Despite a new state law aimed at banning the practice, one New Orleans-area assessor apparently will continue to appraise certain affordable housing developments as he always has — a move that could spark the fourth legislative battle in four years over the matter next spring.
St. Tammany Parish Assessor Louis Fitzmorris says he is relying on a district court ruling this month that says he has broad discretion on how to appraise properties that receive certain federal tax credits, as well as on his reading of the new law aimed at limiting that discretion.
The law, Act 182, bars assessors from including certain tax credits and other affordable housing incentives in figuring a property’s fair market value — a practice that can lead to higher tax bills. But the law does not bar Fitzmorris from calculating the income a tax-credited property could generate, if not for its reduced rents, and then figuring that income into the property’s value, his attorney said.
“We can do this,” attorney Christian Weiler said. “And we will do this, in spite of Act 182.”
Developers must agree to keep their rents low in order to receive the tax credits, which they then sell to investors in order to raise money to build their projects. The investors in turn get a break on their federal tax bills, usually over a 10-year period.
Whether those low rents should shield developers from normal property tax rates is a debate that has long pitted some assessors against developers and the Louisiana Tax Commission, the agency that oversees the state’s assessors and reviews their assessment rolls.
Fitzmorris and Orleans Parish Assessor Erroll Williams have said the credits are an ownership benefit — similar to rent an owner receives for leasing a house — that must be figured into a property’s overall value, pushing up their tax bills. Developers, however, argue that the low rents make it impossible for them to pay the higher taxes, and the Tax Commission sides with them.
Until Act 182, lawmakers had tried but failed to pass definitive laws favoring one argument over the other. This year’s bill, though, was designed to put an end to higher tax rates for affordable housing, a move housing advocates supported.
But Weiler said the law doesn’t specifically bar Fitzmorris’ appraisals of those properties. Further, 22nd Judicial District Court Judge Martin Coady in a ruling this month sanctioned Fitzmorris’ appraisal of the Groves at Mile Branch on Purslane Drive in Covington, a mixed-income development.
Fitzmorris valued that property at $5.1 million, using an approach he said is nationally accepted. The owners balked and went to the Tax Commission, which advises assessors to modify that nationally accepted approach when dealing with such properties. The commission reduced the property’s value to $2.3 million, and Fitzmorris filed suit.
Coady found that the Tax Commission “exceeded its statutory authority and ... committed an error of law in this matter” because he said Fitzmorris is not required, under state law or by commission rules, to use the modified approach the commission recommends.
The court ruling ensures that Groves’ owners and investor First NBC Bank will pay what they are supposed to pay in property taxes, Fitzmorris said.
“If (First NBC) is not paying its fair share of taxes, then you, me and other taxpayers in St. Tammany Parish must make up the difference,” he said.
Because Fitzmorris will continue to value property as he has done, lawmakers might introduce more specific language mandating the use of the Tax Commission’s favored approach next year, Weiler said.
The Tax Commission could also appeal Coady’s decision to the 1st Circuit Court of Appeal in Baton Rouge.
Williams, the New Orleans assessor, has counted the tax credits themselves as property income — a different approach from that of Fitzmorris. Williams said he plans to follow the new law and cease that practice, if necessary.
“We must follow whatever the Legislature says to do,” he said.
Follow Jessica Williams on Twitter, @jwilliamsNOLA.