Analysis: Finding the pieces in the financial and marketing puzzle for a Nashville transit plan

Nashville’s next transit plan will have to be built on trust — at least, that’s the first recommendation from Nashville Mayor Freddie O’Connell’s transition committee on transit and the word mentioned nearly two dozen times in the post-mortem on the failed 2018 plan.

“There is no silver bullet for building trust, but doing so will require the humility to recognize that community members hold unique expertise and insight into their own needs and challenges,” the Transit Center wrote in its report Derailed: How Nashville’s Ambitious Transit Plan Crashed at the Polls—And What Other Cities Can Learn From It. 

“Civic leaders must include, listen to, and empower residents, particularly those who come from low-income neighborhoods and communities of color, who have long been excluded from public planning and policy-making processes, to influence decisions that tangibly affect their lives.”

Twice in the past decade, Nashville failed to advance a transit plan. First, a 2013 initiative focused on improving the bus system, and the ambitious multibillion-dollar light rail and bus deal proposed five years ago.

Like most large-scale spending initiatives in Nashville, there is a constant tension between what the city’s top industries in tourism, real estate and construction want compared to the neighborhoods and communities that would be taxed, disrupted and potentially displaced by any new or improved system. 

The transit initiative, which nearly every interested group believes is necessary, has the potential to unlock a dedicated funding source without needing state lawmaker approval and one that could last for multiple mayoral administrations. But it also likely involves a frank discussion about traffic congestion and the need for building reforms.  

“Transit’s impact on congestion is complicated, and it’s not likely to completely solve the problem, but it can provide alternatives and limit congestion in the future as we grow,” said Neil Kornutick, the co-founder of the pro-housing advocacy group Housing Now Nashville. 

“If we’re trying to convince people that this plan will benefit them, we should highlight how this allows for more funding for sidewalks and opens the door for a conversation about much-needed zoning reforms around any improved transit corridors.”

For this article, the Lookout spoke to nearly a dozen people — some on the record, others on background — ranging from political insiders to business leaders to labor organizers to transit advocates and riders.

The goal was to understand what it would take for Nashville Mayor Freddie O’Connell to get a transit referendum on the ballot and passed by the November 2024 Presidential election.

These conversations often started with discussions about the feasibility of introducing a transit plan on an 11-month timeline and moved to the finer points of the financial puzzle, like what taxes to raise and the cost of light rail lines versus only bus improvements.

On the campaign trail, O’Connell hinted at a favoritism for bus rapid transit, a system that involves creating dedicated bus lanes and buy more of them to improve the frequency and on-time consistency of any system, as well as new routes that won’t just direct people downtown but allow them to move between neighborhoods. 

There is a clear desire from many for a light rail line between the airport and downtown, with BNA’s Thanksgiving parking disaster helping the narrative. But, light rail is also significantly more expensive than any form of busing. 

All of these discussions inevitably circled back to the tax question. The 2017 Improve Act allows for a referendum to raise six different taxes. But, in Nashville’s case only the sales tax, hotel-motel tax and an impact fee — the last of which the State Legislature would have to authorize — could raise enough money to support a plan costing over a billion dollars.

By the numbers, a sales tax increase generates the most money. For example, a 0.25% rate hike brings in almost $1.2 billion over 15 years, according to the latest tax collection data from the Tennessee Department of Revenue.

MTSU Political Science Professor Sekou Franklin said the 2018 transit plan likely relied too heavily on a sales tax increase that would have made Nashville’s rate one of the highest in the country. 

“A sales tax by its nature is regressive,” Franklin said. “It impacts everyone, making things more expensive.” 

Last year, the tourism industry was not an obstacle in increasing the hotel-motel tax rate to fund a portion of a new NFL stadium in Nashville. A hotel-motel tax increase of 2% could generate $345 million over the next 15 years, moving the city’s rate to 9%, higher than most cities but not all. 

But, an impact fee is the white whale of any transit plan. 

For years, the associations representing the homebuilders and realtors have stood in the way of Nashville enacting an impact fee, a flat rate tacked on any new housing, retail or commercial construction project. 

Old Hickory Democratic Rep. Darren Jernigan, now the state legislative liaison for O’Connell, proposed an impact fee for Nashville in 2020 that would have generated $1.9 billion over 15 years.

The burden sharing among the taxes raised between Nashville’s top industries and communities could play a significant role in public buy-in to any plan. 

A complaint often expressed in 2018 was that consultants from former Mayor Megan Barry’s Office and the Nashville Chamber of Commerce ran the transit plan’s marketing, never actually getting buy-in from councilmembers or local communities while dropping a significant amount of the tax and displacement burden on them. 

“My hope is because this is our second time doing a referendum that we will prioritize community engagement, transparency and accountability and prioritize the messaging that way,” said Erin Hafkenschiel, the President of ThinkTennessee and a former transportation advisor in the Barry and David Briley. Nashville mayoral administrations. 

O’Connell’s transition committee recommended the November 2024 timeline for a vote, citing the potential for a high turnout to help it pass. In 2018, political leaders took the opposite approach, believing a low turnout in the May election favored them. 

But, a quick timeline was one of the reasons cited in the Transit Center’s report on why the 2018 plan failed. The timeline also means that O’Connell would have to get enough support from state and federal agencies, the Metro Council and potentially state lawmakers to propose a plan by March or April next year.

August 15, 2024 is the deadline to get a referendum on the ballot.

A big decision looms on whether to bring in Republican state lawmakers who can either throw a wrench in any plan with preemptive legislation or boost it with additional funding. 

O’Connell has hinted he doesn’t plan on creating an entirely new plan but instead pull from parts of previous studies like the nMotion plan for determining the bus and potential light rail improvements needed. 

Nashville’s mayor is likely the most crucial figure in any transit plan as he uses the political capital from his recent election and has the chance to reengage the political network that helped elect him in the first place.

Reporters note: The Improve act stipulates Nashville’s combined hotel-motel and sales tax rate can’t exceed 20%. All the tax revenue projections in this article estimate a 2% annual growth in collections.