizations reporting to the IRS.

Is Moving Nashville Forward a non-profit organization or a PAC?

The Nashville City Paper caught wind of Karl Dean's $26,000 contribution to Moving Nashville Forward, which greased the Mayor's agenda by rebranding it as popular. The journos focus on the question of whether MNF is a non-profit organization (which would legitimate the huge Dean contribution) or a political action committee (a.k.a. "PAC", which would make the Dean donation dubious):

Moving Nashville Forward did not organize as a political organization [PAC] and is therefore not required to submit its list of contributors to the Davidson County Election Commission. None of its membership registered as Metro lobbyists either.

Rather, [Erik] Cole said the group is a 501(c)(4) nonprofit and would be filing a financial report with the Internal Revenue Service at the appropriate time ["would be" filing a financial report after the questions are posed?!]. He was unable to provide The City Paper with a full list of Moving Nashville Forward donors but said it represents the various stakeholders who publicly supported Dean’s tax increase. (Efforts by The City Paper to locate the group’s nonprofit certification online were unsuccessful.)

Moving Nashville Forward originated on May 14 with a press conference hosted by three of its members, including Cole, who issued an “invitation to any and all who want to join the effort.”

Leading up to the council’s definitive tax hike vote, the group’s activities included encouraging citizens to email council members to vote for the mayor’s property tax increase. The coalition also rallied supporters to pack the council chambers for the budget’s public hearing.

We're in line-blurring territory here, with non-profits-that-are-not-yet-non-profits packing council chambers in a fashion that that either PACs or grassroots organizations would with supporters to lobby Metro Council on a controversial budget proposed by a Nashville mayor whose political aspirations for higher office in Tennessee necessitate as many wins as he can notch.

Here are conditions, according to the state's Bureau of Ethics and Campaign Finance, under which Karl Dean is allowed to contribute his campaign funds to other organizations:

Whether an expenditure of campaign funds by a candidate is made for a political purpose depends upon all the facts and circumstances surrounding the expenditure.  An activity engaged in between elections by a candidate which is directly related to and supports the selection, nomination or election of that individual to public office is considered political activity.  An expense which would be incurred by an individual regardless of that person’s candidacy for public office is considered an expenditure for a nonpolitical purpose, except as allowed for the expenditure of surplus contributions.

ALLOWABLE USES.  A candidate with surplus campaign funds from an election shall allocate unexpended funds to one (1) or more of the following:

a.)    The funds may be retained or transferred to any campaign fund pursuant to Tennessee’s reporting requirements, except a candidate for local office shall not transfer surplus funds from such an account to a campaign account for the General Assembly or governor.  T.C.A. § 2-10-114(a)(1)

b.)    The funds may be returned to any or all of the candidate’s contributors as set forth in a formula or plan specified in the candidate’s disclosure of the allocation.  T.C.A. § 2-10-114(a)(2)

c.)     The funds may be distributed to the executive committee of the candidate’s political party.  T.C.A. § 2-10-114(a)(3)

d.)    The monies may be deposited by the candidate in the volunteer public education trust fund.  T.C.A. § 2-10-114(a)(4)

e.)     The funds may be distributed to any organization as described in 26 U.S.C.  170(c).  (Examples - church, schools, school booster clubs, veterans organizations.)  T.C.A. § 2-10-114(a)(5)

f.)     The monies may be distributed to any organization which has received a determination of exemption from federal income taxation pursuant to subsection (3) or (4) of 26 U.S.C. 501(c), if such organization is currently operating under such exemption.  (Section 501(c)(3) includes any non-profit organization that operates exclusively for religious, charitable, scientific, public safety testing, literacy, or educational purposes, or to foster national or amateur sport competition, or for the prevention of cruelty to children or animals.  Section 501(c)(4) covers any non-profit civic organization operated exclusively for the promotion of social welfare and also includes certain local employee associations when the associations’ net earnings are devoted to charitable, educational or recreational purposes. [emphasis mine])  T.C.A. § 2-10-114(a)(6)

