City Council slams River District developers for lack of transparency over tax subsidies

Fed up members of the New Orleans City Council slammed developers of the River District project on Thursday, accusing them of attempting to push through deals for massive tax subsidies without proper public scrutiny.

At issue were agreements passed last month that would give various tax breaks to the companies behind the $1 billion project, which envisions building an entire new neighborhood over the next decade on more than 50 acres of public and private riverfront land that has been barren for decades.

Though the project has had broad political support, the developers have been at loggerheads with some City Council members for months over the transparency of the deal, especially when it comes to tax breaks, subsidies and how the proceeds will be used.

The development group, led by local builder Louis Lauricella and Dallas-based Cypress Equities, has argued that the subsidies are needed to make the project work financially, particularly to meet its promise to include 450 residential units that would qualify for affordable and "workforce" rents.

The River District consortium won the "master development" contract almost three years ago, largely on the promise to include a substantial portion of below-market housing on the publicly-owned land controlled by the Ernest N. Morial Convention Center.

But during Thursday's meeting, Council President Helena Moreno and Vice President JP Morrell castigated the developers for misleading elected officials.

On hold

They said the council last month was led to believe that the tax deals under discussion were put on hold so members had time to review and amend a proposed cooperative endeavor agreement that set the terms for tax breaks and subsidies in the district.

Moreno quizzed Tara Hernendez, a representative of the developers, about why it now appeared that the River District group and the Convention Center had used two obscure state-created committees -- the New Orleans Exhibition Hall Authority Economic Growth & Development District and the River District Neighborhood Investors Subdistrict -- to approve the CEA without the City Council.

"We felt that you weren't ready or prepared at this time" to be a party to the agreement, Hernandez said. The development group and the convention center had certain unspecified deal deadlines to meet, she said, so they went ahead and adopted the CEA. But they would welcome the city as a party to the deal in future, she added.

Lauricella said in an email that the developers wanted to include the city but decided to go ahead without them when they couldn't agree to terms. "We remain ready to work with the City Council on becoming a party to the CEA at any time," he said.

Morrell, however, said the developers have sullied their relationship with the council and public because of the way they pushed things through.

"Regardless of the merits of this project, the speed and the afterthought and the catching up of this entire process has really soured a lot of people," Morrell said. "It's unfortunate because it means that every other thing done with this project is going to be under intense scrutiny going forward."

Morrell said his office is drafting new legislation that would require the River District and other economic development projects like it to meet minimum transparency criteria in future.

The controversy has also left a legal muddle over how the River District tax breaks will work.

The first tax break proposed by the River District was for a 142,000 square foot office building that will be Shell Oil's new headquarters in New Orleans when completed in 2026.

Lauricella told council members that the deal — which exempts the developers from property taxes for the first 15 years — was needed to keep Shell from pulling out of the city. He also said Shell would add 395 new jobs over the life of the tax break.

Shell officials later said they had no part in the crafting of the property tax deal and had not threatened to leave the city. They also said they had not promised to create new jobs.

State law says the tax break must be linked to the creation of at least 10 new permanent jobs or at least 75 new affordable and workforce housing units. The developers have promised to pay "about $5 million" of the $21.6 million in tax savings toward housing and other public projects in the district.

But now, the City Council's legal counsel has advised that tax break—which the council approved on a 5-to-1 vote, thinking it wouldn't have force without their approval of the CEA—was passed too fast and did not leave enough time for review, as required by law. The Orleans Parish School Board also has warned that it might challenge the subsidy.

A River District spokesperson, Amy Boyle Collins, said Thursday developers believe the Shell tax break was legally passed. However, they have asked the Louisiana Attorney General to issue an an opinion "in an abundance of caution."

A legal muddle

Other uncertainties surround the cooperative endeavor agreement passed by the two state committees. The River District and the convention center say they believe it is now legally in place without the city as a party and can proceed. Among its provisions is a new 2% incremental sales tax in the district, which could ostensibly be spent however the River District committees see fit and without city input. The River District has estimated it would raise about $120 million.

However, Mayor LaToya Cantrell's support so far has been based on the understanding that the city would be party to the CEA. The city's director of economic development, Jeff Schwartz, said on Dec. 1 that he expected the city to be included as a party within no more than four weeks.

Council member Lesli Harris, who has been a strong supporter of the River District, withdrew her motion to discuss the CEA at Thursday's meeting. Harris, who chaired the two River District committees last month, said she is not yet sure when a new CEA might be proposed for adoption by the City Council nor whether any amendments might be considered.

The River District and convention center can legally opt to proceed without the city. But they cannot avoid interaction with the city on matters such as permitting, tax collection, infrastructure and a host of other aspects.

Moreno said after the meeting, "They may think they are done with the Council, but the Council is far from done with them."