NEW ORLEANS – From the Bureau of Governmental Research:
BGR has released a new report that analyzes the proposed 20-year property taxes for public libraries and housing that New Orleans voters will decide in the Dec. 11 election. The report is intended to help New Orleans voters make informed decisions on tax proposals. The report also provides BGR’s positions in favor of the library tax, but against the housing tax. Click here to read the full report or the InBref summary.
The New Orleans City Council put the proposals on the ballot after voters rejected a broader proposal in December 2020 to replace and reallocate four existing property taxes for libraries, housing and economic development, streets and capital improvements. This package would have kept the same combined rate of 5.82 million, but would have redirected a significant portion of the library’s revenue to other goals as well as new goals such as early childhood education. After the defeat, the New Orleans city administration did not seek to remit taxes at the ballot box.
The council’s proposals would maintain dedicated funding flows for libraries and housing, but fiscal commitments for economic development, streets and capital improvements will expire at the end of this year. The city administration said it will consider whether to try to reinstate any of the expiring taxes, apply for taxes for other purposes, or continue without earmarking additional revenue. Just last week, city council announced plans to seek voter approval this spring for a new $ 5 million tax to support early childhood education.
Library fee proposal
The proposed library tax would re-authorize the tax dedicated to the New Orleans public library system for operations approved by voters in 1986 and extend its permitted uses to capital needs, such as buildings. While library officials have asked to maintain the current levy of 2.58 mills for 2022, the proposal asks voters to approve up to 4 mills. The municipal council will decide on the part of the maximum rate to be levied each year.
At the current rate of $ 2.58 million, the tax provides just over $ 10 million in annual revenue, or about half of the library system’s total operating revenue. Other income comes mainly from an additional property tax of $ 2.33 million that voters approved in 2015.
The BGR report finds that the library system has planned its use of tax revenues to ensure that it will continue to provide the current level of service while delivering new programs and resources that align with its new strategic plan. The 10-year plan, developed with broad community input, contemplates initiatives to develop children’s creative and thinking skills, expand the library’s role in workforce development, and improve access to resources. of the library for all residents.
While the 2.58 thousandth rate requested by the library meets the needs of its spending plan and targets an acceptable level of financial reserves, the proposed maximum rate of 4 thousandths would not be. At that rate, the tax would produce $ 5.5 million more in 2022 than what the Library needs for its spending plan. BGR calls on city council to maintain consistent budget oversight through its authority to approve the library’s budget and set its mileage rates.
In addition, BGR emphasizes the need for the library system board to publicly report on progress towards annual strategic goals and to conduct an annual performance review of the next library director it hires. . Before releasing its report, BGR considered the resignation of the previous director earlier this month and obtained clarification on the state of the system’s plans in a discussion with library officials.
Based on this analysis, BGR takes the following position on the proposed library tax:
FOR. BGR takes charge of the tax based on the library’s request to maintain its dedicated mileage revenues at the existing level. At the current rate of $ 2.58 million, the tax provides about half of the system’s budget. The library used its existing tax revenues to increase its value to residents by expanding its services. The pursuit of this source of revenue will allow the Library to maintain its current level of service and implement its new strategic plan. The plan reflects the priorities of the community and seeks to extend the value of the library to more residents. In addition, it developed an expenditure plan based on current tax revenues that would reduce the substantial balance of its funds to an acceptable level. Without the tax, the Library would not be able to implement the strategic plan and, after initially cutting services, would have to make substantial cuts to its operations once its fund balances were depleted.
Voters’ approval of the proposal would allow city council to levy up to 4 mills, which would generate significantly higher revenues than required by the library’s current spending plan. This authority could result in an excessive tax as New Orleans faces many demands on its public resources. To address this concern, the board should maintain the library’s current level of tax revenue and consider a request for a fee increase only if the library demonstrates this is necessary.
Strengthening accountability measures is also important, especially since voters will not have a say in the tax for 20 years. City council should closely monitor the library fund balance to ensure that the tax does not generate a surplus. The City should track the balance of funds in its public budget documents. In addition, the library board should require regular public reports on progress towards achieving annual goals that align with the three focus areas of the strategic plan and conduct an annual performance review of the library. director of the library.
Housing tax proposal
The proposed housing tax of $ 0.91 million over 20 years would continue the approach of the current tax, which the City currently levies at the same rate, by directing revenues to the Neighborhood Housing Improvement Fund (Fonds du logement ) from the city. The ordinances of the municipal council, as modified since the entry into force of the tax in 1991, govern the fund and direct its income towards opportunities for home ownership, sanitation and rehabilitation of the plague, and housing Affordable rentals for low and moderate income residents. But the proposed tax would affect all revenue to the Housing Fund. This would be a key change from the current tax, which allows the City to split revenue between the Housing Fund and a separate special fund for economic development in whatever proportion it chooses.
While there are many ways the tax can support housing and affordable neighborhoods, the City has not developed a spending plan that shows how it would use the tax to meet specific housing development or housing goals. improvement of neighborhoods. The lack of such a plan prevented further analysis of the appropriate size of the tax or its potential to effectively address New Orleans housing problems. Although the City has used the expiring tax to fund some initiatives that the evidence shows have or will produce positive results, BGR has not been able to determine how much the City would spend on these or similar programs and initiatives. Additionally, the report raises concerns about the City’s accountability for existing tax revenues and the effectiveness of City Council’s oversight of the Housing Fund.
Based on this analysis, BGR takes the following position on the council tax proposal:
VERSUS. The significant housing affordability issues in New Orleans have spread since the onset of the pandemic and require carefully crafted policy solutions. However, critical gaps in the city’s planning and accountability for the tax undermine its potential effectiveness. The City has not developed a plan indicating how it would use the revenues to achieve specific goals of creating or preserving housing. The absence of a spending plan committing tax revenues to specific initiatives diminishes accountability. It leaves the public without a way to assess whether the tax has achieved its stated objectives and to hold the City accountable. In addition, the unexplained declines in Housing Fund revenue from the existing tax and the failure to adhere to the required budget planning processes in 2020 and 2021 raise serious accountability issues and questions about the effectiveness of the oversight of the government. municipal Council.
Before asking voters to consider another dedicated housing tax, the City should adopt monitoring, planning and evaluation practices that will ensure accountability and effective revenue results. In the meantime, the Housing Fund will continue to collect revenue from short-term rental fees, and the City could use its General Fund revenue to support high priority housing initiatives and leverage other sources of funding. housing.