g.)     The funds may be used to defray any ordinary and necessary expenses incurred in connection with the office of the officeholder.  Such expenses may include, but are not limited to the cost of advertisement, membership fees, and donations to community causes.  T.C.A. § 2-10-114(a)(7)

h.) The funds may be distributed to any institution of public or private education in the state for the purpose of supplementing the funds of an existing scholarship trust or program. Please remember that state law requires that the organization to which you are making a contribution must have an up to date exemption from the Internal Revenue Service, in order for your contribution to be proper under this provision.  T.C.A. § 2-10-114(a)(8)

After seeing the Dean donation, an Enclave reader checked with the Tennessee Secretary of State and found out that Moving Nashville Forward is indeed not currently registered (as required) as a non-profit organization. If, in fact, MNF had been interested in the "promotion of social welfare", why would they have failed to register with the state in advance of the highly publicized campaign to pass the Mayor's budget? And, given the ethics rules, how do they qualify as a non-profit organization eligible to receive Karl Dean's $26,000 donation in the first place?

The only game in town: lay odds that Nashville was scammed by the banks, too

I've been a critic of the new convention center project in the past because the Mayor's Office was unwilling to go the extra mile to incorporate a 24/7 neighborhood south of Broadway into the project and because Metro funds for our services were obligated as insurance to get financiers to approve the project. Since the bank-induced recession set upon us a few years ago, I've also warned that the Music City Center's main financier, Goldman Sachs, should be suspect in its handling of financing for the project. Where is the caveat emptor?

June's Rolling Stone politics piece by Matt Taibbi on the conspiracy by the banking "cartel" to pilfer wealth from municipal bonds issued out of places like Nashville makes me even more concerned about our capital projects, and especially the largest capital project ever launched here, MCC:

these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime ....

In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.

More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

Taibbi goes into detail describing the charges that cities and towns were gored for revenues slowly and deliberately for years. As the federal prosecutor put it, banking grifters colluded to lie to and cheat municipalities through a bidding process that was supposed to protect the latter.

So, I ask again, should we just blissfully assume that Nashville, especially during Karl Dean's tenure of breathless capital spending and bond issues, has not been the mark in the banks' confidence game? Why does Goldman Sachs get the benefit of the doubt, given their checkered past?

Mafiosi a Mafiaoza's

Boss Tweed, an American symbol
of machine politics.

The day before yesterday we stopped off at Mafiaoza's for pizza on our way to the Sounds baseball game and Independence Day fireworks show. During our dinner, we noticed that Mayor Karl Dean entered and joined a table of around 8 to 10 others we could not see from our table. We finished our meal and exited for the short drive to Greer Stadium. Curious myself but trying not to be to conspicuous as I left, I glanced around the table and spotted principals from the pro-Dean lobby group, "Moving Nashville Forward", including former Council Member Erik Cole and former Stand for Children staffer Francie Hunt.

Despite insinuations that Moving Nashville Forward was a grassroots effort of support for the Mayor's tax increases bubbling up from the community, I've tended to believe that they are a more cosmetic attempt to project the Dean Machine (which includes the Nashville Chamber of Commerce in my book) agenda as organic and hyper-local. I also concluded that MNF is an astroturf attempt to influence public opinion top-down without the appearance that the branding is engineered like a campaign. The endgame: clear any popular brush that might inconvenience Hizzoner.

The fact that Karl Dean was out celebrating with Moving Nashville Forward came as no surprise to me. Seeing the group festively together after easy passage of the property tax increase also seemed natural to me. Karl Dean should be breaking bread and giving thanks with the minions. The machine of Nashville politics is chugging along nicely for the man who aspires to offices higher than Mayor.

