An Orleans Parish School Board committee recommended denying six tax exemption requests from Folgers Coffee Company — totaling about $2.9 million in local property taxes dedicated to schools over 10 years — at its Tuesday afternoon meeting.
The Orleans Parish School Board will cast a final vote on the exemption applications at its full board meeting Thursday. That’s the same day that the New Orleans City Council is expected to vote on whether to give the city’s approval for the exemptions, which are worth roughly $25 million in total local property tax breaks over 10 years for Folgers Coffee Company. That includes taxes that go to the schools, the city of New Orleans, the Sewerage and Water Board and several other local government agencies.
The break also includes about $5.4 million in back taxes, according to a report in The Times-Picayune/New Orleans Advocate.*
Folgers is applying for the subsidies through the state’s Industrial Tax Exemption Program, which allows companies to skip paying up to 80 percent of their taxes on investments they make to their properties for up to 10 years.
Historically, the ITEP tax breaks were approved by a state board, without any formal local input. But the property tax breaks affect local governments’ budgets. And in recent years, local agencies have been afforded more power to oversee the exemptions coming from their coffers.
At Tuesday’s school board committee meeting, NOLA Public Schools district Chief Financial Officer Stuart Gay told board members that district could not “fiscally tolerate” the loss of any additional revenue, especially in light of the COVID-19 pandemic which has gutted the city’s tourism economy, driving down anticipated revenue.
Folgers is actually applying for six separate tax breaks for six investments they’ve made to their facilities in eastern New Orleans. The first two were completed in 2018, the second two were completed in 2019 and the last two already commenced in 2019 and will be completed next year.
None of the six exemptions Folgers was seeking Tuesday met the job requirements the district has created for evaluating ITEP requests. In addition, the construction projects that were the subject of the requests were completed or underway. The district requires projects to gain approval prior to construction beginning.
“The applications on today’s agenda do not meet those criteria. Regardless of that, however, fiscal impact alone is sufficient basis to reject these applications and it’s noted in the resolutions, you’ll see that based on significantly reduced revenues from the MFP and the impacts of COVID-19. The school system cannot fiscally tolerate the additional loss of revenue that will result from these applications.” Gay said.
Board member Woody Koppel said he thought the request was in “bad faith.”
“In my opinion this application is not done in good faith and I feel pretty strongly about this,” Koppel said in a strong opening statement. “I also wish to say I believe the city should demand Folgers pay back this $105 million in permitting fees.”
Eight of the ten people who offered public comment also supported the rejection of the company’s application.
“The funds that would be involved in this exemption are part of the local share of the (state school funding). So their money that goes directly into the schools, the services the schools provide for the community,” Greater New Orleans Charter School Collaborative Director Ken Ducote said. “The particular company Folgers, we’re glad they’re in our community. … But if we’re going to waive any exemption it must be based in prudent and reasonable criteria.”
A Folgers consultant appealed to the board to consider how its payroll reinvests in the community and that the company is the eighth largest property tax payer in the city. It is also the largest ITEP recipient in the city, having received more than $120 million in tax breaks between 2000 and 2017, according to reporting in The Times-Picayune/New Orleans Advocate.
“I think you have to look well beyond ITEP,” Jimmy Leonard said. “We ask you delay a decision.”
Public comment carried on, much of it urging the school board to deny the exemptions.
“It is astounding to me … to see the loss of funds that we have in this state for tax exemptions,” Education advocate Betty DiMarco said.
“I love the smell of the coffee roasting when you drive over the Industrial Canal. … But they need to pay their taxes,” Dave Thomas said.
It appears likely that the full school board will vote to deny the requests on Thursday. Since the pandemic began the board has shifted to a virtual “committee of the whole” monthly meeting and Tuesday’s committee meeting included all seven school board members. They voted unanimously against all six ITEP requests.
District and city criteria
An initial attempt in 2018 by then-school board member Ben Kleban to deny all ITEP applications for three years failed. Business leaders criticized the one-size-fits-all approach. The board eventually developed criteria to evaluate the tax exemption applications — including the types of jobs it creates, where the business is located and construction cannot begin before gaining OPSB approval for the tax break. Folgers’ applications failed to meet two of the district’s four criteria.
