In The News › Critical eye sought on developer tax breaks

May 20, 2009

Source: The Times-Picayune

Filed under: Economic Development, Orleans Parish

Critical eye sought on developer tax breaks

By Kate Moran
Business writer

With the help of a good government group that has frequently criticized it in the past, the city’s Industrial Development Board is trying to refine its criteria for awarding property tax abatements to private developers.

The nonpartisan Bureau of Governmental Research has faulted the board for awarding tax abatements to private business without articulating a clear set of the economic development goals and without having minimum standards a developer must meet to qualify for a tax break.

With the board’s blessing, BGR began surveying what practices economic development boards in other cities have adopted for awarding tax breaks to housing developments, retail centers and other projects. Some of these practices will be a model for New Orleans.

Janet Howard, BGR’s president and chief executive, told the board Tuesday it should decide whether it wants to use the tax breaks to promote job creation in certain industries or to revive troubled neighborhoods. She said those two policy goals demand a different set of criteria.

The board took no formal action, but its members asked Howard and BGR research analyst Stephen Stuart to continue studying the issue and come up with parallel sets of criteria for awarding tax abatements to projects that create jobs and improve neighborhoods.

The Industrial Development Board has granted a number of high-profile property tax abatements in recent years, including a 20-year tax break for the new Home Depot in Central City and for the Wal-Mart near the River Garden apartments.

Before it awards such subsidies, the board requires developers to pay for a cost-benefit analysis showing the tax abatement would create an economic benefit for the city. The board does not, however, have any minimum standards that dictate what benefit the project has to create to qualify for the subsidy.

In a series of reports on the matter, the Bureau of Governmental Research has argued the board needs to determine whether the tax abatement is necessary to make a project go or whether it is simply gravy for the developer. The group also wants the Industrial Development Board to consider whether a tax abatement creates a disadvantage for competing businesses that lack such a subsidy.

In a 2007 report, BGR called the board’s current procedure for awarding a tax abatement “an ad hoc, developer-driven process that allows large corporations to negotiate their effective tax rates down to a level far below that of small businesses in the city.”

Board members have themselves shown some impatience with developers who approach them seeking a property tax abatement. On Tuesday, a number of board members were skeptical about granting a break to a nonprofit developer seeking to renovate a devastated apartment complex in Gentilly. Board members were particularly concerned because most of the apartments in Chateau Carre will rent at market rates.

Several board members thanked BGR for its recommendations on Tuesday.

“We decided they have tremendous resources,” said attorney and board member Raley Alford III, who leads a committee looking at possible changes to the board’s tax abatement policies. “Instead of co-existing in an adversarial relationship, we decided we should ask them for help.”

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Kate Moran can be reached at kmoran@timespicayune.com or 504.826.3491.

May 20, 2009

Source: The Times-Picayune

Filed under: Economic Development, Orleans Parish

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