Editorial: A very big ‘ask’ for a Convention Center hotel

By Gambit Editorial Staff

Source: Gambit

August 17, 2018

The Ernest N. Morial Convention Center Board would really like to build a hotel attached to the Convention Center — so badly it wants taxpayers to pay for much of it. Last month, the nonpartisan Bureau of Governmental Research (BGR) looked into a proposal to build the hotel and concluded it would require nearly $330 million in tax breaks and subsidies. While BGR neither recommended nor opposed the project, the watchdog group concluded, “The proposed deal would involve, by far, the largest public contribution to an economic development project involving a private entity in recent memory in New Orleans.”

Convention Center Board President Melvin Rodrigue disputes BGR’s cost estimates of the requested tax breaks and subsidies ($329.5 million in present value), but there’s no disputing other numbers. The proposed hotel is budgeted at $557.5 million, of which private developers would receive $41 million in cash, up front, from the Convention Center — a public entity. Developers also seek a free lease of the Convention Center’s 8-acre hotel site (appraised value: $28.9 million), a 100 percent property tax exemption, a 40-year rebate on hotel/motel taxes, and a 40-year sales tax rebate on food and beverages.

That’s a very big “ask” by any developer.

If New Orleans truly needs more first-class hotel rooms — and New Orleans & Co. (formerly the New Orleans Convention & Visitors Bureau) says it does — why should citizens foot so much of the bill? The developers and the Convention Center characterize the proposal as a “public-private partnership.” Sounds to us like the public is having to pay more than its fair share.

It sounds that way to Mayor LaToya Cantrell, too. In a recent letter to Rodrigue, the mayor said, “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. 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.”

It’s also ironic that one of the local developers behind the proposal is businessman and hotelier Joe Jaeger. During this year’s regular legislative session, when Harrah’s New Orleans casino sought to build a high-rise hotel entirely with privatemoney — and pay hundreds of millions of dollars in taxes to boot — in exchange for extending its license for 30 more years, Jaeger led the charge to kill the proposal, arguing it was being rushed through to passage. Now Jaeger and fellow developer Darryl Berger seek approval for a much sweeter deal, though the mayor’s letter and media scrutiny seem to have slowed this project’s timetable. Rodrigue says the Convention Center board is waiting for an outside analysis of the proposed project (due later this month or in September) before taking a vote.

“Before approving public contributions to the hotel project,” BGR wrote in its report, “the Convention Center should clearly explain why the private market cannot build the hotel at this location without the public’s assistance.”

We agree — because the current proposal is indeed a very big “ask.”

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