In The News › Taxing authority for New Orleans convention district rolling in Legislature

Taxing authority for New Orleans convention district rolling in Legislature

By Robert McClendon

NOLA.com | The Times-Picayune

May 18, 2016
A move to grant special taxing authority that would subsidize a $1 billion private development planned for New Orleans’ waterfront continues to gain momentum in the Louisiana Legislature.

House Bill 1056 sailed unopposed Wednesday (May 18) through the Senate Committee on Local and Municipal Affairs. It would grant the Exhibition Hall Authority, which governs the Ernest N. Morial Convention Center, power to impose its own taxes within a 47-acre “economic development district” that runs between the Pontchartrain Expressway and the Market Street power plant.

The land is undeveloped, but the Convention Center has been in talks with Joe Jaeger, Darryl Berger and the Howard Hughes Corp. to transform the land into the Trade District, a mixed-use neighborhood featuring a 1,200-room hotel, condos, apartments and retail storefronts.

The Convention Center plans to contribute about $155 million directly to the project, according to a recent report from the Bureau of Governmental Research, a watchdog think-tank. About half of that money would pay to build out infrastructure. The remainder would go toward the construction of the hotel.

House Bill 1056 would allow the Convention Center to pay for its obligations by imposing special taxes in the district.

In addition to existing state and local taxes, the Exhibition Hall Authority could impose supplemental taxes, capped at 2 percent for retail sales and 5 mills assessed on property in the future development.

The Exhibition Hall could also issue taxes through a mechanism called tax-increment financing. That strategy would keep the overall tax level in the district even with other parts of the city, but it would come at a cost to the city’s coffers.

Typical TIF districts are used to finance development in blighted or undeveloped areas. A taxing authority takes out bonds to pay for improvements in the special taxing district, and, as the improvements attract private investment, the property becomes more valuable. The resulting increase in tax revenue goes toward paying off the bonds.

When the bonds are paid off, the community attracts new investment and government gets an improved tax base to fund services.

In this case, though, the Convention Center would serve as the taxing authority, not the city. As the development is built out, taxes that would have otherwise gone to the city’s general fund would go to the Exhibition Hall Authority.

Stephen Perry, chief executive of the New Orleans Convention and Visitors Bureau, said recently that officials have no immediate plans to use the taxing authority if it is granted. He has also pointed out that the City Council would have to approve any such district because it would be forgoing future revenue.

Economic development boosters tout such deals as a means of attracting private development that would not have occurred otherwise. Backers of the riverfront project in particular point to the $1 billion in private investment that a special taxing district could attract, spurring job creation and boosting the local economy, which is largely reliant on tourism.

Sen. Karen Carter-Peterson, D-New Orleans, praised the project during Wednesday’s committee meeting. “This is a major economic development project, where there is an opportunity for a lot of folks to benefit,” she said, “to move from one class of poverty to hopefully the middle class.”

Budget hawks, though, often take a skeptical view on TIF deals. Applied too generously, TIFs can turn economic development into corporate welfare, they say.

Louisiana’s law governing TIFs gives taxing authorities broad power over how to spend their money. They can use them to build things themselves or to reimburse private developers directly for their building costs.

The Bureau of Governmental Research report on House Bill 1056 stopped short of condemning the project outright, but it did question the wisdom of granting the Convention Center new taxing authority.

The various taxes that support the Convention Center generated about $60 million in 2015. The Convention Center’s reserves now top $222 million, even as the city struggles to pave streets and recruit police officers, the BGR report notes.

House Bill 1056, approved with no opposition in the House, will now head to the Senate floor.

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