Hotel tax on the table in meetings with Mayor Cantrell, hospitality industry leaders

By Beau Evans

Source: | The Times-Picayune

October 10, 2018

New Orleans Mayor LaToya Cantrell is poised to meet with hotel and tourism industry leaders this week to broach potential tweaks to the existing occupancy tax dedication structure amid a funding shortfall for city drainage infrastructure improvements.

Tens of millions of dollars flow to a handful of tourism, marketing and sports agencies each year via Louisiana Legislature-authorized hotel occupancy taxes levied on New Orleans hotels, leaving the city as a minority recipient of those revenues. Some local officials, including former Mayor Mitch Landrieu, have previously called for revising the way those and other taxes are divvied up to more directly benefit city government services, such as infrastructure and public safety.

But efforts to tweak the tax structure in the past have met with resistance from some state lawmakers as well as hotel and tourism industry leaders, who have argued that siphoning revenues from visitor-serving and entertainment industries could disrupt the city’s critical tourism economy. That economy generates billions of dollars in revenue annually and employs tens of thousands of people, according to reports from the University of New Orleans.

In an email Tuesday (Oct. 9), Cantrell’s communications director, Beau Tidwell, said the mayor is in the “very early stages” of talks with hospitality industry representatives and state legislators about the hotel tax structure. Tidwell did not go into specifics about what the mayor’s proposal might entail, but said meetings are being held this week “with a view toward ensuring a sustainable revenue strategy for New Orleans.”

“We will have more to say in the weeks ahead, but the first step is engaging with our partners in the tourism and hospitality community,” Tidwell said.

The meeting follows a report from The Advocate last week on statements Cantrell made during a luncheon, at which the mayor suggested the idea of directing an unspecified amount hotel tax revenue toward drainage improvements. Cantrell did not dive into specifics of how the intricate web of hotel tax dedications should be redistributed, but she listed the cash-strapped Sewerage & Water Board as a potential recipient, according to the report.

“I’m not saying that we want it all,” Cantrell said at the luncheon, according to The Advocate. “All I’m saying is that we need a little bit more of what we generate.”

The mayor’s office declined a request this week for an interview with Cantrell.

In all, eight entities take a cut of revenues from several hotel taxes and assessments, which in recent years have generated upwards of $150 million or more, according a | The Times-Picayune review of audits and a 2015 report from the Bureau of Governmental Research.

Among the top recipients are the Louisiana Stadium and Exposition District, which runs the Mercedes-Benz Superdome and other local sports and entertainment venues, and the Ernest N. Morial Exhibition Hall Authority, which oversees the convention center. Those two entities collected roughly $50.4 million and $47.1 million, respectively, during fiscal year 2017, according to state audits.

By comparison, New Orleans city government expected to take in slightly more than $18 million from hotel occupancy taxes last year, according to the city’s 2018 adopted budget. The 2018 budget also notes the city retains just 1.5 percent of the total 13 percent state and local tax levy on hotel room sales. The Orleans Parish School Board and the New Orleans Regional Transit Authority also take a cut of hotel tax revenues.

In its report, the Bureau of Governmental Research estimated more than 75 percent of hotel tax revenues generated in New Orleans would go toward tourism, hotel and sports-focused entities in 2015, totaling more than $125 million. Given the city’s infrastructure and public safety needs, BGR recommended officials take a deeper look at rededicating tax revenues across the board, including from hotel taxes.

Since then, the revenue dedications in place in 2015 have remained unchanged while revenues from hotel taxes in particular have continued to grow, according to Amy Glovinsky, BGR president and CEO. In a statement Tuesday, Glovinsky said BGR is on track to publish a new report this fall that specifically examines New Orleans’ hotel tax structure and “offers solutions to begin correcting the misalignment of some existing tax dedications.”

Whatever BGR’s new report finds, convincing the state legislature to enact changes to the hotel tax structure presents a tough task for Cantrell. Already, state Senate President John Alario, R-Westwego, has signaled his initial opposition to diverting any dedicated hotel tax revenues away from their present purposes, particularly if such changes might tamper with the Superdome’s funding streams.

“I have a very high reluctance about diverting any of those,” said Alario, who has an especially strong say in financial measures such as tax structures.

Others in the legislature, however, appear more open to the prospect of tax rededication.

State Sen. Sharon Hewitt, R-Slidell, said that while shifting hotel tax revenues might “at first blush” seem counter to the purpose of those taxes, she understands the merits behind Cantrell’s aim to free up otherwise restricted revenues for pressing local government needs. In an email Tuesday, Hewitt highlighted successful legislation she authored to free up millions of dollars in dedicated funds.

“I look forward to eliminating more dedicated funds this year,” Hewitt wrote.

Additionally, the senator said she has called for a meeting later this month of the legislature’s Dedicated Fund Review Subcommittee to review the collections and use of revenues by several hotel tax-supported funds, including one held by the Convention Center. She said that review will inform the subcommittee’s eventual vote on whether those funds should be altered, left as is or eliminated in recommendations to form the basis of legislation next spring. That meeting is tentatively scheduled for Oct. 29, Hewitt said.

Others in the legislature say rededicating hotel taxes for New Orleans’ drainage needs would be premature, given concerns over the Sewerage & Water Board’s management history. State Sen. Conrad Appel, R-Metairie, said over the phone Monday that any tax tweaks should wait until a state-created task force wraps up its assessment in January on how to best manage the city’s drainage system, which since the early 1990s has been jointly overseen by the Sewerage & Water Board and the city’s Department of Public Works.

“I think the city should resolve the governance part before it works on the finance part,” Appel said.

State Rep. Stephanie Hilferty, R-New Orleans, who authored legislation creating the task force, declined in an email Tuesday to comment until after Cantrell releases a plan.

Aside from state lawmakers, City Councilwoman Helena Moreno says the mayor will also need tourism and hotel industry leaders on board with any rededication proposal. Absent that support, Moreno — who as a state representative in 2017 brought successful legislation to create a fund dedication from sales taxes on short-term rentals — said Cantrell would have a tough road ahead.

“I’m more than happy to help her in any way and work with her,” Moreno said over the phone Monday. “It’s just going to be really hard if they’re not on board.”

Several representatives for tax-receiving tourism, sports and convention entities in New Orleans declined to comment for this story, saying they would prefer to wait until after they’ve met with the mayor this week. But for his part, Stephen Perry, the CEO of New Orleans & Co., indicated any proposals for serious changes to the hotel tax structure may draw stern pushback.

“We look forward to working in partnership with the mayor to continue addressing the needs of our city’s infrastructure,” Perry, who oversees the convention and visitors bureau, said Friday. “However, any efforts to weaken the tourism economy, reduce tourism-generated city revenues … damage innumerable locally-owned small businesses, or decrease tourism industry jobs, will not likely be well received by our industry, small business owners, hospitality workers, or the entire body of state legislators, and many state executives.”

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