Was a privately leased New Orleans industrial development board project exempt from property tax while the board owned it?

Plain-English summary

A New Orleans industrial development board planned to issue revenue bonds, acquire land and buildings, and lease the resulting retail and mixed-use project to private companies. The parish assessor asked whether the property would owe ad valorem tax while the board owned it. In Opinion 03-0398, the Louisiana AG answered no: the project would be exempt while it remained board-owned.

The AG explained that the constitutional exemption for public property required public title and public purpose. It cited Louisiana court decisions on the exemption and the project's bonds, industrial-development statutes describing the boards' public purpose, and earlier AG opinions finding that a private lease did not defeat exemption of board-owned property. Its answer was tied to continued board ownership; the opinion did not decide the tax treatment after any transfer of title.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant at issuance

Orleans Parish assessors

For the proposed project, the AG concluded that board ownership and the industrial-development public purpose satisfied the exemption analysis. The fact that private companies leased the property did not, by itself, defeat the exemption.

Industrial development boards and tenants

The conclusion applied while the board retained title. The opinion quoted R.S. 51:1160, which also permitted a board to require a lessee to make a payment in lieu of ad valorem tax for services rendered to the project, within the statute's stated limit. That payment provision was part of the statutory framework, not a finding that this project had such an arrangement.

Common questions

Did leasing the property to private companies make it taxable?

The AG said private leasing alone did not remove the exemption for this board-owned project.

Why did the AG treat the project as public property used for a public purpose?

The board would own the property, and the cited statutes described industrial development boards as public instrumentalities that promote commerce, industry, and employment.

Would the exemption continue if the board sold the property?

The AG's conclusion expressly applied while the board owned the project. It did not decide a later owner's tax status.

Could a lessee still owe a payment to local taxing authorities?

The opinion quoted R.S. 51:1160's provision allowing a board to require a limited payment in lieu of ad valorem tax for services. It did not say the proposed leases contained that term.

Background and statutory framework

The Industrial Development Board of the City of New Orleans proposed two bond issues to acquire a retail project and a mixed-use housing and commercial facility, then lease them to Riverview Retail Development Company and LGD Rental. The leases were expected to cover bond debt service. The assessor asked about exemption during board ownership.

La. Const. (1974) Art. VII, Sec. 21 exempted public property used for public purposes. The AG cited two Louisiana appellate decisions validating the project's bonds and Slay v. Louisiana Energy and Power Authority, 473 So.2d 51 (La. 1985), for the ownership and public-purpose analysis. It quoted R.S. 51:1152 on the public purposes of industrial development boards and R.S. 51:1160 on their tax exemption and potential payments in lieu of tax.

Citations and references

• La. Const. (1974) Art. VII, Sec. 21: public-property tax exemption discussed by the AG.
• R.S. 51:1152: legislative findings and purposes for industrial development boards.
• R.S. 51:1160: tax exemption for board property and potential lessee payments in lieu of tax.
• Slay v. Louisiana Energy and Power Authority, 473 So.2d 51 (La. 1985): public ownership and public-purpose test.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0398

Original opinion text

One American Place
301 Main Street, Suite 600
DEPARTMENT OF JUSTICE
P.O. Box 94005
CIVIL DIVISION
TEL.: (225) 342-7013
BATON ROUGE
FAX: (225) 342-2090

RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL

OCT 2 9 2OO3
OPINION NUMBER 03-0398
i SA Bond Issues
’ 90-A-2 Public Funds
122 Taxation

Art. VII, §21 of Louisiana Constitution
Ms. Betty Jefferson, Ed.D., CLA
R.$. 51:1152, 51:1160
4th Municipal District, Wards 10 & 11
4E01 City Hall
Industrial development board property which is
New Orleans, LA 70112
leased to pdvate company-is exempt from ad
valorom taxation.

Dear Ms. Jefferson:

As Assessor for the 4th Municipal District of Orleans Parish, you requested the opinion of this office concerning whether certain property owned by the Industrial Development Board of the City of New Orleans (the "IDB") will be exempt from ad valorem taxes. The IDB, working with Riverview Retail Development Company, L.L.C. ("Riverview")and LGD Rental I, L.L.C. ("LGD") intends to issue two issues of revenue bonds to encourage the location of a WaI-Mart SuperCenter and a mixed use housing/commeroial development facility in the City of New Orleans. With the proceeds of the bonds, the IDB intends to acquire the land, the SuperCenter, the housing/commercial development facility and related facilities (the "Project"). The Project will be leased, in part, to Riverview and, in part, to LGD for ~)ayments sufficient to pay the debt service on the revenue bonds.

Your question is whether the Project is exempt from ad valorem tax for the term of the revenue bonds and while the Project is owned by the Board.

La. Const. (1974) Art. VII, Sec. 21 provides a list of property that shall be exempt from ad valorem taxation. "Public lands; other public property used for public purposes" is included within the list of exempt property. Article VII, Section 21(A), when referring to the tax exempt status of public property, other than public lands, imposes a two-fold requirement that:

(1) Title to the property must vest in the public; and

(2) The property must be used for a public purpose.

In Board of Directors of the Industrial Development Board of the City of New Orleans v. All Taxpayers, et al., 2003-0826 (La.App. 4th Cir. 5/29/03), 848 So.2d 740, writ denied, a suit filed to validate the bonds to be issued for the Project, the Court specifically stated that "Article VII, Section 21(A) of the constitution clearly provides an exemption of property

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Ms. Betty Jefferson, Ed.D, C.L.A.
OPINION NUMBER 03-0398
Page -2-

owned by an industrial board from ad valorem taxes." The Fourth Circuit validated the bonds. See also, Board of Directors of the Industrial Development Board of the City of New Orleans v. All Taxpayers, et al., 2003-0827 (La.App. 4th Cir. 5/29/03), 848 So.2d 733, which also validated the bonds.

