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On the Right Track?

New Orleans Economic Development Investment in Perspective

Appendix: Sources Summary

BGR On the Right Track? Appendix: Sources Summary 2

I. Introduction & Methodology This section describes the individual sources of economic development funding made available in New Orleans during the period of 1998 to 2002. In compiling this section, which forms the basis for the calculation of the $1.1 billion in total economic development sources during the period, BGR sought to include all significant sources of funding that meet the study’s scope and limitations, as discussed in the Overview Section. BGR has tried to make the section as complete as possible, but there may be other sources of funding not included here that meet the criteria of this study. The sources are grouped into the following categories, which have been described in the Overview Section:

A. Federal Sources B. State Sources C. Local Sources

a. Taxes b. Other Funds c. Public Benefit Corporations d. Foregone Taxes

Included separately at the end of the Sources Summary are bond proceeds received by various entities during the period 1998 to 2002. BGR excluded these proceeds from the sources calculations for this study because they are repaid out of annual debt service costs for various agencies. The figures in the tables below have been summarized from BGR compilations of data on sources and investments during 1998 to 2002. The investments in the tables below are presented according to the general categories of investment as described in the Overview Section. All figures are presented in thousands of dollars for the fiscal years 1998 to 2002, and have not been adjusted for inflation. Totals may not add due to rounding. BGR faced a number of challenges in collecting and aggregating data:

1. The fiscal years for entities included in the study end on different dates. Local entities’ fiscal years, including New Orleans’, typically end on December 31. The federal fiscal year ends on September 30, and the State’s on June 30. In this report, federal and state fiscal years are aligned with the calendar year (e.g., all funds received in a fiscal year ending in 2000 are considered year 2000 funding).

2. For some grant funds, government entities reported allocations, rather than actual

annual expenditures of grant monies. In those cases, BGR included only allocations made during the period 1998 to 2002.

3. Foregone taxes are defined for purposes of this study as taxes that were abated or

diverted to satisfy obligations for privately owned projects. Estimates of foregone


taxes are based on information provided at the outset of the project by the City, the State, or the beneficiary of the tax relief. In calculating the value of property tax incentives, BGR increased the originally estimated value of property by 1.5% per annum, the average annual increase in assessed value on a citywide basis from 1987 to 2002.


II. Sources by Government A. Federal Sources The federal sources are organized by the federal government entity that provides the funds. Although BGR included federal economic development funds expended in New Orleans, it excluded federal tax incentives (such as tax exemptions for bonds and federal and state tax credits) that did not affect City revenues. The subparts of this section are:

1. U.S. Department of Commerce, Economic Development Administration (EDA) a. EDA Public Works Grants b. EDA Title IX Revolving Loan Fund

2. U.S. Department of Health & Human Services a. Enterprise Community Funds

3. U.S. Department of Housing & Urban Development (HUD) a. Community Development Block Grants (CDBG), including allocations of

these funds for the following programs: i. Mayor’s Office of Economic Development (OED)

ii. Loan Programs: 1. Neighborhood Commercial Revitalization (NCR) Loans 2. CDBG Small Business Loans

b. Section 108 loans c. Brownfields Economic Development Initiative (BEDI)

4. U.S. Department of Labor (DOL) a. Job Training Partnership Act (JTPA) b. Workforce Investment Act (WIA) c. H1-B Technical Skills Training Grant d. Welfare-to-Work Funds (WtW)

5. U.S. Environmental Protection Agency (EPA) a. National Brownfields Assessment Pilot b. Brownfields Cleanup Revolving Loan Fund

6. U.S. Small Business Administration (SBA) a. SBA 504 Loan Program

7. Federal Aid to Major Transportation

a. Louis Armstrong International Airport (Airport)

8. Miscellaneous Federal Funds


a. Grants b. Appropriations

1. U.S. Department of Commerce, Economic Development Administration (EDA) The EDA, a division of the U.S. Department of Commerce, provides funding for economic development activities in New Orleans in the form of public works grants and a revolving loan fund. The City of New Orleans (City) itself has not applied for or received a public works grant since 1983.1 Other entities in Orleans Parish have received grants: The French Market Corporation received a grant in 1985 for renovations; City Park, in 1992 for renovations to Tad Gormley Stadium for the Olympic Trials; the University of New Orleans, in 1995 for infrastructure for its Research & Technology Park. EDA Title IX Revolving Loan Fund. Small businesses in New Orleans may apply for loans from the City’s EDA Title IX Revolving Loan Fund. Administered by the Regional Loan Corporation (RLC), a private nonprofit corporation, the fund is designed to provide financing to small businesses that demonstrate an inability to obtain conventional financing. Loan recipients are required to garner private lender participation on a 2-to-1 ratio of private to public financing.2 Recipients must also contribute equity of at least 10% of total project costs for existing businesses, 20% for start-up businesses. RLC participation typically ranges from $25,000 to $250,000, but there is no maximum loan size.3 The interest rate is up to 2% above the New York prime rate when the loan is approved. The loans may be used to acquire land and buildings, construct or renovate buildings, purchase machinery, equipment, furniture, and fixtures, finance inventory and working capital, and pay professional fees. Fixed asset loans generally mature in five to 20 years; working capital loans, three to seven years. Loan recipients must create or retain at least one job per $35,000 in EDA loan funds. They must also make any job created or retained available to residents of Orleans Parish. For construction projects, loan recipients must pay workers according to the Davis-Bacon Act prevailing wages for the local area. To establish the loan fund, RLC received grants from EDA of $500,000 in 1979 and $1 million in 1983, with a local match of $333,333. As a result of a federal audit, a grant of

1 EDA, list of projects funded in Orleans Parish, September 2002. 2 RLC, http://www.rlcsbidco.com. 3 Ibid.


$500,000 in 1993 was reduced to $250,000, with a local match of $125,000.4 Thus, the RLC has received total funds of approximately $2.2 million. No additional EDA funds were received between 1998 and 2002, but the revolving loan fund was replenished with repayments. From 1998 to 2002, the RLC approved 15 loans from the fund totaling $1.7 million.5 Commercial businesses, including a gas station and grocery, received more than half of the loan funds approved. Three hotel loans totaled $300,000. Other loans to service businesses totaled $219,000, provided to a child care center and two medical businesses. The following table summarizes the loans: TABLE: Regional Loan Corporation, U.S. Economic Development Administration Title IX Loans

Figures in $000s 1998 1999 2000 2001 2002 Total Funds Loaned 275 100 505 302 500 1,682 Total Sources $275 $100 $505 $302 $500 $1,682 Business Development: Small Business Loans

275 100 505 302 500 1,682

Total Investments $275 $100 $505 $302 $500 $1,682 Source: RLC. Figures are loan amounts for the fiscal years ended December 31. 2. U.S. Department of Health & Human Services a. Enterprise Community Funds. In 1994, parts of the City were designated as a federal urban Enterprise Community, for which it received $3 million in a social services block grant from the U.S. Department of Health and Human Services.6 HUD administered the grant, which was passed through the state departments of Health and Hospitals and Social Services to the City.7 The New Orleans Enterprise Community designation covered portions of Algiers, Bywater, Central City, downtown, Desire, Gert Town, the Lower Garden District, the Lower Ninth Ward, and Treme neighborhoods. The distribution of the block grant was overseen by the New Orleans Enterprise Community Congress, a nonprofit consortium of 64 representatives, including Enterprise Community residents and representatives of social service agencies, businesses, community-based organizations, and nonprofit groups.8 The block grant was used to fund a wide variety of social services, such as education programs, youth employment training, and community policing.

4 U.S. Department of Commerce, Office of Inspector General, Economic Development Administration: New Orleans Regional Business Development Loan Corporation RLF, Audit Report No. DEN-6877-5-0001, March 1995, p. 1. Also, telephone interview with Pamela Davidson Ehlers, Economic Development Representative, EDA, August 18, 2004. 5 RLC, list of loans approved for the period 1997 to 2003, August 1, 2003. 6 The Enterprise Community designation also made available a set of federal tax incentives, which have not been included in this study because they do not affect local government revenues. 7 Information supplied by the City of New Orleans. 8 HUD, Empowerment Zones/Enterprise Communities Annual Report: New Orleans, Louisiana Enterprise Community, 2002, p. 1.


While the programs operated from 1995 to 2001, the grant has not been included in the calculations of sources and uses for this study because it was awarded prior to 1998. 3. U.S. Department of Housing & Urban Development (HUD) HUD has provided a variety of funding sources for economic development in New Orleans. These include CDBG, the Section 108 loan program, and a brownfield redevelopment program.9 a. Community Development Block Grants (CDBG). In 1974, Congress established the CDBG program. CDBG provides annual grants to state and local governments for “the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income.”10 The City is responsible for developing its own programs and determining which local projects receive funding. However, the City must determine that any activity it funds through CDBG meets one of three broad, national objectives: (i) to maximize funding for activities that assist low- to moderate-income people, (ii) to aid activities that prevent or eliminate slums or blighted areas, or (iii) to alleviate conditions that pose a “serious and immediate threat to the health and welfare of the community where other financial resources are not available to meet such needs.”11 HUD regulations allow CDBG funds to be used for approximately 30 eligible activities.12 However, at least 70% of CDBG expenditures must fund activities that benefit persons of low and moderate income.13 No more than 15% of expenditures may fund public services, such as job training and child care.14 No more than 20% of the grant plus program income may be spent on planning and administrative costs.15 The City, in applying to HUD for annual CDBG allocations, must state which eligible activities it intends to fund. The City prepares a Consolidated Plan, for which it gathers community input on the selection of activities and the distribution of CDBG funds among the activities. The Consolidated Plan must be submitted every three years, with annual updates in the intervening years.

9 HUD, “Brownfields Frequently Asked Questions,” http://www.hud.gov/offices/cpd/economicdevelopment/programs/bedi/bfieldsfaq.cfm. The City has not incorporated brownfield redevelopment activities into its annual plan for using HUD Community Development Block Grant funds. Congress authorized this use in 1998. 10 42 USCA 5301 (c). 11 HUD, “Community Development Block Grant Entitlement Communities Overview,” http://www.hud.gov/offices/cpd/communitydevelopment/programs/entitlement/index.cfm. 12 24 CFR 570.201-206. 13 24 CFR 570.200 (a)(3)(i). 14 24 CFR 570.201 (e)(1). 15 24 CFR 570.200 (g).


The following table lists the City’s drawdowns of CDBG funds from 1998 to 2002. The table includes in summary the program expenditures of the Mayor’s Office of Economic Development; these are discussed in more detail in the following pages. The table does not include CDBG funds loaned to small businesses. The loan figures were provided separately from the list of CDBG drawdowns; they are provided in separate tables below: TABLE: Community Development Block Grant Drawdowns

Figures in $000s 1998 1999 2000 2001 2002 Total CDBG Drawdowns 20,776 18,727 20,527 19,008 16,357 95,395 Total Sources $20,776 $18,727 $20,527 $19,008 $16,357 $95,395 Administrative Costs:

Mayor’s Division of Housing & Neighborhood Development

2,794 3,014 3,723 3,624 3,410 16,566

Mayor’s Office of Economic Development

189 203 187 243 264 1,086

Business Development: City Programs 810 972 949 1,028 943 4,702 Nonprofit Programs 172 100 212 - - 484 Small Business Assistance

1 235 - - - 236

Targeted Neighborhood Business Assistance

83 36 361 281 134 895

Community Improvement: Community Facilities & Infrastructure

6,963 3,817 5,026 3,536 2,606 21,948

Housing Assistance 7,082 7,206 7,846 7,814 6,815 36,763 Other Community Projects

415 621 252 256 186 1,731

Social Services: Nonprofit Programs

1,743 1,843 1,151 1,653 1,433 7,823

Tourism Development: Marketing & Promotion

242 251 210 284 272 1,258

Workforce Development: Nonprofit Programs

282 429 610 290 294 1,904

Total Investments $20,776 $18,727 $20,527 $19,008 $16,357 $95,395 Source: Mayor’s Division of Housing & Neighborhood Development (DHND). Figures are drawdowns of CDBG lines of credit by program year. Totals may not add due to rounding. Economic Development Programs Funded through CDBG The City has used a portion of its CDBG allocations to fund three economic development programs: the operations of the Mayor’s Office of Economic Development (OED), the Neighborhood Commercial Revitalization (NCR) loan program, and the CDBG small business loan program.


i. Mayor’s Office of Economic Development. CDBG funds pay for most of the costs of the OED. From 1998 to 2002, OED operations funded through CDBG included the following departments: Executive Office. Oversees OED operations. Business Retention and Attraction. Assists businesses with expansion and relocation within Orleans Parish and coordinates the use of incentive programs. The Nagin Administration split the Business Retention and Attraction department into two departments: Marketing, and Business Retention and Expansion. City Business and Permitting Assistance Center. Assists businesses with licenses, permits, and other city procedures and services. International Relations and Trade Development. Works with federal, state, and local agencies to attract foreign businesses, provide services to import and export companies, and organize trade missions to targeted countries. The Nagin Administration split the International Relations and Trade Development office into two offices: International Trade Development, which aims to stimulate trade and investment between the City and foreign markets, and Protocol and International Relations, which works with public and private trade organizations to promote international relations and play host to visiting dignitaries. Neighborhood Commercial Revitalization. Coordinates NCR loans (see below) and technical assistance to businesses in 13 designated commercial corridors in New Orleans. Policy Planning. Supplements other offices and does strategic planning. Small and Emerging Business Development. Provides information and seminars to assist small businesses, and monitors the City’s Open Access program for disadvantaged business participation in developments that use city, state, and federal funds. In 2004, the City plans to merge this office into its revamped disadvantaged business enterprise program.16 Tourism and Arts. Serves as the City’s liaison to hospitality and arts organizations. The Nagin administration combined this office with the offices of film and video and music business development to form a new Office of Arts and Entertainment. Urban Development. Administers loans made through the HUD Section 108 loan program (see below) and the City’s Urban Development Action Grant (UDAG) Repayment Fund (see Local Sources section). In 2004, the Nagin administration renamed this office the Office of Public Investment.

16 Interview with Angel Robinson, senior assistant for business resources, OED, March 1, 2004.


The following table summarizes the CDBG drawdowns for OED from 1998 to 2002. It includes the administrative costs as provided in the previous CDBG table. It also breaks out the OED program expenditures that were provided in summary in the previous table: TABLE: Mayor’s Office of Economic Development

Figures in $000s 1998 1999 2000 2001 2002 Total Administrative Costs 189 203 187 243 264 1,086 Business Development: City Programs

Economic Development 152 159 178 212 186 886 International Trade 108 117 129 166 143 662 Permitting Center 157 178 198 130 127 790 Small Businesses 184 131 176 226 212 929 Urban Development 141 151 202 229 189 912 Policy Planning 69 62 65 65 86 347

Neighborhood Commercial Revitalization Program

83 36 361 281 134 895


Tourism & Arts 242 251 210 284 272 1,258 Total Investments $1,324 $1,288 $1,706 $1,836 $1,612 $7,765 Source: DHND. Figures are drawdowns of CDBG lines of credit by program year. Totals may not add due to rounding. ii. Loan Programs Funded through CDBG. The RLC administers two loan programs funded with CDBG funds: NCR and CDBG small business loans. The RLC currently operates on an annual contract with the City. Expenses of the RLC in administering the loan program are reimbursed with CDBG funds after the submission of a cost control report to the City.17 a. Neighborhood Commercial Revitalization (NCR) Loan Program. The NCR loan program was established in 1978 with a portion of Freret Street, from Napoleon to Jefferson avenues, designated as the first NCR zone.18 At present, there are 13 NCR zones in the City:19

• Freret Street – Napoleon Avenue to Jefferson Avenue • Magazine Street – Pontchartrain Expressway to Jackson Avenue • St. Claude Avenue – Elysian Fields Avenue to Franklin Avenue • Newton Street – Whitney Avenue to Behrman Highway • General Meyer Avenue – Tita Street to Richland Street • North Claiborne Avenue – Orleans Avenue to Annette Street • St. Bernard Avenue – North Villere Street to North Miro Street

17 Interview with William Burnell, executive director of the RLC, July 15, 2003. 18 BGR, Inventory of Economic Development Programs and Strategies in the City of New Orleans, 1970-1992, September 1992, p. 39. 19 RLC, http://www.rlcsbidco.com.


• Oretha Castle Haley Boulevard – Howard Avenue to Philip Street • Chef Menteur Highway – Plum Orchard Street to Read Boulevard • Chef Menteur Highway – Peoples Avenue to France Road • Oak Street – Leake Avenue to Carrollton Avenue • Broad Street – Banks Street to Duels Street • St. Claude Avenue – Industrial Canal to Delery Street

Businesses seeking NCR loans must operate within one of the 13 zones. They may receive loans between $25,000 and $50,000, which can be used for property acquisition, equipment, furniture and fixtures, inventory, and working capital.20 The interest rate is currently fixed at 5%. Loans for fixed assets generally mature in seven to 10 years; working capital and other loans, three to seven years.21 As a general rule, businesses must contribute between 10% and 20% equity to a project. However, if sufficient collateral exists, RLC may loan 100% of project costs.22 From 1998 to 2002, the RLC approved 10 NCR loans totaling $463,000.23 Four of the loans paid for 100% of project cost. Since 2002, the Nagin administration has not allocated new CDBG funds for the loan program. Rather, it directed 2002 NCR funds to grants to merchant associations. It has reserved 2003 and 2004 funds in preparation for a new economic development program.24 According to information provided by the City, the NCR loan fund had a balance of $224,000 and loans receivable of approximately $261,000 as of July 31, 2003. The loans made from 1998 to 2002 are summarized in the table below. Retained Funds are adjustments to avoid double counting the loan funds with CDBG drawdowns provided in a prior table: TABLE: NCR Loans

Figures in $000s 1998 1999 2000 2001 2002 Total Total Sources $ - $ - $ - $ - $ - $ - Business Development: Small Business Loans

50 313 100 - - 463

Retained Funds (50) (313) (100) - - (463) Total Investments $ - $ - $ - $ - $ - $ - Source: RLC. Figures are loan amounts for the fiscal years ended December 31. b. CDBG Small Business Loans. The CDBG small business loan program is designed to assist small businesses in Orleans Parish that demonstrate an inability to obtain adequate conventional financing through private lenders.

20 Ibid. 21 Ibid. 22 Interview with William Burnell, op. cit., April 12, 2004. 23 RLC, list of loans, op. cit. 24 Interview with John Talmage, deputy director, OED, September 2, 2004.


The minimum CDBG loan amount is $25,000 with no maximum, although RLC’s normal participation ranges from $25,000 to $250,000.25 RLC financing typically fills a gap left by private lender participation and the applicant’s equity investment.26 As a general rule, businesses must contribute between 10% and 20% equity to a project.27 The loans may be used for property acquisitions or improvements, machinery and equipment, furniture, fixtures, inventory, working capital, and professional fees.28 The interest rate is fixed at the New York prime rate at the time of approval, with the loan term matched to the life of the assets financed, the lease term, and cash flow projections. Fixed asset loans typically mature in five to 20 years; working capital loans, three to seven years. Loan recipients are required to create or retain at least one job per $15,000 in CDBG funds, or demonstrate other sufficient benefits in accordance with HUD requirements.29 All jobs created or retained must be made available to residents of Orleans Parish, and 51% of such jobs must be made available to persons of low and moderate income. Construction jobs on renovation or construction projects must be paid according to the federal Davis-Bacon prevailing wages for the local area. The following table summarizes the loans made during 1998 to 2002. Retained Funds are adjustments to avoid double counting the loan funds with CDBG drawdowns provided in a prior table: TABLE: CDBG Small Business Loans

Figures in $000s 1998 1999 2000 2001 2002 Total Total Sources $ - $ - $ - $ - $ - $ - Business Development: Small Business Loans

71 156 100 101 145 573

Retained Funds (71) (156) (100) (101) (145) (573) Total Investments $ - $ - $ - $ - $ - $ - Source: RLC. Figures are loan amounts for fiscal years ended December 31. b. Section 108 Loans. Besides CDBG allocations, HUD has established a loan program for local governments to borrow funds for specific developments. Section 108 of the federal law governing CDBG allows HUD to guarantee notes and other obligations issued by local governments that receive CDBG grants (CDBG Grantees). The financing mechanism allows CDBG Grantees to fund large projects that would not be feasible through annual CDBG allocations.30

25 RLC, http://www.rlcsbidco.com. 26 Ibid. 27 Interview with William Burnell, op. cit., April 12, 2004. 28 RLC, http://www.rlcsbidco.com. 29 Ibid. The HUD required minimum is one full-time equivalent job per $35,000 of loan funds, per regulation 24 CFR 570.209. 30 Walker, Christopher, et al., Public-Sector Loans to Private-Sector Businesses: An Assessment of HUD-Supported Local Economic Development Lending Activities, The Urban Institute, prepared for HUD, December 2002, pp. 13-14.


Eligible projects can include economic development, housing rehabilitation, public facilities development, and other large developments, but each project must meet the national objectives and other requirements of CDBG.31 CDBG Grantees are authorized to apply for up to five times their latest approved CDBG award, minus outstanding Section 108 commitments and principal balances.32 Using a standard HUD model, Section 108 notes are issued, pooled together, and sold to investors as certificates.33 The certificates are funded by the pool of CDBG Grantees’ repayments of their notes. CDBG Grantees must pledge their current and future CDBG funds as security.34 They must repay their notes in a maximum of 20 years at interest rates slightly higher than yields on U.S. Treasury obligations. CDBG Grantees have substantial flexibility in investing the proceeds of Section 108 obligations in an eligible project. HUD allows them to invest the funds directly in activities such as infrastructure, property acquisition, site clearance, and demolition. HUD also allows them to provide loans to private businesses or nonprofit organizations. In structuring the terms of the loans, HUD allows CDBG Grantees great flexibility. However, regardless of the terms of the borrower’s loan, CDBG Grantees must repay their Section 108 notes. While HUD guarantees the notes in the event of default by a CDBG Grantee, it has never exercised a guarantee. Rather, HUD has reclaimed CDBG funds to pay the debt or worked out arrangements for repayment.35 Over the past 15 years, the City has received six Section 108 loans:36 MacFrugal’s Distribution Center. The City borrowed $5.2 million in 1989 for the MacFrugal’s Distribution Center in eastern New Orleans. The City invested the funds in pilings for the warehouse. The loan was repaid in 1995; the total debt service cost was $7.3 million. To fund this amount, the City used $3.9 million in repayment funds from UDAG funds, $2.5 million in payments in lieu of taxes (PILOT), and $850,000 from MacFrugal’s partial payments of a $3 million piling reimbursement loan.37 Only $1.1 million of this loan was repaid before the warehouse was destroyed in a 1996 fire. 31 HUD, “Section 108 Fact Sheet,” http://www.hud.gov:80/offices/cpd/communitydevelopment/programs/108/factsheet.cfm 32 Ibid. 33 Walker, Christopher, op. cit., pp. 13-14. 34 HUD, “Section 108 Fact Sheet,” op. cit. Also, HUD, “Section 108 Loan Guarantee Program,” http://www.hud.gov:80/offices/cpd/communitydevelopment/programs/108/index.cfm 35 Walker, Christopher, op. cit., pp. 13-14. 36 City of New Orleans, Comprehensive Annual Financial Report, for the years ended December 31, 1988 to 2002. Also, City of New Orleans, Single Audit Report, for the years ended December 31, 1996 to 2002. 37 Pailet, Meunier and LeBlanc, LLP, City of New Orleans, Urban Development Action Grant, Independent Accountant’s Report on Applying Agreed-Upon Procedures, For the Period from Inception through October 31, 2002, prepared for the Chief Administrative Officer of the City of New Orleans, June 19, 2003, p. 4. Also, Gethers, Ernest G., Memorandum to Eugene Green, Assistant to the Mayor for Economic Development, May 28, 1998.


