The New Orleans City Council started its 2014 budget hearings Wednesday with the fundamentals: the proposed tax collections and revenue estimates that are the basis for Mayor Mitch Landrieu’s $504 million general fund proposal.
Landrieu’s budget would keep the city’s property tax rate steady next year, though city economist James Husserl predicts collections will increase modestly to $114.9 million, from $111.6 million currently forecast for 2013. But the 2014 figure is still below the $115.7 million that appeared in the 2013 budget as originally passed.
Councilwoman Stacy Head said the city’s budget relies too much on property taxes. Collections have increased steadily over the past decade, even as the city has shrunk. The Landrieu administration increased property tax rates in the 2011 budget, and assessments have risen sharply in recent years.
“There is a smaller population than we had in 2005 that is paying $40 million more in property taxes,” Head said. “I firmly believe that there is an overburdening of taxation among a smaller group of people.”
Though the city has about 70,000 fewer people than it did pre-Katrina, property tax collections in the budget proposal are up 38 percent, from $83 million in 2005. The increase in property tax collections accounts for nearly all of the increase in the general fund budget, which has gone up from about $466 million in 2005 to next year’s proposed $504 million.
The mayor’s budget proposal also counts on about $1.3 million in increased sanitation fee collections, which he hopes to achieve with a proposed council ordinance allowing the Sewerage & Water Board of New Orleans to shut off water service to customers who don’t pay the $24 monthly fee. Landrieu first proposed the controversial measure for the 2013 budget, but it failed to make it to a council vote.
Just as Landrieu has left the task of paying for the Orleans Parish Prison consent decree up to the council, Head said the sanitation fee proposal should be left up to the mayor. She noted that the state law allowing the city to collect trash fees through the Sewerage & Water Board also allows the utility to shut off water for failing to pay them. Head said the executive branch only has to draft a new agreement with the board.
“This is a difficult policy decision and I’m sure you’d love to pass that hot potato to us, but the law is clear,” she said. Of course, any agreement between the city and the utility would ultimately have to be approved by the council.
The two members of the public who commented on the revenue budget both criticized the sanitation fee proposal.
“My question concerns the correlation between the sanitation fees and water shutoffs,” said Donald Chopin. “What authority do you have to shut anyone’s water off because they didn’t pay their sanitation fee?”
Councilwoman Jackie Clarkson moved to adjourn the morning session about 1 p.m.
“Can’t we just keep going?” Head asked.
“No, we’re not working through lunch,” Clarkson said.
After lunch, the council moved on to the Finance Department, which handles tax collection, payroll and purchasing.
The largest part of the department’s budget, $30.5 million, is for payments on a small portion of city debts. (The majority of city debt is paid by the Board of Liquidation, City Debt with funds from a separate, dedicated property tax millage; that’s not included in the mayor’s budget.)
The Finance Department’s 2014 debt load includes more than $3 million to pay off tens of millions in pass-through funds the city borrowed from the federal Department of Housing and Urban Development and loaned to commercial properties. The properties are the Louisiana ArtWorks building, the Jazzland/Six Flags theme parks and Palace of the East/Grand Palace theater. All are defunct and aren’t paying back their loans.
“In terms of our HUD loans that we’re still servicing, do we have plans for ArtWorks, Palace of the East and Six Flags?” Councilwoman Kristin Palmer asked Chief Financial Officer Norman Foster. He said they would be addressed in another budget hearing.
Another $8.8 million in debt service funds is set to go to the city’s reserve fund, which would have a $4 million positive balance next year — unless the Orleans Parish Prison consent decree or overdue fire pension payments get in the way.
New Orleans Municipal Employees’ Retirement System
Average annual city contribution: $20 million to $21 million
The Finance Department’s presentation was followed by a brief presentation on the city’s main pension system, which does not include fire and police employees.
The pension system, called NOMERS, was 75 percent funded at the end of 2012. Employee contributions, between $5 million and $6 million per year, are now set at 6 percent of employees’ pay, up from 4 percent two years ago. The city’s contribution will be 21.8 percent of its covered payroll, or $20 million to $21 million.
Civil Service Department
The Civil Service Department, which handles recruitment and personnel matters, has seen its funding cut from more than $1.7 million for 22 full-time employees in 2009 to less than $1.5 million for 15 employees this year. But it’s up for an increase this year. The budget will also fund a new employee to focus on police recruitment.
Many of the department’s requests, however, were refused by the administration, including funding for police lieutenant exams. That particularly concerned council members.
Raymond Burkart, attorney and spokesman for the Fraternal Order of Police, urged the city to fund the exams. “I can’t remember the last time there was a lieutenant’s exam, let alone a captain’s exam,” he said.
Head said there is a morale problem in the Police Department, in part because officers don’t believe they’re being promoted frequently or fairly enough.
A similar discussion occurred last year about sergeant’s exams. Funding for those tests didn’t make it into the original budget, but the council allocated money later.
Personnel Director Lisa Hudson, who heads the department, responded to Head by drawing the council’s attention to another unfunded item in her budget: captain’s tests in the Fire Department.
“If you don’t want the same thing to happen in the Fire Department, you’ll fund fire testing,” Hudson said.
Budget hearings continue on Friday.