State, City & Tourism Leaders Reach Agreement on Infrastructure Deal

 

NEW ORLEANS – On Tuesday, May 6, Governor John Bel Edwards, Mayor Latoya Cantrell and New Orleans tourism industry leaders officially announced that an agreement has been reached between the state, city and tourism officials to provide the funding to address New Orleans’ infrastructure needs. Details were shared in a press release.

“This deal is a tremendous achievement which involved collaboration between state, city and tourism industry leadership to establish funding streams and a plan to ensure that our city’s infrastructure will be functional, reliable and safe well into the future,” said Stephen Perry, president and CEO of New Orleans & Company.

The components of the agreement include $50 million in a one-time payment to the Sewerage & Water Board this year, plus $17.5 million in loan forgiveness for the City of New Orleans over the next five years.

This landmark achievement is the result of negotiations that continued for several months between tourism leaders, the governor’s Infrastructure Task Force and members of Mayor Cantrell’s administration.

The outcome is a plan that is not only good for the City of New Orleans, but it also allows our industry to continue to remain competitive in the high-stakes environment of destination marketing and sales. It will also allow the New Orleans Ernest N. Morial Convention Center to move forward with the $557 million capital plan to make improvements to the current facility and build an anchor hotel to help us compete for, and win, future group business.

“Our industry had an obligation to do all that we could to change the decades-old pattern of deferred maintenance and management challenges within the City’s Sewerage & Water Board agency. We’ve leaned-in to this challenge and have helped provide a solution through an extremely generous funding stream. Our hope is that City Hall and the Sewerage and Water Board can put our city’s infrastructure back on the track of reliability and efficiency. Our city’s residents and visitors expect and deserve this, and now there is no excuse for our city to not be able to provide it,” said Perry.

The $50 million in upfront money includes:

  • $22 million in Hazard Mitigation Grant Program funding from previous disasters and funding from a revolver loan fund in the State’s Division of Administration Office from Hurricane Katrina
  • $28 million from the New Orleans Ernest N. Morial Convention Center, $20 million of which is new money and $8 million is repurposed funding

The deal also includes:

  • $17.5 million in delayed GO Zone repayments the City of New Orleans owes to the State of Louisiana for Fiscal Year (FY) 21 – FY 25. These payments will be restructured and deferred from FY 26 – FY 31.

Convention Center Originated One-Time Funds

Available one-time funds for emergency infrastructure needs from the Convention Center:  $28 million

Total funds available from the New Orleans Ernest N. Morial Convention Center to the city of New Orleans is $28 million in cash, all payable if the other components of the deal and associated CEAs are executed.

Of the $28 million, $8 million is in one-time cash reallocated from unspent amounts of Convention Center/City contracts, CEAs and dedications, or escrowed restricted funds.

Of the $28 million, $20 million is in new cash paid directly from the Convention Center to the City, pursuant to a newly executed CEA. Other CEAs with the city will be concurrently amended in conformity with their modifications necessary for execution of this offer.

Hospitality Industry Recurring Funding Package 

The hospitality industry agrees to endorse and help drive passage of this recurring dollar package of three different tax increases, one a millage increase under existing Downtown Development District (DDD) authority and two sales tax enhancements requiring action of the Legislature. These increases would provide approximately $22.5 million in annual recurring revenue.  All of which would be bondable providing up to $292.5 million in capital dollars, solely at the discretion of the city or could be used for annual expenditures.

The recurring revenue package is comprised of multiple parts, including legislative action, administrative actions, City Council actions, and CEAs.  

$2.5 million

Execution by action of the DDD Board, a millage rollup that would generate $2.5 million annually recurring revenue. This falls substantially on most New Orleans hotels and many restaurants and tourism focused retail establishments that are in the DDD, as well as other commercial properties.

$12.5 million to $13 million
Action by the Louisiana Legislature to increase the hotel tax in Orleans Parish by 1%. This reinstates the .55% of state sales tax on hotel room sales that applied in Orleans Parish from Spring 2016 until June 30, 2018 that was repealed and adds an increase of .45% above that level. Remitted directly to the City Infrastructure Fund.

