Wise allocations of public capital

Why does one city need to dedicate public money and tax privileges to two different golf arcades three miles apart from one another? Well, it's kind of an accident. Or a series of accidents. Not well-intentioned accidents, mind you. These are the kind of accidents that happen when all of your policymakers begin with the assumption that the only lever available to anyone in government is the one that gives nice things to the already wealthy. 

Xiao, a Denham Springs-based businessman whose interests include Airborne Extreme trampoline parks in Louisiana, has been working on the Five O Four project since he purchased it from developer Joe Jaeger in late 2022.

Jaeger and his partners bought the site, the former home of The Times-Picayune, in 2016 for $3.5 million. Originally, he had a deal with Topgolf to build an outlet there. In 2017, after Topgolf pulled out, he struck a deal with rival chain Drive Shack to build one of their facilities.

In 2019, a decision by the Convention Center board to quietly propose a Topgolf on the land they controlled prompted an angry response from Jaeger and questions about why the state-sponsored facility would try to compete with a private development nearby.

Then-Gov. John Bel Edwards said it didn't make sense for two such similar outlets so near together and the Topgolf project appeared to be dead. But the pandemic slowed — and eventually scuttled — Jaeger's plans at the Howard Avenue site until Xiao stepped in with Five O Fore.

Xiao has subsidy deals both from reduced local property taxes and from a deal to recoup an additional 2% sales tax to pay for part of its development costs.

The Topgolf project was revived last year by the Convention Center. Topgolf will pay for the development costs itself and will sublet the land from RDNI, which is a long-term tenant of the convention center on that plot.

Topgolf is not seeking any direct taxpayer subsidy, though it is within the River District economic development district, which means it would raise an incremental 2% sales tax that can be used for River District development costs.

The article could have also mentioned the separate $21 million tax break doled out to Shell as part of that same River District scheme.  But try not to think about that right now. 

Anyway one of the golf arcades is suing the other one now over "unfair trade practices." That's pretty rich considering how both of these businesses got here in the first place.

The best bet is nothing will fundamentally change

It's been over a decade.That's a whole lot of holding out hope that our political leadership plans to do something about the exploitative violence of short term rental proliferation as soon as "the data comes in" or "the stakeholders"have their say, or a judge tells them what to do.

It's not clear when Lemelle might rule, or how he might come down. But more changes for the city's rules could be ahead. City Council leaders have threatened to pass an outright ban on residential short-term rentals if the latest law is ruled unconstitutional.

An ordinance to impose a ban was introduced by the council’s at-large members, Helena Moreno and JP Morrell, in September, within a week of Lemelle's restraining order. It has been repeatedly deferred as Lemelle has presided over hearings over the fall and winter.

The council members have said little about the proposal since introducing it. They declined comment for this article.

Blossom and others want more clarity on what comes next.

“They threatened to do this really big thing and haven’t said anything since they threatened to do it — or promised to do it, depending on who you are — and nobody knows what to expect,” said Blossom, who supports the ban. “Are they going to follow through? Are they going to back down?”

The "really big thing" should have happened 15 years ago.  There comes a time when we have to understand these politicians all work for the landlords. If we want something big to happen, we aren't going to have their help getting it done.

CEO

Last summer a judge ruled against the city council in a lawsuit against the mayor's office in pursuit of greater oversight of how the city disperses funds derived from the Wisner Trust.  The already complex matter of the trust has only become more convoluted in recent years after Mayor Cantrell took the controversial step of negotiating a deal with the Wisner heirs and other parties to the, technically, expired trust.

It had been thought that when the original trust expired, its assets would transfer permanently to the city. But the mayor's deal effectively establishes a new, apparently perpetual, arrangement that maintains the terms of the original trust, keeping the Wisner heirs, LSU, Tulane, and the Salvation Army as co-beneficiaries. This sounds like a bad deal for the city. But because it allows the mayor maximum discretion to distribute the city's cut with minimal oversight from the council or the public, it is a very good deal for the mayor. And, really, that's all that matters, isn't it? 

