The state Department of Finance and Administration is in the process of reviewing Metro's Tourism Development Zone application, which was submitted May 20 in hopes of creating a critical funding tool for the proposed Music City Center.
The voluminous application designates the borders of the TDZ, which is a rough three-square-mile circle around the site of the proposed Music City Center. The proposed convention center TDZ begins in the north along Jefferson Street, is bordered in the east and south by the I-24/I-40 interstate loop, includes the Midtown bars and restaurant area in the south west and then works its way in northeasterly chunks back up to Jefferson Street.
Along with the tourism taxes and fees enabled by state legislation and passed by Metro Council, the TDZ is another funding tool for the estimated $635 million Music City Center. The approval process for the state typically takes three to four months and the TDZ would also need approval of the state Building Commission.
A TDZ shifts sales tax revenue generated by a massive public project to service debt issued for the project. The TDZ sets a baseline year (in this case 2008) and then returns the sales taxes collected above annual countywide growth. For instance, if the TDZ is approved and sales tax collections rise 3 percent throughout Davidson County in 2009 and rise 5 percent within the TDZ, then the remaining 2 percent would be returned to service the debt.
In a letter accompanying the application, Mayor Karl Dean spelled out the need for the TDZ to finance the project.
"The new convention center project will be both the catalyst for revitalization of the (SoBro) area and will beneficially impact the surrounding downtown and midtown areas from the first day the convention center opens," Dean's letter states. "In addition, the areas on the edge of the Tourism Development Zone will experience growth and development due to this investment by our city as the energy created in the core of downtown Nashville spreads throughout the whole zone."
Not included in Metro's extensive application were sales tax collection numbers for businesses within the TDZ. The Metro Finance Department has preliminary collection numbers, but is still waiting for more specific data. The state does not require that sales tax projections be included in its application, but Metro will have to pass the information along to the state Department of Revenue.
Although Metro has already approved the TDZ, some Council members have been publicly skeptical about the sheer size of the zone. They questioned whether Metro was trying to squeeze out too much revenue, despite the fact some of the businesses wouldn't seem to benefit from a new convention center.
Some, like District 6 Councilman Mike Jameson, have worried that Metro is sacrificing its own education dollars by expanding the TDZ so far around the project. Two-thirds of all local option sales tax collections go to Metro Nashville Public Schools. But schools will not collect incremental increases within the zone once the TDZ is established.
The Music City Center project is still waiting for a financing deal to be presented by Dean's administration and approved by Council before it gets the green light. Already Council has appropriated $75 million in tourism taxes to begin land acquisition for the project.
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