In The News › As floodwaters dry up, so does tax base

Oct 6, 2005

Source: Times-Picayune

As floodwaters dry up, so does tax base

Thursday, October 06, 2005

As floodwaters dry up, so does tax base
That puts assessors in unique position

By Gordon Russell
Staff writer

If there’s a silver lining for those who lost their homes to Hurricane Katrina, it’s that tax bills on decimated properties in all likelihood will be small to nonexistent next year.

Of course, the sudden collapse of the revenue stream that flows from property tax is not at all good news for the governments that depend on it, particularly at a time when sales-tax revenue, the biggest source of money for most municipalities and parishes, have shriveled to a pittance in the storm’s wake.

After a news conference Tuesday in which New Orleans Mayor Ray Nagin announced the city was laying off about half its 6,000 employees, Finance Director Reggie Zeno explained that the city’s sales-tax revenue had fallen from about $13 million per month to almost nothing. The layoffs were expected to save the city as much as $8 million a month.

Zeno called property tax revenue “next year’s problem.” But it could be a big problem indeed.

Much of the heart of the city’s tax base, from eastern New Orleans to Gentilly to Lakeview, has been decimated by floodwaters. And a provision in Louisiana law requires assessors to reappraise all property that has been “overflowed” by water.

The state Tax Commission, the Legislature, the assessors and local government officials are trying to figure out a solution to the resulting problems; New Orleans officials, the Tax Commission and the city’s seven assessors plan to meet in Baton Rouge on Friday at 1:30 p.m.

The goal is to somehow balance two imperatives: that local government secure the money it needs to operate, and that properties be valued fairly.

“Everyone is cognizant of the need for revenue,” said Elizabeth Guglielmo, chairwoman of the Tax Commission. “But it must be weighed with the obligation that there be a fair assessment of property.”

No small task

Those considerations aside, there’s also a massive logistical hurdle facing assessors: how to revalue tens of thousands of properties in a few weeks or months. The task is complicated by the fact that mass appraisal techniques, whereby assessors figure per-square-foot prices for various neighborhoods, may prove useless in some areas. Instead, assessors will have to visit many properties individually, particularly in areas that were damaged but not devastated, to see what shape they’re in.

“We want to see what the assessors tell us,” Guglielmo said. “Do they have their rolls? Do they have staff to get the rolls out? Can a roll be filed that doesn’t reflect the storm damage?”

Already, the tax process has been pushed back to give everyone time to regroup.

On Sept. 23, Gov. Kathleen Blanco signed an executive order that suspended for 120 days a variety of obligations – including the filing of tax rolls, which were coming due – for the assessors for Jefferson, Orleans, Plaquemines, St. Bernard, St. Charles, St. Tammany and Washington parishes.

That will likely mean a delay of similar length before bills are mailed out and revenue starts streaming – or, more likely, trickling – in. Take the Lakeview area, traditionally one of the city’s most stable sources of property tax revenue.

Second District Assessor Claude Mauberret said he’ll likely leave land values roughly constant but that all improvements in the area – buildings and houses – will be revalued at next to nothing. Given that most Lakeview residents are owner/occupants and thus shielded by Louisiana’s $75,000 homestead exemption, the city and other entities that share property tax revenue, chiefly the School Board, will receive almost no money from that area next year, Mauberret said.

According to the city’s assessors, the Nagin administration has indicated that it would like to mail out tax bills based on the tax roll that was completed before Katrina hit. They unanimously oppose that idea, saying it would be completely unfair, especially since Orleans is the only parish in the state that requires taxpayers to pony up for the coming year instead of paying for the past one.

“I don’t know how the mayor can send bills to Lakeview and expect them to get paid,” 5th District Assessor Tom Arnold said. “It’s absurd. If you just got a tax bill and you lost your job and your house, how are you going to pay it?” Arnold noted that the assessors themselves are almost entirely dependent for their operating funds on a small property tax millage.

“I may be out of business Jan. 1, too, but that doesn’t give me the right to do this,” he said. Brenda Hatfield, Nagin’s chief administrative officer, disputed the assessors’ contention that the administration wants to send out bills ahead of the revaluation.

“The administration has not taken a position on the timing of the tax bills,” she said. “After all, most people in the administration also have been victims of having their homes devastated and truly understand the plight of our citizens. We understand the assessors’ and the Tax Commission’s concerns, and we will abide by their decisions.”

Taking another look

Janet Howard of the watchdog Bureau of Governmental Research said the pending revenue shortfall makes it opportune to revisit the city’s unique-in-America system of seven independent assessors, Howard said.

“The dramatic decline in the city’s tax base will force them to streamline city government,” she said. “Some of the sacred cows, including the seven assessors, are obviously candidates for re-examination. Do we really need, and can we afford, seven chiefs, some presiding over largely decimated areas?”

Arnold said his own district – the West Bank – was little damaged by the storms but that many properties must be revalued, including businesses that were looted or that now have no source of revenue.

