Watchdog report asks Convention Center to slow down $557 million hotel project

By Beau Evans

Source: NOLA.com | The Times-Picayune

July 20, 2018

A $557 million hotel proposed for the New Orleans Ernest N. Morial Convention Center needs a thorough evaluation of the project’s need and financial details before an approval vote possibly late next month, according to a report released Thursday (July 19) by the Bureau of Governmental Research.

Responding to the report, the Convention Center’s president says they’re doing their due diligence to assess the hotel’s potential impact.

The hotel plan calls for a new 1,200-room Omni Hotel on eight of the 47 acres owned by the New Orleans Exhibition Hall Authority at the upriver end of the Convention Center. It would come with a parking lot, nearly 150,000 square feet of meeting space and a $79 million linear pedestrian park.

Citing presentations and solicitation documents, the report notes the hotel project would be funded by about $516 million in bonds and a $41 million up-front cash payment. The proposed deal would also include a free land lease, full property tax exemption and 40-year hotel and sales tax rebates.

The team developing the hotel project includes local developers Darryl Berger and Joe Jaeger, as well as a Texas-based firm.

In all, the report estimates the proposed deal equates to nearly $330 million in public contributions. It’s that money the report focuses on in its call for a slower, more thorough analysis of the project’s benefits.

“The proposed deal would involve, by far, the largest public contribution to an economic development project involving a private entity in recent memory in New Orleans,” the report states. “Therefore, a careful analysis is essential to determine the necessity of any public contribution.”

The report notes the Convention Center clarified earlier this month that it has not agreed yet to the terms of that deal.

If approved, the financing deal outlined in the report could divert more than $40 million in tax revenues over the next 40 years from the city and other local entities, including the Orleans Parish School Board and the Sewerage & Water Board. The hotel’s ownership would revert to the Convention Center after 40 years, the report says, and the Convention Center would receive revenues generated in excess of what it takes to run the hotel.

But the report says the hotel proposal so far lacks an economic or fiscal impact analysis, and “contains few details about the public’s return on its contributions.”

The Exhibition Hall Authority could vote to approve the proposal as early as Aug. 22, making for a “fast-track schedule” that could hinder deeper analysis, the report says.

BGR does not take a stance on the hotel in the report. Rather, the research nonprofit urges the Convention Center to slow down.

“The hotel project is strategic in the sense that it is part of the Convention Center’s plan to better utilize the building and remain competitive with other exhibition halls across the country,” the report states. “But because any tax rebates and exemptions would impact other tax-recipient bodies, the Convention Center should demonstrate that the project is a top priority for the community as a whole.”

In an email, Convention Center’s president and general manager, Michael Sawaya, said the organization has tapped hospitality industry consultant HVS Convention, Sports & Entertainment Consulting to help evaluate the hotel’s potential economic impact.

“We believe that all of the issues raised in the BGR report have been anticipated and will be included in the final due diligence report,” Sawaya said.

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