Mayor Mitch Landrieu is facing a big budget squeeze.
Courts have ruled that the city of New Orleans must pay millions of dollars to shore up the firefighters pension fund, upgrade the parish prison’s abominable conditions and reform the police force.
Where is the mayor going to get the money?
He has settled on a solution: Ask New Orleans residents to approve new taxes.
But Landrieu needs the state Legislature and Gov. Bobby Jindal to authorize the City Council to put the tax measures on the November ballot. That authorization is far from assured.
The proposed taxes are:
- A 75-cent increase to buy a pack of cigarettes and other tobacco product in New Orleans
- Increase in the city’s hotel tax
- An increase in city property taxes to fund police and fire operations
“All of these measures are designed to give flexibility to the city to address its needs,” said state Rep. Walt Leger, D-New Orleans, the speaker pro tem and the mayor’s legislative point man.
Landrieu has made no effort to bring public attention to the proposed tax increases on cigarettes and hotel rooms, and they have received practically no news media attention. The mayor did not respond to an interview request from The Lens.
The city would need $34 million to $49 million per year to pay for the consent decrees and the pension fund. If approved, the three taxes would raise an estimated $31 million to $41 million per year. The city’s general fund budget this year is $505 million.
Taxes are a sensitive subject. It was only last month that New Orleans voters rejected the Audubon Nature Institute’s request for a 50-year property tax increase, by a 2-1 margin.
Landrieu has fretted to lawmakers privately for several weeks — the latest came during a presentation to Orleans Parish lawmakers Wednesday at the Capitol — about how difficult it will be to pay for a court ruling involving the firefighters pension fund and federal agreements regarding the Police Department and the Orleans Parish Prison. The mayor has sought relief from the courts but has lost every round.
In March, the state Supreme Court said the city must pay $17.5 million to the Firefighters Pension Fund to cover underpaid obligations from 2012. Nick Felton, who is president of the firefighters union, said in an interview that the city also owes $20 million a year for 2013 and 2014.
At the same time, the city must pay millions more — anywhere from $7 million to $22.5 million annually — to pay for a federal consent decree that will likely require hiring of hundreds of additional staffers to upgrade conditions at Orleans Parish Prison, which has been called one of the worst in the nation.
And the city must pay an estimated $10 million per year in the coming years to comply with another federal court agreement that mandates an end to abuses at the New Orleans Police Department. Landrieu tried to get out of the consent decree, arguing that the city didn’t know how much it would cost, but a federal appeals court rejected that argument in September.
One solution, of course, would be for the city to cut spending. But Landrieu has said for more than a year that cuts would gouge essential city services and would be unacceptable to residents.
So Landrieu has turned to the Legislature. State lawmakers would have to approve all three measures, and Jindal would have to approve the cigarette and hotel tax. The governor has steadfastly opposed any tax increase, but Leger said he believes Jindal would support letting local voters decide whether to approve a tax increase. Jindal spokeswoman Shannon Bates said he hasn’t taken a position on the measures.
Property-tax increase would require statewide approval
Leger is sponsoring House Bill 111 to raise property taxes to pay for police and fire protection. The measure, which passed the House last year but died in the Senate, would authorize New Orleans to levy up to six mills apiece for fire and police. The millage is now 5.26 for police and 5.21 for fire. A legislative analysis estimates that the measure would raise $5.6 million in 2015. The increase would cost the owner of a $200,000 home about $31 a year.
Leger said in an interview, however, that he may seek to increase the police and fire tax above six mills because of the city’s budget needs. Whatever the increase, the City Council could decide to use the money to recruit police officers and raise salaries, as the police union advocates.
To take effect, both houses of the Legislature would have to approve Leger’s bill, which would amend the state’s Constitution. The governor cannot veto it. The measure easily passed the House on Monday with an 89-0 vote.**
Next, voters would have to approve setting a higher maximum millage for Orleans Parish. It would have to pass statewide and in Orleans Parish. Then the New Orleans City Council would have to authorize a second vote in the city to determine whether to actually raise the taxes to that new maximum. If voters approved, then the City Council would decide whether to increase the fire and police taxes up to the new limit.
New Orleans would have only local tobacco tax in Louisiana
The bill to raise the cigarette tax, House Bill 1210 would more than triple the current statewide rate of 36 cents per pack to $1.11. Orleans Parish would be the only local government to have its own cigarette tax, said Tonia Moore, a staffer at the Louisiana Campaign for Tobacco-Free Living.
“I have never been a fan of smoking,” said state Rep. Helena Moreno, D-New Orleans, the bill’s sponsor. She said she had no problem agreeing to Landrieu’s request that she push the bill.
She estimated that it would raise $12 million to $18 million per year.
The measure has yet to get its first hearing in a legislative committee. If it passes and gets Jindal’s approval, the City Council would have to vote to put it to a citywide referendum.
The tobacco lobby, which includes convenience stores, has snuffed out recent attempts to raise the statewide tax, which is the third lowest in the country, behind only Missouri and Virginia.
Tobacco interests have yet to take a position on the bill. The Louisiana Association of Wholesalers is opposed to the tax, said its lobbyist, David Tatman.
Hotel taxes could be raised for second year
State Rep. Jared Brossett, D-New Orleans, is sponsoring House Bill 1083 that would allow New Orleans voters to decide whether to add another 1.75 percent levy to the the hotel tax. The current rate of hotel taxes is 16.44 percent, said Stephen Perry, president and chief executive officer of the New Orleans Convention and Visitors Bureau. The new rate of 18.19 percent would give New Orleans the second highest hotel tax rate among top tourism cities, after New York City, he added.
Hotel patrons already saw 1.75 percent added to their bill this year after the hotel industry approved a voluntary surcharge on rooms to pay for tourism marketing, which the Legislature authorized last year.*
Brossett estimated his proposed tax would raise $13 million to $18 million per year for the city. It, too, has yet to get a legislative hearing.
Brossett said the tax presents a good alternative to budget cuts.
“Who wants to see people [city workers] laid off?” he asked. “I’m willing to carry this legislation as an effort to allow the City Council to present this as an option for voters.”
On May 5, Brossett will trade his legislative seat for one on the council.
Like the cigarette tax, the Legislature, governor and City Council all need to approve before the matter is put before voters.
The Greater New Orleans Hotel & Lodging Association did not respond to a request for its position on the measure.
Loan forgiveness not likely
One way the city hoped to free up some room for other expenses appears to be a nonstarter. House Bill 463 calls for the state to forgive the city’s $5 million per year repayment of the Gulf Opportunity Zone loan.
“The legal consensus is that forgiveness of the GO Zone loans to the City of New Orleans is not a constitutional possibility,” Kristy Nichols, the state commissioner of administration, said in an email.
Stacy Head, an at-large member of the City Council, said none of the budget choices confronting the city is good.
“Do you want to give up services because there are things that we can’t pay for, or do you want to vote for a tax?” Head asked. “It’s a horrible situation to be in. But it’s more palatable to let the people decide.”
*Correction: A previous version of the story said the hoteliers approved the voluntary increase last year. Though the Legislature gave them permission to do so last year, the industry didn’t take that action until two months ago.
**Updated since original publication to reflect passage in the House.