Money is the major sticking point over consent decrees that would mandate reforms at Orleans Parish Prison and the New Orleans Police Department.

The city of New Orleans faces an annual tab of $18 million to $33.5 million for both consent decrees. Meanwhile, next year’s general fund budget is expected to come in around $491 million, the same as this year’s.

If the consent decrees go through as expected, the city will have to come up with most, if not all, of that money. There are two ways: Raise taxes or cut spending elsewhere.

City officials have gone into detail about what those cuts could look like, but they have said little about how the city could raise the money. Mayoral spokesman Tyler Gamble declined to comment about whether the city is considering ways to raise revenue to pay for the reforms.

”In terms of revenue options, the first one — being the obvious one — is a tax increase.”—Janet Howard, Bureau of Governmental Research

At an emergency City Council meeting in March, Chief Administrative Officer Andy Kopplin said increasing jail funding by $22 million would result in 305 layoffs, 15 furlough days for every city employee and operational cuts of 6.3 percent.

The Lens calculated how much money could be raised in several different ways. Options include raising property taxes and boosting sales taxes, including the hotel-motel tax.* We ran some of them by Janet Howard and Stephen Stuart of the Bureau of Governmental Research, a local watchdog group.

Property and sales taxes are the city’s two main sources of general fund revenue. Others, including license fees, fines and service charges, account for a relatively small share of revenue and would require massive increases to come up with what’s needed.

“In terms of revenue options, the first one — being the obvious one — is a tax increase,” said Howard, executive director of the organization.

Consent decrees to cost $18 million to $33.5 million annually

Most discussion about the cost of the consent decrees has been based on a five-year timeline. The NOPD arrangement will last at least four years; the city has budgeted for five. A judge could lift the jail consent decree after the facility is judged to be in compliance for two years, so it could be in effect for just a few years — or it could take much longer.

The city has estimated the cost of the NOPD consent decree at $11 million a year. The cost of the jail consent decree has been the subject of federal court hearings; estimates range from $7 million — the city’s estimate — to $22.5 million.

The city must pay for all operations of NOPD. State law also requires it to pay for the operation of the jail, though attorneys for the city have argued that Sheriff Marlin Gusman has other sources of funding, including civil court fees and tax sale commissions, that he could use. The city also accuses Gusman of mismanaging the money he has.

Assuming the consent decrees will in effect for five years, the city would have to raise a total of $90 million to $167.5 million. However, some of those costs will outlast the consent decrees, particularly if jail staffing must be increased to pass muster.

Raise sales taxes

The city’s local tax rate is 5 percent. Raising that to 5.575 percent would yield an additional $18 million annually, based on the city’s estimated tax collections for 2013. Boosting it to 6 percent would yield more than $32 million.

$18 millionfrom 0.575% increase$32 millionfrom 1% increase

However, the combined 9 percent state and local tax rate in New Orleans already is among the country’s highest. An increase would require a popular vote and state legislative approval.

Raise general property taxes

According to the Orleans Parish Assessor’s Office, the 2013 net taxable assessment of all private property in the city is about $3.088 billion. That accounts for homestead exemptions.

Property taxes are collected by millage; one mill is 0.1 percent of the assessed value of a house. In New Orleans, property is taxed at 147 mills on the East Bank and 148 mills in the West Bank. Of that, only 15.1 mills go to general city government.

One mill, therefore, brings in $3.088 million annually.

Property taxes would have to be raised by 5.8 mills to generate about $18 million and 10.8 mills to raise about $33.5 million.

$18 millionfrom 5.8 mill increase$33.5 millionfrom 10.8 mill increase

For homeowners, that would mean tax increases of:

• Nothing for a home valued at $75,000 or less (due to the homestead exemption)

• Between $14.50 and $27 for a home valued at $100,000

• Between $72.50 and $135 for a home valued at $200,000

• Between $130.50 and $243 for a home valued at $300,000

The City Council can’t “roll forward” its general-fund millage above the current level, set in 2011. Any increase beyond its maximum millage level would require a citywide vote.

Raise special property taxes

Some special city taxes — including a 5.26 mill tax for police services — are levied on the full value of property. The taxable assessment of all private property, without accounting for homestead exemptions, is about $3.526 billion.

So one mill would generate $3.526 million a year.

It would take 5.1 mills to raise $18 million; 9.5 mills to raise $33.5 million.

For homeowners, that would mean tax increases of:

• Between $38.25 and $71.25 for a home valued at $75,000

• Between $51 and $95 for a home valued at $100,000

• Between $102 and $190 for a home valued at $200,000

• Between $153 and $285 for a home valued at $300,000

There are obvious drawbacks to raising property taxes across the board in a city with a persistently high poverty rate and a rapidly growing cost of living. And passing such an increase would be politically difficult.

