Government & Politics

Landrieu looking for three tax increases to pay for consent decrees, pensions

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.

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About Tyler Bridges

Tyler Bridges covers Louisiana politics and public policy for The Lens. He returned to New Orleans in 2012 after spending the previous year as a Nieman Fellow at Harvard, where he studied digital journalism. Prior to that, he spent 13 years as a reporter for the Miami Herald, where he was twice a member of Pulitzer Prize-winning teams while covering state government, the city of Miami and national politics. He also was a foreign correspondent based in South America. Before the Herald, he covered politics for seven years at The Times-Picayune. He is the author of The Rise of David Duke (1994) and Bad Bet on the Bayou: The Rise of Gambling in Louisiana and the Fall of Governor Edwin Edwards (2001). He can be reached at (504) 810-6222.

  • Patick

    It isn’t like it is a long drive to leave the city to shop.

  • 6th Ward Transplant

    Rather than increasing property taxes on the poor and middle class, who already deal with rising assessment due to the tight post-Katrina housing market, Mitch should look into taxing nonprofits which currently do not pay any taxes. This includes Tulane University and all those real estate developers masking around as “community development” organizations. Stop subsidizing the ruling class. Make them pay their fair share!

  • Craig

    Well…at least they aren’t raising taxes on booze (yet). That’d be madness. Splitting the cost for shoring up police/fire department services between tourists (hotel taxes) and residents (property tax) actually seems like a fair idea. Kind of surprising considering this mayor has so far seemed content with making his citizens pay for a better tourist experience.

    Ah, but if only those multi-million dollar homes lining St Charles were fairly assessed. As 6th Ward said, the property tax will hit the lower rungs harder.

  • All of these properties under the Homestead Exemptions amount of $75,000 should be taxed as they mostly don’t contribute anything to community except blight, slum lords, crack houses, unwed mothers with thug boyfriends and absentee property owners etc.

    The blanket Homestead Exemptions for Louisiana since Huey P Long has only been another form of Public Housing and Section 8 on a statewide basis and has lead to the highest poverty rate in America.

    This is a good chance for all Louisiana to look at the disaster of the Homestead Exemption for the last 80 or so years as it certainly didn’t raise home ownership rates whatsoever in Louisiana and definitely not in NOLA. And the rules allowing it only the first home as well as the primary resident is from a practical standpoint, UN-AUDITABLE.

  • Besides these three new taxes, what Percentage of the Existing Sales and Property Taxes already go to city employee pensions funds?

    The cities that are going bankrupt, e.g. Detroit and cities in California, have 40% to 60% rate of the tax revenue funding pensions.

    It’s also same for things on a statewide basis like the California Teacher Pensions and some states in the North. Then there is the US Postal Service Pension Funds that are also bankrupting the mail service and the Car Companies UNION Pension Funds that are also bankrupting them.

  • NOLACitizen1

    The easy thing to do is raise property taxes on the handful of properties (and owners) that aren’t already exempt from paying property taxes. A property tax increase, shouldered by a few, for the good of the whole, is not fair and likely would not garner the support needed to pass.

    The more difficult, but lucrative and long-term, road would be to begin taxing income producing property, held in portfolios of nonprofits; i.e., churches, universities, foundations, associations… Literally thousands of now tax-exempt properties would be added to the tax roles.

    New Orleans should also consider a nominal “income tax” on non-city residents, who work in the city. These non-residents use the public resources of city while they’re here; i.e., roads, police, EMS, water… and then take their pay check out of Orleans Parish to be spent elsewhere.

    An investment in effective code enforcement (think of our dear meter maids) would not only help clean up the city but provide an infusion of funds and/or real estate that could be put back into commerce. Speaking of meter maids, just walk down any block in this city and count the large number of illegal automobiles that either are not registered, inspected or both. Ticketing illegal motor vehicles alone could provide millions of additional revenue.

    Unfortunately, after the public turns down a tax increase, the only option left will be lay-offs at city hall. City Hall continues to believe that a very short, “A-List” of citizens are the only one capable of coming up with ideas. Unfortunately, their ideas are often stale and designed to protect the status quo, the interests of their friends, associations, affiliations and pastors.

  • Argol

    If every home owner gets the Homestead Exemption, how is it a form of Public Housing? Rental properties do not get the Homestead Exception, but retired home owners do. You have no understanding of how this exemption works, because it has nothing to do with slum lords, crack houses or absentee property owners. It is most certainly accountable, as every every year, the home owner must prove ownership and residency in the home exempted.

    Now, if you want to talk about taxing church owned properties, well, you will have my attention.

  • Argol

    The US Postal Service, which gets no money from the Federal Budget, is required to fund 70 years of the pension fund. No business is required to do that.

  • The owner of a house that is valued under $75,000 are almost always in ghettos. Hence, the owner owns that cheap house for FREE and pays almost zero property taxes. That same owner, usually cash strapped, and in need of a JOB, will have far better chances to find a good job in Houston, Atlanta, Dallas,etc. Likewise, the owner can rent the house for CASH to a unwed mother with kids who has a THUG boyfriend live with her while the owner is living in Houston, Dallas, etc.

    The State of Louisiana requires that the homeowner who receives a homestead exemption on a property make that property their primary residence. That requirement to live in that house is almost impossible to audit statewide. It would be far more difficult than the US Census and very costly to actually have someone sit there for every house in Louisiana and watch when the homeowner comes and goes from their primary residence.