“How do you tax them for stuff that doesn’t exist?” he asked. “If a guy’s out of business, I’m going to send him tax bills?”

Mauberret, whose district includes Lakeview, the western lakefront and much of Mid-City as well as Treme and the French Quarter, said he plans a drastic revaluation.

“I’m going to reduce Lakeview substantially,” he said. “I’m going to reduce Lakeshore (which is on higher ground), but not as much as Lakeview. Lake Vista, the same thing. Mid-City I need to reduce. All the way until the French Quarter. Everything outside the French Quarter is going to get pretty much wiped off the books. And the Quarter will have to be looked at on a case-by-case basis. It’s unscathed for the most part, but there will be reductions.”

It will be difficult to examine every property in the less-damaged areas, Mauberret said, but homeowners who can show pictures of major damage will get some relief. Those who feel that their homes are overvalued will be afforded appeals, as always, he said.

Mauberret noted that his plans are subject to change – for instance, if the Tax Commission tells him that what he plans to do is improper or illegal. There are also questions about whether homeowners with ruined houses can continue enjoying the homestead exemption, which by law requires that the holder “own and occupy” the property.

“I plan on wiping them (the devastated areas) off unless I get an order not to,” Mauberret said. “I’ll bring the case to court if I have to.”

Third District Assessor Erroll Williams, whose district is by far the largest of the seven, and the most heavily damaged as well – it includes eastern New Orleans, Gentilly and the Lower 9th Ward, among other ruined areas – could not be reached for comment Wednesday. But it seems likely he will pursue a course similar to Mauberret’s.

Assessors in the suburban parishes clobbered by Katrina – essentially all of them except St. John the Baptist – likely will follow a course similar to Mauberret’s, even though suburban homeowners are technically paying taxes on the past year, not the year ahead.

Plaquemines Parish Assessor Robert Gravolet said even though state law dictates that assessments be based on the value of the property the previous Jan. 1, he doesn’t think that would be fair. Nor does he support using a home’s pre-Katrina value for the first eight months of the year and using the damaged value for the other four months, a method he said the Tax Commission recommended.

Those whose homes were destroyed deserve more relief, he said.

“They would pay on the land and maybe a portion of their building, a slab or something,” Gravolet said. “If they sign a homestead exemption, for all practical purposes they would probably pay nothing, which would be justified in most people’s opinion.”

Looking for answers

Guglielmo of the Tax Commission said there may be some solutions in Louisiana law, proposed and on the books, that could help local governments get through the crisis.

For instance, a provision in the state Constitution lets the Legislature postpone tax collections. The state can then be authorized to borrow money on behalf of local governments so they can make ends meet. Guglielmo said she expects that option to be discussed in the upcoming special session of the state Legislature.

Another provision lets taxpayers seek a temporary deferment of taxes and pay by installments over a 10-year period.

Guglielmo said she is researching how other states and jurisdictions crushed by storms or other disasters have handled the problem.

“This is all such uncharted territory, really,” she said.

Another unresolved question is what will become of the reassessment of all residential property in New Orleans that was ordered by the Tax Commission earlier this year, before Katrina, on the heels of a series of articles in The Times-Picayune that exposed widespread inequities in appraisals.

Arnold said the assessors want that order – which required up-to-date, uniform rolls by August 2006 – to be rescinded. The matter likely will be discussed Friday.

Howard of the BGR, which has been a persistent critic of local assessment practices, said it would be a mistake for the commission to lift its order. Howard said it might make sense to push the mandate back a few months to give assessors time to catch up with Katrina damage but that she sees no reason to give up on the notion of equitable tax rolls.

“Don’t get rid of it,” she said. “That problem remains even while we’re focusing on this catastrophe. There may even be an opportunity here to really bring in expertise from outside. The assessors may be able to call on the resources of their colleagues on a volunteer basis.”

Howard added that the homeowners who were feeling the brunt of the inequities before – chiefly those who bought higher-priced homes in recent years – might be hit even harder post-Katrina, especially if city officials attempt to close the revenue gap caused by the destruction of property by raising tax rates.

If that happens, “The impact of the inequity is going to be even more pronounced” than it already was, Howard said.

Hatfield of the mayor’s office said it’s too soon to begin talking about things such as tax hikes. The assessors say it’s an idea that should be taken off the table before it’s even brought up.

“I think there would be a revolt,” Mauberret said. “That would be just ludicrous.”

“The only way they can roll up the millage would be through public hearings,” Arnold said. “Can you imagine the attendance at those public hearings?”

The federal government is going to have to step in and help, Arnold said.

“If the federal government, which helps all these foreign countries, can’t do something, I don’t understand it,” he said. “If the federal government doesn’t do it, the city of New Orleans is going to become the town of New Orleans.”

Gordon Russell can be reached at (504)232-6759.

Oct 6, 2005

Source: Times-Picayune

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