NASHVILLE, TN — The Nashville Convention Center Authority, which receives much of the city’s tourism tax revenue, will for the first time help defray the skyrocketing cost of police and other visitor-related city services.
An item in the Metro budget passed last week directs $10 million of the authority’s surplus to the general fund. The authority, which oversees operations and financing of Music City Center, will also transfer at least $2.5 million annually.
As Nashville’s tourism industry prospered in recent years, the city’s expenses also soared — for services like officers controlling festival crowds and trash haulers picking up beer bottles on Lower Broadway.
But much of the tax collections were cloistered in a fund for Music City Center, the five-year-old convention hall. A financing plan approved by the council in 2010 sets aside a portion of hotel/motel taxes and other tourist-targeted tax revenue to pay off debt of the $623 million convention center.
Metro’s finance director Talia Lomax-O’dneal and the head of the center Charles Starks forged an agreement during this year’s tight budget negotiations that establishes regular funding for visitor city impacts.
The agreement, quietly passed by the authority’s board of directors in May, came after an April Tennessean report revealed the Metro Nashville Police Department’s overtime spending grew by 50 percent over three years, to $9.1 million in 2017. That rise was attributed almost exclusively to festivals, sporting games, and other entertainment events.
“We realize our attendees come to town and need things from Metro departments,” said Starks, president of Music City Center. “We hope this money can help offset some of the cost you have for people being downtown.”
Starks said the center pays separately when police staff its own events.
Music City Center, the 2.1 million square foot campus south of Broadway, draws about 550,000 attendees annually. But most of its revenue comes from off-campus sources.
The center takes in half of the city’s hotel room taxes, plus $2 of $2.50 per-night fee charged on hotel room nights, a 1 percent rental car charge, some of the sales taxes from the convention center and certain nearby hotels, and a portion of the sales taxes collected within a tourism development zone that extends beyond downtown.
It took in more than $92 million of tourism taxes in fiscal 2017.
A portion of the revenue is set aside each year to pay down the bonds used to finance the center’s design and construction, and some is set aside to cover the building’s capital needs. The general fund transfer will come from the authority’s surplus.
During the budget talks, At-large Councilman John Cooper proposed transferring $15.4 million from the surplus to cover cost-of-living raises for city workers, but his proposal fell flat.
“We have a variety of costs, and in no way does this reimburse the city for them,” Cooper said of the agreement. “It’s a gesture. An important gesture.”
Deputy Finance Director Kim McDoniel said the money is not meant to reimburse specific costs, but the city plans to use it to cover police, fire, emergency medical services, public works, parks, and other visitor-related expenditures. Police make up the bulk of those services, accounting for $6.4 million in event-related expenses in fiscal 2017, according to McDoniel. The Parks and Recreation Department spent about $700,000 on special events.
“Given additional expenses incurred when there are conventions and additional tourists downtown, and given the Convention Center Authority’s strong revenues,” McDoniel said in an email, “[the authority] made the decision to make a contribution to Metro to offset some of these additional expenses.”
The authority, established by the Metro council in 2009, is run by a nine-member board of directors appointed by the mayor.
Signed in early May, a memorandum of understanding between the Metro government and the authority establishes $10 million of initial transfers intended to cover fiscal years 2017 through 2019. Beginning in fiscal 2020, the authority will send at least $2.5 million annually. Payments will be greater if revenues exceed a predetermined level.