BGR: Convention Center consultant for hotel project underestimates value of proposed public contributions; Convention Center reacts

By Sabrina Wilson

Source: FOX 8

September 13, 2018

NEW ORLEANS (WVUE) -The Bureau of Governmental Research, a watchdog group released an open-letter it sent to the New Orleans Convention Center Thursday which raises questions about the accuracy of a consultant’s analysis for a controversial hotel project the convention center wants to do.

“When you consider the magnitude of the public contributions which we estimate to be about $330 million did the consultant go about this from the perspective of is there a way for this deal to be structured more efficiently. From the public’s perspective does the magnitude of the public contribution makes sense all things considered?” said Amy Glovinsky, President and CEO of the BGR.

Some of the money would come from the convention center’s reserve account spotlighted in a FOX 8 Lee Zurik investigation a couple of years ago.

“In our letter, one of the most significant variables is what’s called the discount rate and the consultant has chosen a discount rate that’s 8.8%, that based on all of our work doesn’t seem to be the applicable number by which you would reduce the total public contribution amount to enable sort of an understanding of present value,” Glovinsky stated.

According to pages of detailed questions the BGR included with its letter the discount rate is used to estimate the value in today’s dollars of future cash flows that accrue over a period of years and is critical in comparing the value of different investments over time.

“And that decision itself in the consultant’s analysis results in I think about a $100 million dollar difference in BGR’s valuation of the public contributions and consultant’s valuation,” Glovinsky stated.

The letter also states that the consultant’s projection of the hotel’s fiscal benefits for local tax recipient entities does not appear to take into account the big tax rebates and 100% property tax exemption the developers want.

“So taxes at current hotels, the hotel sales tax is higher than what it will be at the convention center {hotel} in terms of dollars that will go to tax recipient bodies by virtue of the tax rebate that the developers have requested,” Glovinsky.

Convention Center President and General Manager Michael Sawaya issued a statement to FOX 8 News:

“We welcome the opportunity for continued dialogue to further public understanding of the proposed Convention Center hotel development project. While BGR’s newest letter shows it may have advanced its basic understanding of the proposed deal, it appears that they still do not have a full understanding of the HVS hotel market and economic impact analyses. It is unfortunate that BGR publicly released their letter before posing questions to us directly so that we could further educate them in the details of the comprehensive HVS report.

We sincerely believe that this proposed hotel development deal advances the long-term interests of the Convention Center to the benefit of the State and the City, and meets the criteria for best practices for economic development,” reads the statement.

While the BGR continues to raise questions a lot of questions it has not taken a position on the proposed convention center hotel.

“The purpose of our work is not to take a position on the hotel but to continue pushing in furtherance of a highly effective outcomes,” Glovinsky stated.

Mayor Latoya Cantrell has voiced strong concerns about the amount of public investment requested for the hotel project.

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