The necessity of meeting both criteda set forth in Art. VII, Sec. 21(A) is clearly recognized by the Louisiana Supreme Court in Slay v. Louisiana Energy and Power Authority, 473 So.2d 51 (La. 1985). Justice Calogero, writing for the Court, initially addressed the issue of the public status of the Louisiana Energy and Power Authority (LEPA) and the Lafayette Public Power Authority (LPPA), and determined that both constituted units of local government and/or political subdivisions of the state. Thus, property owned thereby constituted "public property" for purposes of Article VII, Section 21(A).

Shifting its focus to the second requirement, the Court stated:

"The second requirement for ad valorem tax exemption is that the public property be used for a public purpose. Providing electric service is a public function ...

For the foregoing reasons, we hold that the public power authorities, LEPA and LPPA, are political subdivisions of the State of Louisiana, constitutionally created by statute (LEPA) and by statute and ordinance (LPPA), and that their respective ownerships interest in Rodemacher 2 constitute public property used for publiC, purposes, exempt from ad valorem taxation by virtue of Article VII, § 21(A) of the Louisiana Constitution of 1974."

This office has previously recogr|ized that the fact that public property is leased to a private entity does not preclude it from being used for a public purpose so as to be exempt from ad valorem taxes. See Atty.Gen.Op. Nos. 93-392 and 89-599.

Industrial Development Boards are nonprofit public corporations organized pursuant to R.S. 51:1151, et seq. for the purpose of promoting the existence, development and expansion of commerce, trade and industry in this state. With regard to Industrial Development Boards, R.S. 51:1152 provides, in pertinent part:

"A. The legislature hereby finds and determines:

(1) That the existence, development and expansion of commerce and industry are essential to the economic growth of the state and to the full employment, welfare and prosperity of its citizens;

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Ms. Betty Jefferson, Ed.D, C.L.A.
OPINION NUMBER 03-0398
Page -3-

(4) That the present and future health, safety, right to gainful employment, and the general welfare of the people of the state merit and require the assistance of the state, its agencies, and political subdivisions in the development within the state and its political subdivisions of industrial, agricultural, manufacturing, and research enterprises ... and in the attraction and retention of sound business and commercial enterprises which contribute to the economic growth and vitality of the state and its political subdivisions;

(6) That the means and measures herein authorized by this chapter and the assistance provided in this chapter, especially with respect to financing, are in the public interest and serve a public purpose of the state in promoting the health, welfare, and safety of the citizens of the state ... by the securing and retaining of private industrial, commercial and other enterprises and the resulting maintenance of a higher level of employment and economic activity and stability.

B. It is the intent of the legislature by passage of this Chapter to authorize the incorporation in the several municipalities or in the parishes in this state of public corporations to acquire, own, lease, rent, repair, renovate, improve, finance, sell, and dispose of properties to the end that such corporations may be able to promote industry and develop trade by inducing manufacturing,~ industrial, commercial and other enterprises to locate in this state and further the use of its agricultural products and natural resources ... and to acquire, own, lease, rent, repair, renovate, improve, finance, sell, and dispose of properties to the end that such corporations may be able to attract and retain business and commercial enterprises in the municipality or parish to maintain and expand employment and the economy in the area." (Emphasis added)

Additionally, R.S. 51:1160 pertinently provides:

"For the corporation is hereby declared to be performing a public function on behalf of the municipality or parish with respect to which the corporation is organized and to be a public instrumentality of such municipality or parish. Accordingly, the corporation and all properties at any time owned by it and the income therefrom and all bonds issued by it and the income therefrom shall be exempt from all taxation in the state of Louisiana; provided, however, that the corporation may require the lessee of each of the projects of the corporation to pay annually to parish or municipal taxing authorities, through the normal collecting agency, a sum in lieu of ad valorem taxes to compensate such for any services rendered by

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Ms. Betty Jefferson, Ed.D, C.L.A.
OPINION NUMBER 03-0398
Page -4-

them to such projects which sum shall not be in excess of the ad valorem taxes such lessee would have been obligated to pay to such authorities had it been the owner of such project during the period for which such payment is made." (Emphasis added).

Op.Atty.Gen. No. 77-916 determined, in accordance with the constitutional and statutory provisions quoted hereinabove, that all property held in the name of Industrial Development Boards is exempt from all ad valorem taxation in the State of Louisiana.

In Op.Atty.Gen. No. 93-642, this office concluded that when an Industrial Development Board issues bonds to finance the acquisition of an office building to be used as the corporate headquarters of a holding company and its wholly owned subsidiary, which office building is titled in the Industrial Development Board and leased to the subsidiary, the property would be exempt from ad valorem taxation.

We also direct your attention to Attorney General’s Opinion No. 88-454, which determined that while property upon which a warehouse and distribution facility were to be erected was leased to the developer, and title to the property was held by the issuer (an Industrial Development Board) of taxable revenue bonds, the property would be exempt from ad valorem taxation. See also Op.Atty.Gen. Nos. 99-267 and 99-267(A).

Based upon the foregoing, it-is the opinion of this office that while the Project is owned by~ the Board, the Project will be exempt from ad valorem taxation.

Trusting this adequately responds to your request, we remain

Yours very truly,

RICHARD P. IEYOUB
Attorney General

BY:
S. HESS
Assist~ Attorney ieneral

RPI/MSH