Drainage fee is not “roll forward”
27th November 2023 · 0 Comments
By Christopher Tidmore
Contributing Columnist
Six weeks ago, this newspaper published a plea to local governmental bodies to rollback millages as a means of alleviating the skyrocketing assessment rates on homeowners. Options such as rolling forward millages would only exacerbate the problem of people losing their homes thanks to mounting property tax bills. Moreover, it was noted that the option to ignore rising assessments – and reevaluate property values by councilmanic fiat – would only benefit the politically connected and existing homeowners at the expense of renters, small businesses, and those seeking to buy their first home. (Read the entire column at www.louisianaweekly.com/rollback-millages-not-values)
At the September 20 meeting of the Orleans Sewerage & Water Board, Executive Director Ghassan Korban called for a millage roll forward to bring more revenue to deal with the city’s collapsing water mains in need of reconstruction. He pled with the City Council to approve a roll forward, as the S&WB is in “full tree-shaking mode” to pay for a critical drainage power upgrade and a citywide meter replacement project.
Defending his position to City Council members, Ghassan noted that when voters in this state approve a tax levy, they approve a rate of taxation, not an amount of tax revenue. They authorize the taxing authority to levy the tax at a rate at or below the specified rate for the duration of the period stipulated in the proposition. For example, if voters approve a tax levy of 4 mils for 10 years, they are agreeing to a tax levy up to that rate for 10 years.
In a strict legal sense, there is no debate. The Louisiana Constitution does specify a mandatory rate adjustment to offset revenue increases or decreases due to changes in assessed values if the mandatory rate adjustment takes the form of a roll back, the rate is reduced to less than 4 mills. If the roll back is followed by a roll forward, the rate goes back to 4 mills, exactly what the voters approved.
The letter of the law says exactly what Ghassan suggests, and the City Council possesses the authority to follow his recommendation. They hold final say over the S&WB’s millage rates.
Opponents suggest, however, from the perspective of the struggling homeowner, it is not true that the homeowner voted for a millage at a set threshold – at least as he or she understood the ballot measure upon which the vote was cast.
What that voter did not count upon is that in just under three decades, the value of their home would spiral upward beyond their ability to pay, and far more – in real dollar terms – than ever thought would be demanded by local government. For example, suppose our mythical homeowner lives in the Irish Channel in 1990. Passing a 4 mill tax on their $80,000 home would amount to $30 over a year. $80,000 dollars was the average cost of homes in the Irish Channel at the time. Thirty-three years later, that same home likely would sell for $800,000, and under the current rules would be accurately appraised at that figure. So, if the millage rate remains at 10, as one suggests it should as that’s for what that person originally voted, the $30 tax per annum tax now amounts to $300. One could easily surmise that a $300 tax might enjoy less support from struggling Black homeowners in the Irish Channel than a $30 tax.
In a static model, under existing state law, that millage rate would have rolled back to one mill, to about $30. Of course, few would debate that $30 sum should be adjusted for inflation after three decades, yet telling a homeowner who thought they were voting for $30 in mills, and are now paying $300, constitutes a far different proposition.
And yes, millages rarely last for 30 years prior to renewal. Nevertheless, the metaphor carries. If you are a working class Orleans Parish homeowner, often an African-American family who inherited their house, surging values have meant that your property tax bill can actually exceed your ability to reasonably pay, and sometimes can exceed even what you make in a year, if the amount of the tax paid does not remain somewhat constant.
No amount of infrastructural, educational, or service-based improvement matters if you cannot afford to live in the home of your birth. Such stands as the moral case for taxing bodies, such as the Sewerage & Water Board, to resist the urge to roll millages forward. Local government has the discretion to keep the millages rolled back.
There is no doubt that the city of New Orleans needs billions in sewer repairs. Millage rates, though, may not be the best fashion to raise those funds. As we are all aware, more than half the properties in the city are either owned by the federal government or nonprofits, thus not subject to property taxes. They could be subject to “sewer property fees,” though, and the Sewerage & Water Board could easily abolish its property tax in favor of a “drainage fee” that would impact the average homeowner very little, and still bring new properties, owned by the Catholic church, the universities, and the federal government into actually contributing to the system. That would raise far more money than the proposed role forwards ever could earn, without endangering virtually any homeowners’ tenureship on their property
This illustrates that there are other revenue options that do not put someone in danger of losing a home. Such a service fee has been proven – repeatedly – constitutional, and even the feds would have to pay. That’s not to say there aren’t complications to instituting such a fee. Commercial, residential and nonprofit property owners could potentially pay different rates, and more complex arrangements could factor in to runoff rates for individual properties. Nevertheless, the idea is such a compelling possibility that Mayor LaToya Cantrell expressed support for a drainage fee on November 17 instead of a millage roll forward. It could raise enough money, in fact, to boost revenue, while eliminating the S&WB millage altogether.
Arguing a more global perspective, an Orleans parish millage rate which passes 170 aggregate, the parish is even less competitive for small business when competing with the neighboring parishes in municipalities of the river region. Jefferson Parish has a general millage rate of just over 110, for example. Sean Guidry said that one of the reasons he was moving his corporate headquarters out of the old One Shell Square dealt in large part to Orleans’ excess property tax burden. He also was motivated by concerns of crime, of course; regardless, levels of taxation does motivate mid-level businesses, without access to the industrial tax exemption out of our parish and into others.
This isn’t a push for cutting aggregate tax revenue, after all, but merely keeping it at a stable, consistent level for S&WB and other parochial bodies. Just doing nothing, maintaining the same revenue, means the overall tax rate falls. Yet, there exists a more pressing reason why taxing bodies in Orleans Parish should keep millages rolled back.
A property tax revolt is coming in Louisiana. Many focus on the fact that 2022’s Orleans Parish-only constitutional amendment #6 (to limit assessment increases to 10 percent a year on homes with a homestead exemption) failed last autumn. Nevertheless, it failed narrowly by just 6,984 out of 1,278,422 ballots cast statewide – mainly because it was the measure that would only benefit majority-Black New Orleans. That implies that the constitutional amendment was popular, and would have passed if it affected any other (Caucasian) Parish.
More importantly, in the aftermath of that failed constitutional amendment, some legislators have shared with our editors what they are planning. There is a move afoot to delete the words “over 65” from the constitutional amendment which freezes property assessments for retirees. Expand it to every homeowner, in other words.
In other words, if millage rates do not roll back, there will be a wellspring of support to return the entire state of Louisiana to the de-facto state of chaos that existed pre-Katrina. Essentially, one’s home remained the same value – unchanged – from the day he or she purchased it, putting an unnecessary tax burden on new home buyers, small businesses, and renters.
In other words, Louisiana’s equivalent of California’s Prop 13 would come into force. Such a change would do far more long-term to eviscerate the revenue stream of local governmental bodies then rolling back millages ever could.
Instead of a gradual increase in revenue as millages rolled back, reasonably, properties would stay frozen in value for 20, 30, or 50 years. That constitutes a recipe for the virtual financial destitution of local governments, which rely on property, taxes, and the institution of a mountain-high millage rate which would bankrupt small businesses and make affordable rents almost unknown.
This article originally published in the November 27, 2023 print edition of The Louisiana Weekly newspaper.
