New Sales Tax Proposed by Republican Legislator Aimed To Address Federal Levee Failures Is Fraught With Legal Issues, Morrell & Others Say

File:New Orleans – Eastern New Orleans Levee Work Ap 2006.jpg” by Infrogmation of New Orleans is licensed under CC BY-SA 4.0

Former state Senator J.P. Morrell said today that Senate Bill 226, if approved as written, could likely end up in court because it would force Orleans and four other parishes to pay for the costs associated with an agreement that was negotiated between state and federal government. Morrell previously chaired the state Senate’s powerful Revenue and Fiscal Affairs Committee where the legislation is slated to be heard. 

“The State of Louisiana signed up for the obligation to repay the funds. The parishes of Southeast Louisiana did not negotiate a deal with the federal government,” Morrell continued. Rural and upstate legislators unfriendly to New Orleans often try to pit the parish against the rest of the state. In this instance those same forces are trying to cause a riff with an entire, diverse geographic region. “Just imagine the massive litigation this bill could cause,” he explained.

A hearing on SB 226 has yet to be scheduled. New Orleans state Senators Troy Carter and Karen Carter Peterson are members of the 11-person Revenue and Fiscal Affairs Committee along with state Senator Gary Smith Jr. of Norco in St. Charles Parish which is also part of the proposed taxing district. Neither Carter nor Peterson were available for comment.   

Introduced by state Senator Mac A. “Bodi” White Jr. a Republican from Central, Louisiana, the legislation creates the Southeast Louisiana Taxing District and authorizes a new 1-cent sales tax to pay Louisiana’s match toward funds used by the Army Corps of Engineers’ to rebuild and expand the region’s levee system after Hurricane Katrina. Yes, ironically, a Republican is proposing a new tax though Republicans are typically against the creation of any new tax.

The tax would only be collected in Orleans, Jefferson, St. Bernard, St. Charles and Plaquemines parishes. Voters in the affected parishes would not have an opportunity to approve the tax.  

As part of the region’s new Hurricane and Storm Damage Risk Reduction System, the U.S. government spent approximately $14.5 billion to rebuild and strengthen the system of levees surrounding Southeast Louisiana. The five parishes that previously accepted long-term responsibility for operation and maintenance of the improvements. 

Before work began, Louisiana’s governor signed an agreement which contractually obligated the state to pay approximately $3.27 million (35%) over a 30-year period. The massive project is expected to be completed later this year which then initiates the pay-back process.

According to the legislation, if the state is able to make an initial principal payment of $400 million prior to September 30, 2021 and pay the remaining principal by September 30, 2023, Congress will forgive the $1 billion in interest included in the original agreement. The state’s obligation would be reduced to approximately $1.7 billion. 

The bill suggests that the state issue general obligation bonds to take advantage of the federal government’s interest forgiveness option. But by doing so the state’s debt limit and the amount of remaining general obligation bonds that would otherwise be available to fulfill capital outlay requests could be affected. 

The proposed law sets up an eleven-member board of directors to oversee the taxing district which would include the president of the Senate, the speaker of the House or their designees as ex-official members. Other members include the state treasurer, the secretary of the department of revenue, five members appointed by the governor representing each of the five affected parishes, and two at-large members selected for their experience in financial matters.

Governor John Bel Edwards did not request the legislation, nor is it supported by the state’s Coastal Protection and Restoration Authority (CPRA), the agency which oversees the region’s levee system. 

The City of New Orleans as well as Jefferson and St. Charles parishes have already signaled their opposition to the legislation. Several members of New Orleans legislative delegation have also spoken out. “I am 100% against SB 226,” said state Senator Jimmy Harris. “I think it is horrible that we would take a contractual obligation between the State and the Federal government and pass it off to local government. This is a horrible precedent to set.”                

“This bill addresses a contractual agreement between the State of Louisiana and the Federal Government. As such, it should not be transferred to local municipalities,” said state Senator Joe Bouie. Traditionally the state picks up the required cost share for federally authorized projects.  

“A levee system that prevents a large part of the state from disappearing into the gulf is a critical state concern,” said Representative Mandie Landry. “This is not a “local” issue as some of my colleagues claim. Southeast Louisiana is also where the mouth of the Mississippi River is located. To force SELA to solely pay for critical state and federal infrastructure is wrong, especially when our industry and taxes fuel so much of the state.”      

State Representative Jerome “Zee” Zeringue, a Republican form Houma, Louisiana has introduced an accompanying house concurrent resolution which imposes a December 1, 2021 deadline for the five parishes to a submit a plan to the Legislature on how they will repay their share without utilizing state dollars.  

The New Orleans levee system is a critical piece of infrastructure for the entire state of Louisiana. With 350 miles of levees and other structures, the system protects a million people and many state-owned assets including the Louisiana Superdome and Smoothie King Center, the Morial Convention Center, the Louisiana Supreme Court, LSU Health Sciences Center with its six schools, 12 Centers of Excellence and two patient care clinics including University Medical Center (UMC). The Superdome, Smoothie King Center and Morial Convention Center help drive New Orleans tourism economy which contributes significant tax dollars to the state each year. 

Hurricane Katrina’s incredible devastation was caused by numerous breeches of federally constructed levees. Katrina was anything but normal. Not only did Katrina decimate the region’s physical infrastructure and the economy, it led to significant impacts statewide. With the federal government’s robust support, our citizens and businesses had the confidence to rebuild.   

Climate change is causing vast swings in the weather all over the country from torrential rain and flash flooding, frequent tornadoes, raging fires and never-ending hurricanes. It may take a decade before Lake Charles and the surrounding towns are “back to normal”. Hurricane season begins again in about seven weeks and is already projected to be abnormally active.  

Although other parishes have suffered their fair share of debilitating hurricanes, the Orleans region has been disproportionately affected, and a key cause has been federal levee failures. Is creating a new taxing district that levies a sales tax without voter input and fraught with legal issues really the answer when this is an issue that should be addressed on a federal scale?

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