Guide breaks down proposed amendments
The PAR Guide to the 2019 Constitutional Amendments provides a review of each proposed amendment in the order they will appear on the ballot. The guide is educational and does not recommend how to vote and offers succinct analysis and provides arguments of proponents and opponents.
The Public Affairs Research Council of Louisiana (PAR) is an independent, nonpartisan educational organization.
These proposals were passed during the regular legislative session earlier this year with each bill received at least a twothirds favorable vote in the House of Representatives and in the Senate and now needs a majority vote at the polls for passage, according to PAR. The governor cannot veto a constitutional amendment bill.
Below is a breakdown of the four propositions:
• Amendment 1: Offshore Goods Property Tax Exemption
Current Situation
Businesses and homeowners pay property tax to local governments based on the assessed value of their property on an annual basis. Property might include land, homes, buildings, machinery or business inventory. The state Constitution allows certain exceptions, such as the homestead exemption for homeowners and the Industrial Tax Exemption Program for manufacturers. The only property tax exemptions are those listed by the state Constitution. However, the U.S. Constitution trumps state law. For example, our nation’s Constitution prohibits states from regulating interstate commerce. This “commerce clause” has been interpreted to mean that Louisiana cannot tax property merely in transit or destined for other states or countries.
Historically, businesses have interpreted the law to exclude from taxation property stored in Louisiana but destined for the Outer Continental Shelf (OCS), such as offshore drilling equipment.
In the Gulf of Mexico, the OCS is roughly the area in U.S. waters 200 miles beyond the state jurisdiction, which for Louisiana is three miles. Recently, some local assessors have started to assess certain equipment and other property headed for the Outer Continental Shelf. This assessment is based on their interpretation of the state Constitution and rulings related to interstate commerce. No specific ruling has been made by either the Louisiana Supreme Court or the U.S. Supreme Court to clarify the issue of property destined for the OCS.
Proposed Change
This amendment would prohibit property taxes on raw materials, goods, commodities and articles stored for maintenance if destined for the Outer Continental Shelf. While part of the United States, the OCS is not subject to the jurisdiction of individual states. If the amendment does not pass, the tax on such property would continue to be levied. Lawsuits could follow to determine if the tax passes muster with the U.S. Constitution. The number of parishes immediately affected by this amendment would be relatively small and mostly confined to areas near the Gulf of Mexico.
Argument For
The U.S. Constitution’s interstate commerce clause allows for goods to travel unimpeded from or through Louisiana to other places. Although the commerce clause does not specify that materials going offshore are included in that category, it was understood that goods destined for the Outer Continental Shelf were exempt from property tax assessments. For years businesses thought this property was exempt and only recently have a few assessors called the exemption into question, leading to the current controversy. This amendment offers necessary clarification so as not to cause undue burden or confusion for tax assessors or oil and gas companies or cause a shift in storage or repair of materials to other states. Passage would also help avoid lengthy and expensive battles in state and federal court that would create uncertainty for business for many years.
Argument Against
Adding yet another tax exemption would only further clutter the Constitution and restrict the local tax base. Oil and gas companies should be required to pay tax on the property they own in Louisiana. If the U.S. Constitution’s commerce clause prohibits taxation of materials destined for offshore, then the courts should be the place to decide that question. A vote against this amendment would allow those few parishes that tax this class of property to continue to collect this muchneeded revenue. Some equipment from inactive oil rigs is already exempt under another section of the Louisiana Constitution, and we do not need more tax breaks.
• Amendment 2: Adds Schools to the Education Excellence Fund
Current Situation
The Education Excellence Fund (EEF) is a component of the Millennium Trust created in 1999 with a specific purpose to support excellence in educational practice. The Louisiana Department of Education is responsible for providing the appropriations and oversight of the Fund. Money in the Fund can be distributed only to elementary and secondary schools and special schools that include educational programs for instructional enhancement including early childhood programs for at-risk children, remedial instruction, and assistance to children who fail to achieve the required scores on tests for advancement to a succeeding grade, or other approved programs.
