The New Orleans City Council is considering a measure to give up to $70 million in local sales tax revenue over the next 18 years to a state-created board called the BioDistrict New Orleans, which covers hundreds of acres of land in Mid-City, Gert Town and the Central Business District that includes the VA Hospital, University Medical Center, and the old Charity hospital building.
The council plans to take a vote at its Thursday meeting, a council spokesperson told The Lens this week.
The funding would go toward fulfilling a long-held ambition among New Orleans political leaders — to foster a thriving biomedical industry to create jobs, attract new businesses and help residents build their own.
There is broad support for the overall goal, but there are also lingering questions about whether the current funding proposal is a responsible way to achieve it. A growing number of community groups — including the Mid-City Neighborhood Association, the Carrollton Residents Neighborhood Association, Voice of the Experienced and Together Gert Town — are urging the council to delay the vote and scrap the current plan.
The contract under consideration by the council would give the BioDistrict a certain portion of sales tax growth in the district’s footprint. However, it’s not entirely clear how the money would be spent. The BioDistrict laid out potential projects in a 2013 document, and also plans to draw from a 2018 plan created by the Greater New Orleans Foundation for a separate project called the “Spirit of Charity Innovation District.”
But the city isn’t demanding a full spending plan before the council’s Thursday vote. The BioDistrict would only be required to put together a Master Plan after the funding is already approved.
“There are clearly fundamental problems with the entire conception of this contract,” said a document released by the opposition. “This contract proposes to divert the money first and then figure out later how it should be spent.”
The community groups recently released two documents outlining their legal and financial concerns, including whether the city should be giving local tax dollars — which would typically be used to pay for normal city services — to an unelected state board. The board is made up of mayoral and gubernatorial appointees from the business, healthcare and philanthropic communities, as well as representatives from local universities.
The groups also raised concerns whether the New Orleans City Council will truly have ultimate budgetary control. Although the contract would give the council budget approval authority and the ability to cancel the arrangement, the city wouldn’t be able to stop payments to the BioDistrict if it decided to leverage the funds to issue bonds, which it would have the legal obligation to repay.
In theory, the plan would only fund the BioDistrict using sales tax growth that occurs as a result of the BioDistrict projects. But the opposition claims that as the contract is currently arranged, the money going to the BioDistrict is money that the city would have likely collected anyway, regardless of how the BioDistrict ends up using the funds.
“The City is agreeing to give away tax receipts that it would otherwise receive, unrelated to any activities of the Biodistrict,” one of their documents says.
Councilman Oliver Thomas, the only council member who didn’t sign on as a cosponsor of the measure, told The Lens he shares some of those concerns.
“I intentionally withheld my name,” Thomas said. “To me there’s a lot of unanswered community questions about impact, including fiscal responsibility moving forward.”
The Biodistrict brought a similar request to the council last year, but after complaints from residents, it was withdrawn and resubmitted in August.
Andy Kopplin, chair of the BioDistrict board and president of the Greater New Orleans Foundation, told The Lens in an interview that he had worked extensively with some of those same community groups over the last year to make requested changes to the proposed agreement with the city.
“We’ve added a bunch of additional provisions working with the neighborhood groups,” Kopplin said. “Right now, I feel like we’ve got a really solid proposal that balances and is respectful of those concerns that were raised about transparency, about good government, about protecting the city, about protecting the neighborhoods.”
He said that the groups brought legitimate concerns about the previous version of the contract that have now been fixed, but he pushed back on the specific objections being raised on the new version. He said at this point, the group was really opposed to the entire idea of local tax dollars going to the BioDistrict
“What we haven’t convinced some people of is to like the idea of revenue sharing with the BioDistrict at all,” Kopplin said.
Mary Howell, a civil rights attorney and one of the residents at the forefront of the opposition, agreed that she and others indeed have significant reservations about handing local money to a state body, regardless of the contract details.
“There are a number of people who think that it’s a bad idea to give local dollars to an unelected state board, especially given the history of the relationship between this city and the state,” she said.
But she also insisted that the specific flaws pointed out in the document could leave the city vulnerable, and that the BioDistrict hadn’t done enough to prove that its use of the funds would actually bolster economic activity or increase sales tax revenues.
“The devil really is in the details,” she said.
She said that as far as she can tell, there’s been no independent financial or legal analysis done to determine if this is a good deal, and that the city is relying entirely on speculative economic impact reports produced by the BioDistrict itself.
“There doesn’t seem to be anything in place on the city’s side to make sure that contracts like this don’t just slip by,” Howell said. “This whole experience has been a prime example of system failure. There’s no good reason why an ad hoc group of residents has had to step up to do the amount of work involved in reviewing this contract.”
Thomas said that he believed the proposal has garnered political support due to the confidence people have in Kopplin — who previously served as former Mayor Mitch Landrieu’s top deputy — and the rest of the BioDistrict team, and that the city perhaps needed to take a closer look at the specifics of the contract.
“I think what they sold was the magic and credibility of Andy and the team they put forward, but not the substance behind it,” Thomas said. “Look, I’m supportive of the effort. Andy Kopplin is one of my favorite people. But what it looks like to me like they did is just enough politics to get votes to support the idea, with still a lot of unanswered questions.”
Mayor LaToya Cantrell’s office did not respond to a request for comment.
A second attempt at funding
Although the BioDistrict was first created by the state legislature in 2005, it hasn’t been able to take much action, Kopplin said.
“It never really got off the ground because of Katrina,” Kopplin said. “The district never got sustainable funding, so they never had the resources to implement their plans.”
