The TDZ Tussle

Metro Council is currently mulling over an intergovernmental agreement to comply with new state law regarding Nashville’s Tourism Development Zone. TDZs are designed to allow a tourism area to keep a percentage of taxes that would normally be due to the state and local governments. A designated local governing body then reinvests that money back into the tourist area to promote economic growth.

Nashville’s TDZ was originally created to help finance the construction and maintenance of the Music City Center. Since then, taxes from the large downtown zone have been directed to the Convention Center Authority to primarily pay debt service on the facility’s bonds, support related capital costs, and cover operating shortfalls if needed.

Nashville’s TDZ was scheduled to expire around 2033, but Tennessee House Speaker Cameron Sexton helped lead a push to extend the tax capture and redirect $300 million of the $600 million tax surplus from Nashville's TDZ to help fund infrastructure and capital projects in the East Bank.

A Tax Zone Walks Into a Power Struggle…

While the state's new changes provide funding to help develop the East Bank and fund a convention center expansion, they also reshape the Convention Center Authority’s power structure, giving the state greater influence over its governance. During this week’s Council Ad Hoc East Bank Committee meeting, several council members pushed back against the agreement over concerns about Metro giving up future tax revenue and decision-making power for decades without enough clarity on the financial tradeoffs.

Council members are crying foul, but the rift didn’t emerge overnight—it traces back to the creation of the East Bank Authority.

Mendes dupes the state

Last August, Speaker Sexton, who sits on the East Bank Development Authority Board, questioned whether the Authority truly had any power of its own. Early discussions made it clear that Metro would retain control over negotiating East Bank land contracts until the Authority became financially self-sustaining. But the Authority cannot generate revenue until the area is developed—a catch-22 that frustrated Sexton and fueled broader concerns over the arrangement.

At the time, Sexton criticized Mayor O’Connell’s Chief Development Officer, Bob Mendes, who helped structure the East Bank Authority agreement, arguing it had “tied the hands of this board so we have no funds.”

Sexton went to work

By the following spring, the state passed new TDZ legislation which provides the East Bank with a funding source. Ultimately, it will accelerate the Authority’s ability to unlock its power.

Despite the fact that the council really can’t do anything about the new structure of the TDZ or how the restructured Convention Center Authority spends the tax capture, the council deferred a vote on the intergovernmental agreement during last week’s meeting and the East Bank Ad Hoc committee voted to defer the resolution on Tuesday. It’s unclear what will happen if Metro refuses to move forward, but it will likely come with a legal fee.