D.H. Holmes Redevelopment. In 1993, the City borrowed $5.6 million for the redevelopment of the D.H. Holmes department store (D.H. Holmes) on Canal Street into a Chateau Sonesta Hotel. Through the Canal Street Development Corporation (CSDC), the City loaned the funds to the hotel developer, to be repaid through project rents to CSDC. In 2000, all hotel debt was refinanced, allowing the repayment of the City’s loan to the developer and, in turn, the City’s Section 108 borrowing, two years ahead of schedule.38 Jazzland Theme Park. In 1998, the City borrowed $25.3 million for the development of Jazzland Theme Park in eastern New Orleans. It loaned the funds to the park’s developers. The park opened in 2000. The park’s owner filed for bankruptcy in February 2002, having failed to stay current on its debt payments to its private lender and to the City. The bankruptcy cut short the City’s repayment stream for its Section 108 borrowing. Later in 2002, the park was acquired out of bankruptcy, with the new owner agreeing to pay at least $1.4 million a year from 2002 to 2017, which the City will apply to its $2.4 million annual debt service on its HUD Section 108 borrowing. American Can Apartments. In 2000, the City borrowed $5 million for the redevelopment of the American Can Company building in Mid-City. The City’s loan to the developer carries a maturity of 40 years and an annual interest rate of 2%. However, the City must repay its corresponding HUD Section 108 borrowing in 20 years at approximately 7.6% annual interest.39 As a result of the interest rate spread and the difference in maturities, the City’s borrowing cost exceeds the offsetting repayments by approximately $2.3 million. This shortfall is being covered by the MacFrugal’s settlement proceeds (See Local Sources section).40 Grand Theatre. In 2002, the City borrowed $5 million for the construction of the Grand Theatre movie theater at Lake Forest Plaza shopping center in eastern New Orleans. The 20-year maturity of the theater’s loan matches the City’s borrowing, with an interest rate 1% higher than the City’s interest rate.41 Louisiana ArtWorks. Also in 2002, the City borrowed $7.1 million for construction of Louisiana ArtWorks, a collection of artist studios to be housed in a renovated building at the corner of Howard Avenue and Carondelet Street downtown. The 20-year maturity of the project’s loan matches the City’s borrowing, with an interest rate 1% higher than the City’s interest rate.42 The American Can Apartments, D.H. Holmes, Jazzland Theme Park, and MacFrugal’s projects are discussed in greater detail in the Layering Section. The following table

38 Transition Report, Canal Street Development Corporation, Mayor Marc H. Morial Records, City Archives, 2002. Funds for the repayment of the Section 108 borrowing were placed in a defeasance account to complete the payments as scheduled. 39 Mayor’s Office of Economic Development, HUD Section 108 Guaranteed Loans, Status Update Report, March 5, 2002, attachment. 40 Ibid., p. 1. 41 Interview with Angel Robinson, op. cit., March 1, 2004. 42 Ibid.


summarizes the Section 108 borrowings from 1998 to 2002, excluding the MacFrugal’s and D.H. Holmes borrowings received prior to 1998: TABLE: HUD Section 108 Loans

Figures in $000s 1998 1999 2000 2001 2002 Total HUD 108 Loan Funds 25,300 - 5,000 - 12,100 42,400 Total Sources $25,300 $ - $5,000 $ - $12,100 $42,400 Business Development:

For-Profit Developments 25,300 - - - 5,000 30,300 Nonprofit Project - - - 7,100 7,100

Urban Redevelopment Projects - - 5,000 - - 5,000 Total Investments $25,300 $ - $5,000 $ - $12,100 $42,400 Source: City of New Orleans, Single Audit Report, for the years ended December 31, 1998 to 2002; OED. Figures are loan amounts for the fiscal years ended December 31. c. Brownfields Economic Development Initiative (BEDI). In 1998, HUD began funding its BEDI competitive grant program. Cities may apply for the grants only in conjunction with Section 108 loans. HUD caps the grants at $2 million per award.43 Projects that receive the BEDI grants must increase economic opportunity for low- and moderate-income persons and spur economic revitalization by retaining businesses and jobs.44 Eligible uses of funds include site remediation, extra collateral or enhanced security for Section 108 loans, and lower interest rates on financing.45 Public or private entities receiving brownfield grants cannot use the money to pay for remediation of contamination caused by their actions. Proposed sites cannot be listed on EPA’s National Priority List or be involved in ongoing litigation or enforcement actions.46 Through 2002, only the American Can Apartments development in New Orleans had received an award under BEDI.47 The City received $1 million for the project in fiscal year 1999, of which $500,000 was granted and $500,000 was loaned as part of a financing package. The financing is discussed in more detail in the Layering Section. TABLE: HUD Brownfields Economic Development Initiative

Figures in $000s 1998 1999 2000 2001 2002 Total BEDI Funds - - 1,000 - - 1,000 Total Sources $ - $ - $1,000 $ - $ - $1,000 Urban Redevelopment Project - - 1,000 - - 1,000

43 HUD, “Brownfields Economic Development Initiative (BEDI),” http://www.hud.gov:80/offices/cpd/economicdevelopment/programs/bedi/index.cfm. 44 Ibid. 45 HUD, “BEDI Quick Facts,” http://www.hud.gov:80/offices/cpd/economicdevelopment/programs/bedi/bedifacts.cfm. 46 Ibid. 47 HUD, lists of BEDI grants, 1998 to 2002.


Total Investments $ - $ - $1,000 $ - $ - $1,000 Source: HUD. Figures are allocations of grant funds in fiscal years ended December 31. 4. U.S. Department of Labor (DOL) During the period 1998 to 2002, the City received funds from the DOL for job training programs. The job training funds flow from DOL to the Louisiana Department of Labor, which in turn distributes a portion to the City. The funds received during the period came from the following programs: Job Training Partnership Act (JTPA) and its successor, the Workforce Investment Act (WIA); H1-B Technical Skills Training Grant; and Welfare-to-Work (WtW) funds. The following table summarizes the expenditures of these program funds during the period. TABLE: U.S. Department of Labor Funds

Figures in $000s 1998 1999 2000 2001 2002 Total Job Training Partnership Act 7,690 8,019 2,760 9 - 18,478 Workforce Investment Act - - 408 3,092 5,519 9,018 H1-B Training Grant - - - 460 2,161 2,621 Welfare-to-Work 197 1,846 2,401 4,754 3,922 13,121 Total Sources $7,887 $9,865 $5,569 $8,315 $11,601 $43,238 Workforce Development: City Programs

248 236 632 1,808 2,146 5,070


7,639 9,629 4,937 6,507 9,455 38,168

Total Investments $7,887 $9,865 $5,569 $8,315 $11,601 $43,238 Source: City of New Orleans, Single Audit Report, for the years ended December 31, 1998 to 2002. Totals may not add due to rounding. City and nonprofit expenditures may include some administrative costs that could not be determined from available data. a. JTPA. From 1983 to June 30, 2000, the JTPA represented the DOL’s primary job training program.48 JTPA provided services to adults over age 55, economically disadvantaged adults and youth, and workers unemployed because of plant closings or permanent layoffs, called “dislocated workers.” Administered by the Louisiana Department of Labor, the JTPA funds were allocated to 18 service delivery areas, one of which was Orleans Parish.49 On June 30, 2000, the JTPA program terminated and was replaced by a program authorized under the WIA (see below). JTPA funds were administered by the Orleans Private Industry Council (OPIC), a nonprofit entity created in 1992 as part of an effort to reform the City’s JTPA

48 Private Industry Council of San Francisco, “History: Job Training Partnership Act, 1982-2000,” http://www.picsf.org/about/jtpa.htm. 49 State of Louisiana, Office of the Legislative Auditor, Louisiana Department of Labor: Job Training Program, March 2000, p.4.


administration. OPIC received the JTPA funds until the JTPA program termination in 2000. To avoid double-counting with City DOL funds, OPIC’s reported revenues and expenditures from its fiscal years 1998 to 2000 have been excluded from the calculations of sources and investments in this study. They are summarized in the following table: TABLE: Orleans Private Industry Council, 1998 to 2000

Figures in $000s 1998 1999 2000 Total Job Training Partnership Act 7,660 7,251 7,162 22,073 Other Revenues 312 1,067 2,009 3,388 Total Revenues $7,972 $8,318 $9,171 $25,462 Program Expenses 6,726 6,918 7,958 21,603 Administrative Costs 1,241 1,340 1,304 3,884 Total Expenses $7,968 $8,258 $9,262 $25,487 Change in net assets 5 60 (90) (25) Source: Orleans Private Industry Council financial statements and auditor’s reports for the years ended June 30, 1998 to 2000. Figures are revenues and expenditures. Totals may not add due to rounding. According to OPIC’s annual financial reports, it awarded approximately $2 million to $3 million a year to subrecipients to provide employment training assistance. From fiscal years 1998 to 2000, OPIC’s auditor noted the agency’s failure to monitor all of its subrecipients. In fiscal year 2000, the number of unmonitored subrecipients rose from two or three per year to 21. OPIC management blamed the rise on the termination of JTPA funding and inadequate money to monitor subrecipients during the closeout period of the program. Past JTPA problems, detailed in a DOL audit of the program from inception through 1990, the period prior to OPIC’s formation, had resulted in DOL requiring that the City reimburse it a total $5.4 million. By the end of fiscal year 2000, the City had repaid the entire amount, with $4 million remitted from video poker revenues and $1.4 million reflected in credit reductions.50 Because the penalties were incurred prior to 1998, they have not been included in the sources and uses calculations for this study. b. WIA. In 1998, Congress passed the WIA to replace the JTPA. This legislation took effect in July 2000. While the JTPA focused solely on job training, the WIA consolidates a host of funding sources for employment-related services into a “one-stop” system.51 This approach attempts to avoid duplicating administrative costs. To carry out the WIA, the State Legislature created the Louisiana Workforce Commission in 1997. The commission sets policy for allocating WIA funds, which are funneled from the DOL to the Louisiana Department of Labor. The commission is

50 City of New Orleans, Single Audit Report, for the year ended December 31, 2000, p. 85. 51 State of Louisiana, Office of the Legislative Auditor, Department of Labor: Training Activities, October 2002, p. 2.


comprised of 27 members representing businesses, state government, organized labor, education, community-based organizations, and non-union workers.52 The commission oversees the performance of 18 local Workforce Investment Boards (LWIBs), including the New Orleans WIB. The local board’s 26 members are appointed by the mayor. A majority of members represent businesses, while the rest represent social service, organized labor, economic development, education, community-based organizations, and other agencies providing workforce services.53 The funds are allocated to LWIBs on a formula basis.54 LWIBs are prohibited from administering their own job training and assistance programs, with some exceptions.55 Instead, they contract with training providers through a competitive bid process. The New Orleans WIB contracts with Goodwill Industries to operate its Adult One-Stop Center, and with Tulane and Xavier universities to run its Youth One-Stop Center.56 Tulane and Xavier recently replaced a partnership of Covenant House and Turning Points Academy. The New Orleans WIB’s primary contractors oversee other training and service providers. When an individual chooses a training program, an individual training account (ITA) is established to pay for that program.57 Individual use of Orleans Parish WIA training funds through ITAs has been heavily focused on truck driving schools, following a statewide trend. According to the state Legislative Auditor, more than half of the participants receiving ITAs in Orleans Parish from July 2000 to March 2002 trained at truck driving schools.58 The Louisiana Department of Labor oversees the expenditures of the New Orleans WIB. In program year 2002, which ran from July 2002 to June 2003, the department found that the New Orleans WIB had expended only 54% of the total available funds during the program year, which included substantial funds carried over from the prior year.59 Only 17% of its current year funding allocations was spent during program year 2002. New Orleans WIB had approximately $6.5 million in unexpended funds as of June 30, 2003. Federal law allows two years for local entities to spend their annual allocations, with unspent funds subject to recapture by the state. Nationally, many job training programs

52 State of Louisiana, Department of Labor, Louisiana Strategic Five-Year Workforce Investment Transition Plan for Title 1 of the Workforce Investment Act and Wagner Peyser, for the period July 1999-June 2004, pp. 21-22. 53 La. R.S. 23:2191. 54 Louisiana Department of Labor, Louisiana Strategic Five-Year Workforce Investment Transition Plan, op. cit., p. 29. 55 Ibid., p. 27. 56 National Center for the Urban Community at Tulane and Xavier Universities, http://ncuc.tulane.edu. 57 Louisiana Legislative Auditor, Department of Labor: Training Activities, op. cit., p. 4. 58 Ibid., p. C.2. 59 State of Louisiana, Department of Labor, Workforce Investment Act, Program Review for PY02 (Based on June 2003 Final Expenditure Report and Performance through September 8, 2003) LWIA 12, undated.


faced challenges with implementing the WIA changes, which contributed to lower annual expenditures in the initial years.60 The Louisiana Department of Labor also oversees the New Orleans WIB’s performance. The New Orleans WIB was one of six LWIBs statewide that were placed in corrective action by the governor in June 2003.61 Federal WIA law requires the governor to take corrective action when a local WIB fails to meet performance standards for two consecutive years.62 The Louisiana Workforce Commission, which recommended the corrective action, found the New Orleans WIB had not met certain performance standards for its youth programs.63 Contributing to the problems, the New Orleans WIB’s Youth Council, which sets policy for the youth programs, had become fairly inactive, with difficulties establishing quorums at meetings. In addition, its selection process for a contractor to administer the youth programs took longer than expected and delayed the spending of funds for the programs. For the corrective action period, which ran from June 2003 to June 2004, the New Orleans WIB was monitored on the employment rate for older youths exiting the program and the job retention rate for younger youths. Because of the subsequent six-month period for monitoring job retention and the three-month lag in data collection by the Louisiana Department of Labor, the results of the corrective action period will not be available until early 2005.64 In the meantime, the City has taken steps to improve coordination in the youth programs and the provision of services. The New Orleans WIB has revived its Youth Council since June 2003 and added new committees. In September 2003, the City revamped its Office of Workforce Development that works with the New Orleans WIB. The move was part of an effort to strengthen the delivery of the various workforce development programs. The City renamed the office “Job 1.” c. H1-B Technical Skills Training Grant. In 2000, the U.S. Department of Labor awarded the City a grant of approximately $2.7 million to train workers in technology-related jobs. The goal of the grant, which ran from November 2000 to November 2002, was to train 175 existing workers and 175 unemployed, dislocated, or underemployed individuals in the New Orleans region. Approximately $2.6 million of the grant had been spent as of December 31, 2002. d. Welfare-to-Work Funds. In August 1996, Congress reformed the federal welfare laws and created Welfare-to-Work (WtW) grants to states and local governments.65

60 U.S. General Accounting Office, Workforce Investment Act: States’ Spending Is on Track, but Better Guidance Would Improve Financial Reporting, GAO-02-239, November 2002, p. 28. 61 Telephone interview with Karen Zoeller, communications coordinator, Louisiana Workforce Commission, October 15, 2003. 62 29 CFR 2871 (h). 63 Interview with Karen Zoeller, op. cit. 64 Ibid. 65 DOL, Employment and Training Administration (ETA), “Welfare-to-Work Highlights,” http://www.doleta.gov/wtw.


Originally, at least 70% of grant funds were required to be expended on services to long-term welfare recipients.66 However, this minimum standard and other requirements were eliminated in 1999. This made welfare recipients eligible for WtW assistance if they had received welfare assistance for at least 30 months, if they were within 12 months of reaching their assistance time limit, or if they had exhausted their assistance due to the time limit. The federal government funded a total of $3 billion in WtW grants during federal fiscal years 1998 and 1999.67 It allotted 75% of the grant funds on a formula basis to states, which were required to pass through 85% of their shares to local JTPA, WIA, or other administrative agencies. The remaining 25% of grant funds was awarded on a competitive basis directly by the U.S. Department of Labor to local agencies. The City’s WtW funding during the period 1998 to 2002 consisted of state grants of $5.6 million in 1998 and $5.1 million in 1999, as well as a competitive grant of $5 million.68 No additional WtW funds were received. The federal government ended the WtW program on September 30, 2004.69 Through June 2000, OPIC was designated as recipient of WtW funds available to the City. However, the advent of the WIA shifted this authority to New Orleans WIB’s Adult One-Stop Center.70 The City criticized the slow pace of OPIC’s initial spending of the WtW funds, which OPIC blamed on a reluctance of welfare recipients to enroll in the program.71 However, since the shift of funds to the One-Stop Center, the City has increased WtW spending significantly. 5. U.S. Environmental Protection Agency (EPA) During the period 1998 to 2002, the City had two active brownfield redevelopment programs funded by the EPA: a brownfields assessment pilot grant and a revolving loan fund.72 The City administers the programs through the Mayor’s Office of Environmental Affairs, which was created in 1994.73 The office assists owners of possible brownfield property in New Orleans in identifying and assessing site contamination, removing the contamination, and accessing a variety of grants and tax credits.

66 Ibid. 67 Ibid. 68 DOL, ETA, “Welfare-to-Work Highlights,” op. cit. Also, Varney, James, “A Job Undone,” The Times-Picayune, July 18, 1999. 69 DOL, ETA, “Welfare-to-Work Highlights,” op. cit. 70 Information supplied by New Orleans WIB. 71 Varney, James, op. cit. 72 Since 2002, the City has received at least $500,000 in additional grants for brownfields redevelopment. 73 Mayor’s Office of Environmental Affairs, “The New Orleans Brownfields Program,” undated brochure.


The following table summarizes the EPA brownfield grant activity: TABLE: U.S. Environmental Protection Agency Brownfield Grants

Figures in $000s 1998 1999 2000 2001 2002 Total New Orleans Brownfield Pilot Program

- - 80 - 150 230

Total Sources $ - $ - $80 $ - $150 $230 Business Development: City Programs

- - 80 - 150 230

Total Investments $ - $ - $80 $ - $150 $230 Source: EPA. Figures are allocations of grant funds in fiscal years ended September 30. a. National Brownfields Assessment Pilot. In 1995, the City received a $200,000 National Brownfields Assessment Pilot grant from EPA in 1995 to start the New Orleans Brownfields Pilot Program. This enabled the City to develop a database of more than 275 potential brownfield properties.74 EPA granted supplemental funds of $80,000 in 2000 and $150,000 in 2002 for site assessment work on targeted properties.75 b. Brownfields Cleanup Revolving Loan Fund. In 1997, EPA awarded a $350,000 grant to the City to create a Brownfields Cleanup Revolving Loan Fund.76 The fund, which is managed by Bank One Louisiana, provides low-interest loans (or, in some circumstances, interest-free loans) for cleanup of brownfields.77 EPA requires that the City use at least 85% of the fund for cleanup and certification activities at priority sites, in accordance with EPA guidelines.78 The City may use up to 15% of the total award for administrative and legal costs.79 Of program income, the City may use up to 10% of principal repayments and up to 100% of interest and fees for administrative costs.80 Borrowers from the City may use up to 10% of borrowed funds for administrative costs. Borrowers cannot use the borrowed funds for pre-cleanup activities, such as site assessment and identification.81 During the period 1998 to 2002, the City received few applications and approved no loans from the fund.82 Several factors limited the number of applications, including the

74 EPA, National Brownfields Assessment Pilot, New Orleans, LA: Quick Reference Fact Sheet, EPA 500-F-97-025, May 1997. 75 EPA, Brownfields Supplemental Assistance, City of New Orleans, LA: Fact Sheet, EPA 500-F-02-104, May 2002. Also, information supplied by the Mayor’s Office of Environmental Affairs. 76 EPA, Brownfields Cleanup Revolving Loan Fund Pilot, New Orleans, LA, EPA 500-F-99-047, May 1999. 77 Mayor’s Office of Environmental Affairs, op. cit. 78 EPA, Brownfields Cleanup Revolving Loan Fund Pilot, op. cit. 79 EPA, Brownfields Cleanup Revolving Loan Fund Administrative Manual, May 1998, p. VII-3. 80 Ibid., p. VII-6. 81 Mayor’s Office of Environmental Affairs, “Brownfields Cleanup Revolving Loan Fund Application,” undated. 82 Interview with Nathan Champagne, brownfields coordinator, Mayor’s Office of Environmental Affairs, October 25, 2002.


complex approval process and stringent EPA criteria, such as the required Davis-Bacon wage rates. The City awarded its first loan, totaling $325,000, in 2004 after a two-year approval process.83 6. U.S. Small Business Administration Among its assistance programs, the U.S. Small Business Administration (SBA) provides loans for small businesses through its 504 Loan Program. The SBA offers other loan and loan guarantee programs not included in this study because of the lack of available data. SBA 504 Loan Program. The RLC administers the SBA 504 Loan Program in Orleans Parish and 12 neighboring parishes. It also acts as the funding conduit for the loans.84 The loans provide small businesses with subordinate financing for up to 40% of a project’s costs. Borrowers may use the financing to acquire land and improvements, build new facilities or renovate existing ones, or purchase machinery and equipment.85 SBA 504 loans carry a below-market, fixed interest rate and mature in 10 or 20 years.86 The loans typically cover $50,000 to $1 million of the project cost. Loan recipients are required to create or retain one job for every $35,000 provided by SBA. From 1998 to 2002, RLC approved 26 loans through the SBA 504 program, totaling $14.6 million. Approximately $8.6 million was for hotel projects, with the rest spread among other service, commercial, and industrial businesses. The following table describes the general breakdown of the 504 loans: TABLE: U.S. Small Business Administration 504 Loans

Figures in $000s 1998 1999 2000 2001 2002 Total SBA 504 Loan Funds 3,076 1,140 3,162 2,079 5,110 14,566 Total Sources $3,076 $1,140 $3,162 $2,079 $5,110 $14,566 Business Development: Small Business Loans

3,076 1,140 3,162 2,079 5,110 14,566

Total Investments $3,076 $1,140 $3,162 $2,079 $5,110 $14,566 Source: RLC. Figures are loan amounts for the fiscal years ended December 31. Totals may not add due to rounding. 7. Federal Aid to Major Transportation

83 City of New Orleans, press release, “City, Federal Government Announce Brownfields Cleanup Loan Program,” February 9, 2004. 84 SBA, “Certified Development Companies for SBA 504 Program – LA,” http://www.sba.gov/gopher/Local-Information/Certified-Development-Companies/cdcla.txt. 85 SBA, “Certified Development Company (504) Loan Program,” http://www.sba.gov/financing/sbaloan/cdc504.html. 86 RLC, http://www.rlcsbidco.com.