Anyway, here is how that money gets used now. 

Mayor LaToya Cantrell’s administration improperly paid a city contractor tasked with cleaning up blighted lots and then tried to rush through a renewal of the contract, according to a report by the New Orleans Office of Inspector General that alleged the payments made by City Hall may have violated the state constitution.

The report, issued Thursday by Inspector General Ed Michel and based on interviews with city employees involved in the contracting process, also includes allegations that one employee was forced to resign after trying to slow down the contract renewal.

While it is not clear if the agreement with the Center for Employment Opportunities was eventually renewed, the OIG found that the administration violated its own contract — and possibly the state constitution, which prohibits anything that could be considered giving public money without a public purpose — by paying the group $500,000 without verifying that work it was hired for had been performed.

It feels like a story as old as time in New Orleans.  You've got a seemingly good cause. (We're cleaning up blight! We're helping incarcerated people transition back to work!) But look further and there is no documentation any of that work is done or information about how they go about it. It's a bit reminiscent of the NOAH home remediation scam back during the Nagin Administration. This isn't likely to draw as much attention, though. We're in a different era now. The volume of graft that goes on has magnified several times over and the capacity of the press to keep up is so greatly diminished that it all seems to wash over us like water from a busted main. If a scandal doesn't involve some salacious bit about the mayor's rumored paramour, it barely even registers.

But, alright, fine. Just for laughs, please tell us more about this Center for Employment Opportunities. 

The Center for Employment opportunities, known as CEO, is a New York-based nonprofit that employs recently incarcerated people and aims to help them get back on their feet.

In December, 2021, CEO signed a $1 million contract with the city to clean up abandoned lots, to be paid using money from the Wisner Trust fund. In addition to providing cleanup services to the city, the contract also required CEO to provide support services for the recently incarcerated people it employed. As part of the contract, CEO was to document the work it did and the services it provided to its workers.

But city employees said that documentation for some of that work was never requested nor submitted, according to interview summaries attached to the OIG report. CEO was also told it didn't have to submit invoices, despite contractual provisions requiring them, employees told OIG investigators.

If nothing else, the name of the organization has to be a red flag, right?  Why does the leadership of a supposedly charitable non-profit want its acronym to evoke in our minds the image of ruthless business moguls?  It's amateurish and insulting on its face. 

Or maybe it's just showing off. After all, there's nothing to stop any of this. Not, really. An Inspector General's report can sound like a dressing down, but the accountability is rarely likely to go beyond that. Especially when patronage scams like this are the bread and butter of city politics. And, frankly, that is the reason City Council keeps fighting with the mayor over the Wisner money. They don't necessarily want this sort of thing to stop. It's just that the way the mayor has structured the terms of the trust has frozen them out of the action. For now, anyway.

What does the "government affairs officer" do, exactly?

Blake Corley is quoted at the top of this article expressing his shock and disappointment at the arrest of the grifters for whom he had been laundering money into political contributions. It's hard to imagine he could be that surprised, though.  I mean if anyone should have known what was going on, it would be the person whose specific job it was to handle the operation.  

The complaint alleges the Patels created a fake lender which they used to “make” a $8,540,000 loan to Precision Powered Products, a Houston-based company, allegedly to expand the company in Puerto Rico. That loan was never made.

However, according to the complaint, the Patels allegedly then had 80% of the fake loan secured by the U.S. Department of Agriculture in October 2021 — and then sold the loan to Memphis broker-dealer Hanover Securities the next month for a profit — netting them millions of dollars. The FBI alleges they then transferred that money into accounts controlled by Trisha Patel.

The complaint further alleges that Trisha Patel gave $2.1 million of that money to an unnamed attorney, bought $500,000 into cryptocurrency, gave $200,000 to her four children’s private schools and spent $81,000 on a new BMW. She spent another $91,000 on rent.

