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27.4.14

Dardenne should leverage opposition to Landrieu tax

Gubernatorial politics of the future has emerged from the Louisiana Legislature with competing opinions over a bill to raise hotel taxes in New Orleans, providing jockeying both that may determine success in the field and assist the city as it hurls towards financial difficulty.



As adverse court decisions begin to mount for New Orleans Mayor Mitch Landrieu that compel the city to spend money on items he would rather not, passage of revenue-raising bills specific to the city in this session become more critical. Decisions regarding consent decrees and underfunding of pensions, even discounting a small budget surplus this year, means next year the city must come up with at least $46 million more for next year (and maybe as much as $53.5 million) and perhaps as much as $38 million more annually after that – assuming a flat budget extending from this year’s.



This resulted in a trio of bills to confiscate from the people additional money to meet that annual gap. HB 111 by state Rep. Walt Leger would amend the Constitution to raise property taxes a mil dedicated to police and fire protection. HB 1083 by state Rep. Jared Brossett (who within days will jump from the frying pan into the fire by assuming a seat on the New Orleans City Council, so someone else theoretically must shepherd this bill) would place a 1.75 percent occupancy tax on hotels. HB 1210 by state Rep. Helena Moreno would slap an additional 75 cents tax on tobacco products in the city. All told, they could raise $38.6 million a year.

But only HB 111 has made any progress, zipping through the House. As with the other two, even if it made it out of the Legislature, it would need City Council and then voter approval. Prospects of the former group’s assent are uncertain, and the latter showed itself skeptical to increased property taxes with its devastating defeat recently of a proposal to raise these taxes for half a century to fund the private Audubon Nature Institute over concerns that spending cuts and better efficiencies should be given a whirl prior to asking for a handout. A tobacco tax might also meet resistance, given that the bulk of those purchases are made by Orleanians.



Since HB 1083 would be the only measure that really does not affect directly the pocketbooks of residents that could have the most traction. However, this thinking historically has guided Orleans taxing strategy to give the city a rapacious 16.25 percent effective rate, putting it in the top ten of cities’ lodging rates. The bill would push it all the way to second-highest, just a fraction below New York City.



And that’s an outcome Lt. Gov. Jay Dardenne doesn’t want to see. Dardenne, whose portfolio includes tourism, worries that such rate would make the city even less competitive for grabbing convention and similar business, especially for big bulk events such as sporting championships. The Landrieu Administration naturally favors it for the possible $15 million annually it could bring in.



Which introduces the subtext underneath the conflict. Dardenne of the GOP has all but announced that he will run for governor next year, while Democrat Landrieu remains the best hope his party has to win that contest, which in part may compel him to run. More interestingly, in a projected field, the pair may fight over each other’s voters more than for any other candidates’. Landrieu’s liberalism (reinforced by his recurring desire to raise more tax money rather than cut spending) but ability to win over enough moderate voters to prevail electorally both in the city and with Dardenne’s statewide office before he arrived would compete for voters attracted by Dardenne’s perceived moderate Republican label, earned in part because the Republican’s service in the state Senate featured him supporting measures to raise taxes.



Yet with this declaration of opposition, it helps Dardenne in a gubernatorial quest both relative to Landrieu and also to the entire field. By putting himself on the other side of the issue to Landrieu, Dardenne can draw a distinction between them making him more easily believable as a candidate who seeks right-sized government. And it makes him more convincing to a more conservative electorate that understands Louisiana has a spending problem that needs no more enabling through tax increases.



In fact, using this dispute Dardenne (or tagging along if suggested by others with the power in the Legislature to do this) can steal a march on the issue of managerial competence, an aspect to his mayoralty Landrieu wishes to cultivate. Instead of heaping another assault on lodgers, Dardenne could argue diversion of part of the existing tax that goes to fund the Ernest N. Morial New Orleans Exhibition Hall Authority, it of the $636 million in assets (three-quarters without debt), $171 million unrestricted largely in cash equivalencies, and pulling in several million more a year than it spends that has made it a prime target for its use to supplement state budget spending. It drew in $30 million in 2012 from a 3 percent tax that goes to pay for debt service.



An unfriendly substitute bill could redirect perhaps half of those proceeds to New Orleans (and, given the nature of the bonds involved, perhaps also dedicate additional revenue sources to make up the difference). The $7 million annual surplus the convention center authority has run of late could make up half of that difference, and the other half from growth in revenues (after all, the whole idea was to make the center eventually largely self-sustaining) – assisted by the current budget plan that intends to borrow $50 million from the authority’s stuffed coffers to be paid back with $75 million in construction, meaning the state would carry that much of the newly-created deficit. This would replace effectively HB 1083’s projected additional take.



Advocating this maneuver would make Dardenne (or anybody behind it) appear as willing to live within government’s means, to hold the line against unnecessary taxation, and as a competent manager finding ways to use existing resources to wisely fund purposes of need. That’s a good profile to sell to voters, especially in contrast to Landrieu’s simple sticking his hand out for more lucre, and a winner for the tourism industry and for the citizenry, whose paychecks and business profits would suffer if higher taxes discouraged lodging stays. Dardenne would do well for himself and the city by moving beyond undifferentiated opposition to HB 1083 in taking this next step.

2 comments:

Anonymous said...

You know some of us partially agree with you. I definitely think your pay check should be defined as "confiscating additional money" from the people. Funny how you don't ever complain about being paid by tax dollars.

Anonymous said...


Pray tell, Professor Cockalorum, do you espouse that New Orleans NOT pay it debts?

If not, how do YOU, of the all-knowing, recommend that it do so?

It's easy to criticize but not offer real solutions, as you very well know and practice.