Nobody will ever accuse Mayor Mitch Landrieu of being creative. Time and time again he has traveled down the same well-worn path of shifting blame to justify pursuing unpopular fiscal policies.
Most recently, Landrieu did the ol’ bait and switch by proposing cigarette and hotel tax increases that he knew he lacked the clout to get through the legislature. Next, he turned around and pushed through authorization to double of the police and fire property tax millages, subject to approval of that proposal on the city and state ballots in the fall.
And of course, this sleight of hand comes on the heels of Mayor Landrieu’s attempt to shift blame for the city’s fiscal woes resulting from the two consent decrees over the police and conditions at Orleans Parish Prison to the federal government and Sheriff Gusman, respectively. At that time, Mayor Landrieu effectively denied blame for his own lack of planning by waging a half-hearted legal battle against the consent decree for the NOPD (which he had previously agreed to).
With Landrieu, the buck always stops somewhere else. He’s like Mayor McCheese, who consistently blames the Hamburgler for all the problems in McDonaldland instead of his incompetent “cheese-based” fiscal policy (OK, I may have made that up). The bottom line is that Landrieu wants us to believe that he’s been backed into a corner and has no choice but to push through a major tax increase. It’s simply not true.
Have you ever wondered exactly what percentage of property value is actually generating property taxes? The Bureau of Governmental Research asked that question in 1996 and found that roughly two-thirds of property value in New Orleans was off the tax rolls entirely. About half of this value involved property owned by government entities, while the remainder was split between the homestead exemption and the nonprofit exemption.
The BGR focused on the nonprofit exemption as a source of major problems. It is broadly accepted that properties owned by a nonprofit for its core mission – such as an active church facility or school – should be tax exempt.
Alas, as we all know, nonprofits are notorious for owning vacant, blighted buildings, or for owning properties that are managed to generate revenue (i.e., a paid parking lot open to the public). The properties in the latter category still normally receive the nonprofit exemption even if they don’t actually deserve it.
Moreover, the nonprofit exemption is unlike the homestead exemption in that it is a total exemption. The homestead exemption is a partial exemption: it only goes up to the first $75,000 in the value of a primary residence, and it does not apply to the fire and police millages – exactly the same millages that Mayor Landrieu wants to double.
With nonprofits, there is no limit on the exemption. It applies to all property taxes at all levels. It’s a sweet exemption, at least if you qualify.
In 2011, the BGR decided to take a second look at the issue to see if progress had been made. It found that in terms of raw numbers, there was superficial progress. Instead of two-thirds of property value being off the books, it was now 43%. Alas, the BGR did not attribute this to significant progress in bringing nonprofits back on the tax rolls; rather, the problem appeared to be that nonprofits were not being properly reassessed, so their hideously outdated values were gradually eclipsed as the assessments of taxable properties rose.
To wit, the assessed value of taxable properties rose 146% between 1996 and 2010, while the value of nonprofit exemption properties dropped by 20%, and the number of nonprofit exempt properties rose by 60%. Clearly, the problem has never improved. The tax rolls, at least with regard to nonprofits, are an elaborate fiction of such unrestrained fantasy as to make Lewis Carroll blush.
For example, you know what the assessment of Loyola University is? Zero. Nada. Paradoxically, if you write out a check for “nothing” and demand to buy Loyola lock, stock, and barrel, they’ll turn you down. You’ll be lucky if the campus police don’t rough you up while delivering the bum’s rush.
Thankfully, we don’t need radical reform to cure this problem. All we need is a clear law providing that the nonprofit exemption only applies to properties owned and used by the nonprofit itself for purposes related to its mission. A nonprofit simply owning property should not render that property tax exempt. Surely, such a shift in policy could generate sufficient funds to cure our budgetary woes.
Regrettably, although this is a major problem, Mayor Landrieu has seen fit to ignore it. [Correction: A reader has pointed out that Mayor Landrieu actually did address the BGR report and proposed reforms to the nonprofit exemption in 2011. However, soon after Landrieu tabled those amendments and has not, to my knowledge, ever addressed them again.]
Landrieu could have started lobbying years ago to reform state law regarding the nonprofit exemption (at least as it is applied to Orleans Parish) in order to generate more revenue. Landrieu could have also instituted more severe spending cuts, particularly to his own bloated office. He did not.
Instead, Landrieu has kicked the can down the road and left the city on the brink of financial ruin. Now, he is proposing that the consequences of his lack of creativity and foresight be placed on the shoulders of New Orleans taxpayers. To that proposal, I say we reply with a resounding “no.”
Owen Courrèges, a New Orleans attorney and resident of the Garden District, offers his opinions for UptownMessenger.com on Mondays. He has previously written for the Reason Public Policy Foundation.