Mayor John Cooper has brave new plans for the development of Nashville's East Bank. Unfortunately, Cooper's ambitious vision falls victim to the same problems that plague almost all public works programs.
The first issue is funding. In a recent report from Venue Solutions Group, the cost of renovating the stadium alone would rest just shy of $1.8 billion dollars. According to Metro Council Member Bob Mendes, the full 338 acre East Bank Renovation, (the new stadium, parks, affordable housing, etc.) could cost upwards of $3 billion. For reference, Nashville's 2021 budget was roughly $2.6 billion. So how will this project be paid for? Debt and corporate favors.
The tech company Oracle has agreed to take on $175 million worth of infrastructure development in return for substantial tax breaks. However impressive that number may sound, it’s only pennies compared to the full price of the project. The NFL and Tennessee Titans have also pledged to pay roughly $840 million to help cover the cost of a new stadium. While this is admittedly a good chunk of change, that still leaves well over a billion dollars to Nashville and the state of Tennessee. Mayor Cooper has suggested that the rest of the $1.2 billion stadium bill be paid through a combination of state contributions, sales tax diversions, and revenue bonds. However, bonds need to be paid back, and there is no guarantee that these “state contributions” won’t take the form of loans. With Nashville already $4 billion in the hole, this venture is irresponsible at best.
All that said, financing the project isn’t the only major economic factor being ignored by Cooper's administration. The East Bank plan is a typical example of allocative inefficiency and malinvestment as a result of government management. One of the necessary steps in the East Bank plan is to redevelop 338 acres of floodplain into usable land. Because of the astronomically high opportunity cost of renovating this sandy soiled floodplain, developers have shifted their efforts to other areas. In doing so, market forces have deemed redevelopment of this area to be an inefficient business venture. By passing the East Bank plan, the Metro government has ignored these market signals and plans to begin a high opportunity cost and heavily resource-intensive process. With Nashville's thriving development market, surely those resources could be used by the private sector more quickly and efficiently on something other than floodplain development.
Proponents of Cooper's legislation insist that the East Bank plan is necessary to provide housing for Nashville's growing population, but a large-scale public works plan is by no means an effective way of increasing housing availability. Instead, Mayor Cooper should leave it to the private sector and let the price system dictate what lines of production/development are most necessary.
Furthermore, if the Metro government wants to increase housing availability, it must loosen its overly restrictive building codes. According to a study by the National Association of Home Builders, costs associated with codes make up approximately ten percent of construction expenses. For this reason, it is no shock that housing is so expensive; one of the major downsides to these building codes is its effect on affordable housing. Historically, zoning laws and building codes have served to restrict the availability of affordable housing. As a side effect, low income families are hurt most.
Mayor Cooper and Nashville's Metro Council would be foolish to follow through with the Imagine East Bank plan. Not only are the economic effects costly and inefficient, the plan ignores the core issue behind Nashville's housing development woes. One can only hope that the Imagine East Bank plan lives up to its name and remains a figment of Mayor Cooper’s Imagination.