Later in 2018, the board voted to deny its first ITEP application — a request from Bollinger Shipyard that didn’t meet the board’s new criteria. In February, the board approved one ITEP application from Iriapak USA, a packaging firm, and denied another from the same company.
The City Council, meanwhile, is poised to take a vote on Thursday, although it’s possible they could defer until January 14. One City Council member, Helena Moreno, has been vocal in her opposition to the tax exemptions and her plans to vote against them.
“The combination of all six exemptions creates less than 30 jobs,” Moreno said at a Monday rally against the tax break requests outside City Hall. “To be clear, these exemptions are not for future projects. These are for projects from the past that they now want retroactive exemptions on. It doesn’t make sense. Some of these actually go back several years.”
The value of improvements to commercial properties, such as building renovations and equipment upgrades, are supposed to be included in a business’s property tax bill. According to Broderick Bagert, lead organizer for the advocacy group Together New Orleans, Folgers has simply not paid their taxes for those new investments, even though the exemptions hadn’t been approved yet.
Bagert also commented at the virtual school board meeting Tuesday, encouraging board members to deny the applications.
As a property tax break, ITEP affects local governments, costing them billions of dollars over the years. Even so, locals have not always been given a voice in the process to approve the exemptions.
That’s changed in recent years, as the ITEP rules were altered to allow greater local input, as Orleans Parish residents have seen their property taxes skyrocket and as local media and grassroots organizations have begun to focus on the massive impact the program has on local government revenue. In 2017, The Advocate reported that the program had cost local Louisiana governments about $1 billion in revenue every year on average between 2000 and 2016, even as some of the benefitting companies slashed jobs.
In 2019, the program came under fire as Orleans Parish residents saw their property values, and therefore property tax bills, skyrocket. Folgers tax exemptions in particular were criticized that year after The Times-Picayune/New Orleans Advocate reported that Folgers wasn’t paying taxes on millions of dollars in property even though its tax exemption on those properties had expired in 2017. After months of attention by grassroots organizations, elected officials and the media, Orleans Parish Assessor Erroll Williams eventually agreed to start taxing the property and collect the two years of back taxes.
But this year, the coronavirus pandemic and associated financial crisis seems to be putting an extra layer of outrage on the issue for local opponents. The city is in the midst of a dire budget crisis that has forced furloughs for nearly all city employees and deep budget cuts to city services across the board, some higher than 40 percent. Individual residents, meanwhile, are struggling to meet basic costs of living in the current economic climate, doing so with little public financial aid as the federal government stalls on passing another round of coronavirus stimulus legislation .
“If that’s not enough, in just a few days, residents across our city will begin to receive [property] tax bills in the mail,” State Rep. Jason Hughes said at the Monday rally. “Doesn’t matter if you’re furloughed, doesn’t matter if you’re unemployed, doesn’t matter if you’re recovering from COVID. January 31st, you’ll be required to pay those tax bills.”
Bagert sees the Folgers issue as a window into the broader dynamic at play in the city’s economic development vision in which the city is much more willing to place tax burdens on residents than businesses.
“You start to see a narrative,” he told The Lens in an interview. “We’ve been in this fight in a lot of places, a lot of conservative places, and have never seen the equal of this. The economic development people in this city are the worst anywhere. They are more oriented towards a radical, trickle down, corporate subsidy model than any other place, and there’s some real right bastards across the state.”
Affordable housing advocate Andreanicia Morris, executive director of HousingNOLA, stressed the heavy property tax burden residents have had to bear in recent years.
“Every day, we get emails, phone calls, social media posts from families who are struggling every single day in this city to make ends meet, to pay their rent, to pay their mortgage. And that has gotten harder and harder and harder over the past few years. And one of the things that has increased that hardship are property taxes, the dramatic increase in property taxes that comes with the type of cost explosion we’ve seen in the last few years.”
In 2019, the city reassessed the value of hundreds of thousands of properties around the city. The assessed value of 24,000 properties jumped nearly 50 percent, with thousands more seeing their values double or even triple, according to an analysis of property tax data by The Times-Picayune/New Orleans Advocate.