$7.5 million

Action by the Louisiana Legislature to equalize the STR tax with the effective level of the hotel tax in Orleans Parish. Projected gross revenue in year one is $10 million. 75% flows to the City of New Orleans and 25% flows to New Orleans & Company. 

Additional Recurring Funding from Streamlining of Tourism Marketing

The industry agrees to reallocate control over $8.3 million annual tourism sales and marketing dollars now allocated to NOTMC and New Orleans & Company to the City of New Orleans and RTA in exchange for the execution of CEAs reallocating Harrah’s dollars from the former NOTMC to New Orleans & Company with New Orleans & Company receiving a minority stake in newly enacted STR taxes. This would also enable a higher hotel tax increase, providing both a real shift in tourism taxes reallocated to the city and an increase in new taxes being levied.

To give the city more infrastructure dollars and control over cultural grant functions and obligations, and in order to achieve greater industry streamlining of marketing and reduce duplication costs, the industry will execute a reorganization of its sales and marketing management and execution. Under this new approach, the City receives additional recurring dollars that are reallocated from existing marketing and promotion dollars and the industry takes on the risk of sharing in other new tax categories like the STR tax.

$3 million

Industry through NOTMC agrees to reallocate by CEA to RTA without litigation the 1⁄4 point of the RTA tax on hotel sales established pursuant to Orleans District Court consent judgement and currently remitted to the New Orleans Tourism Marketing Corporation. These industry marketing dollars would be reallocated to RTA as the marketing consolidation and streamlining outlined below is executed.

$5.3 million: distribution to be determined by mayor and city council

Industry supports an ordinance amendment by the New Orleans City Council that reallocates to the City the current occupancy privilege tax dedicated both to the NOTMC and to New Orleans & Company worth a gross of 5.3 million. The NOTMC continues to exist in modified, reduced form. Its President, marketing team, and marketing mission are absorbed by New Orleans & Company which currently provides more than half of all the NOTMC marketing dollars and eliminates currently existing duplication. The CEO of NOTMC becomes the Senior Vice President and Chief Marketing Officer of the entire tourism enterprise in a new expanded role. The Harrah’s CEAs are amended to redirect and flow their $2 million contribution to marketing directly to New Orleans & Company instead of the old NOTMC. The entire $5.3 million occupancy privilege tax remains with the City.

Some $600,000 that flows to city funded cultural offices remains. The NOTMC remains in existence with a reduced staff and a new CEO appointed by the Mayor at a funding level to be determined by the mayor and city council. The city continues the NOTMC community and grant functions and, for example, maintains and funds the NOTMC community commitments like Essence, Bayou Classic, French Quarter Festival etc. The new mayoral administration develops its own new priorities on city cultural commitments. The remainder can be pledged to the City Infrastructure Fund or managed as directed by the Mayor and the City Council. The actual amount pledged to infrastructure and the amount reserved for cultural commitments would be determined by the Mayor and the City Council.

Review and Summary

TOTAL PACKAGE VALUE $71 – $74 million

The hospitality industry agrees to support the New Orleans Ernest N. Morial Convention Center and the state in allocating from the Convention Center by CEA $28 million to the city for use in the Infrastructure Fund.

The hospitality industry agrees to endorse and help drive passage of this recurring dollar package of a millage increase under existing DDD authority and two sales tax enhancements requiring action of the Legislature, and a city ordinance change. In addition, there would be $3 million new recurring dollars for RTA.

$48 million

One-time funding for infrastructure would be approximately $48 million. The Morial Convention Center pledges $28 million to the infrastructure fund.

Approximately $23 to $26 million net to the Infrastructure Fund 

Plus $3 million to RTA

With the reallocation of the Harrah’s marketing dollars to New Orleans & Company from the old NOTMC, the reallocation of $5.3 million in marketing dollars from the hospitality industry to the city and to RTA, a streamlining of industry marketing programs with associated cost reductions, passage of a 75/25 split on the sharing of revenue of a new industry backed STR tax increase, a concurrent industry agreement to support a hotel tax increase of 1%, and a DDD millage rollup, the hospitality industry supports a package of $23 to $26 million recurring dollars to the City Infrastructure Fund and an additional $3 million in recurring revenue to RTA.

 

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