Focus on Finance: Funding the Future of Nashville

 

Richard M. Riebeling has served since September 2007 as the Director of Finance for the Metropolitan Government of Nashville and Davidson County. Previously, Riebeling worked in public finance investment banking, a private legal practice, and journalism. He has also served in public office as an aide to former Nashville Mayor Richard Fulton and as Commissioner of the Tennessee Department of Economic and Community Development under former Governor Ned McWherter.

In 2013, the New York Times published an article speculating that Nashville may be the new “it” city in America. How do you plan economically for projects to strengthen Nashville while keeping in mind that the current rate of growth may not remain constant?

The challenges are great, but we’ve got some natural advantages. Nashville is the kind of city that is attractive to young people. It’s got diversity of background. You have lots of people attracted to Nashville because of the music scene. Although the South has been historically below the national average regarding wages, I think that’s slowly changing, and certain cities are going to be able to really prosper. I think Raleigh-Durham, Austin, and Nashville are the three that come to mind because they are all about the same size, they’re capitals, and they have a lot of synergy.

The key is to take advantage of the opportunity today, but build the infrastructure so that it’s sustainable. We don’t want to be yesterday’s poster child and have everybody forget about us. I think you do that with just core blocking and tackling. You take care of infrastructure. You make sure the quality of life is good.

The biggest challenge is schools. That’s the key component because corporations and businesses want to make sure they have a good public school system.

Nashville is one of the top regions in the country for job growth. Not only are the music industry and health care growing in your city, but so is manufacturing. Why do you think the manufacturing sector can thrive in Nashville when it is in decline in so many other US cities?

Cost. It’s labor cost. It’s operational cost. It’s energy cost.

We’ve become sort of a mini-Detroit. Nissan moved its corporate headquarters from California to right outside Nashville. General Motors is reopening their plant there. So you have a pretty good concentration of manufacturing, and I think it just comes down to cost. Companies are going to go where the costs are lower.

Not getting into labor issues – Tennessee is a right-to-work state, so there is not required representation, which is the trend currently. I grew up in a labor family, and my father was a construction worker so he was die-hard union all the way, but it’s a fundamental shift that we are seeing. I think it has long-term structural problems that we all need to think about in terms of wages, but right now we’re attractive to those kinds of industries. So manufacturing is continuing and growing.

In terms of this lower cost, is that something you have to think about and project into the future since Nashville is becoming a more prosperous city and thus those costs may shift?

I think that’s right. I think over time it will shift. Nashville has always been well above the state average wage, and above the national average, so we’ve sort of been a little bit of an island in the rest of the state. We’ve been above the norm principally because we have the big insurance and banking industries and a lot of colleges and universities, so you’ve got a real strong middle to upper-middle class that have always kind of carried the way.

I think you’re going to have challenges, but I think you still have a tax structure that is lower than other states. We don’t have an income tax, which is a major achievement. We live off of sales tax, which is great when the economy is good, but we suffer when it’s not. That’s the challenge: How do you build for the bad times and make sure you have infrastructure in place to prevent it from becoming a major issue?

You touched on sales tax, and I know various projects have been implemented to try to increase tourism and industry in Nashville. Some critics have voiced concerns that the tax incentives being provided for projects like the Music City Center and attracting HCA (Hospital Corporation of America) Holdings will contract the tax base enough to make it difficult to sufficiently provide services to Nashville residents. What makes you think that this won’t be the case?

I think that there is always a tension anytime that you give any type of tax break. I think there is a tension between did you need to do it and should you do it. It’s a great public policy discussion.

I think you have to look at each case differently because there is no one-shoe-fits-all when it comes to economic development as to whether a company should get an incentive or not. I fall into the group that says if you don’t provide the incentive from time to time you’re not going to get that growth.

The key is creating jobs. If you create jobs, the rest is going to come. If you have to give up some tax revenue for a period of time to create jobs, I think that is something you need to do. Not in every case, but in those where it is going to move a number of jobs there.

The other key is what the jobs will pay. Are these good jobs? Are these minimum wage jobs? Or are they sort of above the average? In the HCA case, the average job was going to be about $80,000 or $90,000, which is well above the average income, so in that instance it’s sort of a no brainer.

Obviously you give up as little as possible, utilize the art of negotiation, but I think if you never give incentives you don’t grow your base and you’re going to have more economic problems. When the going is good I think you need to take advantage of it in order to build for the future.

The EV (Electric Vehicle) Project is providing the largest deployment of electric vehicles and charging infrastructure in history, and the state of Tennessee is scaling this project faster than anyone else. What long-term impact do you see this having on the economy of Nashville?

The Nissan Leaf is made right outside of Nashville, so there’s a real interest in that area. I think there is a good chance that Volkswagen in Chattanooga, which is a few hours to the southeast, is also going to do an electric vehicle there. I think that energy costs are historically lower in the South because of the TVA (Tennessee Valley Authority).

We don’t have a lot of the environmental issues that some of the big urban cities do, although we do have a lot of pollution because we sit in a valley. I think part of it is sort of PR in that you want to promote your image of the city as being green and eco-friendly, because I think that is really going to be increasingly important over time, especially in attracting young and creative people. So it is as much for that attractive image as it is just for the good public policy on the environmental side.

Nashville’s Office of Management and Budget’s website contains a “Citizen’s Guide to the Metro Budget.” Does this reflect a belief, on your part or on the part of the city, that citizens should be more financially literate so they can be more engaged in their local economy?

Yes. Whether they take advantage of it is another question. We just redid the whole city’s website, and we’re trying to get more participants involved in it.

I think generally speaking we have a pretty well run city. I think people’s attitude towards city government is relatively positive compared to a lot of places.  I’ve lived there for a long time now and have seen a lot of polling data over the years. Other than a small period in the early 1980s, Nashvillians have always felt very good about their city.

I think all those efforts to try to increase financial literacy are critical. Tennessee is a very low tax state, and it’s very difficult to increase any kind of revenues. I think the more the public understands where the money is going and how it’s being spent, that will help them be more open to allowing the collection of additional revenues when necessary.

So as long as the public understands what is going on, they are more likely to be amenable?

I think that’s right. I still have a fundamental belief in the American people, and the people of Nashville, that if people think that they are getting some value for what they are funding, most people are willing to pay for it. People know the importance of schools. They know they want parks – we have a great park system and great greenways. We have a great library system and public services, and people know that kind of stuff costs money. So I think the more they know about the way the money is being spent and that it’s going towards services that are either available to them or could be if they chose to utilize them, you can get public support.