Louis Armstrong International Airport. In 1943, the City established the New Orleans Aviation Board (Board) to operate the city-owned Louis Armstrong New Orleans International Airport (Airport), located in Kenner. From 1998 to 2002, the Airport received funds through the Federal Aviation Administration for various capital improvements. The following table summarizes the funds: TABLE: Federal Grants to Airport

Figures in $000s 1998 1999 2000 2001 2002 Total Federal Aviation Administration 6,788 10,879 11,300 4,353 4,940 38,260 Total Sources $6,788 $10,879 $11,300 $4,353 $4,940 $38,260 Major Transportation: Airport Investment

6,788 10,879 11,300 4,353 4,940 38,260

Total Investments $6,788 $10,879 $11,300 $4,353 $4,940 $38,260 Source: New Orleans Aviation Board, financial statements and auditor’s reports, for the years ended December 31, 1998 to 2002. Figures are grants received. 8. Miscellaneous Federal Funds From 1998 to 2002, the federal government also made the following funds available for economic development programs and projects within the scope of this study: a. Grants. In 2000, Congress approved a $150 million Coastal Impact Assistance Program providing one-time grants to Louisiana and six other oil-producing coastal states through the National Oceanic and Atmospheric Administration. Louisiana received approximately $26.4 million.87 From this amount, the City received $616,000 for the redevelopment of Lincoln Beach. Separately, the National D-Day Museum development received three federal grants during the period. The Department of the Army provided grants in 1998 and 2000, for $2 million and $2.1 million, respectively, to fund construction of the existing museum. In 2002, the Department of Defense provided $4.25 million for building and land acquisition costs related to the museum’s proposed expansion.88 The following table summarizes the miscellaneous federal grants: TABLE: Miscellaneous Federal Grants

Figures in $000s 1998 1999 2000 2001 2002 Total Coastal Impact Grant, Allocated Amount

- - - - 616 616

Expended Amounts of 1998 Army Grant

- 902 1,098 - - 2,000

87 Louisiana Department of Natural Resources, news release, “DNR progressing with plan for coastal impact assistance funding,” April 26, 2001. 88 The National D-Day Museum Foundation, Inc., financial statements and auditor’s reports, for the year ended June 30, 2002, p. 7.


Expended Amounts of 2000 Army Grant

- - - 585 1,515 2,100

Expended Amounts of 2002 Defense Grant

- - - - 271 271

Total Sources $ - $902 $1,098 $585 $2,402 $4,987 Urban Redevelopment Project

- - - - 616 616

Tourism Development: Tourism Infrastructure

- 902 1,098 585 1,786 4,371

Total Investments $ - $902 $1,098 $585 $2,402 $4,987 Source: City Council Ord. Cal. No. 24,119; National Oceanic and Atmospheric Administration; The National D-Day Museum Foundation Inc., financial statements and auditor’s reports, for the eighteen month period ended June 30, 1999 and for the years ended June 30, 2000 to 2002. Coastal Impact Grant is the allocated amount. D-Day Museum grants are expended amounts. b. Appropriations. In 1998 and 1999, the Department of Defense appropriated a total of $32.1 million for telecommunications infrastructure and equipment at the Department of the Navy’s Space and Naval Warfare Systems Command (SPAWAR) Information Technology Center at the University of New Orleans Research and Technology Park.89 In 1998, Congress approved a highway and mass transit bill that included a $6 million grant for road improvements near the Union Passenger Terminal downtown.90 From this money, approximately $1.6 million was spent on construction of a road for the New Orleans Arena.91 TABLE: Miscellaneous Federal Appropriations

Figures in $000s 1998 1999 2000 2001 2002 Total Defense Appropriations, Appropriated Amounts

18,467 13,678 - - - 32,146

Highway Appropriation, Expended Amounts

100 - 1,095 375 - 1,570

Total Sources $18,567 $13,678 $1,095 $375 $ - $33,715 Business Development: Research & Development

18,467 13,678 - - - 32,146

Sports Subsidies: Sports Facilities

100 - 1,095 375 - 1,570

Total Investments $18,567 $13,678 $1,095 $375 $ - $33,715 Source: Louisiana Stadium and Exposition District, financial statements and auditor’s reports, for the years ended June 30, 1998 to 2002; information supplied by SPAWAR Information Technology Center data. Defense Appropriations are appropriated amounts by federal fiscal years ended September 30. Highway Appropriation is expenditure of amounts by Louisiana Stadium and Exposition District.

89 SPAWAR Information Technology Center, list of congressional funding received in federal fiscal years 1998 and 1999, September 7, 2004. 90 Alpert, Bruce, and Bill Walsh, “Highway bill gets OK from Congress,” The Times-Picayune, May 23, 1998, Section: National, p. A1. 91 LSED, financial statements and auditor’s reports, for the years ended June 30, 1998 to 2002. Also, Regional Planning Commission, presentation by Executive Director Walter Brooks, February 18, 2004.


B. State Sources In this section, BGR included state economic development funds expended in New Orleans. However, it excluded state tax incentives (such as corporate income tax credits) that did not affect City revenues. The subparts of this section are:

1. Capital Outlay a. Expenditures b. Other Allocations for which Expenditure Data Was Limited

2. Louisiana Department of Economic Development (LED) a. Economic Development Award Program (EDAP) b. Workforce Development and Training Program

3. Louisiana Department of Labor a. Incumbent Worker Training Program

4. Governor’s Office of Urban Affairs and Development a. Urban Affairs grant fund

5. Miscellaneous State Funds a. Appropriations b. Grants

1. Capital Outlay The City and various local public agencies and private entities have received allocations of funds directly from the State’s capital budget. These capital outlays are presented in two forms in this report because of data limitations. a. Expenditures. Actual expenditures of state capital funds for the period 1998 to 2002 were reported by the governing entities for the Port of New Orleans (Port), Airport, Audubon Aquarium of the Americas (Aquarium), Audubon Zoo (Zoo), Ernest N. Morial New Orleans Convention Center (Convention Center), the National D-Day Museum, and the Louisiana Gene Therapy Research Consortium. These expenditures are summarized in the following table: TABLE: State Capital Outlay Expenditures

Figures in $000s 1998 1999 2000 2001 2002 Total State Capital Outlay 28,240 18,561 22,074 9,405 23,494 101,774 Total Sources $28,240 $18,561 $22,074 $9,405 $23,494 $101,774 Business Development: Research & Development (Louisiana Gene Therapy Research Consortium)

- - - 2,825 1,705 4,531


Major Transportation: Airport Investment - - - 1,266 3,734 5,000 Port Investment 2,844 1,631 10,694 2,269 3,887 21,325


Convention Center 28,587 11,322 - - - 39,909 Aquarium 187 3,201 371 613 109 4.480 Zoo 1,036 2,140 5,507 2,362 425 11,469 National D-Day Museum

- 761 5,503 71 - 6,335

Retained Funds (4,414) (494) - - 13,534 8,726 Total Investments $28,240 $18,561 $22,074 $9,405 $23,494 $101,774 Sources: Financial statements and auditor’s reports for the Board of Commissioners of the Port of New Orleans, the New Orleans Aviation Board, the Louisiana Gene Therapy Research Consortium, the Ernest N. Morial New Orleans Exhibition Hall Authority, the Audubon Commission, and The National D-Day Museum Foundation, Inc. Figures are expenditures of grant funds for the fiscal years ended December 31, except for the Port fiscal years, which ended June 30. Totals may not add due to rounding. b. Other Allocations for which Expenditure Data Was Limited. During the period 1998 to 2002, another 19 projects falling within the scope of this study received capital outlay awards. Because of limited available expenditure data, the appropriations as approved by the Louisiana State Bond Commission are provided below. The commission gives final approval to the outlays approved by the State Legislature. TABLE: State Capital Outlay Allocations

Figures in $000s 1998 1999 2000 2001 2002 Total State Capital Funds 12,077 3,160 18,211 9,650 8,245 51,343 Total Sources $12,077 $3,160 $18,211 $9,650 $8,245 $51,343 Business Development:

For-Profit Projects 8,203 1,000 - 1,000 - 10,203 City Project 1,500 - - - - 1,500 Nonprofit Project - 575 5,075 100 1,000 6,750 Research & Development

- - 6,375 - 7,000 13,375

Targeted Neighborhood Business Assistance

- - - 660 - 660

Community Improvement: Community Infrastructure

- - 1,500 - - 1,500

Government: Military Affairs

1,440 1,465 131 1,850 - 4,886


934 120 - 40 245 1,339

Urban Redevelopment Projects

- - 5,130 6,000 - 6,000

Total Investments $12,077 $3,160 $18,211 $9,650 $8,245 $51,343 Source: State of Louisiana, Division of Administration, Office of Facility Planning and Control. Figures are capital outlay amounts approved by the State Bond Commission in the fiscal years ended June 30. Totals may not add due to rounding.


Since 2002, the State has made two notable capital outlay investments for biomedical research. One is a $10 million grant to the New Orleans Bio Innovation Center Inc. for the construction of a “wet lab” business incubator for biomedical research companies. The second is to the Louisiana Gene Therapy Research Consortium for $13.8 million for the construction of a clinical manufacturing facility. 2. Louisiana Department of Economic Development (LED) LED directly oversees two grant programs to assist individual businesses: one for infrastructure and another for customized job training. a. Economic Development Award Program (EDAP). LED administers the EDAP, which was created in 1995 to provide grants for publicly owned infrastructure to assist industrial or business developments. Infrastructure projects are defined as new construction, improvement, or expansion of roadways, parking facilities, equipment, bridges, railroad spurs, water works, sewerage, buildings, ports, and waterways.92 LED oversees the program through the Louisiana Economic Development Corporation. Eligible expenditures are engineering/architectural expenses, site acquisition and preparation, construction costs, and capital equipment having a depreciable life of at least seven years. Certain types of capital equipment are not eligible for EDAP awards, such as furniture, fixtures, and computer or transportation equipment.93 Basic infrastructure projects must create or retain at least 10 permanent Louisiana jobs. Louisiana companies locating elsewhere in the state cannot receive EDAP assistance, unless the company presents evidence that it is likely to relocate outside of the state or its expansion will significantly increase jobs and capital investment.94 In 2002, the State Legislature expanded EDAP to include the Louisiana Opportunity Fund. The fund, commonly called the “deal closing fund,” is intended to provide infrastructure financing to attract new business to the state or spur expansion when the governor judges a highly competitive bidding situation to exist between Louisiana and other states.95 As of May 2004, no awards had been made from the fund.96 LED did not approve any EDAP funds for Orleans Parish projects during the state fiscal years 1998 to 2002. In fiscal 2003, the movie productions of “Runaway Jury” and “Unchain My Heart,” now titled “Ray,” both filmed in New Orleans, received EDAP awards of $547,085 and $611,000, respectively. Of these amounts, 97% and 94%, respectively, had been expended as of January 2004.97 92 Louisiana Administrative Code, Title 13, Part III, Sec. 103. 93 State of Louisiana, Office of the Legislative Auditor, Economic Development Award Program, May 2004, p. 1. 94 Ibid., Sec. 109. 95 Ibid., Sec. 103. 96 Legislative Auditor, Economic Development Award Program, op. cit., p. 2. 97 Ibid., Appendix E, p. 3.


b. Workforce Development and Training Program. The Workforce Development and Training Program provides customized training for employees of businesses that either want to locate in Louisiana or expand existing facilities. Although not required by statute, LED generally makes the awards available to businesses that have been in the state for less than three years to avoid duplication of services with the State Department of Labor’s Incumbent Worker Training Program (see below).98 During the period from 1998 to 2002, two awards were made to companies located in Orleans Parish: Riverbarge, $149,021; and Tidewater Inc., $500,000. Prior to 1998, two other New Orleans businesses received awards: Castle Rock Pavers, $203,873; and Lockheed Martin, $89,178. The following table summarizes the Orleans Parish awards from 1998 to 2002: TABLE: State Workforce Development & Training Program

Figures in $000s 1998 1999 2000 2001 2002 Total Program Funds 500 149 - - - 649 Total Sources $500 $149 $ - $ - $ - $649 Business Development: Customized Employee Training

500 149 - - - 649

Total Investments $500 $149 $ - $ - $ - $649 Source: LED. Figures are grant allocations made during the fiscal years ended June 30. 3. Louisiana Department of Labor Incumbent Worker Training Program. The State Legislature created the Incumbent Worker Training Program, administered by the Louisiana Department of Labor, in 1997 to provide customized training to employees of individual businesses or groups of businesses.99 The businesses must have been located in the state for at least three years.100 The program, funded through state wage taxes, was authorized at $6 million a year in fiscal years 1998 and 1999. In fiscal year 2000, funding was increased to $50 million a year. In 2003, the State Legislature voted to renew the program for four more years. The department contracts with training providers, instead of the businesses themselves. Training providers range from technical colleges to universities to private job training organizations. The program funds are provided on a cost reimbursement basis to the training providers, which submit invoices to the department.101

98 Louisiana State Legislature, House Select Committee on Fiscal Affairs, Select Committee on Fiscal Affairs Final Report, March 23, 2001, p. 10. 99 Legislative Auditor, Department of Labor: Training Activities, op. cit., p. 20. 100 House Select Committee on Fiscal Affairs, Final Report, op. cit., p. 9. 101 Legislative Auditor, Department of Labor: Training Activities, op. cit., p. 4.


While the Incumbent Worker Training Program has received substantial funding over its lifetime, the State has been slow to expend the funds. State Legislative Auditor figures show more than $110 million in taxes and interest funded the program from inception to February 2002.102 But expenditures of these funds during that period totaled only $21.3 million, of which 29% paid for administrative costs. Through May 2003, 34 Orleans Parish businesses or associations had been awarded training assistance totaling approximately $10 million of the program’s appropriations during 1998 to 2002. The businesses represented many different industries, from engineering firms to hotels to transportation companies. The following table summarizes the Orleans Parish awards: TABLE: State Incumbent Worker Training Program

Figures in $000s 1998 1999 2000 2001 2002 Total Program Funds 540 266 4,984 3,634 584 10,007 Total Sources $540 $266 $4,984 $3,634 $584 $10,007 Business Development: Customized Employee Training

540 266 4,984 3,634 584 10,007

Total Investments $540 $266 $4,984 $3,634 $584 $10,007 Source: Louisiana Department of Labor. Figures are grant allocations made during fiscal years ended June 30. Awards of 2002 funds incomplete as of May 2003 information provided to BGR. Totals may not add due to rounding. 4. Governor’s Office of Urban Affairs and Development Urban Affairs grant fund. The Governor’s Office of Urban Affairs and Development administers a grant fund for members of the Legislative Black Caucus to distribute to nonprofit organizations in their districts. The nonprofit groups conduct a variety of programs in line with the office’s mission of assisting disadvantaged urban residents, from computer training to elderly services to youth development. From fiscal years 1998 through 2002, the fund awarded approximately $16.2 million to grant recipients in New Orleans. Of this amount, $14.3 million funded various social services administered by New Orleans nonprofit organizations. The remainder funded housing assistance, job training, and other programs. The following table summarizes the awards: TABLE: Governor’s Office of Urban Affairs grants

Figures in $000s 1998 1999 2000 2001 2002 Total Program Funds 3,168 3,077 3,614 3,731 2,626 16,216 Total Sources $3,168 $3,077 $3,614 $3,731 $2,626 $16,216 Community Improvement:

Housing Assistance 601 319 359 236 153 1,669 Other Community Projects - - - 54 112 166

102 Ibid., p. 23.



2.566 2.758 3.235 3.431 2.346 14.336


- - 20 10 15 45

Total Investments $3,168 $3,077 $3,614 $3,731 $2,626 $16,216 Source: Governor’s Office of Urban Affairs and Development. Figures are award amounts made during fiscal years ended June 30. Totals may not add due to rounding. 5. Miscellaneous State Funds The following state funds were supplied during the period for economic development programs and projects within the scope of this study. a. Appropriations. The State Legislature provided a series of appropriations during the period 1998 to 2002 to fund the construction of the SPAWAR Information Technology Center at the University of New Orleans Research and Technology Park. Separately, as part of its investment in biomedical research in New Orleans, the State appropriated funds to the Louisiana Gene Therapy Research Consortium. The consortium, which began operations in 2000, consists of Louisiana State University Health Sciences Centers in New Orleans and Shreveport and Tulane University Health Sciences Center in New Orleans. The funding, channeled through the Louisiana Board of Regents, pays for the establishment of laboratories and the recruitment of scientists and researchers. TABLE: Miscellaneous State Appropriations

Figures in $000s 1998 1999 2000 2001 2002 Total Miscellaneous Appropriations: Consortium

- - - 2,480 2,500 4,980

Louisiana Gene Therapy Research Consortium, related revenues

- - - 50 25 75

Miscellaneous Appropriations: SPAWAR Information Technology Center

12,000 18,500 18,250 - 17,749 63,974

Total Sources $12,000 $18,500 $18,250 $2,530 $17,749 $69,029 Administrative Costs (Consortium)

- - - 170 429 598

Business Development: Research & Development

Consortium - - - 1,460 2,416 3,876 Technology Center 12,000 18,500 18,250 - 15,224 63,974

Retained Funds - - - 900 (319) 580 Total Investments $12,000 $18,500 $18,250 $2,530 $17,749 $69,029 Source: Louisiana Gene Therapy Research Consortium and University of New Orleans Research and Technology Foundation financial statements and auditors reports. Consortium figures are revenues expenditures for fiscal years ended June 30, 1998 to 2002. Foundation figures are annual appropriations


received for the fiscal years ended December 31, 1998 to 2000, and June 30, 2001 to 2002. Totals may not add due to rounding. b. Grants. The New Orleans Business and Industrial District, now called the New Orleans Regional Business Park, received grants to study a proposed motor speedway development, to renovate its Enterprise Center building, and to increase cleanup efforts in the district. The New Orleans Museum of Art received state funds to cover portions of the costs of its Degas, Louisiana Purchase, and other exhibits. It also received an annual operating subsidy. The following table summarizes the miscellaneous state financing: TABLE: Miscellaneous State Grants

Figures in $000s 1998 1999 2000 2001 2002 Total Miscellaneous Grants 264 291 115 508 763 1,941 Total Sources $264 $291 $115 $508 $763 $1,941 Business Development: City Programs

- - 37 163 144 345

Community Improvement: Other Community Projects

64 41 77 70 72 314

Tourism Development: Special Events

200 250 - 275 546 1,282

Total Investments $264 $291 $115 $508 $763 $1,941 Source: New Orleans Business and Industrial District and New Orleans Museum of Art financial statements and auditors’ reports for the fiscal years ended December 31, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Other Investment. Another significant state investment in biomedical research in New Orleans took effect in fiscal 2003. The State Legislature authorized a 12-cent increase in the state tax on packs of cigarettes, 25% of which will fund the Louisiana Cancer Research Center in New Orleans.103 The Legislative Fiscal Office forecasts approximately $6.8 million in annual tax revenue for the center. It will use the revenue to finance construction of its research facilities and development of its research programs.104

103 Louisiana State Legislature, Act 19 of 2002 Regular Session. 104 Louisiana Cancer Research Consortium, http://www.lacrc.net.


C. Local Sources The local sources are organized by five types: Taxes, Other Local Sources for Economic Development, Public Benefit Corporations, Foregone Revenue, and Bond Proceeds Summary. The Overview Section describes the scope and limitations for selecting the following sources. The subparts of this section are: TAXES

1. Audubon Commission Taxes 2. Convention Center Taxes, including:

a. Exhibition Hall Authority’s Hotel Occupancy Tax b. Food and Beverage Tax c. Service Contractor Tax d. Tour Tax

3. Downtown Development District Tax 4. Hotel Occupancy Privilege Tax

5. Hotel Occupancy Taxes, including specific levies for:

a. Exhibition Hall Authority b. Louisiana Stadium and Exposition District c. State General Fund

i. New Orleans Metropolitan Convention and Visitors Bureau ii. New Orleans Area Tourism and Economic Development Fund

(including Grant Program for Orleans Parish Legislators) d. Regional Transit Authority

6. New Orleans Business and Industrial District Tax 7. Economic Development Fund Tax

OTHER LOCAL SOURCES OF ECONOMIC DEVELOPMENT FUNDING

1. City Bond Proceeds a. Expenditures b. Other Allocations for which Expenditure Data Was Limited

2. City General Fund 3. Harrah’s Payments to New Orleans Tourism Marketing Corporation

4. Jazzland Payments to NOLA Economic Development Corporation


5. Louisiana Stadium and Exposition District, Operating Revenues

6. Miscellaneous Capital Funds

7. New Orleans Tourism Marketing Corporation, Other Revenues

8. Settlement Proceeds, including: a. CSX Settlement Proceeds b. MacFrugal’s Settlement Proceeds (including Industrial Development

Board of New Orleans Inc.) c. NOPSI/Entergy Settlement Proceeds (including City Council/Entergy

Economic Development Fund)

9. Urban Development Action Grant Repayment Fund PUBLIC BENEFIT CORPORATIONS

1. Canal Street Development Corporation 2. French Market Corporation

3. New Orleans Building Corporation

4. Piazza D’Italia Development Corporation

5. Rivergate Development Corporation

6. Upper Pontalba Building Restoration Corporation

FOREGONE REVENUE

1. Enterprise Zone Rebates 2. Industrial Tax Exemption

3. Payments in Lieu of Taxes, including the following projects:

a. Days Inn Hotel b. American Can Apartments c. Saulet Apartments d. Jazzland Theme Park/Six Flags New Orleans e. Crescent Crown Warehouse f. Public Housing Redevelopments

4. Restoration Tax Abatement a. Commercial Properties b. Residential Properties


5. Tax Increment Financing, including the following projects:

a. St. Thomas Redevelopment b. Lowe’s Home Improvement Store (TIF-like arrangement) c. Algiers Economic Development District d. World Trade Center Hotel

6. Other Foregone Revenue: Sports Team Tax Exemptions

BOND PROCEEDS SUMMARY TAXES The tax sources contained in this subsection represent individual levies for economic development purposes. 1. Audubon Commission Taxes The Audubon Commission was established in 1914 by the State Legislature to manage and operate Audubon Park and Audubon Zoo (Zoo).105 Since the mid-1980s, the commission’s purview has expanded to include the Audubon Aquarium of the Americas (Aquarium) and Entergy IMAX Theatre, Woldenberg Riverfront Park, and other facilities. The commission is governed by a 24-member board, appointed by the mayor with approval of the City Council. The commission contracts with the Audubon Nature Institute, a private, non-profit organization, to operate and manage its facilities. The institute has a 32-member board, elected by members of the Audubon Louisiana Nature Center, Zoo, and Aquarium. The commission receives two ad valorem property tax millages: 0.44 mills for the Zoo and 4.11 mills for the Aquarium, Woldenberg Riverfront Park, and related facilities. The tax collections are deposited with the Board of Liquidation, City Debt, to repay the debt service on bonds for the Zoo and Aquarium. Any excess revenues may be withdrawn to fund other purposes authorized by voters, such as maintenance, operations, and marketing. Outstanding tax-supported debt as of December 31, 2002 totaled $44.5 million.106 The following table summarizes the tax revenues and expenditures: TABLE: Aquarium and Zoo taxes

Figures in $000s 1998 1999 2000 2001 2002 Total Aquarium & Riverfront Park:

Current & Prior Year Taxes 5,863 5,969 6,514 6,668 6,963 31,976 105 Audubon Commission, financial statements and auditor’s report, for the year ended December 31, 2002, p. 15. 106 Ibid., p. 12.