    And since (a) the house is in a ghetto, (2) pays very little or no insurance since the house value is too little, (3) pays no property taxes due to homestead exemption and (4) the owner collects rent in CASH, the owner has no financial incentive to improve the house whatsoever and doesn’t care about the safety since living somewhere in TX, GA, FL, etc.

    See how that works?

  • So what should the US Postal Service do? Say if they drop it to 30 years of funded liability and then they have another funding problem? Should they again drop it to 15 years? And with everything going electronic and news papers and magazine going bankrupt or electronic, could 7 years of pension funds still be too much?

    Maybe the US Postal Service should go back to why they were created in the first place and see if they can understand the original need if they still want to survive?

  • Argol

    The Homestead exemption only applies to a home that is the registered primary home of the tax payer. Any house that is the homeowners residence is exempted for the first $75,000 of value. A home valued at $150,000 is assessed tax on $75,000. Very few homes in New Orleans are assessed under $100,000, certainly no multiple unit homes.

    Insurance is not required unless there is a mortgage . Also, where are these ghettos of which you speak?

  • Argol

    The Post Office was originally funded by an Act of Congress that was passed into law. That stopped in1970 when the Post Office was converted into an independent business. Funding the pension program for workers not yet born cost nearly $5 billion. That is the reason the the USPS has budget problems.

    As for the original need, the US Post Office operated as a bank until 1967, and could do that again, and turn a profit. That is what every postal service in every modern country does to this day.

  • Steve Myers

    I deleted all the discussion about the U.S. Postal Service, which isn’t related to this story.

  • Very few homes in New Orleans are assessed under $100,000, certainly no multiple unit homes.

    Doesn’t Orleans Parish have the HIGHEST poverty rate in America?
    How about most Central City, Gert Town, Hollygrove, Treme, 9th Ward and the list goes on and on?

    Only 40% of the properties in Orleans Parish pay any property taxes.
    Hence, are you saying the other 60% of the properties are all non-profits like churches, universities and hospitals? I don’t think so.

    Assuming that the value of tax-exempt property increased since 1996 at
    the same rate as that of non-exempt property, then 60 percent of the
    city’s real property value is off the tax rolls today, with nonprofit
    groups accounting for a third of that, or 21 percent of the value of all
    Orleans Parish property, BGR says.

    New Orleans property tax exemptions for nonprofit groups targeted

  • nickelndime

    LANDRIEU’S TAX INCREASES or HOW TO PAY FOR GOVERNMENT BLOATING: Layoffs at City Hall wouldn’t be such a bad thing. It’s like these people are doing you a favor on their own personal time when they have to wait on a person anyway. And it’s hard to spend one’s pay in New Orleans because these minimum-wage employees don’t want to spend too much time working, and they also act like customers are a PIA and they don’t want to be bothered. These minimum-wagers (at least they have a job) don’t seem to comprehend the fact that without “customers,” they wouldn’t have a job. Then there are the tourists! Mitchell wants to make sure they have a fantastic experience while they are here in the Banana Republic of New Orleans. And alcohol keeps them happy, so leave that alone, but tax tobacco.

  • nickelndime

    LANDRIEU’S MO’ TAXES IDEAS: If only Mitchell and his Deputy Mayors and his handful of team members could only figure out a way to tax all the illegal drugs in this city!!! Then, they would really have something. But is that like, we don’t want to touch “THAT” AND let’s keep the alcohol flowing, because alcohol and drugs numb the senses and distort reality? The “rich” are not smoking cigarettes. Look at the statistics. Keep the lower and middle class down. Tax them as hard as you can. They can be broken, and Mitchell is doing one helluva job!

  • eirikr1

    Um, yeah, but apparently YOU don’t.

    There is no ” (4) the owner collects rent in CASH,” as rental properties and any properties that the owner does not live in do not qualify for the exemption.

    same thing for “and doesn’t care about the safety since living somewhere in TX, GA, FL, etc.”

    both of your false examples would be fraud, and jail bait.

    btw, FYI, a condo is considered a home. You can get a pretty nice condo for 75,000 without being in a “ghetto”…

  • eirikr1: You are correct, both cases would be fraud.

    However, AUDITING, the Homestead Exemption is fiscally and practically IMPOSSIBLE from a state-wide or even a city-wide basis.

    It’s very difficult, and time consuming, to even AUDIT a single house as who is going to sit all-day and night, outside the house in question and watch who goes in and out and actually know who those persons are?
    And then do that auditing on a yearly basis? No way!

    Just look how much manpower the US Census takes.

  • nickelndime

    LANDRIEU AND TAXES: Moreno is a weak link. She has been in Mitchell’s company too long (both have blonde hair and blue eyes), and she should be considered unreliable and unrealistic. Moreno should be forced to participate in the tobacco studies (for the benefit of all humankind) instead of the monkeys and the alligators who are forced to exercise on treadmills, after inhaling. The 7th Ward (d/b/a DA HOOD) has the highest poverty rate in America and the Phillipines, not the whole of Orleans Parish. I leave the city every day (God willing and the creek don’t rise) just to get a grip on reality AND at least once to shop. On weekends, I may leave the city a minimum of five times. This is called therapy. I collect everything I can in CASH, cuz when you need to get out of this city quickly, it’s good to have ca$h.

  • nickelndime

    U go, Steve! The USPS isn’t related to this story, OR IS IT? Somehow, in the BIG picture, the USPS comments may be more related than you know. Somebody doesn’t get a piece of relevant mail delivered, and the next thing you know…Who knows what the effect will be?!? You are one of the good guys, Steve x1, but just don’t go ruling people’s comments out b/c it doesn’t appear to fit within the context.