MONOPOLIZED: THE TOURIST ECONOMY $ TAXES $ AND A TALE OF TWO CITIES

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Paying taxes is no one’s idea of fun, but living as we do amidst crater-sized potholes, a flood protection infrastructure that has barely improved since Katrina, and staggering poverty rates, it’s hard to deny that if ever a city needed tax dollars, it’s New Orleans. As the April 18th filing deadline draws closer, you may find yourself wondering where exactly your local taxes will be directed: will they go towards improving the inhumane conditions at OPP, funding much-needed community youth programs, or bolstering our floundering school system?

It is hotel owners, corporate restaurant companies, and old money business interests such as these that have been selling the same New Orleans tourism experience to visitors for decades, making considerable profits within an extremely inequitable business model.

It is likely that most New Orleans taxpayers have an appropriately bleak outlook on whether our tax dollars will come any closer to covering city costs this year than they have in the past few decades. As Jeffrey Allet, the New Orleans FBI Special Agent-in-Charge puts it, corruption in Louisiana is “robust.” Those who are already acquainted with the way our local government does business won’t be at all surprised to learn that in spite of persisting debts and a severely underserved population, a large percentage of tax revenue each year is diverted away from the city’s operating budget straight into the hands of special purpose entities such as the Ernest N. Morial Convention Center and the Louisiana Stadium and Exposition District.

In 2015, the Bureau of Governmental Research (BGR), a nonprofit government watchdog organization, published a report called The $1 Billion Question. In the report, the research agency details the allocation of local tax revenue, highlighting the ways in which unchecked tax dedications can lead to so much generated income for local tax-recipient entities that they often accumulate surplus wealth inaccessible to the public, even as the city of New Orleans faces fiscal deficit year after year.

According to BGR’s President and CEO Amy Glovinsky, the organization issued a similar report in 1966. She stated over email that “one of the reasons for the City’s fiscal crisis was a fragmented local governmental structure where entities other than the City were performing many essential municipal functions. These included, among others, the S&WB, the Board of Liquidation and the Parks and Parkways Commission, all of which were vying for limited tax dollars and other public revenues. A half-century later, we found in The $1 Billion Question, that the level of fragmentation had increased dramatically.”

Glovinsky explains that the fact that the municipal financial crisis has not decreased in spite of an exponential rise in taxes since the ‘60s is due to a simultaneous rise in groups collecting money from tax dedications: “Today, there are more than 60 local entities that receive a share of Orleans Parish tax dollars. This helps explain why the City is once again struggling to provide basic services and infrastructure even though total inflation-adjusted tax revenue has nearly tripled in the past 50 years.”

The numbers, according to the report, are grim. While the two categories that receive the most tax money are public education and public safety, the next largest percentage of tax revenue goes to the category of tourism, conventions, and sports, which receives almost 14% of total revenue. General municipal funds, which pay for governmental operating costs such as city administration, facilities, and sanitation, receives only around 11%. This fund is consistently scrambling to cover its costs, especially in recent years, after the city was charged with repaying millions of dollars of the firefighters’ pensions that had been squandered through decades of mismanagement and bad investments.

Tourism, conventions, and sports receives one-and-a-half times more money than flood protection and drainage, and four-and-a-half times more than street maintenance, much to the horror of Fix My Streets NOLA, a grassroots community street repair initiative known for the ubiquitous signs reading “Fix My Street! I Pay My Taxes!” The dilapidated streets are in some ways the most visible sign of municipal neglect, but by no means the worst. A 2013 report from the Health Commissioner’s office shows the high numbers of people without health insurance suffering from chronic disease; but the category of health, human services, and neighborhood improvement only receives 1.5% of total tax revenue.

The New Orleans Public Defender’s Office is so underfunded that our judicial system has been thrown into crisis. Last November, New Orleans’ Chief Defender Derwyn Bunton announced that the office would have to start turning down cases. There simply weren’t enough people for the job, even with lawyers juggling as many as 300 cases at once. Even now inmates are languishing in prison waiting indefinitely for the provision of their basic constitutional rights.

Meanwhile, the Convention Center has been quietly and steadily amassing millions of dollars in surplus since 2002, after the state legislature approved a 1% hotel tax and 0.25% citywide food and beverage tax to fund what they called “Phase IV,” part of a plan to expand the Convention Center complex. Although the plan was scrapped after Katrina, the Convention Center still continues to receive roughly $15 million a year from these additional taxes, and as a consequence they are now holding over $200 million. This surplus is over five times their annual operating budget. To the BGR, this surplus represents an opportunity to reallocate tax money towards the areas where it is most necessary. The report concludes with a plea to put community needs over ambitions of individual tax bodies.

BGR has a long history tracking corruption in New Orleans. The organization was established in the early ‘30s under architect and planning advocate Charles Favrot, who felt that legendary Louisiana socialist hero/ demagogue Huey Long and his political machine had gone unchecked for too long. In the years since its founding, BGR has thrown its weight behind reform movements as diverse as fraud prevention through the introduction of voting machines in the ‘40s, preserving the Vieux Carré in the ‘60s, and preventing the privatization of the Sewerage & Water Board in 2002.

