A new report from an accounting firm hired by organizers of the proposed new city of St. George says no additional taxes would be needed to run the city’s governmental operations.
The report by the accounting firm Carr, Riggs and Ingram said the new city would have a healthy budget surplus of at least $9 million and that East Baton Rouge Parish would suffer a deficit of $14 million, or 6 percent of its general fund revenues.
But the report’s assertions were disputed by opponents of the incorporation effort. They say the St. George group has a faulty understanding of the way the city-parish budget works and would collect much less revenue than projected. And, they note, the report doesn’t include the cost of building new schools to serve the proposed new city.
The issue of whether St. George would have to raise taxes has been significant for friends and foes of the movement.
Baton Rouge officials have used the threat of unknown tax increases to lure businesses out of the proposed city of St. George and to scare off tax-averse voters.
St. George organizers, meanwhile, have maintained they would run a streamlined, efficient government that wouldn’t be as wasteful as the monolithic parish government.
The CRI financial report, released Wednesday by St. George organizers, estimated annual city expenses for St. George at $54 million to pay for everything, including its own city council, police protection provided by the Sheriff’s Office, and services such as public works.
The East Baton Rouge Parish budget, in contrast, is more than $800 million. The report also found the city would have revenues of about $65.5 million, of which $59 million would come from sales taxes.
However, city-parish officials say they stand behind a December report, conducted by accounting firm Faulk and Winker and paid for by the Baton Rouge Area Chamber and Baton Rouge Area Foundation, which found St. George would have to raise property taxes by at least 20.5 mills to cover city operational costs and build schools to accommodate the number of students living in the area.
The St. George report did not address whether the cost of an independent school system, associated with the mission of the new city, would result in tax increases.
“The most glaring problem with this CPA report is the exclusion of any expenditures associated with a new school district, which St. George always says is the point of a new city,” said M.E. Cormier, a leader with Better Together-Residents Against the Breakaway. “Where will these children go to school? And how will these schools be built? The city doesn’t even exist yet and they’re not thinking about their students.”
William Daniel, chief administrative officer for Mayor-President Kip Holden, said there are “glaring errors” in the way the firm calculated the projected St. George sales tax revenues.
The report, he said, appears to incorrectly include sales taxes derived from the industrial corridor of the parish, which includes the Exxon plants located north of downtown and is not within the boundaries of either St. George or of the city of Baton Rouge.
It also includes revenues from Towne Center, another parish retail giant anchored by Whole Foods. But, Daniel said, St. George would not benefit from those revenues.
Failing to separate those sales tax generators out of their budget, Daniel said, means St. George revenues are actually about $15 million less than what CRI projected.
He said the erroneous inclusion of those taxes alone would more realistically put St. George’s revenues at about $45 million, which is short of St. George’s projected $54 million expenditures.
The Faulk and Winkler report, which did parse out the industrial corridor and Towne Center from St. George’s revenues, estimated St. George would have revenues of $51 million.
Daniel said it’s clear that St. George organizers and CRI didn’t have a full understanding of the city-parish budget. He said they have never reached out to the city-parish to ask questions.
Daniel said the circumstances were different when the city of Central incorporated in 2005. He said Central organizers came to the table and the two parties negotiated a budget. However, the city-parish did not oppose the Central incorporation, as it is opposing the much larger St. George.
Asked if the city-parish would be amenable to budget talks with St. George, Daniel said that was unlikely.
“I think we’re beyond sitting down at the table to look at a budget,” he said. “They claim they’ve had a budget for two years without any input from us. Well, we’re past those kind of meetings.”
CRI partner C. Donald Wheat said in an interview Wednesday that it is possible his firm didn’t parse the sales taxes from the industrial corridor and Towne Center out because they were basing their assumptions from public documents that did not make that distinction clear.
But he noted that St. George’s budget also assumes it will generously pay back the city-parish about $17 million for the cost of parishwide offices including the district attorney, City Court and the Coroner’s Office.
Wheat said they are providing 60 percent of the city-parish’s costs to run these offices, but they only make up 24 percent of the population.
Wheat noted that’s a cost the organizers volunteered to pay, but he said they could have made the argument to pay a smaller, more proportionate share.
In the previous budget, St. George offered to pay 100 percent of those costs. However, critics of the city noted the pledge was not legally binding and said St. George officials could end up leaving the city-parish with unexpected deficits.
St. George’s budget also includes voluntary, small allocations for services including the Downtown Development District and the Baton Rouge River Center, which Wheat suggested could also be negotiated.
St. George organizers released their report with two weeks left before the group is due to turn in at least 2,700 signatures from registered voters supporting the city to bring the incorporation issue to a vote.
A petition was turned in last October for St. George’s incorporation, the largest drive in state history, but it came up short in signatures. If the organizers cannot secure the shortfall by May 28, the petition will be voided. St. George officials say they are still hoping to collect 500 more signatures.
This is the first time St. George has identified a professional agency to lend credibility to its budget projections. The organizers of the proposed new city had previously been relying on a one-page budget but said the projections had been cobbled together by unnamed volunteers and experts who used city-parish budgets as a source.
“Any negative economic impact of this incorporation on the city-parish government of Baton Rouge can be greatly reduced with sound financial management and planning from East Baton Rouge Parish during the transitional phase post-incorporation, which is likely to take several years,” Wheat said in a statement.
St. George officials described CRI as the 22nd largest public accounting firm in America and the largest in the southern U.S.
St. George Spokesman Lionel Rainey said he was satisfied a credible firm was backing the group’s claims that no taxes would have to be raised.
“We have stated from day one that we would not have to raise taxes to run a modern, competitively contracted form of government,” Rainey said in a prepared statement. “We are pleased to have that verified by a public accounting firm with the stature of CRI. We reject any notion or intentional misinformation presented to the public to the contrary.”
The original budget for St. George projected more than $80 million in revenue with $60 million in expenditures, but the new budget reflects recent annexations by the city, including the Mall of Louisiana and L’Auberge Casino. Those annexations altered projected revenues for the proposed new city.
The budget assumes St. George will pay $4 million in legacy costs to the city-parish, which was not included in its original budget. The Faulk and Winkler report estimated that St. George should pay $3.6 million a year for 30 years for legacy costs.