The last we heard in the running argument between the pro- and anti-St. George crowds on whether the proposed new city in the southern unincorporated area of East Baton Rouge Parish is viable was a December study by local CPA firm Faulk & Winkler which said that St. George would run a deficit of some $13 million if it didn’t raise taxes.
The Faulk & Winkler study, which was commissioned by the Baton Rouge Area Foundation and Baton Rouge Area Chamber, concluded that St. George’s sales tax revenues would be about $51 million per year after the various annexations – the Mall of Louisiana, L’Auberge casino – into the city of Baton Rouge last year. That was down from an initial projection of about $80 million when the new city was first proposed.
This morning, the St. George organizers are out with their own budget study – this one performed by national accounting firm Carr, Riggs & Ingram (CRI), which does budget consulting for some 450 municipalities across the South.
And CRI’s numbers, which can be seen here, look a whole lot better than the BRAC/BRAF/Faulk & Winkler numbers.
CRI projects an $11 million annual surplus, and differs from Faulk & Winkler on most of the budget line items.
For example, instead of $51 million in annual sales tax revenue projected in the Faulk & Winkler study, CRI says the real figure is more like $59 million – and provides a fairly detailed justification for why…
Sales taxes are the most significant revenue source for the City of St. George. Previous reports have estimated Sales Tax revenues for St. George ranging from $46 million (post annexations) to $86 million (prior to annexations). The estimated sales tax losses to the proposed City from the recent annexations by the City of Baton Rouge are $9 million. Total Sales Tax collections in the unincorporated areas of East Baton Rouge (which includes St. George and the recent annexations) during 2013 totaled approximately $84 million. If we remove the estimated sales tax losses due to the annexations the total would have been approximately $74 million. Based on population (69% of unincorporated East Baton Rouge), the retail activity in St. George versus the rest of unincorporated East Baton Rouge, and the demographic statistics of the households in St. George, a reasonable conservative estimate of the percentage of these sales taxes that would remain in St. George is 80%. This results in approximately $59 million in sales taxes to St. George for budgetary purposes.
The difference in the two basically comes down to an estimate based on population, median income and available retail space. Faulk & Winkler estimated that the sales tax revenue in St. George would be 69 percent of the total in unincorporated areas of East Baton Rouge, while CRI thinks it will be 80 percent. If you don’t like St. George you probably agree with Faulk & Winkler; if you do, you probably believe CRI. What it would come down to, in all likelihood, is whether you think people who live in St. George would be more, or less, likely to shop in St. George. There’s no question the purchasing power of St. George residents is there.
And the other variable comes from development. There is a lot of undeveloped land in St. George, even after some of the annexations. One imagines if/when St. George becomes a city the local government will be quite aggressive in trying to develop more retail space in the city in order to push the sales tax revenues up to keep St. George purchasing power in St. George.
CRI also estimates another $6.5 million in tax revenues from things like occupational license taxes, business taxes, permits and the like, giving the city a total revenue stream of some $65 million per year. That doesn’t include property tax revenue, because any property taxes collected by St. George would go to the school district would create and not directly into the city budget. That differs greatly from the Faulk & Winkler study, which estimated that St. George would have to levy a property tax of some 11.5 mills to cover its costs.
Some of the other interesting items in the CRI study involve the expense side of the ledger. Faulk & Winkler had said that St. George wouldn’t be able to run its city for the $60.3 million the organizers had initially proposed in their budget, and that was a major piece of their contention a budget deficit would be inevitable along with tax increases. Not so, says CRI – the new study has St. George coming in at just $54 million.
The difference in the expenditure figures comes in large measure from variances in how much of the “constitutional” expenses St. George will shoulder. Currently, all of the costs for the “constitutional” parish functions – the 19th Judicial District Court, the District Attorney’s office, the parish prison and Sheriff’s office, etc. – are paid for by taxes collected in the unincorporated areas of the parish. St. George’s organizers initially said they would continue paying to fund the constitutional costs at a 100 percent clip, but that was before the city of Baton Rouge annexed the casino and the Mall, among other properties.
Now, St. George is saying they’ll fund 60 percent of the constitutional expenses. That’s likely going to cause a major donnybrook with the city, whose argument won’t be the best – after all, St. George would contain 24 percent of the parish’s population and pay 60 percent of the parish’s constitutional expenses. And the savings from only guaranteeing to cover 60 percent of those expenses instead of 100 percent come to some $11 million – they’d be spending $17.2 million rather than $28.4 million.
Faulk & Winkler also estimated that St. George would be on the hook for some $3.6 million per year in legacy costs – pensions and so forth – to the city-parish government. CRI bumps that number to $4 million and includes it in the total.
The bottom line from CRI is that St. George would bring in about $65 million a year and spend $54 million, generating a budget surplus of $11 million. Meanwhile, a St. George incorporation would create a $17 million loss to the city-parish government, creating a deficit of between $9-14 million.
Which would mean it’s time for some fiscal austerity in EBR. And that’s not a bad thing – after all, the Kip Holden Experience in Baton Rouge has been a spending orgy like never seen before.
A couple of interesting numbers we picked up – namely, that in the past 11 years the city-parish government has increased spending an average of $72,000 per day, every day. You read that right – on average, each day for 11 years Holden’s government has spent $72,000 more than the day before.
And since 2009, the increase in spending in EBR has been greater than the increases in government spending of all of the other major cities in Louisiana…combined.
Given that, it’s hard to make the case that if St. George occasioned a slimming-down of the city-parish government it’s a catastrophe. St. George would force EBR to go on a diet, but at this point shouldn’t that happen anyway?