If you were negotiating to buy a home or other property, would you tell the seller what your maximum acceptable price was before negotiations had even started? Would you begin your project without a guaranteed maximum price and without bank financing in place? That’s what the Mayor and the Metro Council voted to do when they approved $75 million for the purchase of the 16 acres in SoBro for this deal. The property has recently been generously appraised at around $35-40 million. Obviously the owners will hold out for the higher price, now that they know what Metro is willing to pay; as a point of clarification, I voted against the land acquisition bill that authorized the $75 million. Just for clarification, the proposed new convention center will be the cost equivalent of two Titans Stadiums, one Sommet Center, the downtown public library and the Frist Center all rolled into one and will raise Nashville’s general obligation debt from $1.7 Billion to $2.7 Billion, a 58% increase, all at once.

Last week, the Council, at the Mayor’s urging, continued putting the cart before the horse when it voted to establish a Convention Center Authority (CCA) that would take over the construction management of this project. In my opinion, the reason Mayor Dean and his cronies are doing this is simple, but no one understands. We are being told, “it is for the purpose of managing the CC.” But, until one is built, the CCA is not needed. We already have a Convention Center Board and MDHA, which built the Titans Stadium, Sommet Center and the Downtown Library among other major projects. The real reason is that once a CCA is established, it will have the authority to offer the bonds to finance this project. But the state law was written so that the authority could only offer revenue bonds, not general obligation bonds (GO). The reason this is important is because if GO bonds are used, the Mayor is afraid there will be a referendum on the project. You can't do referenda on revenue bonds, only GO bonds. Imagine, a government that doesn't want to hear from the people.

Of course, revenue bonds sounds better than GO bonds. We all want the project to be paid for strictly by the revenues generated, and not by the taxpayers. But, using revenue bonds could make the project cost about $10 million more per year, due to higher interest costs. And, if revenue bonds are used, Metro will still be forced to guarantee the loans with moral obligation clauses or assumption pledges, which requires Nashville to put up any and all revenue sources other than property taxes as a guarantee. That means sales taxes can and will be used to meet the short fall if convention center revenues don't live up to projections, which is a distinct possibility because the projections are based on an economic picture 3 years old! KPMG did a study last year that said the CC project wouldn't break even for 17-20 years! The Chamber crowd and the Convention Visitors’ Bureau are all touting 1 million new visitors will be created, but a study completed by former finance director, David Manning, in 2007 estimates an additional 150,000 new visitors per year. The Mayor's predictions seem to be based on fairy tales rather than hard data. MDHA has already paid a consultant $500,000 to do another feasibility study, and he still has produced no work product other than a glorified spreadsheet!

Property Taxes are about 41% of Metro's total revenue, with the rest, about $800 million, mostly coming from sales tax. 2/3 of all sales tax collections go to Metro schools funding. If the project has a shortfall, it will be made up from that sales tax pool. Another interesting fact about the CCA that the Council voted to establish is that the Council can pledge all revenues other than property taxes NOT WITHSTANDING AND WITHOUT REGARD TO ANY OTHER LAW WHETHER PUBLIC OR PRIVATE to make up short falls in debt service, which could be about $70 million per year, or short falls in operations. And, making up these shortfalls must take precedence over all other government obligations. These shortfalls would be paid for by taxes that are pledged to fund education and items like pensions and healthcare. The difference would then have to be made up by raising property taxes to make up the sales tax/education funding shortfalls. Since the CCA would legally be able to use those sales tax revenues, it could literally raise our property taxes without going to the people! By the way, I was one of three council members that voted against forming the CCA.

So, by using revenue bonds, the cost is about $10 million more per year and the metro taxpayer gets to guarantee the project with education dollars and ultimately property taxes. And the administration gets to avoid a referendum. I am NOT for this project, but not even considering the use of GO bonds to do the deal if you are for it is fiscally irresponsible.

One other interesting point is that a Tourist Development Zone (TDZ) to raise revenue to pay for the convention center was created by the Mayor and approved by the Council; again, I voted against this. Why? Because this TDZ is artificially large. A tourist development zone was established in a 3 square mile area of downtown. We had originally been told it would just occupy the area around the convention center itself. The Mayor stretched it across the East Bank, West to 21st Avenue, South to the interstate and North to Jefferson Street. You know that the new CC will not affect business on Jefferson Street. The idea with a TDZ is that you can use the incremental increase in sales taxes that result from the operation of a convention center and pledge those monies to operations and debt service. But there is a really funny thing about a TDZ for a public facility - all incremental increases in sales taxes including those previously earmarked for education can be redirected to the convention center.

So, any benefit that the convention center might bring will not benefit education or the general fund. Furthermore, any increase in retail activity that occurs that is not a result of the convention center will get used for the convention center, and thus will not benefit education or the general fund. So any future increases in education or other items like pensions and healthcare will be funded with higher property taxes.

If this project is funded only with revenue bonds that aren’t back by the full faith and credit of the government, I can support this project. If our tax dollars have to be used to guarantee this project then I am left no other option than to oppose it. I hope banks will believe in this project and loan the city the money to build the convention center without taxpayer guarantees. But I don’t think that will happen. The real question is, “based on the revenue projections of this project, current convention business trends and the economy’s current weakness, would you invest your personal savings or borrow money to invest in this project, without a guarantee from Nashville’s government?” My Answer is NO.

Eric Crafton is the Metropolitan Council Member from District 22.