The Lost Penny

How LaToya Cantrell used a power play against hospitality industry in tourism-dollars fight

By Tyler Bridges

Source: The Advocate

April 22, 2019

In a hardball move against the hospitality industry, New Orleans Mayor LaToya Cantrell took her fight for tourism tax dollars to the Louisiana Legislature Monday, with members of her administration testifying in favor of a series of bills to redirect hotel taxes and other funds towards city infrastructure.

Despite opposition from tourism leaders, the House Ways and Means Committee passed a measure that would impose an additional 1 cent per $1 tax on hotel guests in Orleans Parish. But the committee ran out of time to address two other bills sought by the mayor that would take money from the hospitality industry and the Ernest N. Morial Convention Center for a city infrastructure fund. Ways and Means will take up the measures again on Tuesday morning.

The legislative push may prove difficult without officials from the tourism and hospitality industry in support. But with negotiations stalled between the Cantrell administration and hospitality leaders over how much and how the industry will contribute to the infrastructure fund, Cantrell Chief of Staff John Pourciau said they wanted to move forward with a legislative strategy in case no deal was reached.

“We don’t want the clock to run out,” Pourciau said, with the 60-day session now in week three.

Stephen Perry, president and chief executive of New Orleans & Co. and the chief industry representative in talks with the Cantrell administration, testified against two of the bills Monday. And in an interview afterward Perry called Cantrell’s legislative push a negotiating ploy.

The bills “can’t pass in an election year without everyone coming together,” said Perry, who confirmed The Advocate’s report last week that Cantrell had rejected the hospitality industry’s latest proposal.

“We have a lot more talking to do,” he added.

After the hearing, Perry could be overheard in the committee room telling Pourciau, that the industry would kill Cantrell’s bills if the mayor didn’t compromise.

Perry’s group, New Orleans & Co., is a private entity that receives public dollars to market New Orleans to business groups.

After testifying for the bill, Pourciau said in an interview that Gov. John Bel Edwards, who is helping broker the negotiations, has not indicated whether he would support or oppose the bill.

State Rep. Neil Abramson, D-New Orleans, the Ways and Means chairman and Cantrell’s floor leader, is sponsoring all three bills.

The 1-cent hotel tax passed by Ways and Means on Monday – House Bill 522 – would require a two-thirds majority to win passage in the Legislature, a bar that has been difficult to clear in recent years, although legislators in this case would be voting to impose the tax on hotel guests in New Orleans.

The Bureau of Governmental Research, a nonprofit, first recommended the proposal in a report released in January titled the “lost penny.” New Orleans imposed the 1-cent tax on hotel guests until the mid-1960s when city officials agreed to suspend the tax in favor of letting the state impose other sales taxes on hotel guests. Those taxes went to fund construction of what became the Mercedes-Benz Superdome.

If the latest proposal passes the Legislature, the hotel tax in New Orleans would rise from 16.35 percent to 17.35 percent.

Pourciau, Perry, hospitality leaders and members of the governor’s staff have been trying for weeks to settle on a plan that would raise the money sought by Cantrell for the city’s Sewerage & Water Board.

She is seeking $75 million in one-time money: $40 million to upgrade S&WB machinery that might fail in a heavy rainstorm this year and another $35 million to pay contractors.

”The city’s at risk,” Paul Rainwater, a lobbyist for the city and crisis management expert who headed the S&WB as an interim step for 100 days after the major August 2017 flood, told the committee. He said five turbines power the city’s drainage pumps. The youngest dates to when Ronald Reagan was president in the 1980s while the oldest dates to when Theodore Roosevelt was president in the early 1900s.

Repairs have to be specially crafted outside of the state because replacement parts don’t exist, Rainwater said.

“I have never seen a utility that has been neglected for so long,” said Ghassan Korban, the S&WB’s executive director. “Not a day goes by where a pump doesn’t break.”

Cantrell is also seeking an annual revenue source of $40 million to improve equipment on an ongoing basis.

Perry said the hospitality industry’s plan would provide $55 million in one-time money and $25 million in recurring revenue.

The hospitality industry has agreed to a .55 percentage point tax increase on hotel guests and will accept a 1 percentage point increase. But it will only agree to those terms, Perry said, if Cantrell also agrees to raise taxes on short-term rentals to the same rate paid by hotel guests and if a portion of the money collected goes to the hospitality industry to market New Orleans to visitors.

Cantrell has rejected that proposal. She has also rejected the industry’s proposal to pass any increase in the hotel tax in the Legislature via a measure that would create a special taxing district for the hotel tax and have residents of that district vote on whether to impose that tax.

That strategy would allow passage of a bill in the legislature by a simple majority, an easier hurdle, but would force Cantrell to bring another tax before New Orleans voters.

Industry leaders say Cantrell is planning to seek voter approval for a storm water management fee later in 2019 and wants the public to vote only once on a new fee, not three times as industry officials are proposing.

Cantrell also has rejected the industry’s proposal to impose a .25 percentage point increase in sales taxes on food and beverages consumed at bars, restaurants and hotels through that same taxing district and a vote of its residents.

A second measure before Ways and Means – House Bill 521 – would authorize the city to take a portion of a “self-assessment” tax that the hotel industry decided to impose on its guests. Perry said the bill is unconstitutional.

The third measure before Ways and Means – House Bill 573 – would limit the Convention Center’s unrestricted reserves to $100 million and call for excess money to go to the infrastructure fund.

The Convention Center has $235 million in reserves, but Michael Sawaya, its general manager, has consistently said that the center’s board has already tied up all that money with improvement spending plans that include a 1,200-room hotel at the Convention Center’s upriver end. The governor, who appoints a majority of the board, has agreed to provide $20 million from the Convention Center for the city’s one-time needs.

Anne Milling, a long-time civic leader, testified in favor of HB573.

The Convention Center “has more than $200 million in a bank account while we in New Orleans struggle to fix aging pumping stations,” Milling told the committee.

Melvin Rodrigue, the Convention Center’s board chairman, didn’t get the chance to offer a counter view because the committee had to adjourn.

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