As Parish Councilman Josh Carson put it at a recent council meeting, Lafayette Parish government faces a lose-lose proposition. Either raise taxes, without a public vote, at a time when many people are already struggling to pay their bills, or significantly reduce parish government’s capacity to maintain essential services like roads, drainage and public safety.
The parish is in this pickle because, for the first time in decades, the assessed value of property in the parish declined — a pretty substantial 6.6%. This undid the last five years of growth and could erase $3.9 million from the parish budget next year.
But parish government doesn’t have to lose this revenue. State law allows it to increase property tax rates without calling an election to offset drops in revenue to keep essential services going.
Of course, raising taxes without giving taxpayers the opportunity to vote on it, especially when thousands are out of work, is not the way to win a popularity contest in Lafayette. And there’s been a steady chorus of people — most prominently Mayor-President Josh Guillory — preaching the gospel that government needs to live within its means. With people tightening their belts, the slogans go, politicians should be tightening their belts, too.
But that politically expedient rhetoric glosses over the real impact not raising property taxes will have on parish residents. Put simply, there’s no more fat left to cut from the parish’s budget. So if the parish doesn’t raise these property taxes, it’s going to exact a serious cost on the delivery of essential services in the parish.
Big cuts to services most agree are “essential”
Parish roads, bridges and drainage will lose almost $1.2 million next year. The millage dedicated to parish roads and bridges stands to lose almost $650,000, while the one dedicated to drainage will drop more than $500,000 if parish government doesn’t raise taxes. That’s more than $1 million in essential infrastructure work that won’t get done next year.
As a reminder, the parish already faces a backlog of more than $60 million worth of roadwork and potentially hundreds of millions of investment that’s needed to restore and improve our parish’s drainage capacity. So losing this revenue will only add more miles to the backlog.
The millages dedicated to the parish jail and district courthouse will lose almost $700,000 next year if parish government doesn’t raise taxes. But neither the jail nor the courthouse can afford to cut their budgets at all.
Just last year, the Lafayette sheriff sued parish government for not paying enough to properly operate and maintain the jail (M-P Joel Robideaux countersued on his way out). And in years prior, the district judges have threatened to sue parish government for basically the same problem at the courthouse.
Both facilities already pay the bare minimum or less to keep public safety infrastructure operating. And, if Guillory gets his way and the Parish Council allocates $3.5 million to fix the Buchanan garage, there won’t be any savings left to tap into.
That means without tax increases neither the jail nor the courthouse will have any money available to pay for any unforeseen expenses or unexpected repairs for at least the next year and likely much longer.
Less than zero
That’s how much money the parish general fund will have. As it stands, without stabilizing revenue, the parish general fund will lose at least $266,000 next year from the millages dedicated to its general fund. Mind you, the parish general fund is currently budgeted to end next year with a fund balance of only $50,000.
But losses from other dedicated funds — including those public safety taxes — could force another $700,000 in costs on the parish general fund. State law mandates that the parish pay for those operations, come economic hell or high water.
Almost $5 million of the parish general fund’s expenses go to other state-mandated services like the district attorney’s office, the district judges, the registrar of voters and more. These are all essential services that have arguably been underfunded for years and have had to beg to minimize an endless stream of budget cuts due to the parish’s failing finances.
Most of the rest of the parish’s general fund pays for the parish’s share of operating Lafayette Consolidated Government. In theory, the parish could lower those payments, but it’s not clear if the City Council would approve any budget that puts more of the financial burden for operating LCG on the city when many city advocates feel as though the parish already hasn’t been paying its fair share.
Literally the only things left to cut in the parish general fund are funding for the 4-H program, Acadiana Open Channel, and fire protection in unincorporated Lafayette. But even if the Parish Council were to zero out 4-H and AOC — which would cripple an important educational program and end live coverage of parish council meetings — it would still have to cut around $600,000 from the $1.4 million budget for fire protection in unincorporated Lafayette.
The parish has no other viable options
The parish doesn’t have enough savings to offset any of these potential losses of property tax revenue. Technically, the parish does have the capacity to sell bonds, but taking on debt to cover operating shortfalls is not sustainable and arguably not a financially sound thing to do, especially at a time of such incredible economic uncertainty.
While some have suggested that voters should get to decide the fate of these increases, that’s not an option either because of timing. The earliest any vote could be put on a ballot is March. And even if the public voted to approve these tax increases, they wouldn’t go into effect until the following year.
So the only real options parish government has are to raise taxes without a public vote or cut $3.9 million from essential services in the parish’s budget and suffer the consequences.
Ball is now in Guillory’s court
The Parish Council voted to approve these millage increases last week by a 3-1 margin after multiple attempts to defer the vote and extensive discussion. Now Guillory has 10 days to either approve the increases or veto them.
This is an extremely tough position for him to be in. He has maintained his philosophical opposition to raising taxes, especially beyond what taxpayers initially authorized without giving them a chance to vote. But he has not yet proposed any plan for how to cut $3.9 million from the parish budget if these taxes aren’t increased. And as we’ve just covered, not raising these taxes will mean having to cut spending on the exact services he has deemed essential — those many would argue are in need of more funding, not less.
Making this situation all the more politically challenging is that the assessed value of residential property actually went up this year. So that means the burden of paying for any increase in property taxes will fall more on residential property than commercial.
I don’t envy either the Parish Council or the mayor-president for being in this position. Saying that government should live within its means is one thing, but forcing the parish to live within a reduction to its already meager means is something else entirely. Whatever decision is made, this may only be the beginning — because we don’t know when, or even if, assessed property values will recover.
