Having interviewed Mayor Landrieu in late September of 2016 regarding his intent to sell and/or lease the New Orleans Public Belt railroad, I pressed him on why he seemed so determined to sell, or “privatize”, many of New Orleans' largest public assets. His general response was that the City was in dire financial straits when he took office and desperate actions were needed to pull it out of the hole. Landrieu also continually referenced the wisdom of “public/private partnerships” and how cities all around the country were utilizing them to great benefit.
The Roadmap to the Glory Days of New Orleans Slush
When the Saints almost went marching out
New Orleanians who lived through Katrina have no shortage of traumatic stories and memories they carry with them to this day. But one trauma-inducing event that many people have suppressed or even forgotten about was the threat by the owner of the New Orleans Saints, Tom Benson, to move the Saints out of the city in the wake of the storm under the prospect of greener pastures in San Antonio, Texas.
The 2009 deal between Benson and the State/LSED consisted of two parts.
The second part of the deal involved the newly acquired Dominion Tower and properties purchased by Benson’s Zellia, LLC. In addition to the State agencies leasing over 70% of the office space in the tower, a state organization called the Louisiana Office Facilities Corporation (essentially an extension of the LSED) agreed to lease the New Orleans Center property which included the Mall and area now known as Champions Square, as well as the aforementioned parking garage for $2.3 million annually. The LSED agreed to take on the operations of the parking garage, mall and Macy’s retail store, retaining all revenues up to the $2.3 million mark (to compensate for the rent to Zelia), then any additional revenues would be split with Zelia 50/50. The agreement called for Zelia to be responsible for any initial renovations and repairs to the properties with the LSED maintaining daily operations and maintenance.
Public/Private Partnerships: The Road to Prosperity for the Private
After ratifying the agreement in an LSED Board of Commissioners meeting, Commissioner Robert Bruno stated the deal was (paraphrased from meeting minutes), “One of the most complicated, creative, bipartisan examples of a public/private partnership that could ever be imagined.”
How would one not be willing to invest in a multi-million dollar contract that placed any business risk solely on the State of Louisiana? The deal guaranteed a near full occupancy rate of Benson Tower on top of a guaranteed 2.3 million dollars a year lease for the Champions Square property and the parking garage in which Zelia doesn’t even have to manage (The management of the properties is contracted to the company SMG by the LSED).
All Benson had to do was purchase the properties and the state took on any and all business risk to guarantee Zelia a financial windfall.
|The entire 1400 block of LaSalle Street has been closed to the public
and incorporated in to the Champions Square footprint
The street has been completely closed to automobile traffic with numerous permanent structures erected by the LSED including gateways on both ends of the street. During concerts and events in the Square these gateways are closed to the general public and used as a ticketing entrance for private events.
|One of two permanent "Gateway" structures on each end
of the 1400 block of LaSalle Street
|Even the map at Champions Square show LaSalle Street as an
official part of its footprint
The problem being there is no contract with the City to utilize the street, temporarily or permanently…not even a cooperative endeavor agreement. This is problematic not just for the revenue lost by the City, it’s also a violation of Article 7, Section 14 of the Louisiana State Constitution.
I also filed a public records request with the LSED to see if they had any contracts with the City for the use of the street and to see their contract with Zelia, LLC. While the LSED contract with Zelia mentions Champions Square, there is no mention of the use of LaSalle Street. Therefore, there is no contract that would allow Zelia or the LSED to use it, much less build permanent structures and close it to the public.
After receiving the LSED/Zelia contract I asked their current administration (they were quick to point out they have an entirely new board since the 2009 agreement was established) a series of questions about the nature of the contract and the appropriation of the 1400 block of LaSalle.
In respect to what is known regarding the use of the street, the LSED provided me with a “good faith” letter they sent to the City in 2011 regarding their construction plans for LaSalle which stated they would be pursuing a long-term lease of the property.
The City Real Estate Administrator, Marha J. Griset, replied that they were agreeing to enter into a long-term lease under the following conditions: A deposit shall be made, the City Planning Commission will grant approval, and the City Council will endorse the lease (ordinance). Also that the LSED must continue with the process towards the signing of the long-term lease.
"The City of New Orleans has received the economic benefit of (i) the improvements that were made to LaSalle Street, (ii) the ongoing maintenance, repair, etc. of LaSalle Street, and (iii) increased tax revenues derived from events that occur at Champions Square. "
The loss of 1400 LaSalle to the City without any compensation or contract is bad enough but the fact that a state entity, the LSED, has financed millions of public tax dollars to “improve” the street solely for the benefit of Zelia, a private entity, is a double-whammy to taxpayers.
However, The LSED also has a separate marketing fund for which it is responsible but doesn’t seem to be subject to state audit or public disclosure through the Legislative Auditor. Individuals seeking more information on the marketing fund are directed to the LSED. The reason this is significant is that the marketing fund also makes rent payments that look to be either profit sharing or revenue sharing arrangements for the Champions Square events, I believe this is part of the 50/50 profit split mentioned above but I’m not sure.
As an example, in fiscal year 2014, LSED paid $2.3 million for the lease, but the marketing fund also paid $1.9 million. For fiscal year 2016 the amounts were $2.5 million paid by the LSED and $2.0 million paid by the marketing fund. However, elsewhere these lease payments by the marketing fund are shown as revenue for Champions Square.
Hence, the total amount paid to Zelia by the LSED to date may be significantly higher than $14 million.
In January the Mayor informed many of the non-profit festivals in New Orleans that the City would no long waive various permit costs, including street closures and parking meter rental loss, to these festivals. It greatly affected many of the festivals that already had fixed budgets in place for 2017 and are now facing thousands of dollars in added expenses.
The non-profit entities are now being hit with multiple permitting fees for the use of public streets while Tom Benson has been given an entire street by the City, with the State paying him for its use.
I asked Mayor Landrieu’s Deputy Mayor of External Affairs, Ryan Berni, if the Mayor was aware of the issue…here’s his response:
“We have been working with the State for the last several years on a property swap that would include the street and the State’s portion of Duncan Plaza. For a number of reasons, it hasn’t been settled due to the values of the property not matching up. It is something we are still working on with LSED and the State.”
The only problem with that is that no one I spoke with at the LSED mentioned anything about that deal, so I’m not sure who is negotiating with the City on the matter. Nor could I find any documentation of the deal.
Land swap deal aside, we’ve gone seven years with no contract in place and millions of dollars left on the table. In fact, millions of state tax dollars have been paid to a private entity who doesn’t even own the public property in question.
If you don't have time read it all....just watch this short video for the basic skinny on the story...