It all started with a conversation about why government owned LUS is allowed to compete with private sector businesses who provide electricity, telecommunications, or water.
The government pays no taxes. Therefore, any government owned “business” also pays no taxes. However, for as long as anyone can remember the Lafayette Utilities System (or LUS for short) has paid an ILOT, or payment “in lieu of tax.” It’s an effort to somewhat level the paying field with private enterprises who do have to contend with taxes. Last year, the ILOT was worth $24,679,711 to the City of Lafayette. However, if we go back and combined nineteen years worth (2001-2002 is the earliest amount we have, thanks to the 2003-2004 budget), the total ILOT amount contributed to the city’s general fund has been a staggering $387,821,622.
What “tax” is this payment in lieu of?
Here at Citizens for a New Louisiana, we understand that words mean things. If this ILOT is supposed to be “in lieu” of a tax, then which tax is it in lieu of? To answer that question, call any business owner. Although it’s filtered through businesses, sales tax is collected from and paid directly by the consumer. Businesses pay property and inventory taxes. Anyone who owns real property receives a tax statement from their parish tax assessor usually in October or November of every year.
Land, home, and business owners in Lafayette Parish pay a property (ad valorem) tax millage of 89.945. Roughly speaking, that’s 0.09% of your property’s assessed value. If you’re in business, then an inventory tax may also be applicable. If your business is in Downtown Lafayette, the Downtown Development Authority gets an extra 13.8 mills. making your total parish millage 103.045. The City of Lafayette also has several of its own property tax millages, totaling 17.94. So, all told, property in Downtown Lafayette pays the highest millage of 116.845.
To be fair, I separated the Downtown tax from the rest because it’s the only “parish property tax” that’s not collected parish-wide. So, combining the City of Lafayette to the rest of the parish’s property taxes brings us to a total tax of 107.885 (89.945 + 17.94 = 107.885). The percentage breakdown is roughly 83% parish to 17% city. Using this math, the parish’s portion of last year’s ILOT should have been $20,484,160. ( $24,679,711 x 83% = $20,484,160.13 )
But the ILOT is paying the entire tax to the city
We now have a save the city committee that’s supposed to figure out what went wrong with Carlee Alm-LaBar and Kevin Blanchard’s failed “fix the charter” project. The fact is, “fix the charter” never addressed the longest standing argument between the city and parish: the “payment allocation table.” That’s over on page 66 of LCG’s 2020-2021 Annual Budget. It’s a table that determines what percentage of a specific consolidated service or department the city is responsible for versus the parish.
What doesn’t exist is the “income allocation table.” That’s probably because, unlike places like Baton Rouge, the city and parish of Lafayette have never fully consolidated. Figuratively speaking: the city has its own checking account, and the parish has its own. They’ve determined a split for expenses. However, they’ve never figured out a split for income; and specifically that ILOT payment.
What would happen if the ILOT allocation were tied to a percentage of property tax millages?
Earlier, we added together most of the parish and city property taxes. Then, with a little math magic, we identified what percentage of the property taxes went to each. Based on those percentages (83% to the parish, and 17% to the city), this is what the income allocation breakdown should look like for each of the last nineteen years.
If you’re wondering what the actual numbers are for each year, here’s an excel style sheet breaking that down.
| wdt_ID | Year | ILOT Amount | Parish | City |
|---|---|---|---|---|
| 1 | 2020 | 24,679,711 | 20,484,160 | 4,195,551 |
| 2 | 2019 | 25,051,002 | 20,792,332 | 4,258,670 |
| 3 | 2018 | 23,708,786 | 19,678,292 | 4,030,494 |
| 4 | 2017 | 22,568,235 | 18,731,635 | 3,836,600 |
| 5 | 2016 | 23,306,557 | 19,344,442 | 3,962,115 |
| 6 | 2015 | 22,847,494 | 18,963,420 | 3,884,074 |
| 7 | 2014 | 22,073,824 | 18,321,274 | 3,752,550 |
| 8 | 2013 | 22,131,617 | 18,369,242 | 3,762,375 |
| 9 | 2012 | 21,596,096 | 17,924,760 | 3,671,336 |
| 10 | 2011 | 19,199,649 | 15,935,709 | 3,263,940 |
| 11 | 2010 | 19,462,860 | 16,154,174 | 3,308,686 |
| 12 | 2009 | 19,462,860 | 16,154,174 | 3,308,686 |
| 13 | 2008 | 18,660,233 | 15,487,993 | 3,172,240 |
| 14 | 2007 | 18,799,006 | 15,603,175 | 3,195,831 |
| 15 | 2006 | 18,831,929 | 15,630,501 | 3,201,428 |
| 16 | 2005 | 16,653,751 | 13,822,613 | 2,831,138 |
| 17 | 2004 | 16,316,608 | 13,542,785 | 2,773,823 |
| 18 | 2003 | 16,331,779 | 13,555,377 | 2,776,402 |
| 19 | 2002 | 16,139,625 | 13,395,889 | 2,743,736 |
| ∑ = 387,821,622 | ∑ = 321,891,946 | ∑ = 65,929,676 |
How the ILOT currently works
I called Lorrie Toups late yesterday afternoon and discussed this idea with her. She explained that, unlike a regular business, the ILOT is not based on value. It’s based on revenue. Said another way; at the end of the fiscal period, a percentage of the revenue received by LUS is paid as a pseudo tax to the City of Lafayette. When I asked about using the property tax model covered in this article, she understood my point. However the way it was set up a long time ago was to benefit the city because the city owns the asset. This revenue model also accounts for federal and state income tax, which a government run business doesn’t have to pay but a private business does.
Wouldn’t it be great if your business could avoid paying federal, state, and parish taxes by paying yourself the total amount owed?
So, next time someone on City Council mentions those old dreaded words, “payment allocation table,” the Parish Council shouldn’t run for cover. Instead, they should immediacy bring up the “LUS ILOT allocation table.” After all, if LUS was a private business (that this ILOT helps them to imagine), then the bulk of all of that tax revenue would be going to the parish. Last year, it would have been $20,484,160 to the parish and $4,195,551 to the city. Over the last nineteen years, it’d have been $321,891,946 to the parish, and only $65,929,676 to the city.
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