BGR Position
BGR opposes the proposed property service charge on the December 5 ballot. Although the proposal attempts to address a major need of the City (primarily an inadequate and outdated pay plan) and a contingent contractual obligation of the School Board (to grant six percent raises) the proposal is seriously deficient and lacking in many critical respects.
Missing elements
t An approved pay plan indicating what the city funds would be used for and how much it would cost
t An adopted ordinance that clearly defines how the property service charge would be levied and collected (definitions, procedures, etc.) and how much would go to what function or purpose
t An overall fiscal plan showing how the City plans to address its projected $31 million deficit in 1999, with only $5 million from this proposal committed to that purpose
A strategic plan for the Orleans Parish School Board (promised but not yet developed)
t An agreement between the City and the School Board outlining the terms and conditions of the proposed transfer of city funds to the School Board
Unnecessary element
t Across-the-board pay raises for all public school employees, particularly with no plan for accountability or performance incentives. (Twenty-seven percent of the proposed $47.7 million is promised to this purpose.)
Legal questions or problems
t The proposed transfer of city funds to the School Board could be ruled unconstitutional because the city has no “duty or legal obligation” to fund pay raises for public school employees.
t Neither who is obligated to pay the charge not exactly what the charge will be applied to (land or land and surface area of improvements) is clearly stated in either the ballot proposition or the proposed ordinance.
t Under either scenario (that the transfer of funds is unconstitutional or that the City requires conditions for funding that are unacceptable to the School Board), the City could end up collecting and using the entire $47.7 million for city purposes.
Major concerns about the property service charge funding mechanism
t The charge exempts property owned by non-profits, schools, religious organizations, labor unions, business and professional organizations, social and fraternal clubs, lodges, health organizations, Mardi Gras krewes; trade, travel and commerce organizations; some cemeteries; and all local, state or federally owned land. Together, these exemptions encompass approximately 48 percent of the value of all real property in the City of New Orleans.
t Estimated revenue yields of the property service charge are based on inadequate information. Even though two experts have stated that the city’s estimates are “plausible,” the City has no reliable database on owner(s), dimensions of property, or classification of use to employ when preparing bills.t Because of the six classes of property taxed at different rates with three caps, the need to document and verify exemptions, and the need to set up a review and appeal procedure, there will be substantial new costs involved in collecting the property service fee. The City’s description of the proposal, however, states that “… no additional collection costs will be incurred.”
t The property service charge would likely be non-deductible on a federal or state tax return except as a business expense.
Misleading aspects
t The public may vote for this proposal thinking that this additional revenue would solve the city’s fiscal crunch. In fact, this proposal would have only a minor impact on the city’s fundamental budget problems in 1999 and beyond. Only $5 million at most (approximately 10 percent of the total funds generated) would be used to address the projected shortfall in the 1999 budget. Most of the funds would go for new expenditures (pay raises, libraries, more police) or to replace existing revenue (amusement tax). This proposal, if approved, would not even provide a one-year “fix” of the city’s fiscal problems.
t The $13 million proposed for the School Board would not entirely cover the raises the proposal’s passage would obligate the School Board to pay. In some respects, the School Board would be worse off than it is now, in that an obligation is created that is not fully funded.
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