Related Revenues 24 15 10 10 16 75 Audubon Zoo:

Current & Prior Year Taxes 628 639 697 714 745 3,423 Related Revenues 20 16 21 19 11 87

Total Sources $6,535 $6,639 $7,242 $7,411 $7,735 $35,561 Tourism Development: Tourism Infrastructure

Aquarium & Park, Debt Service

3,865 3,868 3,866 3,868 3,806 19,273

Aquarium & Park, Other Expenditures

2,054 2,112 2,528 2,881 3,060 12,635

Zoo, Debt Service 375 377 378 373 373 1,875 Zoo, Other Expenditures 276 277 327 368 370 1,618

Retained Funds (36) 5 144 (79) 126 160 Total Investments $6,535 $6,639 $7,242 $7,411 $7,735 $35,561 Source: Board of Liquidation, City Debt, annual statements for the years ended December 31, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Retained funds are sources not drawn for debt service or other purposes. 2. Convention Center Taxes The Ernest N. Morial New Orleans Convention Center (Convention Center) opened in 1985; it was first expanded in 1991 (Phase II) and again in 1999 (Phase III). Bonds have been sold to finance a fourth expansion (Phase IV). The Ernest N. Morial New Orleans Exhibition Hall Authority (Exhibition Hall Authority) levies four taxes dedicated to the repayment of bonds issued to finance the Convention Center’s expansions and other purposes, such as building the Exhibition Hall Authority’s general fund reserves, prepaying debt, and funding Convention Center expansion projects.107 The taxes are: the Exhibition Hall Authority’s Hotel Tax, the Food and Beverage Tax, the Service Contractor Tax, and the Tour Tax (collectively, the Convention Center Taxes). They are separate and distinct from the Exhibition Hall Authority’s 2% and 1% hotel occupancy taxes (collectively, the Exhibition Hall Authority Hotel Occupancy Taxes). Both sets of taxes are also separate and distinct from the City’s Hotel Occupancy Privilege Tax. Both the Exhibition Hall Authority Hotel Occupancy Taxes and the Hotel Occupancy Privilege Tax are discussed later in the Local Sources section. a. Exhibition Hall Authority’s Hotel Tax. Since 1988, the Exhibition Hall Authority has imposed a tax on hotel rooms, which was passed by the State Legislature108 and subsequently approved by Orleans Parish voters in 1987.109 The levy, which functions as

107 Cooperative Endeavor Agreement by and among the Ernest N. Morial New Orleans Exhibition Hall Authority, the Louisiana Restaurant Association, and the Greater New Orleans Hotel-Motel Association, May 8, 2002, p. 4. 108 Louisiana State Legislature, Act 390 of 1987. 109 Exhibition Hall Authority, financial statements and auditor’s report, for the year ended December 31, 2002, p. 28.


a surcharge, is 50 cents per occupied hotel room per night for hotels with 10 to 299 rooms; $1 for hotels with 300 to 999 rooms; and $2 for hotels with 1,000 or more rooms. b. Food and Beverage Tax. The Exhibition Hall Authority levies a 0.5% tax on food and beverages sold at “food service establishments” in Orleans Parish or at the Airport.110 The Food and Beverage Tax is collected, and reported, with the Exhibition Hall Authority’s Hotel Occupancy Tax. In 2002, the State Legislature authorized the Exhibition Hall Authority to increase the Food and Beverage Tax by 0.25% to support bonds for construction of Phase IV.111 The Exhibition Hall Authority imposed this tax effective July 1, 2002. c. Service Contractor Tax. The Exhibition Hall Authority levies a tax on contractors who provide goods and services for trade shows, conventions, and exhibitions in Orleans Parish.112 The tax is levied at 2% of the total charges paid by the exhibitor to the service contractor for furnishing the goods and services.113 d. Tour Tax. The Exhibition Hall Authority levies a $1 tax per capita on the sale of tickets for sight-seeing tours in Orleans Parish.114 Convention Center Taxes are spent in conjunction with the Exhibition Hall Authority Hotel Occupancy Taxes to pay debt service and other expenditures. Because of this, BGR has listed the investments funded by both sets of taxes under the Exhibition Hall Authority Hotel Occupancy Taxes table later in the Local Sources section. The following table depicts only the revenues from the Convention Center Taxes from 1998 to 2002: TABLE: Convention Center Taxes

Figures in $000s 1998 1999 2000 2001 2002 Total Exhibition Hall Authority’s Hotel Tax and Food & Beverage Tax Revenues

8,460 9,169 9,254 9,697 11,089 47,669

Service Contractor/Tour Tax Revenues

1,555 1,789 2,093 1,617 1,862 8,916

Total Sources $10,014 $10,959 $11,347 $11,314 $12,951 $56,585 Investments Included in table of Exhibition Hall Authority Hotel Occupancy Taxes Below

- - - - - -

Source: Exhibition Hall Authority financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues. Totals may not add due to rounding. 3. Downtown Development District Tax

110 Louisiana State Legislature, Act 390 of 1987. 111 Louisiana State Legislature, Act 72 of 2002 First Extraordinary Session. 112 Louisiana State Legislature, Act 42 of 1994. 113 Exhibition Hall Authority, financial statements, op. cit., p. 29. 114 Louisiana State Legislature, Act 42 of 1994.


In 1974, the State Legislature created the Downtown Development District (DDD), a special taxing district for downtown New Orleans.115 The boundaries of the district are the Mississippi River, the Pontchartrain Expressway, Claiborne Avenue, and Iberville Street. The DDD is authorized to levy up to 22.97 mills of ad valorem property tax on land and buildings within its boundaries. The levy has remained at 15.9 mills for several years.116 State law creating the DDD lists the uses of the tax as enhanced sanitation and police services, capital improvements, facilities, and other operations of the district. From fiscal years 1998 to 2002, DDD operating expenditures exceeded its revenues. The following table summarizes the revenues and expenditures: TABLE: Downtown Development District

Figures in $000s 1998 1999 2000 2001 2002 Total DDD Tax Revenues 3,763 3,896 4,785 5,408 4,701 22,552 DDD Other Revenues 413 312 271 398 375 1,770 Total Sources $4,176 $4,208 $5,057 $5,805 $5,076 $24,322 Administrative Costs 852 959 1,312 1,404 1,514 6,041 Business Development: DDD Programs

4,099 3,881 4,556 4,489 3,641 20,666


- - - 264 539 803

Retained Funds (775) (632) (811) (353) (618) (3,188) Total Investments $4,176 $4,208 $5,057 $5,805 $5,076 $24,322 Source: DDD financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Table excludes allocations from the New Orleans Area Tourism and Economic Development Fund to the DDD. These are presented in the table for that fund below to avoid double counting. Table also excludes expenditures of bond proceeds. Retained funds are annual drawdowns of the DDD’s fund balance to cover expenditures in excess of revenues. The 2000 expenditures include some capital projects expense. To avoid double counting, the table excludes an annual grant to the DDD from 1998 to 2002 from the New Orleans Area Tourism and Economic Development Fund. These grants are included in the figures for that fund below. These grant funds were dedicated to the DDD’s Goodwill Ambassador program, which was terminated in March 2000, and Hospitality Ranger program, which was begun in August 2000. From these grants, the DDD had recorded unspent revenues of $705,000 as of December 31, 2002. The table also excludes a total $2.5 million in expenditures of proceeds from a $7.4 million tax-supported bond issue in 2001. As discussed at the beginning of the Sources Summary, bond proceeds are treated separately at the end of the section to avoid double counting with annual debt service costs. Expenditures through February 2004 consist of landscaping, signs, and banners throughout downtown and architectural and consulting

115 DDD, financial statements and auditor’s report, for the year ended December 31, 2002, p. 17. 116 Information supplied by DDD.


fees on the proposed Canal Street improvements.117 The DDD will invest its remaining bond proceeds and other funds in the Canal Street improvements. The DDD’s participation in this project is discussed more fully under the Canal Street Development Corporation description later in the Local Sources section. 4. Hotel Occupancy Privilege Tax The Hotel Occupancy Privilege Tax is used to fund the New Orleans Tourism Marketing Corporation (NOTMC).118 The tax, which functions as a surcharge, is levied at a rate of 50 cents per occupied hotel room per night for hotels with 3 to 299 rooms, and $1 for hotels with 300 or more rooms. The tax is separate and distinct from the Convention Center Taxes and the Exhibition Hall Authority Hotel Occupancy Taxes, as previously discussed. The following table lists NOTMC’s annual Hotel Occupancy Privilege Tax revenues. Because the tax revenues are spent in conjunction with several other NOTMC funding sources, the investments of all NOTMC revenues are presented in a later table under New Orleans Tourism Marketing Corporation, Other Revenues. TABLE: Hotel Occupancy Privilege Tax

Figures in $000s 1998 1999 2000 2001 2002 Total Hotel Occupancy Privilege Tax 3,912 4,181 4,303 4,090 4,479 20,964 Total Sources $3,912 $4,181 $4,303 $4,090 $4,479 $20,964 Investments Included in Table of NOTMC Other Revenues Below

- - - - - -

Source: NOTMC financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues. Total may not add due to rounding. 5. Hotel Occupancy Taxes Hotel Occupancy Taxes are paid by the occupant of a hotel room based on a percentage of the rent charged by the hotel. The current tax rate totals approximately 13% in Orleans Parish, an aggregate of several individual Hotel Occupancy Taxes: Tax Recipient Rate (%) City General Fund 1.5 Orleans Parish School Board General Fund 1.5 Exhibition Hall Authority 3.0 Louisiana Stadium and Exposition District 4.0 State General Fund119 2.0 Regional Transit Authority 1.0 Total Hotel Occupancy Taxes 13.0 117 DDD, description of the “Downtown Revival!” capital improvement program, http://www.neworleansdowntown.com/pages/index.cfm?DocID=65. 118 City Council Ord. Nos. 14,118 and 14,138 MCS, approved Oct. 4, 1990. 119 Figure is rounded. Actual rate is 1.97%.


In this report, BGR has included taxes paid to the Exhibition Hall Authority, the Louisiana Stadium and Exposition District (LSED), dedications of part of the Regional Transit Authority tax to the New Orleans Tourism Marketing Corporation (NOTMC), and dedications of Orleans Parish collections of Hotel Occupancy Taxes for the State General Fund. BGR has excluded the City General Fund and Orleans Parish School Board shares, which finance the general operations of the respective governments. The annual collections, by fiscal year, of the four entities reviewed in this section are summarized in the following table. The figures for the LSED and State General Fund reflect fiscal years ending June 30; the other two, December 31. Amounts are net of City or State tax collection fees: TABLE: Summary of Hotel Occupancy Taxes Included in Study

Figures in $000s 1998 1999 2000 2001 2002 Total Exhibition Hall Authority $11,466 $12,724 $14,760 $12,977 $17,667 $69,594 LSED 24,833 28,231 31,611 32,980 32,729 150,383 State General Fund 11,574 12,156 14,516 14,074 14,793 67,113 Regional Transit Authority, NOTMC Share

- - 1,133 2,847 3,064 7,043

Total Tax Revenues $47,872 $53,110 $62,019 $62,878 $68,253 $294,133 Source: Financial statements and auditors’ reports for the Exhibition Hall Authority, LSED, NOTMC, and Regional Transit Authority; State Treasurer’s office data; BGR calculations. Figures are revenues for LSED and State General Fund fiscal years ended June 30 and Exhibition Hall Authority, NOTMC, and Regional Transit Authority fiscal years ended December 31. Figures exclude interest income and other related revenues. Totals may not add due to rounding. a. Exhibition Hall Authority. In 1978, the State Legislature approved the creation of a 1% Hotel Occupancy Tax dedicated to the development of the Convention Center in New Orleans.120 The tax was increased to 2% effective October 1980.121 In 2002, the State Legislature approved an additional 1% Hotel Occupancy Tax to fund the development of Phase IV.122 The tax took effect July 1, 2002, allowing the Exhibition Hall Authority to receive six months of revenue in its fiscal year ended December 31, 2002. This additional revenue helped to pay for debt service and other purposes, including consulting services, site preparation, and construction-related costs for Phase IV.123 As previously discussed, the Exhibition Hall Authority Hotel Occupancy Taxes are separate and distinct from the Convention Center Taxes and the Hotel Occupancy Privilege Tax.

120 Louisiana State Legislature, Act 305 of 1978. 121 Exhibition Hall Authority, financial statements, op. cit., p. 27. 122 Louisiana State Legislature, Act 72 of 2002 First Extraordinary Session. 123 Exhibition Hall Authority, financial statements, op. cit., p. 27. Also, Cooperative Endeavor Agreement among the Exhibition Hall Authority, the Louisiana Restaurant Association, and the Greater New Orleans Hotel-Motel Association, op. cit., p. 4.


The following table summarizes the tax receipts and related revenues, such as interest and other income on its debt service and capital projects funds. Because the Exhibition Hall Authority Hotel Occupancy Taxes are spent in conjunction with the Convention Center Taxes, the table also includes investments of both sets of taxes: TABLE: Exhibition Hall Authority Hotel Occupancy Taxes

Figures in $000s 1998 1999 2000 2001 2002 Total Plus: Convention Center Taxes From Earlier Table

$10,014 $10,959 $11,347 $11,314 $12,951 $56,585

Exhibition Hall Authority Hotel Occupancy Tax

11,466 12,724 14,760 12,977 17,667 69,594

Related revenues 2,363 1,703 1,435 1,641 1,163 8,304 Total Sources $23,843 $25,385 $27,542 $25,932 $31,781 $134,483 Tourism Development: Tourism Infrastructure

Convention Center, Debt Service

12,988 14,494 14,487 16,445 16,688 75,102

Convention Center, Development Costs

- - 10,980 6,114 12,371 29,465

Retained Funds 10,855 10,891 2,075 3,373 2,722 29,916 Total Investments $23,843 $25,385 $27,542 $25,932 $31,781 $134,483 Source: Exhibition Hall Authority financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Retained Funds are excess current year sources retained in various fund balances. b. Louisiana Stadium and Exposition District. Created in 1966,124 the Louisiana Stadium and Exposition District (LSED) levies a 4% Hotel Occupancy Tax in both Orleans and Jefferson parishes (LSED Hotel Occupancy Tax). The LSED first used its tax revenues to finance the construction of the Louisiana Superdome (Superdome). In the 1990s, the LSED issued additional bonds for several projects, including the New Orleans Arena (Arena) and improvements to the Superdome in Orleans, as well as Zephyr Field and a training facility for the New Orleans Saints football team (Saints) in Jefferson. Under State law, LSED Hotel Occupancy Tax revenue is subject to four primary dedications (Primary Dedications), listed in order in the following table. State law further requires that any surplus remaining after these dedications must be distributed to a series of additional dedications (Additional Dedications), also listed in the following table: Primary Dedications Maximum Annual

Amount Debt Service As needed Operations and Maintenance As needed Renewal and Replacement Reserve $2,300,000 Greater New Orleans Sports Foundation 500,000 Additional Dedications

124 La. Const. Ancillaries, Art. 14, Sect. 47.


Jefferson Parish Tourism Promotion 1.13% of gross hotel tax New Orleans Recreation Dept. $2,200,000 Xavier University 250,000 Southern University at New Orleans’ small business center

250,000

Jefferson Parish - Westbank Sports and Civic Center (Alario Center)

500,000

University of New Orleans School of Hotel, Restaurant, and Tourism Administration

250,000

New Orleans Visitor Information Center 350,000 Remainder: LSED Economic Development Fund Any remainder The LSED had no surplus from the tax in fiscal 1998. In fiscal years 1999 through 2001, the tax generated too little surplus to fully fund the Additional Dedications. State law provides, however, that pro-rata shares of the surplus must be paid in the event of an inadequate surplus. The inadequate surpluses also meant that no revenues were deposited in the LSED’s Economic Development Fund. In 2002, two factors combined to erase any tax surplus: (i) increasing subsidy commitments to the Saints and the newly arrived New Orleans Hornets basketball team, and (ii) declining tax receipts. According to projections by an LSED consultant, the combination of these factors will erase any surpluses for the foreseeable future.125 The following table summarizes the LSED Hotel Occupancy Tax from 1998 to 2002: TABLE: LSED Hotel Occupancy Tax

Figures in $000s 1998 1999 2000 2001 2002 Total LSED Hotel Occupancy Tax 24,833 28,231 31,611 32,980 32,729 150,383 Total Sources $24,833 $28,231 $31,611 $32,980 $32,729 $150,383 Business Development: Nonprofit Program

- 150 63 48 - 261


- 300 127 96 - 523

Social Services: City Program - 1,320 558 420 - 2,299 Government: Other Local Governments Entities

Jefferson Parish Projects - 491 214 169 - 874 Other LSED Projects, Debt Service

1,453 1,455 1,515 1,549 1,553 7,525

Sports Subsidies: Team Subsidies

New Orleans Saints, Estimated Debt Service on Saints Training Facility

383 384 400 409 410 1,985

125 Barrett Sports Group, LLC, Louisiana Stadium and Exposition District: Analysis of Current Financial Obligations, prepared for the Louisiana Stadium and Exposition District, May 18, 2004, p. 12.


New Orleans Saints, 2002 Subsidy Payment

- - - 4,000 6,639 10,639


Superdome & Arena General Operations

11,499 11,907 16,154 13,462 11,777 64,799

Louisiana Superdome, Estimated Debt Service

3,546 3,551 3,698 3,781 3,790 18,367

Louisiana Superdome, Estimated Debt Service on Renovations

1,309 1,311 1,365 1,396 1,400 6,781

New Orleans Arena, Estimated Debt Service

5,365 5,372 5,595 5,721 5,737 27,787

Zephyr Field, Estimated Debt Service

1,277 1,279 1,332 1,362 1,365 6,616

Tourism Development: Marketing & Promotion - 210 89 67 - 366 Special Events (Greater New Orleans Sports Foundation)

- 500 500 500 60 1,560

Total Investments $24,833 $28,231 $31,611 $32,980 $32,729 $150,383 Source: LSED financial statements and auditor’s reports for the years ended June 30, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Because LSED reports only aggregate debt service expenditures, BGR calculated the annual shares of these expenditures related to individual projects based on the projects’ pro-rata shares of the bond proceeds received since the 1993 authorization. c. State General Fund. The two State General Fund Hotel Occupancy Taxes collected in Orleans Parish are fully dedicated to local purposes. One of the taxes equals 0.97%; the other, 1%. New Orleans Metropolitan Convention and Visitors Bureau. In 1995, the State Legislature dedicated the Orleans Parish collections of the 0.97% State General Fund Hotel Occupancy Tax to the New Orleans Metropolitan Convention and Visitors Bureau Inc., a nonprofit organization that promotes tourism and attracts convention business in the New Orleans area.126 The bureau receives its hotel tax funds via annual appropriation by the State Legislature. During fiscal year 2002, the revenue accounted for 69% of the bureau’s operating revenue.127 In the following table, BGR included only the tax revenues and a pro-rata share of the bureau’s annual expenditures. It excluded the annual contribution to the bureau from NOTMC. This contribution is included later in the Local Sources Section in the summary table under New Orleans Tourism Marketing Corporation, Other Revenues. The following table also excludes the remainder of the bureau’s revenues, which are self-generated.

126 La. R.S. 47:331, 47:332.10. Louisiana State Legislature, Act 193 of 1995. 127 BGR calculation based on the New Orleans Metropolitan Convention & Visitors Bureau Inc., financial statements and auditor’s report, for the year ended December 31, 2002.


TABLE: State General Fund Hotel Occupancy Tax, New Orleans Metropolitan Convention and Visitors Bureau

In $000s 1998 1999 2000 2001 2002 Total State General Fund Hotel Occupancy Tax Revenues Dedicated to the New Orleans Metropolitan Convention and Visitors Bureau

5,739 6,435 7,277 6,562 7,505 33,518

Total Sources $5,739 $6,435 $7,277 $6,562 $7,505 $33,518 Administrative Costs 1,073 1,280 1,389 1,346 1,580 6,668 Tourism Development: Marketing & Promotion

3,492 4,400 4,983 5,257 5,418 23,549

Retained Funds 1,175 755 904 (41) 507 3,301 Total Investments $5,739 $6,435 $7,277 $6,562 $7,505 $33,518 Source: New Orleans Metropolitan Convention and Visitors Bureau Inc. financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues and pro-rata shares of total expenditures. Totals may not add due to rounding. Retained Funds are annual excesses or deficiencies of revenues over expenditures. New Orleans Area Tourism and Economic Development Fund. In 1997, the State Legislature dedicated the Orleans Parish collections of the 1% State General Fund Hotel Occupancy Tax to the New Orleans Area Tourism and Economic Development Fund (NOATEDF).128 The statute governing the NOATEDF provided for the following primary dedications: 1997-2002 Primary Dedications Annual Amount Greater New Orleans Sports Foundation $530,000 State Department of Culture, Recreation & Tourism for tourism promotion in N.O.

800,000

University of New Orleans Metropolitan College for training in tourism and economic development

600,000

Downtown Development District 400,000 Audubon Commission 100,000 Office of Lieutenant Governor for the New Orleans Visitor Information Center

500,000

City Park Improvement Association 200,000 Algiers Economic Development Foundation 200,000 The Orleans Parish tax collections have generated significant surplus revenue. Originally, the surplus was dedicated to the New Orleans Business and Industrial District’s (now called the New Orleans Regional Business Park) proposed financing of a motor speedway. In 1999, after these plans collapsed, the State Legislature redirected current speedway allocations and future surplus collections into a grant program for legislators representing all or part of Orleans.129

128 Louisiana State Legislature, Act 1423 of 1997. 129 Louisiana State Legislature, Act 1380 of 1999.


In 2002, the Legislature imposed a new set of dedications. Effective July 1, 2002, the first $2 million is used to fund the Phase IV expansion of the Convention Center. Excess revenues pay subsidies to the Saints and New Orleans Hornets sports teams.130 If any funds still remain unexpended and unencumbered at the end of each year, they must be transferred or deposited as follows: (i) the first $1.75 million will reimburse the State’s General Fund for the transition and relocation expenses of the Hornets from Charlotte to New Orleans,131 and (ii) any excess will be placed in an economic development fund to be used for grants by legislators in Orleans Parish for “tourism, economic development, racetrack planning and development and other activities.”132 The following table summarizes the NOATEDF expenditures from 1998 to 2002: TABLE: State General Fund Hotel Occupancy Tax, New Orleans Area Tourism and Economic Development Fund

Figures in $000s 1998 1999 2000 2001 2002 Total State General Fund Hotel Occupancy Tax Dedicated to NOATEDF

5,834 5,721 7,239 7,512 7,288 33,595

Related Revenues 37 337 418 383 159 1,335 Total Sources $5,872 $6,058 $7,657 $7,895 $7,448 $34,930 Administrative Costs - - 104 316 389 809 Business Development: Nonprofit Program

200 200 200 200 200 1,000

Community Improvement: Community Facilities and Infrastructure

200 200 200 200 200 1,000

Other Community Projects 600 600 4,240 3,926 3,909 13,275 Sports Subsidies: Team Subsidies (Saints)

- - - - 784 784

Tourism Development: Marketing & Promotion 1,070 1,285 631 1,272 1,303 5,561 Special Events 530 530 530 530 530 2,650 Tourism Infrastructure 100 100 100 100 100 500

Retained Funds 3,172 3,142 1,652 1,351 33 9,350 Total Investments $5,872 $6,058 $7,657 $7,895 $7,448 $34,930 Source: LSED financial statements and auditor’s reports for the years ended June 30, 1998 to 2002; information supplied by the State of Louisiana, Department of the Treasury. Figures are revenues and expenditures. Totals may not add due to rounding. Retained Funds summarize the unspent DDD grant amounts from 1998 to 2002; the 1998-1999 accumulation of surplus NOATEDF funds for the New Orleans Business & Industrial District, and the subsequent transfer of these funds to LSED for the legislators’ grant program; miscellaneous adjustments to available NOATEDF funds; interest earned on NOATEDF; and reductions in the NOATEDF fund balance for grant disbursements from 2000 to 2002.

130 Louisiana State Legislature, Act 73 of 2002 First Extraordinary Session. 131 Louisiana State Legislature, Act 152 of 2002 First Extraordinary Session. 132 As of November 2002, the NOATEDF had a $0 balance. All surplus revenue was allocated to the Exhibition Hall Authority ($2 million) and New Orleans Sports Franchise Fund ($1.3 million), according to information supplied by the State of Louisiana, Department of the Treasury.