Last year the Fund allocated $15.6 million for education. The vast majority ($15.1 million) was appropriated to 153 local schools and school systems and 43 non public schools. In addition, $75,000 plus the average per pupil amount was paid to specific public schools that are not part of a local school system but have been authorized by the Legislature. These distributions were made to the Louisiana School for the Deaf and Visually Impaired ($153,646), the Louisiana Special Education Center ($75,648), the Louisiana School for Math, Science and the Arts ($81,458), and the New Orleans Center for the Creative Arts ($79,219). Each recipient is required to submit an annual plan to the Department of Education that outlines performance expectations and how they will spend the money.
Proposed Change
The amendment would add appropriations to one legislatively approved special school, Thrive Academy, and two laboratory schools operated by colleges - the Louisiana State University Laboratory School and the Southern University Laboratory school. Each school would receive $75,000 plus the average per pupil amount the Fund pays to other public schools. The Louisiana Educational Television Authority (LETA), which is not a school but is a state agency providing statewide educational programming through Louisiana Public Broadcasting, would receive $75,000 annually as part of the proposed changes. The amendment also performs housekeeping by removing an outdated provision of the Constitution that is no longer in force.
Argument For
EEF serves an important purpose and benefits the children at the schools it sponsors. The amendment adds three great schools that should have been a part of the original language. The lab schools’ omission was simply an oversight and the Thrive Academy was not in existence when the fund was created. These schools are worthy public institutions that serve students just as the other public schools that are already eligible for EEF support. The Louisiana Educational Television Authority, through LPB, provides programs of unmatched quality and access to many children across the state, particularly underserved children under six years of age. LETA already is included in the state’s special schools budget category under the Louisiana Department of Education.
Argument Against
This amendment would add yet more needless detail to Louisiana’s already cluttered Constitution. Many other special interests would like new revenue sources or financial protection by being included among the high-status beneficiaries of funds established in the Constitution. The lab schools have other sources of income, including substantial funding from the state Minimum Foundation Program and tuition, which is already aided by subsidies. The amendment is a good example of using the Constitution for minutia instead of for fundamental law. We are basically calling upon voters to perform the Legislature’s role of making appropriations by constitutionally allocating a few hundred thousand dollars of state money in a new direction. The better way would be to propose a different constitutional amendment that would let the Legislature or the state board of education allocate the funds in a manner most likely to support excellence in education.
• Amendment 3: Board of Tax Appeals Jurisdiction
Current Situation
Individuals and businesses unhappy with a decision they believe is in error by the state Department of Revenue or local taxing authorities can appeal to the state Board of Tax Appeals.
This Board is Louisiana’s version of a Tax Court. The Board is a three-person quasi-judicial executive branch body whose members must be attorneys with tax law experience and credentials. All are appointed by the governor and confirmed by the Senate. The Board hears cases on various tax and fee disputes but does not address property tax issues, which are the domain of the Louisiana Tax Commission. Board decisions can be appealed to state courts of appeal. One of the members hears cases for the Board’s Local Tax Division, which considers disputes with local tax collectors. Thirty-four states have tax tribunals, including 28 that are within the executive branch.
The Board does not have the authority to declare tax laws, ordinances or tax collector actions as unconstitutional. Taxpayers must have their Board case transferred to a district court if they believe a tax law, rule or action of a taxing authority is unconstitutional. Even if just a portion of a case involves a claim of unconstitutionality, the whole process is put on hold until the court system can resolve the constitutional issue. This system results in court cases that can take a year or longer to resolve.
Proposed Change
The proposed amendment would enhance the scope and power of the Board of Tax Appeals and allow the body to rule on whether taxation and fee matters are constitutional under Louisiana or U.S. law. This level of authority is not generally allowed for executive branch agencies. However, the American Bar Association recommends that executive branch tax tribunals should possess at least some limited authority to consider constitutional issues on specific grievances that come before those bodies. Many state tribunals may do so. This amendment would let taxpayers have their entire tax dispute heard in one forum and could expedite resolution. The Board decisions could be appealed to state courts. Taxpayers still would have the option to take their case to the courts instead of the Board of Appeals. The Legislature would be able to pass laws affecting the Board’s jurisdiction and other related matters with a two-thirds vote.
