The New Orleans agency that manages the French Market and other French Quarter real estate earned praise from the Inspector General's Office on Wednesday for eliminating the middleman in a Bourbon Street property lease — a move that netted the city nearly $180,000 in the new arrangement’s first year.
IG Ed Quatrevaux also lauded the French Market Corp. for ending what he called its illegal practice of making sponsorship payments to outside groups without written agreements to justify them.
Those steps and others were in line with recommendations Quatrevaux's office made to the corporation three years ago.
But Quatrevaux at the same time chided the agency for not taking his past advice when it comes to overtime for its employees. The IG said in 2013 that employees exceeded their allowed annual and weekly overtime limits, and he again found instances of such problems in his latest review.
"We are pleased that the FMC eliminated the middleman, which generated new revenue for the city, and that the FMC stopped making illegal donations," Quatrevaux said in a statement. "The next step for the FMC is improving employee overtime controls to follow Civil Service rules."
Ever since it was signed more than a decade ago, there was controversy over the French Market’s annual lease of Edison Park in the 300 block of Bourbon Street for $1 to a nonprofit group that then subleased it to a private firm for as much as $140,000 annually.
That nonprofit, New Orleans Musical Legends Inc., was launched by former City Councilman Eddie Sapir and was managed by Dottie Belletto, who also runs New Orleans Convention Co. Inc.
Some of the $140,000 that sublessee Cafe Beignet paid to Belletto’s group each year was used to erect and maintain statues of famous local musicians on the site. But critics continued to decry the $1 arrangement as a sweetheart deal, and Quatrevaux began looking into it in 2011.
He concluded that the use of a middleman was depriving the city of the chance to reap the property’s fair market rental value, which an appraiser in 2013 pegged at $170,450 annually.
A few months later, the French Market Corp. announced that it would lease the property directly to Cafe Beignet but still pay Belletto — who has worked on Mayor Mitch Landrieu’s campaigns and handled his 2010 inauguration — the bulk of the money the agency received from the lease.
After Quatrevaux also criticized that plan, the corporation agreed to let Belletto’s group use the park rent-free for fundraising events, in exchange for its continued maintenance of the musician statues. But Belletto’s board rejected that deal, The Lens reported in 2014.
After kicking the nonprofit off the lease, the French Market Corp. “increased its rental income from $1 per year to $179,652 during the first year of the contract,” the inspector general's report said.
An even better business deal would be for the public agency to raise Cafe Beignet’s minimum annual rent from $140,000 — or 7 percent of gross sales, whichever is greater — to at least the $170,450 in rent that Edison Park is worth, the report added.
Quatrevaux praised the corporation for agreeing to send the city all revenue from its three city-owned parking lots for three years, beginning in 2015. That move resulted in a nearly $1 million increase in revenue for the city last year, according to the report.
He also commended the agency for now documenting the public purposes served by its sponsorship payments to outside firms.
He said the French Market can fix its other problems by monitoring employees' hours to ensure that any overtime worked is necessary.
The French Market hired its latest executive director, Kathleen Turner, in August. Turner replaced Jon Smith, who resigned in January to return to private-sector real estate after less than three years on the job. Frank Pizzolato, who filled the role before him, left in 2013 after two years.
Pizzolato filled a lawsuit after his departure, accusing the board of forcing him out because he was white and because he was looking into whether a tenant was improperly using electricity paid for by the market. The suit was later dismissed.