New Orleans Convention Center

Cantrell blasts subsidies sought for proposed Convention Center hotel; center leader urges patience

By Richard Thompson

Source: The Advocate

August 14, 2018

In the opening salvo in what could become a lengthy negotiation over whether the Ernest N. Morial Convention Center moves forward with its plans to build a high-rise hotel, Mayor LaToya Cantrell has expressed “grave concerns” about the large public subsidies being sought by the developers.

In a letter last week, Cantrell said she had “grave concerns about the amount of subsidy this project will receive and the future implications of this project on tax revenue in New Orleans.”

In response, Melvin Rodrigue, president of the Convention Center board, described the hundreds of millions of dollars in incentives outlined in the developers’ proposal for the 1,200-room hotel as simply a starting point for discussion. He urged patience by public officials.

The project has drawn support from many of the city’s business and hospitality leaders, who are eager to add another high-rise hotel to the city’s skyline, especially one that’s big enough and with the facilities necessary to serve as the headquarters for major conventions.

Perhaps most important, officials say, is that it would provide a huge bloc of rooms upriver from the Convention Center, making it a key piece of a broader vision to bring more visitor foot traffic to the upriver end of the giant exhibition hall, rather than having it all concentrated around Poydras and Canal streets.

Perhaps by the end of the week, Convention Center officials expect to receive a preliminary report from HVS Convention, Sports and Entertainment Facilities Consulting, a Chicago-based firm hired to study the proposed hotel’s potential economic impact and the rationale behind building it.

In May, Convention Center officials voted to begin negotiations over the latest proposal, with an eye toward presenting the framework of a deal to the New Orleans Exhibition Hall Authority, which governs the giant assembly hall, for approval this summer.

That process has been slowed a bit as the consultants prepare their report. But Cantrell’s letter comes on the heels of a critical report last month by the nonpartisan Bureau of Governmental Research, which warned that the massive project could be on the fast track to approval and urged the board to slow down.

That report did not take an official position on the hotel’s merits, but questioned why nearly $330 million in tax breaks and incentives being sought by the developers are necessary, and why the private market can’t support the project on its own.

Cantrell’s letter said the “scant specific details which have been made available cast doubt not only on the strategy around this hotel, but also on the Convention Center’s future plans for the use of its reserves and dedicated revenue.”

In his response Friday, Rodrigue urged patience while the consultants’ study is being completed, saying it would provide “a comparison of similar development projects across the U.S., and specifically will show the amount of economic development incentives required for comparable projects.”

In an interview, Rodrigue said the Convention Center board would not take an official stand on the proposal until the report is complete. By then, he said, “the merits of the project will be self-evident.”

However, he expressed frustration with Cantrell for not reserving judgment, and both sides blamed the other for not having already met to discuss the proposal in detail.

“We have been telling her since (her mayoral) transition that we would love to meet with her and catch her up to speed,” Rodrigue said. “What we have a challenge with is that a letter of opposition comes out when we haven’t come out with our position yet.”

Meanwhile, Cantrell’s letter took issue with the Exhibition Hall Authority for not fine-tuning the proposal with her administration. She noted that the project may require approvals, such as a height waiver, from the city in order to get built. The authority also has yet to provide a cost-benefit analysis for the hotel, she said.

Cantrell also laid out a number of other concerns with the developers’ proposals, chief among them being the estimated $330 million in tax breaks and incentives that are being requested — a sum she described as “money our citizens cannot afford to do without.”

“Under the current proposal, the developers will be able to build the hotel on free land, pay no property taxes — and will be able to enjoy a direct subsidy of over $40 million directly from the Convention Center,” Cantrell’s letter said. “On top of that, there is a call to waive sales and occupancy taxes worth hundreds of millions of dollars over the life of the hotel.”

“All of these concerns give me pause, regarding both the specifics of the hotel project and the future plans of the Convention Center,” she said.

The proposed $557.5 million hotel would include at least 150,000 square feet of ballroom and meeting space as well as ground-level retail space. It would be connected to the center by a bridge over Henderson Street.

The development team includes local businessmen Darryl Berger and Joe Jaeger, as well as Matthews Southwest Hospitality, a Texas-based real estate firm, and Preston Hollow Capital, a Texas-based finance company.

Altogether, BGR estimates that the requested tax breaks and incentives would be worth $329.5 million in today’s dollars — a tally that Rodrigue disputes and plans to counter with his own assessment in the consultants’ upcoming report.

The Convention Center has amassed a surplus of more than $210 million. It brings in nearly $60 million a year from state-approved hotel taxes, a sales tax on food and drinks sold throughout the city and other sources.

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