When properties are taken off the tax rolls or when their valuations are reduced, the rest of the taxpayers pay more. This is because property tax calculations are simple math: the gross, citywide valuation multiplied by the millage rate. Thus, fewer properties or less property value to tax equals higher taxes for those who pay. Rep. Chuck Kleckley, R-Lake Charles, sponsored a state law, House Bill 682, to shield a large number of properties in New Orleans from paying their fair share of property taxes. As the City Council’s Budget Committee chair and a longtime advocate for property tax equity, Kleckley’s bill troubles me.
HB682 shields some developers of rental housing from fair valuation. It forces the assessor to use the “income approach” to value the property. Even more egregious is that it mandates that the assessor ignore part of the developer’s income when using the income approach. Kleckley seeks to protect select developers who develop rental property with the use of low-income housing tax credits granted through the Louisiana Housing Corporation. As stated by a supporter of the bill, these “generous” subsidies are given “in exchange” for the developers keeping their rents at a certain level for a certain period of time.
These subsidies are, most simply, prepaid rent in exchange for the developer’s agreement to forgo collection of a portion of the rent from tenants. To be clear, the rent is paid. It is just paid to the developer in advance in a lump sum.
Notably, the developers acknowledge the obligation to pay property taxes as an estimated operating cost in their gap funding subsidy application to the LHC. In turn, the LHC uses these estimated operating costs (including taxes) to evaluate the application and award the subsidy. For the state to then shield these developers from the actual obligation to pay appropriate property taxes would be letting them “have their cake and eat it too.”
Yet again, the state Legislature is considering a bill that will not impact the state’s fisc but will either cause significant loss of revenue for our local governments or force the tax burden on other property taxpayers. If you agree, oppose HB682.
member at-large, New Orleans City Council