Let New Orleans drown in water and red ink or stop giving special interests money to finance their real-life Monopoly game? It should be a no-brainer for Louisiana lawmakers.
Earlier this month, Mayor LaToya Cantrell executed a campaign promise by requesting redirection of a portion of hotel tax revenues to the city’s Sewerage and Water Board. The agency's infrastructure needs repairs and upgrades costing billions of dollars. Equipment failures in the past couple of years have contributed to multiple instances of flooding.
Cantrell is asking the Legislature to divert taxes going to two public entities and two nonprofits designed to boost tourism. The state agencies are the Ernest N. Morial Exhibition Hall Authority and the Louisiana Stadium and Exposition District. The nonprofits are the New Orleans Tourism Marketing Corp. and New Orleans and Co. (formerly known as the Convention and Visitors Bureau).
Altogether, the four rake in almost $130 million annually from fees levied on hotel rooms largely paid by out-of-towners, comprising 12 percent of all local taxes raised. Almost $100 million goes to the convention center complex and sports facilities. Existing debt and contracts might make it difficult to siphon from the LSED, which must depend on additional state general funds to meet its expenses. By contrast, the convention center has so many leftover dollars. In recent years, it has looked far and wide for ways to spend the extra money. For the last several years, the Authority’s revenues typically exceeded expenditures by $20 million annually, or about two-fifths of the hotel taxes collected. This has allowed the agency to accumulate around $220 million in cash equivalents unencumbered by any obligations.
That bankroll mushroomed largely because the agency enticed the Legislature in 2002 to increase the lodging tax, hiking it more $10 million yearly, to pay for its Phase IV expansion along the city riverfront. The expansion was canceled in the wake of Hurricane Katrina in 2005. The authority cajoled legislators in 2014 into removing restrictions on building a hotel with private money.
This has led to the authority’s latest maneuver to justify the largesse, which involves giving away a combination of tax breaks, rental payments, and $41 million in cash to build on its land a hotel with 1,200 rooms that it will own after four decades. It values the concessions over the deal’s life at $165 million in present value, although the independent Bureau of Government Research pegs the giveaway at double that amount.
Cantrell opposes the deal, although the city can’t do much to alter it. She says without an alternative funding source like the hotel tax, city residents and businesses will have to foot the entire tab for drainage improvement. (The S&WB already collects a property tax assessment worth nearly $50 million annually).
Diverting the money will prove a tall order. Legislators turned away a similar request from former Mayor Mitch Landrieu, although his didn’t focus on infrastructure. Area state Rep. Stephanie Hilferty last year tried to repeal the 2002 tax, but that bill went nowhere. And Senate President John Alario, whose father’s name adorns an LSED structure, has voiced opposition to any change.
But lawmakers should grant Cantrell’s request. Instead of giving more excess cash to an agency eager to fund a private venture of questionable need (with more than 8,500 rooms already located near the center), legislators should help keep the public safe by rerouting some tax proceeds to tackle the Crescent City's local drainage matters. That would help avoid squeezing overtaxed New Orleanians and reduce the future burden on S&WB users.
Jeff Sadow is an associate professor of political science at Louisiana State University-Shreveport. He is author of a blog about Louisiana politics at www.between-lines.com and writes about Louisiana legislation at www.laleglog.com. Follow him on Twitter, @jsadowadvocate or email firstname.lastname@example.org. His views do not necessarily express those of his employer.