City Tax Farming Contract Ruled Unconstitiutional

Tax law ruled unconstitutional
30 percent penalty set on delinquencies
Friday, October 05, 2007
By Gordon Russell

The beneficiaries of a controversial contract to collect delinquent property taxes in New Orleans may have to return around $30 million they grossed over the life of the deal under a ruling handed down by the 4th Circuit Court of Appeal this week.

The appellate court deemed unconstitutional a 1998 city law that established a 30 percent penalty on delinquent taxes for the purpose of paying the Texas law firm that won the collections contract.

The firm, now called Linebarger Goggan Blair & Sampson, shared its fees with a local group with strong political ties called United Governmental Services of Louisiana.

This is one of the uglier manifestations of political cronies benefiting from privatization of government services. In this case, a collection agency is paid a fee for tracking down delinquent taxes. The 30 percent fee is appended directly to the taxpayer's bill. As is often the case in miserable times, the good money is made in hunting misery bounty.

But bounty hunting, being the miserable business that it is, requires an especially amoral disposition in those who seek its ill-gotten fortunes. Just what sort of folk are we thinking about here? Yeah.. the usual.

The contract, signed in 1998, was among the more controversial of Morial's tenure, in part because of the winning partnership's nebulous duties and in part because of its political pedigree.

Partners in United Governmental Services include restaurateur Sam Kogos, a member of Morial's inner circle; lawyer John Keller, a partner with Morial's uncle Glenn Haydel in a lucrative Regional Transit Authority management contract; lawyer William Grace, who was a Morial appointee to the Sewerage & Water Board; and businessman Westervelt "Westy" Ballard, Grace's brother-in-law.

In a separate case, Haydel pleaded guilty to bilking the RTA of $550,000. He is serving a two-year term in federal prison. Keller pleaded guilty to a lesser charge of knowing about, but failing to report, wire fraud committed by Haydel and others.

Any minute now the NOLA-hating Yuppie Left will jump out of its chair and start screaming once again about how this unique New Orleans crony-capitalism can only be cleaned up by young professional reformers from the civilized world. And any minute now, they'll again be not thinking big enough.

Just last week, Paul Krugman pointed out that the same kind of brutal cronyism is being perpetrated on a much grander scale at the federal level. It's astonishing that Federal tax collection and even US military operations are conducted by mercenary outfits for private gain. It's not quite as astonishing... but every bit as repulsive... that municipal and state governments around the country exhibit these same symptoms of societal rot turning the very nuts and bolts of public institutions into private revenue farms.

But the Yuppie Left won't acknowledge this. It interferes with their favorite passtime of telling everyone that if we just turn down the music, build a few more condos, fix the broken windows, and get a real job then maybe we'll be worthy of less scorn. And only then will the corruption be sophisticated enough to justify fixing our Federally flooded city.