New Orleans Councilwoman Helena Moreno is asking the Louisiana Tax Commission — the state body that finalizes parish property tax rolls before tax bills are sent out — to investigate and reverse a set of controversial tax cuts that Orleans Parish Assessor Erroll Williams granted to nearly every commercial property in the parish for this year.
Williams’ decision, made last year, would take roughly $42 million away from local taxing bodies, including the city government, public schools and the Sewerage and Water Board. That includes individual cuts between $1.5 and $2.5 million for several multinational companies including major hotel chains Marriott, Hilton, Harrah’s, Sheraton and the Ritz-Carlton, according to reporting in The Times-Picayune/New Orleans Advocate.
The newspaper first reported the tax reductions in October, as Mayor LaToya Cantrell was preparing to unveil a 2021 city budget with across-the-board cuts due to a projected shortfall from the ongoing coronavirus crisis. That followed a 2020 that saw citywide furloughs, a spending freeze and a $100-million-plus shortfall in tax and fee revenues.
In a recent letter to the Louisiana Tax Commission, Moreno accused Williams of giving preferential treatment to some businesses and “adding to an already massive budget shortfall at a time when the City, its institutions, and its people can least afford it.”
“Assessor Erroll G. Williams has overstepped his role in assessing property by arbitrarily deciding the ‘winners’ and ‘losers’ in New Orleans’ real estate market and at a time when the COVID-19 pandemic has drastically impacted everyone’s livelihood and budgets,” the letter said.
Moreno’s letter is dated Dec. 14, but Louisiana Tax Commission Chairman Lawrence Chehardy said the commission only received it last week, on Jan. 7. That was the day after the Tax Commission approved the 2021 Orleans Parish rolls. Since receiving the letter, the Tax Commission has asked Williams’ office to respond to the allegations and is awaiting a response.
State law gives the Louisiana Tax Commission, or LTC, the power to change or correct “any and all assessments of property for the purpose of taxation, in order to make the assessments conform to the true and correct valuation” up until the taxes have been paid. But in an interview, Chehardy hinted that the LTC would not be inclined to challenge Williams’ decision.
“My hope would be that he would set up a meeting with Ms. Moreno and discuss it with her and hopefully assuage her concerns,” Chehardy told The Lens. “But generally speaking, the commission is not looking to go and look at a specific piece of property and make a change. We feel that’s the job of the assessor, not the tax commission. So that’s kind of where we’re at right now.”
Moreno’s letter closely mirrors a letter that a coalition of advocates, including the Louisiana Fair Housing Action Center, sent to the LTC in November. Cashuana Hill, Executive Director of the Fair Housing Action Center, told The Lens that she applauded Moreno’s similarly worded letter.
“This is a decision that definitely needs to be looked into,” Hill said, referring to Williams’ tax cuts. “I think that at the very least, it’s a decision that doesn’t make sense. On the other end of the spectrum it’s a decision that’s cruel and very very disturbing. Definitely the prioritization of multinational corporations over individuals is something that absolutely needs to be investigated.”
In an interview, Williams told The Lens that he stood by his decision.
“I made a decision, you can write whatever you want in respect to it, I’m comfortable with whatever you say about it but I have to stand for what I’ve done,” he said. “I don’t believe I have to give every individual decision or why we did it.”
Blanket tax reductions granted without requests from owners
The assessor’s main job is to set an official value for all Orleans Parish properties so that it can be applied to the city’s property tax rate. Williams told The Lens that early in the pandemic, he began discussions with the State Assessors’ Association and Governor John Bel Edwards’ office about a law that requires assessors to consider the effect of disasters on property values, and how it should be applied to the coronavirus crisis.
According to the Times-Picayune/New Orleans Advocate, industry representatives, including former advisor to former-Mayor Mitch Landreiu Michael Sherman, also consulted with Williams on how to apply the law.
The law, approved in the aftermath of Hurricane Katrina, requires assessors to take recent disasters into account if the property “was damaged, destroyed, non-operational, or uninhabitable” due to the disaster. In June, the LTC came out with an advisory clarifying that the law could be applied to damage resulting from the coronavirus pandemic.
“Any taxpayer who believes the value of their property was negatively impacted as a result of COVID-19 should submit all documentation and information to their assessor to substantiate any claim for reduction in value of their property,” the advisory said. “The taxpayer bears the burden of substantiating such claim for reduction in value.”
Chehardy said there are a number of ways that assessors can choose to apply the rule, and that it may differ from parish to parish. He said that this year was an especially complicated year to apply the rule given the unprecedented pandemic and economic crisis, massive federal aid programs and the temporary nature of the disaster as opposed to flood or fire damage.
“Because there are so many different circumstances with these properties that can come into play, I can picture assessors saying ‘I’m not going to make any change on the tax roll and that if a property owner feels that he or she is entitled to a consideration, then bring me the evidence.’ ”
That’s not what Williams, the assessor for Orleans Parish, decided to do. Instead of waiting for property owners to approach him or looking at properties on a case by case basis, the assessor simply applied blanket percentage reductions to business properties, according to his spokesperson.
