Audit alleges LTC methods cost parishes
A report released by the Louisiana Legislative Auditor’s Office claims the method the Louisiana Tax Commission uses to appraise public service companies may have cost Richland Parish almost $4 million a year.
The report showed that changing the method of assessing these companies would have resulted in an additional $55,931,433 in Richland Parish in 2015, which would have translated into an additional $3,982,318 in tax revenue.
The audit report indicated the tax commission does not follow accepted national standards of appraisal that take into account the businesses’ future income growth potential when appraising public service entities such as railroads, pipelines, telephone and electricity-producing companies that operate in multiple parishes.
The report states if the tax commission changed the way it calculates the assessed values of public service companies, it could result in local governments statewide sharing an increase of $249 million in annual tax revenue. In fact, the report said the tax commission itself would collect an additional $964,000 in service fees in 2018.
The report indicates a change in the weights the commission assigns to a company’s valuation approach from year to year can impact the company’s fair market value and ultimately the tax revenue for local governments.
Richland Parish Assessor Lee Brown said all public service is valued in Baton Rouge by the Louisiana Tax Commission Local assessors are then given the value to work with.
“We get a number, no work papers” Brown said.
Brown noted the school system lost the most funding under the current method of assessing public service companies.
“Our School System receives the lions share of tax dollars,” Brown said. “On the average 41.17 percent of property taxes is devoted to Richland Parish school system so around $1,646,640.00 loss in revenue due to unfair valuation processes this includes bonds, maintenance and support.”
Brown added that with an increase in assessed value, there could be tax savings brought to the table for current taxpayers. He would lie to see the LTC use the finding to improve future assessed values for the people of Louisiana.
“Rules and regulation need to be adopted to effectively bring fair and equitable assessed values for the future,” Brown said. “With budgets being stretched to do more with less, these tax dollars are needed to lighten the burden of our taxpayers and fund our schools and other taxing bodies to provide the services for our area.”
In its response to the audit allegations, the Louisiana Tax Commission stood behind it’s method, noting that assessing the fair market value of a business is more of an art than a science.
“It is critically important to restate that the Tax Commission is not a tax collector, nor is it the Commission’s purpose to appraise/assess property at an arbitrarily high value,” the LTC responded. “Rather, the Commission’s role, with regard to public service properties, is to determine the fair market value of public service properties/companies, to assess them accordingly, and to fairly allocate the value among the parishes. The appraisal process is not a mathematical calculation or a mechanical process where one simply adds arbitrary numbers together. The appraisal process leans heavily on the skill, experience, and expertise of the appraiser.”
The governor, senate president and speaker of the house have been sent a copy of this by the Louisiana Legislative Auditor. So far, officials said there has not been any response as to any plans to correct the inequities in deriving a fair market value and the so called discretionary practices the auditors feel need to be corrected.