Royal Street scene

Despite ballot wording, French Quarter hotel rooms are exempt from this security tax

By Ben Myers

Source: The Times-Picayune | The New Orleans Advocate

October 1, 2021

A tax agreement signed Thursday with the French Quarter Management District marked the final step toward resuming enhanced police patrols in the Vieux Carré and seemingly ended a contentious process over the past 1½ years.

But the agreement includes something that voters never considered when they approved the tax in April: an exemption for hotel rooms from the new sales tax that will pay for the extra policing.

The supplemental police patrols are generally popular, but the hotel exemption is controversial; Mayor LaToya Cantrell’s administration, the Louisiana State Bond Commission and the nonprofit Bureau of Governmental Research argued against it. One member of the French Quarter agency’s governing board, which will oversee the tax revenue, worries the exemption will spawn a lawsuit over the Bond Commission’s objections or from a voter who feels hoodwinked.

“This is not an anti-hotel thing; we all want the hotels to survive and to prosper. But we didn’t vote to exempt them,” said Robert Simms, a Cantrell appointee to the Board of Commissioners. “That could put this whole thing into litigation, which would delay the start of putting additional resources on the street. That’s what I’m worried about.”

The April 24 referendum asked voters to approve a 0.25% sales tax, estimated to generate $2.5 million annually. The first $2 million goes to police patrols, and anything beyond that amount goes to “homeless assistance services.” A similar five-year sales tax expired at the end of 2020, after voters refused to renew it.

An earlier draft of the April ballot measure included the hotel room exemption. But the Bond Commission, which holds authority over referendum language, concluded the exemption was illegal. The City Council, formally acting as a special French Quarter taxing authority, then removed the exemption, earning approval from both the Bond Commission and voters.

In August, however, council member Kristin Gisleson Palmer, whose district includes the French Quarter, revived the exemption in a council resolution to levy the tax. Collections will begin in October on all French Quarter sales, except hotel rooms.

Palmer acknowledged in an interview that removing the exemption from the ballot was intended to make it “clean” for Bond Commission approval. But she said the previous sales tax also included a room exemption, and, like the current one, was added by a council resolution after a ballot measure that lacked it.

“It’s the exact same tax that was levied from the very beginning. There hasn’t been any changes,” Palmer said. “It’s just reinstating.”

Yet the circumstances underlying the exemption are different this time. Nadine Ramsey, Palmer’s predecessor on the council, supported the previous room exemption in council resolution in 2016, when the hospitality industry was already ponying up for French Quarter public safety and infrastructure through a voluntary assessment on hotel rooms. But the industry stopped delivering that revenue last year as the pandemic took hold.

That is one of several reasons the Bureau of Governmental Research decried the current room exemption in a report last month. Among other things, the independent nonprofit said taxation standards across the United States include hotel rooms in sales tax levies.

The Bond Commission, meanwhile, determined that local sales tax exemptions are illegal unless the Legislature has granted them to all taxing authorities. A Bond Commission spokesperson would not comment on Thursday,

French Quarter Management District leaders said they are moving on, now that the agency has signed a cooperative endeavor agreement with the city.

“We have answered these questions repeatedly. We have got the CEA. We are moving on to getting the budgets done, to getting enough officers that we can actually meet the fulfillment of the CEA,” Executive Director Karley Frankic said.

Cantrell said she, too, is moving on, despite being “deeply concerned that the hotel exemption is not in alignment with the State Bond Commission,” according to a statement provided by spokesperson Beau Tidwell. “We have made our concerns known to all parties. [Palmer] chose to move forward with the exemption, regardless.”

The statement adds that the Cantrell administration “is pleased to finally have an agreement in place, after lengthy delays.”

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