Chicagoland's cautionary tale

In a Chicago suburb, the result of a pro sports team prowling for taxpayers to bankroll a new stadium and opportunistic politicians quick to make promises they cannot keep:

This for a deal that — initially, at least — looked like it might actually work out for the town of Bridgeview, since taxpayers' $100 million in stadium bonds were supposed to be paid off by stadium revenues. Except that, according to the Tribune, "the final deal called for much of the revenue from soccer games to go to the Chicago Fire, leaving Bridgeview with as much as a $23 million budget hole over the stadium's first five years — one that could ultimately have to be filled by raising property taxes.

This is why it's so vitally important who's on the hook for stadium costs if revenue projections don't work out — and why it's crucial in Seattle that prospective arena builder Chris Hansen is actually agreeing to increase rent payments to cover any shortfall in arena revenues.

Bridgeview, though, didn't get the Fire owners to agree to such a provision, so now they're getting, well, kicked in the teeth. Not so much, though, the Bridgeview elected officials who approved the deal, who've gotten to hand out millions of dollars worth of contracts to favored businesses.

These stadium deals seem to become shell games where money is hidden and shifted until heads spin trying to figure out where it all went. We experienced some of that recently here in Nashville with the pro hockey revenues. Buyers beware of the legalized confidence games.

The Mayor's property tax hike proposal navigated rough seas during last night's public hearing

Watching the Metro Council's public hearing debate over the Mayor's proposed budget last night (on the second of three readings) was not different for me than any of the previous years' debates. Most of the advocates for Karl Dean's budget were Metro employees and outside agencies that would benefit from the proposal. That is typical and not at all inappropriate. The main difference for me was that for once the Mayor, who no longer is subject to Metro elections, is finally proposing a tax increase to fund services and payroll rather than pitching his usual slew of budget cuts. That energized a large group of public opponents, mostly conservatives encouraged by Republicans, who seemed to at least match the proponents in numbers.

I am not opposed to Mayor's property tax proposal, but for reasons too numerous to list here, I'm not a zealous advocate either. While more sympathetic with those who say we need more revenues to address our budget challenges, I also believe that the Mayor has not done much over most of his tenure to stop the free fall Metro services while committing to historically large capital projects and helping to sell off public education. So, I am both for raising taxes and sympathetic with the populist backlash that keeps reeling at the Mayor's Office.

Therefore, you may be able to guess where my impression of last night's meeting ended up. If not, I'll clarify. While I disagreed with most of their misplaced shots at government and their ridiculous calls for selling off and privatizing more government entities, I thought the opponents of the Mayor's budget were strongest where they articulated populist options to Dean's plan. One I heard several times was that council should formulate amendments to the budget that would only hike pay for police officers and teachers; a corollary to this was the argument that amendments should allow raises in pay of those workers at the bottom end of the Metro payroll, but not of the ones at the top of the Courthouse pyramid.

Conservatives rarely seem afraid to appeal to populism. That does not mean they get it right when they claim it. Liberals by and large seem uncomfortable with mass appeals. The vacuum they leave when they balk at populist appeals from the bottom is inevitably filled by opportunistic and angry conservatives. If the council progressives could ever stoop to take up the populist banner and make working class people their primary focus, they would divide and conquer. They would blunt conservative criticism of what appear to be elite commitments to public art and libraries. These don't have to be snobbish and condescending priorities. Liberals in the New Deal age were able to pull populism together with intellectual and artistic pursuits. It was never an either/or. Liberals in this age invite an either/or by shying away from populism and kowtowing to the wealthy and well-placed.

Former CM Erik Cole tried to brand his pro-Dean group, "Moving Nashville Forward" as a grassroots effort, but to me it came across as astroturf. Mr. Cole just happened to be the last one to speak in favor of the tax plan at last night's public hearing. As a CM Mr. Cole once argued that council decisions should not be subject to popular will. So, the fact that he has been blasting out emails encouraging people to wear t-shirts and pack the public gallery in the effort to lobby council to support Mayor Karl Dean looks cynical to me. Given his past ambivalence, I might call it a case of "populism envy" if not one of cynicism. In those blasts he also wrongly pointed out that Dean opponents did not offer any options (in fact, I just cited some of the more populist options that were expressed during the public hearing).