Grant Program for Orleans Parish Legislators. Because of a lack of information, BGR could not match available records of the legislators’ grant allocations with the LSED audited disbursements for the program. Therefore, BGR has excluded the grant allocations from the calculations in this study and treated them separately here. From the inception of the grant program in fiscal year 2000 through August 2003, when the last grants were awarded, approximately 820 grants had been awarded totaling $14.6 million.133 LSED used a portion of the monies allocated for the grant program to cover administration costs and the fees of independent auditors to monitor grant recipients. Of the grants disbursed, private schools in New Orleans received a total of $885,000 in 56 grants. Public schools in New Orleans received a total of $689,000 in 77 grants, made either directly to the schools or to nonprofit organizations working with the schools. The three largest nonprofit recipients were New Orleans Health Corporation, $751,000 in three grants; Holy Name of Mary Church, for the benefit of various groups, $463,000 in 10 grants; and Dryades YMCA, $448,000 in nine grants. In addition, the City Park Improvement Association, the State agency that operates City Park, received $365,000 for the benefit of various neighborhood groups and other purposes. The Orleans Levee District received $184,000 for the benefit of various lakefront neighborhood groups. Another $338,000 was granted to various local government entities, including the New Orleans Business and Industrial District, the City Department of Parks and Parkways, the New Orleans Museum of Art, the New Orleans Police Department, Orleans Parish Criminal District Court, Orleans Parish Juvenile Court, and the Sewerage and Water Board. d. Regional Transit Authority. In 1985, Orleans Parish voters approved a 1% sales tax for the Regional Transit Authority (Transit Authority). Hotel room rentals were exempted from the tax.134 In 1999, the Transit Authority took action to impose the tax on hotel room rentals to raise local matching money for federal dollars for construction of the streetcar line on Canal Street. The New Orleans Metropolitan Convention and Visitors Bureau and others sued the Transit Authority to stop the imposition. The case was settled in May 2000, with the bureau withdrawing its opposition in return for the Transit Authority’s dedicating a portion of the hotel tax revenue to local tourism projects.135 In June 2000, Transit Authority and the New Orleans Tourism Marketing Corporation (NOTMC), signed a cooperative endeavor agreement that allows NOTMC to receive annually 40% of the first $7.2 million of Transit Authority’s tax revenue collected on hotel room rentals and 60% of the revenue collected in excess of $7.2 million.136 In return, NOTMC promotes Transit Authority services to tourists and business travelers, consults with the authority

133 BGR calculations based on LSED data. 134 RTA resolution in 1984 approving the ballot language. 135 Donze, Frank, “Hotels agree on tax for streetcar,” The Times-Picayune, May 3, 2000. 136 NOTMC, financial statements and auditor’s report, for the year ended December 31, 2002, p. 28.


on information promoting its services, and assists the authority and other agencies in securing funds for streetcar and light rail projects. In April 2002, NOTMC, the Transit Authority, and the Exhibition Hall Authority signed a separate cooperative endeavor agreement to dedicate 50% of NOTMC’s tax share to the Exhibition Hall Authority for development of Phase IV of the Convention Center.137 NOTMC also agreed to dedicate up to 3.45% of its tax revenue to the Mayor’s Office of Tourism and Arts, which must “make all reasonable efforts” to use the funds to boost tourism, public transportation and other goals. During the period 1998 to 2002, the tax was collected for part of fiscal 2000 and all of fiscal 2001 and 2002. In these years, the Transit Authority retained $1.7 million, $4.3 million, and $4.6 million, respectively, for the Canal Streetcar project.138 These amounts are not included in this study. The NOTMC received the remainder of the tax revenues, which are summarized in the following table. Because the tax revenues are spent in conjunction with several other NOTMC funding sources, the investments of all NOTMC revenues are presented in a later table under New Orleans Tourism Marketing Corporation, Other Revenues. TABLE: Regional Transit Authority Hotel Occupancy Tax, NOTMC Share

Figures in $000s 1998 1999 2000 2001 2002 Total Transit Authority Hotel Occupancy Tax, NOTMC share

- - 1,133 2,847 3,064 7,043

Total Sources $ - $ - $1,133 $2,847 $3,064 $7,043 Investments Included in Table of NOTMC Other Revenues Below

- - - - - -

Source: NOTMC financials statements and auditor’s reports for the years ended December 31, 2000 to 2002; BGR calculations. Figures are revenues. 6. New Orleans Regional Business Park Tax The New Orleans Regional Business Park (Regional Business Park), formerly the New Orleans Business and Industrial District, is a special taxing district of approximately 7,000 acres in eastern New Orleans, roughly bounded by the Industrial Canal, the CSX Railroad tracks, the Maxent Canal, and the Intracoastal Waterway.139 Its statutory purpose is to acquire, construct, improve, maintain, and operate projects and to provide additional municipal services within the district.140 The Regional Business Park levies an ad valorem property tax of 22.79 mills on all taxable real property within its boundaries.141 The tax was renewed in February 2002 for

137 Ibid., p. 29. 138 Regional Transit Authority, financial statements and auditor’s reports, for the years ended December 31, 2000 to 2002. 139 BGR, New Orleans Business & Industrial District Millage Proposition, January 2002, p. 1. 140 La. R.S. 33:4701 141 BGR, New Orleans Business & Industrial District, op. cit., p. 1.


an additional 10 years. The Regional Business Park has sole and exclusive use of the proceeds of the tax. In the table below, BGR has summarized the Park’s tax revenues and its rental income and other revenues. It did not include state and city grants for capital projects, which have been accounted for in the State Capital Outlay, State Miscellaneous Financing, and UDAG Repayment Fund tables in this report. TABLE: New Orleans Regional Business Park Taxes and Other Revenues

Figures in $000s 1998 1999 2000 2001 2002 Total District Tax Revenues 270 263 298 299 240 1,370 District Other Revenues 365 426 467 413 266 1,937 Total Sources $635 $689 $765 $711 $506 $3,307 Administrative Costs 411 372 376 509 572 2,241 Business Development:

City Programs 482 249 342 226 226 1,524 Loan Cost - - 213 158 40 410

Retained Funds (258) 68 (165) (182) (331) (867) Total Investments $635 $689 $765 $711 $506 $3,307 Source: Regional Business Park financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Table excludes State Capital Outlay grants, State Miscellaneous Financing, and City UDAG Repayment Fund grants, which have been included in other tables. Table also excludes pre-1998 grants. Retained Funds are annual excesses or deficiencies of revenues over expenditures (excluding the aforementioned sources). 7. Economic Development Fund Tax In 1991, Orleans Parish voters approved a 2.5-mill ad valorem property tax to create the City of New Orleans Economic Development Fund (EDF). In 1995, Orleans voters rededicated half of the EDF tax and half of a separate Neighborhood Housing Improvement Fund (NHIF) 2.5-mill tax to a fund for capital improvements.142 The remaining 2.5 mills of the two taxes were combined into the Housing and Economic Development Trust Fund, which is dedicated to both economic development projects and neighborhood housing improvements. Although the proposition approved by voters does not provide for a 50-50 distribution of funds between the two purposes, the City has in the past split the millage receipts roughly in half. The proposition approved by voters does not define “economic development project.” This has allowed the City to direct the money to a variety of projects, both through direct allocations and a formal grant program operated through OED. Procedures for the grant program are established in the City Code of Ordinances (City Code). According to City Code, the purpose of the EDF grant program is to provide funds for economic development projects and activities that create new jobs or enhance the creation of wealth in the City and that are “within the normal purview of city government.” These include, but are not limited to physical infrastructure, including 142 New Orleans Ballot Proposition No. 2, July 1995.


buildings; and projects and activities that enhance trade, commerce or attract visitors to the City.143 The projects must be nonprofit.144 Projects excluded are public education projects; housing projects that do not directly create new permanent jobs or directly enhance wealth; housing projects funded through the Neighborhood Housing Improvement Fund; and physical infrastructure that does not directly create new permanent jobs or directly enhance wealth.145 In 1992, the EDF allocated $1 million to finance the creation of Business Resource Capital Specialty BIDCO Inc. (BRC), a private, for-profit lending institution managed by the Regional Loan Corporation.146 BRC combined the EDF grant with private and state funds to start a loan program for small businesses in Southeast Louisiana.147 From 1998 to 2002, BRC loaned approximately $885,000 to commercial businesses, $800,000 to hotels, $210,000 to other service businesses, and $100,000 to an industrial business.148 According to a 2002 accountant’s report, the EDF received $25.3 million in property tax collections from its inception through July 31, 2002.149 It earned an additional $2.3 million in interest and $16,000 in program income for total revenue of $27.7 million. From 1998 to 2002, the EDF received approximately $10.6 million in revenues: $9.7 million in tax revenues plus another $854,000 in interest and other income.150 It received another $1 million from the MacFrugal’s settlement proceeds, discussed later in the Sources Summary. During this period, the City transferred $2,635,000 from the EDF to the General Fund to cover various City obligations.151 The largest uses were transfers of funds to reimburse the City’s General Fund for $800,000 in 2000 and $1,000,000 in 2002 paid in regard to the City’s annual operating subsidy to the NOTMC.152 Because the tax revenues are spent in conjunction with several other NOTMC funding sources, the investments of all NOTMC revenues are presented in a later table under New Orleans Tourism Marketing Corporation, Other Revenues.

143 City of New Orleans, Code of Ordinances, Sec. 70-405. 144 Ibid., Sec. 70-408. 145 Ibid., Sec. 70-405. 146 Ruth, Dawn, “$6 million OK’d for N.O. projects,” The Times-Picayune, September 4, 1992. 147 RLC, http://www.rlcsbidco.com. 148 RLC, list of loans, op. cit. 149 Pailet, Meunier and LeBlanc, LLP, City of New Orleans, Economic Development Fund, Independent Accountant’s Report, For the Period from Inception through July 31, 2002, prepared for the Chief Administrative Officer of the City of New Orleans, August 14, 2002, Exh.B. 150 City of New Orleans, Comprehensive Annual Financial Report, for the years ended December 31, 1998 to 2002. 151 Ibid. 152 Ibid. City Council budgeted a total $2.8 million to be transferred to the General Fund to reimburse the NOTMC subsidy in 1998, 1999, and 2001; however, city financial statements for these years show no such transfers were made.


Another $835,000 was transferred in 2002 to fund obligations to New Orleans Council on Aging, $140,000; Total Community Action, $85,000; MetroVision, $100,000; the National Association of Counties Convention, $285,000; and the New Orleans Museum of Art, $225,000.153 Other allocations during 1998 to 2002 totaled $4.6 million. The largest individual allocations included $500,000 for the City’s development of the Hornets training facility, $250,000 for the City’s expenses for the Super Bowl, and $236,500 for a nonprofit eastern New Orleans business incubator.154 Other recipients ranged from organizations that support small businesses to groups that hold community events or provide housing assistance. City-administered programs for economic development, the development of the City’s master plan, and the Mayor’s Military Advisory Committee were allocated a total $557,750. Salaries and administrative costs totaled approximately $672,000 during the 1998 to 2002 period.155 The following table summarizes EDF revenues, allocations, and administrative expenditures from 1998 to 2002. The 1999 figure for Tourism Development, Special Events is a $20,000 grant to the New Orleans Museum of Art for its Degas exhibit. These funds were in addition to the museum’s annual allocation for 1999, shown in the City General Fund table later in the Sources Summary: TABLE: Economic Development Fund

Figures in $000s 1998 1999 2000 2001 2002 Total Plus: MacFrugal’s Settlement Proceeds From Table Below

1,000 - - - - 1,000

EDF Tax Revenues 1,791 1,820 1,985 2,030 2,121 9,747 Related Revenues 180 135 258 234 47 854 Total Sources $2,971 $1,955 $2,243 $2,264 $2,168 $11,601 Administrative Costs 177 124 124 124 124 672 Business Development:

City Programs 260 - 8 - - 268 Nonprofit Programs 412 250 240 273 337 1,511

Community Improvement: Community Events 126 213 153 105 - 596 Community Facilities and Infrastructure

- - 33 33 - 65

Housing Assistance 91 - - 15 - 106 Other Community Projects 100 90 143 140 255 727

153 Amendment to City Council Ord. No. 20,469 MCS. 154 The City has not disbursed the funds for the business incubator project, according to the City Council Fiscal Office. 155 Pailet, Meunier and LeBlanc, LLP, Economic Development Fund, op. cit., p. 12. Also, Bruno & Tervalon, City of New Orleans, Economic Development Fund, Independent Accountant’s Report on Applying Agreed-Upon Procedures – Compliance with the Economic Development Fund’s Policies and Procedures, For the Twelve-Month Period from January 1, 1998 through December 31, 1998, prepared for the Audit Committee of the City Council of the City of New Orleans, September 27, 1999, p. 7.



19 - 23 25 - 67


88 - - 115 225 428

Government: Military Affairs - - - 40 - 40 Other City Purposes - 125 125 - - 250

Sports Subsidies: Team Subsidies (Hornets)

- - - - 500 500

Tourism Development: Marketing & Promotion 15 - 10 - - 25 Special Events 200 20 250 125 285 880

Retained Funds 1,483 1,134 337 1,270 (557) 3,667 Investments in NOTMC Included in NOTMC Other Revenues Table Below

- - 800 - 1,000 1,800

Total Investments $2,971 $1,955 $2,243 $2,264 $2,168 $11,601 Source: City Council ordinances; City of New Orleans, Comprehensive Annual Financial Report, for the years ended December 31, 1998 to 2002; and independent accountants’ reports on EDF expenditures. Source figures are revenues, administrative expenditures, and allocations. Administrative costs for the years 1999 to 2002 are estimates based on a four-year expenditure total. Amounts transferred in 2000 and 2002 to NOTMC are included with the table of other NOTMC revenues below. Retained Funds include amounts allocated, but not transferred, to the City General Fund to reimburse NOTMC expenditures in 1998, 1999, and 2001; and adjustments to balance annual sources against annual allocations in BGR’s calculation. The only EDF award approved by City Council in 2003 was $500,000 to the Idea Village, a nonprofit organization that assists technology-related start-up companies.156 In August 2004, the City Council approved several significant grants directed at business development, including disadvantaged business assistance, and other projects. The largest allocation, $337,500, went to the Newcorp Business Assistance Center, which will provide loans and technical assistance to small businesses. OTHER LOCAL SOURCES OF ECONOMIC DEVELOPMENT FUNDING This subsection describes local sources of funding for economic development in New Orleans that are not taxes, public benefit corporations, or foregone taxes. 1. City Bond Proceeds In 1995, Orleans voters approved the issuance of $147.4 million in general obligation bonds by the City. The bonds funded a variety of projects, including street repairs, improvements to parks, playgrounds, and recreational facilities, and public building and facility upgrades.157 Voters did not approve specific projects, only general types of projects. Actual appropriations of bond proceeds require City Council approval. 156 City Council Ord. Cal No. 24555, approved January 23, 2003. Also, telephone interview with Suzanne Mague, Council fiscal officer, October 13, 2003. 157 BGR, Overview and Status Report on the New Orleans Capital Program, October 2000, p. 3.


One project fell within the scope of this study: $12 million for the development of Phase III of the Convention Center. Of that amount, $6 million fell within the 1998 to 2002 period. In 2000, Orleans voters approved $150 million in general obligation bonds to fund a variety of street improvements and other projects, including upgrades to public buildings, recreational facilities, and City equipment.158 Voters did not approve specific projects, only general types of projects. Actual appropriations of bond proceeds require City Council approval. Seven appropriations fell within the scope of this study: the Louisiana ArtWorks development; improvements to Audubon Zoo and Park; Lincoln Beach renovations; the third-floor expansion of the New Orleans Museum of Art; infrastructure for the redevelopment of the St. Thomas housing project; construction of the Hornets training facility; and construction of the National D-Day Museum. Because of data limitations, city bond funds are presented on two bases: expenditures (where the information is available) and allocations (where expenditure information is not available). a. Expenditures. First, the governing entities of the Convention Center and Audubon Zoo and Park reported actual expenditures of City bond funds during 1998 to 2002. These are provided in the following table: TABLE: Expenditures of City Bond Proceeds

Figures in $000s 1998 1999 2000 2001 2002 Total City Bond Proceeds 6,000 - - - 701 6,701 Total Sources $6,000 - - - $701 $6,701 Tourism Development: Tourism Infrastructure

Audubon Zoo - - - - 701 701 Convention Center 6,000 - - - - 6,000

Total Investments $6,000 - - - $701 $6,701 Source: Financial statements and auditors’ reports for the Exhibition Hall Authority and the Audubon Commission for the years ended December 31, 1998 and 2002, respectively. Figures are revenues. b. Other Allocations for which Expenditure Data Was Limited. The City provided limited expenditure data for the other five projects. Because of this data, the total appropriations are listed in the years in which they were approved by City Council: TABLE: Other Allocations of City Bond Proceeds

Figures $000s 1998 1999 2000 2001 2002 Total Allocated City Bond Proceeds - - - 5,350 5,290 10,640 Total Sources $ - $ - $ - $5,350 $5,290 $10,640 Business Development: Nonprofit Project

- - - 250 - 250

Community Improvement: - - - 500 500 1,000

158 Capital Projects Administration, list of projects for bond election, Nov. 7, 2000.


Community Facilities and Infrastructure Urban Redevelopment Projects - - - 4,200 3,800 8,000 Sports Subsidies: Team Subsidies (Hornets)

- - - - 990 990


- - - 400 - 400

Total Investments $ - $ - $ - $5,350 $5,290 $10,640 Source: City Council Ordinances and information supplied by the city Capital Projects Office. Figures are allocations of bond proceeds for fiscal years ended December 31. 2. City General Fund The City’s General Fund is its general operating fund. The City recorded approximately $429.5 million in General Fund revenue for fiscal year 2002.159 Relatively little General Fund revenue is expended on economic development activities, as defined in this study. From 1998 to 2002, General Fund expenditures included operating subsidies provided by the City to the New Orleans Museum of Art and the NOTMC.160 The City transfers $200,000 from the General Fund annually to the Audubon Commission pursuant to the Riverfront Economic Development Agreement (REDA), signed in 1992 by the City, the Board of Commissioners of the Port of New Orleans (Dock Board) and the Audubon Commission.161 The following table summarizes General Fund expenditures for these purposes from 1998 to 2002. Because the tax revenues are spent in conjunction with several other NOTMC funding sources, the investments of all NOTMC revenues are presented in a later table under New Orleans Tourism Marketing Corporation, Other Revenues. TABLE: City General Fund

Figures in $000s 1998 1999 2000 2001 2002 Total City General Fund 1,440 1,410 650 1,425 200 5,125 Total Sources $1,440 $1,410 $650 $1,425 $200 $5,125 Community Improvement: Other Community Projects

240 210 250 225 - 925

Government: Other Local Government Entities

200 200 200 200 200 1,000

Investments in NOTMC Included in NOTMC Other Revenues Table Below

1,000 1,000 200 1,000 - 3,200

Total Uses $1,440 $1,410 $650 $1,425 $200 $5,125

159 City of New Orleans, Comprehensive Annual Financial Report, 2002, op. cit., p. 78. 160 The latter is subject to a mathematical formula detailed in City of New Orleans, Code of Ordinances, Sec. 150-1001. 161 City of New Orleans, Comprehensive Annual Financial Report, 2002, op. cit., p. 77.


Source: City of New Orleans, Comprehensive Annual Financial Report, for the years ended December 31, 1998 to 2002; City operating budgets; New Orleans Museum of Art financial statements and auditor’s report for the years ended December 31, 1998 to 2002. Figures are revenues and expenditures. In 1999, the museum also received $20,000 in an Economic Development Fund allocation for its Degas exhibit. In 2002, the museum received its operating subsidy through a transfer of $225,000 from the Economic Development Fund. In 2000 and 2002, the City transferred $800,000 and $1 million, respectively, from the Economic Development Fund to meet the NOTMC operating subsidy. 3. Harrah’s Payments to New Orleans Tourism Marketing Corporation Harrah’s New Orleans Casino (Harrah’s), the City’s land-based casino, opened at the foot of Canal Street in 1999. Since then, it has made a series of payments to the City, the Orleans Parish School Board, and the NOTMC.162 Orleans Parish School Board revenue from Harrah’s is excluded from this study because it can be used only for the board’s capital projects. Payments to the City are discussed later in the Local Sources section (see Rivergate Development Corporation). Beginning in 1999, Harrah’s agreed to pay $1 million a year to the destination marketing program of the City for the joint benefit of the City and Harrah’s. NOTMC conducts the program on behalf of the City.163 In 2001, the Greater New Orleans Hotel-Motel Association agreed not to oppose Harrah’s effort to build a casino hotel in return for an additional contribution to NOTMC. Under the agreement, Harrah’s will pay NOTMC $500,000 a year for the remainder of the term of the casino contract with the funds dedicated to marketing the entire city.164 If Harrah’s builds a hotel with more than 250 rooms, it will contribute an additional $500,000 a year for the life of the agreement.165 The agreement took effect in April 2001, with Harrah’s paying a pro-rata amount for that year. As of November 2004, Harrah’s is constructing a 450-room hotel. The following table summarizes Harrah’s payments to NOTMC. Because the tax revenues are spent in conjunction with several other NOTMC funding sources, the investments of all NOTMC revenues are presented in a later table under New Orleans Tourism Marketing Corporation, Other Revenues. TABLE: Harrah’s Lease Payment to NOTMC

Figures in $000s 1998 1999 2000 2001 2002 Total Harrah’s Casino: Payment to NOTMC per Casino/City Lease Agreement

- 1,000 1,000 1,000 1,000 4,000

Harrah’s Casino: Payment to NOTMC per Casino/Hotel

- - - 375 500 875

162 Harrah’s also invested $1.25 million in the Newcorp Business Assistance Center, a private nonprofit corporation that assists small businesses with a variety of needs, including financing. 163 NOTMC, 2002 financial statements, op. cit., p. 29. According to information supplied by Harrah’s, the casino contract expires in 2024 with two, 10-year extensions possible. 164 NOTMC, 2002 financial statements, op. cit., p. 29. 165 Interview with Sandra Shilstone, executive director of the NOTMC, July 11, 2003.


Association Agreement Total Sources $ - $1,000 $1,000 $1,375 $1,500 $4,875 Investments Included in table of NOTMC Other Revenues Below

- - - - - -

Source: NOTMC financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues. 4. Jazzland Payments to NOLA Economic Development Corporation In May 1998, the City Council created the NOLA Economic Development Corporation (NOLA), a nonprofit economic development corporation, “to stimulate the economy of the City through the construction and operation of a jazz theme park which will create jobs and lead to economic development in general.”166 In July 1998, the developer, Jazzland Inc., transferred land in eastern New Orleans to NOLA, which leased the land back to Jazzland Inc. for 99 years.167 Under state law, property owned by an economic development corporation for its statutory purposes is exempt from ad valorem taxes.168 In exchange for the tax exemption, Jazzland Inc. agreed to pay NOLA a series of annual “rents.” In effect, these rents functioned as payments in lieu of taxes (PILOTs).169 Further discussion of the Jazzland tax exemption is included under the PILOT discussion below. NOLA used the rent payments primarily for operating and administrative expenses. It expended approximately $96,000 for a promotional project in eastern New Orleans. Although NOLA was supposed to use part of its revenue to fund economic development grants in the City, it never made any grants.170 The bankruptcy of Jazzland Inc. in 2002 resulted in the sale of Jazzland Theme Park to SFJ Management Inc. (SFJ), a subsidiary of Six Flags Inc. As part of that sale, the bankruptcy court terminated the lease between NOLA and Jazzland Inc. NOLA ceased operations in August 2002, and the City began the process of dissolving the corporation.171 The following table summarizes the revenues and expenditures of NOLA from 1998 to 2002: TABLE: NOLA Economic Development Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total Jazzland Payments 12 26 459 288 - 786 NOLA EDC Other Revenues - - 100 19 - 119

166 City Council Ord. No. 18,708 MCS. 167 NOLA, financial statements and auditor’s report, for the year ended December 31, 2001, pp. 5-7. 168 La. R.S. 33:9030. 169 La. R.S. 51:1160. 170 City Council motion M-01-781 was proposed in November 2001 to appropriate approximately $223,000 in grant awards, but this was withdrawn. 171 NOLA, financial statements and auditor’s report, for the year ended December 31, 2003, p. V.


