Over the past few weeks, Orleans Parish Assessor Erroll Williams has repeatedly defended what he said was an office policy as to how New Orleans business property assessments are handled. That policy would be out of step with the opinion of the chairman of the Louisiana Tax Commission, which oversees Williams’ office, and the practices of seven other parish assessors who spoke to The Lens.
As Williams described it, the labor and engineering costs that go into acquiring new business equipment are not included in the equipment’s taxable value. That could leave potentially hundreds of millions of dollars in business property untaxed.
Beginning in August, Williams discussed the policy in detail multiple times with The Lens, and last week, he described it to a New Orleans City Council committee.
“The issue right now is we have a difference from what the chairman and the other assessors say,” he said to council members. “When you have a contract and you’ve got labor costs on a building, we include it in the valuation of the building. But when it’s equipment, the installation of equipment it’s not necessarily included in the equipment cost.”
“That’s all part of the value of the property and ought to be in there,” said Louisiana Tax Commission Chairman and former Jefferson Parish Assessor Lawrence Chehardy in an interview. “What it costs to acquire an asset and what it costs to put that asset into service is a cost of the asset.”
But it turns out that the costly policy Williams described may not actually exist.
On Wednesday, another employee from the Assessor’s Office, Lisa Ross, provided records that contradicted Williams’ statements. And a spokesman for the office sent a written statement walking back Williams’ earlier remarks.
“When valuing business personal property the Orleans Parish Assessor’s Office uses the total acquisition costs of equipment including freight, installation, taxes and fees,” said a statement from spokesman Devin Johnson.
Williams first communicated the policy to The Lens in an August interview about how he handles the Industrial Tax Exemption Program, a generous property tax break used to encourage manufacturing.
At the time, Councilwoman Helena Moreno and the group Together New Orleans were criticizing Williams over two Folgers properties — worth a combined $40 million — that weren’t being taxed even though their exemptions expired in 2017.
Since the beginning of July, Moreno had been asking the assessor about the exemption. But through August, the Assessor’s Office maintained that the exemptions were valid through 2021. Questions from Moreno, Together New Orleans and the media eventually prompted the assessor to check with the Department of Economic Development on the status of the exemptions. The department told him that they had indeed expired in 2017.
Williams said he will tax the properties in 2020, bringing in an additional $700,000 in tax revenue for the city. He will also collect back taxes from 2018 and 2019, he said.
At the budget committee meeting last week, he added that he discovered a third invalid industrial tax exemption and added it back to the rolls as well. He said that one would be worth about $139,000 in taxes.
Explaining his valuation of the third exempted property, Williams said that much of it was not real estate but equipment, which depreciates over time. And unlike real estate, he said, he does not include labor and engineering costs when assessing taxable business equipment.
If true, that would have huge implications for assessments, and ultimately taxes collected by the city, New Orleans public schools, the Sewerage and Water Board and other Orleans Parish public agencies.
It’s unclear how big an impact that could be because publicly available assessment records don’t include detail about things like equipment installation costs. Those details, however, are available from the state Department of Economic Development when businesses are granted certain tax exemptions. The Lens looked at industrial tax exemptions that have expired since Erroll Williams first took office as New Orleans’ first parish-wide assessor in 2011.
Utilizing a formula that Williams said his office uses, we found that the exemptions included about $138 million in labor costs for new equipment — all of which would be untaxed under what Williams previously described, until Wednesday, as his policy.
‘We apologize for any confusion’
Prior to this week, Williams insisted four times — once at the committee meeting and three times in interviews — that labor costs were not included in his assessments.
That stated policy appeared to be unusual. Chehardy disagreed with it, for one. The Lens also spoke to seven Parish Assessors or their spokespeople from East Baton Rouge, Lafayette, Jefferson, Avoyelles, Cameron, St. Charles and Jefferson Davis Parishes. None of them exclude the labor costs for new equipment, they said. Some were unsure how they would even go about separating those costs and excluding them.
“He’s entitled to his opinion,” Williams said in mid-September in response to Chehardy. “It’s not a cost of what it costs to buy the equipment, that’s our view. Now there’s other people who might think of it differently… But to see what the practice is you actually have to talk to other assessors and find out if they include it.”
Weeks later, The Lens asked Williams to clarify his position.
“From our view, that labor and engineering for equipment installed in the property is not taxable,” he said. “Now if you build a new house, I’ll give you an example, the labor house in building that is included in that.”
Most of the documents that could confirm just how business properties are valued are self-reported tax records, which are exempt from disclosure under the state public records law. But the standard form businesses use to report equipment value only asks them to list the costs of acquiring it. It does not ask for a breakdown of equipment and materials costs.
So this week, The Lens contacted Williams’ office again for clarification, this time asking for an employee in his office to describe the process they use to determine how much of that reported acquisition cost represents labor, so they can exclude it from the assessment.
We also informed Johnson, Williams’ spokesman, about the $138 million tally in untaxed business equipment for properties with expired industrial tax exemptions, and asked if the office was able to provide a total number, including equipment used by businesses that had not been granted industrial tax exemptions.
It was then that Ross provided records — from the Department of Economic Development — that the Assessor’s Office used to determine the value of two ITEP properties, listing both equipment costs and labor costs. Johnson later sent the statement saying that those costs are, in fact, included.
“We apologize for any confusion resulting from comments indicating otherwise,” Johnson wrote.