The Ernest N. Morial New Orleans Convention Center. (Michael Isaac Stein/The Lens)

The Ernest N. Morial New Orleans Convention Center has spent $49 million of its large cash reserves to cover deep budget shortfalls caused by the coronavirus pandemic, which has ground the convention industry to a near-complete halt and starved the center of its normally robust revenues from tourism taxes, rental fees and concession sales. 

At a Thursday finance committee meeting, members of the Convention Center’s governing board — the Exhibition Hall Authority — questioned how long the Convention Center could, or should, continue depleting its reserves.

“We dug deep, very deep into our reserves here,” Al Groos, board member and president of the Royal Sonesta Hotel, said. “And I’m not sure we can do that again next year. I think we need to have some contingency plan. Because we don’t really know right now. We know the first quarter is starting to show weakness, and we already have a cancellation in May, and we don’t really know what the city is going to allow, quite frankly. But I think we really need to have a contingency plan if things really start to fall apart next year.”

There is no clear end in sight for the Convention Center’s budget woes. The convention business is far from returning to its pre-pandemic levels, due to the country’s continued struggle to contain infections. Concerned convention organizers continue to cancel meetings as far out as May 2021. And with a slumping tourism industry, it’s unclear when hotel tax revenues — a major part of the Convention Center’s budget — will return to where they were in 2019.

“We’ve had our reserves to rely on,” Alita Caparotta, the center’s vice president of finance, said. “But, to your point, they are being depleted. And we do need to look very honestly at what 2021 looks like.”

Caparotta said that the Convention Center now estimates that its tax revenues will come to about $23 million this year, less than half of the $67 million officials were expecting when they approved this year’s budget

The center was expecting an additional $35 million from self-generated revenues, including convention fees and food and beverage sales. Caparotta’s presentation didn’t include an updated estimate for self-generated revenues, but so far this year the Convention Center has only collected $9.3 million, according to her presentation. In July, the center took in just $107,000.

“Very little revenue is coming into the authority, mostly cancellation fees that we are able to charge,” Caparotta said.

Many aspects of the coronavirus pandemic and the city’s economic future are still unclear. But board members said they don’t expect a drastic turnaround through the beginning of 2021, at least.

“As we continue to dip into the reserves to pay for operational expenses, I suppose that it’s going to have to be carefully watched as we move forward and things extend into the first quarter of 2021,” board member and finance committee chair Stephan Caputo said. 

How much money does the Convention Center have left?

The Convention Center’s large cash reserves have become a common target in recent years for those who argue that its annual tax allocation — typically about $65 million per year, mostly from hotel taxes — is too high, and could be better utilized on behalf of the city.

In 2019, local watchdog the Bureau for Governmental Research wrote a report on hotel taxes that was critical of how the Convention Center had been able to rack up $235 million in reserves. Later in the year, Mayor LaToya Cantrell told The Times-Picayune that she wanted the Convention Center to fork over $75 million from its reserves to fund long-needed infrastructure repairs in the city.

Cantrell managed to help broker what she called a “fair share deal” that included about $28 million in one-time money from the Convention Center, about $22 million of which came from its reserve fund

More recently, a wide coalition of organizations demanded that the Convention Center release $100 million to give financial aid to struggling hospitality and tourism workers during the pandemic. The center ended up donating $1 million to two relief funds. 

One of the central disagreements between the Convention Center board and the coalition, called the Coalition to Create a Fair Fund for Hospitality Workers, was over how much money the center actually has. Board members argued that the coalition was overstating the size of the center’s unrestricted reserves. 

The Convention Center recently changed how it categorized different pockets of assets, leading to the appearance that its reserves are quickly dwindling. 

In a November report, the Convention center claimed it had $215 million in unrestricted assets — money that isn’t earmarked by law or contract for a specific purpose — at the end of July. Thursday’s report claimed that the center only had $43 million in unrestricted assets left. 

The pandemic-related drawdown is only $49 million thus far, so that doesn’t explain the entire decrease. Most of the difference is caused by an accounting change, specifically a change in how the Convention Center categorizes their assets on financial documents. Instead of “unrestricted” assets versus “restricted” assets, the center is now using the categories of “unrestricted” assets versus “restricted and designated assets.”

Thursday’s report says that along with the $43 million in unrestricted assets, the center also has $209 million in “designated or restricted” assets. 

The 2019 independent audit includes definitions of “restricted” and “designated” assets. Restricted assets include “capital projects, funded by the proceeds of taxes, restricted for building expansion and improvements.” Designated assets, meanwhile, can include money for projects that are “in the planning stages, or in the acquisition phase.” 

Capital spending 

Although the Convention Center board and staff on Thursday alluded to the need to make cuts in the 2021 budget, they stopped short of getting into details.

“You will hear more about that next month,” Caparotta said. “We are working toward what the different options would be.”

The convention center’s operating budget for this year is $57 million, with over half going to paying salaries and benefits for nearly 400 employees at the center. The remaining money is mostly spent on utilities, marketing, trade show services and facility maintenance. There is also $6 million categorized under “general and administrative.” 

The Convention Center’s capital budget is bigger than its operating budget, in large part due to a 5-year, $557 million capital plan that the center unveiled in 2018. That comes out to an average annual spend of $111 million. Since 2019, however, the center has only spent $75 million, meaning that there is still nearly half a billion dollars worth of capital expenses planned for the convention center over the next several years. 

Already this year, the Convention Center has pressed pause on two other capital projects due to the deep revenue losses — a marquee hotel development on the center’s upriver side and an accompanying “entertainment district” to surround the hotel with bars, restaurants and other entertainment. 

Convention Center officials have not announced any changes or cuts to the five-year capital plan, however, and did not respond to questions from The Lens. 

Already, the capital plan was expected to dig into the center’s reserves. In 2019, the Bureau for Governmental Research reported that the plan would nearly cut the center’s reserves in half. With the deep losses from 2020 and expected losses in 2021, the center would likely have to dig even deeper into its reserves to continue as planned.

There are some indications that the capital plan, at least in the short term, is being curtailed. The original 2020 budget called for $86 million in spending on the capital plan. That was reduced to $58 million after the pandemic began. And according to Caparotta’s presentation, the center has only spent $17 million on the project so far this year.

Caparotta said that staff would present a 2020 budget to the board at its November meeting, currently scheduled for November 18. 

“Looking at 2021 is a really sticky wicket,” Groos said. “I don’t recall ever working on a budget that is so unknown.”

Michael Isaac Stein

Michael Isaac Stein covers New Orleans' cultural economy and local government for The Lens. Before joining the staff, he freelanced for The Lens as well as The Intercept, CityLab, The New Republic, and...