Total Sources $12 $26 $559 $307 $ - $905 Administrative Costs - 27 127 248 - 402 Community Improvement: Other Community Projects

- - - 96 - 96

Retained Funds 12 (1) 432 (37) - 407 Total Investments $12 $26 $559 $307 $ - $905 Source: NOLA financial statements and auditor’s reports for the years ended December 31, 1998 to 2001. Figures are revenues and expenditures. Totals may not add due to rounding. Retained Funds are annual excesses or deficiencies of revenues over expenditures; the 2001 amount includes a $186,030 provision for doubtful Jazzland payments. 5. Louisiana Stadium and Exposition District, Operating Revenues During the period 1998 to 2002, the LSED used operating revenues received from the Superdome and Arena to fund a variety of economic development purposes. These included (i) payment of Superdome manager SMG’s 2002 game-day operating costs for the Saints games, (ii) payment of cash subsidies to the Saints under the team’s lease with LSED; (iii) debt service on a note payable to the Superdome concessionaire for improvements to the Superdome concession areas; (iv) debt service on another note payable to the Arena concessionaire for construction of the Arena concession areas; and (v) Super Bowl inducements. The following table summarizes the sources and investments of LSED Other Revenues: TABLE: LSED Operating Revenues

Figures in $000s 1998 1999 2000 2001 2002 Total LSED Operating Revenues from Superdome and Arena

400 715 - 1,378 3,988 6,481

Total Sources $400 $715 $ - $1,378 $3,988 $6,481 Sports Subsidies: Team Subsidies (Saints)

- - - - 1,467 1,467


Superdome 400 716 - - - 1,116 Arena - 1,378 1,387 2,765

Tourism Development: Special Events (Super Bowl)

- - - - 1,134 1,134

Total Investments $400 $715 $ - $1,378 $3,988 $6,481 Source: LSED financial statements and auditor’s reports for the years ended June 30, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. 6. Miscellaneous Capital Funds Proceeds from the sale of city-owned real estate are placed in Miscellaneous Capital Funds. These funds are available for capital projects.172

172 BGR, Overview and Status Report on the New Orleans Capital Program, op. cit., p. 3. Also, interview with Knox Tumlin, Capital Projects Administrator, August 26, 2003.


From 1998 to 2002, the City allocated Miscellaneous Capital Funds to cover administrative costs for project planning. In 2002, the proceeds from the Canal Street Development Corporation’s sale of the Bienville Street parking garage were allocated to future Canal Street improvements.173 The financing of these improvements is described more fully under the Canal Street Development Corporation discussion later in the Sources Summary. TABLE: Miscellaneous Capital Funds

Figures in $000s 1998 1999 2000 2001 2002 Total Miscellaneous Capital Funds 100 100 100 100 606 1,006 Total Sources $ - $ - $ - $ - $606 $1,006 Administrative Costs 100 100 100 100 100 500 Tourism Development: Tourism Infrastructure

- - - - 506 506

Total Investments $100 $100 $100 $100 $606 $1,006 Source: City Council Ordinances and information supplied by the city Capital Projects Office. Figures are allocated amounts for the fiscal years ended December 31. 7. New Orleans Tourism Marketing Corporation, Other Revenues NOTMC is a nonprofit economic development corporation174 formed for the purpose of stimulating tourism in New Orleans.175 It markets New Orleans as a destination for leisure travelers.176 As previously discussed, NOTMC receives several sources of funding, including the Hotel Occupancy Privilege Tax, a share of the Regional Transit Authority Hotel Occupancy Tax, a disbursement from the City’s General Fund (at times reimbursed through the EDF), and payments from Harrah’s. NOTMC also generates other revenues (NOTMC Other Revenues), such as advertising revenues and interest income. In the table below, revenues from all sources are included. TABLE: New Orleans Tourism Marketing Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total Plus: Hotel Occupancy Privilege Tax from Earlier Table

3,912 4,181 4,303 4,090 4,479 20,964

Plus: NOTMC’s Share of Regional Transit Authority Hotel Occupancy Tax from Earlier Table

- - 1,133 2,847 3,064 7,043

Plus: Harrah’s Casino Payments to NOTMC from Earlier Table

- 1,000 1,000 1,375 1,500 4,875

Plus: City General Fund Payments to NOTMC from

1,000 1,000 200 1,000 - 3,200

173 Canal Street Development Corporation is also contributing $9.5 million in bond proceeds to the project. 174 La. R.S. 33:9020 et seq. 175 City Council Ord. Nos. 14,118 and 14,138 MCS, approved Oct. 4, 1990. 176 Interview with Sandra Shilstone, op. cit., July 11, 2003.


Earlier Table Plus: EDF payments to NOTMC from Earlier Table

- - 800 - 1,000 1,800

NOTMC Other Revenues 157 301 446 498 668 2,071 Total Sources $5,069 $6,483 $7,882 $9,809 $10,711 $39,953 Administrative Costs 238 294 312 271 314 1,428 Business Development: City Programs

200 200 200 200 200 1,000

Community Improvement: Community Events

31 67 60 94 40 292


4,499 5,460 6,256 7,449 7,469 31,133

Retained Funds 101 461 1,054 1,796 2,688 6,100 Total Uses $5,069 $6,483 $7,882 $9,809 $10,711 $39,953 Source: NOTMC financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Figures are revenues and expenditures. Totals may not add due to rounding. Retained funds are excess annual revenues and, from 2000 to 2002, amounts dedicated to the Exhibition Hall Authority but not paid in current year. 8. Settlement Proceeds Proceeds from three settlements in the City’s favor were tapped to provide funds for economic development efforts during the period 1998 to 2002. One settlement resulted from the legal action following a 1987 tank car fire in Gentilly (CSX Settlement). Another related to a 1996 fire that destroyed the MacFrugal’s Distribution Center in eastern New Orleans (MacFrugal’s Settlement). The third was the 1986 settlement with Entergy New Orleans (Entergy), formerly New Orleans Public Service Inc. (NOPSI), regarding the company’s Grand Gulf nuclear power plant (NOPSI/Entergy Settlement). a. CSX Settlement Proceeds. In 2002, City Council allocated $2 million of CSX Settlement proceeds for construction of the Hornets training facility.177 As of November 2004, no funds had been expended because construction had not yet begun.178 TABLE: CSX Settlement Proceeds

Figures in $000s 1998 1999 2000 2001 2002 Total Allocation of CSX Settlement Proceeds

- - - - 2,000 2,000

Total Sources $ - $ - $ - $ - $2,000 $2,000 Sports Subsidies: Team Subsidies (Hornets)

- - - - 2,000 2,000

Total Investments $ - $ - $ - $ - $2,000 $2,000 Source: City Council Ordinances and information supplied by the City’s Capital Projects Office. Figures are allocated amounts by fiscal years ended December 31. b. MacFrugal’s Settlement Proceeds. In 1998, the City received $4.8 million from the MacFrugal’s Settlement. City Council subsequently allocated the funds to Industrial

177 City Council Ord. No. 20,672 MCS. 178 Interview with Knox Tumlin, op. cit.. August 26, 2003.


Development Board of the City of New Orleans, Louisiana, Inc. (IDB) operations,179 a debt service reserve fund for the American Can Apartments project,180 demolition of the Oakbrook Apartments, a grant to a local business, the EDF, and the City’s General Fund.181 The following table summarizes the uses of the MacFrugal’s Settlement proceeds, except for the uses of the IDB’s appropriation, which are discussed below: TABLE: MacFrugal’s Settlement

Figures in $000s 1998 1999 2000 2001 2002 Total MacFrugal’s Settlement Proceeds 4,840 - - - - 4,840 Total Sources $4,840 $ - $ - $ - $ - $4,840 Business Development: Grant 125 - - - - 125 Community Improvement: Housing Assistance

385 - - - - 385

Urban Redevelopment Project 2,300 - - - - 2,300 Government: City General Fund 830 - - - - 830 Included in Table for Economic Development Fund Above

1,000 - - - - 1,000

Included in Table for IDB Below 200 - - - - 200 Total Investments $4,840 $ - $ - $ - $ - $4,840 Source: City Council Ordinances and information supplied by the Council Fiscal Office. Figures are allocated amounts. Industrial Development Board of the City of New Orleans, Louisiana, Inc. The IDB is a nonprofit corporation created by City Council to promote industry and develop trade, attract and retain businesses, and maintain and expand employment, among other purposes.182 The IDB typically carries out its purposes by issuing revenue bonds on behalf of “development projects,” which are broadly defined in State law to include almost all private developments except utilities.183 The IDB generates fees from its bond issues and minor amounts of other revenues. These revenues, along with the IDB’s expenditures, have been included in the following table: TABLE: Industrial Development Board of the City of New Orleans, Louisiana, Inc.

Figures in $000s 1998 1999 2000 2001 2002 Total Plus: Allocation of MacFrugal’s Settlement Proceeds from Table Above

200 - - - - 200

IDB Other Revenues 0 5 122 5 6 139

179 City Council Ord. No. 19,161 MCS. 180 OED, HUD Section 108 Guaranteed Loans, Status Update Report, March 5, 2002. 181 City Council Ord. Nos. 18,728, 18,729, 18,923, and 19,336 MCS, and information supplied by the Council Fiscal Office. 182 La. R.S. 51:1152 (B). 183 La. R.S. 51:1151.


Total Sources $200 $5 $122 $5 $6 $339 Administrative Costs 4 27 40 48 41 160 Retained Funds 197 (22) 82 (43) (35) 179 Total Investments $200 $5 $122 $5 $6 $339 Source: IDB financial statements and auditor’s report for the four years ended December 31, 2000, and IDB income and expense reports for the 2001 and 2002 calendar years. Figures are revenues and expenditures. Totals may not add due to rounding. c. NOPSI/Entergy Settlement Proceeds. The NOPSI/Entergy Settlement included an agreement by the utility to fund an economic development fund, today called the City Council/Entergy Economic Development Fund (Entergy EDF). In 1991, the utility agreed to continue the fund at $250,000 a year.184 The fund is not part of the City’s budget. The fund’s purpose is to spur business development, boost employment, foster community redevelopment, and develop job skills. Applicants may include individuals, organizations, or businesses in the City that will create economic development through innovative business initiatives.185 Prior to 2001, the Council Utilities Regulatory Office reviewed applications before they were sent to the Council’s Economic Development Committee, which conducted further review and made recommendations to the full Council. Effective 2001, then-Council President Eddie Sapir shifted the reviews to the offices of individual council members.186 District members screen applications in their respective districts, while at-large members consider city-wide applications. Sapir also implemented a plan to divide the Entergy money among the council members for distribution. In 2001, for example, the plan allotted each district member $25,000 and each at-large member $40,000. The Council allocated the remaining unencumbered funds to future grants.187 Of the $1.25 million in the Entergy EDF from 1998 to 2002, 47% funded preparations for major events in the City, including the Super Bowl, the Final Four, and the Inter-American Development Bank meeting. The Council provided approximately $146,000 in direct grants to businesses and $36,000 to nonprofit programs and projects that assist businesses. The Council drew $105,000 to fund its job fairs. The following table summarizes the Entergy EDF grants from 1998 to 2002: TABLE: NOPSI/Entergy Settlement – City Council/Entergy Economic Development Fund

Figures in $000s 1998 1999 2000 2001 2002 Total Entergy New Orleans Funds 250 250 250 250 250 1,250

184 City Council, “City Council/Entergy Economic Development Grant Guidelines and Procedures,” p. 1. 185 Ibid., pp. 1-2. 186 Sapir, Councilmember-at-Large Eddie L., Chairman, Economic Development Committee, Memorandum to other City Council members, December 7, 2000. 187 Ibid.


Total Sources $250 $250 $250 $250 $250 $1,250 Business Development:

For-Profit Projects 55 - 60 16 15 146 Nonprofit Programs 25 - 11 - - 36

Community Improvement: Community Events - - 22 19 5 46 Community Facilities and Infrastructure

40 - 8 16 57 121

Housing Assistance, Nonprofit Programs

- - 6 - - 6

Other Community Projects - - 23 16 19 57 Social Services:

City Programs - - - - 1 1 Nonprofit Programs - - 29 14 44 87

Government: Other City Purposes - - - 15 1 16 Tourism Development: Special Events

105 225 63 127 73 593

Workforce Development: City Programs 25 25 - 27 28 105 Nonprofit Programs - - 29 - 5 34

Retained Funds - - - - 3 3 Total Uses $250 $250 $250 $250 $250 $1,250 Source: City Council Ordinances and information supplied by the Council Utilities Regulatory Office. Figures are grant disbursements for the fiscal years ended December 31. Retained Funds are unallocated 2002 funds as of March 2004. 9. Urban Development Action Grant Repayment Fund The Urban Development Action Grant Repayment Fund (UDAG Repayment Fund) is a fund established by the City with the repayment proceeds from loans made with federal Urban Development Action Grant funds (UDAG Funds) received in the 1980s. HUD requires only that such funds be used for eligible activities under federal Community Development Block Grant regulations. The UDAG Repayment Fund also receives the repayment proceeds of loans made from its own funds. The City controls distributions from the UDAG Repayment Fund. Projects are reviewed first by the city administration and ultimately approved by City Council. According to an independent accountant’s report prepared for the City, 11 projects received $8.6 million disbursed in the form of grants and loans. Also, prior to 1998, the City withdrew another $3.9 million to repay part of the Section 108 loan for the MacFrugal’s Distribution Center. The available balance in the fund was $1.2 million as of October 31, 2002.188 The following table summarizes the awards: ($ thousands) Year Type Disbursed 188 Pailet, Meunier, and LeBlanc, LLP, Urban Development Action Grant, op. cit., p. 4.


Municipal Auditorium renovations for New Orleans Brass hockey team

1997 Grant $2,200

City Business Assistance Center189 2000 Grant 799 New Orleans Building Corporation 2000 Grant 250 New Orleans Business & Industrial District – Folger’s substation

2000 Grant 350

New Orleans Business & Industrial District – Royce Instrument Corp.

2001 Grant 250

Canal Street Development Corp. 1994 Loan 1,000 Castle Rock Pavers 1996 Loan 250 Venus Gardens Redevelopment 1997 Loan 600 Handelman Redevelopment 1997 Loan 250 American Can Apartments 2000 Loan 1,000 Lake Forest Plaza mall 2002 Loan 1,700 Total All $8,649 The six loans repaid a total $1.4 million during the period 1998 to 2002. The loan to the Canal Street Development Corporation was repaid in 1999, accounting for the bulk of the repayments. Another $2.6 million was repaid from original UDAG loans.190 The following table summarizes the repayments to and disbursements from the UDAG Repayment Fund: TABLE: UDAG Repayment Fund

Figures in $000s 1998 1999 2000 2001 2002 Total UDAG Loan Repayments 512 1,803 722 343 701 4,081 Total Sources $512 $1,803 $722 $343 $701 $4,081 Business Development:

For-Profit Projects - - 350 80 1,700 2,130 City Programs - - 1,049 - - 1,049

Urban Redevelopment Project - - 1,000 - - 1,000 Retained Funds 512 1,803 (1,677) 263 (999) (98) Total Uses $512 $1,803 $722 $343 $701 $4,081 Source: Pailet, Meunier and LeBlanc, LLP, City of New Orleans, Urban Development Action Grant, Independent Accountant’s Report on Applying Agreed-Upon Procedures, For the Period from Inception through October 31, 2002, prepared for the Chief Administrative Officer of the City of New Orleans, June 19, 2003. Also, New Orleans Business and Industrial District financial statements and auditor’s reports for the years ended December 31, 2000 to 2002. Figures are repayments received by year and disbursements of grant amounts. Totals may not add due to rounding. Retained Funds are the excesses or deficiencies of annual repayment amounts over annual disbursements. The $80,000 figure under 2001 Business Development, For-Profit Projects is the expended amount of the $250,000 grant to the New Orleans Business and Industrial District for the Royce Instrument Corp. project. Another $12.1 million could be collected on outstanding loans of UDAG Funds and UDAG Repayment Funds, but the prospects are mixed:

189 Grant allocation totaled $1 million. Approximately $201,000 remained unspent as of October 31, 2002. 190 BGR calculation.


• The accountant’s report listed $7.7 million receivable from the eight remaining loans of UDAG Funds. Approximately $4.3 million of this amount represents the UDAG loan to Riverwalk Marketplace shopping center, a steady source of repayment. However, the chances of collecting the $3.4 million receivable from the other seven loans appear grim. Approximately $2.7 million is receivable on loans to five subdivision developments built in eastern New Orleans in the 1980s. The report expressed little hope in collecting these loans because of “abundant foreclosures” and “significant lapse of time.”191 The other $664,000 is owed on two loans in arrears as of October 2002.

• Another receivable of $780,000, listed separately in the report, showed no

repayments received as of October 31, 2002. • Another $3.7 million is still due from the five loans still outstanding from the

UDAG Repayment Fund.192 The largest amount owed is Lake Forest Plaza’s balloon payment of $1.6 million. The balance of the loan was due in December 2003. As of July 2004, the balance had not been paid and the City was still discussing the payment with the borrower.193

Castle Rock Pavers, which renegotiated its payment schedule with the City, had repaid only $9,000 in principal through October 2002. American Can Apartments’ loan has a term of 40 years, with principal payments starting in 2020. Principal on loans for the Venus Gardens and Handelman projects is due no later than 20 years from the closing date, unless a sale, refinancing, or property transfer occurs.

PUBLIC BENEFIT CORPORATIONS A public benefit corporation (PBC) is a nonprofit corporation formed under Louisiana nonprofit corporation law194 by the chief executive of a political subdivision of the State “for the purposes of owning, leasing, developing, and operating properties” owned by the political subdivision or the PBC.195 Specifically, these purposes include “planning, renovating, constructing, leasing, subleasing, managing, and promoting such properties.”196 Under state law, PBCs are not required to seek public bids on property leases, provided that the lease or sublease is approved by the local governing body. Leases need only

191 Pailet, Meunier, and LeBlanc, LLP, Urban Development Action Grant, op. cit., p. 9. 192 Ibid., p. 6. 193 Interviews with Angel Robinson, op. cit., March 1 and July 12, 2004. 194 R.S. 12:201-269. 195 R.S. 41:1215 (B). 196 Ibid.


provide a “fair and equitable return of revenue” to the PBC or political subdivision.197 Leases must be negotiated and let in accordance with “objective criteria,” listed in state law as “highest rent or highest percentage of gross profits, quality control of products, financial stability, architectural design, uniqueness of operation, and overall economic importance to the primary objective of stimulating other industrial or commercial activity within such development.”198 In New Orleans, leases may run up to 99 years.199 For this study, BGR reviewed six PBCs created by the City with purposes related to economic development efforts in New Orleans: Canal Street Development Corporation, French Market Corporation, New Orleans Building Corporation, Piazza D’Italia Development Corporation, Rivergate Development Corporation, and Upper Pontalba Building Restoration Corporation. These PBCs share several characteristics. For example, the mayor is the sole stockholder of the PBCs. Also, when the corporations are dissolved or otherwise terminated, their assets revert back to the City.200 The mayor appoints, with Council approval, the directors of these corporations. Council approves their annual budgets. In addition, the mayor and Council may choose to divert excess funds generated by PBC properties to the City’s General Fund or other purposes, including economic development. The excess funds are called the “net proceeds” of the PBCs.201 The PBCs generally define net proceeds as funds not needed for their purposes, including administrative and operating expenditures, debt service, and maintenance of any reserves for debt issues, capital repairs, or other needs. For the purposes of this study, BGR included as “net revenue” the amount available for administrative costs (which PBCs can control to some extent apart from property operations) and economic development investment. In the tables below, BGR calculated net revenue by subtracting property expenditures, including debt-related costs, and General Fund transfers from gross property revenues. (BGR excluded the General Fund transfers because they are used to fund general government services.) It should be noted that during the period 1998 to 2002, the City tapped only two of the six PBCs, the Canal Street Development Corporation and the Upper Pontalba Building Restoration Corporation, for excess funds for economic development projects. The following table summarizes the net revenues of the six PBCs from 1998 to 2002: TABLE: Summary of Net Revenues of Public Benefit Corporations

Figures in $000s 1998 1999 2000 2001 2002 Total Canal Street Development 656 928 1,606 1,451 1,434 6,076

197 R.S. 41:1212 (G). 198 R.S. 41:1215 (B). 199 Ibid. 200 BGR review of articles of incorporation and enabling legislation of the PBCs. 201 Ibid.


Corporation French Market Corporation 547 723 1,176 846 590 3,881 New Orleans Building Corporation

- - - 248 (1,003) (755)

Piazza D’Italia Development Corporation

150 150 150 150 150 750

Rivergate Development Corporation

121 126 138 132 105 622

Upper Pontalba Building Restoration Corporation

110 94 214 297 499 1,214

Total Net Revenues $1,584 $2,021 $3,283 $3,125 $1,776 $11,788 BGR calculations. Totals may not add due to rounding. 1. Canal Street Development Corporation In 1989, Dillard’s Department Store acquired D.H. Holmes, a New Orleans-based department store chain. Dillard’s shuttered the chain’s flagship store on Canal Street and donated the property to the City’s Canal Street Development Corporation (CSDC).202 The D.H. Holmes Property included significant portions of two blocks of land (bounded by Canal, Bourbon, Iberville, and Dauphine streets), the store building, an adjacent annex building, and a parking garage. CSDC’s stated purpose is “to stimulate business development in the Central Business District and the adaptive reuse and development of Canal Street for commercial purposes.” CSDC is governed by seven directors appointed the mayor, two of whom must be City Council members.203 CSDC leased portions of the D.H. Holmes Property to two subsidiaries of Historic Restoration Incorporated (HRI), a New Orleans real estate firm. One subsidiary converted the store building into the Chateau Sonesta Hotel; the other converted the annex building into the D.H. Holmes Apartments. CSDC’s leases with both subsidiaries run for 99 years, beginning on December 1, 1989. A separate HRI company also leased the upper floors of the parking garage from CSDC. Property rent payments supply almost all of CSDC’s operating revenue, aside from a modest amount of investment income. CSDC usually retains its excess revenues. However, in 2002, the City requested $3.4 million from CSDC to fund various expenditures. For example, the request included $334,000 to meet part of the City’s $1 million obligation for the New Orleans Museum of Art’s Egypt exhibit. Approximately $2.3 million of the requested money was drawn before December 31, 2002. The remaining amount of the request was not disbursed as of December 31, 2003.204 In 2003, the CSDC’s excess funds were allocated to four additional projects: $100,000 to help fund a strategic plan for Canal Street; $25,000 for the City’s Canal Street Projection

202 Interview with Neil Kohlman, CSDC executive director, April 8, 2004. 203 CSDC Articles of Incorporation. 204 CSDC, financial statements and auditor’s report, for the year ended December 31, 2003, pp. 40-41.


