In The News › BGR backs both New Orleans property tax items on Dec. 10 ballot

BGR backs both New Orleans property tax items on Dec. 10 ballot

By Greg LaRose

NOLA.com | The Times-Picayune

November 16, 2016

A new property tax to pay New Orleans firefighters what they’re owed in back pay and renewal of an existing tax for infrastructure repair both have the support of a government watchdog group. Both requests will be on the Dec. 10 ballot.

The Bureau of Governmental Research, in a report released Tuesday (Nov. 15), explained the tax proposals and its reasons for supporting them. New Orleans voters will consider the taxes when they will also help decide a U.S. Senate runoff in Louisiana.

The new 2.5-mill tax is needed to meet the city’s obligation to firefighters. If it fails, the city will have to cut other areas of its budget to find the money. The millage is expected to generate an estimated $8.9 million annually, and the homestead exemption would not apply.

If the proposal is approved, the owner of a $350,000 home would pay an additional $87.50 in taxes each year. For every additional $100,000 in home value, another $25 would be collected. Commercial property owners will pay $35 for every $100,000 in value.

The city committed in March to pay firefighters $75 million in state-mandated back pay, provided firefighters take steps to reform their faltering pension system and drop a claim to $68.5 million in interest on the money they were owed. In January, the city made a $15 million payment for the back pay settlement and asked voters in April to approve a new tax to fund future payments.

Voters rejected that request when Mayor Mitch Landrieu paired it with a 5-mill property tax to pay for hiring more police. If it fails again in December, the city would have to find the money elsewhere. According to BGR, the minimum would be a $1 million annual payment from 2019 to 2026, $2 million annually from 2027 to 2033, and then $17 million a year until the $60 million balance is met.

If the tax is approved Dec. 10, the city would pay $5 million annually over the 12-year duration of the tax and increase its annual contribution to the firefighters’ pension system to about $12 million. In its report, BGR says “it is not possible to precisely assess how well the size of the tax proposal squares with the settlement costs.”

“The bottom line is this: The $8.9 million that the tax is expected to yield will not be sufficient to fully cover the settlement costs for at least the first several years, but it may well be more than enough in the later years,” the report states.

The Sewerage and Water Board wants voter to renew an existing millage for drainage repairs. It is currently collecting 4.66 mills but wants to renew just 4.46 mills for a 30-year duration. The current tax has been collected since 1967 and is projected to generate $16.1 million this year. The renewed portion of the millage would result in collecting about $690,000 less in drainage revenue annually.

A homeowner claiming a homestead exemption on a $350,000 property would pay $446 a year, or $6 less. Commercial property owners would pay $62 per $100,000 in value, down from $65. If the tax fails, the Sewerage and Water Board would lose 28 percent of its annual revenue.

The utility uses its drainage tax revenue for operational costs, system improvements and paying off debt. It currently doesn’t collect enough taxes to fully fund its capital spending plan, putting off nearly $50 million on projects planned for 2016. BGR said the Sewerage and Water Board’s deferred drainage work could exceed $270 million by 2020 if it doesn’t find a new revenue source.

Another looming cost for the S&WB will be the operation of city’s three east bank outfall canals and pumping stations once the Corps of Engineers completes work next year. The board will also starting paying for a portion of the Corps’ work on multiple drainage projects in the city that are part of the broad Southeast Louisiana Urban Flood Control Project.

While stopping short of saying it supports the option, the BGR report mentions that the Sewerage and Water Board has previously attempted to collect stormwater fees and says the utility is considering them again. The fees are assessed based on a property’s surface area that does not allow rainfall to penetrate. Driveways, rooftops and parking lots would be charged, as they create storm runoff that the drainage system must handle.

New Orleans voters rejected a stormwater fee proposal in 1985, and the City Council failed to act on a similar request in 1998 that officials said didn’t require voter approval. “However, implementation of a stormwater fee remains a future prospect and is uncertain. The S&WB cannot implement a fee at will; it would require City Council and, possibly, voter approval,” BGR said.

“A property tax and stormwater fee can coexist … Even with a property tax renewal, the S&WB can pursue a stormwater fee down the road for infrastructure maintenance expenses and new drainage obligations that are beyond the scope of the current budget,” the report continues.

Absent any additional revenue sources, BGR says keeping the drainage property tax in place is advantageous because it is established and voters understand the assessment and collection process. “The drainage system is among the most critical components of New Orleans’ infrastructure, and the property tax is vital to the maintenance of that system.”

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