PROFESSIONAL ABSTRACT #1

2017 Presentation Addressing NOEHA Funding

17F_Acct315_ET Nicholls State University
Ms. Stacy Lejeune, Professor
12-11-17

New Orleans Exhibition Hall Authority $227 Million Unreserved Net Position:
Prudent Administration but at what cost to the Citizens of New Orleans?

As a State Revenue Tax Officer assigned to the New Orleans region, one of my primary duties is

to ensure compliance with the New Orleans Exhibition Hall Authority (NOEHA) hotel occupancy and

related food/beverage assessment taxes, which affects the hotel, food and bar establishments through-out

the City of New Orleans. The NOEHA taxes are some of the most misunderstood and least heard of

assessments currently in place in the New Orleans area. The Department of Revenue (LDR) is contracted

by NOEHA for the collection of these assessments, with none of the revenue destined for the state’s

General Fund.

To recognize the potential scope of this issue, one must understand the assessments and what is

taking place. There are actually three separate “taxes” collected on behalf of NOEHA: an original room

sales tax enacted in 1978, that is currently 3%, which is collected by LDR but paid through the

Louisiana Stadium Dome Commission; a 2002 (with later amendments) enacted per night, per occupied

room charge of either .50 cents or $1.00 depending on the size of the hotel, and the food and beverage

graduated assessments of 0.50% and 0.75% depending on the reported food and beverage sales occurring

in Orleans Parish. While the sales tax portion by law must be collected from customers, both the room

occupancy and food and beverage taxes are not considered sales taxes. These are, in fact, assessments

against the business. The business itself remains liable regardless of whether any money was collected

from customers or the business was aware of tax when finally assessed. As such, I am frequently tasked

with educating both new and existing businesses who are unaware of their liabilities under one or all of

the assessments.
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NOEHA, itself, was created by the Louisiana Legislature in 1978 under Act 305, and is mandated

with operating the Ernest N. Morial New Orleans Convention Center. The initial 1% room sales tax was

intended to provide the necessary funding resources to maintain the convention center. From its most

recent 2016 published Audit of Financial Statements, NOEHA has expanded beyond its initial charter by

entering into cooperative agreements to provide funding, among other things, for special law enforcement

in the French Quarter, as well as, infrastructure and building financing for adjoining city projects.1 None

of which, on the surface, seems to relate to the Convention Center operation. The issue then becomes at

what expense to the City of New Orleans does NOEHA help or hurt both in terms of actual benefit and/or

loss of direct revenue? Should the current $227,786,000 in unreserved net position, primarily from the

surpluses of NOEHA hotel and food/beverage tax assessment collected, be transferred to the City’s

coffers as originally addressed in the 1978 legislation?2

Section 7 of Act 305 provides for the transfer, at the Authority’s discretion, of any surpluses over

expenses to be paid to the City of New Orleans. This was likely intended to appease the concerns of city

leaders. The extent to which any surplus has been redirected to the City is negligible with the exception

of certain noted reimbursements requested by the city. At their core, however, all three assessments

continue to be for NOEHA expansion and to maintain competitive advantage in the convention markets.

As of the 2015 fiscal year, the convention center expansion plans, which was the impetus for much of the

additional tax revenue subsequently enacted, have been shuttered with the net effect of creating the

massive unrestricted fund reserve. This while at the same time NOEHA reports net operating losses,

currently down to $29,925,000 from the previous year loss of $32,574,00.3 (See table below)

1
Laporte, a Professional Accoun ng Corp., Ernest N. Morial New Orleans Exhibi on Hall, Audit of Financial Statements: March
14, 2017, p. 33.
2
La. Senate Regular Session Bill 410, Act 305, Sec on 7, dated 1978
3
Laporte, a Professional Accoun ng Corp., Ernest N. Morial New Orleans Exhibi on Hall, Audit of Financial Statements: March
14, 2017, p. 6.
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The discrepancy has not gone unnoticed. According to the government watchdog group, Bureau of

Governmental Research’s (BGR) November 2015 report entitled, The 1 Billion Dollar Question, Do the

Tax Dedications in New Orleans Make Sense?, NOEHA began amassing tax revenue with the 2002

amendments which continues to go unspent with no end in the foreseeable future. At the time of the

report, tax revenue generated from the new assessments equated to $15 million, which according to the

BGR , amounts to five mills of New Orleans property tax collected each year for over a decade that is not
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being used to benefit the city.4 BGR began calling for comprehensive tax reform after the State

