Latest New Orleans hotel tax idea could generate $6.7M for city projects; LaToya Cantrell calls plan ‘inadequate’
By Jeff Adelson
Source: The Advocate
December 6, 2018
Facing political pressure to share some of their hotel tax revenue with city agencies, New Orleans tourism leaders on Thursday proposed an alternative: a new hotel tax that would generate $6.7 million a year for municipal infrastructure projects.
But the idea apparently is not enough to defuse efforts by Mayor LaToya Cantrell to shift money that now goes to the Ernest N. Morial Convention Center, Mercedes-Benz Superdome and hospitality groups to beefing up the city’s infrastructure.
The mayor immediately issued a news release calling the proposed plan a “first step” that would represent an “inadequate” contribution from those groups, given the amount of tax money they receive and the huge cost of fixing the city’s decrepit streets, pipes and stormwater systems.
New Orleans & Co. President and CEO Stephen Perry and GNO Inc. President and CEO Michael Hecht unveiled the new plan on Thursday, saying it had the backing of the city’s hotels, as Perry argued against any moves to take away revenue from the tourism and entertainment industries.
The proposal is built around a 0.55 percent sales tax that hospitality leaders would ask the state Legislature to impose on hotel rooms in New Orleans. That would bring the total tax to the rate where it was from 2016, when lawmakers raised taxes to deal with a state budget crisis, until this year, when the Legislature agreed to allow about half the increase to expire.
The money would be used “to figure out solutions, identify resources and create paths where we together can figure out solutions to problems that have festered for six or seven decades in New Orleans,” Perry said.
The tax would bring in about $6.7 million a year, which Perry said could be used to issue bonds for a one-time infusion of $81 million. That’s about the amount city officials estimate would be needed each year to repair and replace the city’s crumbling infrastructure.
That money — as well as any additional tax revenue in future years that wasn’t needed to pay off the bonds — would be put into a city account for infrastructure spending, Perry said.
The announcement appeared to be an effort to mollify Cantrell as she seeks to convince state leaders to redirect some of the $200 million in tax money collected in New Orleans that now goes to the Convention Center, Superdome and tourism promotion groups including New Orleans & Co., the new name for the former Convention and Visitors Bureau.
But the announcement appeared to just provide more ammunition for Cantrell, who so far has been largely unsuccessful in convincing state officials to back her plan.
“We’re not asking anybody for a favor. Last year, our people generated more than $200 million in hospitality revenue — but less than 10 percent of that came to the city. Seventy percent of that $200 million went to just four hospitality agencies,” the mayor said in a news release.
“I will continue to fight to get our people all that they deserve,” she said.
Perry also laid out a plan for spending the money, including $5 million to $10 million for a master plan to identify and prioritize needed infrastructure improvements, $25 million to build a pipeline under the river connecting Sewerage & Water Board water treatment plants on each bank to reduce problems with boil-water advisories, and $25 million to $27 million for a downtown transit hub.
Tourism officials would not seek to exercise veto power over any decisions the city makes about spending the money but would want a seat at the table for those discussions, he said.
If this plan works out, Perry said there are two other funding proposals that could be rolled out in the future. He declined to provide any details on what those would be.
The city’s tourism taxes have come under fire from a variety of angles. Beyond Cantrell’s proposal, the way those taxes are distributed has been criticized by the Bureau of Governmental Research, a nonpartisan group which also has questioned proposed subsidies for a hotel the Convention Center hopes to build.
During a news conference, Perry launched a pre-emptive attack on a forthcoming BGR report that he said would deal with those taxes.
Proposals to redirect money that now goes to the Convention Center and Superdome would be barred by bond agreements those two organizations have signed and would undermine efforts to refurbish and improve the facilities, Perry said.
Fixing up the Superdome ahead of the 2024 Super Bowl in New Orleans and bringing the aging Convention Center up to current standards are key priorities that will benefit not just tourism interests but the city as a whole, he said.
Perry also argued that “an eight-year bull run” of tourism, which he said accounts for 43 percent of the sales taxes already in the city’s budget, has allowed the city to climb out of the deficits left at the end of the former Mayor Ray Nagin’s administration and to expand services.
“We’ve made it possible for the city to grow” and provide services that “touch every block and neighborhood,” Perry said.
Cantrell administration officials have not said publicly what they would consider a fair offer from the tourism groups, though Perry said that during meetings with city officials the number floated was equivalent to 1 percentage point of the sales tax being collected. That would amount to about $12.2 million.
The rest of the $80 million or more that’s needed for infrastructure each year would have to come from other sources. But Perry said the city would never be able to hit that figure.
“There’s no mechanism we were able to identify that has any chance of political reality of getting” that much money, he said.
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