New Orleans Mayor LaToya Cantrell’s push for tourism tax dollars sparked verbal fireworks in the State Capitol on Tuesday, with hospitality leaders warning that a series of bills to re-direct hotel taxes for the city’s drainage needs would “destroy” parts of the city’s hospitality industry.
In a House Ways and Means Committee hearing, Cantrell made an impassioned – and ultimately successful – plea that two bills aimed at redirecting taxes to New Orleans infrastructure and away from the city’s tourism agencies ought to move out of committee and into the full House.
Stephen Perry, head of New Orleans & Co., a private entity that markets the city to business visitors, made an equally impassioned appearance before the committee. He called one of the bills, House Bill 521, a misguided attempt to help the city’s infrastructure in a way that threatens New Orleans’ economic engine as well as his agency.
“What you have before you is a very earnest attempt to take down and destroy the largest economic development corporation in Louisiana,” Perry told committee members.
HB521 seeks to carry out a complicated maneuver that centers on a 1.75 percent tax that hotel owners in New Orleans decided to impose on their guests, with the $18 million collected each year going to market the city to visitors, bring in major events and help pay for extras.
The bill would essentially take .25 percent of that tax for drainage, if approved by New Orleans voters.
In an interview, Perry said the move was so offensive to hotel owners and general managers that, in protest, they would simply stop collecting the 1.75 percent tax and the $18 million collected each year would disappear.
State lawmakers would be asked to make up the difference, he predicted.
The committee approved HB521 without objection. A second bill, House Bill 573, which would take away some tax dollars planned for upgrading the Ernest N. Morial Convention Center, was approved as well. Approved on Monday was House Bill 522, a companion measure that would raise the tax on hotel guests by 1 percentage point.
Cantrell’s trip to Baton Rouge came after she and chief of staff John Pourciau spent weeks trying to privately negotiate a plan with the tourism industry that would provide more money for roads and drainage by redirecting dollars from tourism and by levying new taxes on overnight visitors.
The mayor is seeking $75 million in one-time money and $40 million in recurring revenue. Hospitality leaders have agreed to about $55 million and $25 million apiece.
Those talks broke down last week, as Cantrell acknowledged to committee members on Tuesday, over how much and how to fund the infrastructure needs.
What’s not clear is whether Cantrell intends to try to push all three bills through the legislative process over the objections of the powerful hospitality industry or whether she is trying to use them as leverage to obtain a better deal with the industry.
The 1 percentage point increase in the hotel tax could be an especially difficult sale because, in an election year, it would require a two-thirds vote in both the House and the Senate and the approval of Gov. John Bel Edwards.
Pourciau in an interview afterward – Cantrell ducked into an area in the Capitol basement that is off limits to reporters – said the mayor’s office had told tourism officials that they would push forward with legislation this week after the talks stalled.
“We didn’t want the clock to run out on us,” Pourciau said, since the 60-day session is now in week three. “We’re still committed to trying to get a deal done.”
Perry and Rodrigue also echoed that point in testimony before the committee even as they argued that the proposed bills could cripple the industry.
Perry warned that HB521 would lead to the elimination of money that helps fund efforts to land events like the Super Bowl and the NCAA Final Four, and that also pay for State Police troopers in the French Quarter and help underwrite the British Airway flights from London.
Melvin Rodrigue, the general manager of Galatoire’s who chairs the Convention Center’s board, said HB573 would handcuff the center’s plans to modernize a facility that is an important driver of bringing big-spending visitors to New Orleans.
State Rep. Neil Abramson, D-New Orleans and the Ways and Means chairman who is sponsoring all three bills, tried to sooth frayed nerves.
“I know there is a lot of angst to get this done,” Abramson said, referring to the negotiations. “I’m optimistic we’ll get it done.”
The mayor’s decision to push the three bills essentially means that state lawmakers, for now anyway, are having to referee a dispute centered in New Orleans but that involves taxes levied by the Legislature.
“A collaborative solution must be achieved,” said state Rep. Barry Ivey, R-Central, who asked more questions than any other committee member. “The politics of this are so complicated.”
The issue isn’t complicated, according to Cantrell.
The city’s drainage pumps and pipelines are constantly in danger of breaking, she said, because previous city leaders didn’t modernize the equipment and machinery.
“This can has been kicked and kicked and kicked,” she said. “I am the one bending over to pick up that can.”
The issue isn’t complicated to Perry or Rodrigue either.
“We can’t afford to slide backwards,” Rodrigue told the committee members. “If the tourism economy retracts, all of our efforts to find collaborative solutions are for naught.”
Rodrigue objected to HB573 because it would cap the “unrestricted” reserves of the Convention Center at $100 million – currently the center’s reserves are $235 million – and force the Convention Center to turn over excess revenues to the city each year.
At the heart of the debate was 1.75 percent in taxes authorized by the Legislature to build a further expansion of the Convention Center known as Phase IV. It was cancelled in 2006, because of Hurricane Katrina and because business at the Convention Center had already been declining.
Rodrigue said the Convention Center needs to keep collecting the taxes for a $557 million improvement plan that is underway. Nearly $100 million of that amount would subsidize the construction of a 1,200-room hotel at its upriver end.
The committee turned aside his objections with an 11-2 vote, with only Ivey and state Rep. Dodie Horton, R-Haughton, voting against HB573.