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New proposal would cut city fees at heart of school funding dispute [1]

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Date: 2025-04-09

The New Orleans City Council is expected to end the city’s practice of charging fees on the taxes it collects at its regular meeting Thursday (April 10). The proposed ordinance is the latest move by the council in its ongoing battle with Mayor LaToya Cantrell after she backed out of a $90 million settlement with the Orleans Parish School Board that was originally meant to address those fees.

“Essentially, what we’re trying to do is resolve the issue not just with the school board but with all the groups where we potentially have exposure, where legal fees and fines are collected on ballot initiatives,” said Council President JP Morrell, the author of the proposal.

Morrell’s ordinance will be paired with another ordinance authored by budget chair Joe Giarrusso, which will appropriate an additional $10 million to the school district. Both ordinances, if passed, will work to partially satisfy a deal that the council and Chief Administrative Officer Gilbert Montaño negotiated with the school board last fall.

“The mayor and the council made a deal with the school board,” Giarrusso previously told Verite News. “It is our duty to stand with our kids and partners and uphold that deal.”

In 2019, the school board sued the city over its practice of charging fees for its work collecting the district’s local taxes. The city collects and distributes ad valorem taxes not only for the school board, but also for the library system, the Sewerage & Water Board and a handful of other local entities. In recent years, those fees amounted to 2% of the school district’s overall tax revenue, or an estimated $10.5 million per year.

The school board has long maintained that the fees are illegal because the full amount of the millage is owed to the district. The school board further alleges that this illegal fee has resulted in more than $130 million being diverted from the district over the years. But the city’s lawyers have insisted that the fees are legal and are being charged for “services rendered.”

But Morrell contests the city’s argument.

“A fee for a service requires you to disclose how much that service costs, and [the city’s finance department] has never shown ten and a half million dollars of work annually on behalf of the school board,” Morrell said. “It would be reasonable if it cost half a million dollars, which is what we’re kind of hearing is the average for most parishes to collect those kinds of fees.”

Morrell said his ordinance would also require the school board and other entities with dedicated millages to negotiate in good faith with the city upon a fee for tax collection or start collecting their own taxes by the end of 2026.

“There was a concern if the city’s going to collect the tax into infinity but not collect a fee then it turns into a gratuitous donation, which we’re also not allowed to do,” Morrell said. “So, it will give everybody an 18-month period where the city will continue to collect the tax and not charge a fee because we’re all working together trying to resolve it.”

Representatives for the school board and for the mayor’s office did not respond to requests for comment.

Why is school funding so troubled?

The council and Cantrell have been at odds since early February, when Cantrell announced that she would not honor a $90 million settlement that the city and the school board negotiated last fall.

That settlement came after OPSB announced that the school district was facing a multimillion-dollar budgetary shortfall due to an accounting error – a figure that ballooned to an estimated $50 million. According to the district, the catastrophic error occurred due to inaccurate projections over how much money the school district would receive in property and sales taxes.

In November, Cantrell’s top deputy Montaño, members of the New Orleans City Council and members of the school board negotiated a settlement that would deliver $20 million in financial assistance to the school district before the end of the school year as well as commit an additional $70 million in support for educational programs over the next ten years. In return, the school board would dismiss its longstanding lawsuit against the city for its practice of charging fees to collect local taxes for the district, and the city would agree to stop charging those fees.

At first, it seemed like the settlement was a done deal as key stakeholders, including City Attorney Donesia Turner and Chief Finance Officer Romy Samuel, worked together to draft a cooperative agreement recognizing the terms of the settlement. At the same time, the city council appropriated the funds during its annual budgeting process.

But those talks fell apart in late December. City officials, including Turner and Samuel, stopped replying to inquiries from school board officials and city council members asking for updates on the agreement. The city also failed to pay the first $10 million owed to the school board by the end of December 2024.

Then, in late January, Cantrell told the school board that she would be reneging on the settlement agreement, claiming the city was not obligated to fulfill the terms of the settlement since she was not directly involved and did not sign off on the settlement. Samuel also said that the city was in financial dire straits and could not afford the settlement.

Cantrell’s actions kicked off a series of retaliatory efforts by the council, which joined the school board in its lawsuit against the city. Councilmembers also passed ordinances prohibiting city employees from spending money on travel and booze in an attempt to call the mayor’s bluff on the state of city finances.

Cantrell, for her part, has gotten a series of modest victories: First, in March, a judge ruled that the $90 million settlement was not binding since it had not been finalized, but that Cantrell and the city still owed the school board the $10 million that been appropriated in the annual budget. Then, in late March, a different judge blocked the travel ban, agreeing with Cantrell that it violated the city charter.

With this week’s proposed ordinances, the council has continued its aggressive actions against the mayor. Giarrusso has said that councilmembers plan to continue to pass ordinances that will fulfill all the initial terms of the settlement.

The school board, for its part, has cobbled together a plan to address the budgetary shortfall by drawing upon its reserves and redistribution some of its operational budget to provide a $25 million stopgap. Additional support from the council could all but eliminate the impacts of the accounting error and prevent dramatic cuts across the district.

Even outside of the accounting error, the district has expressed concern over its financial future as it has watched the population of school-age children shrink in recent years, leading the district to consider undertaking “right-sizing” measures, like selling old buildings and consolidating low-enrollment schools.

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[1] Url: https://veritenews.org/2025/04/09/city-tax-fees-school-board-funding/

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