Is Nashville on the verge of bankruptcy, with city employee retirement plans partly to blame?

Is Nashville on the verge of bankruptcy, with city employee retirement plans partly to blame?
(FOX 17 News)

FOX17 KZTV Nashville
by Kelly Avellino
Tue, July 11th 2023, 1:54 PM GMT-7

NASHVILLE, Tenn. (WZTV) — Metro employees do not contribute to their pensions like much of the private sector. Nashville spent more than $109 million in tax dollars paying into those pensions in 2023. That's about 3% of Nashville’s $3.2 billion budget.

In other recent years, the city has paid in more than $90 million.

Total Metro Nashville pension contribution:

• FY 2024- $90,578,600
• FY 2023- $109,920,140
• FY 2022- $91,721,171

(Source: Metropolitan Government of Nashville and Davidson County, Office of the Treasurer)

Data from the Beacon Center of Tennessee reports Nashville’s overall financial standing at $2.7 billion in the hole (unrestricted net position). That includes the city’s total assets, debt and funds available now to pay off those bills. A 34% property tax hike in 2020, along with record tourism, has still not been enough to get the city out of the red.

“I think when you look at the financials of Nashville, I don’t know how much more bankrupt you can get than being billions of dollars in the hole,” said Jason Edmonds, a policy analyst at the Beacon Center of Tennessee.

“Nashville really just does not have the amount of money it needs to pay its bills, whether current or in the future.”

A different 2023 report from TruthInAccounting.org ranks Nashville as 63rd out of the largest 75 cities in the U.S. for financial well-being. Each Nashville citizen would theoretically owe $11,300 if the city had to pay all of its debts, right now. The report classifies Nashville as a “sinkhole city.”

However, city employee supporters argue Nashville’s pension plan, which also relies on the stock market, is fully-funded.

“The pension is an important part of the benefit package that employees work for every day,” said Brad Rayson, president of SEIU Local 205, the union for Nashville city employees. “I think it’s important to recognize that the members we represent are performing essential services for our city. They’re our support staff in schools at the water department They’re doing yeoman’s work every day, and for pretty modest salaries.”

Rayson points out that government salaries are often less than the private sector. He says the city would still be contributing money to retirements, even if employees were to pitch in, as well- the same as private employers offering employees a 401k.

“This is just a form of deferred compensation that they’re earning today so that they can have a secure retirement years down the road,” continued Rayson.

In 2014, Tennessee began requiring state employees to contribute to their retirement. Fox 17 news confirmed the move has saved $855.3 million in tax dollars, since then, according to the Tennessee Department of Treasury.

FOX 17 News also reached out to other similar-sized cities to Nashville, to see what their employees contribute. Memphis city workers contribute 8%. Raleigh city employees pitch in 6%. Columbus city workers pay 10%, which a city representative said has saved the city $200 million since 2010.

“Nashville specifically, when looked at other peer cities- their benefits are much more incentivized than others,” said Edmonds.

The TruthInAccounting.org report also shows that Nashville has $4.5 billion in underfunded post-employment benefits, like healthcare. In that aspect, Nashville ranks second only to New York City.

“The city is not putting money away, or at least not putting enough money away, for those future payments,” said Edmonds.

“I feel like we owe our public employees a secure retirement, like it’s provided here in Metro. The question for me is why don’t more employers provide the kind of retirement benefit that allows employees to retire with some level of financial security, like Metro employees do,” said Rayson.