A developer planning to build three hotels just north of Louis Armstrong International Airport will be able to tax his customers extra to help finance the buildings’ construction, the Kenner City Council decided Thursday.
Developer Mike Vira said he will reward the City Council’s decision by committing to give the vast majority of the 250 jobs his hotels will create to Kenner residents, noting that the people paying the additional tax largely will be out-of-town guests who will spend money at other area businesses as well.
“This is going to impact a lot,” said Vira, who has other local hotel properties on the West Bank and in Metairie. “It’s a win-win situation.”
Vira said he is positioning his three hotels to benefit from the increase in travelers expected to result from the new $650 million passenger terminal being built on the north side of the airport, which officials hope will open in 2018.
One of those hotels, a 110-room Holiday Inn, already is under construction and should open for business around the end of summer next year, Vira said.
He said he hopes to begin building a similarly sized Hyatt Place in December, with a target opening date of late next year.
Vira said he plans for the third hotel to be a 130-room Marriott Courtyard that will open sometime in 2017.
He anticipates the hotels will cost a total of $40 million to build. They will sit on a 5-acre site near the corner of Veterans Memorial Boulevard and Bainbridge Street.
Vira, though, wanted some form of public financing to complement his investment. “I am going to spend $40 million,” he said. “I am going to give almost 300 jobs out.”
By a vote of 7-0 with no discussion, the City Council approved imposing additional taxes of up to 2 percent — the most permitted under state law — on purchases made and rooms booked at the hotels. Those taxes would be on top of the levies normally collected throughout Kenner.
“The attractive part of this deal is that ... the city is not giving anything away,” said Jefferson Economic Development Commission Director Jerry Bologna, who estimates that an extra $175,000 to $200,000 a year could be generated by the additional taxes at the hotels. “Mike Vira is passing on this burden to his customers, which typically will not be Kenner residents.”
Vira said he would like to recoup 75 percent of the additional taxes over the next decade, or about $1.3 million to $1.5 million, according to the estimates provided by JEDCO, which has facilitated the dealings between the hotel developer and Kenner.
Vira said he hopes the arrangement will reimburse him for implementing improvements to his properties such as landscaping, lighting and underground power lines. But those details are still being negotiated, and Kenner intends to reimburse Vira only for what it considers “extraordinary” building costs, such as the demolition of an existing structure on the land, said the city’s chief administrative officer, Mike Quigley.
Quigley said the city is aiming to negotiate an arrangement in which Vira would pocket a large percentage of the additional tax money generated at his hotels in the early years, but that amount would shrink over time as it approaches an agreed-upon cap. Kenner would keep a larger cut of the money as time goes on, and once the cap is reached, the city would pocket 100 percent of the extra tax revenue, Quigley said.
Since Vira and Kenner began pursuing their arrangement, other hotels interested in similar deals have contacted municipal officials, City Councilman Keith Conley said.
Conley said he couldn’t think of a good reason not to explore more arrangements like the one with Vira.
“It’s creative financing,” he said. “The only effect it has on the constituents of Kenner is that it’s more revenue coming into the city.”