Two LSU professors said Monday that organizers of the proposed city of St. George are overestimating its revenues and underestimating expenses, which would lead St. George to a deficit.
Those who support incorporating a new city in the southeastern part of the parish have promoted the idea St. George would operate with a surplus. St. George organizers and volunteers are collecting signatures on a petition that would allow voters within the proposed city limits to approve or reject the incorporation. The organizers have until late November to collect signatures from 25 percent of registered voters inside of St. George’s proposed boundaries.
Speaking Monday before the Baton Rouge Press Club, LSU economist Jim Richardson and Public Administration Institute Director Jared Llorens said the organizers' estimated surplus is not accurate. The LSU professors' study was paid for by a new nonprofit called One Baton Rouge, spearheaded by political consultant Michael Beychok. The group paid $17,500 for the study, and Beychok said the money came from private donors.
Richardson — who helps lead the state’s revenue estimating conference — said St. George should expect to receive $45.8 million a year in revenue from taxes. The St. George organizers have estimated the city would receive $58 million a year in revenue.
Richardson and Llorens used city-parish revenue figures of tax collections within the proposed St. George city limits to derive their $45.8 million estimate.
“Technically then, unless you’re planning to raise revenue, then your budget constraints are $45.8 million,” Richardson said. “That’s how much you have to spend, period. And the question then is how much spending do you have?”
Their $45.8 million a year tax revenue estimate is similar to the city-parish’s own analysis of how much money St. George might expect. The city-parish finance department delivered a report in May that said St. George could expect to receive $45.4 million in revenue.
While the city-parish’s own analysis did not delve into spending, Richardson and Llorens found a major discrepancy on that side of the ledger as well for St. George. The LSU professors said St. George should be prepared to spend around $51 million annually, which would be more than the revenue estimated by the professors and the city-parish.
St. George organizers, however, dispute the calculations.
”We have to start by challenging their estimate on our expenses,” said Drew Murrell, an attorney and spokesman for the St. George campaign. “They created that estimation by how Baton Rouge has been doing things, which is exactly our point. … It assumes we’re going to operate in the same mismanaged, bloated way East Baton Rouge operates in now.”
Richardson and Llorens used two types of measurements to come up with their $51 million spending projection. They used a ratio of 22.2 percent in comparison with the city-parish budget to determine how much St. George would need to spend in certain categories. They used that figure because St. George would represent 22.2 percent of the parish’s population, excluding Baker, Central and Zachary.
On the other hand, accountants with Carr, Riggs and Ingram who created St. George’s proposed budget used the figure 19.2 percent to compare spending with the city-parish budget. They chose 19.2 percent to represent St. George as a percentage of the total parish population, including Baker, Central and Zachary. In responding to the presentation Monday, Murrell said it does not make sense to exclude those three incorporated municipalities from the calculations.
Richardson and Llorens also compared spending at cities similar in size and geographic footprint to St. George, which estimates a population of 86,000 spanning 60 square miles. Their $51 million spending estimate includes more than $12 million for public works, more than $12 million for courts and corrections spending, and more than $9 million for executive and legislative spending.
The proposed city should also expect to be paying for road maintenance, drainage, contracts for various governmental services, city-parish pension buyouts and more, they said. While Llorens and Richardson estimated $47.6 million in spending, they added on $4 million that St. George organizers have proposed giving to the East Baton Rouge Sheriff’s Office for additional police protection.
Murrell said it's unclear what “comparable and noncomparables” the LSU professors used to derive their figures when they looked at other municipalities. He also challenged their estimate that St. George would owe the city-parish $8.9 million annually to the city-parish for pension costs.
Murrell recalled a 2014 report from Faulk & Winkler about St. George that said the proposed city would owe the city-parish $3.6 million a year for legacy and pension costs. And he pointed out that the Faulk & Winkler figure was published when St. George was expected to be larger than it is now.
St. George’s proposed budget says the city would spend $34 million a year, and have a surplus of $24 million. Organizers have previously suggested they could use that surplus for infrastructure projects, rather than having to repay bonded debt. And they have said St. George would save money by contracting services, rather than hiring government employees and incurring costs like health care and pensions.
Llorens questioned during the Press Club presentation Monday whether contracting workers is a surefire way to save money.
“This is one of those areas that we’ve identified as ‘known unknowns,’” Llorens said. “You know that you can contract out and outsourcing is always an option, [and] unknown is whether or not it costs you more or less and whether you’re going to be paying for greater or lower quality services, and how you actually realize those savings.”
Murrell said Monday that St. George would try to save money through many means, but they would pivot from contracting services if it becomes too expensive.
“We’re going to be small enough and flexible enough to meet the needs of our taxpayers,” he said.
This is the second time Richardson and Llorens have delved into the St. George budget. They performed a 2013 study on St. George’s proposed finances during the initial, unsuccessful incorporation campaign. St. George organizers fell 71 signatures short in 2015 of forcing a vote on incorporation. At that time, the footprint for the proposed city was larger than the current proposed boundaries.
The Richardson-Llorens study during the initial incorporation campaign found that St. George would have led to a $53 million budget shortfall for Baton Rouge city-parish government. The Baton Rouge Area Chamber and Baton Rouge Area Foundation paid for that study, which occurred before City Hall annexed a number of major retailers into its boundaries that otherwise would have fallen inside of St. George.
The new iteration of their study presented Monday does not focus on how St. George would affect the city-parish’s finances. BRAC has also released its own report — which Richardson said Monday he had not reviewed — and announced its opposition to the creation of the proposed city. Forum 35, a nonprofit for young professionals in Baton Rouge, also recently announced its opposition to the campaign.
Beychok, who helped run Mayor-President Sharon Weston Broome’s mayoral campaign, said Monday he created the One Baton Rouge nonprofit within the past month. The Louisiana Secretary of State’s Office lists him as its registered agent, and Cordell Haymon and Donna Mayeaux as other officers.
Neither One Baton Rouge organizers nor St. George organizers have disclosed their financial backers.
Beychok said Monday that One Baton Rouge is less of an “action” group than Better Together/Residents Against the Breakaway. But he said “the purpose of the group is to keep Baton Rouge together.”