New Orleans Loses $316 Million Annually to Property Tax Breaks

New Orleans is currently grappling with a stark financial imbalance. While City Hall moves forward with tax increases to address a $77 million budget shortfall, a new report from the Bureau of Governmental Research (BGR) reveals that the city sheds $316 million in potential revenue annually due to property tax exemptions. These breaks, which cover roughly 37% of the city’s total assessed property value, have become a focal point as officials scramble to fund critical infrastructure.

The math is becoming increasingly difficult for local leaders to ignore. Three specific property millages currently fund the city’s drainage system, but the clock is ticking on their viability. One millage is set to expire at the end of next year, and a second will follow in 2031. With 60% of the drainage system’s revenue in jeopardy over the next five years, the BGR report suggests that the current funding model is unsustainable. The watchdog group is now calling for a “fair, transparent and accountable” fee on tax-exempt properties to share the burden of maintaining the city’s water management infrastructure.

Beyond the Nonprofit Narrative

For years, the public conversation surrounding tax exemptions has often centered on nonprofit organizations. However, the BGR data clarifies that these groups account for less than a quarter of the total exempted real estate value in New Orleans. Government-owned property, including over 1,500 city-owned parcels, makes up more than half of the exemptions. The remainder consists of developer incentives and the standard homestead exemptions available to homeowners.

You almost kind of hear this wishful thinking that, if only you could get nonprofits to pay taxes, all of our financial woes would be solved, and that’s not the case.

That observation, from BGR chief executive Rebecca Mowbray, underscores the scale of the challenge. Simply targeting nonprofits would not bridge the massive gap in the city’s budget. Instead, the administration of Mayor Helena Moreno is looking toward a broader strategy. Andrew Tuozzolo, special counsel to the mayor, noted that the city is currently evaluating which city-owned parcels—many of which are vacant or parkland—could be sold or redeveloped to return them to the tax rolls.

The Complexity of a New Parcel Fee

The Moreno administration is exploring a novel approach to fill the funding gap: a parcel fee that would apply to untaxed properties. Designed to generate roughly $15 million annually, the fee would be calculated based on stormwater runoff and vehicle trips generated by each parcel. If implemented, it would be the first of its kind at a parish-wide scale in Louisiana. However, the path to implementation remains fraught with legal and logistical hurdles.

Questions persist regarding the city’s authority to levy such fees against state and federal land. “It’s still yet to be determined exactly what the limit of our authority is regarding, for instance, federal buildings,” Tuozzolo explained. While officials initially hoped to present a proposal this fall, the timeline has shifted. The administration is now aiming to release the plan by next spring, with a potential referendum for voters in the fall of 2027.

The Balancing Act for Taxpayers

City officials are quick to emphasize that they do not intend for taxed property owners to carry a heavier load. The proposed fee structure includes a credit system designed to protect small churches and nonprofits from undue financial strain. The administration’s core argument is that the current reliance on a shrinking pool of taxpaying property owners is inherently inequitable, especially when untaxed properties contribute significantly to the wear and tear on roads and water mains.

The landscape is further complicated by the recent passage of a state constitutional amendment on November 3. This change allows cities and parishes to grant an additional $30,000 homestead exemption for residents over the age of 65. While popular, such measures further constrain the municipal tax base. As Stephen Stuart, the BGR research director, pointed out, the public needs a clear understanding of the fiscal consequences of these exemptions: “How does that affect government revenue? How does it affect other taxpayers?”

Ultimately, the BGR report does not advocate for the wholesale elimination of exemptions. It acknowledges that these policies often serve legitimate public purposes, such as fostering affordable housing and charitable services. Instead, the report pushes for more rigorous cost-benefit analysis and standardized valuations. As New Orleans prepares for the upcoming expiration of its drainage millages, the debate over who pays for the city’s basic infrastructure is likely to intensify, moving the conversation from abstract budget figures to the practical reality of maintaining a city below sea level.