Let me begin this post by making one thing incredibly clear, this is not a political post. This is a post by a concerned business owner and citizen who can’t help but notice what I see as problems. I see two huge problems. One is a value problem and the other is an affordability problem made worse by our incredibly high insurance (home, car, health, etc) as well as the new property tax values that are hurting everyone.
Depending on what is paid for, a good or service will carry a certain amount of expectations. Throughout my career, I have found that if two reasonable people have a disagreement, it is often because expectations were not properly explained or met. I’m the founder and CEO of 1 Percent Lists, a lower fee real estate company. So value and managing expectations is at the forefront of our mindset daily.
Are We Getting the Value We Deserve from Property Taxes?
Everything we pay for has a cost and a quality to it. The intersection of those two things is value. Generally speaking there isn’t a major problem until the cost gets high and the quality goes down because then someone is overpaying for poor quality. So we pay a lot, but are we getting value for what we pay specifically with property taxes?
It is important to understand what property taxes pay for. They fund public services like schools, roads, police, fire departments, parks and other public services.
Teddy Roosevelt said, “Comparison is the thief of joy.” Louisiana, on paper, has one of the lowest property tax rates when compared to other states. However, Orleans Parish and St Tammany Parish, where I live, have property tax rates that are right at the national average. Jefferson Parish has property taxes that are 25% cheaper than Orleans Parish. How would you rate the public services in Jefferson Parish compared to Orleans? Is there any wonder that the population in New Orleans is shrinking? When the population begins to shrink now you have less people and businesses to cover your costs which means everyone has to pay more and the value problem gets even worse.
When High Costs Don’t Match Community Benefits
St Tammany is an amazing place to live but it is very expensive. We like to visit Baldwin County, Alabama (Fairhope, Daphne, Foley, Orange Beach, Gulf Shores, Spanish Fort) as a family and their property taxes are 60% less than ours. Their school system is fantastic. Their roads are amazing. I have never sat in traffic in Baldwin County. It is incredibly well taken care of and with landscaped areas everywhere you look in public places. Their sales tax is also lower at 8% compared to St Tammany’s 8.7%. Their homeowners and car insurance are also a fraction of ours in Louisiana.
What are they getting right that we are getting wrong? With our property taxes so high, why is our traffic so awful? Why do we have overcrowding issues in our schools? How do we not have a Madisonville High School to help alleviate the traffic nightmare that we all deal with?
Are Rising Property Taxes Adding Unnecessary Strain on Homeowners?
I was recently at an event hosted by Arena Collective in Terra Bella and our parish property assessor was there answering questions. I do not know him personally but he seemed happy to answer and explain anything that was asked of him. He warned everyone of the cost increases that were coming, which I’m sure wasn’t the most pleasant news to give in a room full of real estate professionals.
But, in my opinion, a very important question wasn’t asked until I finally asked it. That question was simply “With credit card debt at record levels, groceries through the roof, and virtually everything that we pay for skyrocketing in price, is it a good idea to have people’s property taxes go up so tremendously? Before you answer, please bear in mind that we already have people struggling to afford their homes due to the rising cost of living and Florida (who has the same problems with insurance as us) capped property tax increases at 3% per year.”
His response was to explain why property taxes are going up, millage rates, the math, outdated homestead exemptions, the laws on the books, and many other things. But at the end of the day what I was hoping for was a simple, “No this isn’t a good situation, I’m sorry, and I will do everything I can to fix it.” I was hoping for understanding and empathy, not an explanation.
Are Other States in the Same Boat?
A few months earlier I was at another Arena Collective event with over 100 real estate professionals, lenders, and title companies and the new state insurance commissioner was there. He also seemed like a great person and answered a host of questions but at the end another important question wasn’t asked so I chose to ask it. The simple question was, “Why is our insurance so high and other states along the coast also getting hit by hurricanes are so much more affordable? I just drove home from Florida. They have the same trial lawyers we do. Why is our home and auto insurance so high? Why is this problem seemingly so unique to us?”
He immediately said he empathized with our problems. He said he was looking at who was doing better than us and learning from them and was already working on a special session to fix these problems. Then, he pointed to numerous laws and policies on the books causing those issues and made it clear he fully intends to deal with them.
Other states suffering the same problems are handling it seemingly better and cheaper than we are. One elected person explained what is happening to us. Another elected person empathized with us, defined a problem, said it’s a huge issue, is seeking solutions anywhere they might be, and made it his priority to deal with it. Comparing other states to us and comparing how two different politicians respond to problems definitely stole my joy as predicted by President Roosevelt.
How Rising Insurance and Property Taxes Are Impacting Families and Local Businesses in Louisiana
Homeowners insurance rates have climbed in this state to the point where it is killing home purchases and making some properties completely unsellable. Property taxes might not have quite as dramatic of an impact as a huge home insurance premium but it definitely further stretches budgets that already are at their limits due to inflation and makes the aforementioned problems worse. These things put the squeeze on families and it’s becoming unbearable. When families are struggling with affordability and housing issues every business owner will feel it in some way.
All of these things bring me back to the beginning which is to say that in Louisiana we have two major problems that we have to address.
Affordability
We have one part of our population with a major affordability problem and that demographic is growing rapidly. These are people who when interest rates, groceries, insurance, property taxes, and many other things were cheaper they could spend more. It was possible to eat out more often. They planned great birthday parties for their kids. They donated their time and effort as little league coaches, volunteers, and many other things because they had the ability to be more involved in their communities. All of these things become harder when it’s a struggle to cover your family at home due to rising costs. What’s more is businesses feel this pain through them. The bounce house that doesn’t get ordered. The custom cookies that don’t get baked. Affordability issues are highly contagious.
Value
The next major problem is a value problem. This hits everyone the same but it also affects business expansion and economic growth which impacts us all. Are we getting value from the property taxes we pay? Many more people work from home since Covid and for those people or the person considering opening a business, why should they choose St Tammany Parish over somewhere else? How is the economic health of the area? Are the taxes lower? Before you build some massive building which hires the architect, contractor, roofer, building supplier, and then employees; what will it cost to insure it? How’s the infrastructure getting to and from your newly developed property? How will your workers feel about a 30 plus minute long 7 minute commute everyday from Mandeville to Madisonville?
Final Thoughts
Why are so many major developments happening in southern states but not Louisiana? Car manufacturers are spending billions upon billions of dollars developing manufacturing in the south. Alabama has attracted Mazda, Toyota, Honda, Hyundai, and Mercedes-Benz. Why haven’t we?
What are we doing from a policy perspective to make our area more affordable and inviting to people and businesses? If we don’t begin to look at everything through that lens we will have a more painful conversation again very soon.
