Shouldn't Our Community Demand
More?
New Orleans has pinned many of its hopes for prosperity on the hospitality
industry, operating under the belief that money invested in tourism
will trickle down to the rest of the city's struggling population. The
hotel owners, property developers and financiers have been the recipients
of generous city, state and federal economic incentive programs and
subsidies.
Among the most heaily used incentive programs is the Restoration Tax
Abatement (RTA), which encourages developers to restore buildings in
certain districts of the city. In return, developers get a big tax break
because they only have to pay taxes on what the property was worth before
they renovated it. The Sheraton New Orleans, for example, got a
$2.1 million tax break for what amounted to a redecoration program.
The Chateau Sonesta recieved $2.8 million. The proposed conversion of
the Maison Blanche buiilding into a luxury Ritz Carlton Hotel will mean
a hefty $7.7 million tax break for the owners.31 The city of
New Orleans also acts as a "lender of last resort" on behalf
of local hotel projects. The city recently provided the Chateau Sonesta
Group, for example, with a $5 million federal Housing and Urban Development
(HUD) Section 108 load to complete financing for the Chateau Sonesta
Hotel.32
The industry also benefits from other programs, such as the Corporate
Jobs Tax Credit, the Quality Jobs program and the Enterprise Zone program.
New Orleans has a relatively modest 11 percent occupancy tax on hotel
rooms. Verylittle of this tax, however, directly benefits New Orleans
residents. According to a study released by the Convention Center, the
city and state together collected an estimated $50 million in occupancy
tax from Convention Center delegates and their guests in 1997. Of this
total, only 14 percent was earmarked for the Orleans Parish School Board.
By contrast, nearly 55 percent of this revenue went directly back into
the tourism infrastructure.
These generous subsidies, along with low taxes and wages, have made
New Orleans a darling of the hospitality industry investors, most of
whom are out-of-town owners. Of New Orleans' 20 largest hotels, only
four are majority locally owned. Millions of dollars are being made
in New Orleans hotels, but those dollars aren't staying in New Orleans.
Instead, they are flowing to Wall Street investors and out-of-state
corporations.
Hospitality industry supporters argue that the subsidies have helped
create thousands of jobs. They are right..But what kind of jobs? When
should a community question whether to continue subsidizing a super-proitable
industry without addressing its poverty-level jobs? When should a community
demand a better return on its taxpayers' investments?
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