Mayor LaToya Cantrell and representatives from the police department, fire department, EMS, Louisiana State Police, the FBI and Homeland Security hold a press conference updating residents on public safety preparations before the height of Carnival season in New Orleans, La., Thursday, Feb. 21, 2019.

The delicate negotiations between Mayor LaToya Cantrell, the governor’s office and hospitality leaders over ways to direct tens of millions of dollars to New Orleans’ ailing infrastructure suffered a sharp setback last week after a contentious meeting between the groups, according to several sources.

The impasse between the two sides seems set to send the talks back to the drawing board less than a week before the Legislature meets.

Earlier in March, talks looked to be progressing toward a deal that would have won Cantrell at least some of the tourism money she has sought to shore up the financially shaky Sewerage & Water Board and help repair the city’s cratered roads.

But multiple people present at the high-stakes sit-down, which occurred on the sidelines of a New Orleans Black Chamber of Commerce luncheon on Thursday, said that Cantrell balked at a proposal from New Orleans and Co. President Stephen Perry that called for the creation of a new taxing district.

Key to Cantrell's 2019 legislative agenda? Tourism cash to rebuild N.O. S&WB, more. Here's what to know ...

The plan would have required New Orleanians to vote to increase taxes on hotels and on food and beverage sales, according to several sources, who asked not to be named given the delicacy of the current negotiations.

That plan was a non-starter for Cantrell, who is hoping to convince residents to vote for a new drainage fee later this year that would help stabilize the Sewerage & Water Board’s finances, several sources said. An additional tax increase would make passing that new fee more difficult, and an unsuccessful effort would leave the mayor essentially empty-handed.

Many of those at the meeting expressed hope a deal could still be salvaged, a sentiment echoed by Gov. John Bel Edwards’ office, which has served as a mediator between the two sides.

“A number of options remain on the table,” Edwards spokeswoman Christina Stephens said. “The governor believes aid to address the issues facing the Sewerage & Water Board is of critical importance and that city officials and tourism leaders can and will work to find common ground on behalf of the people of the New Orleans.”

But with the legislative session rapidly approaching, time is running out to rally support among lawmakers who would have to approve any deal shifting money around in the complicated tax structures that provide funding to the city’s tourism groups.

Since last fall, Cantrell has mounted an aggressive push to redirect some of the tax money that now goes to tourism groups, the Ernest N. Morial Convention Center and other hospitality entities. She wants to shift it to the city’s ailing infrastructure.

That has culminated in a demand that those state-created tourism groups either relinquish some of the money they now receive from taxes collected in the city or agree to higher rates.

Cantrell's plan to aid N.O. S&WB? $75M upfront, $40M in revenue from tourism, sports industries

Cantrell has sought a total of $40 million a year from those groups, about half the amount the administration says is needed each year for infrastructure work.

An earlier offer from Perry, which would have brought in about $6.7 million a year by increasing hotel taxes, was rejected by Cantrell in December as inadequate.

Since then, it appeared progress had been made. The governor’s office set up a working group composed of city and state officials, tourism officials, lawmakers and businessmen to try to find both the recurring revenue and an upfront cash infusion of $75 million for the S&WB.

As of last month, negotiators believed they could deliver about $50 million upfront and between $20 million and $25 million a year. However, that depended on the two sides coming to terms.

Working groups zeroing in on cash to meet Mayor LaToya Cantrell's demands for S&WB help

During Thursday's discussions, Perry laid out a proposal that would have seen the Legislature create an “economic development district” encompassing nearly the entire city except for Gentilly, New Orleans East and the Lower 9th Ward, according to sources at the meeting. It would serve as a mechanism that would allow city officials to call for a public vote to raise hotel taxes and potentially food and beverage taxes, which are paid by residents as well as tourists.

Another component of the plan would involve raising taxes on short-term rentals, which currently are taxed at a lower rate than traditional hotels, according to those at the meeting.

Altogether, the proposal could bring in tens of millions a year for the city, according to sources familiar with the proposal, though it would not tap the large reserves or hefty cash flow of the Convention Center or other tourism entities. An undertone of much of Cantrell’s rhetoric around the tourism issue has been the need to win the city its “fair share” of that money.

Perry said he was not ready to publicly discuss his proposal while the negotiations remain “in a very sensitive stage.”

“All sides are moving pieces,” he said. “Look at it as a chess board, and we’re moving pieces on and off the chess board, and there’s no agreement on any one of the components yet. It’s really not appropriate for me on behalf of all our companies and interests to comment until we’ve gone a little further with the mayor and the governor.”

But Cantrell reportedly balked at Perry's proposal, in large part due to the need for a public vote, according to those at last week's meeting. Going that route would put the onus for delivering the deal on the mayor and present a risk that voters would reject the plan and leave the city with little to show for the negotiations.

In addition, the administration is expected to go to voters sometime in the next year with a plea to support a drainage fee or other new tax to bring in some of the additional money Cantrell says is needed. Asking voters to support two new taxes in a row was seen as a deal-breaker.

The approach the city would prefer to take is less clear, though it apparently would rely on state lawmakers to agree to raise taxes targeting tourists in the city. While such a move would also be a heavy lift in a tax-averse legislature, a plan that had the blessing of Cantrell, the industry and the city's delegation could potentially gather support from lawmakers, particularly if it did not impact districts outside the city.

Cantrell’s office struck a hopeful note on Tuesday.

“All parties are at the table, and nothing has been set in stone at this point,” her spokesman Beau Tidwell said in an email. “The mayor’s team is reviewing several different scenarios and permutations of an agreement, all of which are subject to change as the conversation continues. We believe we can get to a win-win for everybody.”

Hotel taxes are at the center of Cantrell's fight to provide more money for New Orleans infrastructure

Beyond the issue of who would be responsible for delivering the revenue increases sought by the city, Perry’s proposal came with additional strings attached.

First, the plan calls for the Regional Transit Authority to abandon its efforts to recoup tax money it gives the New Orleans Tourism Marketing Corp. each year under a two-decade-old agreement over hotel taxes. The RTA is seeking to reclaim the $2.9 million it sends to the tourism group each year and recover about $31 million it has handed over since that agreement was first made.

RTA demands $31 million from tourism groups; says 2001 agreement giving them money was illegal

The proposal also calls for the Tourism Marketing Corp. itself to be absorbed by Perry’s organization.

Mark Romig, the tourism group’s president and CEO, has been an ally of Perry in the dispute with the city. He said on Tuesday he did not have any comment on that aspect of the plan.

“I’m not privy to those conversations, so I wouldn’t be able to comment,” Romig said. “Our emphasis is on leisure marketing and we have to maximize that effort." Perry's group focuses on conventions and large groups.

"We’ve been asked by our board to stay focused on the day-to-day work, and that’s what we are doing,” Romig said. 

Follow Jeff Adelson on Twitter, @jadelson.​