New Orleans hospitality leaders pitch hotel sales tax increase dedicated to local infrastructure

By Beau Evans

Source: | The Times-Picayune

December 6, 2018

New Orleans hospitality industry and business representatives are pitching a plan to raise $81 million in one-time money to plan and undertake fixes to drainage and other city infrastructure. Mayor LaToya Cantrell panned the proposal shortly after it was made public Thursday (Dec. 6), calling it “not adequate to the scale of our needs.”

Local tourism leaders are proposing a state sales tax addition for New Orleans only. They want to restore a portion of the tax that expired at the end of June and use the money to help address needs at the beleaguered Sewerage & Water Board and develop a drainage improvement plan. Cantrell instead wants to rededicate revenue from existing hotel taxes and spend that money on infrastructure. Her idea has been met with resistance from key state officials, such as Senate President John Alario and, most recently, Gov. John Bel Edwards.

In a statement Thursday afternoon, Cantrell said the proposal falls short of the city’s massive infrastructure needs. She said the city’s hospitality industry generated more than $200 million in revenue last year, but that only 10 percent of that money went into the city’s coffers. She also dismissed the proposed strategic plan.

“I’m happy to see the industry leaders now acknowledging the importance of these issues, and I appreciate their proposal as a first step,” the mayor said. “But it is not adequate to the scale of our need.”

The business proposal would restore the state sales tax back to 5 percent for certain transactions in the city. The current rate is 4.45 percent statewide, after state lawmakers finally agreed after four sessions earlier this year to put back a portion of the penny that expired June 30. The additional 0.55 percent of the tax would be levied only at New Orleans hotels, according to Stephen Perry, CEO of New Orleans and Co., the local convention and visitors bureau.

Outlining the proposal at a news conference Thursday, Perry said the plan would generate about $6.75 million in annual revenue and be placed in a fund restricted for infrastructure initiatives. To jumpstart the work, Perry said the proposal calls for borrowing $81 million through a bond financed by the proposed tax revenue.

Ideas for the tax revenue that Perry pitched Thursday included:

  • $5 million to $10 million to create a citywide strategic drainage plan
  • around $25 million to build a pipeline under the Mississippi River to stabilize water pressure and fend off boil advisories
  • $27 million for a downtown public transit and parking hub; and
  • $20 million to be used at the Sewerage & Water Board’s discretion.

Perry said those proposed initiatives would be hashed out with the mayor, the New Orleans City Council, local business leaders and nonprofit groups. If approved by the legislature, Perry said, the one-time $81 million in improvements and the strategic study would be leveraged to entice additional funding from federal and local private sources.

Perry added that he and other local business representatives have already met with Cantrell to discuss the proposal, and plan to do so again next week.

“There’s a lot of excitement about this,” Perry said, “but there’s also uncertainty because it’s just at the beginning.”

Cantrell did not disclose any details of her tax rededication plan in Thursday’s statement. The mayor’s office has previously declined | The Times-Picayune’s request for an interview to discuss those details.

The sales-tax restoration proposal comes ahead of a new report from the Bureau of Government Research that’s expected to double-down on its earlier call in a 2015 report to reexamine hotel tax dedications. That report estimated that 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, while only a fraction of revenues would be available for the city to use for infrastructure improvements. The new report focusing on hotel taxes is expected to arrive in the coming days.

Speaking on Monday, Perry dismissed the Bureau of Governmental Research’s report and described Cantrell’s rededication proposal as wishful thinking. He argued diverting existing tax revenues could hurt economic performance of the Mercedes-Benz Superdome and Ernest N. Morial Convention Center, both of which receive the bulk of annual hotel tax revenues.

Perry said the Cantrell administration has suggested that City Hall recoup a penny on the existing hotel sales tax, which rounds out to about $12.3 million annually. That move would disrupt the funding stream is tied to New Orleans & Co.’s proposal to build a 1,200-room hotel attached to the convention center, Perry said.

“The answer…is not in taking funding away from those things that are currently paying for virtually everything that happens in the city,” Perry said Thursday. “It’s in keeping those streams intact so we can keep the economy growing while coming up with new approaches in which we get new infrastructure dollars flowing.”

Amid the pushback, Cantrell indicated in her statement Thursday that she intends to continue pushing for the tax rededication.

“I will continue to fight to get our people all that they deserve,” the mayor said. “This is our approach across the board. We’re establishing a new infrastructure fund to ensure all redirected revenue is allocated towards these vital infrastructure and maintenance needs. We look forward to working with all of our stakeholders to make this a win-win that benefits everyone.”

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