According to the complaint, she used another $1.2 million to pay “various attorneys, lobbyists, and consultants on behalf of Nikesh Patel.” The complaint does not name the attorneys, lobbyists and consultants, but Corley, who denied that he is involved, has worked for the Patels and their businesses, including as the chief government affairs officer and in-house counsel for PPP and American Powered Pumps, a new Florida-based company.

“The majority of the remaining funds went to another business entity associated with the Patels,” the complaint reads, though it does not identify the entity. Trisha Patel is listed in a press release as the owner of American Powered Pumps, which formed last year.

One expects the Government Affairs Officer is the person responsible for the interactions highlighted above. Or at least one expects that he is heavily involved in shepherding them. In any case he took about $100,000 of the fraud money and put it into a couple of PACs from where it was spread to a long list of state political figures. The Gambit article gives a pretty thorough accounting of that.

While it's true that candidates don't always have a lot of control over who contributes to their campaigns and not every contribution automatically implies a quid pro quo and so forth, we can focus on a couple of salient matters in this case. For example, there's the curious case of Corley's fiance's recent campaign for the State House. Despite her status as a complete unknown 27 year old challenger to a well-liked Democratic incumbent, Madison O'Malley immediately attracted immense institutional support from Dem Party insiders. 

At the end of October 2022, Corley and his fiancee O’Malley attended a Diwali event at the White House with Trisha Patel. Also present, according to publicly available information, was Louisiana Democratic Party Chair Katie Bernhardt.

Not long after the White House event, O’Malley set up a campaign committee, launching her bid against Rep. Mandie Landry in New Orleans. Within a month, Trisha Patel, her in-laws Rohini and Ajay Patel, Desai, Caimano and the state Build USA PAC had donated a combined $15,000 to O’Malley.

That race between O’Malley and incumbent Landry, both Democrats, garnered significant attention. The Orleans Parish Democratic Executive Committee endorsed O’Malley, as did several high-profile Democrats, including Congressman Troy Carter, Gov. John Bel Edwards and former U.S. Sen. Mary Landrieu.

It was a stunning development at the time. And, thanks to Landry's broad grass roots support in the district, it didn't pay off. (Landry won with an overwhelming 66% of the vote.) But it does indicate just how detached Democratic Party leadership have become from their voters. That they'd spend so much time and energy on public endorsements and campaigning for this one fraudulent candidate in a single house district while doing practically nothing to stem the tide of embarrassment in the statewide races that year illustrates how broken and corrupt an operation they're running now. 

These next few years are going to extremely difficult for Louisiana. The worst people in the state have free rein to max out on their worst impulses. And with the "opposition party" content to sit around collecting checks from criminals and do little else in the way of opposition, we can only expect the worst outcomes.

It's just Dracula's castle now

It's been a while since we did a round-up of our city's most "iconic" doomed redevelopment projects.  In what's now a twenty year race to see who gets "back into commerce" only one of these has made it all the way there... for better or worse. The Trade Mart building is now the Four Seasons hotel.  Boysie Bollinger will sell you his penthouse there for $19.5 million if you are interested.  As for our other favs, well let's take a look.

Plaza Tower: Please enjoy this recent NOLA.com slideshow on the history of the tower. Last month, the city put out an RFP on possible demolition.  That didn't make Joe Jaeger, the building's current owner, very happy. Both Jager and the city have made vague references to possible sale in the works.  But nobody knows who the buyer might be.

Six Flags: As of this past October, Troy Henry has a lease on the property and, apparently, the green light to begin demolition.  He does not, however, have any partners lined up to operate any of the attractions and amenities his pitches for the property have promised.  Nor does he have any financing outside of the potential public subsidy should anything materialize.

Municipal Auditorium: Thankfully this will not become the next City Hall. What it will become remains anyone's guess. There is finally a plan in place to spend the $37 million in FEMA funding to "stabilize" the structure. The years of arguing over what to do with the building almost allowed that to expire. But, even now, there's still no agreed upon vision for the building. An RFP could come soon though.

