Mayor Mitch Landrieu wants the state Legislature to create a special economic district along the New Orleans riverfront in which all tax revenue generated by new hotels and other development would be the city’s.
First deputy mayor Andy Kopplin told The Lens Wednesday that the plan is a work in progress with details still to be decided.
The effort is another attempt by Landrieu to cover a pension deficit and to pay for federal consent decrees that Kopplin said could cost the city up to $40 million a year.
“The money is intended to help us with the financial challenges we face,” he said.
The plan calls for creating the Louisiana Economic Development District and allowing the city to keep all of the sales tax and hotel/motel taxes generated from new developments within the district. The state and other public entities would not get a share.
The beauty of the measure, from a political standpoint, is that it would take tax revenue away from entities that are not yet getting the money because the developments have yet to be built, said Stephen Perry, the president and chief executive officer of the New Orleans Convention and Visitors Bureau. “The goal is to figure out a potential revenue source for the city that is not relied upon by anyone now.”
Kopplin and Perry said initial discussions center on having the taxing district include the vacant World Trade Center – the city has signed a deal with a developer to turn it into a 245-room hotel and 280 luxury apartments – and potentially the area just upriver from the Ernest N. Morial Convention Center. Officials envision transforming that area, called Phase V of the convention center, by turning it over to private development that could lead to $750 million in hotels, retail shops and condos.
Kopplin said city officials don’t know yet how much revenue the tax district, if enacted, would generate for the city.
Perry said the tourism industry is backing Landrieu’s proposal in the hope that it will head off another mayoral initiative that it doesn’t like at all: a 1.75 percentage point increase in the hotel/motel tax. That would require voter approval in November’s election — assuming the Legislature saw fit to authorize the New Orleans City Council to place the proposition on the ballot.
“We want to fund answers that make good economic sense,” Perry said. “The [proposed] hotel sales tax would give New Orleans a hotel tax rate that is 50 percent higher than those in Orlando or Las Vegas, our two biggest competitors.”
The hotel/motel tax measure was scheduled to be considered Thursday by a House committee but has been pulled from the agenda while the city attempts to nail down the special taxing district as an alternative, Kopplin said.
As The Lens disclosed last week, the mayor would like voters to approve tax hikes, and the city would use that money to pay for court judgments that require the city to shore up the firefighters pension fund, upgrade the parish prison and reform the police force.
Kopplin estimated that improving the jail and fully funding the pension plan would cost up to $40 million annually. The city is already accounting for the $11 million cost to reform the police force but Kopplin said that means budget cuts in other vital programs.
The alternative to the revenue-generating measures — cutting $40 million to pay for the court-ordered judgments — would be catastrophic for public safety, Kopplin said, considering that 62 percent of the city’s general operating budget goes for police, fire, emergency services and the like.
Another revenue measure the city wants the Legislature to enact would impose a tax on tobacco products, including 75 cents on each pack of cigarettes. The bill, HB 1210, would have the Legislature authorize the New Orleans City Council to put the proposed tax on the November ballot for voters to decide. The bill’s sponsor is state Rep. Helena Moreno, D-New Orleans. The bill will be heard Thursday by the House Municipal, Parochial and Cultural Affairs Committee.
Plans for the proposed riverfront tax district have not been made public until now. Members of the New Orleans legislative delegation know little or nothing about it.
Here’s how the taxing district would work: If the World Trade Center becomes a hotel as planned, the city would collect the entire 9 percent sales tax on retail purchases — under current law, 4 percent goes to the state treasury — and all of the average 16.44 percent hotel/motel tax. Under current law, the city would have to share that future tax revenue with the convention center, the Orleans Parish School Board, the Regional Transit Authority, the Convention and Visitors Bureau, the New Orleans Tourism and Marketing Corporation and the Louisiana Superdome.
The sponsor of the bill, SB 678, is state Sen. Rick Gallot, D-Ruston. Orleans Parish senators normally sponsor local bills, but Gallot said the mayor’s office turned to him because he had not maxed out on the number of bills that a legislator can file. Gallot said one of the senators who represents New Orleans would manage the bill.
A broad-brush description of the plan was contained in a seven-page outline of the city’s 2014 legislative priorities given to Orleans Parish lawmakers. Obtained by The Lens, the document says that the bill submitted by Gallot will be rewritten.
“The bill is a placeholder in its current form,” the mayor’s handout reads.
Officials from the RTA, the convention center and the Superdome did not respond to a request from The Lens about whether they would support the concept. Officials from the school board and the marketing corporation said they didn’t yet have enough details to comment.
A spokesman for the state Division of Administration also declined to comment, saying it doesn’t have enough information about the proposal.