The Lost Penny

Cantrell pressing governor to use convention center funds for New Orleans infrastructure

By Beau Evans and Julia O'Donoghue

Source: | The Times-Picayune

February 22, 2019

New Orleans Mayor LaToya Cantrell has signaled she wants $75 million for city infrastructure repairs straight from the Ernest N. Morial Convention Center’s reserve account, tapping money from hotel tax revenues that Gov. John Bel Edwards, key state lawmakers and tourism industry leaders have said should be hands-off.

Cantrell, in an interview Thursday (Feb. 21) with | The Times-Picayune, said she’s seeking the one-time $75 million upfront payment on top of $40 million in recurring annual revenue to fix city sewerage, water system and streets. Half of the recurring money, the mayor suggested, could come from hotel tax revenue now dedicated to local tourism groups, and the rest of the money could come from existing taxes on New Orleans short-term rentals and the Downtown Development District, among other sources.

“It seems that New Orleans in many ways just hasn’t gotten her fair share,” Cantrell said Thursday. “I’m standing up for what I know is the right thing to do for this city.”

Edwards has said repeatedly he does not favor taking money from the convention center or redirecting hotel tax dollars, but he agreed earlier this month to set up a “working group” at Cantrell’s request to find other resources for New Orleans infrastructure. The group met for the first time last week.

Cantrell said Thursday she’s pushing for the group to “come up with solutions that we can get behind” within 30 days.

“This could be worked out with the convention center, with the governor, and it will not require anything from the New Orleans & Co.,” said Cantrell, referencing the industry-supported convention and visitors bureau. “I am seeking for the upfront to come from (the convention center’s) reserves, and even working through potential dedication toward some reoccurring.”

The governor’s office has billed the same group as an informal gathering of stakeholders looking for alternative funding sources – not just tourism tax dollars – to help New Orleans.

“All options are on the table,” Matthew Block, the governor’s general counsel and a member of the working group, said Friday.

Cantrell said she has discussed the matter with members of the working group. When asked if the convention center’s governing board would be open to handing over money it plans to use for facility upgrades and other projects, Cantrell on Thursday responded: “I think if the governor is, they will be. The governor is very important in this.”

The governor appoints nine of the 12 members of the convention center’s governing board.

‘All options are on the table’
New Orleans has experienced frequent street flooding and boil water advisories in recent years, problems local officials say will take hundreds of millions of dollars to fix – money the city lacks. Even so, Cantrell acknowledged Thursday that she would be open to collecting a new stormwater fee in the future, but only if all other options to redirect existing revenues for infrastructure are exhausted first.

“I’ll look into the stormwater fee as we move towards 2020,” she said.

Cantrell reiterated that she would prefer to secure upwards of $100 million annually in new recurring revenue for infrastructure. She highlighted a recent report from the nonprofit watchdog Bureau of Governmental Research, which said the city loses out on $12.3 million from a hotel tax suspended decades ago. That report, released last month, recommended restoring the city’s share of that 1 percent tax, an idea Cantrell said Thursday she’s “been advocating for as well.”

BGR’s report estimated the city nets just 10 percent of the roughly $200 million in annual taxes from local hotel rooms. Most of those taxes now go to the convention center and the Louisiana Stadium and Exposition District (LSED), which owns the Mercedes-Benz Superdome and Smoothie King Center.

Melvin Rodrigue, who chairs the convention center’s Exhibition Hall Authority, said its members are “sensitive to the needs” the mayor has identified, but money from the center’s reserves has already been dedicated to “an ambitious and game-changing capital improvement plan with costs that exceed $550 million.”

The plans Rodrigue cited were approved in May 2018, with “significant dollars” already invested, he said, including nearly $560 million in meeting room renovations, roof replacement and a pedestrian park among other items. Those plans, which include a 1,200-room hotel, have previously drawn pushback from Cantrell and BGR.

Still, the Exhibition Hall Authority is “committed to the mayor and helping her in any way possible,” Rodrigue said.

“Should she ask us to help find solutions, we will be at the table,” Rodrigue said.

The mayor said she’s also “looking for” a possible cap on revenues from fees the local hotel industry assesses per night for each room rental. The BGR report equates the fees to a 1.75-mill tax. Cantrell said any revenue accrued above the cap could go into a new infrastructure maintenance fund the New Orleans City Council created last month.

Additionally, Cantrell said she’s feeling out other potential sources. They include as much as $6 million annually in Downtown Development District tax revenues, $7 million from a levy on short-term rentals and several millions more from a local alcohol beverage tax that’s caught in a court battle.

“All options are on the table,” Cantrell said. “And as we explore them, we may say: ‘OK, the juice isn’t worth the squeeze.’ But we need to look to see how it may kind of grow the pie a little for the city to fix infrastructure.”

