The governing body of the New Orleans Ernest N. Morial Convention Center set its 2020 budget at its Wednesday meeting. The Convention Center board was also expected to approve a contract with Populous, a Missouri-based architecture firm, to be the master architect for the center’s five-year, $557 million capital improvement plan.
But that vote was ultimately deferred until the Exhibition Hall Authority — the state created body that presides over the convention center — has its next meeting in December because of questions over the legality of the contract structure, as well as concerns about the inclusion of minority owned businesses.
As usual, the convention center expects to have a budget surplus in 2020. Next year the center will get $18.7 million more than what it needs to operate, according to budget documents presented to the authority. That’s in large part due to the $66.4 million in tax revenue — mostly from hotel taxes — that the Convention Center expects to haul in for 2020.
By comparison, $66.4 million is roughly equal to nine percent of the entire general fund budget for the city of New Orleans.
The tax dollars make up for the expected shortfall on convention center operating revenues, primarily event space rental and food sales. That revenue is expected to total about $35 million. But maintaining and marketing the Convention Center is expected to cost $57 million.
But with the help of the tax dollars, the Convention Center has retained a surplus year after year, allowing it to build up up $215 million in unrestricted reserves as of September, though that is down from about $235 million at the same time last year.
As part of a deal with Mayor LaToya Cantrell, the Convention Center agreed to pay the city $28 million from its reserve fund to be used for infrastructure maintenance and repair. In return, the Convention Center got the city’s blessing on a bill allowing it to develop a 1,200-room hotel.
The reserve fund will also be used to help finance the rest of the center’s redevelopment plan. The plan includes roof repairs, bathroom renovations and an update to the center’s 1980s aesthetic. The center expects to spend $86.2 million on the plan in 2020. In a report earlier this year, The Bureau of Governmental Research predicted that the center’s reserves will drop all the way down to $122 million by the time the project is complete in 2022.
Board defers vote on architectural firm
A vote on a multimillion-dollar contract for the Convention Center’s redevelopment plan was deferred, however, due to board member concerns.
In August, the convention center put out a preliminary request for qualifications for a master architect for the five-year capital plan. It received three responses. But only one of those firms was invited to submit a response to the next round of the process, called a request for proposals. That firm was Kansas City-based Populous.
Populous has helped design convention centers around the world. Michael Sawaya, the general manager of the New Orleans convention center, has worked with them before when he worked for as the city of San Antonio’s director of convention, sports and entertainment facilities. Populous was hired to lead the design team for a $325 million expansion of the Henry B. Gonzalez Convention Center in San Antonio that was completed in 2016.
At Wednesday’s meeting, board member Ryan Berni raised concerns about the structure of the contract. Under the contract, Populous would get paid in two different ways. They would get a roughly $2 million fee paid by the Convention Center to act as the executive architect that would coordinate all the various projects within the overall plan to make sure there was a conducive design.
Populous would also collect another $2 million from other architecture firms working on the project who would pay for Populous’ time and expertise.
Berni questioned how they could legally sign a contract with Populous that would force other firms that aren’t party to the contract to hire the firm.
“Legally, how can we force the other contractors of the Convention Center to hire a subcontractor?” Berni asked Sawaya and David Phelps, the center’s general counsel.
“That’s not a question we were expecting,” Sawaya said.
Phelps said he would look into the legality for the December meeting.
Also on Wednesday, it was revealed that the convention center has gone forward with a $183,000 purchase for an iron fence from Prison Enterprises — a division of the Louisiana Department of Safety and Corrections that sells services and products manufactured and provided by Louisiana prison inmates.
In September, the authority voted against ratifying the contract, raising concerns about the use of prison labor.
“I’m not sure how well versed everyone else is on this, but prisoners make cents on the dollar for this work,” Commissioner Robertson said at that meeting. “And I have a problem with that.”
According to a state legislative audit from May, inmates working for Prison Enterprises can either work to reduce their sentences or for wages up to 20 cents an hour. Prisoners ineligible to work for a sentence reduction must work for three years for no compensation at all before they can achieve the introductory rate of 2 cents an hour, according to the audit.
Sawaya is authorized to enter into contracts worth up to $250,000 without board approval when they are for the Convention Center’s linear park project along Convention Center Boulevard. Even though the board declined to ratify it, the contract was still valid, according to Phelps.
Given that it was a legal contract and the fence had already been built by Prison Enterprises, the Convention Center decided to go forward with the payment. On Wednesday, the authority also passed a resolution that changes the requirement for signing contracts for the linear park project.
Now, instead of being ratified “ratified,” linear park contracts executed by Sawaya must only be “presented” to the board.