Council progressives can get all the support the want for funding the arts and the libraries if they would first be advocates for the working class and others pushed to the margins by Nashville's ruling class. Very few look comfortable doing that. The Mayor's plan is going to pass, but it is up to the council to include amendments that make a tax hike more progressive in the populist sense of "progressive" in order to bridge the gap between liberals and common people.

Former council critic of populism now embracing it to help the Mayor?

Monday morning former council member and husband of one of Karl Dean's appointees sent out an email blast across Nashville encouraging a populist effort, even though in his last term as CM he criticized populism to aid a scuffling Dean project. Here is Mr. Cole's "Moving Nashville Forward" email:

This morning, you read in the Tennessean about the Mayor's plan to move Nashville forward with a budget that invests in our schools, our neighborhoods and our city. You also read about a few folks who say no to everything , without ever presenting a plan of their own.

Now, it's time to make your voice heard. Here’s how you can help:

1. EMAIL all Council members with the subject line : "Say YES to Moving Nashville Forward." You can email them at councilmembers@nashville.gov , or find members' individual addresses here.

2. VOLUNTEER to help us turn out calls and emails to Council members. Reply to this email with your contact info.

3. JOIN US Tuesday, June 5 at 6:30 p.m. at the Metro Council Public Hearing on the Budget. Come, wear a T-shirt and show your support!

Finally, please share this email by clicking the icons at the top of this message. Don't forget to Like Moving Nashville Forward on Facebook and follow @MoveNashForward on Twitter.

Thanks so much for helping out. Your support and hard work will pay off for Nashville!

All the best,

Erik Cole
Moving Nashville Forward

You may recall the WPLN interview late in 2009 where Mr. Cole insisted that he would be unbowed by the historic turnout against the Mayor's fairgrounds plan comparing his unpopular support of the Mayor to those who marched for civil rights and to those who fought Hitler. His criticism of supporters of the fairgrounds and community-based planning came across to me as condescending when I originally listen to it, especially when thousands wrote emails and eventually showed up for the public hearing in "Save the Fairgrounds" tees to speak against the Mayor's proposal.

Apparently, what was not good for the goose is now good for the gander. I'm not saying that the people who support a tax increase are wrong. However, Mr. Cole seems to have a double standard on the question of populism and its uses; he does not seem as quick to bludgeon populist support of his issues by comparing it to the slowness of Americans to support civil rights and to fight fascism. Nope. He looks comfortable mobilizing support for his cause absent a single reference to his own past "caveats" about the popular will.

Metro Council rubber stamps another Karl Dean property tax giveaway to a big corporation

Remember this when the Mayor proposes a property tax increase on regular Nashvillians the next time his budget comes before Metro Council for approval; the next time he defends that tax increase by saying, "We have no other choice if we want to fund Metro services":

Hospital Corporation of America, the nation’s largest private health care provider, is close to landing a $3 million property tax break from Metro for building a new $200 million data center in Antioch.

The Metro Council, after no deliberation, gave preliminary approval Tuesday to hand HCA a 60 percent property tax abatement on real and personal property taxes over seven years to accommodate a new Antioch data center at The Crossings on Old Franklin Road. The incentive, which Mayor Karl Dean’s administration engineered, is set for final approval in April.

We had a choice; that is to say, the Mayor had a choice. It was the same choice he had when he raised stormwater fees to pay for improvements a few years ago. At that time he raised residential water rates at a higher rate than he did business water rates, even though the latter generate huge amounts of stormwater run-off with paved parking lots and expansive roofs. At that time a few council progressives shouted protests loud and long about favoritism and dirty dealmaking with the rich.

