The New Orleans City Council on Thursday rejected two controversial tax exemption applications from Folgers Coffee Company, while deferring decisions on four others. The two rejections were passed unanimously, while the four deferrals were passed on a narrow 4-3 vote.
The council also unanimously passed a related, non-binding resolution that dictates that any extra revenues realized by denying the tax exemptions should go to ending the current city worker furloughs specifically for public safety personnel, including in the police department, fire department and emergency medical services.
As a package, the six exemptions would have saved Folgers upwards of $25 million in property taxes over the life of the ten-year exemptions through the Industrial Tax Exemption Program. They’re being considered as the city languishes through the coronavirus pandemic and associated economic crisis that have forced the Cantrell administration to slash services and furlough employees as residents continue to struggle to make ends meet with relatively few government relief programs to help.
With that crisis as a backdrop, the exemption requests from Folgers, a company that has done relatively well through the pandemic, have been criticized by many New Orleans residents.
The debate is far from over. The four deferred tax exemptions will be considered at a Jan. 7 City Council committee meeting and then a final council vote will be taken on Jan. 14. Even the two exemptions rejected by the council will still have a chance for partial acceptance through other bodies that collect dedicated property taxes, such as the Orleans Parish School Board and Orleans Parish Sheriff’s Office.
The move to defer will get rid of one firm vote against the exemptions — Councilman Jason Williams. Williams, who said on Thursday he wanted to reject the exemptions, will soon be leaving his seat to take his new elected position as Orleans Parish District Attorney. Councilwoman Helena Moreno, who fought to reject all six applications instead of deferring them, said on Thursday that Folgers lobbyists have been pushing for the deferrals.
“They hired a heck of a ton of lobbyists,” Moreno said. “I’ve gotten the calls too: ‘Defer, let’s see if we can work something out, there’s all this confusion around the numbers.’ Guys, it still shouldn’t be a confusing situation. It’s still a lot of money that would be coming to this city when we absolutely need it most.”
The council is now poised to take a vote on the remaining four exemptions on Jan. 14 with just six total members. If the council deadlocks and neither approves or rejects the exemptions by Jan. 15, the exemptions will automatically go into effect. Council members Moreno, Jason Williams and Joe Giarrusso voted against deferring the four applications, while council members Cyndi Nguyen, Jay Banks, Kristen Palmer and Jared Brossett voted in favor.
Public comment was overwhelmingly submitted by residents urging the council to reject the exemptions and not to defer. That included a former New Olreans City Council member, Brod Bagert, who served in the late 1970s. Bagert warned the public that there was a practical reason for Folgers to want the votes deferred.
“I cannot imagine giving away huge chunks of local tax dollars to an already established local business under the guise of economic development,” he said. “As a former City Council person, the public needs to understand that a vote today in favor of deferring the vote on the folgers exemptions is a vote in favor of that exemption. The composition of the council is about to change and a vote to defer the exemption will permit it to pass in the future.”
The idea to defer the exemptions came from Councilwoman Cyndi Nguyen, who represents the district where Folgers is located. She argued that there were still open questions about the exact numbers surrounding the exemptions, and argued that Folgers hadn’t gotten a fair chance to make its case.
She said that she wanted to know exactly how much public money the city would lose if the exemptions were passed. Recently, there has been some confusion over how much Folgers would immediately owe in back taxes if all the exemptions were rejected. Together New Orleans, a prominent advocate against ITEs, had originally claimed that the company would immediately owe $11 million. The actual figure is closer to $5.4 million, according to The Times-Picayune/New Orleans Advocate.
“I would prefer for people to know exactly how much more we’re dealing with so we don’t have every department coming in fighting over this money,” Nguyen said.
Palmer argued that the council should manage the expectations of the public by being clear about how much money the city would get.
Still, there appears to be a general consensus about how much the city will ultimately lose out on over the life of the 10-year exemptions — upwards of $25 million.
Moreno pushed back on the idea that they needed more information, saying that whether the immediate gain to the city was $5.4 million or $11 million, the city was in desperate need of any funds it could find. And, she added, none of the projects met the guidelines that the City Council passed in 2018 as a rubric for ITEs. One of the guidelines requires the exempted investment to create at least 15 jobs that pay at least $18 an hour, she said.
“None of these applications meet our guidelines,” Moreno said. “Each application would simply need to create 15 jobs at $18 an hour. The combined applications couldn’t even meet a third of our job requirements. Some of these applications create zero jobs.”
She said that altogether, the projects only created 27 permanent local jobs.
“They may have only created 27 jobs through their projects, but they’ve certainly hired about that many lobbyists to handle us, the City Council,” Moreno said.
The ITE program allows companies to skip paying taxes on up to 80 percent of their investments on their Louisiana facilities for up to ten years. The idea is to spur investment that can create local jobs. But as The Advocate reported in 2017, that’s not always the case. In fact, some of the largest exemption recipients had actually slashed jobs.
And critics have derided the lack of evidence showing that the exemptions actually spur new investments, rather than simply provide tax breaks on investments companies would have made no matter what. In the case of the Folgers applications, the four deferred applications were for projects that were already completed in 2019, while the two rejected on Thursday are already under way.
Historically, ITEP tax breaks have been granted by the state alone, even though the loss of property taxes primarily affects local government coffers. The Advocate report from 2017 found that the program cost local governments roughly $1 billion every year on average from 2000 to 2016.
State approval for ITEP applications has been nearly automatic. But in recent years, the program rules have changed to give local taxing bodies the right to refuse an ITE even if the state has approved it.
The City Council isn’t the only local public body that will get to decide on the exemptions. When property owners in New ORleans pay their annual tax bill, only some of that money ends up with the central municipal government. Other portions are dedicated to specific places, such as public schools, and are controlled by independent bodies.
The City Council has spoken on the property taxes it controls, roughly half of the overall rate. Now, other public bodies that receive dedicated property tax revenue, including the Orleans Parish School Board, will also have to decide whether to apply the exemptions to their own dedicated taxes.
On Tuesday, an OPSB board committee voted against the exemptions, but a final decision will be made by the full OPSB board on Thursday evening.
