Monday, June 18, 2018

So who gets to keep the money?

Joe Jaeger says his new hotel will actually belong to the people of Louisiana.
But despite its potential significance, the long-discussed project is likely to come at a high cost to the Convention Center and other local agencies, at least if the development team — which includes local businessmen Darryl Berger and Joe Jaeger, as well as Matthews Southwest Hospitality, a Texas-based real estate firm, and Preston Hollow Capital, a Texas-based finance company — gets its way.

Jaeger, the biggest hotel owner in New Orleans, defended his group's proposal, describing the new hotel as "a difficult project" that will ultimately end up back in public hands.

"In reality, this is a Convention Center hotel that will ultimately be owned by the Convention Center,” he said.
And who could argue?  We are going to be paying for it, after all.
To help cover the hotel’s cost, the developers are seeking $41 million in cash from the Convention Center, as well as a complete rebate of a 10 percent hotel occupancy tax and a 4 percent sales tax on all hotel revenue from sources other than room rentals until the hotel's $516.5 million bond debt is repaid — roughly 40 years.

In the first year, the hotel is projected to generate almost $57 million in revenue from rooms — making that rebate worth about $5.7 million, according to financial documents that were included in the developers' proposal.
This is the controversial hotel/motel tax revenue we've been hearing about for years. New Orleanians have long argued that the public revenue generated through the so-called "economic engine" that drives the city should address the city's dire infrastructure needs, or the worsening housing crisis, or anything that might meet the needs of the  the workers who make that revenue possible in the first place. Instead the bulk of the money goes right back into subsidies and support systems for profiteers like Berger and Jaeger.
The BGR study estimated that the hotel taxes generated $165.9 million in 2015. After accounting for all the pass-throughs and levels of distributions, the watchdog group estimated that about $126.8 million -- 76 percent -- went to tourism-related entities. The remaining 24 percent went to public services such as city government, transportation and education.

No other major American destination city devotes a smaller share of its hotel taxes to local government than New Orleans, according to a recent study by the Las Vegas Convention and Visitors Authority. On average, the 17 cities in the study dedicated 65 percent of hotel taxes to basic services. New York dedicates 100 percent to its city government.
There's really no reason Jaeger would need $500 million in free money to finance a project like this. 

But, hey, there is some good news. 
After the project's debt is paid off, decades from now, the board that governs the Morial Convention Center could take control of the hotel, or it could lease or sell it and retain the full proceeds.
Because we're putting all these millions of public dollars into building this privately managed hotel is that, after 40 years or so, we "could" end up owning it.  But, really, why wait?  If we're building the thing with our money now, why not just keep the revenue?  If it's our money in the first place, there's really no need to just hand it over to some oligarch like Jaeger. 

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