Property Tax Levies and Collections
in New Orleans,
Before and After
Hurricane Katrina
I
n August 2006, Hurricane Katrina hit the City of New Orleans, Louisiana, devastating the city’s levy system along with its commercial and residential housing stock. Immediately after Katrina, the city’s population dropped from about 497,000 to about 211,000, putting the city’s economy and financial position in a precarious state. This study exam-ines property tax levies and collection trends before and after the hurricane to assess the financial impact on New Orleans’ tax-based revenue. In doing so, it also provides a preliminary barometer of what other cities are likely to experience finan-cially if faced with a major natural disaster and its aftermath. The New Orleans experience illustrates what cities are likely to expect with regard to changes in their population and property tax bases as well as providing a window into the gestation time from disaster to recovery with respect to their financial condition and position. In short, the New Orleans experience is a case study of how a natural disaster alters the financial landscape of a city drastically and immediately, andprovides insights into how the tax base might behave after a natural disaster.
TAX LEVIES AND COLLECTIONS
Prior to Katrina, the city’s estimated and net assessed real property values were increasing steadily (see Exhibit 1). In 1995, the city’s estimated actual value for real property was about $7.5 billion, with a net assessed value of about $885 million. By 2000, the estimated actual value of real property had increased to about $9.9 billion, with a net assessed value of about $1.1 billion. The estimated actual value for real property reached about $12.1 billion in 2004. At this time, the net assessed value of real property was about $1.4 billion. From 1995 to 2005, the city realized a steady increase in the estimated and net assessed values of real property from year to year. As of year-end 2008, the estimated actual value of real property was about $17.2 billion, with a net assessed value of $2 billion.
Exhibit 1: Estimated and Assessed Value of Taxable Real Property
Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20 18 16 14 12 10 8 6 4 2 0 Millions of Dollars
n Estimated Actual Value n Net Assessed Value
7,593,398 8,132,351 8,233,296 8,684,889 9,941,294 10,406,525 10,557,947 10,703,481 10,703,481 12,199,345 12,794,634 9,459,193 11,674,784 17,182,001 885,899 948,777 960,554 977,783 1,013,240 1,159,821 1,241,098 1,231,764 1,248,743 1,423,261 1,492,750 1,103,604 1,362,097 2,004,624
A similar trend is evident for personal property estimated actual and net assessed values from 1995 to 2004 (see Exhibit 2). In 1995, the estimated actual value of personal property was about $3.1 billion, with a net assessed value of about $467 million. By 2005, the estimated actual value of per-sonal property had increased to about $4.5 billion, with a net assessed value of about $679 million. However, beginning in 2005, the estimated actual and net
assessed values in personal property began to decline. From 2004 to 2005, the estimated actual value of personal property declined from $4.5 billion to $4.1 billion, a decrease of about 9 percent. In 2006, the year after Katrina, the estimated actual value of personal property dropped to about $3.8 billion, an annual decline of 9 percent from 2005. For year-end 2007, the estimated
actual value of personal property declined further, to about $3.2 billion, a 15 percent decline from the prior year. In 2011, the estimated actual value of personal property was about $3.6 billion.
Despite the incremental increase in the actual assessed value of real property and its tax levy, the gap between annual real estate taxes levied and collected has widened since 1995 (see Exhibit 3). In 1995, the city’s total real estate tax levy was about $145 million, with tax collections of about $143 million, a gap of about $1.9 million. By 1999, this gap between total real estate taxes levied and collected had widened to about $12.4 million. In 2005, the gap between total real estate taxes levied and collected amounted to about $19 million. Immediately after Katrina in Exhibit 2: Estimated and Assessed Value of Taxable Personal Property
With respect to the amount
of personal property taxes
collected per capita, the data
show that annual personal
property taxes collected have
returned to pre-Katrina levels.
Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 .5 0 Millions of Dollars
n Estimated Actual Value n Net Assessed Value
7,593,398 8,132,351 8,233,296 8,684,889 9,941,294 10,406,525 10,557,947 10,703,481 10,703,481 12,199,345 12,794,634 9,459,193 11,674,784 17,182,001 885,899 948,777 960,554 977,783 1,013,240 1,159,821 1,241,098 1,231,764 1,248,743 1,423,261 1,492,750 1,103,604 1,362,097 2,004,624
2006, the gap between real estate taxes levied and collected increased by another $7 million, from $19 million to $25.6 mil-lion. Since Katrina, the annual gap between real estate taxes levied and collected has increased to about $26 million.
With respect to the collection of personal property tax lev-ies, Exhibit 4 shows that a gap remains,
despite a decrease in amount of per-sonal property tax levied. In 1995, a total of about $79 million was levied on personal property with about $75 million collected, a gap of $3.8 million. In 1999, the total personal property tax levy was about $98 million with about $81 million collected, a gap of about $17 million. By 2001, the gap between personal property taxes levied and collected had increased to about $19 million. Immediately following Katrina
in 2006, the total personal property levied decreased to about $99 million with about $88 million in collections, a gap of about $12 million. Despite a significant decrease in personal property tax levies since 2006, the gap between what is levied and collected persists.