Kopplin is hoping to finally change that. Last year, he approached the city with a plan: a tax increment finance (TIF) agreement that would allow the Biodistrict to collect a portion of sales tax growth within the district, instead of sending it to the city’s general fund.
But that effort got derailed when a group of residents began pointing out what they deemed to be major flaws.
“It was our little ragtag group that brought to the forefront the problems with the original [contract],” Sandra Stokes of the Louisiana Landmarks Society said at an Aug. 29 City Council hearing.
Among their concerns was the fact that the BioDistrict had expropriation powers — the ability to force residents, landowners and businesses to sell their property to convert it to public use — over a wide area of the city including residential chunks of Mid-City and Gert Town.
Howell said that residents have become wary of those state powers in the wake of Hurricane Katrina, when the state took over roughly 70 acres of land in lower Mid-City for a series of medical facilities including the University Medical Center. More than 70 homes were uprooted from the neighborhood, intended to be relocated and preserved. But many languished after haphazard transportation to new locations across the city or they were altogether abandoned on public land.
Howel said that a 2013 BioDistrict plan appeared to involve taking over additional residential city blocks.
Major changes have been made to the BioDistrict and TIF contract in response to those concerns. The BioDistrict would no longer have the power to expropriate property, and many of the residential neighborhoods in its original footprint — which encompassed over 1000 acres — have been removed.
The currently proposed contract requires the BioDistrict to come up with a master plan within 12 months after the contract is signed. That plan will require approval from the City Council and the City Planning Commission. The BioDistrict would also be forced to get annual budget approval from the City Council. And the council would have the explicit ability to cancel the contract.
In terms of funding, the TIF would provide the BioDistrict with all the sales tax proceeds collected within the district above the baseline level of what was collected in 2021. That baseline would increase by 2 percent each year to adjust for inflation.
The annual proceeds going to the BioDistrict would be capped at 125 percent of the projections made in a report commissioned by the BioDistrict. Over the 18 year lifespan of the TIF, the BioDistrict could collect a maximum of roughly $70 million.
Critics say that although the contract is much improved from last year’s version, there are still a number of problems.
Lingering issues
As Kopplin told the council, the idea for the TIF is that the BioDistrict would only be funded by sales tax growth that occured as a result of the projects taken on by BioDistrict.
“If there’s no growth, there’s no money for the district,” Kopplin told the council in August.
But not everyone agrees that’s how it will pan out. The opposition documents argue that the way the contract is set up, the BioDistrict would get credit for tax growth it had no hand in. To start, they take issue with using 2021 as a baseline year, arguing that the city was still reeling from the coronavirus pandemic and that the BioDistrict will now get credit for growth associated with the ongoing recovery.
The document claims that the BioDistrict contract is even ignoring the advice of its own commissioned financial report, which recommends increasing the baseline sales tax collection to account for the pandemic recovery.
Kopplin told The Lens that 2021 was simply the most recent year that data was available. And, he said, a recovery from the pandemic isn’t guaranteed.
The opposition also argued that the 2 percent annual growth rate in the city’s base tax collections was too low to account for inflation and natural sales tax growth that will likely occur independent of BioDistrict investments. The documents point out that inflation was over 8 percent from August 2021 to August 2022.
Kopplin argued that the Federal Reserve’s target inflation rate is 2 percent, and that it wasn’t by any means clear that there would be natural sales tax growth in the BioDistrict area independent of the BioDistrict projects.
“If you look at the area post-Katrina, I mean there’s nothing happening,” he said. “It’s not inevitable at all.”
But critics claim that the biggest issue is that there’s no way to analyze whether the BioDistrict’s spending will actually lead to an increase in sales tax collections because it isn’t entirely clear what the board will use the money for.
“The contract states in the most general language that the BioDistrict will in the future, at some unspecified time and manner, create unspecified projects that will create a bioscience hub within its boundaries. This unspecified value cannot be analyzed or evaluated,” the opposition document says.
Critics say a plan should be finalized first, before the city signs off on the tax sharing contract. But Kopplin said that the BioDistrict already has a master plan.
“The critics are well aware that we have a master plan.”
Kopplin pointed to an “action plan update” the BioDistrict published in 2013 as well as a 2018 plan that the Greater New Orleans Foundation created for a proposed “Spirit of Charity Innovation District” that would encompass a much smaller area within the BioDistrict surrounding the former Charity Hospital building.
He also pointed to a presentation to the council in August that provided a three year “sample budget” that included funding for quality of life improvements, a “health equity accelerator hub” and job readiness programs at Tulane University, Xavier University and Delgado Community College.
Howell argued that neither the powerpoint presentation, the nine-year old BioDistrict document nor the 2018 plan for an entirely different project suffice as a real master plan for this specific initiative.
Finally, the opposition has raised doubts as to whether the city will truly have as much budgetary control as Kopplin claims. They point out that although the council has the power to approve the budget or cancel the contract, the city is obligated to continue providing funds to the BioDistrict, no matter what, to pay back loans or bonds the district takes out for “projects previously approved by the City of New Orleans by ordinance.”
Though the City Council has a vote on the master plan, the proposed contract doesn’t require its approval for the BioDistrict board to take on debt to fund it. It’s unclear what would suffice as “projects previously approved by the city.” The contract itself, for example, provides a very broad definition of “project.”
Kopplin said that there were no current plans for the BioDistrict to take out bonds, but “theoretically” it could happen at some point.
“We don’t want to rule it out,” he said.
But he maintained that under the contract, the BioDistrict wouldn’t be able to quietly take out bonds without the council’s awareness and explicit permission. He said that the intent of the contract is to give the council and city full oversight over how the funds are spent.
“I feel really good about the proposal,” he said.