Unneeded corporate welfare tempts tax redirection

It has become increasingly clear that change must come to the Ernest N. Morial New Orleans Exhibition Hall Authority’s greased path to raising and spending money.

In recent years, a steady drumbeat of questions has risen over the ever-increasing pot of money that the organization, which runs the city’s Convention Center and Exhibition Hall, sits on. At the close of 2017, it had over $150 million lying around in cash equivalents and for many years running its revenues have exceeded its expenses by over $20 million annually.

That’s due to taxes which, if there’s any real need to collect these in the first place, should better go to other pressing priorities. Instead, with so much dough rolling in the Authority spends some on matters that have nothing to do with its functions such as nearby roads and public safety as a kind of peace offering to New Orleans, and banks the rest with an eye on tremendous pie-in-the-sky capital projects that stray further and further away from its actual footprint and/or mission.

The latest dream involves giving away a combination of tax breaks, rental payments for four decades, and $41 million in cash to build a hotel on Authority land, a deal the present value of which it claims comes in at around $165 million. It maintains that 1,500 extra rooms will expand the market size to attract more and bigger clients, bringing jobs and tax receipts.

But the independent Bureau of Government Research estimated the present value of costs at about $330 million, using metrics industry observers say capture better the actual amount. It also calls into question the rosy future scenario painted by the Authority, arguing cannibalization of existing business more likely would occur, a view in line with industry observers.

Nor does the city seem that enthused with the idea. Mayor LaToya Cantrell threw cold water on it and pointed out as well that the city might have to provide various legal reliefs for it to go forward.

(Ironically, or perhaps hypocritically, one of the interests that would receive the heavy subsidization is New Orleans developer Joe Jaeger. Months ago, perhaps more than anyone else, he raised the alarm about a deal for the state to extend Harrah’s as the operator of the land-based casino. Conducted some hurriedly and with considerable financial sweeteners, it would have renewed the contract six years earlier without any competition, for which in exchange in part Harrah’s would have built a hotel about a fourth of the size contemplated in the present case. That extension died in the Legislature, and now he’s part of this effort.)

Unfortunately, citizens and their governments have no check on this action, or any spending decisions generally by the Authority. At any time, it could decide to write the check, say it will exempt collections of taxes and foot those bills itself, and grant use of its land (purchased nearly two decades ago with its excess tax receipts). Only the fact that the governor appoints nine and the mayor three members to the governing board constrains its activities.

With Cantrell opposed, even as she has appointed none of the current members if they wish to stay on they will have to consider her wishes. Gov. John Bel Edwards hasn’t said anything public about it, but a number of legislators including those from the area have expressed a desire to redirect tax dollars from the Authority to the city. A move like this again could energize such efforts, which last surfaced in 2017.

Building such a hotel might bring promised benefits. But there’s no need to use taxpayer resources on that. At the same time, the issue registers at yet another symptom of too much money going to an organization with too little legitimately to do. Regardless of how this turns out, lawmakers need to address the disease in 2019 by shuttling those dollars to some other source with genuine needs, if these need collection at all.