State Questions Nashville's Use Of Tax Incentives

NASHVILLE, Tenn. -- Nashville is the new "it" city.

But a NewsChannel 5 investigation discovered city officials continue to declare Nashville's downtown blighted and unsafe, all so developers are eligible for tax incentives.

The Tennessee Comptroller's Office has serious concerns about whether Metro is following state law in its use of tax-increment financing (TIF) based on what NewsChannel 5 Investigates showed them.

Nashville, however, was not always booming.

Old news footage shows that strip clubs, boarded windows and crime were common downtown.

It was so bad that, in 1977, the Metro Council declared downtown a "slum area" and "blighted" -- calling it "detrimental to the safety, health, morals and welfare of the community."

That definition paved the way for a "redevelopment district" and allowed Metro to offer that tax-increment financing as a tax break for developers.

Today, Nashville is very different. Construction cranes dot the skyline along with record numbers of tourists.

Despite the changes, that 1977 redevelopment district is still in place, and Metro is still offering TIF incentives to downtown developers.

"Right now I'm pretty sure we could charge people to come into downtown rather than giving them money," said Metro Council Member Emily Evans.

Evans has been critic of the city's use of tax incentives.

"We certainly aren't following the intent of the law," Evans said.

She said downtown is no longer blighted.

"The definition is 'it's bad, things are bad and as a city we need to use our taxing authority to encourage development,'" Evans said.

Yet, in 2009, the Metro Council not only extended the downtown redevelopment district to 2040, they again declared downtown "blighted."

The council determined that downtown was "detrimental to the safety, health, morals and welfare of the people of Nashville."

NewsChannel 5 Investigates asked Metro's finance director, "Is downtown Nashville blighted?"

Rich Riebeling responded, "I think it was when the redevelopment district started."

Riebeling struggled to justify the definition.

"Is it true parts of downtown Nashville are detrimental to the safety and health?" we asked.

Riebeling responded, "I don't,I can't answer that. I don't know if that's the case. I don't make that determination. The council and MDHA made it."

NewsChannel 5 Investigates followed again, "Does that definition match what you see downtown?"

"Of course not," Riebeling admitted. "Downtown is not blighted."

He continued, "I understand that you are using one word to try and draw a conclusion, which is fine. I think if you look at how it has been used ,it's very clear the city has benefited from our use of TIF."

The assistant general counsel with the Tennessee Comptroller's Office, Betsy Knotts, had concerns.

"There is a need for a little more oversight," Knotts said.

She said the expansion of Nashville's redevelopment plans until the year 2040 -- more than 60 years after it started -- raised red flags.

"I do think 60 years is rather long. I mean, it's why the cut off is 30," Knotts said.

Knotts said the goal should be to pay off debt as quickly as possible.

"Eventually the (TIF) plan is done and the debt is paid -- and you've got this lovely pool of property tax proceeds that can go to schools and other governmental purposes," Knotts said.

But that's not happening in Nashville.

NewsChannel 5 found that even when TIF loans are paid off, Metro continues to send property taxes to MDHA for future projects.

Take, for example, the Kroger on Rosa Parks. It was built with a TIF loan that was paid off in 2003, but its property tax money is helping to pay for the Sounds ballpark.

And nearly $1.6 million in property taxes from the Icon condo will go to a new pedestrian bridge in the Gulch.

Tennessee's tallest building, the so-called Batman Building, was paid off in 2002. But the $1.7 million it generates every year goes toward the Omni Hotel.

NewsChannel 5 Investigates asked Knotts, "That money from that building is not going back into the general fund. What do you think of that?"

"That," she said, "gives me pause."

The state passed a law in 2012 tightening rules on how TIF is used.

We asked, "So this calls into question whether that law is being followed?"

Knotts responded, "In my opinion, yes."

But Riebeling said Metro is doing what it has always done. The city has never returned TIF money back to the general fund.

"By policy, the city has never chosen to do that. The money has always gone to MDHA," Riebeling said.

NewsChannel 5 Investigates asked, "Has Metro followed state law?"

Riebeling responded, "I don't know of any reason why we're not following state law. If we haven't, then we'll address it."

Iconic Nashville Buildings Pay Little For City Services

The state comptroller has called for a meeting with Metro officials to go over how the city uses tax-increment financing.

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