Robbing Peter to Pay Keith

Last week I wrote about how the Hightower Hotel was one step closer to reality, with perhaps the crucial piece of evidence being a feasibility study that, for the first time, seemed to show that the hotel could turn a profit. Turns out “seemed” is the operative word here.

In a story first broken by Lou Burnett in FaxNet Update, it seems that the authors of the study never consented to have their report say the hotel would do this. Rather, Mayor Hightower apparently freelanced this one, with the assistance of state Treasurer John Kennedy. Both asserted that they have never pressured the Louisiana Tech professors to change their report which otherwise showed the hotel to be a losing proposition. Instead, they merely supplemented those different numbers onto the presentation to the entire state Bond Commission.

What the study did was to investigate conditions as if the hotel were privately owned given today’s conditions. What it did not do was to try to guess future conditions although the report warned that the climate for gambling (oops, “gaming;” the Louisiana Constitution says “Gambling shall be defined by and suppressed by the legislature”) might well become much more adverse which would make prospects for the hotel even worse. Further, there is a broad assumption that the convention center would necessarily bring in new business. Whether it does, chances are there will be a ripple effect that takes away sales taxes from private hoteliers that would have gone into the city’s coffers, that may more than take away from any property taxes not owed by the hotel. In short, unless there’s a lot of new business generated by the convention center, this likely ends up a shell game where the city robs itself of other revenues to make the hotel look like it will pay its own way.

(And what is the effect of the Hotel Trust Authority, stacked with Hightower appointees and yes-men, on the taxability issue? At one time, this panel was supposed to own and oversee the hotel’s operation, and now nobody is quite sure what it’ll do. Would any involvement with it at all with the hotel make the hotel subject to parish and school district taxes?)

As always, the larger question here has been whether the city should serve as a venture capital outfit or hotel owner. Common economic sense says no, that only a private sector owner completely free to make it (or not) on its own would be the most efficient user of this capital. And the risk forced upon city taxpayers is not only too large, but a violation of trust with their dollars. It’s one thing to take tens of millions of dollars and put it into something that with certainty one will benefit the entire city (such as repairs to the city’s water infrastructure, which Hightower has neglected as its renovation costs soar into the hundreds of millions of dollars, necessitating making it up on the backs of city residents), but another entirely to gamble with it hoping it will take in more money than it costs.

All along, Hightower has argued for the hotel’s necessity to make the convention center a success. But with the center’s own prospects diminishing in the post-9/11 world, what he’s proposing is something I heard about to avoid long before my banking (pre-academic) career commenced, “throwing good money after bad.”