Thursday, November 1, 2012

Budget 2013: “We can’t host our way out of a budget crisis"

Posted By on Thu, Nov 1, 2012 at 12:11 PM

A recent study by the University of New Orleans Hospitality Research Center estimates that tourists in New Orleans spent nearly $3.5 billion in the first half of 2012, nearly $5.5 billion in all of 2011. Annual economic impact from Mardi Gras, we’re told, is anywhere from $300 million to nearly $1 billion, depending on how it’s calculated and who’s doing the calculating. Next year, boast tourism officials, the Super Bowl alone is expected to generate more than $400 million in economic impact for the city.

And yet this all has little effect on city tax revenues.

“We can’t host our way out of a budget crisis,” said Mayor Mitch Landrieu this week after presenting a lean, $491 million 2013 budget proposal, which calls for cuts averaging 8 to 10 percent for most city agencies. That’s because most of the taxes generated by tourism don’t go to the city’s general fund.

Take the 13 percent hotel tax.

(More after the jump)

Three state entities — the Superdome, the Morial Convention Center and the state general fund — get nine of those 13 cents per hotel dollar. Two-and-a-half cents are then divided between the New Orleans Regional Transit Authority and the Orleans Parish School Board. What remains — 1.5 cents per hotel dollar — goes to the city. City officials project $13 million in hotel tax revenue next year. In a fantasy-scenario, in which all hotel taxes went to the general fund, the city would reap about $113 million.

San Francisco’s 14 percent hotel tax — an entirely local tax — was expected to generate $220 million in the 2011-2012 fiscal year according to city budget documents. Of that, about $140 million — or 64 percent — went to general fund discretionary spending. (If the same proportion applied here, the tax would generate about $72 million for the 2013 general fund budget.)

The remaining $80 million goes to specific programs. Last year, well over half of that was allocated to convention center expenses, tourism and marketing. But about $16 million went to city-funded museums. And the 2012-2013 budget earmarks more than $5 million for the city’s affordable housing/rental assistance program.

Atlanta budgets one-quarter of hotel tax revenue to the general fund. If New Orleans government took in the same portion of the city-state 13 percent hotel tax, it would receive about $28 million. But Atlanta has an eight percent tax rate, so one-quarter means two cents on the dollar, or about $17.5 million if that were the case here. Likewise for Clark County (Las Vegas), Nev., which allocates one cent to discretionary general fund spending and one cent to local road projects.

On the other hand, Austin levies a 9 percent hotel tax, of which nearly 90 percent is spent on the city’s convention center and tourism promotion. The remainder goes to the city’s cultural arts programs. Miami-Dade County’s 2012-2013 budget sends every cent generated by its 6 percent local hotel tax to tourism and convention-related programs or debt service on entertainment and sports facilities.

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