Project; $645,000 for the Louisiana ArtWorks development; and $145,000 for improvements to the parking garage. These allocations fell outside the period of this study and have not been included in the table below, which summarizes the CSDC net revenue from 1998 to 2002: TABLE: Canal Street Development Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total CSDC Net Revenue Calculation: Property and Other Revenue 1,125 1,577 2,059 1,701 1,783 8,245 Less: Property Debt-Related Costs (344) (334) (205) (44) - (928) Less: Property Operations (124) (315) (248) (205) (349) (1,241) Less: General Fund Transfers - - - - - - Total Sources (Net Revenues Included in Study Calculations)

$656 $928 $1,606 $1,451 $1,434 $6,075

Administrative Costs 104 96 103 104 108 515 Excess Funds Allocated to Other Projects:


- - - - 225 225

Social Services, City Program - - - - 1,000 1,000 Government:

Military Affairs - - - - 40 40 Other City Purposes - - - - 1,035 1,035 Other Local Government Entities

- - - - 214 214

Tourism Development: Special Events

- - - - 920 920

Retained Funds: Excess Net Revenues Retained by CSDC

552 832 1,503 1,347 957 5,190

Allocated Amounts Distributed to Above Projects in 2002

- - - - (2,333) (2,333)

Allocated Amounts Not Distributed in 2002

- - - - (1,101) (1,101)

Total Investments of Net Revenues

$656 $928 $1,606 $1,451 $1,434 $6,075

BGR calculations based on CSDC financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Totals may not add due to rounding. In 2002, CSDC sold the parking garage for approximately $506,000. This amount was included in a prior table summarizing the City’s Miscellaneous Capital Funds. Financing of Proposed Canal Street Improvements. In June 2004, City Council and the Nagin administration approved revised plans for financing $17.3 million in capital improvements to Canal Street. The City has tapped the CSDC and the Downtown Development District (DDD) to finance the cost of the project. Previously, when the cost of the capital improvements was estimated at approximately $15 million, the DDD had earmarked nearly $5 million of its 2001 bond issue, and CSDC had reserved $506,000 in proceeds from the sale of the D.H. Holmes parking garage (See


Miscellaneous Capital Funds in Local Sources section) and $9.5 million from a 2002 revenue bond issue (See Bond Proceeds section). Under the new financing plan,205 the DDD will still invest its $5 million in bond proceeds and CSDC its $506,000 in proceeds from the sale of the parking garage. However, the City will issue up to $12 million in revenue bonds to refinance the CSDC’s 2002 bonds and generate additional funds to cover the current $17.3 million cost. CSDC will pay the debt service on the City’s bonds. The DDD will use its ad valorem tax receipts to reimburse a portion of CSDC’s debt service and contribute to the early retirement of the bonds. To this end, the DDD will use 100% of its ad valorem tax receipts above $4,811,570 in 2004 and 60% of its receipts above $4,612,197 in 2005 and thereafter. Further, both the DDD and CSDC will make additional cash contributions to the project: $275,000 from existing DDD funds, $300,000 in existing CSDC funds, and up to $300,000 a year in additional DDD funds to the extent necessary to defray project costs. 2. French Market Corporation The French Market Corporation (FMC) leases several City-owned properties that comprise the French Market. Its stated purpose is “renovating and operating the French Market properties and other similar ventures owned by the City of New Orleans as well as the acquisition, formation and operation of a public market or markets for the benefit of the general public.”206 FMC’s board has 12 directors appointed by the mayor, three of whom are City Council members.207 FMC derives most of its revenue from rental income paid by tenants of the French Market. According to its lease with the City, FMC is required to pay to the City the greater of $1 a year or “distributable net profits.” Distributable net profits are defined as funds remaining after debt service, operating expenses, and “reasonable reserves for replacement, maintenance, management, promotion and tax purposes.”208 FMC transferred $500,000 in rent plus another $4.9 million in other net profits to the City’s General Fund during the period 1998 to 2002. Aside from these General Fund transfers, FMC generally retains any other excess revenues for capital repairs to French Market properties. These are reflected in Retained Funds in the table below. TABLE: French Market Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total FMC Net Revenue Calculation: Property and Other Revenue 5,864 6,403 6,945 7,058 6,989 33,259 Less: Property Debt-Related Costs (197) (483) (213) (206) (200) (1,299) Less: Property Operations (4,120) (4,198) (4,457) (4,906) (4,999) (22,679) Less: General Fund Transfers (1,000) (1,000) (1,100) (1,100) (1,200) (5,400) Total Sources (Net Revenues $547 $723 $1,176 $846 $590 $3,881

205 City Council Ord. No. 21,587 MCS. 206 FMC Articles of Incorporation 207 Ibid., and FMC, financial statements and auditor’s report, for the year ended December 31, 2002, p. 14. 208 City Council Ord. No. 4,745 MCS.


Included in Study Calculations) Administrative Costs 678 682 901 870 788 3,920 Retained Funds: Excess (deficiency) of Net Revenues Retained by FMC

(132) 40 274 (24) (198) (39)


$547 $723 $1,176 $846 $590 $3,881

BGR calculations based on FMC financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Totals may not add due to rounding. Table excludes bond proceeds, listed in Bond Proceeds table below. Table also excludes $50,000 per year in management fees received from the Upper Pontalba Building Restoration Corporation, listed in that corporation’s table below. 3. New Orleans Building Corporation The City Council created the New Orleans Building Corporation (NOBC) in 1999 to own, lease, develop, and operate properties owned by the City or by NOBC.209 Its board includes the mayor; both At-Large Council members; one district Council member, chosen by the Council; and three members appointed by the mayor with Council approval.210 In 2001, NOBC replaced the New Orleans International Trade Building Corporation as the City’s landlord for the World Trade Center property. In 2002, NOBC assumed control of the New Orleans Union Passenger Terminal in downtown and will oversee redevelopment plans.211 Several other City-owned properties are under NOBC control, including the former Lincoln Beach amusement park. The following table summarizes NOBC net revenue from 1998 to 2002. NOBC’s negative net revenue for 2002 reflects the operating deficit of the Union Passenger Terminal. NOBC has retained any excess revenues. The table excludes $250,000 in UDAG Repayment Funds awarded to NOBC to offset operating expenses. These have been included in the UDAG Repayment Fund table above. TABLE: New Orleans Building Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total NOBC Net Revenue Calculation: Property and Other Revenue - - - 613 1,277 1,890 Less: Property Debt-Related Costs - - - - - - Less: Property Operations - - - (364) (2,281) (2,644) Less: General Fund Transfers - - - - - - Total Sources (Net Revenues Included in Study Calculations)

$ - $ - $ - $248 ($1,003) ($755)

Administrative Costs - - - 79 332 410 Retained Funds: Excess (deficiency) of Net Revenues

- - - 170 (1,335) (1,165)


$ - $ - $ - $248 ($1,003) ($755)

209 City Council Ord. No. 19,465 MCS. 210 NOBC Articles of Incorporation. 211 NOBC, financial statements and auditor’s report, for the year ended December 31, 2002, p. 6.


BGR calculations based on NOBC financial statements and auditor’s reports for the years ended December 31, 2001 and 2002. Totals may not add due to rounding. In 2002, the negative net revenues reflect the operating deficit of the Union Passenger Terminal, which NOBC acquired during that year. 4. Piazza D’Italia Development Corporation In 1990, the City created the Piazza D’Italia Development Corporation (PDIDC) to improve and develop the Piazza D’Italia, a City-owned downtown monument and plaza. The City leased the property, which includes an adjacent parking lot, to PDIDC. It has a board of seven members appointed by the mayor, two of whom must be City Council members. The CSDC administers PDIDC’s operations. In 2002, PDIDC and the City leased the parking lot portion to developers of the Loews Hotel in the adjacent former Lykes building, which is not owned by the City. The lease did not include the Piazza D’Italia monument and plaza. A separate maintenance and use agreement obligates the developers to maintain and secure the Piazza D’Italia.212 From 1998 to 2002, the PDIDC took in $150,000 a year in revenue from the parking lot.213 Funds were placed in reserve for maintenance and restoration of the Piazza D’Italia. The Retained Funds calculation in the following table includes the reserve funds. The City has not diverted PDIDC funds to other projects. TABLE: Piazza D’Italia Development Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total PDIDC Net Revenue Calculation: Property and Other Revenue 150 150 150 150 150 750 Less: Property Debt-Related Costs - - - - - - Less: Property Operations - - - - - - Less: General Fund Transfers - - - - - - Total Sources (Net Revenues Included in Study Calculations)

$150 $150 $150 $150 $150 $750

Retained Funds: Reserve for Piazza D’Italia Maintenance and Restoration

150 150 150 150 150 750


$150 $150 $150 $150 $150 $750

BGR calculations based on information supplied by CSDC. 5. Rivergate Development Corporation In 1993, the City Council established the Rivergate Development Corporation (RDC)214 to develop the former Rivergate Convention Center (Rivergate). The RDC is governed by a nine-member board appointed by the mayor, which must include one at-large Council member and Council members from Districts B and C.

212 Information supplied by CSDC. 213 Ibid. 214 City Council Ord. No. 15,777 MCS.


RDC leases the Rivergate site and adjacent properties from the City and subleases them to Jazz Casino Company,215 a wholly-owned subsidiary of Harrah’s Entertainment Inc., for the operation of Harrah’s New Orleans Casino (Harrah’s). Over the past decade, this sublease has been amended several times to account for new owners, two Harrah’s bankruptcies, and other events. RDC serves only as the landlord for the casino. It has no property expenses related to the casino buildings and has provided no subsidies for its construction or operation. BGR has included RDC professional services contract expenditures in its calculation of net revenues because they are related to the casino lease and development and the bankruptcies. It received reimbursement for its legal expenses related to the bankruptcies.216 Harrah’s is required to make a series of payments to RDC (Casino Payments). Under the RDC enabling legislation,217 the City must first use the Casino Payments to pay RDC operating expenses. Any Casino Payments in excess of the RDC obligation in the enabling legislation are transferred to the City’s General Fund.218 From 1998 to 2002, RDC transferred a total $56.4 million to the General Fund.219 The following table summarizes RDC net revenue from 1998 to 2002: TABLE: Rivergate Development Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total RDC Net Revenue Calculation: Property and Other Revenue 8,903 11,636 12,137 13,675 12,300 58,652 Less: Property Debt-Related Costs - - - - - - Less: RDC Expenditures for Professional Services Contracts

(391) (432) (191) (326) (245) (1,585)

Less: General Fund Transfers (8,391) (11,078) (11,809) (13,217) (11,950) (56,445) Total Sources (Net Revenues Included in Study Calculations)

$121 $126 $138 $132 $105 $622

Administrative Costs 121 126 138 132 105 622 Total Investments of Net Revenues

$121 $126 $138 $132 $105 $622

BGR calculations based on information supplied by RDC. Totals may not add due to rounding. 6. Upper Pontalba Building Restoration Corporation In 1988, the City Council formed the Upper Pontalba Building Restoration Corporation (UPBRC)220 to renovate and operate the Upper Pontalba Building and other similar ventures owned by the City of New Orleans for the benefit of the general public.221 The 215 Interview with Cynthia Connick, RDC executive director, April 8, 2004. 216 Information per Rivergate Development Corporation. 217 City Council Ord. MCS 15777. 218 City Council Ord. MCS 15777, Rivergate Development Corporation. 219 The City pays $200,000 a year from its General Fund receipts from Harrah’s to cover its obligation to the Audubon Commission under the Riverfront Economic Development Agreement. This agreement and the funding is included in the City General Fund description in the Local Sources section. 220 City Council Ord. No. 12,244 MCS. 221 UPBRC Articles of Incorporation.


Upper Pontalba Building is a French Quarter building used for both residential and commercial purposes. UPBRC’s board consists of seven members appointed by the mayor, two of whom must be Council members.222 In 1995, UPBRC completed an $8.1 million renovation of the building’s apartments.223 The majority of the construction cost was financed with a bank loan, which was refinanced by $5.5 million in revenue bonds issued in 1996. At December 31, 2002, the outstanding debt totaled $4.5 million. The bonds, payable from property rent, mature in 2016.224 UPBRC derives most of its revenue from rents paid by tenants of the Upper Pontalba Building. Its expenses include an annual $50,000 payment to French Market Corporation for the cost of administering the operations of UPBRC. The UPBRC sets aside approximately $100,000 per year in distributable net profits to be used only for special projects recommended by the City administration and approved by City Council. In 2002, City Council authorized spending $540,000 of the profits to repair the mall areas surrounding Jackson Square. As of April 2004, the repairs were near completion.225 UPBRC generally retains other excess revenues for capital repairs to its property. These are reflected in the calculation of Retained Funds in the table below. TABLE: Upper Pontalba Building Restoration Corporation

Figures in $000s 1998 1999 2000 2001 2002 Total UPBRC Net Revenue Calculation: Property and Other Revenue 1,120 1,153 1,281 1,387 1,362 6,302 Less: Property Debt-Related Costs (332) (329) (379) (311) (263) (1,614) Less: Property Operations (677) (729) (688) (778) (600) (3,473) Less: General Fund Transfers - - - - - - Total Sources (Net Revenues Included in Study Calculations)

$110 $94 $214 $297 $499 $1,214

Administrative Costs 128 133 136 145 144 685 Excess Funds Allocated to Other Projects:


194 100 100 100 100 594

Retained Funds: Excess (deficiency) of Net Revenues Retained by UPBRC

(211) (139) (22) 52 255 (65)


$110 $94 $214 $297 $499 $1,214

BGR calculations based on UPBRC financial statements and auditor’s reports for the years ended December 31, 1998 to 2002. Totals may not add due to rounding.

222 UPBRC, financial statements and auditor’s report, for the year ended December 31, 2002, p. 15. 223 Ibid., p. 15. 224 Ibid., p. 24. 225 Telephone interview with Patricia Henry, UPBRC Business Manager, April 8, 2004.


FOREGONE REVENUE This subsection summarizes the cost of the public’s investment through various tax incentives during the period 1998 to 2002. The estimated foregone taxes have been quantified based on available public information. Foregone taxes are defined for purposes of this study as taxes that were abated or diverted to satisfy obligations for privately owned projects. For reasons stated in the Executive Summary, BGR has not attempted to quantify the benefits of these investments. 1. Enterprise Zone Rebates State law establishes the Enterprise Zone (EZ) Program, which provides, among other benefits, a rebate of state and certain local sales taxes paid on construction materials, machinery, and equipment used during construction.226 State law prohibits the rebate from applying to local sales taxes dedicated to schools or bond indebtedness.227 The City restricts its local rebates to the 2.5% sales tax collected for its General Fund.228 The 2.5% sales tax rebate is also available through the state’s Quality Jobs incentive program. To qualify, a business must increase its statewide workforce by 10% within the first 12 months, with a minimum of one net new job, or create a minimum of five net new jobs within the first 24 months of the start of construction.229 In addition, 35% of the new jobs must be filled by residents of EZs within the parish where the applicant is located, or residents who are receiving public income or employment assistance, lacking in basic skills, or physically challenged.230 To receive the rebate on local sales taxes, applicants must first obtain an endorsement resolution from the local governing authority. This resolution is required for final State approval of their application. While the State enters into a sales tax rebate contract after final approval,231 the City requires a separate application process before approving actual payment of its rebate.232 According to OED, the detailed review involved in this process has limited the number of rebates paid by the City.233 The following table summarizes the foregone taxes resulting from the seven rebates issued by the City from 1998 to 2002: TABLE: Rebated City Sales Taxes Under the Enterprise Zone Program

226 Louisiana Department of Economic Development, Enterprise Zone Program fact sheet; also, La. R.S. 51:1787 227 Louisiana Department of Economic Development, Enterprise Zone Program fact sheet 228 Interview with Ernest Gethers, Senior Assistant for Business Services, OED, September 12, 2003. 229 LED, Enterprise Zone Program fact sheet. 230 Ibid. 231 Ibid. 232 City Council Ord. No. 14,438 MCS. 233 Interview with Ernest Gethers, op. cit., September 12, 2003.


Figures in $000s 1998 1999 2000 2001 2002 Total

City Sales Taxes Rebated under Enterprise Zone Program

85 38 93 - 249 465

Total Sources $85 $38 $93 $ - $249 $465 Business Development: Local Tax Relief to Businesses

85 38 93 - 249 465

Total Investments $85 $38 $93 $ - $249 $465 Source: Information supplied by OED. Figures are annual taxes rebated. Totals may not add due to rounding. 2. Industrial Tax Exemption The Louisiana Constitution provides for an exemption from ad valorem property taxes on new manufacturing plants or additions to existing plants.234 Commonly called the Industrial Tax Exemption (ITE), the exemption applies for an initial term of five years and may be renewed for another five years. It affects ad valorem taxes on property improvements, buildings, machinery, equipment, and any other property that is part of the manufacturing process. It does not apply to land.235 ITE contracts require the approval of the Louisiana Board of Commerce and Industry and the governor. No local approval is required,236 even though all ad valorem taxes are locally levied. The Constitution further states that the board and the governor need act only “in the best interest of the state.”237 State regulations do not define what this means.238 Moreover, they do not require any basic measures of performance, such as job creation. A study of ITE contracts from 1990 to 1999 by the State House Fiscal Division found that only 5% of contracts were for new plant locations.239 The majority went to “miscellaneous capital additions,” or small capital outlay additions to a plant totaling not more than $5 million over a 12-month period. A list of ITE contracts for New Orleans provided by Louisiana Department of Economic Development showed 127 active contracts from 1998 to 2002. The department estimated foregone local taxes over a 10-year period for each contract, using a formula that multiplies the investment costs by 15% of assessed value and then by 170 mills. Based on the department’s estimates, BGR calculated approximately $22 million in foregone ad valorem property taxes in Orleans Parish during the period 1998 to 2002.

234 La. Const. Art. 7, Sec. 21 (F). 235 LED, Industrial Tax Exemption fact sheet. 236 LED regulations for Industrial Tax Exemption program. 237 La. Const. Art. 7, Sec. 21 (F). 238 Louisiana State Legislature, House Select Committee on Fiscal Affairs, Select Committee on Fiscal Affairs Final Report, March 23, 2001, p. 6. 239 Ibid., p. 7.


The department’s estimates provide only a rough gauge of foregone taxes. They do not account for lower property values because of depreciation of the assets or the possibility of below market-rate assessments. Further, the department’s estimates assume a static millage rate, rather than one that changes each year. TABLE: Estimated Foregone Ad Valorem Taxes Under the Industrial Tax Exemption Program

Figures in $000s 1998 1999 2000 2001 2002 Total Orleans Parish Ad Valorem Taxes Foregone under Industrial Tax Exemption Program

3,061 2,883 3,504 5,706 6,855 22,009

Total Sources $3,061 $2,883 $3,504 $5,706 $6,855 $22,009 Business Development: Local Tax Relief to Businesses:

1st Municipal District (M.D.) Properties

162 162 187 1,061 1,134 2,705

2nd M.D. Properties 43 43 19 19 19 143 3rd M.D. Properties 2,571 2,424 3,044 4,365 5,441 17,846 4th M.D. Properties 141 114 113 113 113 593 5th M.D. Properties 68 68 68 68 68 338 6th M.D. Properties 76 73 73 81 81 385 7th M.D. Properties - - - - - -

Total Investments $3,061 $2,883 $3,504 $5,706 $6,855 $22,009 BGR calculations based on information supplied by LED and assessment records. Figures are estimated annual foregone ad valorem tax revenues. Totals may not add due to rounding. 3. Payment In Lieu Of Taxes (PILOT) The IDB is authorized under state law to enter into a payment in lieu of taxes (PILOT) agreement with a private developer on whose behalf the IDB issues revenue bonds.240 Eligible projects include almost all private developments except utilities. The bonds are subject to approval by the Secretary of the LED and the Louisiana State Bond Commission. In issuing the bonds, the IDB takes title to the property developed for these projects and sells or leases it back to the private entity. If the IDB chooses to retain title to the property and lease it to the company, the property remains exempt from ad valorem taxes.241 The IDB may require the lessee to pay an annual PILOT up to the amount of taxes that would have been owed under private ownership.242 Under state law, a PILOT is not required, and there is no minimum amount that must be paid.243 Thus, the amount is subject to negotiation between the lessor and lessee.244 BGR identified three PILOTs authorized through the IDB that were in effect for the period 1998 to 2002: the Days Inn Hotel, the American Can Apartments, and the Saulet Apartments. In addition, the tax exemption for Jazzland Theme Park through NOLA is 240 La. R.S. 51:1151 et seq. Maximum term for bonds allowed by state law is 40 years. 241 La. R.S. 51:1160. 242 Ibid. 243 Ibid. Also, Louisiana Attorney General Opinion Nos. 02-130 and 02-198. 244 La. R.S. 51:1160. Also, interview with O. Ray Cornelius, IDB bond counsel, December 18, 2002.


included here because it functioned as a PILOT; under state law, property owned by economic development corporations for their statutory purposes is exempt from ad valorem taxes.245 In 2002, the IDB assumed ownership of the park, since renamed Six Flags New Orleans, and continued the tax exemption. The following table summarizes BGR’s estimates of foregone taxes from 1998 to 2002. As stated at the beginning of this section, foregone taxes are defined for purposes of this study as taxes that were abated or diverted to satisfy obligations for privately owned projects. Estimates of foregone taxes are based on information provided by the City, assessors, IDB consultants, or the beneficiary of the tax relief. In calculating its estimates, BGR subtracted annual PILOT amounts from its estimates of property taxes that would be owed if no PILOT existed. Also in its estimates, BGR increased the originally estimated value of property by 1.5% per annum, the average annual increase in assessed value on a citywide basis from 1987 to 2002. TABLE: Taxes Foregone Through Payment in Lieu of Taxes Program, 1998-2002

Figures in $000s 1998 1999 2000 2001 2002 Total Orleans Parish Ad Valorem Taxes Foregone Under PILOT Program

111 113 114 1,878 3,012 5,227

Total Sources $111 $113 $114 $1,878 $3,012 $5,227 Business Development: Local Tax Relief to Businesses

111 113 114 1,878 1,879 4,094

Urban Redevelopment Projects - - - - 1,133 1,133 Total Investments $111 $113 $114 $1,878 $3,012 $5,227 BGR calculations based on estimates of property taxes derived from assessment records, IDB consultant reports, and IDB meeting minutes, less PILOT amounts. Figures are estimated annual foregone ad valorem tax revenues. Totals may not add due to rounding. BGR projects the annual amount of taxes foregone due to PILOT agreements to increase more than fourfold during the period 2003 to 2007. The increase will result from PILOTs approved by IDB for a warehouse and the redevelopment of several public housing sites. The following table summarizes BGR’s projections of foregone taxes for PILOTs active during 2003 to 2007: TABLE: Taxes Foregone Through Payment in Lieu of Taxes Program, 2003-2007

Figures in $000s 2003 2004 2005 2006 2007 Total Orleans Parish Ad Valorem Taxes To Be Foregone Under PILOT Program

3,058 4,852 4,807 4,878 5,000 22,594

Total Sources $3,058 $4,852 $4,807 $4,878 $5,000 $22,594 Business Development: Local Tax Relief to Businesses

1,906 2,211 2,128 2,161 2,195 10,602

Urban Redevelopment Projects 1,152 2,641 2,678 2,716 2,805 11,992 Total Investments $3,058 $4,852 $4,807 $4,878 $5,000 $22,594

245 La. R.S. 33:9030.


BGR calculations based on estimates of property taxes derived from assessment records, IDB consultant reports, and IDB meeting minutes, less PILOT amounts. Figures are estimated annual foregone ad valorem tax revenues. Totals may not add due to rounding. a. Days Inn Hotel. In 1983, the IDB took title to property in eastern New Orleans and signed a 20-year lease, issued bonds, and negotiated a PILOT in the full amount of the taxes for development of a Days Inn Hotel (the Hotel). Litigation over the tax status of the Days Inn hotel in eastern New Orleans following its 1991 bankruptcy put on hold the City’s collection of PILOTs from the hotel. In 2001, a court ruled that the hotel was exempt from ad valorem taxes. The court canceled all of the hotel’s outstanding tax bills since 1991 and ruled the hotel was not obligated to make PILOTs.246 Because of the court’s action, the Hotel paid no PILOTs or ad valorem taxes during the period 1998 to 2002. Based on assessor’s office figures, BGR estimated the foregone taxes between $111,000 and $114,000 per year. In early 2004, with the lease having run its course, the IDB decided to formally transfer the property back to the lessee, making it taxable again. b. American Can Apartments. In 2000, the IDB took title to property in Mid-City and leased it back to a subsidiary of HRI. The IDB then issued $29 million in revenue bonds to finance part of the building’s $44.5 million conversion into 268 apartments and ground-level retail shops.247 The IDB approved a 10-year PILOT of $36,556 per year, about the amount of ad valorem taxes before the apartment conversion.248 For 2002, the first year of the PILOT,249 BGR estimated the annual foregone taxes at approximately $303,000, the difference between the PILOT amount and the developer’s estimate of $340,000 provided to the IDB in May 1999. c. Saulet Apartments. In 2000, the IDB took title to a Lower Garden District property and leased it back to a Houston developer to build 703 apartments called the Saulet Apartments (Saulet). The IDB issued two sets of bonds totaling $43.5 million to finance the bulk of the estimated $60 million development.250

246 The Bank of New York v. Honorable Erroll G. Williams, Assessor, City of New Orleans and Industrial Development Board of the City of New Orleans, Louisiana, Inc., 796 So.2d 69, 2000-1922 (La.App. 4 Cir. 8/22/01). 247 Official Statement, $29,000,000 Industrial Development Board of the City of New Orleans, Louisiana, Inc., Variable Rate Demand Multifamily Housing Revenue Bonds (3700 Orleans LLC Project) Series 2000. 248 PILOT agreement and information supplied by the 2nd Municipal District Assessor’s Office and the City Department of Finance. 249 The PILOT agreement ends after the 10th year following the year in which the apartments were available for occupancy. The apartments opened in 2001. 250 IDB resolution, October 15, 2002.


