Death and Hotel Taxes: BGR releases new report on New Orleans hotel sales tax

By Jennifer Gibson Schecter

February 2019

The old idiom that nothing is certain but death and taxes remains true, with the possible addition of Roger Goodell’s loathing of the Saints to round out the list. The certainty surrounding taxes, however, is in the paying of them, not in how they will be applied to the greater good.

The latest report by the Bureau of Governmental Research (BGR) takes a deep dive into the Orleans Parish hotel sales tax structure, including how it is distributed. It also recommends changes state and local leaders should make to better support the city’s infrastructure.

Entitled “The Lost Penny,” the report is a follow-up to BGR’s previous work in a 2015 report called “The $1 Billion Question: Do the Tax Dedications in New Orleans Make Sense?”

“In 2015, BGR published a comprehensive review of property, sales and other local tax dedications in New Orleans. Our [new] study builds on that research by taking a closer look the sources and uses of hotel taxes,” said Amy Glovinsky, BGR president and CEO. “BGR hopes the study will help inform the growing public dialogue on the appropriate scale and use of hotel taxes in New Orleans.”

“The Lost Penny” points to a 1966 amendment to the Louisiana state constitution when voters supported a new tax on hotel rooms in Orleans Parish to fund construction of the Superdome after the National Football League approved the Saints franchise. The New Orleans City Council then suspended its 1 percent sales tax on hotel rooms as a temporary measure to limit the potential negative impact of hotel taxes and support the tourism industry. That “temporary measure” is now nearly 53 years old.

The current hotel tax rate for guests in New Orleans is 16.35 percent, which is estimated to yield $200 million in 2019, or one-sixth of all local tax revenues in Orleans Parish. The report breaks down the revenue by purpose and states that of the estimated amount, 75.5 percent ($150.9 million) will go to tourism, convention and sports; 9.5 percent ($18.9 million) will go to general municipal; 9.1 percent ($18.1 million) will go to public education; 3.1 percent ($6.3 million) will go to public transit; and 2.8 percent (5.6 million) will go to the state.

The key takeaway from the report is that BGR sees an imbalance in the amount that is allotted directly to tourism, convention and sports and recommends an increase in the amount for general municipal purposes in order to invest in the city’s infrastructure — particularly drainage, roads and public safety. To do this, “The Lost Penny” says the state legislature should increase the Orleans Parish hotel tax by at least the equivalent of a 1 percent tax, or $12.3 million currently.

We have a cart and a horse situation.

For over 50 years, hotel tax revenue has done what it was meant to do, which is support tourism in New Orleans. Organizations including the Louisiana Stadium and Exposition District (Superdome, Smoothie King Center), New Orleans Ernest N. Morial Convention Center, New Orleans & Company (formerly New Orleans Convention and Visitors Bureau) and New Orleans Tourism Marketing Corporation, among others, have used the hotel tax revenue to invest in our tourism infrastructure. They have marketed New Orleans as a destination not just for bachelor parties or family vacations, but for conferences, conventions and major sporting events like the Super Bowl and NBA All-Star Game. They have also built and maintained the facilities to host those visitors. The tourism industry employs tens of thousands of area residents and its success is critical to our regional economy.

But, as with the cart and horse, if a hotel concierge gets robbed on the walk to his car for a lack of policing, or a restaurant owner loses her business because of heavy rain flooding her building, are we putting the right thing first?

One of the most interesting things I read in the report said that it “found that tax dedications are often imposed in New Orleans without analyzing competing needs. Also, the majority of tax dedications are levied indefinitely without a requirement for renewal by voters or legislators. This makes it difficult for citizens and policymakers to reassess them in light of changing conditions and needs.”

It is clear that the conditions and needs of New Orleans are not the same today as they were in 1966. In a recent interview with Stephen Perry, president and CEO of New Orleans & Company, regarding the new 0.55 percent hotel sales tax he and other industry officials proposed in December, he agreed that a change in tax revenue was necessary, but was ardent in the defense of maintaining the percentage that his industry currently receives. He saw any attempt at refunneling the money as a threat to “disassemble the largest performing private industry in the city and the largest employment base.”

I don’t see BGR recommending the disassembly of the tourism industry. I do see them encouraging a conversation for us all to figure out that tax revenue sweet spot of continued tourism growth and responsible government spending on infrastructure.

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