Argument For
Taxpayers should be able to seek timely redress for unconstitutional taxes. The Board of Tax Appeals specializes in tax law. Allowing the Board to hear cases involving the constitutionality of tax and fee collections only makes sense. Tax law is complex and experts should review the case first. If either side does not like the decision, they can still appeal to the court system. Following a modernization of the Louisiana tax appeals process in 2014, this change would be another important step toward improving the system to make it fairer and more efficient. It places Louisiana in the mainstream of states that have reformed their tax dispute process. The amendment would reduce delays and costs in deciding tax disputes, which is why both business and local government support this change.
Argument Against
Historically, courts have been the only bodies that can decide whether an action or rule complies with the Louisiana or U.S. Constitution. This amendment and its companion act would change that precedent. Unlike judges in the court system, none of the members of the Board of Tax Appeals is elected and they might have less expertise in Louisiana or U.S. constitutional law. Board members might be influenced by the governors who appoint them or the Senators who confirm them. There is no evidence that the current system fails to resolve issues correctly. Constitutional decisions by the Board would be highly likely to be appealed to the courts.
• Amendment 4: New Orleans Tax Exemption for Affordable Housing
Current Situation
Property tax exemptions are listed in the state Constitution. Additional exemptions cannot be added by state law or local ordinance. Property taxes are a major source of revenue for local governments. Usually local governments have no control over what is exempted from property tax, because those rules are in the Constitution and new exemptions are initiated by the state Legislature. A shortage of affordable housing is a problem in many urban areas, particularly New Orleans.
Proposed Change
The amendment would grant the City of New Orleans the ability to establish property tax exemptions for residential properties that provide affordable housing. Developments over 15 units and shortterm rental properties, such as for Airbnb lodging, would be ineligible. The tax assessments could be fully or partially exempted. Properties could be upgraded without being taxed for the added value. Depending on how the city structures the program, the target could be owner-occupied homes, with the exemption applying directly to the homeowner, or rental homes or apartments with the tax break going to the landlord or developer in exchange for affordable rents. New Orleans would create the rules and process for the program, which could vary greatly depending on how it is constructed. The precise definition of “affordable” housing would be left to the city to decide. Companion legislation requires proposed rules to be published 30 days before becoming effective with at least one public hearing during that period. The exemption would apply to all property taxes collected including resources that otherwise would flow to the sheriff, parks, libraries and schools. To take effect, the proposed amendment would have to be approved by a majority of the voters in Orleans Parish as well as statewide. New Orleans would be required to absorb any decreases in specific ad valorem tax collections as a result of this new authority.
Argument For
Giving local government another tool to handle local issues such as affordable housing only makes sense. There is a genuine need for more affordable housing in New Orleans. The proposal is an attempt to help longtime residents remain in the city, to attract new residents and also to reduce blight. Because property taxes finance local government, the decision on what to exempt should be made at the local level. This amendment avoids the problem of past attempted changes to the Constitution that would have added narrowly defined programs. This proposal gives New Orleans flexibility to make future adjustments without the need for further constitutional amendments to refine the program. If properly implemented with clear criteria and accountability mechanisms, this New Orleans program could become a model for other local governments. The real net cost to the city’s coffers should be marginal, assuming the incentive is effective. New Orleans may draw on the experience of other cities around the country that have similar programs.
Argument Against
This amendment could diminish a critical and evolving revenue base for New Orleans at a time when a disproportionate amount of city property is exempted already. Lowpriced owner-occupied homes already benefit from the $75,000 homestead exemption. Several state and federal programs exist to address urban housing problems. The definition of “affordable” could be made so broad that the program could give a tax break to developers more so than to actual home dwellers. And the projects might happen anyway without this incentive. Citizens in the program would be less invested in their communities and insensitive to the impact of higher tax millage proposals burdening other property owners in the future. New Orleans already swells with tax exempt government buildings as well as properties owned by nonprofits and religious institutions, which sometimes operate commercial-style facilities. The pressure to raise taxes would increase with this program. All in all, this amendment could turn into a costly proposition with high risk for abuse and favoritism. Creating this new authority only for New Orleans would require further need for constitutional amendments should other parishes or municipalities wish to have the same authority.
To view PAR’s full Guide to the 2019 Constitutional Amendments, visit parlouisiana.org .