Solution journalism spring 2023: Underground infrastructure edition

The Ongoing Issue New Orleanians Face

New Orleans was built in the 1800s on a swamp just above sea level. However, the pumps used to clear water from the city couldn’t compete with mother nature. More and more water continues to pour into the city, and today, more than half the city sits lower than sea level. and this progression will continue for parts of New Orleans as a result of the human-made water systems that have disrupted the sediment deposit process. Thus, residents regularly contend with torn-up streets replete with insufficient water pipes and the sudden appearance of potholes.

Potholes are a daily issue for the residents as they shred their tires, overturn their bikes, wreck the suspension on their cars, and make getting to and from anywhere a nightmare. City officials filled 36,979 potholes on 2773 blocks, for an average of 13 potholes per block. Potholes have been an ongoing issue since at least 1961, as people have taken pictures of their children posing in the gaping holes that periodically appear on the streets of New Orleans. Potholes cause automobile tires to burst and oil pans to explode. The average car repair for hitting a pothole is $400, with no help from the city for repairs.

The Department of Public Works is trying to address the problem and has 68 projects underway, spending $600 million, up significantly from the average $20 million to $40 million spent. Inspector General Edward Michel understands the dire need to get the streets repaired as he mentioned that the presence of potholes further extends as a quality of life issue for citizens, and the city must work more efficiently to respond in a timely manner to service requests. Michel’s office has also released reports that reveal only a quarter of complaints are resolved within a month, while another quarter of complaints take more than a year to handle.

Most people would believe the causes of these potholes are the hurricanes that constantly pass through the South, but no, it is triggered by what happens below the streets, specifically, the water pipes that have never been refurbished or tested. According to Giarrusso, more than 50% of the system is at least 80 years old, and some even go back a century or more. The unfortunate fact is that water pipes aren’t meant to last this long, and as a result, the entire water pipe system is punctured with leaks. Additionally, 47.9% of the city’s water pipes were installed before 1940, making them at least 80 years old, and of those, 34.4% are 100 years or older. Thus, it is important to include that the lifespan of water mains, depending on the material used, is between 75 and 100 years.

Repairing potholes is not just a one-time fix. Even after the gravel is poured on the spot, leaks in underground water pipes cause the hole to sink again. The Sewerage & Water Board is challenged to assign crews, excavate part of the street to determine whether there is an aging, leaky water pipe, and repair the pipe, if necessary, as well as the thousands of potholes plaguing the city. The Department also needs to communicate the repair timeline with residents so they can coordinate transportation.
New Orleans residents know the water system is to blame for the abundance of potholes, and now they have confirmation that their water system is failing. How? The water systems were graded in a number of categories, including water quality violations, infrastructure, operations, and maintenance. In addition to the water pipes leaking and contributing to the potholes that appear all around the city, a large percentage of water that goes into the city’s system dribbles out. This contributes to a lack of viable water for those living in the city. In two and a half year period beginning in January 2019, New Orleans residents filed, on average, 250 complaints a month for a total of 6,000 service requests.

Since 2017, New Orleans has spent over 1.8 billion dollars on street improvements in the pipeline in the coming years. Unfortunately, as Cedric Grant, executive director of the Sewerage & Water Board, has mentioned, any time there is road work in New Orleans, there is a possibility of finding old lead service pipes. Roadwork enhances the risk of lead getting into the water in New Orleans because the city lines are regularly disconnected and reconnected to home pipe systems, which can result in the dislodging of deports that prevent lead from getting into homeowners’ water pipes. Ultimately, the infrastructure beneath the ground must be effectively worked on to resolve the many issues residents of New Orleans face because of it.
The city is not keeping up with repairs. City officials are asking the federal government to help with repairs and are hopeful that President Biden’s new infrastructure plan can provide support. The city can’t seem to find funding to help identify and build out areas where excess water can be safely stored. It also needs more pumps and budgets to help replace century-old pipes. The city is also not looking ahead to find more reliable power sources, like solar, to help during blackouts.