COLLECTION PER CAPITA When annual real estate and per-sonal property tax collections are examined on a per capita basis, the data show that the City of New Orleans is collecting more property tax-based revenue from a smaller population base. In 1995, the real estate property taxes collected per capita were about $288 (see Exhibit 5). When the city’s population decreased to 490,000 in 1998, the real estate property taxes Exhibit 3: Real Estate Taxes Levied and Collected
The impact and aftermath of
Hurricane Katrina on the city
of New Orleans has several
implications for real estate
and personal property taxes
in cities prone to natural
disasters.
n Variance from Taxes Levied
Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 (5) (10) (15) (20) (25) (30) Thousands of Dollars (1,890) (1,928) (2,189) (2,738) (12,453) (17,766) (14,046) (13,361) (11,105) (15,886) (18,946) (25,654) (24,692) (26,542)
collected per capita increased to about $329. When the city’s population base declined to 462,000 in 2005, the amount of real estate property taxes collected per capita increased to about $538. Immediately after Katrina in 2006, the real estate taxes collected per capita increased
to about $921, as the city’s population base dropped from 462,000 to 211,000. Since 2007, the real estate taxes col-lected per capita has declined to about $767, as the city’s population base increased to about 317,000. As these data suggest, the tax and financial burden placed on the city’s population base has increased after Katrina.
With respect to the amount of per-sonal property taxes collected per cap-ita, the year-end data show that annual
personal property taxes collected have returned to pre-Katrina levels (see Exhibit 6). In 1995, the city collected about $152 in personal property taxes per capita. In 1998, the city col-lected about $181 in personal property taxes per capita, as its
population base decreased to about 490,000. When the city’s population base decreased to about 462,000 in 2005, personal property taxes collected per capita increased to about $215. Immediately after Katrina in 2006, the amount of personal property taxes col-lected per capita increased to about $416. Since then, the amount of per-sonal property taxes collected per capita has decreased to about $188 as the city population base increased to 317,000.
Exhibit 4: Personal Property Tax Levied and Collected
When annual real estate
and personal property tax
collections are examined on a
per capita basis, the data show
that the City of New Orleans
is collecting more property
tax-based revenue from a
smaller population base.
n Variance from Taxes Levied
Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 (2) (4) (6) (8) (10) (12) (14) (16) (18) (20) Thousands of Dollars (3,840) (7,089) (4,644) (6,157) (17,356) (10,418) (18,972) (14,348) (11,289) (9,203) (7,234) (11,599) (7,788) (7,903)
IMPLICATIONS FOR OTHER CITIES
The impact and aftermath of Hurricane Katrina on the city of New Orleans has several implications for real estate and per-sonal property taxes in cities prone to natural disasters. First, the estimated actual value of taxable
property is likely to decrease imme-diately after a natural disaster. The extent to which this occurs depends on the magnitude of the devastation and its effect on the real estate stock. If there is a substantial decrease in the estimated actual value of taxable real property, the effect on the net assessed value of the property will most likely be proportional. In the case of New Orleans, the net assessed value of real property increased to the pre-Katrina levels in 2008.
With respect to changes in the estimated actual value of personal property, the New Orleans experience shows that the value of taxable personal property will decline after a natural disaster. The extent of that decline depends on the magnitude of the devastation. Since Katrina, the recovery of the personal property tax base has been slow in New Orleans. As of 2008, the estimated value of taxable personal property in the city has recov-ered to pre-2000 levels.
A third implication of the New Orleans experience is that natural disasters will accelerate and heighten property tax collection losses. This is due to several factors such as eco-nomic and population displacement. In the city of New Orleans, Hurricane Katrina increased the existing gap Exhibit 5: Real Estate Taxes Collected Per Capita
The estimated actual value of
taxable property is likely to
decrease immediately after a
natural disaster. The extent
to which this occurs depends
on the magnitude of the
devastation and its effect on
the real estate stock.
n Real Estate Taxes Collected Per Capita
Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1,000 900 800 700 600 500 400 300 200 100 0 Thousands of Dollars 288 310 316 329 328 374 404 420 435 495 538 921 784 767
between real estate taxes levied and collected as well as the existing gap between personal property taxes levied and col-lected. This was due, in part, to the economic and population displacement caused by Katrina;
how-ever, in 2005, the annual gap between real estate taxes levied and collected reached a high of about $19 million. Current fiscal data suggest that this gap will hover around $26 million over the next several years.
The fourth implication of the New Orleans experience is that the finan-cial burden on the residents who remain behind increases substantially. In the case of New Orleans, the popu-lation base had been declining incre-mentally since 1996; in turn, the real estate and personal taxes collected per capita were increasing
simultane-ously. When Katrina occurred, the City of New Orleans expe-rienced an immediate population decline of about 250,000, thereby reducing the population base from about 462,000 to 211,000 and increasing the real estate taxes collected per capita from about $538 to $921. A similar effect occurred with regard to personal property taxes collected per capita. Because popula-tion displacement is likely to occur after a natural disaster, cities and their residents should expect the tax burden on taxpayers to increase immediately after the disaster. They also should expect gradual population increases in the ensuing years.
CONCLUSIONS
Although this article focused exclu-sively on the City of New Orleans real
With respect to changes in
the estimated actual value of
personal property, the New
Orleans experience shows
that the value of taxable
personal property will decline
after a natural disaster. The
extent of that decline depends
on the magnitude of the
devastation.
Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 450 400 350 300 250 200 150 100 50 0 Thousands of Dollarsn Personal Property Taxes Collected Per Capita
152 159 170 181 167 197 188 190 210 228 215 416 258 188
estate and property tax levies and collections before and after Hurricane Katrina, the financial consequences the city experienced after Katrina are many. General govern-ment expenditures associated with public safety increased as general tax-based revenue declined. With respect to the financial burden on its taxpayers, the general obligation debt burden per capital on the city’s taxpayers increased. The New Orleans case study shows that cities face monumental finan-cial challenges after experiencing a natural disaster such as Hurricane Katrina. y
SALOMON ALCOCER GUAJARDO is associate professor at John Jay College, City University of New York. He can be contacted at sguajardo@jjay.cuny.edu.
The author would like to thank Renald Iacovelli and Judy Lynne Peters, Department of Public Management, John Jay College, The City University of New York, for comments and suggestions on an earlier version.
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