Charity Hospital: There is news today! Not very encouraging news, of course.  Remember that years-long and very pained public process of getting various entities private and public (LSU, Tulane, the state and city governments, a developer partnership called "1532 Partners") to agree on a development plan? Well that's all scrapped. Instead they're doing this new thing. 

The Domain Companies, a New York firm known in New Orleans for developing the South Market district on Loyola Avenue, has finalized a deal to take over redevelopment of the old Charity Hospital, a project that is more than three years behind schedule and has at least doubled in cost.

What will they build now?  Unclear. But as a placeholder, please enjoy a bunch of gobbledygook.

Domain CEO Matt Schwartz said he isn’t ready to unveil updated plans for the building, but he said the project’s most important component — Tulane’s presence as anchor tenant — will remain the same. Other elements, such as the specific number and configuration of apartments, labs and offices, will be adjusted to make the project more financially feasible.

“Some of it will have to be retooled to make sure the different components are speaking to each other,” Schwartz said in an interview Tuesday. “We are looking at rightsizing the different components for viability, finance ability and making sure we’re targeting the right market and right demographics for what will work.”

The project was originally estimated to cost $250 million, and was later revised to $300 million. After the pandemic, interest rate increases and inflation drove up construction costs. Sources familiar with the project said it could cost as much as $600 million now.

Thumbing back through our notes we are reminded that in 2019 the LSU board gave its final approval to the plan while meeting in Shreveport in order to get as far away as possible from any objections from the New Orleans public. Even at that moment, the emphasis was already moving away from "innovation hubs" and affordable housing and toward condos and STRs. 

Plans for the project also include renting about 150 residential units to Sonder, a short-term rental company that already has significant operations in New Orleans. That would be about 50% more units than would be allowed for the property under short-term rental rules the City Council passed earlier this year, which bar renting more than 25% of the units in commercial buildings to tourists.

And, now, what with all the "right sizing" and "market targeting" Domain is going to do, who knows what they'll end up with. 

Hard Rock fell down. Kailas got up again

 You'll never keep this city's permanent wealth class down. 

The lead developer of the Hard Rock Hotel, which collapsed while under construction in 2019, has begun construction on a major new project in a former downtown office building two blocks from the site of the fatal disaster.

Mohan Kailas and his partners in the new venture are planning to turn the 31-story skyscraper at 1010 Common Street into a mixed-use complex with two hotels, including a 250-room Fairmont Hotel with a rooftop pool.

The project, which will cost more than $90 million, will also include an extended stay Element Hotel and six floors of office space.

It's so obscene you almost have to admire it. 

It’s the first big project for Kailas, a seasoned developer with several successful real estate projects under his belt, since the Hard Rock fell. The collapse killed three construction workers and injured dozens of others. Kailas was never accused of criminal wrongdoing in connection with the disaster. In legal filings and prepared statements, Kailas and his partners have blamed the project’s engineer and steel provider for the structural failure, which remains the subject of more than 100 unresolved lawsuits.

Oh well, no one to blame. Nothing has to change. And now we're right back to building nice things for rich people in a city facing an ever-worsening housing crisis. Yes, there will be a public subsidy. Why even bother asking anymore, really. 

Kailas and his partners in the project, which include Atlanta-based investment group Monarch Private Capital, will use federal historic building tax credits to help finance the building’s conversion. The tax credit program enables developers to recoup 20% of what they spend rehabilitating a building.

The boil order century

I guess we should have known the increasing frequency of system failures and boil orders would inevitably lead to S&WB just giving up even trying to know if the water is safe.  

NEW ORLEANS — The Louisiana Department of Health has sent three notices of violations to the Sewerage and Water Board based on the findings of a joint investigation by the Illuminator and WVUE-TV Fox 8. The series “Tapped Out” found — and state officials confirmed — utility employees regularly fabricated drinking water testing results based on a review of several months of data.

One of the employees involved in falsifying samples has been fired, the Sewerage and Water Board has confirmed.

By skipping sampling sites or conducting the test improperly, the Sewerage and Water Board could have potentially missed the presence of contamination or when levels of chlorine in the water were inadequate to ensure it was safe.

