On Thursday morning, the Orleans Parish School Board, with support of the New Orleans City Council, will square off in Civil District Court against the City of New Orleans, in an attempt to wrestle $90 million from the city’s administrative arm.
At issue is a $20 million cash settlement, and an additional $70 million in promised education funding over the next decade. In November, representatives from city council, school district, and city – including chief administrative officer Gilbert Montano – stood shoulder-to-shoulder to announce the resolution.
OPSB will also ask the court to enforce another, less-discussed aspect of the settlement, that the city needs to stop a 40-year practice that essentially takes money from schoolkids and puts it into the city’s coffers.
The November settlement was seen as crucial because it resolved OPSB’s 2019 lawsuit against the city at a time when NOLA Public Schools desperately needed a cash infusion to stem its unfolding financial crisis.
But late last month, Mayor LaToya Cantrell reneged on the deal, saying it was forged without her knowledge. Making the $20 million payment as promised would threaten the provision of continued city services, she contended in a press statement and in a meeting with school officials.
A stunned City Council held a hearing within days, questioning how Cantrell could claim ignorance of the deal, when her right-hand man, Montano, helped to forge it and was at the November press conference, giving remarks that he said were on behalf of the administration and the mayor.
“If we’re saying no deal is perfected unless the mayor is in the room, that’s going to fundamentally change the way we operate,” City Councilmember JP Morrell said at the hearing.
The hearing ended with no resolution in sight.
Fighting it out in court
On February 7, OPSB lawyers, noting that more than a month had passed since an initial $10 million was due, asked Judge Nicole Sheppard of Orleans Parish Civil District Court to force the city to comply with the settlement agreement. Last week, the New Orleans City Council signed on to the request.
The school board is also taking its fight to the Louisiana Legislative Auditor. Board member Olin Parker asked district officials to appeal to the state auditor for a review of the city’s tax-collection methods, including how the city remits that money to schools.
Sheppard is the judge overseeing the 2019 lawsuit, in which OPSB alleged that the city was illegally skimming tax money dedicated to schools. In its filing, the school board contends the city took more than $134 million in unconstitutional “deductions” from sales and property taxes dedicated to OPSB. Council members suggest it could be as high as $150 million.
The OPSB, along with City Councilmembers, argue that the fee is unconstitutional, because tax money that’s specifically dedicated to schools, libraries and other agencies must go directly to public services.
But the city claims that its collection fee is a fair price for the work that’s done.“The city cannot provide those services without it,” said city attorney Donesia Turner. “The city cannot work without being compensated.”
Fee collection has been standard practice for at least four decades, noted Turner, who came armed with a memo directing the city to divert 0.015% of taxes for collection services, signed by Mayor Ernst “Dutch” Morial, who led the city from 1978 to 1986.
Today, the city’s collection fee stands at 2%. When questioned by City Councilmembers, Turner and other administration officials could not explain how or when the fee increased.
“Not only was the original fee a problem but you’ve raised the fee over time, (placing a fee) on a millage that voters never voted on,” Morrell said.
Fee is an essential part of settlement
Thursday’s court hearing will examine the settlement, its terms, as outlined in emails and a draft Cooperative Endeavor Agreement circulated through city and OPSB lawyers.
The agreement included a promise from the city to stop collecting the administrative fee on school tax payments as of January 1.
Ending the city’s deductions is at the very heart of the lawsuit, Morrell said. If the city continues to grab OPSB money, the debt will again build up, making the $20 million settlement nothing better than “a payday loan,” he said.
“The fee is the underlying basis of the lawsuit,” Morrell said. “Unless there’s movement on the fee in the city’s position it’s going to be a waste of time.”
Asked by The Lens if the School Board would consider an installment plan for the $20 million, School Board President Katie Baudouin said that the cash infusion, though important, was not her main concern.
Like Morrell, Baudouin was focused on a resolution to the ongoing problem. “It’s about the fee,” she said.