For the past three years, Dylan Tête, an Iraq War veteran, has been planning a housing development for his fellow veterans.

Tête designed the complex, called the Bastion Community of Resilience, to help veterans avoid the sense of isolation he felt when he left the U.S. Army in 2005 and arrived in New Orleans, battling thoughts of suicide.

But for now, Tête’s idea is on hold, caught up in an arcane debate over how projects like his, which receive federal incentives for providing low-income housing, should be taxed.

It’s a debate with big implications for a city that badly needs more tax dollars to pay for things like police protection and schools — but also needs more affordable housing of the kind that Tête is proposing to build, a 78-unit property on Mirabeau Avenue in Gentilly, at the site of former Mirabeau Apartments.

Tête has received $558,000 in federal low-income housing tax credits. Developers get to sell those credits to investors in order to raise money for their projects, and the investors in turn get a break on their federal tax bills over a 10-year period. An investor might buy the credits from a developer for $500,000 and save $650,000 in taxes over the 10-year span.

The question is whether New Orleans should figure those tax credits into the overall value of the property, which would be reflected in higher property tax bills.

Orleans Parish Assessor Erroll Williams says yes, that the credits should count as income, just like the rent that an owner can expect from leasing out a house.

Developers — and the Louisiana Tax Commission, which reviews appeals of assessors’ decisions — disagree. The credits are a need, not a perk, they argue, because they make financing possible and because developers can get the credits only by agreeing to keep rents low. Those low rents, in turn, mean that projects are often unable to generate enough income to pay higher tax bills.

The spat, in developers’ eyes, amounts to a serious threat to New Orleans’ already inadequate supply of affordable housing, while Williams and those who agree with him say critics are simply trying to avoid taxes that would otherwise benefit a cash-strapped city.

Tête claims the difference of opinion could bankrupt him. He says the city could tax his building more than $170,000 annually if it takes the credits into account, about $114,900 more than he would otherwise pay.

He said he can’t afford both the higher property taxes and his loan payments.

“Based on the (estimated) assessment from the property Assessor’s Office, we’re not going to be afford to build this project,” Tête said.

So far, Williams — and by extension, the city’s budget — has been losing this argument.

More than two dozen other city developments or partnerships have received the same type of low-income credits, according to a list provided by the Assessor’s Office. Most have produced multifamily apartment complexes or shotgun double homes. The state Tax Commission has consistently overruled higher assessments from Williams.

In past rulings, the commission has decided that credits are an “intangible benefit” for project investors, not income, and thus are exempt from property taxation under state law.

Williams counters that the credits are a very tangible part of the overall property’s value.

The competing ideas lead to drastically different appraisals: Use of Williams’ preferred method in six appraisals led to property values that were on average 72 percent higher than their value under the Tax Commission’s method, according to documents he provided, amounting to a $10.9 million difference.

The result is less money in the city’s coffers, Williams said.

He also questioned the fairness of the state agency’s method, given that it is typically big developers and investors who take advantage of the tax credits, rather than small property owners who must then compete with the lower rents offered by the big guys.

“The tenant goes to the guy who rents at $500 a month,” Williams said, referring to properties built with money from credits. “That’s happening all over the city.”

Developers say that argument is nonsensical. Affordable housing, given the low rents involved, does not typically throw off big profits, said David Miller, of Renaissance Property Group LLC, Bastion’s developer. On the contrary, he said, it “is generally established to operate at a level just above break even.”

Christian Hooper, of Riverlake Properties, which is not affiliated with Bastion, said the prospect of higher property taxes could have a chilling effect on new developments, which could undercut the city’s goal of adding 5,000 additional affordable housing units by 2021.

“Mom and Pop can go out and apply for tax credits just like Renaissance Property Group can,” Miller said. “Most people won’t, though, because it’s an extremely complicated program, and it’s not something you dabble in.”

Still, Williams is not the only one who thinks developers are getting too sweet a deal on their taxes.

Making the same argument, St. Tammany Parish Assessor Louis Fitzmorris sued the owners of the Groves at Mile Branch in Covington and the state Tax Commission in December, though no judgment has been issued.

New Orleans City Councilwoman Stacy Head has been sharply critical of attempts to exempt properties from taxation or shield tax credits from inclusion in appraisals.

It’s also a national debate. As of 2006, 18 states had seen court decisions on the issue, and 22 had legislation to address it, according to a report from the John Marshall Law School in Chicago. Most statutes are favorable to tax-credit property owners, but many court decisions are not, Marshall’s Joseph Rosenblum found.

Proposed laws on the matter have been introduced and killed in the Louisiana Legislature twice in the past two years: in 2014 in a bill that favored assessors and in 2015 in a bill that favored developers.

The Orleans Parish Civil District Court has been more decisive: It sided with developers after Williams challenged the Tax Commission’s appraisals of the Muses Apartments on Baronne Street and Wisdom Manor on Quince Street last year. The Muses case is on appeal, and Williams’ appeal for Wisdom Manor is forthcoming.

The legal fight will set precedents, Williams said. He resents being painted as anti-affordable housing, a characterization he said was ironic given that he grew up in a public housing project himself.

“I don’t have any personal interest in this other than to follow what I think is good, sound appraisal policy. Period,” he said.

As the court battle plays out, Bastion’s backers have petitioned the city’s Industrial Development Board, a nonprofit public corporation that issues tax-exempt bonds and tax reductions. They want that panel to grant the project a 35-year PILOT, or payment in lieu of tax, which would allow the backers to pay only what they would pay if the assessor did not count the project’s tax credits as income.

The board is expected to weigh the matter in March, and a favorable board vote could mean a spring groundbreaking, Tête said.

He hopes it will be only the first.

“We’re building the first Bastion in New Orleans because it is a city that is familiar with trauma,” he said, “but more importantly, the people here understand and practice community.”

Follow Jessica Williams on Twitter, @jwilliamsNOLA.