The Orleans Parish school district may sue the city of New Orleans to recover what could be millions of dollars in property taxes the city collected on local schools’ behalf then diverted to state retirement funds.
An Orleans Parish School Board committee on Tuesday advanced a proposal to authorize lawyers for the district “to take any and all steps necessary, including litigation” to recover the withheld taxes.
The proposal will now go before the full school board for consideration at its meeting on Thursday.
As The Lens reported in May, the city of New Orleans may have improperly diverted millions of dollars in dedicated property taxes — which voters approved to be used for schools, drainage, public safety and neighborhood security — to meet its obligations to five state-administered retirement systems.
A school board suit over the matter would follow an ongoing lawsuit — filed in April — by the Downtown Development District, a state-created board that uses a special tax to pay for security and infrastructure improvements in and around the Central Business District. The development district wants to recover about $50,000 to $70,000 the city diverted each year between 2013 and 2018, totalling about $400,000.
That’s only a small portion of the $6 million to $7 million in total Downtown Development District property taxes the city collects every year. But other than a two percent collection fee, the Downtown Development District has demanded the remainder of the money the city collected on its behalf.
It argues that its tax, which is levied on downtown properties, can be used only to fund its activities, such as sidewalk improvements, a new homeless shelter and security in the Central Business District. Development district lawyer Bill Aaron cited a state Supreme Court ruling and an Attorney General’s opinion that local governments are not allowed to use property taxes for expenses not approved by voters.
It’s unclear how much money school board attorneys believe the school district is owed, but spreadsheets filed by the Downtown Development District in its suit show the city used more than $1 million annually in school taxes to pay the retirement systems, of about $150 million collected each year for schools.
Sharonda Williams, an attorney who represents the school board, confirmed in late May that the school district and the city were in talks about the diverted taxes.
Neither Mayor LaToya Cantrell’s office nor school board officials responded to requests for comment on this story.
The filings in the Downtown Development District suit show that, from at least 2014 to 2016, the city used between $3.7 million and $4.2 million per year in taxes earmarked for outside agencies or city departments to contribute to the state pension systems.
The city is required to contribute to the retirement funds, for the offices of the clerk of court, sheriff, registrar of voters, district attorney and parish assessor. Those contributions are set at a percentage of all the property taxes the city collects — about $500 million per year.
Only about 10 percent of those taxes are intended for general city purposes. About $450 million are collected either on behalf of other agencies — like the Downtown Development District and the school district — or are dedicated to specific city departments, like police and fire.
Last month, Orleans Parish Civil District Court Judge Piper Griffin ordered the city to stop diverting Downtown Development District taxes to the pension funds. The city is appealing the decision, according to subsequent pleadings. The development district is still seeking to recover the money the city has already diverted.
Staff Writer Marta Jewson contributed to this story.