A new or increased tax levied against properties’ full values would require an amendment to the state constitution. The Legislature would have to authorize the amendment, which would have to be approved by voters citywide and statewide. Then the City Council would implement it.

$18 millionfrom 5.1 mill increase$33.5 millionfrom 9.5 mill increase

Last year, Mayor Mitch Landrieu urged legislators to advance an amendment that would have allowed the city to raise the police and fire taxes to 6 mills each — adding about 1.5 mills total — but the bill failed.

“To raise taxes you’re going to have to go to the voters,” Howard said. “One of the big problems New Orleans has to deal with is the fairness of the structure of the tax system, because the taxes are falling on a very small percentage of the property value.”

“Going with a constitutional amendment, you’re addressing one part of it, which is the homestead exemption,” she said. “But you still have the nonprofit problem.”

Eliminate the nonprofit property tax exemption

The assessed value of land owned by nonprofits in New Orleans was $384 million in 2011 — nearly 10 percent of all real estate in the city that year, according to a 2011 Bureau of Governmental Research report, “The Nonprofit Exemption: Bad News for Taxpayers.” All that land is exempt from property taxes.

If these organizations — including major landowners like Tulane University — paid property taxes, the city’s general fund would collect an additional $5.7 million a year.

And that land is probably undervalued. The report notes that the value of non-exempt properties nearly tripled from the mid-1990s to 2011, but the value of exempt nonprofit property remained “virtually unchanged.”

If the value of nonprofit-owned land tracked the rest of the city, it would be assessed at $1.175 billion. And cutting the exemption would bring $17.7 million to the general fund every year.

The state constitution, however, protects nonprofit organizations from property taxes. In 2011, Landrieu’s Tax Fairness Commission unsuccessfully proposed state legislation to narrow the exemption and allow cities to collect some taxes on nonprofits.

“This is a very tough thing to take on,” Howard said. “A lot of people have a vested interest in it.”

Barring a change to the exemption, Howard said, a more realistic solution might be levying a public safety fee on nonprofits that don’t pay property taxes.

She did not say how that could be set up, suggesting that The Lens ask the city. The mayor’s office declined to comment.

Tax property owned by charities that have lost their tax-exempt status

Since 2010, the Internal Revenue Service has revoked the nonprofit status of hundreds of thousands of organizations that have failed to file mandatory annual reports, known as Form 990s. More than 1,600 have New Orleans addresses, according to the agency’s online revocation database.

In August 2011, New Orleans Assessor Erroll Williams announced that he had removed 4,000 nonprofits, including some flagged by the IRS,  from his exempt list for failing to provide proper documentation to his office. But Williams hasn’t done that since, said Devin Johnson, his spokesman.

Johnson said Williams is “taking on bigger fights right now.” Namely, he wants to collect from major developments, like Benson Tower, that have negotiated complex and lucrative “payment in lieu of taxes” deals with the city Industrial Development Board. Williams is involved in ongoing litigation over the so-called PILOT deals.

Increase hotel-motel tax

“We’ve gotten ourselves into a situation where the City of New Orleans basically works for the rest of the state,” Landrieu said during an Aug. 20 community budget meeting. “When we host a Super Bowl, it’s good for us … But the tax money goes to the state.”

$17 millionfrom additional 2 percent tax$34 millionfrom additional 4 percent tax

New Orleans’ city government receives only 1.5 cents on the dollar from the 13 percent hotel/motel tax, less than the 2 cents that go to the state general fund. The 2013 city budget predicted that it would receive about $13 million from that tax this year.

Based on those numbers, paying for both consent decrees would require an increase of two to four cents on each hotel dollar. The cost of a $150 hotel room, including the current 13 percent rate, is now $169.50 after taxes. That would go up to $172.50 with a two percent increase or $175.50 with a four percent increase.

Those room taxes don’t include a new “hotel assessment,” which gives hotels the option to charge another 1.75 percent surcharge on rooms to fund marketing by the New Orleans Convention and Visitors Bureau.

Tough decisions ahead

City officials say they can’t pay for both consent decrees. However, two federal judges, who have ruled that the jail and the Police Department are in violation of the U.S. Constitution, so far have not accepted that as a reason to let the city off the hook.

“I think we need to come up with some creative funding for the city,” said Janet Hayes at Landrieu’s town hall meeting on the budget Tuesday night. “I don’t want to hear what we can’t do. I want to hear what we can do.”

*Correction: This story originally suggested that one of the city’s options to fund the consent decrees is to issue bonds. However, the policy of the Board of Liquidation, City Debt, prohibits issuing bonds for operating expenses. (Aug. 26, 2013)

Clarification: This story was updated after publication to clarify that The Lens spoke with the Bureau of Governmental Research about some of the funding options, but not all of them.