While New Orleanians howl over broken streets and a shrunken police force, some local agencies — particularly those devoted to promoting tourism — have been largely immune to budget woes. In fact, some are downright flush.
That’s the conclusion of a report released Tuesday by the nonpartisan Bureau of Governmental Research, which called on Mayor Mitch Landrieu’s administration to look at whether New Orleans’ $1 billion annual tax haul is really funding the city’s top priorities.
At the heart of that imbalance are the numerous taxes earmarked for specific uses — funds that neither the mayor nor the City Council can redirect to more pressing needs. Those taxes make up three-quarters of the money collected in Orleans Parish every year.
The most stark example in BGR’s report is the Ernest N. Morial Convention Center, a state agency that is funded in part by such a dedicated tax and that the report says has built up a “startling” surplus of $200 million, five times the center’s annual operating budget of $40.2 million.
“The tax dedications were approved in piecemeal fashion over the course of many years with little planning and accountability,” according to the BGR report. “The allocation of resources that evolved from this ad hoc process has not been re-evaluated in the context of changing conditions and current needs.”
The report comes as the City Council is considering a nearly $600 million city operating budget for next year. Growing revenue from sales and property taxes has given the city some breathing room after years of cuts. But Landrieu and other officials say they would need roughly $100 million more to meet all of the city’s goals.
The BGR findings come as no surprise to the administration, which has pushed in the past to free up restricted tax dollars and get more tax-exempt properties owned by nonprofits on the tax rolls.
“The mayor has long agreed that the current tax structure is outdated and does not meet the city’s needs,” Landrieu spokeswoman Sarah McLaughlin said in an email. “In the past five years, we have consistently advocated for changes at the Legislature but were rebuffed.”
The issues raised by the report mirror debates at the state level, where the proliferation of dedicated taxes and other revenue sources that can be used only for specific purposes has led to yearly cuts in funding for higher education and health care, the two main unprotected areas of the budget.
Education and public safety each receive about 24 percent of the taxes collected in New Orleans, according to the report. That’s followed by tourism, conventions and sports, which together get about 14 percent.
The report takes particular aim at the Convention Center and the semiprivate New Orleans Convention and Visitors Bureau, both of which are partly funded by dedicated taxes.
The Convention Center’s surplus was accumulated mainly through a quarter-cent sales tax on food and beverages and a 1 percent tax on hotel rooms. Both of those taxes were imposed by the Legislature in 2002, and both were intended to pay for an expansion that was scuttled after Hurricane Katrina.
“These self-imposed reserves are clearly excessive, redundant and far beyond what best practices would recommend,” according to the report.
There has been discussion of redirecting some of that money to help develop a private hotel and other attractions near the Convention Center and make improvements to area streets, which together would cost about $150 million. That effort is still in the planning stages.
An additional hotel assessment of 1.75 percent is split among the CVB, the New Orleans Tourism Marketing Corp. and the city, which must spend the money on public safety and improvements in the French Quarter.
When that tax was proposed in 2013, BGR opposed it on the grounds that it would make future tax increases for general services more difficult to pass. That theory was born out last year, when the city failed to get a general hotel tax through the Legislature.
The report also calls for rethinking a 1 percent sales tax dedicated to the New Orleans Regional Transit Authority, suggesting it might be overly generous given the 68 percent decline in ridership the agency has seen during the past 30 years. That funding is allowing the agency to pay for the $41.5 million streetcar line being built on North Rampart Street, a project the report suggests should have been largely paid for by the federal government.
BGR says more study also should be given to the Tax Assessor’s Office, which receives 2 percent of all property taxes collected in New Orleans, regardless of its budget needs. That has led to annual surpluses of about $2.8 million, and the office now has $7.7 million in reserve, more than its yearly operating expenses, according to the report.
“It is time to review current taxes in New Orleans and identify those that are ripe for rededication to basic municipal needs,” according to the report. “The city is the only general purpose government entity in the parish and the one in the direst financial straits. Therefore, the mayor must take the lead in pursuing all appropriate changes to local tax dedications.”
Follow Jeff Adelson on Twitter, @jadelson.