2/3 rds of all revenue are from taxes that are based on % of sales or property values. Sales taxes are a % of price and property taxes are a % of value. Both are up. So the problem is not the income, the problem is that again we are talking about adding increasing % of tax to pay for ongoing and pending reoccurring expenses, while at the same time adding to the capital development for our infrastructure, with no way to pay the new capital infrastructure ongoing expense and depreciation. Then we take the allocation of state discretionary capital outlay to the parish, as well as the parish revenue, and use it as subsidy for more capital projects we have now budget to ongoing operating expense and depreciation, or to entice movement people and development to the municipalities. Which in turn adds to the ongoing operating expense and depreciation cost. So to take 40 years of misapplication of state revenues and parish revenues to subsidize municipalities and unfunded capital expense/depreciation, then tell the taxpayer we should not complain about increasing higher tax rates without their support, will solve the problem is insulting to all reasoning. It will only encourage the subsidy of our failed development model. Read Strong Towns. Lafayette is the poster child for failed policy. LEDA has been allocated $5.6 MM to build the Opportunity Machine building downtown. That will take the annual operating expense on a yearly bases from its present annual $350,operating expense to closer to $1mm. Use that money to close the gap. Or take the $2mm dollars allocated from the city and APC to the "Bottle Lofts", Need I go on.
Unless we change, nothing will change.
Tim - To be clear, you have every right to complain about taxes going up just to keep the lights on! All I was trying to do in this piece is make sure everyone realizes the near-term costs of not raising taxes because of the parish’s dire financial straits.
You’re 100% right that the reason the parish is in this situation is decades of fiscally irresponsible policymaking and unsustainable development patterns that we’ve been incentivizing with capital outlay dollars.
Unfortunately we can’t use LEDA’s money to prop up the finances of parish government because LEDA has its own dedicated millage, unless you can convince LEDA’s commission that spending money to cover parish government’s obligations is the best way for them to foster economic development. And we shouldn’t be using any more of the city’s money to prop up the parish’s finances.
I completely agree that something needs to change. Both the city and the parish need to start considering the total cost of ownership of all their existing infrastructure and services relative to their funding and also make sure they understand the added cost of ownership and the ability to pay for that before investing in any new infrastructure or service project.
Because if they don’t then we’re going to keep making the same mistakes, like spending $3.5M to fix the Buchanan Garage, which only generates $90k/year in income yet needs more like $180k/year to be spent on properly operating and maintaining it. Moving forward with that project is either going to obligate the parish government to spend almost another $100k/year of tax dollars that it doesn’t have to properly operate and maintain this garage, or we’re just going to not properly maintain it, which is what got this structure condemned in the first place, and end up right back in the same position in a few years of having a garage that’s fallen into such disrepair it becomes a public safety hazard.
Based on the data at the time, Gosh was right to tell the council they had to cut the budget. And in the end he will be right, just the timing is off. And it will be more obvious next year, when we have this same debate. What changed is the"surplus" or new found money from sales taxes. But that is only because the government is borrowing for the different stimulus plans to fight Covid created economic downturn. People making minimum wage got a 30% raise by not working. The already unemployed got more money, not less. And worst of all, basically every person making under $100,000 a year got a $1,200 check from the government. Many people didn't pay their mortgages or rent. This increase is sales tax revenue is going to go away immediately. Next year is going to be the worst year for Lafayette, ever. And the year after that, maybe even worse. Unless of course we issue more "stimulus" money, then it will be the year after that, or .... So forth and so on.
What is probably right is Conrad's best guess on real estate values. Except his commercial values are probably too high. When those assessments go out, he is going to get a lot of calls from commercial office buildings owners. He will not be able to justify the assessed amounts. He may not lower them for this year, but next year he will have to. And LEDA is going to get the state to subsidize the build out of more office building space. Like Op Machine. And then And LEDA is going to get the state and/or LCG to subsidize the build out of more office building space and tout it as "economic development". Like Opportunity Machine. watch.
Residential valuations should go up a little next year, but that is only because of artificially low interest rates. That automatically raises home values. The government has nationalized this credit markets, so it is now totally disconnected from supply / demand dynamics. Every person buying a home below $300k, will have negative equity in 5 years.
Below article from the Advertiser is the reason why we should be against raising local taxes. And the only reason. Until the system breaks down completely, we are never going to look at where the real money is going. This is exactly what Strong Towns told us not to do. Remember the guys we hired to advise us.
The only real answer is to stop letting the LCG council, APC, and A1 direct federal and state money to the capital projects that are putting us in more dire financial straits.
from the advertiser.Gateway Laf.https://www.theadvertiser.com/story/news/local/2020/09/11/louisiana-lafayette-10-million-federal-grant-university-avenue-project/3461102001/
Boulet said government agencies are making investments in the area through the $30 million Gateway Corridor project and the $35 million Bottle Art Lofts project, partially funded by taxpayers.
Republican U.S. Sens. Bill Cassidy and John Kennedy announced the U.S. Department of Transportation grant Thursday. The grant will bolster local funding for the $30 million project to restructure a one-mile stretch of the avenue south of its Interstate 10 underpass. (the Republicans are worse than the Democrats, at hypocrisy) But this is really a bipartisan whirlpool we are in
What I don't know is whether or not technology and innovation can drive down the cost of production sufficient to pay off the debt. I hasn't worked for Japan.