Fourth Circuit rules City of New Orleans withheld over $7.6m in tax revenue owed to OPSB

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The City of New Orleans illegally kept more than $7.6 million in tax revenue owed to the Orleans Parish School Board, a state appeal court has ruled.

The School Board sued the city in 2019, claiming the city improperly withheld the money over the past five years and used the money to cover its underfunded pension obligations. The suit also claimed that the "administrative fee" City Hall charges for collecting taxes for various agencies is unconstitutional. The suit filed in Orleans Parish Civil District Court sought repayment of what it said was OPSB's share of the money.

In its June 3 ruling, the state 4th Circuit Court of Appeal didn't require the city to repay the School Board the millions of dollars from the past, but did say that in the future "all tax proceeds must be directed to the OPSB," meaning the city can no longer charge its 2% fee for collecting and dispersing public school funds.

"The City is wholly without authority to use the OPSB taxes for purposes other than their dedicated purposes," Appeal Court Judge Daniel Dysart wrote in the ruling.

LaTonya Norton, a spokeswoman for Mayor LaToya Cantrell's office, said the city "will likely file an appeal in response to the Fourth Circuit’s decision."

The 2019 lawsuit accused the city of shortchanging the School Board on its dedicated taxes for at least half a decade.

The School Board argued that the city instead kept some of the money owed and put it toward various retirement funds, including pension funds for city clerks, assessors, New Orleans firefighters, district attorneys and sheriffs.

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City officials hadn't disputed that it had used taxes levied on behalf of both OPSB and another taxing body, the Downtown Development District, to fund pension obligations, but said they were legally allowed to do so because state law required them to use property tax money for statewide retirement systems.

The appeals court, however, said it didn't mean that the city could use tax money that was specifically earmarked for other purposes.

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