Cantrell’s goal is to immediately prop up the Sewerage & Water Board as it labors under financial duress and a backlog of major equipment needs, while also drumming up new reliable funding to keep the city’s streets, pipes and pumps in good working order.

Earlier this week, Sewerage & Water Board officials outlined a list of “immediate needs”: paying off its drainage system debt; permanent street paving; sewer repairs required by a federal consent decree; and the continued overhaul of its in-house power system. Those needs shake out to a cost of about $85 million total, utility officials said.

Lawmakers and advocates have also been told the new money is needed to keep the Sewerage & Water Board’s drainage system from running out of money before the end of the year.

“We have an immediate funding need so drainage has the funding to operate for 2019,” said Leslie Jacobs, a local philanthropist who is part of the governor’s working group. Her husband, Scott Jacobs, is a former chairman of the Sewerage & Water Board’s directors.

But the tourism sector has balked at using the convention center reserve funding, totaling more $230 million, for city infrastructure. So far, Edwards and Senate President John Alario, R-Westwego, have publicly sided with the industry over Cantrell when it comes to hotel-tax dedications. Edwards has said the convention center’s intent to use its reserve funding to renovate the facility and build an adjacent hotel is important to keeping New Orleans a top destination for major events.

As the convention center, Superdome and Smoothie King Center are state-owned facilities, Edwards and the Louisiana Legislature exert some oversight over their funding and operations. Besides appointing most of the convention center’s governing board, the governor also appoints all seven members of the Louisiana Stadium and Exposition District.

In interviews with six of the 22 members of the governor’s working group earlier this week, none mentioned taking $75 million immediately from the convention center reserves. After Cantrell floated her proposal in her interview Thursday, three working group members said they were surprised the mayor had proposed taking that much short-term money from the convention center.

“There was no discussion about what really, if anything, the state would do or what the ask would be from the state,” said Rep. Franklin Foil, R-Baton Rouge, a member of the working group and vice chairman of the state House Appropriations Committee, which builds the state budget for the Legislature. “There was no specific ask made from the state at this point.”

The two other working group members who expressed surprise at Cantrell’s proposal asked not to be named publicly in order to discuss the ongoing process. They said the group is looking at a very different source of revenue initially: federal hazard mitigation grant funds and other money left over from natural disasters that could be repurposed.

New Orleans vs. the rest of Louisiana
Legislators and local officials disagree over whether lawmakers and the governor would have to approve the use of the convention center’s reserve funds for New Orleans infrastructure. Some lawmakers said legislators would likely have to sign off on it as part of the operating budget. Others said the Exhibition Hall Authority could shift the funds without state approval.

Yet everyone interviewed agreed that it would be better to have buy-in from Edwards and the Legislature. The governor controls enough votes on the Exhibition Hall Authority to block a proposal he doesn’t support. If money is moved from the convention center to shore up New Orleans’ drainage, lawmakers could also suggest the convention center’s funds be tapped for other purposes as well, even outside the city.

Legislators have previously targeted the convention center for money when facing shortfalls in higher education and health care. Gov. Bobby Jindal’s administration took cash out of the fund to help cover other state expenditures.

Bailing out New Orleans’ sewage, drainage and water systems could also rub many rural legislators the wrong way, some of whom represent communities that have struggled to maintain safe drinking water in recent years.

Many towns in Louisiana have had to hike utility fees to salvage their own systems, said state Sen. Eric LaFleur, D-Ville Platte. If people in communities with less resources are paying more for their water around the state, legislators might have a hard time explaining why New Orleans got so much assistance, said LaFleur, a member of the working group who leads the state Senate’s budget committee.

“It’s very difficult for someone to go back to Ville Platte and explain why they had to fund a water system in New Orleans,” LaFleur said. “It would be difficult for us to do it.”

Foil said the state has helped other municipalities with water system upgrades through grants, but not on the scale of $75 million.

Cantrell: ‘I’m on the right side’
The impasse comes at a key time for Edwards and Cantrell, two of the most powerful Democrats in the state. The governor will want the mayor’s help turning out city voters in his bid for re-election this fall.

Amid these potential conflicts, Cantrell is holding firm to her conviction that New Orleans has gone too long without recouping more of the money the city and its visitors generate. She said she’s sensed an awakening lately among many residents who were unaware of how much revenue raised in the city does not go into local government coffers.

In her view, the best path forward is for leaders at every level in Louisiana to work together on bolstering the city’s infrastructure and setting aside more money to do it. But the mayor said she’s not afraid to take a stand on her own if need be.

“I’m on the right side of this,” Cantrell said. “The disparities in this city, the lack of reinvestment in this city, whether it’s infrastructure in terms of physical or the human infrastructure – (it) just hasn’t been adequately reinvested in.

”The time is now,” she added. “And the future depends on it.”

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