The Grand Bargain

Krewe D'Etat float depicting Mayor Cantrell and NO and Company's Stephen Perry engaged in a tug-of-war over tax revenue


Here is a T-P story about the latest package of make-work projects the Convention Center has slated in order to continue justifying the existence of a slush fund it manages out of its share of hotel-motel tax revenues. They're getting a new roof, re-doing the bathrooms, putting in some new A/V equipment and a bunch of other stuff.  You've probably already seen the work underway on the redesign of Convention Center Boulevard. That's part of this too. As is, of course, the infamous Jaeger/Berger hotel project.

Part of that package includes $67 million to help spur construction of a new 1,200-room hotel, pegged for 47 acres at the convention center’s northern end across from Mardi Gras World. The hotel proposal has come under scrutiny from Cantrell and the watchdog nonprofit Bureau of Governmental Research, which priced the incentives developers are seeking at nearly $330 in public costs including tax breaks and a free land lease. A consultant the convention center hired has said those incentives round out closer to $170 million.

We already know the hotel is a big political controversy.  But it's really just one scheme in a long running gambit by the Convention Center to keep its surplus cash rolling in by spreading it around among the city's political and business elite. The surplus derives from a strategic decision to refinance rather than retire bonds originally intended to fund the convention hall's abandoned Phase IV. The workaround allows the Convention Center to continue collecting the tax dedicated to servicing those bonds. The arrangement is legally ambiguous. In order to justify it at all, they have to spend the money on something, though.  And that's how we get these renovation projects/street reconstructions/hotel plans like the ones described in that T-P article.

It would be nice if we could say the hotel was the last straw. But it's likely all of this would have been allowed to go in perpetuity with important people passing free money back and forth among themselves as long as we could maintain the illusion that we were at least able to approximate the basic infrastructure of a typical US city might rely on in, say, the late 19th century.

But, as it happens.. 

More than half the water that leaves the New Orleans Sewerage & Water Board’s treatment plants may be seeping through broken pipes and into the ground before it reaches customers — an amount of waste that is far out of line with other utilities, according to a new report from a consultant hired to study the problem.

All that wasted water — and the millions of gallons more that go to hydrants and other public uses that aren't billed — accounts for almost 20 percent of the cost of running the water system, according to the report, adding further strain to a utility that has faced financial instability for years.

So in order to deal with this, everyone is going to have to get by with a little bit less graft than they've gotten used to.  Or maybe not.

We read in the Advocate today that a working group of 22 public officials and tourism executives are hammering out a grand bargain that should preserve everyone's racket. All they have to do is agree on a buyout price.

A dozen people involved in the latest behind-the-scenes discussions say they think the two groups can deliver about $50 million of the $75 million in one-time money that Cantrell is seeking.

They would cobble it together from a variety of sources including federal money, a small portion of the $235 million in reserves held by the Ernest N. Morial Convention Center, a tax on short-term rentals in New Orleans and altering the structure of taxes on hotel guests.

Any agreement would include an initial offer by tourism leaders that Cantrell rejected as inadequate by itself: reinstating a 0.55 percent sales tax on hotel rooms that just expired. That would provide $6.7 million a year to the city.

This would have to happen in several different pieces of legislation. But the overall picture amounts to something like a Payment In Lieu Of Taxes type deal cities often strike with developers.  It would exchange a lump sum payment from the Convention Center for future concessions back to the tourism cabal. Basically they're buying the mayor off.

The legislative details aren't available yet. But the general idea is the S&WB gets a one time emergency payment and the cabal gets everything it wants. Berger and Jaeger get their hotel. And the Convention Center gets to ret-con its Phase IV slush fund into legitimacy.

The hotel’s design and financing package have not been approved yet by the convention center’s governing board. Sawaya said it could come after the Louisiana Legislature meets this spring. That’s when legislation will likely be proposed to tweak language in current state law that restricts how the convention center can spend its hotel tax revenue, he said.

That legislation, Sawaya said, would scrap a provision that requires a chunk of tax revenues to fund an expansion project that the convention center decided to abandon after Hurricane Katrina. It’s been a focal point for critics of the convention center’s large reserve account who question why that account has been allowed to grow so large for a project that won’t ever be built.

“We have to unwind that,” Sawaya said, referring to state law on the expansion project-tied tax revenue.

Unwind and then rewind, he means. This doesn't say they have to give the money up; only that it won't be based on Phase IV anymore.  Again, we'll have to wait and see what the pieces look like but it figures to be mostly bad.  The fact that part of the deal is built on a "short term rental tax" is ominous. The mayor has been mostly quiet about STRs since taking office. This could signal her intent to favor their proliferation. 

Fundamentally, Mayor Cantrell is selling out the city's working classes while allowing the tourism criminals to maintain their wealth and privilege. The news media won't write it that way.  Likely they will praise her acceptance of the one time emergency payment as a big political victory. It's true the city and S&WB needed that money desperately. Maybe her bargaining position was never that strong.

It's just as true, though, that the oligarchs were never entitled to anything like what they're getting away with.  A true political victory here would break the power of concentrated wealth to withhold vital services from the public.  But, remember, LaToya always told us she was never interested in "taking from the rich and giving to the poor and all that kind of crap."

In one indication a deal is imminent, several of the key negotiators are participating in a public forum on tourism hosted by the Advocate on April 3.  We don't yet know what percentage of the $20 admission price will go to funding public infrastructure. But there's still time to hammer all that out.  In any case, the tone of the conversation should be nice and friendly. The panelists will probably spend most of the time congratulating each other. No one who might possibly object to the arrangement will be in the room.

.@theadvocateno is hosting a panel about the tourism industry but no musicians, service industry worker reps, or culture bearers have been invited. There is only one women panelist, and almost all of the rest are wealthy, white tourism industry executives. https://t.co/sle3u1r9fG

— MaCCNO (@musicculture504) March 16, 2019