If the property tax rate had been maintained from 2019 to 2020, the increased property values would have provided the city with an additional $26 million in revenues. But the City Council at the time said that in order to decrease the burden on homeowners, they wanted to set the tax rate at a lower rate that would have kept property tax revenues steady with 2018 collections.
Mayor LaToya Cantrell’s administration responded by forcefully stating there would be dire consequences if the Council lowered the tax rate. Cantrell administration officials told the City Council that losing that extra money could mean firing 500 city employees or across the board 10 percent departmental budget cuts. Councilwoman Helena Moreno called it a “scare tactic” from the administration.
But now, some are wondering why the Cantrell administration has not applied that same level of urgency to the Folgers exemptions — which could net the city nearly $15 million in extra revenue next year alone — now that the city is in a much more dire financial position than it was last year.
The Cantrell administration was also similarly silent in October when Orleans Parish Assessor Erroll Williams drastically reduced commercial property values while increasing residential property values. Some commercial properties such as hotels were given tax cuts of over 50 percent.
All in all, according to the Times-Picayune/New Orleans Advocate, Williams’ tax adjustments will reduce commercial property tax collections next year by 42 million, while increasing residential property tax collections by $30 million.
In a statement to The Lens, a spokesman for Folgers’ parent company, The J.M Smucker Company, stressed the company’s benefits for the community, including 750 local jobs.
“While we understand there are individuals who do not support the ITEP program as it is currently structured, or our specific applications, we are one of several businesses in New Orleans participating in the program, which many cities and states have in place to encourage and drive local economic growth,” the statement said.
“We understand it is in Folgers’s business interest to capitalize on available opportunities to cut their costs, which is why it’s up to us,” Together New Orleans member Evelyn Turner told The Lens. “This program has been treated like it’s an entitlement. If these exemptions should be just given automatically, we suffer. These industrial tax exemptions are supposed to be competitive incentives, not just a matter of eligibility.”
Local control, if you’re careful
The Industrial Tax Exemption Program is administered by the state’s Board of Commerce and Industry. Prior to local input, the board for years almost guaranteed that ITEP applications were granted, with a nearly 100 percent approval rate from the year the program began to 2016, according to a 2017 report from Together Louisiana, Together New Orleans’ statewide affiliate.
In 2016, Governor John Bel Edwards helped change the program rules to allow local taxing bodies, like the City Council and local school board, to veto exemptions that were approved by the state board. Some local bodies, including the New Orleans City Council and Orleans Parish School Board, passed a set of rules that were more stringent than the state’s to use as a rubric when deciding whether to approve or reject an exemption.
But then, earlier this year, the Board of Commerce and Industry, with Edwards’ backing, changed the rules again to allow companies to appeal local decisions. In his reelection campaign, Edwards lobbied the business community by saying he would work to limit how far local entities could go beyond the state rules.
According to the rule change, companies can appeal a local decision if it was based on “reasons in conflict with the ITEP rules.” Now, Bagert is worried that the very rules passed to prevent exemptions from being rubber stamped could provide a loophole that render local judgements meaningless.
But many parts of that rule are untested. It’s unclear whether a rule would have to be in direct contradiction with a state rule to be considered “in conflict,” or whether that standard could be applied to local rules. Bagert said that the few appeals that have been filed this year have all been heard by the Board of Commerce and Industry, but ultimately all were denied.
In addition, the city’s ITEP rules only say that the City Council “may” approve applications that meet its criteria, giving the council discretion to reject them for other reasons, such as a pressing budget crisis.
“Even if the Application did not violate the City’s policies and even if those policies govern the instant application, the Council would nevertheless disapprove the Application for the distinct and independent financial reasons described above,” one of the resolutions says. “If any provision or item of this resolution or the application thereof is held invalid, such invalidity shall not affect other provisions.”
*Correction: An earlier version of this story cited a higher estimated figure of back taxes that would be owed by Folgers if the exemptions are rejected. That estimate was based on a miscalculation by a local advocacy group, according to a Dec. 16 news report. (Dec. 17, 2020)