St. George backers argued Thursday that they would still have a surplus, perhaps as much as $10 million to $15 million, when they launch the city despite recent annexations of the Mall of Louisiana and other commercial property by the city of Baton Rouge.
That’s the opposite conclusion of a report released last month by the Baton Rouge Area Chamber and Baton Rouge Area Foundation that argued the proposed new municipality could start as much as $9 million in the hole and that property taxes would have to rise as a result.
The Committee for the Incorporation of St. George posted its rebuttal to last month’s report late Thursday morning.
Commissioned by BRAC and BRAF, local accounting firm Faulk & Winkler found that the proposed city of St. George’s anticipated $80 million in revenue has dropped to $51 million as a result of annexations drawing away sales taxes that make up the majority of the budget.
St. George has lost out on sales tax dollars as more and more businesses have petitioned to be annexed to Baton Rouge, including the Mall of Louisiana, L’Auberge Casino, Celtic Studios, Costco and more.
Faulk & Winkler also questioned whether the new city could operate for the estimated $60 million in expenditures. The firm, for instance found that St. George’s per capita cost was half the average of nine other similarly sized southern cities.
The St. George report, which was written by members of the St. George Committee, argues Faulk & Winkler wrongly included in its comparisons some expenses — for instance, for the library and Sheriff’s Office patrols — that are paid for through separate taxing entities. Take those expenses out and St. George actually is spending more on average than the nine other municipalities, it found.
The new rebuttal also repeatedly contrasts Faulk & Winkler’s work with a report released in 2013 that also was paid for by BRAF and BRAC and authored by LSU economist James Richardson. His report cautioned that the city of St. George would pull away 40 percent of the sales tax money that’s going toward city-parish operations.
Citing the Richardson study, published in December 2013 before many of the annexations, St. George backers say the new city would receive some $25 million more in revenue than what Faulk & Winkler says the city would receive.
“How are the numbers of the Richardson study and the new study so vastly different?” the rebuttal asks.
“Strange … it is almost like BRAF and BRAC paid two separate contractors to tell two different stories,” the rebuttal says at another point.
To make up for the alleged shortfall as well as to pay for as many as eight new schools for a proposed companion school district, Faulk & Winkler found that property taxes would have to rise at least 20.5 mills. A person with a $350,000 house, claiming a homestead exemption, would pay $720 more in property taxes per year.
“It is no surprise that their report indicated an increase in taxes,” said Lionel Rainey III, a spokesman for St. George.
He noted a recent poll found that if taxes went up, people would not vote in favor of St. George.
Rainey said Richardson’s numbers would leave the city of St. George with a surplus between $10 million and $15 million.
The proposed city’s one-page budget, developed in 2013, would leave a surplus of only about $4 million.
Either way, Rainey said, St. George has no plans to raise new taxes.
Representatives with BRAC and BRAF referred questions Thursday to Tommy LeJeune, a partner with Faulk & Winkler.
“We went fresh and based it on our own effort,” LeJeune said. “Although we had the Richardson report, we relied on our work.”
The company forecast lower sales tax collections, which led it to predict lower revenues, he said.
Faulk & Winkler used sales tax collections from 2013, breaking the numbers down by population as well as by zip code. The population approach came in $10 million less in revenue than the zip code approach. The firm then averaged the two, but LeJeune said he believes the population approach is likely closer to the mark, which would mean an even greater deficit awaiting a city of St. George.
Richardson, for his part, said Thursday that he has read neither the Faulk & Winkler report nor the St. George rebuttal. Richardson said it’s hard to come up with good estimates, particularly for sales taxes, because the numbers are not broken down in a way that you can make a precise measure of St. George sales activity.
Richardson also agreed that St. George is likely underestimating how much running a city of that size will cost.
“This is not Central,” he said. “This a major metro area that covers a wide area that will want services.”
Rainey disputed such contentions, saying the new city will be much more efficient than traditional cities.
Rainey said St. George relies on finance professionals to help it with its financial forecasting. While he disputed Faulk & Winkler’s report, he said St. George welcomes scrutiny and will update its official budget soon.
“We’d love somebody to show us where we’re inaccurate or where we’re wrong,” he said.