Government & Politics
 

Proposition 6 is deeply flawed: Hold your nose and vote for it anyway

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A hot housing market has made for soaring tax assessments.

In New Orleans, there has been a lot of concern about the impact of rising property assessments and the associated taxes. The suspected causes of these rapid increases include Air B&B and other modes of short-term rental, rapid gentrification, and inequality in assessments by the Assessor’s office, to name a few.

Whatever the cause, the result of rapid increases in property taxes remains the same: homes lost by owners who cannot afford the increases and by renters who cannot bear the increased property tax burden passed on to them. The end result is a general displacement of neighborhood residents who are not rich enough to live there anymore.

In response, state Senator J.P. Morrell, D-New Orleans, spearheaded a bill to amend the Louisiana State Constitution, and got it through the legislature—no small feat. He is selling it as a success and benefit to his constituents. He says on his website:

“Exacerbated by Short Term Rentals, the demand for housing in New Orleans is exploding, causing a huge increase in property tax valuations—upwards of 300% in some neighborhoods. So I authored legislation to phase in new assessments, giving more time to longtime homeowners who otherwise might suddenly be forced out of their homes through no fault of their own.”

Morrell’s proposed amendment—Proposition 6—will be on the ballot November 6, worded as follows:

CA NO. 6 (ACT 718 – SB 164) – Reappraisal of residential Property. Do you support an amendment that will require that any reappraisal of the value of residential property by more than 50%, resulting in a corresponding increase in property taxes, be phased-in over the course of four years during which time no additional reappraisal can occur and that the decrease in the total ad valorem tax collected as a result of the phase-in of assessed valuation be absorbed by the taxing authority and not allocated to the other taxpayers?”

This protection is paltry at best, and non-existent at worse. It does not address the problem, and is not the protection we need or deserve.

The only change it provides is that homeowners with giant increases in their assessments will see them phased in over four years, after which they could be raised again. It does nothing to actually tamp down rapid hikes in property assessments and taxes.

It pales strikingly in comparison to the 19 states that have reined in assessment increases, most commonly by limiting them to between 3 percent and 5 percent annually. People have been clamoring for years for limits in that range. Instead, in the very best-case scenario, the proposed amendment effectively limits the annual assessment increase to 15 percent. In many cases it will provide much less protection than that.

Here’s how the new legislation would work:

  • If your property assessment goes up by more than 50 percent, then the associated increase in property taxes is phased in over four years (a quarter of the increase the first year, half of the increase the second, three-quarters the third, and the full amount after that).
  • If your property assessment goes up by less than or equal to 50 percent, then no protection is in place. You owe the new amount of property taxes in full the following January. Same as usual.
  • The phase-in only applies to properties with homestead exemptions.
  • In cases of major renovations, new construction, or transfer of ownership, these protections are not applicable.

The table below gives a few examples of how differently valued houses would be affected. It shows how taxes would rise with assessment increases just below or just above the threshold for phasing in the hike, as proposed by the amendment.

Current Assessed Value and Property taxes per year 50% increase in assessed value (no protections) 51% increase in assessed value (protections applied, new taxes phased in over four years)
Current Assessed value Current property taxes (per year) New assessed value Property taxes New assessed value Property taxes

(year 1)

Property taxes

(year 2)

Property taxes

(year 3)

Property taxes

(year 4)

$150,000 $1,253 $225,000 $2,408 $226,500 $1,548 $1,842 $2,137 $2,432
$250,000 $2,794 $375,000 $4,720 $377,500 $3,285 $3,776 $4,267 $4,758
$500,000 $6,646 $750,000 $10,498 $755,000 $7,628 $8,610 $9,592 $10,575

Note:  assumes homestead exemption, and applies the 2018 property tax rates across all scenarios

Homes currently assessed at $250,000, for example, could still see their property tax bills increase by nearly $2,000 before the so-called protections would take effect. Phased in at just above the 50 percent threshold, they would still go up by about $500 each year for four years.

Ironically, faced with an assessment increase at the 50 percent level, math-savvy homeowners would find themselves in the weird position of begging the assessor to increase their assessment, thereby triggering the phase-in.

Those who have an assessment increase at or below the 50 percent threshold would have only five months, from August when the new assessments are typically announced, to save up the hundreds—or more likely thousands—of dollars before the new property tax bill comes due in January.

Those lucky enough to get the slightly higher increase that pushes them above the 50 percent threshold, would get the phase-in and wouldn’t have to figure out over a period of five months if they can scrape the money together or sell and move.

And this protection is only for houses with homestead exemptions. If you are renting an apartment in a house that is not owner-occupied, you are out of luck. For tax hikes on that property, the sky’s the limit.  And landlords are likely to just pass that cost on to the tenant in a lump sum, so long as the rental market remains as tight as it is right now.

A further irony is that an earlier draft of the bill had proposed granting the four-year phase-in to properties with an assessment increase of only 35 percent. An increase of that size is still way out of line with other states that regulate assessment jumps, but at some point in the process, our lawmakers decided it was too generous and bumped to 50 percent the size that an assessment increase could be without triggering the phase-in.

I know what I’m talking about from personal experience. A few years ago, I got slapped with a whopping increase in my assessment. It seemed pretty clear that a proliferation of short-term rentals was behind the spike in real estate prices reflected in the assessor’s revaluations. I was struggling to make ends meet, and a big tax increase was beyond my capacity. I won’t quickly forget being told by an assessor’s office employee that if I couldn’t afford to live in a gentrifying neighborhood, I should get out — which is exactly what I had to do.

Bearing all that in mind, on November 6 I will still (grudgingly) vote YES on proposed amendment No. 6. My hunch— and my hope—is that its flaws will become obvious, making it merely a first step toward a more thoughtful process of further reform.

But let’s be absolutely clear. The amendment, if passed, does not provide real protection. For those of us faced with a huge and sudden increase in property taxes, it provides only a bit more time to either scrape tax money together or move out if you can’t.

What a pity that Morrell has squandered so much political capital on this deeply flawed amendment when what’s clearly needed is a ceiling on revaluations that actually limits them to the 3 to 5 percent annual increase range that prevails in states that have addressed the issue more intelligently.

Peter Horjus

It appears that, like the New Orleans Assessor’s office, Morrell believes that if you can’t afford to pay huge increases in your property taxes, you don’t deserve to stay in your home. He just thinks you deserve a bit more time to get out.

Peter Horjus, a survey statistician in international development, is an active member of the downtown communities, where he has lived since 2000.

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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About Peter Horjus

Peter Horjus, a survey statistician in international development, is an active member of the Marigny community, where he has lived since 2000.