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Louisiana's highest court answered these key questions about St. George's incorporation

1 month 3 weeks 3 days ago Friday, April 26 2024 Apr 26, 2024 April 26, 2024 2:10 PM April 26, 2024 in News
Source: WBRZ

BATON ROUGE — The Louisiana Supreme Court laid out a series of questions and answers as it ruled Friday in favor of the incorporation of a new city of St. George in the southeastern corner of East Baton Rouge Parish. The entire decision can be read here.

Here's a verbatim of key parts of the justices' decision:

Does the proposed area have definite characteristics of a village?
The record establishes that St. George is an identifiable area with a thriving business community and its own fire  department. The area also desires its own school district, which is largely the impetus of the incorporation effort. A single
issue, like schools, can support incorporation. Schools are often the hallmark of a community. The desire for a separate school district evidences St. George’s distinct identity from Baton Rouge.

Further, the area boasts economic and population growth unique to St. George and not connected to or dependent on Baton Rouge. As explained by Incorporators’ expert, Dr. Will Heath, Baton Rouge contains its own “fixed assets”: the state capitol, universities, the river front. Those are wholly separate from the business and residential interests of St. George, giving both St. George and Baton Rouge their separate identities. This factor favors incorporation.

Have the residents of the proposed area for incorporation taken initial steps toward incorporation?
The residents of St. George petitioned and voted for incorporation by a 54% vote. This factor favors incorporation.

Has a nearby city initiated preliminary proceedings toward annexation?
In 2014, businesses and government interests within the proposed area for incorporation successfully petitioned for annexation into Baton Rouge. The people in those areas decided how they would associate and which local government would govern them. The rights of the remaining citizens of St. George are no less important. The annexations, which  included portions of the LSU campus, the Mall of Louisiana, and L’Auberge Casino, created significant economic value for Baton Rouge. They also reduced any adverse impact of St. George’s incorporation. This factor favors incorporation.

Have there been any financial commitments toward incorporation or annexation proceedings?
The incorporation effort began in 2013, after two failed attempts to form a school district. The initial petition to incorporate failed. The current incorporation attempt began in 2018. For over a decade, substantial money has been expended on legal and expert fees to form an independent school district and to incorporate. This factor favors incorporation.

Does a neighboring city have the prerogative to contest incorporation, although consent of such city is not required? 
An elected official of Baton Rouge has exercised his individual right to contest incorporation. Notably, Baton Rouge did not contest the incorporation. This factor favors incorporation.

Does incorporation affect an existing city within three miles? 
The statute recognizes this factor as part of the reasonableness test: “In determining whether the incorporation is reasonable, the court shall consider the possible adverse effects the incorporation may have on other municipalities in the
vicinity.” La. R.S. 33:4(D). The effect of incorporation on a neighboring city is usually one of restricted geography. In other words, does the incorporation adversely affect the ability of a neighboring municipality to grow, annex and expand? If the geographic boundaries for incorporation impinge on another area’s potential for growth, incorporation may be unreasonable.

In contrast, adjoining municipalities are not usually funded by a surrounding unincorporated area. Their tax base is within their municipal limits. This case is different. The City-Parish’s fund-allocating agreements that result in shared tax revenues between the incorporated and unincorporated areas is not typical. So, Baton Rouge makes the argument that incorporating St. George will decrease its funding. Thus, an adverse impact or effect.

While the argument may be correct, it is not complete. A decrease in funding to the City-Parish does not necessarily result in an unreasonable adverse impact. Cost-savings must also be considered to determine the full economic impact of incorporation.

Challengers’ evidence shows only expected lost tax revenue. They failed to offer evidence of any corresponding advantage to Baton Rouge of not providing services to St. George. If Baton Rouge currently provides no services to St. George, that weighs in favor of incorporation: St. George citizens pay taxes but receive no services. If the only impact of incorporation is a reduction in tax revenue paid by St. George citizens to Baton Rouge, with no reciprocal services, a windfall results for Baton Rouge. Incorporation will reasonably rectify that inequity.

On the other hand, if St. George citizens receive services for the taxes they pay, incorporation brings cost-savings to Baton Rouge, which will no longer be required to provide those services. Challengers failed to address that. Without evidence of the full economic impact of incorporation, denying incorporation because of an unreasonable economic impact on Baton Rouge is error.

Challengers’ economic expert, James Richardson, did not consider the cost effect of Baton Rouge not providing services after incorporation. He used per capita and comparative city approaches to determine St. George’s expenses. These accounting methods do not actually establish what the City-Parish is spending on St. George.

Linda Hunt, Finance Director for the City-Parish, conceded there will be cost savings if St. George assumes financial responsibility for services currently provided by the City-Parish. However, she admitted to not quantifying or determining the
amount. The City-Parish has discretion in allocating revenues between Baton Rouge and the unincorporated areas. Evidence of that allocation is critical to determining reasonableness here and is totally absent from the record.

The only evidence put forth by Challengers that arguably relates to cost savings is St. George’s estimated operating cost: $51 million. In other words, if St. George’s services cost $51 million, Baton Rouge will save that amount by not providing those services. If the amount is $47.81 million, which accounts for the correct pension liability, that nearly neutralizes the  lost revenue claimed by Baton Rouge, which is roughly $48 million.