He's passing out tax breaks now and sending us the bill for them later. Yet, some of the same progressive council members who fought the good fight last time are sitting out this one in silence. In sum, Karl Dean and the Metro Council are choosing to subsidize wealthy business on the backs of smaller property owners instead of requiring them to pay their fair share just like you and I will be expected to when the tax hammer falls.

Tax breaks for the wealthy and influential are just another form of class warfare, and the Mayor and Metro Council are choosing up sides against the middle class. But when the budget discussions start percolating in a little while not a word will be said about Metro's preferential option for the rich.

Instead, it will be about collecting the money for our public school kids, for police protection of our neighborhoods, and for job growth in the private sector. Opponents of unbalanced tax increases will be scapegoated for opposing full funding for Metro services.

These tax breaks will be forgotten or ignored.

Shame on council progressives for not lifting a single voice to oppose. Shame on council conservatives who will likely howl loud and long against a property tax increase but did not bat an eye at the subsidies flying out the courthouse door to big business (you will be the ones who deserve all of the scorn and backlash for abandoning Metro services with any budget cuts). A pox on both of your houses.

Dean's deal for Dolly joins list of corporate welfare arrangements

Last year Mayor Karl Dean announced a sweetheart giveaway for the LifePoint company: zero property taxes the first 4 years, markedly less than half of property taxes the 7 year after that, and only 75% of property taxes until year 15 of their lease. Last week Hizzoner announced another round of tax breaks for Dolly Parton's corporation and Gaylord Entertainment, that leaves me wondering how Nashville is going to fund our services with the tax dollars going out to big business:

When Dolly Parton builds her new water and snow park in Nashville, she's set to receive a pretty big thank-you gift in return ....

Friday, Nashville Mayor Karl Dean filed legislation [at the Metro Council] that would give Parton's company and Gaylord a 60 percent break on their property taxes for up to 12 years.

Nashville wants to offer that kind of deal because number released Friday show the park is expected to generate more than 1,900 direct and indirect jobs during construction, and 1,800 once the park is open. It's also expected to host 500,000 visitors a year.

It will generate $1.6 million in annual sales tax revenue for Nashville and the state.

And I'm sure that, once the park is finished, the State of Tennessee under the influence of entertainment industry lobbyists will break the promise of the millions coming back to Nashville by funneling those revenues back to entertainment industry interests on the hush-hush like they did with the Nashville Predators. However, right now the Mayor wants to sell this project for public support, so I'm sure he swears on all that is holy that Nashville is not going to lose any trickle-down sales tax revenue on this one.

LifePoint sails through our tamed Metro Council

Ronnie Steine, who in the past has been the Mayor's own little straw boss on the Metro Council, is fond of repeating the mantra over and over that council should not debate bills on first reading, but let them get into the committee meeting process and then debate them on second. The problem with that option is that the hand-picked, loaded committees where the really important stuff gets decided tend to discourage disagreement and dissent. Like some out-of-sight-out-of-mind, coal-stoked furnace in the basement, they are engineered to burn off anything not beneficial to the Mayor's Office. By the time the important ordinances get to second reading, unless there is a well-organized popular front against them, opponents who are not silenced are pushed aside by the lotus eaters on the council.

The LifePoint legislation, up for second reading last night, is a case in point. It is a bill that affects all of us in that it hands land to a private company tax-free for a number of years on the illogical basis that it will increase our tax revenues. Questions that CMs raised earlier were put to bed last night:

The Metro Council, on a unanimous second of three votes, gave preliminary approval of millions in financial incentives to Brentwood-based LifePoint Hospitals as a way to lure the company’s headquarters and its 400 employees to Nashville ....

Leading up to Tuesday’s vote, some council members were skeptical whether the deal constituted true economic development worthy of a significant tax break.

