Tax-exempt properties represent about 35 percent of the $38 billion value of real estate citywide
Even as New Orleanians see their property tax bills go up -- along with their monthly sanitation fees -- roughly 15,000 properties in the city worth a combined $13 billion remain off the tax rolls, shielded from all property taxes. The sites comprise about a third of the property value in New Orleans.
View full sizeThe Port of New Orleans is one of the largest holders of tax-exempt property in New Orleans based on real estate value. Containers stacked at the Napoleon Avenue Wharf were photographed in April 2009. So it's no surprise a mayoral tax commission is hard at work investigating ways City Hall can begin to shake some revenue loose from those properties.
The Tax Fairness Commission this week discussed several options, including asking tax-exempt entities to render a voluntary "payment in lieu of taxes;" charging a capped service fee based on an exempt property's square footage; and levying a flat fee on every property across the city, as City Hall did briefly in the late 1970s.
In the latter scenario, commission members wondered aloud whether the city might be able to credit the fee back to owners who pay more in property taxes than the fee itself. They also asked a city lawyer to research whether those choices and others would require authorization from the state Legislature, the City Council or voters.
Also floated was pressing for a statewide constitutional amendment that would narrow the definition of exempt property, which now covers land and structures owned by a broad range of groups, regardless of how the property is used. Those groups include universities, churches, professional groups, college fraternities and parade organizations.
Thirty-five percent of value
Although tax-exempt properties comprise less than 10 percent of the number of properties on New Orleans' tax rolls, they represent about 35 percent of the $38 billion value of real estate citywide, according to data provided by Darren Mire, the deputy chief assessor of valuations.
Mire said the actual value could be greater because exempt property rarely is reassessed, given that it's shielded from taxes. Research by a local government watchdog group supports that view.
Tax-exempt properties, though numerous, may represent a less-promising source of potential revenue than a casual glance would suggest, given that many of the largest owners of such properties are public bodies.
According to a list provided by Mire, the largest holders of tax-exempt property based on real estate value include the Port of New Orleans, Tulane University, the Orleans Parish School Board, Audubon Park, Touro Infirmary and the Superdome Commission.
City could shed property
Also on the list is the U.S. government and the city itself, which holds tax-exempt property worth nearly $1 billion. Chief Administrative Officer Andy Kopplin said his staff has been working to inventory the more than 1,500 parcels the city owns.
"We are looking at all city-owned property for blight and whether it's something we need to have in our inventory, and to have a disposition plan," he said.
City Councilwoman Stacy Head, who is not a commission member but attended Wednesday's session, suggested pushing the state Legislature to empower parish or city leaders to decide which properties are exempt from property taxes.
"We as a council can be unbelievably clear, and we can move quickly" to modify local laws that face court challenges, Head said.
No one, however, suggested doing away completely with exemptions for nonprofit and government entities.
In light of recent increases in property taxes and the sanitation fee, commission members keyed in on the fact that tax-exempt groups use city services paid for with property taxes but shoulder none of the fiscal burden.
"To me it is not about the money; it's about what is fair," said Charles Rice, CEO of Entergy New Orleans. "If they are not paying for upkeep of this city, I have an issue with that."
The panel also harped on tax-exempt groups that use their properties for profit-making ventures. It is not clear how many properties fall into that category.
"To me, this whole thing with the nonprofits looks like a good idea that went too far," attorney Larry Kullman said.
Louisiana goes further
Adam Langley of the Lincoln Land Institute, a Massachusetts think tank that has studied nonprofit taxation, said that while most states allow religious, educational and charitable groups to be exempt from property taxes, Louisiana goes much further, excusing professional, trade and social organizations.
"It's safe to say that in almost every other state, the property has to be used for a nonprofit purpose," he said.
While taxing now-exempt properties could generate needed revenue, changing the tax code can be a minefield.
Langley said that negotiated "payments in lieu of taxes," dubbed PILOTs, often irritate nonprofit groups that view their business as providing a community service.
PILOTs also can ruffle political feathers if nonprofit groups and government bodies aren't treated consistently, a potential outcome in a large city where such organizations range from storefront churches to major health care and educational institutions.
Langley pointed to recent cases in Baltimore and Pittsburgh in which city officials persuaded tax-exempt nonprofits to pay millions of dollars over several years in lieu of taxes in return for dropping proposals for new sales taxes and fees that would have affected the organizations.
But such political hardball could backfire, he cautioned.
Homestead exemption studied
Commission members also discussed whether the statewide homestead exemption, which makes the first $75,000 of an owner-occupied home free from most property taxes, ought to continue to apply to municipal taxes in New Orleans. That's not the case in other Louisiana cities.
"Every other city millage in the state other than the city of New Orleans is exempt from the homestead exemption," Chief Administrative Officer Andy Kopplin said, adding that the commission should weigh in on the matter before the state Legislature convenes April 25.
The commission has until March to suggest tax reforms that would need legislative approval and until June to issue a final report. Kopplin stressed that the commission's charge is not to come up with new revenue sources but to recommend ways to equalize the citywide tax burden.
In other business, Mayor Mitch Landrieu's administration has selected economists Tim Ryan, the former University of New Orleans chancellor, and Jim Richardson, an economics professor at Louisiana State University, to conduct research and produce reports for the tax commission, Kopplin said.
Contract negotiations with both economists should be completed "shortly," he said.
Michelle Krupa can be reached at mkrupa@timespicayune.com or 504.826.3312.