The mission of the organization, according to Amy Glovinsky, is to “use the power of independent, nonpartisan research to provide guidance on government planning, structure, processes and finances. To that end, BGR monitors government agencies, identifies problems, interviews stakeholders, researches best practices, and recommends solutions.” The organization, in the tradition of economic liberalism, tends to make recommendations that promote a classical capitalist model; they mean to hold businesses accountable to the law without discouraging economic growth. In the $1 Billion Question, they don’t suggest a shift in the role of tourism in the economy so much as a more equitable distribution of its revenue.

However, it is probable that these recommendations will fall on deaf ears, as the proposed shift in thinking about local taxes would also require a radical shift in the New Orleans economic power hierarchy. When we talk about tourism in New Orleans, we are talking about a revenue stream which is highly controlled by an elite group of businessmen. Take, as an example, the leadership of the Convention Center. Melvin J. Rodrigue, the President of the Convention Center Board is also President and CEO of Galatoire’s Restaurant; the Vice President, Robert Bray helms the Marriott Hotel; and the Treasurer, Stephen Pettus, is a managing partner in Dickie Brennan’s restaurant group. It is hotel owners, corporate restaurant companies, and old money business interests such as these that have been selling the same New Orleans tourism experience to visitors for decades, making considerable profits within an extremely inequitable business model.

A 2014 NOLA.com article on income inequality within the tourist sector showed that a reliance on export industries, which generate income from outside resources rather than circulating local dollars, has resulted in a proliferation of low-paying jobs and a scarcity of opportunities to establish a stable middle class. The article cites the example of Jason Walker, a worker at Harrah’s Hotel who, even while holding jobs at two different hotels, could not make ends meet and, unable to secure affordable housing, was forced to sleep in the hotel’s break room or the bus station.

ANTIGRAVITY-APRIL-2017-Monopolized2-by-Ben-ClaassenAs for relying on city government to intervene, there is plenty of evidence to suggest that the economic interests in charge also hold sway over local government. The case of Ron Forman illustrates the blurred line between economic and political power. Beginning his career in the office of Mayor Moon Landrieu in the ‘70s, Forman has been mixing business and politics for decades. He has served as Chairman of the Louisiana Stadium and Exposition District, a powerhouse of the New Orleans tourism industry, which BGR cites as one of the biggest recipients of local tax dedications. He also heads the Audubon Nature Institute, one of the public-private funding structures that has come under fire recently in the wake of a recent scandal involving backroom negotiations to create a new sports development at the Fly (sufficient community outrage shut down the project). Furthermore, as Chairman of the New Orleans Jazz Orchestra, Forman was tied to Irvin Mayfield’s infamous mishandling of New Orleans Library Foundation funds. Forman’s longstanding ties to the New Orleans business community made him an initial front-runner when he ran against Ray Nagin and Mitch Landrieu in the 2006 mayoral election, under the government-run-as-a-business mantra.

Within the current power structure, there is virtually no system of checks and balances to prevent such abuses as the misappropriation of tax revenue. As the BGR report shows, even the tax assessor’s office is implicated in the system of tax dedications. As mandated by state law, 2% of property taxes go to the assessor’s office, which the report says is “problematic because it gives the assessor more revenue each time voters approve taxes for unrelated purposes;” they are effectively given a commission on every tax they approve. As a result, the tax assessor’s office has accumulated a substantial budget surplus of their own.

The logic of investing in large-scale tourism infrastructure such as the Convention Center follows the same lines as trickle down economics: the more money is pumped into big business tourism, the more—in theory—the local economy benefits. In that vein, the Convention Center intends to move forward on an expansion of the Convention district that, according to the website, “will include a boulevard re-imagined as a linear park, with a people mover from Canal Street to the power plant, and substantial retail, entertainment, residential and lodging components. The re-development is envisioned to be in place for the city’s tricentennial celebration in 2018.”

However, much like supply-side economics, there is little to no evidence to suggest that this model encourages much besides increased income disparity. For those of us who don’t have homes on Audubon Boulevard, it doesn’t make much sense to keep throwing money into the tourist sector, even outside of unnecessary tax dedications to tourist entities.

Unfortunately, the notion that we should only invest in our tourism infrastructure once our basic needs as a city have been fully met has not been the takeaway from BGR’s report for many in the city government, including Mayor Landrieu. In late January, the Mayor, Governor Edwards, and other politicians announced a proposed $40 million set of safety and surveillance measures. The Advocate quoted Mayor Landrieu as saying, “Here’s the first thing I want everyone to know: when you go on Bourbon Street now, everything you do will be seen.” This proposal was drafted after the Thanksgiving shooting on Bourbon Street that injured nine and killed one, and includes a drastic increase in video surveillance in 20 different neighborhoods and restrictions on nightlife, even changing open container laws. A large part of the rationalization for this plan is the sense that crime discourages tourism, and the necessity of these measures from an economic standpoint seems almost unanimous among a diverse group of city leaders, including BGR. In fact, BGR suggests that the city use Convention Center surplus to fund the $40 million security plan.

That the impact of mass incarceration, poor health services, and an economy offering few middle class job options have on the city’s crime hardly seems to enter the conversation at the highest level of decision making should give us pause. The fact that hyper surveillance and tougher law enforcement in the name of protecting tourists is going almost unquestioned should make us extremely wary. How much will the city’s residents have to endure before New Orleans’ leadership realizes no amount of tourism dollars is worth sacrificing the health of the city?

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