No member even bothered to go through the motions of the challenge for the good of democratic process. They just rolled over for Karl Dean, perhaps the most undemocratic Nashville Mayor in memory. His little straw boss on council is wrong: the only process operating at the Courthouse is the figurative cinerator in the bowels of the Mayor's Office, fueled by outside lobbyists. The committee system is an extension of that, designed to kill resistance.

The larger point

One thing you can say about the debate over Mayor Karl Dean's paradoxical plan to give LifePoint tax breaks for a move over the county line to get back a few tax revenues: at least it hasn't been conducted like last July's IQT relocation debacle. Before Canada realized it, Nashville offered IQT subsidies to lay off 1,200 Canadians. Before the news media realized it, social media reported that IQT shuttered completely. Before Karl Dean realized it, IQT announced that they would not be coming to Nashville.

At least in the case of LifePoint, it feels more transparent than it did with respect to IQT, which finally declared bankruptcy in November, and is now facing government pressure to meet its financial obligations of worker compensation.

While LifePoint does not stand to be the same unmitigated embarrassment, the buckling blow to the Mayor's narrow, unexamined thrust of economic development, it generates a new set of obstacles that can hurt an administration that just claimed that it had no clue that the state orchestrated the diversion of sales taxes from Metro coffers to the Nashville Predators. For all the times we're admonished to trust the Mayor's access to information, he seems to come up clued out when the chips are down (cue IQT).

The most glaring obstacle is the Dean Administration's readiness to overbarter in order to sate commercial desires even at the expense of the balance that reason brings. One prominent Nashvillan described the LifePoint deal to me thusly, "Giving away an eroding resource to move less than a few miles into our county. If they needed consolidated space, then that alone should be enough incentive." But Metro is bound and determined to pile up special-interest incentives at greater future risk to service to the rest of us.

Consistent with past unwillingness to rock Rich Riebeling's boat, the Tennessean reporters editorialized the move as a "victory for Davidson County" and a "significant boost" for the area on north of the Williamson County line.

They also claimed the move will "boost" Metro tax revenues, even though the Mayor's bill before the Metro Council (co-sponsored by CM Sean McGuire, CM Brady Banks, and CM Karen Johnson) requires LifePoint to pay zero property taxes the first 4 years, markedly less than half of property taxes the 7 year after that, and only 75% of property taxes until year 15 of their lease. At that rate how can the Tennessean reporters claim that LifePoint is going to "boost" our revenues with any journalistic credibility?

Incidently, The council could also give LifePoint a break on personal property taxes for roughly $50 million worth of computers, software and other equipment (like "supplemental HVAC," a.k.a. "extra air conditioning for computers") that will go into the data center that it plans at the new building. What computer equipment lasts 15 years?

So, the other obstacle to this project is the Mayor's own logic behind how revenues work. With a decade and a half of paying no or very few property taxes on their property, how is LifePoint supposed to be bringing new revenue into Davidson County coffers? Depending on when LifePoint takes up occupancy, Karl Dean could be done with his last term as Mayor by the time the healthcare company starts paying any revenues to Metro.

But Hizzoner insists to all those media who will listen with unconditional regard that deferred scratch is better than none at all:

“If this project didn’t exist – if we didn’t do this arrangement, they would be paying no taxes. So you’re talking about taxes that only exist because we’re doing this deal. And then you start talking about the things that come from this deal.”

Dean says jobs will flow from construction of the headquarters, spurring restaurants and shopping that could lure other investment. And Dean says jobs in the healthcare sector build on one of Nashville’s core strengths, saying “LifePoint could be anywhere they want to be.”

Again with benefits for the restaurant industry? That was a talking point used to sell Music City Center, too.

This seems like just another expansion of the Dean bubble, a small chimera in a sequence of capital plans--convention center, fairgrounds redevelopment, new ballpark among them--that form a slickly marketed, yet profoundly ungrounded dream of a common good.

LifePoint looks like one more notch on the baton of a Mayor who would someday be King. But after IQT, can we have faith that the Mayor has thought out this process carefully or that Nashville won't be fooled again?