Land Use
 

Rebuttal: Don’t blame soaring taxes on short-term rentals alone

Remember how retailers laughed at Amazon.com and the “online shopping revolution”? How Blockbuster infamously passed on the opportunity to buy both Netflix and Redbox? Kodak invented the digital camera in the 1970s, but was too married to its business model to embrace the change.

In hindsight, those were disastrous mistakes.

The sharing economy has arrived on our front doorstep and is changing the way the world’s residents interact and do business with one another. If that scares or intimidates you, in our great democratic society you can choose not to participate.  Another great American tradition is called capitalism.  Those individuals who want to participate in the sharing economy should have that right.

A few weeks ago, The Lens published a column by Peter Horjus insinuating that the new policies and regulations regarding short-term rentals in New Orleans somehow caused his property valuation for tax purposes to double. Horjus’ diatribe was articulate and coherent, which may have led some to think that it was accurate.

Instead it was an unfortunate use of ad hominem and red herring arguments. It sought to condemn short-term rentals, but did so without grasping the truth about how land is valued in Orleans Parish.

Property taxation is created through Article 7, Section 18 of the Louisiana state constitution. Property and sales taxes are the two primary ways that local government raises funds to provide for its citizens (although many might say that red-light cameras are a third).  What the state of Louisiana gives to municipalities with one hand it takes away in the form of the Homestead Exemption and similar tax breaks, including among others the constitutional exemptions on lands used by the state or its political subdivisions and on property owned by nonprofits, labor unions, lodges or clubs organized for charitable and fraternal purposes.

The state of Louisiana is happy to dole out these exemptions because it is not dependent on property taxes. Instead, the state taps into a mix of corporate and personal income taxes, sales taxes, fees on mineral extraction, and federal entitlement funds.

Under the terms and provisions of Louisiana Revised Statute 47:951, all property in the state is subject to assessment for tax purposes, even property that has been adjudicated to the state.  In order to assess property in Orleans Parish, the assessor uses what is known as a Computer Assisted Mass Appraisal, an algorithm, in essence, usually referred to by its acronym: CAMA.

The Orleans Parish Assessor explains CAMA thusly: “CAMA is an automated process for analyzing and maintaining property data, values and notifications by efficiently weaving together information gathered by disparate, but co-dependent divisions within the Assessor’s Office.  Thus, data from physical records, real-time appraisals, applicable exemptions, satellite images, and graphic mapping, among other sources, all come together in an attempt to produce a fair and equitable tax roll.”

While the assessor has some leeway in deciding which data to include in CAMA, it’s unlikely that short-term rentals have yet become a consideration.  The Notices of Assessment went out in early July, with the tax rolls to stay open from July 15 through Aug. 15.  The short-term rental regulations went into effect on April 1 with short-term rental license permits not issued until after that date.  The city began accepting applications prior to that date, but has not reviewed all the applications it has received. If the goal was to “produce a fair and equitable tax roll,” then whether or not a property had a short-term rental license permit could not yet have been part of the data set.

In his article, Horjus posits that “the reason properties are selling for such high prices is probably, in large part, because residences formerly occupied long-term by tenants or owners are being used commercially, as short-term rentals.”  This is a bombastic conclusion for which no proof is offered.  There are myriad reasons why homes may sell for higher values, not merely because they can be used as short-term rentals.

As a resident of the French Quarter, I can understand Horjus’ emotional attachment to his neighborhood.  New Orleans is now and has always been a tableau of ethnicities producing food, music, and cultural traditions that have intrigued people throughout the world for centuries.  As a small business owner, I know that we all need to stay attuned to variations and opportunities that are currently arising in the economic environment.

Horjus is entitled to his opinion and as an American is free to share it. But one thing is certain: Short-term rentals did not and could not have so dramatically affected his property tax assessment in the short amount of time they have been lawfully regulated.

I have had a close friend for many years who invokes what he calls the 50 percent rule. Any time you hear something really great about something, subtract 50 percent.  And any time you hear something truly negative about something, add 50 percent.  That way you will always wind up in the middle.

Bob Ellis

As short-term rental regulation evolves in New Orleans, I would encourage residents, voters, elected officials, business leaders, and anyone with an opinion about them to keep an open mind.  For in steadfastly safeguarding and preserving the past, we may very well wind up stymying the future.

Bob Ellis is a local attorney who represents the Alliance for Neighborhood Prosperity and other operators who worked with the mayor and City Council to legalize short term rentals.  He can be reached at Bob@RJEllis.com

The opinion section is a community forum. Views expressed are not necessarily those of The Lens or its staff. To propose an idea for a column, contact Lens founder Karen Gadbois.

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