The Recovery School District won approval Tuesday for a complex financial maneuver that will help it pay for the renovation of a St. Claude Avenue elementary school.
The city’s Industrial Development Board granted the school district’s request for a 10-year payment in lieu of taxes, or PILOT, on the property that will allow the district to use federal tax credits to save money on construction. The “payment” approved by the IDB calls for a payment of $0.
Without the PILOT, the RSD would have had to pay property taxes on the school if it had received the tax credits. Schools normally are exempt from having to pay taxes, but public companies, like the one through which the RSD would apply for tax credits, are not.
With IDB approval in hand, the RSD and the Orleans Parish School Board now plan to sell the school to Drew Elementary School Facility LLC, a partnership between USBankcorp and the RSD that the two school boards created for the exclusive purpose of owning the school and receiving tax credits.
The district is seeking about $3.1 million in federal tax credits to leverage against the renovation project’s $22.5 million budget. Much of the cost of the project is being covered by money the RSD has received from the Federal Emergency Management Agency for post-Katrina school renovations and replacements.
The school already is under construction and is expected to be occupied by Arise Academy, a charter school, starting this fall.
If the building is not used for a school, it will revert back to the Orleans Parish School Board.
The RSD and OPSB intend to use a similar arrangement to help fund work on four other schools.
The IDB approved the PILOT request 6-2, with Eugene Green and Edith Jones voting no. Green took issue with the school district’s decision not to submit a cost-benefit analysis or a “but for” analysis as part of its PILOT application — information required of other developers seeking PILOTS.
A “but for” analysis explains why the requested tax break is essential to making a project work financially.
Several board members also expressed discomfort with awarding a PILOT to the school district because it could not commit to the IDB’s normal requirements of 35 percent Disadvantaged Business Enterprise participation and 40 percent local participation on construction contracts.
The school district said that because the work on the Drew School was originally bid using FEMA funds, it is prohibited by FEMA regulations from employing “geographic preferences” in its evaluation of bids or proposals.
The Drew School project is part of a $1.8 billion effort, theSchool Facilities Master Plan, by the Recovery School District and the Orleans Parish School Board to rebuild schools damaged by Hurricane Katrina. Eighty-one schools are scheduled to be built, renovated or refurbished as part of the plan.
In other matters, the IDB approved a PILOT and lease agreement for Deep South Studios, which has proposed turning a 17-acre former railroad yard in Algiers into a $63.5 million film and television production facility.
Under that arrangement, the developer has agreed to pay the city a base PILOT totaling nearly $2.7 million over 10 years. The developer also has agreed to pay a supplemental PILOT if the gross income it reports to the state begins to exceed $10 million annually.
Editor’s note: This story was changed Jan. 14 to clarify that the “payment in lieu of taxes” that the RSD is responsible for under the new arrangement amounts to $0.