But, Incorporator’s expert, Mr. Jean-Paul Tujague, testified cost-savings to Baton Rouge lessens the financial impact to $32 million, not $48 million. $32 million lost revenue results in an approximate 10% cut to a $320 million budget*. Ultimately, Challengers bear the burden of proving an unreasonable adverse effect on Baton Rouge. But, their evidence was either incomplete (failed to show the net impact) or showed no financial impact due to a complete cost offset. Relying on Incorporators’ evidence, a 10% budget reduction is not an unreasonable adverse effect.
Also, the statute does not limit the adverse impact factor to economics. Evidence shows that Baton Rouge can actually be positively affected by St. George’s growing population. Those people and their money will stay in the parish. This increases revenues and improves quality of life across the parish. This factor favors incorporation.

*-footnote: The City-Parish’s general fund is $320 million. Richardson and the trial court found $214 million of that fund cannot be cut because certain expenses are either “mandated” or “difficult to be reduced.” That leaves $106 million in the budget that “can be reduced.” The trial court found that taking $41.4 million ($48 million in lost tax revenue minus St. George’s $6.6 million contribution towards constitutional offices) from that $106 million budget amounted to an “approximate” 35% reduction of Baton Rouge’s budget. Reducing the amount of the budget from $320 to $106 million but keeping the tax loss the same (roughly $42 million), inflates the adverse impact. First, all amounts in the general fund are discretionary to a limit. That requires setting spending priorities. The approach by Richardson and the trial court to determine the impact on Baton Rouge’s general fund assumes all City-Parish budget decisions are reasonable and should be funded. Because every municipality must develop its own budget priorities (by making cuts in spending, not incurring capital projects when funds are limited, and raising funds), it is unreasonable to compare the reduction caused by the loss of St. George’s contribution in sales tax to a reduced budget. Any projected impact should be calculated from the full budget. Thus, even using Challengers’ numbers, the budget is reduced by only 12.9%.

Does the population of the area show an increase and continuity of settlement?
The record establishes the population of St. George is increasing. Conversely, the population of Baton Rouge is declining. If allowed to incorporate, St. George’s population will stay in East Baton Rouge Parish, thus benefitting Baton Rouge because of shared funds. Testimony established that without incorporation, an outmigration is possible. St. George residents can relocate to neighboring parishes with more shared interests, including more desirable school districts. Should an out-migration occur, the City-Parish’s general fund will be adversely impacted even without incorporation.

The opposite is also true. Dr. Heath explained that St. George has proven its ability to attract business, generate trade, and create wealth. If incorporated, St. George’s economic and population growth creates a positive impact on Baton Rouge because it increases tax dollars in the parish and promotes parish population retention. Population and continuity of settlement are beneficial to both St. George and Baton Rouge. This factor favors incorporation.

Does a community have a separate identity?
This is largely repetitive of the first factor regarding the municipality’s unique identity as a village. However, we note Challengers’ argument that St. George has no separate identity, and that major thoroughfares will be split in half by imaginary city lines, without natural geographic delineation. But, that fact is inherent in any map-drawing. Abutting an area already incorporated and recently annexed into Baton Rouge is an unavoidable reality and not determinative. This factor is neutral and does not weigh in favor of or against incorporation.

Do natural geographical boundaries separate an area from other municipalities?
Major water ways (the Mississippi River, the Amite River, Bayou Manchac), as well as locally known creeks, act as some boundaries. Other areas are marked by major highways. And, as discussed above, other areas are delineated only by map lines and pre-existing boundaries. This factor is neutral and does not weigh in favor of or against incorporation.

Is transportation affected? 
There is no evidence of any impact on transit costs. However, the evidence relative to public works shows that St. George will privatize most, if not all, of those services.*

That should have been reflected as a reduction of the adverse impact to Baton Rouge, which will not bear that responsibility. This factor favors incorporation.

*- footnote: As represented by the Incorporators, these services include, but are not limited to drainage maintenance, minor street  repairs, traffic control issues, street sign maintenance, litter control, and weather-related emergency services.

Will incorporation affect the interest of landowners in the affected area?
Landowners and residents of St. George will benefit by their sales tax revenue being used on needs specific to St. George. Again, because of the nature of the consolidated City-Parish government, Baton Rouge has arguably experienced a windfall by collecting taxes in St. George without returning proportionate money and services. Incorporation will allow the money paid by St. George citizens to stay in St. George. This factor favors incorporation.

Is the cost of operating the municipality prohibitive?
This factor is previously analyzed under the ability to provide public services within a reasonable period of time. We find St. George’s revenue will cover its operating costs. This factor favors incorporation.

Will an estimated tax base of the proposed area support incorporation?
After incorporation, and if approved in an election, the 2% sales tax now paid to the City-Parish will be paid to St. George. A majority of electors in St. George already voted to incorporate. According to Incorporator Chris Rials, “one would reasonably expect that if 54% of voters wanted to have St. George, 54% would approve what they’re already paying for.” We agree.

Thus, there is a tax base of roughly $48 million to support services proposed by St. George. The sufficiency of that amount is previously addressed in the section regarding the ability of St. George to provide public services within a reasonable  period of time. This factor favors incorporation.

Is the overall welfare of the residents of the affected area improved by incorporation?
This factor addresses the benefits to St. George if it is incorporated. Instead of solely determining whether there is an adverse effect on a neighboring city, reasonableness requires that we address the other side of the scale: the advantages to the proposed municipality. Financially, the residents of St. George will receive local services for their taxes. Incorporation improves the general welfare of the people and empowers self-determination. The people will decide what is in their best interest and govern accordingly. That is consistent with our constitutionally described purpose of government. La. Const. art. I, § 1; La. Const. article I, §26.

Self-determination allows a community to protect, promote, and prioritize what is uniquely important to them. It should be favored. This factor favors incorporation.

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