Since taking office, Mayor-President Joel Robideaux has opposed new taxes. But on his way out the door, he introduced 12 new ones, six sales taxes and six hotel occupancy taxes, as part of six new economic development districts (EDDs). All six seem headed toward approval at the very last regular meeting of the consolidated council on Dec. 17.
The fact the districts are drawn to avoid registered voters, dodging a public vote, has been a particularly egregious poke in the eye to the anti-tax brigade, which has ramped up the typical furor.
But lost in the outrage is a more nuanced analysis of what these districts are and how they’re supposed to work. Setting aside the philosophical argument about EDDs in general, the way these particular districts are designed is problematic, taking unnecessary risks that increase the odds the proposals will yield broken promises and boondoggles down the road — all at a time when trust in taxes and local government is at an all-time low.
How EDDs work
The best way to understand how EDDs commonly work is to explore the one held up as a shining example for this set: Stirling Lafayette, the retail center anchored by a Target at the intersection of Louisiana Avenue and I-10.
For that project, there was a specific development (Stirling Lafayette) that needed specific infrastructure (roads, drainage and sewage) with a specific budget ($8 million). A bond was sold to pay for that infrastructure, and a new tax (1% sales) was implemented to pay it back. Once enough taxes were collected to pay back that bond, the tax would go away unless it got extended. This district — more commonly called a tax increment financing district or TIF — was extended in 2015 to pay for infrastructure for a new development on the northeast corner of that intersection, which has yet to materialize.
In short, the whole thing was narrowly defined and limited in scope.
Generally, EDDs are intended to spur new development and economic growth. In the case of Stirling Lafayette, the goal was to create new jobs, attract new retail that’s more accessible to surrounding neighborhoods, and spur development of the surrounding land, all of which will increase property and sales tax revenue for local government.
Many regard this project to be a success. The development got built, hundreds of jobs have been created in the area, and the property now generates hundreds of thousands a year in new tax revenue for local government; the bond was even paid back quicker than originally projected. Seemingly the only fly in this ointment is the fact that to date there’s been no development of adjacent land other than a gas station.
But these new EDDs aren’t like the Target development
None of these new EDDs include all of the ingredients in Stirling Lafayette’s model: a specific development that needs specific infrastructure with a specific budget.
Here’s a table that breaks down the ingredients of each of the proposed EDDs relative to the model established by Stirling Lafayette:
|Trappey||Downtown||University Gateway||Holy Rosary||Northway||Acadiana Mall|
|Specific development||Trappey Riverfront||None||None||Holy Rosary Institute||None||None|
|Tax||2% sales + 2% hotel||1% sales + 2% hotel||1% sales + 2% hotel||1% sales + 2% hotel||1% sales + 2% hotel||1% sales + 2% hotel|
|Term||40 years||25 years||25 years||40 years||25 years||40 years|
Only two of the new EDDs have specific developments: Trappey and Holy Rosary. Two others, Downtown and University Gateway, outline infrastructure improvements that support an array of different development. Cooperative Endeavor Agreements for the Northway and the Acadiana Mall don’t really offer any definition of what specific developments will be supported.
Four of these EDDs do provide at least some specificity of what types of infrastructure would be invested in, but all six also include broad lists of qualified infrastructure and development expenses.
Put simply, the scope of the development activities in these new EDDs is loosely defined and broad, and they’re set to last a really long time. That’s not remotely what happened with Louisiana Avenue.
By not designing these EDDs narrowly, we create the potential for a number of unintended risks.
How do we know if the economic benefits these EDDs are designed to achieve will actually happen? Charles Landry, the lawyer LCG hired to create the districts, actually wrote a four page article highlighting best practices for the creation of EDDs. In it, he says that many governing authorities will choose to hire third parties to analyze the economic benefits of these projects. They do that to show the projects have public benefit, as required by state law, and aren’t strictly for private enrichment. Yet none of these proposed EDDs has taken that step and instead all use the same generic list of economic benefits.
