Hamilton Herald Masthead


Front Page - Friday, February 27, 2015

Bill requiring vote for city borrowing opposed

View from the Hill

Sam Stockard

Legislation by Sen. Lee Harris requiring local governments to hold a referendum before they take on “extraordinary” debt could run into opposition from his own City Council and municipal leaders across Tennessee.

In an effort to keep cities and counties from ratcheting up their debt, Harris, a first-term Democrat from Memphis, is sponsoring a bill that would make city councils and county commissions obtain voter approval if they plan to borrow more than 10 percent of their operating revenue for a construction building project. 

The legislation would affect public works such as schools, roads and bridges, as well as public-private projects.

“It doesn’t stop you from building stadiums. It doesn’t stop you from building hotels and giving them away to a private enterprise if that’s what you choose to do,” Harris notes, adding this bill could enable Democrats and Republicans to find common ground. 

“All it says is if you want to build a stadium for a billionaire, go to the citizens of your community and ask them for permission first. Make the case to them.”

If the city of Memphis wanted to build a new arena for the Grizzlies to replace FedEx Forum, Harris estimates it could cost upwards of $300 million. But considering how well the Grizzlies are playing and the level of their community support, it is “conceivable” that voters would approve such a measure in a referendum, he says.

If city leaders can’t sell such a project to voters, “that’s a good sign” the project holds no merit, Harris adds. Otherwise, taxpayers could be stuck paying the principal and interest on poorly-supported construction projects for 25 to 30 years, affecting generations of residents.

Memphis City Councilman Harold Collins isn’t sold on Harris’ idea, though he’s not surprised, pointing out Harris had a similar outlook when he served on the Memphis City Council.

Collins contends such a law would make approving public works projects exceedingly difficult because voters might not receive the information they need to make an informed decision. 

For instance, Collins says, many Tennesseans didn’t understand Insure Tennessee, a measure to insure 280,000 working state residents caught in a coverage gap with money available from the federal Affordable Care Act. The plan was defeated in a Senate committee.

Often, residents aren’t fully aware of the sources for major construction projects, he points out. 

For instance, the $165 million Memphis Fairgrounds project is to be funded with sales tax revenue from a Tourism Development Zone, 75 percent of which will come from state sales taxes generated by the Fairgrounds. 

The premise behind a TDZ is the production of sales taxes that wouldn’t exist without the development, and in this case, they will go to pay off revenue bonds.

Collins is concerned, too, about the potential for governing by referendum. He notes that voters elected the Memphis City Council members to make difficult decisions.

“The referendum they have comes when it’s re-election time,” he notes. “If they don’t like the way a council member [votes], they have the opportunity to do something about it at election time.”

While it might sound good to voters, Memphis City Council Chairman Myron Lowery calls Harris’ proposal “highly impractical” because of the time it would consume and the expense. He points out it would cost Memphis about $1 million to hold a referendum and even more for a special referendum separate from council elections.

“You don’t want to spend that kind of money to let the public vote on a financial transaction which is difficult for many to understand,” Lowery says. “That’s why we have a representative democracy, so you can elect those you trust to do due diligence and vote in your best interests.” 

Municipal officials from the Bluff City to Knoxville take a similar stance.

“It would unnecessarily hinder our ability to pursue funding in areas where it makes sense,” says Jesse Mayshark, director of communications for the city of Knoxville.

Major infrastructure projects cost tens of millions of dollars, and they are typically paid off over 20 to 30 years. In many cases, local governments issue bonds to borrow the funds for public works projects such as roads, schools, bridges and even water treatment and wastewater treatment systems.

“People elect the mayor and the city council to make decisions about what needs to be done,” Mayshark says.

With $180 million in debt and one of the highest bond ratings in Tennessee, Knoxville is in good shape in that area. But if it needs to borrow a substantial amount of money to build a bridge in one part of the city, the project shouldn’t be held hostage by residents who might not use that bridge and would be more inclined to oppose it in a referendum, he contends.

“Like a lot of things in the Legislature, it seems like a solution in search of a problem,” Mayshark says.

One of the main pitfalls of such a law would be its impact on small cities or counties who have small operating budgets but need to borrow a large amount for a school or road job, he points out.

In Murfreesboro’s case, it would have had to hold a referendum before constructing its newest elementary school, Overall Creek, which cost upwards of $25 million. The city’s general fund operating budget this fiscal year is $127 million.

“Counties and cities have a pretty good feel for what needs to be done in their jurisdiction,” Murfreesboro Mayor Shane McFarland says. 

City officials are in the midst of a Murfreesboro 2035 plan that will determine how the municipality develops over the next two decades. Part of that involves taking input from local residents and business groups.

“When you start dictating from the state level how municipalities ought to run their city, that’s a slippery slope,” McFarland says.