Top Cantrell deputy warns of dire consequences without increased property tax revenue, but council member calls it a ‘scare tactic’

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The City Council will need to decide whether to increase property taxes for thousands to fill a reported budget gap

Mayor LaToya Cantrell’s Chief Administrative Officer Gilbert Montaño appeared at the New Orleans City Council’s budget committee meeting on Thursday to make the case for why the council should keep property tax rates the same instead of lowering them, a move that would lead to steep tax increases for thousands of property owners whose assessments have skyrocketed this year. 

The administration has been preparing to make the sales pitch for months, arguing that the city does not have enough revenue to meet its needs. But many council members remained skeptical that keeping the rate steady — a move referred to as a “roll forward” — was right for the city.

“Getting to a full roll forward is going to be difficult if not impossible for me,” said Councilman Joseph Giarrusso. 

According to Montaño, the city needs to find another $25 million to sustain last year’s budget without dipping into the city’s $18 million reserve fund. Because Cantrell has yet to release her 2020 budget proposal, it’s unclear whether that math takes into account any departmental increases the Mayor’s Office is seeking next year. 

That missing $25 million comes from two figures — the roughly $20 million in expenses that were previously funded with one-time money and estimated losses in short-term rental tax collections revenue due to new, stricter regulations passed by the council earlier this year. 

The biggest piece of the the $25 million is $13.5 million to maintain police pay raises that were approved under former Mayor Mitch Landrieu. 

Council members said they were glad the conversation is starting early, giving them time to consider options before Dec. 1, their deadline for passing a 2020 budget. But they were nonetheless unconvinced by many parts of Montaño’s pitch. 

Perhaps the biggest criticism was around what Montaño said the consequences would be if they failed to roll forward. One potential budget cut, according to the presentation, would be laying off 500-plus city employees. Another was a 10 percent budget cut for all city departments. The options also included pay cuts across the city and cutting personnel in the police department, fire department and EMS. 

The adopted 2019 budget was about $702 million. Recent city projections have revised it closer to $715 million, $50 million of which is one-time revenue.

“I mean, aren’t there other alternatives to this?” Councilwoman Helena Moreno said. “It almost looks like some kind of scare tactic.”

After the meeting, Montaño told The Lens that it was an illustration of the potential real-world effects of a budget gap. 

“People know what 500 employees laid off looks like and means,” he said. “They won’t know what it’s like to squeeze fund balance and then cut wage reserves and all the technical parts of the budget. So it personifies it and that’s important.”

Council members also questioned whether there will be such a large loss on short-term rentals. While agreeing that new short-term rental guidelines and enforcement measures will likely reduce the number of active listings, they said the analysis didn’t take other factors into account.

“It’s kind of like a doomsday thing if you don’t show the other parts,” Councilwoman Kristin Palmer said. 

The new regulations increase nightly fees for short term rentals from $1 per night to $5 per night for residential rentals and $12 for commercial rentals. City economist Deborah Vivien, however, said that wouldn’t be enough to make up for the last sales taxes.

And it was not immediately clear how, if at all, the administration’s analysis took into account a new proposed short-term rental tax that will go before voters in November.. 

‘Every option on the table’

Council members also argued that there could be other ways to find that money aside from property tax increases.

“I don’t want to see it fall on the backs of our property owners, because that will fall down to renters,” Palmer said. “There’s other revenue generation. There are things this council can do pretty quickly to find the $13 million in revenue.”

This year’s reassessment has been controversial, with thousands of properties facing huge tax increases due to higher assessments. The value of 24,000 properties will jump nearly 50 percent, with thousands more seeing even steeper increases, according to an analysis of property tax data by The Times-Picayune/New Orleans Advocate.

Since the assessment numbers came out, the City Council has been actively seeking new ways to raise property tax revenue from businesses and nonprofits to avoid putting so much burden on homeowners and renters. 

Pressure from Councilwoman Helena Moreno recently convinced Orleans Parish Assessor Erroll Williams into getting two Folgers properties whose tax exemptions had expired in 2017 back on the rolls. That will bring in roughly $700,000 next year, Williams said. In a separate presentation today, Williams told the council that he has found a third untaxed property with an expired exemption that would bring in $139,000.

The council is also pressuring Williams to go after nonprofit property tax exemptions, which some argue allow properties that are not actually being used for charitable purposes to go untaxed. Councilmembers also mentioned cracking down on homestead exemption fraud. Councilwoman Palmer suggested a new parcel fee for every property. 

Some of those revenue sources might be necessary even if the council does vote in favor of a roll forward. A statement from Williams today said that with thousands of appeals to this year’s property assessments, he expects the net property value increase to be 12 percent, much lower than earlier estimates that pegged the number as high as 18 percent. 

If that ends up being the case, according to Montaño’s presentation, that would only bring in $16.1 million, well short of the administration’s goal. 

“I think all of us up here want to look at every option on the table and not have any more burden on our renters, our property owners,” Councilman Jared Brossett said. 

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