The IDB also approved a PILOT of $100 per unit for the first 10 years and $200 per unit for the remaining five years. The apartments were completed in late 2001.251 In 2002, the PILOT totaled $70,300.252 IDB consultants estimated $421,800 per year in ad valorem taxes without the PILOT.253 The consultants used an estimate of $600 per unit in taxes, which they derived from reviewing taxes on comparable properties. However, BGR used an estimate of $1,280 per unit, an average of estimates based on construction cost, net operating income, and assessors’ calculations. This is roughly in line with the $1,268 per unit estimate for American Can Apartments without its PILOT. d. Jazzland Theme Park/Six Flags New Orleans. As previously described, NOLA’s ownership of Jazzland Theme Park effected an exemption from ad valorem taxes on the park. For 2001 to 2002, the post-development recorded assessed value was disputed by the park’s developer, Jazzland Inc. In 2002, Jazzland Inc. filed for bankruptcy. The park was subsequently purchased out of bankruptcy court at a value of $69.3 million.254 This value was used to estimate foregone taxes. In 2002, the theme park, now called Six Flags New Orleans, was able to continue its tax exemption under its new owners, SFJ Management Inc. (SFJ), a subsidiary of theme park operator Six Flags Inc. SFJ and IDB entered into a sale-leaseback of the park for 75 years. SFJ agreed to pay the IDB rent, but no PILOT.255 The IDB passes through SFJ’s rent payments to the City to pay part of the annual debt service on the HUD Section 108 borrowing for the original Jazzland development. Once the City repays this borrowing in 2017, SFJ has an option to purchase the park. Under this scenario, the tax exemption would cease. With the use of SFJ rent for debt service and no additional PILOT, local taxing bodies receive no ad valorem tax revenue from the park. BGR applied the same $69.3 million value as the basis for its calculations of foregone taxes from 2003 to 2007. e. Crescent Crown Warehouse. In 2003, the IDB acquired a portion of the former MacFrugal’s site and leased it back to the developer of a beer distribution warehouse,

251 According to the PILOT terms, the 2001 amount would have been based on a percentage of units completed. However, the amount paid, if any, could not be determined. 252 The property has been listed as exempt on the tax rolls since 2001. In 2000, the last year a bill was issued, it totaled $77,340 and was fully taxable. However, the former owners of the property contested the tax bill. It was twice reduced to $6,445, according to city finance records. 253 Pappalardo, Albert S., and Lewis W. Stirling, III, Letters to the Industrial Development Board of the City of New Orleans, June 7 and June 14, 1999. 254 Debtor’s First Amended Chapter 11 Plan of Reorganization, In re: Jazzland, Inc., Debtor, Chapter 11 Case No. 02-11257, U.S. Bankruptcy Court for the Eastern District of Louisiana, New Orleans Division, June 21, 2002, p. 25. In a June 26, 1998 memorandum to City Council members, the Council Fiscal Officer noted that a HUD appraisal estimated the park’s value upon completion of construction at approximately $69.1 million. 255 Lease Agreement by and between the Industrial Development Board of the City of New Orleans, Louisiana, Inc., and SFJ Management Inc., as approved by City Council Ord. Cal. No. 24,379, August 8, 2002.


Crescent Crown Distributing LLC (Crescent Crown). The IDB approved a PILOT for 20 years. During the first 10 years, Crescent Crown must pay a PILOT equal to the taxes on the property prior to Crescent Crown’s acquisition. These taxes were approximately $50,000. In the 11th year, the payment will be one-tenth of the taxes that would be owed on the value of the property. In each successive year, the PILOT will increase by another one-tenth until the full taxes are paid in the 20th year.256 BGR calculated the foregone taxes from the Crescent Crown PILOT based on property valuations of $2.6 million for land and $10.4 million for improvements as provided in an IDB consultant’s report.257 f. Public Housing Redevelopments. Since 2003, the IDB has effected PILOTs for the redevelopments of five public housing sites operated by the Housing Authority of New Orleans (HANO). In 2003, the IDB acquired portions of the St. Thomas public housing site and leased them back to the developer, a subsidiary of HRI. The IDB issued revenue bonds for the first phase of rental units and for land acquisition and construction of a Wal-Mart Super Center (Wal-Mart). The IDB also approved two PILOTs: (i) $1 per year for each of the 122 low-income units and $100 per year for each of the 174 market-rate units in the first phase of rental housing for 15 years, and (ii) $300,000 per year, increasing to $450,000 per year over 20 years, for the Wal-Mart. All but $25,000 a year of the Wal-Mart PILOT will be diverted from taxing bodies to finance part of the bonds for the first phase of rental housing.258 On a preliminary basis, the IDB has agreed to additional bond issues and PILOTs for future phases of the St. Thomas redevelopment, including a second phase of rental housing. However, these phases remain under development and the IDB has not given final approval for their bonds or PILOTs. BGR estimated the foregone taxes from the rental housing PILOT using a property valuation based on projected net operating income.259 It estimated the foregone taxes

256 City Council Resolution R-03-657. 257 Stirling, Lewis W., III, Real Estate Counseling Report of the Efficacy of a Payment in Lieu of Tax (PILOT) Agreement for the Crescent Crown Distributing LLC Project, Prepared for the IDB, December 2002. 258 BGR, Tax Increment Financing in New Orleans, April 2003, Appendix A, p. 3, and Appendix A-1, p. 1. 259 The required PILOT on the first phase of rental housing is $1 per low-income unit and $100 per market-rate unit. With 122 low-income units and 174 market-rate units, BGR calculated the annual PILOT at $17,522. BGR calculated the foregone taxes as the difference between the PILOT and BGR’s estimate of taxes otherwise owed by the first phase. BGR based this estimate on net operating income figures provided to City Council, capitalized at a rate of 10% to estimate property value. The net operating income figures were provided in Lambert Advisory LC, St. Thomas Hope VI & Wal-Mart Evaluation Report to the New Orleans City Council, prepared for the New Orleans City Council, April 11, 2002, p. 22.


from the Wal-Mart PILOT based on the portion of the Wal-Mart PILOT diverted from tax recipient bodies to pay debt service on bonds for the first phase of housing.260 In late 2003 and early 2004, the IDB issued revenue bonds and approved nominal PILOTs of $1 per year for four other public housing sites: Desire, Fischer, Guste, and Florida. IDB consultants, when analyzing the costs of the PILOTs, could not calculate property valuations based on projected net operating income because the rents will be heavily subsidized by HUD. Rather, they used construction costs as the basis for their valuations. To calculate estimated taxes per unit, they divided the estimated taxes by an adjusted number of units that could be built with existing tax credits and other funds if no PILOT were approved. BGR has used the consultants’ assumptions in computing its estimates of foregone taxes. 4. Restoration Tax Abatement In 1982, Louisiana voters approved a constitutional amendment authorizing an ad valorem tax abatement for existing commercial structures undergoing expansion, restoration, improvement, and development. The structures are required to be located in downtown, historic, or economic development districts. In 1990, voters approved another constitutional amendment to expand the abatement to owner-occupied residences and allow the option for five-year renewals of all initial abatements.261 Called the Restoration Tax Abatement (RTA), the abatement freezes the assessed valuation on a property at the level prior to the start of construction.262 Ad valorem taxes continue to be paid on the frozen assessment. The abatement applies only to the physical renovations to the property;263 it does not include the acquisition cost of the structure or movable furniture and fixtures.264 For owner-occupied residences, the minimum rehabilitation cost must be at least 25% of the assessed valuation of the improvements on the property for the year prior to the start of construction.265

260 The Wal-Mart PILOT runs for 20 years and increases gradually from $300,000 to $450,000 per annum. However, tax recipient bodies will receive only $25,000 per annum. The remainder will be diverted to pay debt service for the first phase of housing. BGR has considered the diverted portion to be the foregone taxes. 261 Public Affairs Research Council of Louisiana, 1999 Louisiana Tax Handbook, p. 68. Also, La. Const. Art. 7, Sec. 21 and La. R.S. 47:4311. 262 La. R.S. 47:4311. 263 Restoration Tax Abatement Rules, Title 13, Part I, Ch. 9, Sect. 901 (B) (1): “…equipment which becomes an integral part of the existing structure …” 264 LED, Restoration Tax Abatement Program fact sheet. 265 La. R.S. 47:4315.


The RTA has been one of the City’s most popular tax incentives since the program took effect in 1983.266 The RTA has been used in many types of developments, from houses to hotels. In 2002, the newly elected Nagin administration halted the RTA program to review it and propose new guidelines. According to its December 2002 study, 354 properties received an estimated $140.4 million in tax relief under the RTA program from 1983 to 2001.267 The study estimated that in fiscal year 2002 there were 188 RTA properties receiving tax relief of $13.4 million, of which $2.6 million represented the portion diverted from the City.268 Through fiscal year 2008, the study estimated that these properties would avoid paying $61.4 million in taxes. If every eligible project received a renewal, the potential total tax abatement would rise to $127 million by fiscal year 2013, with more than $24 million diverted from the City.269 The City’s estimates were based on a review of applications under the RTA program from 1983 to 2001. It calculated foregone taxes based on a percentage of final project costs as reported by the approved applicants. The annual totals for 1983 to 2001 did not reflect the foregone taxes in each year, but rather the five-year estimated foregone taxes of applications approved in each year. To estimate foregone taxes by year from 1998 to 2002, BGR reviewed information on approved RTA applications from the City. It then reviewed available assessment records and, in some cases, individual contracts to determine if the approved RTA contracts were active for all or part of this period. In most cases, the reported project costs for active contracts were multiplied by either the residential or commercial assessment rate to estimate assessed values; for the 6th Municipal District, actual assessments on exempt RTA improvements were provided to BGR.270 Finally, millage rates for 1998 to 2002 were applied to the assessed value figures to determine foregone taxes. For both residential and commercial properties, BGR found 220 active contracts costing taxing bodies in Orleans Parish an estimated $49.5 million in foregone taxes during the period 1998 to 2002.

266 City of New Orleans, Chief Administrative Office, A Review of the Restoration Tax Abatement Program, December 2002, p. 5. 267 Ibid., p. 2. 268 Ibid., p. 2. 269 Ibid., p. 6. 270 There is no uniform system among the seven Orleans assessors for tracking RTA contracts and recording the total number of active contracts or value of the affected property. The assessors track only those contracts in their individual districts. At least one assessor actually assesses the exempt portions of the properties. Others record no assessed value or make memorandum entries of project costs reported for the contracts.


a. Commercial Properties. BGR found 114 active RTA contracts on commercial properties; half of these properties were located in the 1st Municipal District, another 37% in the 2nd Municipal District. The following table summarizes the estimated foregone taxes, by municipal district, from these contracts: TABLE: Estimated Foregone Ad Valorem Taxes Through Restoration Tax Abatements on Commercial Property

Figures in $000s 1998 1999 2000 2001 2002 Total Estimated Foregone Ad Valorem Taxes from Active RTA Contracts on Orleans Parish Commercial Properties

4,941 5,417 6,995 11,883 15,004 44,241

Total Sources $4,941 $5,417 $6,995 $11,883 $15,004 $44,241 Business Development: Targeted Neighborhood Business Assistance

1st M.D. Properties 2,879 3,310 4,874 6,341 8,436 25,839 2nd M.D. Properties 1,585 1,623 1,642 5,074 6,326 16,251 3rd M.D. Properties 76 77 45 28 28 254 4th M.D. Properties 168 170 190 196 196 920 5th M.D. Properties - - - - - - 6th M.D. Properties 233 237 244 244 15 973 7th M.D. Properties - - - - 4 4

Total Investments $4,941 $5,417 $6,995 $11,883 $15,004 $44,241 BGR calculations based on assessment records, RTA contracts, and information supplied by OED. Estimates include only RTA contracts active during the period. Figures are estimated annual foregone ad valorem tax revenues. Totals may not add due to rounding. b. Residential Properties. BGR found 106 active contracts on residential properties, of which 25% were located in the 1st Municipal District and another 25% in the 2nd Municipal District. The following table summarizes the estimated foregone taxes, by municipal district, from these contracts: TABLE: Estimated Foregone Ad Valorem Taxes Through Restoration Tax Abatements on Residential Property

Figures in $000s 1998 1999 2000 2001 2002 Total Estimated Foregone Ad Valorem Taxes from Active RTA Contracts on Orleans Parish Residential Properties

837 922 1,030 1,169 1,274 5,232

Total Sources $837 $922 $1,030 $1,169 $1,274 5,232 Community Improvement: Housing Assistance

1st M.D. Properties 482 477 608 564 614 2,744 2nd M.D. Properties 205 220 232 216 254 1,127 3rd M.D. Properties 19 47 45 213 241 565 4th M.D. Properties 47 81 88 90 76 383 5th M.D. Properties - - 4 4 4 13 6th M.D. Properties 57 70 25 55 55 262 7th M.D. Properties 27 27 27 27 29 137


Total Investments $837 $922 $1,030 $1,169 $1,274 5,232 BGR calculations based on assessment records, RTA contracts, and information supplied by OED. Estimates include only RTA contracts active during the period. Figures are estimated annual foregone ad valorem tax revenues. Totals may not add due to rounding. 5. Tax Increment Financing Tax increment financing (TIF) is a financing mechanism that enables a local government to capture new tax revenues generated in a designated area and reinvest them in that area to fund improvements. The local government freezes the tax base in the TIF district at the pre-development level for a period of years. Taxing bodies continue to receive the taxes on the pre-development base, but the incremental taxes are applied to infrastructure and other improvements designed to spur private sector development.271 While the City did not forego any tax revenues due to TIF during the period 1998 to 2002, the following projects have been approved or are under discussion to receive a TIF incentive:272 a. St. Thomas Redevelopment. In November 2002, City Council approved the City’s first TIF district for the redevelopment of the St. Thomas public housing site. The district will capture the 2.5% City sales taxes generated by a Wal-Mart Super Center to repay $20 million in TIF bonds. The bond proceeds will be used to build the first two phases of rental units on the former St. Thomas site. BGR estimated the foregone taxes based on (i) City sales taxes diverted to pay debt service on TIF bonds and (ii) sales taxes lost from Wal-Mart’s competitors. State law limits the state amount of principal and interest due in any year to a maximum of 75% of City sales taxes from the first full calendar year of operations.273 This amortization produces a stated maturity of 45 years. However, state law also allows additional sales tax revenues to be pledged toward prepayment. The City Council agreed to devote 80% of the excess City sales taxes to prepaying the bonds. The City expects to reduce the maturity to 13.5 years. If there is no excess, the 45-year maturity would apply. b. Lowe’s Home Improvement Store. In June 2003, City Council approved a TIF-like arrangement for a proposed Lowe’s on Elysian Fields Avenue. The agreement requires the City to rebate Lowe’s for 50% of its City sales taxes, up to $600,000 per year, for a total of six years. The rebates will help repay the costs of infrastructure. BGR used the maximum $600,000 per year as the foregone taxes, a figure supported by the store’s sales projections. c. Algiers Economic Development District. In October 2003, City Council approved a TIF district for Algiers. The district will capture 50% of incremental City sales taxes, above a baseline of $898,000, generated by an existing Wal-Mart Super Center in 271 For more detail on TIF, see BGR, Tax Increment Financing in New Orleans, April 2003. The report is available on our web site, www.bgr.org. 272 Project summaries prepared by BGR Staff in December 2003. 273 La. R.S. 33:9033.3.


Algiers. Total captured sales taxes, which will be diverted from the City’s General Fund to a special City fund for the TIF district, are capped at $1 million per year. The TIF revenue, which will be captured for 10 years, must be matched dollar for dollar by the State. In 2004, the Council effected the TIF district by approving a cooperative endeavor agreement between the City, the TIF district, and the Algiers Development District, a special taxing district created for Algiers by the State Legislature in 1992.274 The agreement specifies that initial spending of TIF revenues will be limited to approximately $247,500 in planning and administrative costs, with the remaining funds disbursed quarterly in accordance with a long-term economic development plan to be approved by Council.275 City finance department estimated a tax capture of approximately $544,000 in 2004.276 This estimate has been used in BGR’s calculations. d. World Trade Center Hotel. In spring 2002, the State Legislature created a special taxing district for a proposed hotel development in the World Trade Center, a City-owned property.277 The taxing district is authorized to levy and collect a site-specific 13% hotel occupancy tax in lieu of the hotel occupancy tax in Orleans Parish. In March 2004, the taxing district approved the levy of the site-specific tax and the pledge of the tax collections to the private financing for the hotel. Projections of the foregone hotel occupancy taxes were prepared in October 2003 by the New Orleans Building Corporation (NOBC), the City’s special purpose entity that leases the World Trade Center property to the private, nonprofit World Trade Center of New Orleans Inc. to sublease to the hotel developer. BGR based its calculations on these projections. In the table below, BGR has summarized its projections of foregone tax revenue from each of the approved TIFs from 2003 to 2007. For the years 2004 to 2007, BGR reduced its estimates by 3% to adjust for future inflation in taxable sales. TABLE: Estimated Foregone Taxes through Tax Increment Financing, 2003-2007

Figures in $000s 2003 2004 2005 2006 2007 Total City Sales Taxes to be diverted for TIF incentives

- 544 3,884 3,841 3,780 12,068

Hotel Occupancy Taxes to be diverted for TIF incentives

- - - 3,803 3,900 7,702

274 No tax was approved for the Algiers Development District. 275 Cooperative Endeavor Agreement by and among the City of New Orleans, the Algiers Economic Development District No. 1, and the Algiers Development District, as approved by City Council Ord. Cal. No. 25,189, April 1, 2004. 276 Zeno, Reginald E., Director of Finance, Letter to The Honorable Jacquelyn Brechtel Clarkson, Councilmember, District C, March 24, 2004. On April 15, 2004, the Council appropriated this amount to the City budget for 2004 for the Algiers TIF program. 277 La. R.S. 33:9038.21.


Total Sources $ - $544 $3,884 $7,644 $7,699 $19,770 Business Development: Local Tax Relief to Businesses

- - 583 4,368 4,449 9,399

Community Improvement: Community Facilities and Infrastructure

- 544 544 544 544 2,174

Urban Redevelopment Project - - 2,758 2,732 2,707 8,197 Total Investments $ - $544 $3,884 $7,644 $7,699 $19,770 BGR calculations. Figures are estimated annual foregone tax revenues, adjusted for future inflation in taxable sales. Totals may not add due to rounding. 6. Other Foregone Revenue: Sports Team Tax Exemptions Both the Saints and the Hornets benefit from local and state tax exemptions on tickets, concessions, merchandise, and parking revenues at the Superdome and Arena, respectively. Local sales tax exemptions cover the 5% of the 9% sales tax collected by the City, the Orleans Parish School Board, and the Regional Transit Authority. The parking tax exemptions cover the 3% tax collected by the City. For the Saints exemptions, BGR estimated the foregone local sales tax revenues based on ticket, concessions and merchandise, and parking revenues for the LSED fiscal years 1998 to 2002, ended June 30.278 The figures have not been adjusted for inflation. The Hornets did not start play until the LSED’s 2003 fiscal year. Because this falls outside the fiscal 1998 to 2002 period of BGR’s study, the sources and uses calculations below do not reflect their impact. TABLE: Other Foregone Revenues, Sports Team Tax Exemptions

Figures in $000s 1998 1999 2000 2001 2002 Total Foregone local taxes on Saints ticket, concessions, merchandise sales

862 986 1,101 1,347 1,768 6,064

Foregone local taxes on Saints parking revenue

8 9 9 15 13 54

Total Sources $870 $995 $1,110 $1,362 $1,781 $6,118 Sports Subsidies: Team Subsidies (Saints)

870 995 1,110 1,362 1,781 6,118

Total Investments $870 $995 $1,110 $1,362 $1,781 $6,118 BGR calculations based on information supplied by SMG and LSED. BOND PROCEEDS SUMMARY BGR has excluded from its calculations of sources and uses for this study the proceeds of bonds issued by various agencies during 1998 to 2002. The agencies include the Audubon Commission, the Exhibition Hall Authority, the CSDC, the DDD, and the FMC. The bonds have been excluded to avoid double counting with debt service 278 BGR calculations based on figures from Superdome manager, SMG.


expenditures during this period. For information purposes, the bond proceeds are summarized below: TABLE: Bond Proceeds Summary

Figures in $000s 1998 1999 2000 2001 2002 Total Audubon Commission Bonds - - - 6,684 - 6,684 Exhibition Hall Authority Bonds

25,000 - 37,000 - - 62,000

DDD Bonds - - - 7,375 - 7,375 CSDC Bonds - - - - 9,680 9,680 FMC Bonds - 1,365 - - - 1,365 Total Bond Proceeds $25,000 $1,365 $37,000 $14,059 $9,680 $87,104 Aquarium Improvements, Insectarium

- - - 6,684 - 6,684

Convention Center Phase III 25,000 - - - - 25,000 Convention Center Phase IV - - 37,000 - - 37,000 Canal Street/DDD Improvements

- - - 7,375 9,680 17,055

French Market Improvements - 1,365 - - - 1,365 Total Allocations of Proceeds $25,000 $1,365 $37,000 $14,059 $9,680 $87,104 Source: Financial statements and auditor’s reports for the Audubon Commission, Exhibition Hall Authority, DDD, CSDC, and FMC. Figures are bond proceeds, some of which include issuance costs, and the allocations of these proceeds to individual uses. Totals may not add due to rounding.

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