Is there a Tool to Help Combat Infrastructural Issues?

The finance tool known as TIF, or tax increment financing, is used to fund public infrastructure and other improvements up-front in cities across the country. Local governments can then pay later for such investments. This is done by assimilating the future anticipated increase in tax revenues generated by the project. Cities can use this tool when a new development is of an abundantly large scale and when its completion is expected to result in a sufficiently large increase in the value of encompassing real estate such that the resulting incremental local tax revenues generated by the new project can fund bond insurance. Ultimately, tax increment financing enables local governments to repair and enhance their communities.

The tax increment financing law was established in Illinois in 1977, but Chicago approached the program tentatively as it created its first TIF distinct in 1984. The city of Chicago works with a group of intellects to identify areas that are not living up to their potential. The city then examines the land to determine if it is eligible to become a TIF district. For an area to be eligible for TIF Illinois, the structures in the area must have some of the following issues: age; obsolescence; illegal use of individual structures that are below minimum code standards; excessive land coverage; lack of ventilation, light, and/or sanitary facilities; lack of community planning; excessive vacancies; lack of physical maintenance; deleterious land use of layout; or dilapidation or deterioration. If the area qualifies, the city creates a TIF redevelopment plan to revitalize the neighborhood, along with holding public hearings to provide input. Following the completion of a redevelopment plan, the City Council formally votes on the creation of the TIF district. In Chicago, funds are generated by growth in the (EAV) Equalized Assessed Valuation of properties within a designated district over a period of 23 years.

The Ryan/Garfield TIF was one of Chicago’s first districts created to aid the commercial redevelopment of 10 acres of vacant land in the Washington Park community in 1986, also considered one of the poorest neighborhoods in Chicago. The goal of this district was to create a new retail center to provide goods, services, and employment for local residents. The funds were targeted to enhance site preparation, street and sidewalk improvements, traffic signalization, utility relocation, security features, and job training. Like all TIF districts, Ryan/Garfield was funded for 23 years, and by 2008 the financing was terminated as the district had successfully completed its purpose. In addition to the Ryan/Garfield TIF in 1986, the West Ridge/ Peterson TIF was created to foster the commercial redevelopment of six acres of underutilized land along Peterson Avenue. A specific objective of the city was to encourage the redevelopment and replacement of a vacant retail structure within the redevelopment project area. In 2007, the construction of the Target along Peterson Avenue was certified as completed, successfully accomplishing the objectives of the redevelopment plan and, by the time of its expiration, a compound annual growth rate in total property values of 9%. The utilization of tax increment financing has enabled areas in Chicago to undergo redevelopment plans to impact the lives of the nearby residents positively.

Following the Naval Air Station’s closure in 1995, the Village of Glenview established the Glen TIF in 1998 to integrate the land into the rest of Glenview. The village saw it was necessary to implement redevelopment plans so they could demolish the Naval Air Station’s structures and 1.5 miles of runway, clean contaminated soils, build stormwater detention, and construct public improvements. The utilization of tax increment financing and Glenview’s redevelopment efforts resulted in The Glen, a 1,100-acre development, and The Glen Town Center, serving as the development’s “downtown” as it is filled with an abundance of drinking and eating options and a movie theater. Surrounding the town center is nearly 2,400 residential units, a retail complex, a hotel, the Kohl Children’s Museum, and a corporate campus. By engaging with tax increment financing, neighborhoods and areas in dire need of redevelopment can flourish in ways no one ever thought was possible.

Before & After Utilizing Tax Increment Financing in Chicago (Photo by:   )

Like any government-controlled initiative, tax increment financing could have possible corruption and limitations. One of the largest users of tax increment financing in Chicago was Mayor Daley, as over 160 TIF districts were implemented that covered about one-third of Chicago by the end of his tenure. An examination of the city’s TIF records reveals that in the last eight years of Daley’s tenure, his administration spends about one point seven billion dollars of TIF money toward public and private endeavors. Although Daley’s administration provided vague accounting of TIF activities, the money was not tracked or approved as part of the budgeting process. Thus, this created speculation as people couldn’t trust where the money was actually going. This can happen with any local government regarding TIFs, and Chicago has taken initiatives to have the mayor be more accountable for their actions.