Legislature denied a 2014 request by the City to bring a voter referendum for approval of a 1.75% hotel

tax increase. The measure was opposed by the Convention and Visitors Bureau (CVB) and defeated

despite the CVB’s own 1.75% tax approved the previous year, which according to BGR, has an estimated

net impact equating to 84% or roughly $13 million dollars a year that is not going into City coffers.5

BGR is adamant that to the extent of current taxation across the multitude of agencies, and despite

claims of benefit to the City, the tax models in place have the reverse effect of harming the City’s overall

financial strength. Specifically, BGR’s study found only one-fourth of local tax revenue is available to

New Orleans for general appropriations with the remaining three-fourths dedicated to specific purposes

and other entities, including 14% of revenues dedicated to tourism, with less than 3% going to street

repair.6 As the legislature demonstrated, it was not going to support increased taxes at the risk of losing

potential tourism dollars.

For its part, NOEHA is slow to concede change, citing the economic impact NOEHA and its

operation have on the City. In a TV Newsman Lee Zurik interview, NOEHA General Manager Bob

Johnson, when asked for comment about redistribution of the surplus, responded, “One of the few

industries in this city and in this region that is thriving and growing and has the potential to create some

economic development, economic growth - why would anyone think it was a good idea to start choking

off those resources that have been dedicated to the tourism industry?”7 Beyond citing the standard

benefits to the City, Mr. Johnson offered little explanation for the surplus, which is both five times the

center’s operating budget and double the amount of the actual bonds it is intended to pay off, currently

$99,715,850 as of year end 2016 See Note 6 to the 2016 CAFR below:8

4
Bureau of Governmental Research, The $1 Billion Ques on, Do the Tax Dedica ons in New Orleans Make Sense?, November
2015, p. 3.
5
Ibid, p. 14.
6
Ibid, p. 16.
7
Zurick, Lee, “Conven on Center cash piles up as a endance numbers fall flat”, November 3, 2017,
h p://www.fox8live.com/story/33613721/zurik-conven on-center-cash-piles-up-as-a endance-numbers
8
Laporte, a Professional Accoun ng Corp., Ernest N. Morial New Orleans Exhibi on Hall, Audit of Financial Statements: March
14, 2017, p. 31
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While there can be no doubt the City benefits to a degree, the benefits realized are less than

adequate for City funding purposes as BGR’s report highlights. The divide will only grow wider. In fact,

NOEHA revenue, despite its current non-use, will continue to increase and is expected to spike with new

2016 legislation wherein the definition of a hotel subject to taxation was amended from the previous six
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rooms to only one room. The change, enacted to take advantage of the short term rental markets and bed

and breakfasts that had gone untaxed, was expected to generate millions of dollars annually for NOEHA,

effective with the 7/1/16 amendment.

This too has not gone unnoticed by some lawmakers, specifically, State Representative Helena

Moreno of New Orleans, who introduced a bill to earmark 3.97% of the revenue generated from the

online booking site, AirBnB.com, which agreed to cooperate with State and local officials in

implementing the new short term rental sales and occupancy tax regulations. According to City of New

Orleans Deputy Mayor Ryan Berni, the 3.97% subsequently approved was set aside for the city to pay for

code enforcement.9 According to a November 10, 2017 NOLA.com news report, over $3 million dollars

in taxes have been submitted by Airbnb under the new program.10 There has been no reported response

by BGR found on this latest funding development. I suspect, however, since the additional revenue

dollars remitted by Airbnb will once again be earmarked for a specific purpose, in this case, code

enforcement, BGR will likely claim the City will see little to no overall financial benefit in combating the

City’s funding crisis. In fact, I would contend, the new revenue is only covering new expenses created by

the program and could actually exacerbate the city’s shortfalls even further.

While the question as to what legitimate purpose justifies NOEHA’s five times operating budget

in reported unreserved net position is left to speculation and conjecture, there cannot be any doubt of the

negative impact the current tax structure has on the City of New Orleans’ ability to fund its operation.

NOEHA is only one piece of the $1 billion dollar misaligned tax structure disguised as progress but

strangling the City financially. It is, however, a piece that could easily be the solution and the catalyst to

real economic change in the city limits.

9
NOLA.com, “Airbnb says it’s generated $3 million in tax revenue since New Orleans made short-term rentals legal,”
November 10, 2017, h p://www.nola.com/poli cs/index.ssf/2017/11/airbnb_taxes_new_orleans.html
10
Ibid.