Property tax valuations are split into land and building values. According to Williams, the percentage cuts were applied to the building value, rather than the overall taxable assessment.
Hotels received the biggest cut at 57 percent, followed by event venues at 46 percent, restaurants and bars and 45 percent and theaters at 42 percent. But even industries that have fared relatively well during the pandemic, such as grocery stores and pharmacies, saw some tax cut, albeit much smaller than the hotel cuts. The only category of commercial property to receive no reduction was communication towers, Williams said.
“There is no evidence that any of these businesses affirmatively approached the Assessor to substantiate claims for reduced value,” Moreno’s letter said. “Instead, it appears that Assessor Williams acted unilaterally to grant reductions to their fair market value.”
When asked in a Tuesday interview why he applied blanket cuts, Williams said that he couldn’t just “wait to be flooded” by appeals.
“When people get their tax bill they show up, I can’t handle that volume at this point in time,” he said. “In January we don’t entertain a whole lot unless we find that we made a mistake. That means that our office would have to put change orders through saying I made a mistake on all these hotels, I made a mistake on all these office buildings, I made a mistake on all these shopping centers.”
Moreno complains in the letter that many of these businesses don’t meet the criteria of “non-operational,” since they never stopped operating completely. Some businesses didn’t even see a substantial drop in revenues at all. Chehardy told The Lens that “non-operational” could likely be applied to a severe drop in business.
“Non-operational, in my opinion, is kind of a broad term. Lets say a hotel continued operating, but as a result of this pandemic, occupancy at the hotel has gone from an average of 80 percent down to 15 percent. That would be a consideration.”
Still, the cuts were applied to nearly every commercial property in the city, and it’s unclear whether every single one of those businesses would fit under even a broad definition of “non-operational.”
Moreno’s letter also claims that the value reductions weren’t universal, and that some businesses, including local ones, were left out.
The letter points to one specific business, the Canal Street Bed and Breakfast, claiming it received no tax cut at all. A spokesperson for the Assessor’s Office pointed out that Canal Street Bed and Breakfast did, in fact, receive a cut. Moreno’s office did not provide any other evidence that the tax cuts were being applied inconsistently.
The variance in tax cuts among businesses within the same category seems to be the result of the cuts being applied to the building portion of the property value rather than the entire property value. Some properties are weighted differently between their building and land valuations. Properties with proportionately higher building values saw higher overall tax cuts.
Another concern with Williams’ blanket cuts is that the benefits are going to property owners, not necessarily the businesses that exist on those properties. Many restaurants, for example, rent or lease their buildings. Chehardy gave an example of a restaurant that was struggling, but continued paying rent to the property owner.
“Am I entitled to a tax break because restaurants in general aren’t making money? In that case I’d say no,” Chehardy said.
Board of Review
Chehardy said that the LTC’s ability to go in and change the tax rolls was limited by law and that its ability to investigate and study Williams’ accuracy and consistency was limited by budget constraints.
“It’s complicated here because we have this coronavirus, and would take a lot of resources on the part of the commission to have to go in and perform a study of that nature,” he said. “Because then we’d be having to get more extensive information from the properties to find out what kind of COVID adjustment should be made.”
The Lens asked how, then, a sitting City Council member should have gone about challenging Williams’ commercial tax cuts.
Chehardy pointed to a Louisiana statute that allows challenges of assessments — including challenges filed by government taxing bodies, like the city — to be put before the parish Board of Review, which certifies the tax rolls before they’re sent to the Tax Commission. Challenges are typically brought by the property owner, and Chehardy said he’s never heard of anyone actually utilizing that portion of the law allowing government bodies to file them. Still, he said, that would be the proper course of action for a concerned City Council member.
“The time to challenge this would have been during the Board of Review,” he said.
In a statement, a spokesman for Moreno, chief of staff Andrew Tuozzolo, pointed out some of the difficulties in trying to utilize the Board of Review. The first issue is that the New Orleans City Council is the Board of Review in Orleans Parish, meaning Moreno would be appealing to a body that she sits on.
The second issue, according to Tuozzolo, is over access to the assessor’s records.
The law requires a challenge to be filed seven days in advance of a Board of Review meeting, which was held on Oct. 15 last year. (Meeting minutes indicate that Moreno was absent for the meeting.) That means Moreno would have had to file a challenge on Oct. 8. But she, and most of the public, did not even become aware of the issue until late October, more than a week after the meeting and more than two weeks after the challenge deadline.
“Unfortunately, the Assessor does not alert the Council in advance regarding individualized valuations or policy changes in advance of Board of Review,” Tuozzolo said. “If property owners or others do not object to the valuations, they are not reviewed in the process. We learned of the Assessor’s actions to drastically cut these large commercial property assessments on 10/23 via NOLA.com, which was over a week after the Council sat as the Board of review on 10/15.”
This story has been updated with additional context from an interview with Assessor Erroll Williams