The city of New Orleans lost roughly $8.6 million in expected 2021 revenue because of Hurricane Ida, according to a Friday presentation from city economist Randall McElroy. The city’s 2022 budget is also expected to take a multi-million dollar hit due to the recent decision by Orleans Parish Assessor Errol Williams to give blanket residential property tax cuts due to the storm.
New Orleans spent tens of millions of dollars responding to Hurricane Ida, but the bulk of that is expected to be reimbursed by FEMA, according to a spokesperson for Mayor LaToya Cantrell. Losses to expected revenue, on the other hand, are generally not reimbursed, and therefore have a bigger impact on the city’s bottom line.
The issue was discussed at a Friday meeting of the city’s Revenue Estimating Conference, a body led by Cantrell that predicts and tracks the city’s annual revenues. On Friday, the REC officially lowered the 2021 budget.
“We have, in light of the hurricane, adjusted some of these revenues,” McElory said.
Ida caused a 10-day power outage to the majority of the city, and forced a huge chunk of residents to evacuate. That meant fewer people going to New Orleans stores and gas stations or spending their money at restaurants and bars, which in turn meant less sales taxes going to the city. The storm also halted tourism, meaning less money being spent at hotels and attractions.
The result, according to Friday’s presentation, is a $7.7 million drop in “other taxes,” a broad category that includes sales taxes, hotel taxes and liquor taxes. The city is also expecting $415,000 less in license and permit fees, as well as $474,000 less in fines and forfeitures.
The effects of the storm are also expected to carry into 2022, due to a recent decision by Orleans Parish Assessor Erroll Williams to provide across-the-board, 5 percent tax reductions for all residential properties due to Hurricane Ida. All residential properties will receive that cut. And there will be additional cuts for some properties that were damaged during the storm.
Williams is justifying the cuts using a law passed after Hurricane Katrina that allows for property tax cuts due to natural disasters. The law authorizes tax cuts not only for property damage, but also for when a natural disaster causes a property to be temporarily unusable. Williams argued that the city’s prolonged power outages made residential properties uninhabitable.
Williams used the same law last year to justify a controversial tax cut for all business properties in New Orleans due to the effects of the Coronavirus pandemic. Williams is currently up for reelection in the upcoming Nov. 13 election.
“We were a little blindsided by this, but we just have to plan for it,” McElory said on Friday. “This is one of the things that keeps me up at night. I’m definitely concerned about this.”
McElory said that the ultimate revenue impact of the cut wasn’t entirely clear, but that the city is currently estimating a 4 percent overall decrease in property tax revenues, meaning a $6.7 million loss to the 2022 budget.
“This may change in the next meeting slightly, but it’s gonna be a cut,” he said. “This is going to be a really big number.”