Voters humiliate stubborn Caddo over unnecessary tax
If at first you don’t succeed … be prepared to get a worse beatdown the second time, the Caddo Parish Commission learned this past weekend as its tax renewal was gutted 3-1 at the polls.
The Commission has been taking its lumps lately, in part due to a controversial financial deal putting taxpayers on the hook for millions in a venture capital deal. Essentially, the parish purchased the former General Motors plant and set up a deal to allow three-wheel vehicle startup Elio Motors to lease it for production. Elio claims it has collected at least 10,000 reservations for these but production seems nowhere near ready to commence and the Commission signaled its own dubiousness about the arrangement when it allegedly dangled the property to another concern for purchase, about which some commissioners were not even aware.
Apparently the mystery firm turned down the parish. All this went down right before the election, with the central question of whether the parish, sitting on tens of millions of dollars in idle funds collected through the shale boom of recent years, needed to ask to issue up to $23 million in debt – the only difference from the defeated measure being asking for about a million bucks fewer – at the same 1.75 mill rate set to expire in June. At least this time Caddo released a laundry list of projects that would cost about $19 million to try to justify the need.
But that only deflected from the major question of what purpose had the general fund reserves, over twice the amount of the proposed issue. Many commissioners and those in the community prone to crony capitalism argued that substantial sums had to sit idle for quick expenditure on “quality of life” concerns that include everything from spaying for mosquitoes to luring Elio and other unnamed companies to bring jobs.
However, these arguments misunderstand economics and the proper role of government. In essence, tax proponents argued the one-off nature of shale money did not change the dynamics of government finance, but failed to understand how that sum could be used to change those dynamics. The sum can subsidize a tax cut that would stimulate economic activity that could assist in paying for general government expenses – and one must wonder how much of those expenses truly are needed, for since 2007’s beginning of shale extraction the parish’s operating expenses skyrocketed from $79.1 million to $93.6 million in 2012, an increase of over 18 percent where in this period the increase in the urban Consumer Price Index was only 10.7 percent. Notably, property tax as a portion of revenues declined from 61 percent to 55 percent in this period.
A better argument is that the Parish has gotten more free-spending with this chunk of change lying in the background, and the economic boost from cutting taxes plus a more discriminating attitude on spending means some the Oil and Gas Fund excess could be used for immediate capital needs during the few years it would take for the stimulus to ramp up parish economic activity to recover forgone tax revenues. And if any big emergency came up where debt truly seemed necessary, the Louisiana Constitution has plenty of election dates to bring a new measure to voters, or even allows for an emergency vote at any time. Alternatively, the parish could have come back with a reduced millage in light of the surplus, but commissioners just wouldn’t back down.
No doubt the parish sitting on a pile of cash, its dalliance with venture capitalism, and its acceleration of spending all played a role in the crushing defeat, over an issue where allegedly fiscally conservative Republicans who played the major role in pushing forward both votes met opposition from the local party and elites. They were humiliated when a thousand fewer people showed up for this election, but two thousand more voted against it. Did they, who also got sent a message last fall about hubris when an attempt by them to stretch out term limits was defeated as decisively at the polls, learn their lesson this time? They may need another before they understand the concept of right-sizing government – and that may come in 2015.
Posted by Jeff Sadow at 10:35