Metro financial executives presented details of a proposed $2.97 billion budget — including pay increases for Metro workers and a major investment in schools — to Metro Council members on Friday.
The budget reflects $319.6 million in new revenue, a 12.1% increase over the current year. About $50 million of this new revenue will be used to pay down debt, and the exact amount spent on inflation costs has yet to be released.
The proposal, which must still be approved by the Metro Council, contains a $92 million funding increase for Metro Nashville Public Schools, encompassing wage increases for school bus drivers, cafeteria workers and support staff as well as paid family leave for all MNPS education employees.
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The budget proposal also includes a 4% cost-of-living adjustment and a 3% average merit increase for Metro employees. While the cost of living increase is less than the 5% recommended by the Public Service Commission, the budget also commits to an $18 minimum wage for full-time positions. Another $20 million in the proposed operating budget would go to affordable housing.
Metro Chief Financial Officer Kelly Flannery said the proposed budget is balanced without the use of stimulus funds or one-time revenue and does not require any property tax increases. But the budget proposes a combined tax rate of $3.252 per $100 of assessed value, down slightly from the current $3.288.
The budget maintains a ‘conservative’ approach to revenue projections as the likelihood of a recession looms, she said.
“This board has remodeled Metro’s tax house, and the next step is to protect the house … to make sure it doesn’t decay again,” she said Friday.
City revenue is on the rise
Revenues have risen over the past year as pent-up demand, stimulus funding and rising prices have supported sales tax receipts, but Flannery warned the strong growth will not last. About 75% of the projected $319 million growth will occur in 2022, and 2023 growth will be more in line with pre-COVID levels, she said.
Debt servicing is expected to be around 13.85% of the 2023 operating budget, which is within the Metro Council’s “comfort level” of 15%, Flannery said. But she recommended reviewing the strength of this measure and noted that Metro needed at least an additional $56.3 million in operating fund reserves to meet best practices.
The Metro Council passed legislation last May that saved about $1 billion in long-term medical liabilities for retirees and saved about $60 million by refinancing bonds last year to take advantage of low interest rate.
But with interest rates set to rise, Flannery recommended the Metro Council issue all the necessary bonds now in hopes of saving about $65 million over the life of the bonds.
Metro Council members will review the plan for approval, with departmental submissions beginning on May 18. A public hearing on the proposed budget will take place on June 7.
Cassandra Stephenson covers metropolitan government for The Tennessean. Contact her at email@example.com or (731) 694-7261. Follow Cassandra on Twitter at @CStephenson731.