Orleans Parish School Board Weighs Corporate Perks Against Student Spending

Jun 24, 2018

Public schools get a large portion of their funding from local property taxes — that's taxes paid on homes and businesses, including big factories. But for decades, manufacturers in Orleans Parish have gotten a big break on those property taxes, and that means less money for schools. Now the parish school board is considering asking companies to pay up. 

At certain times of the day, the Folgers Coffee plant on the Industrial Canal fills its New Orleans East neighborhood with the smell of roasting coffee. Above a maze of nondescript, windowless buildings and snaking pipes rises a painting of a giant red coffee can. 

This plant is worth millions of dollars. Along with the tons of roasted coffee beans this plant produces each year, it could also be producing more in property taxes for the local school system.

"In 2017, about $3 million that would have otherwise gone to the school board were exempt," Jeanie Donovan says, who directs the nonprofit Louisiana Budget Project.

The state has been giving Folgers and other local manufacturers big breaks on their property taxes through the Industrial Tax Exemption Program (ITEP). The program is meant to encourage companies to expand and create jobs. But it also means millions of dollars less each year for local agencies that depend on property taxes to fund their budgets, like the fire department, Sewerage and Water Board, the police department, and public schools.

"I don't know how I could ever...support taking away any additional resources from the school system" - school board member Ben Kleban

Donovan points to research done by the faith-based nonprofit Together Louisiana, showing the Orleans Parish school system misses out on around $3 million a year due to ITEP. City government, including the police department and the Sewerage and Water Board, misses out on $7.6 million a year. 

Esperanza Charter School Principal Nicole Saulny looks at the back of her school building, where her charter network and the school district will soon have to spend thousands in repairs.
Credit Jess Clark / WWNO - New Orleans Public Radio

Schools Short On Cash

At Esperanza Charter School in Mid-City, principal Nicole Saulny walks around the side of the school building. It's covered with huge white tarps.

"So we're looking at the back of my kindergarten class, and it has some water damage and some termite damage," Saulny explains.

The termites have made several classrooms unusable. It's going to take thousands of dollars to repair. But there are a lot of other things Saulny would like to spend money on, like more classrooms. The school is so crowded that some classes are held in trailers. She also wants a gym, so kids have a place to play when it's hot or raining.

"So I would build the gymnasium, I would put Smartboards in each classroom, each classroom would have their own computer carts with laptops," Saulny says. She says she'd like to hire more teaching assistants and give her staff the raise they need to keep up with the rising cost of living in New Orleans.

In short, Esperanza and other public schools say they need more funding. Now they're looking for companies like Folgers to pay up, and they might be able to make it happen. In 2016, Gov. John Bel Edwards changed the Industrial Tax Exemption Program so that local school boards get a say in whether manufacturers get tax breaks that impact their local budgets. Orleans Parish School Board member Ben Kleban wants to take advantage of that new power. At a May school board meeting, he said he doesn't want to give out any breaks at all.

"We have all of these needs educationally," Kleban told his fellow board members. "I don't know how I could ever, as a board member, given the outcomes and the track record of this program, support taking away any additional resources from the school system."

Researchers Question Whether ITEP Really Brings Jobs

The New Orleans mayor's office is against a blanket denial of all ITEP requests. They want to attract new businesses and boost employment, and they don't want the school board to get in the way by denying every tax break that comes across its desk. 

But Jeanie Donovan — the researcher with the Louisiana Budget Project — says the tax breaks haven't actually created that many jobs.

"The outcomes for the Industrial Tax Exemption Program have not been great," Donovan says.

That's because rather than seeking exemptions for plant expansions that create jobs, she says companies are getting exemptions for expanding automation and reducing the reliance on human workers.

"What are we really incentivizing here, and where are these public funds really going?" - researcher Jeanie Donovan

In the last 20 years, the tax breaks have cost the city $178 million dollars, and they've created 233 jobs. Do the math, and that comes out to a cost of around $765,000 per job created.

"I don't think that's a good deal at all," Donovan says.

Donovan says the solution is for the city and school board to exercise their new power to say, "no" when companies apply for tax exemptions that aren't a good deal.

"It's important for the local taxing entities, including the school board, who have this new authority to look at these new applications and look at what are we really incentivizing here and where are these public funds really going?" she says.

The school board is working with the mayor's office to come up with a plan they can both agree on.

Meanwhile, Folgers is planning to ask for millions of dollars in new exemptions — which they say will create 11 new jobs.  Folgers' parent company J.B. Smuckers declined to interview, but a spokesperson provided the following written statement:

"Due to the forward-thinking business environment in New Orleans, we have chosen to make significant infrastructure and personnel investments here in recent years versus other locations throughout our manufacturing footprint.

"We respect that local and state leaders need to balance the needs and interests of several constituents when reviewing a program like this. We are open to discussing the future of the program with them if they choose to solicit input from the business community."

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