Electric bills considered among possible targets for tax increase

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"We've got some fabulous properties that are subject to 'zero' property taxes in the city of New Orleans," Councilwoman Stacy Head said at Monday's budget hearing.

The idea of increasing the tax applied to electric bills in New Orleans resurfaced Monday during the first city council hearing on next year’s budget, suggested as a possible route to lessen the amount that property taxes will have to be raised to pay for expanded city services next year.

District B Councilwoman Stacy Head told the rest of the council that her idea is not yet a fully-formed proposal, but that placing part of next year’s tax increase on Entergy customers – rather than property owners – could spread the burden of next year’s budget among a far wider swath of people in New Orleans. Such a tax increase would reach not only renters, Head said, but also nonprofits, churches, universities and other institutions that pay no property tax but do pay electric bills.

“This is a way that every store, every rental, every homeowner, every church, every educational institution — everyone uses utilites, and this is a way to have the hook in everyone, as opposed to a small subset of the city of New Orleans,” Head said (See video of the budget hearing; utility tax discussion begins 2 hours, 56 minutes into video). “It seems more equitable — should it be possible — to me.”

The electric-bill tax — which Head has called relatively unusual for a city to assess — currently amounts to about $11 million for the city; Mayor Mitch Landrieu has requested about $23 million in increased property tax, and Head said her intent was only to shift only a few million of that from property taxes onto electric bills. Head said her staff has yet to determine whether the city has the ability to raise the tax, or how much it could possibly raise.

Head raised the idea of a utility-tax increase nearly two months ago at a meeting of the city’s budget committee (Video here: begin shortly after 16 minutes). Deputy Mayor Andy Kopplin said then that while the mayor’s office had not looked at that tax specifically, the administration had heard during its city-budget town-hall meetings a concern about “this issue of fairness … making sure that whatever the fee is, everybody pays their fair share.”

Kopplin did not directly address the proposal during Monday’s hearing, either, and suggested that the mayor’s office had not pursued it.

“I certainly would benefit from same research you’ve asked be conducted on the issue,” Kopplin told Head. “If there’s consensus that can be developed around a different revenue proposal at the council level, we will certainly work with you and be open to discussions.”

The utility taxes have been an uncertain source of revenue. In April, city economists noted that collections were “perplexingly” off budget $1.5 million for the year, but by August had rebounded to within $400,000 of the original 2010 budget.

Neither Head’s office nor Landrieu’s communications department has responded to email and phone requests about the utility tax over the last two months – such as the actual tax rate or how it is assessed. UptownMessenger.com sent the city a written Freedom of Information Act request for this information Oct. 12, but the only response thus far has been that the legal department is determining whether the “records are available for review.”

Reaction from the rest of the council to Head’s idea was mixed. Councilwoman Cynthia Hedge-Morrell said while she will be open-minded in her review of the idea, she generally opposes the idea of increasing people’s electric bills.

“It seems to me you’re going from overtaxing property owners to overtaxing people that don’t own property,” Hedge-Morrell said, noting that the property-tax increase should have been done gradually since 2007 to avoid the present shortfalls. “We have some people in this city that are barely surviving, and to say that we’re going to shift the burden on everybody in some form or another is not being what a community is. A community is supposed to embrace and look after those that are less fortunate. There are people daily that call my office that can’t even pay the bills that they’re getting, utility and rent and everything, because they don’t have enough income coming in to do it.”

Councilwoman Jackie Clarkson argued that putting a portion of the tax increase on energy bills might lessen the burden on businesses that might react to too great a tax hike by reducing their workforce.

“I don’t think it’s a question of anyone trying to burden the poor more,” Clarkson said. “We’re trying to keep those who can afford more taxes by simply not overburdening them to where they have a choice, and they choose to go somewhere else.”

Councilmember Jon Johnson did not take a position on the idea, but called the discussion a good starting point as the council begins thinking about the city’s direction in the coming year. “I think it’s premature for us to rule out or rule in anything with this budget,” Johnson said.

The council has scheduled roughly four weeks of budget negotiations.

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