This probably also raises the question as to whether or not it's ever really been safe. Likely there's a range of acceptable amoeba levels we're always adjusting to keep up with what's in there.

Meet the new year. Same as the old year

We're back. We're still doing the things.

Large fire visible in Algiers coming over the Woodland Bridge. Looks to be an Entergy Substation with nearly 10,000 people out of power. pic.twitter.com/p8oh3uYF2E

— Zack Fradella (@ZackFradellaWx) January 5, 2024

Update: If you have any information about the bird and/or small furry animals responsible, please contact the authorities. 

A spokesperson for Entergy New Orleans told WWL Louisiana, “This morning, NOFD responded to a fire at an Entergy substation in Algiers. This created an outage currently impacting approximately 9400 customers. Entergy crews are working as quickly and safely as possible to restore service.”

The cause is under investigation, according to Entergy and officials say no known environmental concerns at this time.

Upperdate: Ah yes, of course there is more

The outage has affected the Wastewater Treatment Plant and Sewer Pumping Stations on the West Bank. According to the Sewerage and Water Board of New Orleans, flow to the plant has stopped because the sewer pumping stations are offline. 

The S&WB claims the stations do not have backup power onsite working to mobile generators and pumps to the stations. The S&WB is asking West Bank customers to be mindful of their water and wastewater usage, and to conserve as much as possible.

I suppose we can kick off 2024 with a quick told-you-so

The building we've come to know in recent years as "DXC Tower" has been sold. 

Two Monroe businessmen and real estate investors, the brothers Eddie and Joseph Hakim, have purchased one of New Orleans' most visible office buildings: the green granite high-rise at 1615 Poydras St. currently named for its anchor tenant, DXC.

The Hakims bought the 23-story building from its longtime owner, businessman and philanthropist Frank Stewart, late Friday. The price was not disclosed.

It's the second Poydras Street high-rise for the Hakims. In 2013, they bought the 20-story Orleans Tower, formerly the Amoco Building, for $16 million and breathed new life into the aging tower, located across from City Hall. They renovated it and raised its occupancy from about 45% to more than 80% today.

The article does its best to suggest that somehow this sale indicates the market for New Orleans downtown office real estate is bucking trends.  It says the sale is a "bright spot" in a local office market where occupancy rates are still below pre-COVID levels but "better than in many larger cities." 

Anyway it's all nonsense. Read further and we see the real reason this building is being sold now is because Frank Stewart is dumping properties, possibly at a financial loss.  

Now 89, Stewart has been trying to downsize his real estate portfolio in recent months and has spent much of 2023 quietly marketing 1615 Poydras for sale. Those efforts got a boost in late September, when Stone’s firm listed the building publicly.

No asking price was specified, but an online flier said the building was less than 52% occupied and being marketed “in cooperation with the lender ... at debt amount.” In real estate terms, that meant Stewart and his partners in Stewart Capital were working with their lender to sell it, even if at a loss, in hopes of avoiding a default on the mortgage.

It is unclear how much Stewart and his partners still owed on the building at the time of the sale.

Read even further than that and we get an update on the status of the building's current titular tenant. 

Since 2017, the building has been named for DXC Technology Co., the Ashburn, Virginia-based firm that opened a regional office in the high-rise amid great fanfare and a promise of up to 2,000 jobs. The company hired only a fraction of its promised workforce and has since downsized its footprint in the building.

DXC continues to honor its lease on the building, which runs through 2031, but is currently trying to sublease four of its six floors, according to online real estate listings. Lahasky said the family has not had any conversations with the company but that meeting with DXC to discuss the lease will be a priority.

Of course, DXC didn't merely "open a regional office" there.  The "great fanfare" referenced in that passage also included a hefty public subsidy from the state and the city. The deal looked incredibly shady to us, especially given the company's outsourcing and downsizing strategy at the time. We did say so. 

Anyway, nobody remembers any of that. On to the next boondoggle, I'm sure.