Recently, there’s been some discussion about Knoxville’s debt and whether the city is responsible with your tax dollars. If you listen to some, you might start to question if Knoxville is experiencing an economic freefall coupled with an unfathomable budget shortfall. (Spoiler: These claims are false and intentionally misleading.) Ensuring that Knoxville is on a responsible fiscal path is one of the promises I made to you four years ago and something this City Council has worked hard to deliver. Before being sworn in, I committed myself to learning about the city’s budget and how to keep our city on a successful financial track. With all the disinformation swirling around, I want to take this opportunity to talk to you directly about Knoxville’s stable financial position.

The City of Knoxville has two mechanisms to provide long-term economic stability:

  1. Economic Stabilization Reserve – A resolution from City Council that requires 20% of the general fund to be held in reserve. In the 2021/2022 fiscal year that reserve fund = $50 million.
  2. Unassigned Fund Balance – In addition to the Stabilization Reserve, 5% of the general fund balance is reserved in the city’s unassigned fund balance as an internal finance policy, representing a portion of the general fund that has not been assigned, restricted or committed to any specific purpose. In simple terms, this is a fund that the city does not plan to spend, similar to a savings account. In the 2021/2022 fiscal year this 5% = $13 million.

As a result of these two economic stabilization mechanisms, Knoxville has $63 million in reserves for FY2021/2022.

Having these stabilization mechanisms in place has allowed our city to maintain a AAA bond rating, which is similar to possessing a very good credit score. In fact, our strong bond rating allowed the city to refinance some of our long-term obligations and save taxpayers $5.4 million in 2020 alone.

Next, let’s examine the city’s debt. The city’s current total debt is $173 million. That’s down from a high of $261 million back in 2004. Over the time to date that I have served on City Council, the city has reduced the debt by almost $56 million. A Moody’s Sector Profile on Knoxville from May 2021 (graph below) analyzed Knoxville’s debt burden as compared to the local government’s tax base. This report revealed that Knoxville’s net direct debt as a percentage of full value has decreased and is below the 2019 median for all U.S. cities.

(Source: Moody’s Sector Profile (Cities & Counties) dated May 10, 2021 & Moody’s Municipal Financial Ratio Analysis database.)

The largest single line item of debt is, of course, the Knoxville Convention Center which is being paid off ahead of schedule, and is down to $80 million, with more than $24 million paid off in the last four years.

Another area to consider when measuring Knoxville’s fiscal health is pension obligations. Our city attracts and retains good public servants through a variety of incentives, including pensions. However, an underfunded pension is bad for workers and is a drag on a city’s overall economic health. Knoxville updated the city pension back in 2013 and plan H is fully funded. Plans A, B, C, F, and G are legacy pensions, and as of 2020, are 77% fully funded. The 2021 update will be available in October and is predicted to indicate that legacy pension plans are 80% funded. The unfunded portion of the pension is drawn down by about $20 million per year and is scheduled to be fully funded in 2037. By comparison, Knoxville’s responsible pension approach is the envy of other municipalities. For example, Chattanooga Fire and Police is only 49.9% funded, while Nashville and Memphis are responsible for multiple plans which range from 0% to 60% funded.

Knoxville’s fiscal position is strong and continuing to flourish. I am proud to be a part of a City Council that manages your tax dollars responsibly. I will continue to work hard to keep Knoxville on this responsible path and protect your trust. I am committed to continuing our work together; to reach out, listen, build bridges, and continuing the work you hired me to do.

2 thoughts on “Knoxville’s Budget Debate: Fact vs. Fiction

  1. Hey Andrew. Correct me if I have the numbers wrong. Did the Mayor use $14M of reserves to balance the budget? How will this money be paid back? Or will it?

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    1. The $63M in the economic stabilization reserve that I reference is based on 25% of the general fund. In 21/22 budget the general fund original appropriations (gross) is $253.6M. By comparison, the general fund in the previous year was $234.6M. These reserves remain untouched and the budget is balanced.

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