New Orleans River District project begins with promise of jobs, request for lower taxes

By Anthony McAuley

Source: The Times-Picayune | Nola.com

November 29, 2023

The River District development formally got underway on Wednesday, with New Orleans and Louisiana officials gathering in the shadow of the Ernest N. Morial Convention Center to shovel the first dirt for a $1 billion new neighborhood on the east bank of the Mississippi River.

The project, which is being built mostly on land controlled by the Convention Center, has been more than two decades in the making. It’s expected to include a new office building to serve as local headquarters for Shell Oil, as well as a Top Golf entertainment complex and about 900 apartments and condominiums.

Local developer Louis Lauricella, who leads the River District consortium, and other backers of the public-private project predicted it will create thousands of jobs and will result in more than $43 million of new taxes annually for the city and state when it is completed.

What impact?
In public meetings this week, the River District’s backers offered more details about the large-scale public subsidies that they argue are needed for the development to generate that tax revenue and what they estimate will be a $1 billion-a-year economic impact.

For one, Shell Oil, which currently leases nine floors in the Hancock Whitney Center in the Central Business District, is seeking $21.6 million in property tax breaks to move to the new seven-story River District building, projected to open in spring 2026.

In comments on the sidelines of Wednesday’s groundbreaking, Gov.-elect Jeff Landry lauded the fact that Shell Oil has committed to stay in New Orleans and expand its head count here. He also said the River District project includes a commitment to set aside about half the residential units for locals who qualify for affordable or workforce housing rents.

“We know there are some affordable housing options that help bring these kinds of projects into the city, and we know that you certainly can’t move a city without a labor force,” Landry said. He would not comment directly on the level of public subsidy, and said he was still studying the details.

The Convention Center has owned the 47 barren acres along its upriver edge for more than two decades and has been trying to develop it in one form or another for almost that long. The River District project might expand to more than 50 acres if developers come up with an acceptable proposal for land that is currently used as a surface parking lot.

The River District consortium has promised to build 350,000 square feet of office space — including the 147,000 square foot Shell building. They have also proposed building 115,000 square feet of shops, restaurants and entertainment and cultural venues over the next decade.

Lauricella and Cypress Equities of Dallas, which is part of the River District consortium, also bought with other private partners the old Market Street power plant adjacent to the River District acreage, which they plan to incorporate into the neighborhood.

The public support for the project includes the land, which the Convention Center valued at about $250 million and which has been leased to the River District consortium on terms that include 99-year leases and a rent of $10 per square foot for the affordable housing plot. The rent for the market rate residential land starts at $63.75 per square foot.

Another district
Also, in August, a new law sponsored by state Sen. Royce Duplessis created the New Orleans Exhibition Hall Authority Economic Growth and Development District, to encompass the River District and the Market Street power plant. The law designates all property deemed public within its boundaries as exempt from construction and ad valorem taxes.

It also allows for the consortium to apply for tax deals for any completed private project within the new district, the first of which is the proposed payment-in-lieu-of-taxes, or PILOT, for the Shell building. The City Council will vote Friday on the proposed Shell tax break.

At a council Economic Development Committee meeting Monday, Lauricella argued that not passing the Shell PILOT would be a “death knell” for the New Orleans office market.

Jeff Schwartz, Mayor LaToya Cantrell’s head of economic development, told the committee that the subsidy for the Shell building would be more than made up by new jobs and taxes.

“It’s about job creation, job retention and growing our city’s tax base,” Schwartz said, recommending that the council approve the tax break.

Office space
Schwartz said the office market in New Orleans, as with the rest of the United States, is facing a lot of uncertainty after the COVID-19 pandemic.

“To see a Fortune 50 company saying to the city of New Orleans that they want to remain here for the coming decades and want to make about $129 million investment in total development costs to build a new office building here is a pretty singular statement,” he said.

Among a handful of people opposing the PILOT on Monday was Santana Mitchell, a member of the Unite Here Local 23 union. He pointed out that the London-headquartered oil major reported $42 billion in net profit for 2022.

“The proposed PILOT isn’t even for real economic development,” Mitchell argued. “It’s for a move to a newer, fancier building down the street.”

When the plan for the new Shell headquarters was announced in September, local property analysts fretted that the oil company’s move out of its current space would leave a hole in the existing Class A office building market.

But Schwartz said the move would ensure that Shell’s existing 1,000 local employees, who mostly oversee the company’s Gulf of Mexico and other deepwater operations, would remain in New Orleans. He said Shell has promised to add 400 jobs over the next two decades in New Orleans.

Council member Helena Moreno, who chairs the economic development committee, asked about the developers’ promise to use money from lower property and construction taxes to subsidize other parts of the River District development, especially proposed workforce and affordable housing. Moreno wanted to know how the tax savings would be distributed between saving Shell money on its new building and underpinning affordable housing.

Schwartz said the River District has committed to place about $5 million of the tax savings into a trust that will be used to help finance affordable housing, public transit and “other public benefits.”

The affordable housing component, which originally had been significantly larger, also will require additional public subsidy, including a grant from the Louisiana Housing Corp.’s $230 million Community Development Block Grant that is expected to be distributed next year. As Shawn Barney, managing director of consortium member CLB Porter, told the City Council committee on Monday: “There are a lot of gaps to fill.”

City Council member Lesli Harris, whose District B includes the River District area, has been a strong supporter of the consortium’s efforts and said the affordable housing will justify the public subsidies for other parts of the development.

“Given that we’re not developing that much housing here in the city that is affordable and close to the [Central Business District] and downtown where people work,” the commitment to provide 450 affordable and workforce units is “pretty significant,” Harris said.

Stephen Stuart, research director of the Bureau of Governmental Research, a public finance watchdog, said that while his nonprofit hasn’t analyzed the Shell tax break proposal, the City Council should closely scrutinize it and other such requests under the district’s blanket tax break legislation.

“The burden is on the developer to demonstrate why any public incentive is necessary,,” he said, “and for city economic development officials to vet the proposal with the public’s overall interest in mind.”

Editor’s Note: This story was updated to clarify information about the property tax exemptions in the River District.

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