Will a stormwater fee finally fly in New Orleans? Officals are preparing a new pitch

By Ben Myers

Source: The Times-Picayune | Nola.com

January 25, 2024

After two recent whiffs in persuading the City Council to approve new revenue proposals, the Sewerage & Water Board is preparing yet another pitch to raise money for nearly $1 billion in deferred drainage upgrades.

This time, utility officials are revisiting an idea that has been debated for decades but has never really gotten off the ground: stormwater fees that, unlike property taxes, every landowner in the city would have to pay.

Details haven’t been finalized, including how the fee would be structured. Utility officials stress that New Orleans voters would have final say over any new fee. And, assuming the plan eventually makes it to the ballot box, council members would first shape and green-light the final proposal, according to S&WB Executive Director Ghassan Korban. He said he expects council members to receive a first draft this spring.

Around that time, officials expect to lay out a step-by-step process leading up to final adoption, Korban said. He said it could be another year or longer before a vote.

The renewed push for funding includes a “very methodical, very intentional” public-relations campaign that aims to show residents the critical disrepair of the city’s drainage infrastructure, Korban said.

The utility’s top priority in recent years has been building a new power complex to replace old, failure-prone equipment that has failed in several heavy rainstorms over the last decade.

With construction on the $300 million complex underway and a new substation set to be operating by mid-2025, Korban said it is now time to turn attention to the drainage system itself.

“This year is going to be the drainage year, in terms of highlighting the need for funding,” Korban told the S&WB this week. “It’s a matter of time before (the system) starts failing us.”

At the meeting, Korban highlighted problems at various pump stations that could render them inoperable. At Drainage Pump Station 7 on the western edge of City Park, Korban showed a picture of outfalls at the Orleans Avenue Canal that are detached from pilings.

That is just one in a number of projects that need to be addressed in the next five years that have a combined price tag of nearly $1 billion, an amount that grows every year. The utility gets about $68 million from three existing drainage millages. Only $13.5 million of that is available for capital projects each year, officials say.

Most of the capital money goes to a local match for federally funded projects that have already been completed, leaving just over $3 million a year for new projects.

“That is a very, very insignificant amount of money for the size of the drainage system we have,” Korban said in an interview.

Third time a charm?
The S&WB has twice sought and failed to get the council’s blessing on new revenue proposals over the last year and a half.

In late 2022, the utility floated water-rate hikes to help pay for water treatment and sewer upgrades. Last year, it asked the council to “roll forward” its drainage millage rates to reap additional property tax revenue from the three existing millages.

The two proposals were made for different reasons – one for water and sewer needs, the other for drainage – and the circumstances were different, since the council adamantly opposed property tax increases last year. But the results were the same, with council members refusing to consider either request. Years of damaged public trust stemming from a history of mismanagement, infrastructure breakdowns and inaccurate billing didn’t help.

The S&WB has hope for a different result this time around, but it is imperative that officials make a compelling case that ties dollar amounts to specific projects, said Council member Joe Giarrusso.

“The Sewerage & Water Board is going to have to explain what the fee will do, how it will be spent, and what are the ways it will be held to account,” Giarrusso said.

When it comes to convincing voters to get behind it, a stormwater fee has the advantage of spreading costs to all property owners, including nonprofits, religious institutions and government agencies, Giarrusso said.

The city’s largest nonprofit property owner, Tulane University, said it was open to the idea, while noting that more details are needed.

“Tulane supports efforts to improve New Orleans’ infrastructure and welcomes the opportunity to discuss options for achieving this goal with the City Council and other municipal leaders,” the university said in a statement.

Philosophical shift
Tax-exempt properties make up only about 7% of the total number of New Orleans parcels, but they represent nearly half of the city’s combined property value, since many of those properties are part of large institutions, according to the Orleans Parish Assessor’s Office. That these properties skate on paying property taxes for drainage – not to mention police, fire and other vital services – has long been controversial, with the public policy watchdog Bureau of Governmental Research and others objecting.

But proposals to change the system have never garnered enough momentum.

That could be ripe for change, though, since Giarrusso, who chairs the council’s budget committee, and the Cantrell administration appear to be in lockstep in relying less on property taxes and more on user fees, at least when it comes to drainage. Giarrusso said weaning the S&WB off property taxes is a top priority. Cantrell’s chief administrative officer, Gilbert Montaño, said New Orleans is “very much an overtaxed city,” while making clear he sees fees differently.

“If I was to predict the future of how there will be revenue enhancements, it will be more specific, more of a fee for a user base, as opposed to, we just are going to tax the whole city and get a pile of money,” Montaño said.

Stormwater fees increasingly common
Stormwater fees are gaining in popularity across the country, with more than 2,100 jurisdictions now financing drainage with some type of fee, according to an annual survey by Western Kentucky University.

The most common structure, and one that officials say is under consideration, ties the fee to the average amount of impervious ground in a typical residential lot. Residential owners either pay the same uniform fee, or in tiers according to size. Commercial owners have a different set of tiers.

Giarrusso said New Orleanians will want to know how the fee compares to what they currently pay in property taxes.

“Conceptually, people agree that taxpayers and residents can’t keep on being hit up for increased revenue, with nonprofits not contributing,” Giarrusso said. “But they definitely want to know the details about how it’s going to work.”

Korban said he was confident taxpayers would not be asked to kick in more than they already are.

“I can say with great certainty that I don’t think anybody, especially in the residential space, would pay a penny more than what they pay now. It is very likely for them to pay less than what they contribute in millages,” Korban said.

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