Louisiana voters will face four proposed amendments to the state constitution on their Oct. 12 primary ballot. That’s a fairly typical number for a statewide election year (The notable exception was 2003, when there were 15 proposed amendments on the ballot). This year’s crop includes tax breaks for the offshore energy industry, a reallocation of money from Louisiana’s share of the 1999 tobacco settlement, a plan to expand the authority of the state Board of Tax Appeals and tax exemptions for affordable housing developments in New Orleans.
While all of these issues are important to some people or specific communities, this year’s amendments also serve to highlight the increasing density of the state constitution, which was adopted in 1974 and has since been amended 195 times. By asking voters to decide matters that are seemingly far removed from most people’s everyday concerns, the Legislature increases the likelihood that the entire constitution will be overhauled.
Amendment 1: Oil and gas property tax break
What it does: This amendment would create a constitutional property tax exemption for drilling equipment and other materials that are being stored in Louisiana for maintenance but are eventually destined for the Outer Continental Shelf (OCS).
Background: Parishes in Louisiana collect property taxes that they use to pay for public education, police protection, parks and other services or amenities. The constitution allows certain exemptions, such as the homestead exemption for a person’s primary residence and the Industrial Tax Exemption Program for manufacturers. Under the U.S. Constitution’s “commerce clause,” states are not allowed to tax property that is in transit and bound for another state or jurisdiction, such as goods that are traveling by truck on the interstate highway system. By tradition, Louisiana has interpreted the commerce clause to mean that maintenance equipment that is stored in Louisiana but bound for offshore drilling rigs on the Outer Continental Shelf should also not be taxed.
In recent years, tax assessors in several coastal parishes began taxing offshore equipment that was being stored in Louisiana, which in some cases had been sitting for years. Unhappy about this new development, oil and gas interests convinced the Legislature to approve a new exemption to the state constitution declaring that maintenance equipment bound for the OCS is exempt from property taxes. This exemption, if approved, could potentially deprive local governments of millions of dollars in tax revenue that could be used to support education and other services.
Our views: There are legitimate legal questions about how the commerce clause applies to this situation. The proper venue for these disputes to be settled is the court system. This amendment bypasses that time-tested process, and adds yet another tax break to the hundreds of existing exemptions that already exist. But it does not reduce the cost of educating children, or paying police officers to protect our communities. Those expenses still must be paid, just not by the oil and gas industry.
Amendment 2: Tweaking the tobacco settlement
What it does: A portion of the money from Louisiana’s 1999 settlement with tobacco companies flows into the Education Excellence Fund, and gets distributed among different educational programs. The amendment would direct $75,000 from the fund each year to the Louisiana Educational Television Authority (LETA) and another $75,000 to Thrive Academy, a boarding school in the Baton Rouge area for children with special needs.
Background: Louisiana created the Millennium Trust in 1999 to safeguard the state’s share of the global tobacco settlement. The Education Excellence Fund is part of that trust, and last year it distributed $15.6 million to various education needs. Both funds are in the state constitution, which means any changes to the rules governing the funds must be approved by voters.
Our views: It is easy to understand why the Legislature created constitutional trust funds to safeguard the tobacco settlement money. Without those guardrails, it would have been too tempting for lawmakers to tap this funding stream during economic downturns. But it also means that seemingly minor changes, such as a reallocation of $150,000, have to be subjected to a statewide ballot. Still, the amendment deserves to pass.
Amendment 3: Board of Tax Appeals jurisdiction
What it does: When a taxpayer believes they have been wrongly taxed by the state or local tax collector, they have the right to appeal to the state Board of Tax Appeals or to their local district court. But when a tax dispute involves the state constitution, the appeal must be heard in district court. This amendment would allow the Board of Tax Appeals to determine if a tax is unconstitutional. Taxpayers would still have the option of taking their case to a district court.
Background: The state Board of Tax Appeals is a three-member board of attorneys appointed by the Governor and confirmed by the Senate. Each member must have a Masters of Law (LLM) in taxation, or be board certified by the Louisiana Board of Legal Specialization. One of the three members can be a former judge without any tax background. Terms are staggered with two members serving 4-year terms and the third serving a 6-year term. District court judges are elected by voters, but are not required to have any expertise in tax law. Supporters of this amendment contend that tax disputes involving constitutional issues are best heard by a panel of experts, and that district court is needlessly time consuming. Opponents of this amendment question the precedent set by allowing an unelected board to rule on constitutional matters, particularly an unelected board that lives under the executive branch and could be more susceptible than judges to shifts in political power.
Our views: People who believe they have been charged a tax that is unconstitutional have an understandable desire to have their case heard as quickly as possible. This amendment could speed up that process by expanding the jurisdiction of an unelected board of tax experts. But while the Board of Tax Appeals has expertise in taxation matters, its members may not have the same familiarity with constitutional law. The tax appeal process varies state by state, and we are unconvinced that leaving such disputes with the Board of Tax Appeals is the best process for Louisiana taxpayers.
Amendment 4: New Orleans affordable housing tax exemption
What is does: This amendment aims to encourage affordable housing in New Orleans by allowing the city to exempt certain properties from taxes. The amendment does not apply to short-term (30 days or less) rental properties, and does not cover affordable housing developments with more than 15 units.
Background: Cities and parishes in Louisiana are responsible for collecting property taxes, and deciding the rates at which property owners should be taxed. But municipalities do not currently have the right to decide if certain properties should be exempt from taxes. That authority is vested in the state constitution, which is why a statewide amendment is needed to provide a limited exception that only applies to New Orleans.
Home prices and rents have skyrocketed in New Orleans in the years following Hurricane Katrina due to a confluence of factors. This has created a crisis for many renters in the city, 1 in 3 of whom spend 50 percent or more of their income on housing costs. In a city where more than half of the residents are renters, this imposes a substantial burden on working families.
Our View: Property taxes provide a vital revenue stream for local governments, paying for schools, parks and many other necessities. But local authorities should have the right to balance the need for that tax revenue against the goal of making housing more affordable for low-income residents. This amendment gives New Orleans that much-needed flexibility and deserves support.