Connecting the Pieces

There are several ways to address the funding necessary to help address the problem: use tax increment financing, issue bonds, tax higher income brackets, and ask developers to pay their fair share.

The city government takes a different look at TIFs and can use increment financing to fix city issues. If New Orleans’ city government were to implement tax increment financing, it could fund the issues caused by the underground infrastructure. The first step is to evaluate areas that could be considered TIF districts. From there, a redevelopment plan should be created to portray how testing and fixing the underground pipes would revitalize the roads and the neighborhood. Utilizing this method could positively benefit the New Orleans community without imposing heavy taxes. So, why doesn’t New Orleans use tax increment financing to fix our issues? In 2009, New Orleans Mayor Ray Nagin issued an executive order establishing a city policy on the use of tax increment financing. The order entails that TIFS will be approved by the city only for defined geographical areas that are inactive and destroyed, in which restoration would only occur within the foreseeable future with the use of a TIF, and where the lack of development has the ability to cause instability or effect growth elsewhere in the city. The policy around commercial and residential development can be used to finance public improvements, improve infrastructure, and “support investment needs that demonstrate clear public benefit.”

Residents in New Orleans face heavy taxes through its regressive tax system – low-income residents end up paying a higher percentage of their income in taxes compared to wealthier residents. In Louisiana, the bottom 80% of taxpayers, those earning less than $91,500 per year, pay 9.8% of their income in state and local taxes, while the richest 20% pay a far lower rate of 7.3%. These higher tax rates on lower-income households impact communities of color more than white communities, as white households make up 61% of Louisiana’s population but comprise 79% of the state’s top earners. As they continue to be the leading earner in the state, those in the bottom 80% continue to be put in a cycle of paying large portions of their income on taxes and other mandatory fees. Louisiana’s tax system ranks 39th overall on our 2023 State Business Tax Climate Index. Certainly, overhauling the tax system and using it to repair the aging infrastructure should be a solution to fixing the problem.
Taxing the wealthy in New Orleans is another important means of raising money to address the infrastructure. In New Orleans, the bottom 40 percent of the population earns just 7.5 percent of the income, according to Bloomberg. Inequality is growing nationally, but the speed of growth in New Orleans is faster than that in many other cities. This means that the remaining 60 percent of the residents earn 92.5% of their income. This group needs to take more responsibility for the city’s upkeep, and a surplus income tax can address this. To drive home this point further, the Times-Picayune ran an article claiming that New Orleans is the second worst for income equality in the nation, comparable to that of Zambia. It’s time to look more closely at the well-to-do residents to address the infrastructure they rely on every day.

Louisiana’s regressive tax system

Having private equity pay their fair share is another means of raising money. Rather than subsidizing commercial construction, including new hotels planned for the city like the World Trade Center property, the city government can insist that developers can pony up funds from reduced tax breaks.
In all, there are various ways to address the funding necessary to fix the issues caused by the underground infrastructure in New Orleans. Tax increment financing is a viable option that could revitalize the roads and neighborhoods without imposing heavy taxes. However, the city’s policy on the use of TIFs limits their approval to defined geographical areas that are inactive and destroyed, which may not include areas in need of immediate repair. The regressive tax system in Louisiana puts a heavier burden on low-income residents and communities of color, making it necessary to overhaul the tax system and use it to repair the aging infrastructure. Taxing the wealthy in New Orleans and having private equity pay their fair share are also important means of raising money to address the infrastructure. It is imperative for the city government to explore and implement these options to ensure that the community’s basic needs are met and to promote a more equitable distribution of resources.