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An environmental advocacy group has filed a lawsuit against the River District and the City of New Orleans in an attempt to block a tax break for the construction of a new local headquarters building for Shell Oil.
The lawsuit, filed by the Louisiana Bucket Brigade in Orleans Parish Civil District Court late Thursday, argues that the approval by the City Council last month of the tax break — which exempts the developers of the building from property tax for the first 15 years — has “serious problems,” including false claims made by the developer and city officials about retaining and growing Shell jobs in the city.
The Shell building, which would be 147,000 square feet, is a key early project in the broader $1 billion River District project, which is being built mostly on about 50 acres of land controlled by the Ernest N. Morial Convention Center.
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The project envisions hundreds of new residential units, millions of square feet of office space, as well as retail and entertainment venues. It has broad support from politicians and economic development promoters. However, the tax break for the Shell building, valued at $21.6 million, has spurred controversy, with some alleging that it broke state law because it was pushed through without enough deliberation and under a false premise of job growth.
The City Council approved the payment in lieu of taxes, or PILOT, deal by a vote of 5-to-1 on Dec. 1.
However, the council’s two members-at-large, Helena Moreno and JP Morrell, subsequently said they felt they had been rushed into approving it and argued that it hadn’t complied with the state law governing River District tax breaks.
Opposing views
The council’s lawyer agreed that the law required them to take more time to review the PILOT. But on Thursday, the state attorney general’s office offered its own opinion and said that the PILOT approval had complied with state law.
Assistant Attorney General Brett Robinson said he felt the 45-day review period in the law was optional and that the City Council validly approved the PILOT even though it had taken just four days to review.
The Louisiana Bucket Brigade lawsuit, if it proceeds to trial, will give a court the chance to decide which opinion is correct.
Office move
The lawsuit also challenges the PILOT on the grounds that the developer and City Hall officials misled City Council about retaining and growing Shell jobs in the city.
The filing argues that one of the developers — local builder Louis Lauricella, who is leading the River District consortium — “told the City Council that the deal was needed to keep Shell from pulling out of the city.”
It also notes that Jeff Schwartz, Director of Economic Development for Mayor LaToya Cantrell’s administration, told the City Council that the project would result in the retention of over one thousand Shell jobs and the addition of hundreds more.
Shell later distanced itself from those claims and said it had nothing to do with the economic impact study commissioned by the developers to support their claim for a tax break.
Shell said it planned to move 819 employees from its existing space in the Hancock Whitney tower to the new River District building. The company said it had no plans to add any new jobs.
“The whole premise of the Shell tax break — that it was necessary to keep Shell in the city — was untrue,” the lawsuit asserts.
The lawsuit also argues that the state law governing River District tax breaks requires that they be directly linked either to the creation of at least 10 new permanent jobs or 75 units of affordable or workforce-rate housing.
“The PILOT here is for a commercial office building and will not house anyone,” nor did the PILOT proposal allocate payments for any below-market housing in the River District, the lawsuit says.
“Nor is there any firm indication it will create any new permanent job, as Shell would just be moving its regional headquarters from one part of New Orleans to another.,” it says.
Lauricella declined to comment, saying he hadn’t yet had a chance to review the lawsuit.
City Hall didn’t respond to a request for comment.
Anne Rolfes, executive director of Louisiana Bucket Brigade, said the advocacy group has standing to sue as a taxpaying entity in the city given that the Shell PILOT would deprive schools and other tax-dependent entities of funds.
“Our schools are vastly underfunded, and the beautiful children of this city can’t reach their potential because their education is subpar,” she said via text message. “There is no way we should give a behemoth like Shell a tax break at the expense of a city in such dire need.”
The advocacy group argues that while the tax break isn’t directly for Shell, the oil company benefits by having the building of its new headquarters subsidized.
“The Bucket Brigade is not opposed to the River District project generally.,” the lawsuit says. “But the Bucket Brigade is opposed to giving tens of millions of dollars of taxpayer revenue to a multi-billion-dollar oil and gas company on false pretenses and under a rushed and law-violating approval process.”
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