Diverse reaction to recommendations on New Orleans hotel tax
The New Orleans government’s share of taxes from hotel rooms in the tourism-dependent city should increase by more than $12 million a year, an independent research group said in a report released Wednesday.
Reviving a debate involving city officials, tourism leaders and state lawmakers, the Bureau of Governmental Research report suggested that the city should get revenue equal to a 1 percent increase in the hotel tax. That could be accomplished in part, the report said, by redirecting revenue from existing taxes.
Mayor LaToya Cantrell, who took office in May, has been pushing for the city to get more hotel tax revenue that now goes mostly to tourism-related programs and structures, such as the Superdome. Tourism leaders have so far resisted the idea. And legislative leaders have been cool to it.
A political group supporting the mayor, Action New Orleans , welcomed the report saying it confirmed Cantrell’s call for the city to get a “fair share” of hotel tax revenue. Steve Perry, CEO of the nonprofit tourism promotion agency New Orleans & Company , has long opposed redirecting hotel tax revenue. He issued a lengthy statement Wednesday emphasizing the importance of the dome and the convention center to tourism.
“These two billion-dollar buildings were built by hotel tax dollars and the hospitality industry and the state of Louisiana and paid for by the visitors we work so hard to attract,” the statement said. “We built them for the benefit of the city of New Orleans and its citizens without the city or any resident having to pay a dollar to build, renovate, or operate them. Has a better deal ever been designed for a city?”
Perry, who recently proposed a .55 percent increase in hotel taxes, also said a full 1 percent hike could put the city at a competitive disadvantage.
Driving the call for the city to get more money are major infrastructure needs, including aging street drainage and drinking water systems and streets full of potholes.
According to BGR’s report, a complex system of hotel room taxes that has developed over the years in New Orleans adds more than 16 percent to nightly hotel bills and raises just under $200 million annually. The board that operates the Superdome and a nearby arena get more than 30 percent of that. The Ernest N. Morial Convention Center gets more than 25 percent. The local school board, transit authority, the state and different tourism promotion entities get shares. The city gets less than 10 percent, according to the report, which says part of the reason the city’s share is that low goes back more than half a century.
The BGR report, entitled “The Lost Penny,” says that in 1966 the city agreed to suspend collection of 1 percent of its municipal sales tax on hotel rooms. That was done to ease the burden of a then-new state-approved tax on hotels that funded Superdome construction. It was supposed to be a temporary suspension but remains in effect more than 50 years later, the report said.
“This means that the city can apply only 1.5 percentage points of its 2.5 percent sales tax to hotel rooms,” the report said.
The report recommends that state lawmakers allow the city to begin collecting at least part of the long-suspended 1 percent sales tax. And, while cautioning that too big an increase in the overall tax rate could affect tourism, it says lawmakers should also consider redirecting existing “excess” hotel room tax revenue to the city to help make up the difference.
What constitutes “excess” and what should be done with it is likely to spark disagreement. The report includes an analysis of the convention center’s reserve funds and law that BGR says enables the Superdome to avoid sending surplus revenue to the city.
Late last year, Perry proposed increasing the hotel tax by .55 percent to raise more than $6 million annually. That proposal called for the issuing of $81 million in bonds, to be paid off with the new revenue, to fund some initial infrastructure repairs and develop a long-term plan.
At the time, Cantrell said that plan was inadequate. “We’ve had plans from the outset,” she said then in a prepared statement, which later added, “What we need is revenue.”
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