The $1 Billion Question Revisited

It’s time to change how New Orleans’ tax dollars are spent, distributed, nonpartisan group says

By Jeff Adelson

Source: The Advocate

April 25, 2019

The Bureau of Governmental Research is once again calling for changes in the way taxes are distributed in New Orleans, issuing a new report just as Mayor LaToya Cantrell and representatives of the tourism and hospitality industry are battling over revenue at the state Legislature.

The report is an update on a 2015 study by the nonpartisan policy think tank titled “The $1 Billion Question,” which examined where tax dollars go in New Orleans and raised questions about whether that distribution aligns with the priorities and needs of the city’s residents.

Both reports examine how money is distributed among the various agencies that collect and receive tax dollars in New Orleans, including the city itself, the school system, various tourism promotion groups and other entities such as the agencies that oversee flood protection.

The new report found little change over the last four years in how tax money is distributed, though the total amount involved has risen.

Not including taxes that go directly to state government, about $1.25 billion a year is now collected and doled out to agencies in New Orleans — a 14 percent increase over 2015.

Public safety is now the top area of spending in New Orleans, making up about a quarter of the total. Public education, which previously was in the top spot, now comes in second at about 24 percent of all spending.

But it’s the third category, “tourism, conventions and sports,” that has proven the most controversial in recent years. Spending in those areas takes place through a variety of entities that receive dedicated tax revenues — including the Ernest N. Morial Convention Center, the board that oversees the Mercedes-Benz Superdome and the tourism promotion group New Orleans and Co. Those and similar entities now get about 14 percent of the total local taxes collected in the city.

That’s compared with about 5 percent of tax revenue spent on drainage and 3 percent on the levee system — a discrepancy that both BGR and the Cantrell administration have pointed to as a sign that spending is not in line with the city’s needs.

Tourism and hospitality groups, on the other hand, argue that they need the money they receive to maintain and upgrade their facilities and to promote the city, thus keeping the flow of visitors and the money they spend coming to the city.

The BGR report urges lawmakers to make changes that include “considering the most clearly justified tax rededication options,” such as increasing the city’s share of hotel tax revenue. That’s in line with Cantrell’s current push.

Cantrell and the tourism industry have been holding negotiations, following the mayor’s call last year for the city to get a greater share of hotel taxes and other tourism revenue. Those talks appear to have stalled, though Cantrell has succeeded in getting some bills that would bring the city more money moved out of committee in Baton Rouge.

The current debate over tourism taxes “certainly was a factor in our issuance of (the new report) and getting this into the hands of legislators, not only the New Orleans delegation but the entire Legislature,” BGR President and CEO Amy Glovinsky said.

Although the original report has not yet resulted in significant changes in how money is divvied up, it — along with another BGR report saying that the city needs tens of millions more each year in infrastructure spending — has served as something of a foundational document for Cantrell’s fight to redirect tourism taxes to rebuilding pipes and streets.

In addition to its look at current taxes, the report also calls for a more cohesive approach to financial planning by the city. The city should create a comprehensive, long-range plan that prioritizes needs and seeks revenue for those purposes, rather than going after new taxes on the ad hoc basis that has been used in the past, Glovinsky said.

BGR is also working on a report examining the growth in spending within city government over the last 10 years. It’s expected to be complete before this fall’s discussions on the 2020 budget, Glovinsky said.

“We’ve called repeatedly for a demonstration that existing tax revenues are being used optimally before the city asks for new revenues,” she said.

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