How do we know if these EDDs will collect the right amount of tax revenue? The Holy Rosary EDD has a great vision to redevelop the Holy Rosary Institute but the only significant retailer in its boundary is a Dollar General. It’s not clear how this EDD will ever generate a meaningful amount of money. Conversely the Acadiana Mall EDD would generate more than $50 million over its 40-year term if it continues to generate the $130 million in retail sales it did last year, according to LEDA’s economic analysis. That’s more than the $39 million the mall sold for a year ago. And because we don’t know what specific infrastructure is going to get built over what timeframe and how much that will cost, even if we knew how much money these EDDs will generate — which by and large we don’t — we still wouldn’t know if that’s enough money to accomplish the goals we’re setting out to achieve by establishing these EDDs in the first place.
How do we know that any of these developer partners will still be around in 25 to 40 years? The partners to these EDDs include two private developers, two non-profits (on one district), one not-for-profit corporation and one government agency. But there are no guarantees that any of them will still be operating decades from now. Even the government agency — the Downtown Development Authority — will have to survive three millage renewals over the 25-year term of the Downtown EDD’s new taxes, which is not assured in our anti-tax climate. If any of these partners are no longer viable, that will either shut the EDD down or that partner could transfer its rights to access these public dollars to another party.
What if poor implementation of these EDDs kills public trust in general? It sometimes feels like our elected officials have still not woken up to the depths of anger and mistrust among a huge swath of the public against local government. Over the last few years, our community hasn’t just voted down every new tax that’s been proposed, we’ve also voted to not renew taxes for the library system and the state-mandated parish correctional center and courthouse. The combination of years of mismanagement in local government, years of broken promises by elected officials, years of economic stagnation, and years of anti-tax activism have created a perfect storm of anti-tax sentiments.
At a time when extreme sensitivity and public outreach is needed around anything related to taxes, especially consideration of new taxes, this push to cram a slate of new taxes will only stoke the flames of anti-tax activism, making it harder still for any attempts at even considering the possibility of generating new tax revenue in the future.
The reason these issues matter
To be clear, the point of this analysis is not to cast doubt on the need to invest in these areas of our community. In fact, it’s because these communities need investment that we should be very deliberate about how we make those investments.
For years now, Downtown has endured chronic underinvestment from LCG in maintaining its existing infrastructure, which has deteriorated to a point where it’s actively preventing new developments from moving forward. Northgate Mall has seen stores closing as development moved south and the neighborhoods around it struggled economically. University Avenue and its surrounding neighborhoods have devolved from a hub for commerce to an area riddled with blight and economic suffering. Redeveloping Holy Rosary has been an aspirational vision for years, a symbol of our past and, if developed, hope for our future. The Trappey canning plant has been an untapped resource for decades, one of the greatest opportunities for redevelopment left rotting away. Acadiana Mall has seen its own struggles in more recent years, and it faces a very uncertain future as retail trends move away from malls and its ownership changes hands between bankrupt and bargain-hunting absentee landlords.
All of these areas have legitimate needs, but we can’t ignore the fact that the way these EDDs are being proposed will bind the city to collect taxes for decades and aren’t easily changed in the future.
But there is another way we can still move forward. Rather than plowing ahead with implementing 25- and 40-year taxes with broadly defined expenses, we could follow the model established by the Stirling Lafayette development.
To do that we would have to go back to the drawing board and come up with lists of specific infrastructure needs with specific costs and then design the taxes to only collect enough money to pay for those costs.
Doing this will limit our risks if something goes wrong and give us a chance to prove out that this model can work and that these developer partners can be trusted to transform public dollars into the economic benefits we’re being promised before we sink decades worth of public investment into these endeavors.
Also, by taking this more incremental approach, we can at least attempt to start rebuilding trust between the public and our local government. Because if we stay on this course of passing 12 new taxes while the majority of our elected officials are on their way out of office, then we’re just feeding the beast of mistrust in government.