How New Orleans could reconfigure taxes if plan is passed: See propositions, funding changes, more

By Jeff Adelson

Source: The Times-Picayune | The New Orleans Advocate

November 21, 2020

New Orleans voters will be asked to reconfigure five soon-to-expire taxes into four new ones on the Dec. 5 ballot, leaving the overall tax rate the same but altering how much funding various city services and functions receive.

The complex tax swap is a plan by Mayor LaToya Cantrell’s administration to boost funding for infrastructure, economic development, affordable housing and create a new stream of cash for early childhood education. But that comes at a substantial hit to the New Orleans Public Library, which will see 40% of its revenue cut under the proposal.

A variety of groups have campaigned against cuts to the library. The Bureau of Governmental Research, a non-partisan think tank, recommended voters reject the plan so it could be reworked by officials.

All told, the series of changes would leave tax rates the same for residents and businesses but redirect money in ways Cantrell and her leadership team say are more closely aligned with the city’s current priorities.

The tax swap is in three propositions, with residents able to cast votes for or against each one individually. Each tax would be authorized for 20 years. Early voting began Friday.

Proposition 1 is perhaps the most straightforward. Separate millages that fund the city’s large infrastructure projects and a separate tax for streets and traffic signals would be combined into a single, more generalized tax for repairing, maintaining and upgrading streets, drainage and buildings, as well as purchasing equipment and vehicles. The existing millages have a combined tax rate of 2.33 mills; the new one would be levied at 2.619 mills, bringing in about $10.5 million a year.

Cantrell campaigned for a new tax for that purpose last year but was rejected, with 54% of voters saying no.

Cantrell noted a steady stream of money for maintenance and repairs is crucial, particularly with the city completing more than a billion dollars of FEMA-funded roadwork that will need maintenance.

Proposition 2 is by the far the most controversial, requiring steep cuts to the libraries in order to pay for the increases elsewhere.

An existing 2.58-mill library tax would be cut down to .987 mills. The library would keep about $2.5 million of that money annually, with the remaining $1.5 million going to a city program that pays for pre-Kindergarten for needy students.

The tax is one of two millages that fund libraries – the other was a new tax voters approved five years ago that nearly doubled the system’s yearly funding. But Proposition 2 would knock that down again, cutting 40% from the $20.8 million budget the library has maintained for the last two years.

City officials have said the cut would not result in any layoffs or loss in services. Instead, they argued the library could use its $14.5 million reserve.

“The reserve just sitting there when we’re facing all these other issues, when we’re faced with furloughs and all these other issues,” Cantrell said, referring to cuts needed in the city’s budget due to impacts of the coronavirus pandemic.

Most of the library’s reserves were built after the 2015 tax, though city Chief Administrative Officer Gilbert Montaño said $3 million of that total came just this year.

Under the city’s proposal some costs currently born by the library would be combined with functions of the rest of city government. Examples include spending on new capital projects, which Montaño said could save the library $1 million to $2 million a year, or combining janitorial services.

Along with regular retirements and other attrition, that would bring the library’s budget down to the roughly $12 million it would bring in under the new plan while leaving it with a 10% reserve, he said.

The early childhood education part of the tax would go to replace some of the money the city now spends out of its general budget for a pilot program that provides childcare to families at or near the poverty line.

The pre-K program was first started in 2017, when the then-$750,000 a year program paid for 50 spots for families in need. It has since grown, largely at the urging of the City Council, to a $3 million effort known as City Seats that pays for 150 students to attend early childhood programs.

The city’s money can also be matched by state funds, though the exact amount that could be available to the city depends on a variety of factors.

Without the money from the millage, Cantrell said the city would not have the money for the program next year.

A coalition of groups including the Friends of the New Orleans Public Library and labor organizations have come out against the plan and urged a no vote.

“We would like to have an initiative that fully funds both the library and early childhood education, rather than pitting them against each other like this,” said Courtney Kearney, a Friends of Library board member.

Kearney noted that New Orleans already spends less per-capita on the library than other places in the state, including Jefferson Parish, East Baton Rouge and Shreveport. She said libraries provide needed services to those who can’t otherwise afford them, including internet access.

Kearney also noted the tax proposition does not specifically lay out how much would be spent on libraries versus childhood education, meaning the city could later cut funding even further.

A key problem for opponents, however, isn’t necessarily the early childhood funding. Instead, it’s that the library’s cuts would be to offset increases in the other propositions, particularly an economic development fund that would be boosted through Proposition 3.

“If the mayor wants an economic development fund they have to find that money somewhere else,” Kearney said.

Proposition 3 would split an existing housing and economic development fund, resulting in separate but larger funds. Housing and blight alleviation would get about $4.3 million a year and $4.6 million would go to economic development.

The affordable housing piece would give the city money it could use to expand existing efforts, Cantrell said. Meanwhile, Montaño argued the economic development piece would be more important now than ever, given the hit the city has taken during the coronavirus pandemic.

The Bureau of Governmental Research called for voting down all three propositions, arguing that the city had not articulated detailed enough plans for the funds. Specifically, it noted a lack of details about the changes at the library and suggested the city return to voters with a new proposal next year with more information and, possibly, a shorter duration than 20 years.

If passed, the changes to the taxes would go into effect Jan. 1. However, if any of the propositions fail the existing taxes would still be collected next year and stay on the books until 2022. That would give the administration the ability to rework the plan and present it to the voters again.

However, there are complications.

The budget the City Council passed on Thursday depends on the dedications included in the new millages, meaning the city would not be able to spend all the money the way it was planning and would need to adjust its spending plan for 2021.

And because keeping the combined tax rate the same requires the passage of the lower library and early childhood tax, the failure of that proposition but the passage of the others would mean a tax increase.

Its not clear how the administration would proceed if any parts of the package fail.

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