For years, the tourism industry received a cut of the RTA's hotel taxes. The transit agency says the arrangement has impeded its efforts to improve service.

The Ernest N. Morial New Orleans Convention Center has filed a lawsuit against the Regional Transit Authority in Orleans Parish Civil District Court over millions of dollars in contested tax revenue. The center’s governing board voted to approve the lawsuit in April but only officially filed it on May 26. 

The dispute stems from a 20-year-old agreement that has forced the RTA to pay $6 million to $7 million a year to the tourism industry, about half of which has gone to the Convention Center. In 2018, the RTA stopped making those payments, arguing that the money was needed far more by the public transit system than by the city’s well-endowed tourism institutions. 

The RTA officially announced it would permanently stop making the payments in a 2019 letter from RTA Chairman Flozell Daniels. The letter said that the payments to the tourism industry had totalled $62 million since the agreement began.

“This is $62,000,000 that has been unavailable to the RTA for investments in transit services, improvements to infrastructure, amenities for our riders, and the replacement of aging vehicles,” the letter said. “For two decades our service has been impacted by limitations on financial resources, while the resources available to the tourism and hospitality marketing agencies have steadily increased.”

The City Council voted to formally support the RTA’s decision shortly after. 

“RTA will continue to advocate for transit in our city by going to great lengths in securing the necessary funding to safeguard transit as a steadfast necessity for those that rely on our services,” RTA spokeswoman Arian Randolph said in a written statement. “Our priorities remain with our riders in providing transportation options and building the much-needed infrastructure to ensure that mobility is not an obstacle. The loss of any funding due to the agency endangers that objective and transit citywide.”

In its lawsuit, the Convention Center said the RTA’s decision was an “abrupt and unjustifiable breach” of the agreement, and demanded the RTA restart the annual payments, repay the funds they didn’t pay over the last few years plus interest as well as “attorney’s fees and costs.”

The origins of the disputed agreement go all the way back to 1985, when Orleans Parish voters approved a ballot proposition to create a one percent sales tax “dedicated to transit and transit-related purposes.” That sales tax is now the RTA’s primary funding source, bringing in over $80 million in 2018. 

The original ballot measure, however, specifically exempted hotel room sales from the tax. For years, that’s how the tax was applied. But in 1999, the RTA sued the city, saying the exemption for hotel rooms was invalid and demanding it start collecting those taxes on the RTA’s behalf. 

A number of tourism groups quickly intervened in the suit, and they were able to reach a settlement — the tax would be applied to hotel rooms, but the money that came from hotel room sales would be split between the RTA and the tourism industry. 

The hotel portion of the RTA tax has brought in roughly $14 million in recent, pre-pandemic years. Under the agreement, half of that goes to the tourism industry, split between the Convention Center and the New Orleans Tourism Marketing Corporation — a publicly funded marketing agency for the city’s tourism industry which has since merged with New Orleans and Company, another publicly-funded tourism marketing agency. 

According to the lawsuit, the RTA started reducing its payments in the second half of 2018. The suit said that starting in the third and fourth quarter of 2018, the RTA only paid the New Orleans Tourism Marketing Corporation portion of the money, but not the Convention Center portion. Then, according to the suit, the RTA stopped making the payments altogether starting in 2019.

The Convention Center proposed a settlement in early 2020, which would require the RTA to keep paying the Convention Center’s portion, but stop paying the portion going to New Orleans Tourism and Marketing Corporation. That would allow the RTA to keep roughly 75 percent of the hotel sales tax revenue, instead of 50 percent. 

The Convention Center declined to comment for this story. But the Convention Center’s board chair, Jerry Reyes, said in an April meeting that the RTA had not come to the table to negotiate a settlement.

“The authority has made repeated efforts to resolve this without litigation, but the RTA has not wanted to come to the table,” he said. “Therefore I’m left with no choice but to offer this resolution to you all today and pursue the RTA in litigation.”

This story has been updated with a statement from the RTA that was sent to The Lens after publication.

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...