With a projected sharp decrease in the hotel occupancy tax that supports its budget, Visit Baton Rouge is preparing to seek a $2 million line of credit from a private lender in the event that it runs into financial trouble later this year or next.
An item will be introduced for future consideration at today’s Metro Council meeting that would enable the agency to pursue the line of credit and, more importantly, guarantee the funds in the event VBR would draw them down and then default.
If the council ultimately approves the agreement, VBR will also have to seek permission from the state bond commission, which must sign off any time a public entity borrows money, before it can go to the bank.
The measure that will be introduced to the council this afternoon comes one day after the VBR board met and trimmed its 2020 budget for the second time this year.
Revenues, originally projected in January to approach $5.5 million, have been revised downward to $2.5 million. Expenses, meanwhile, have been trimmed by nearly $1.8 million.
VBR President and CEO Paul Arrigo says most of the savings have come from cuts to administration and marketing, as well as to incentives that would have been spent on convention groups that are no longer planning gatherings for 2020. Part-time positions to work conventions and information centers have also been eliminated for now.
Arrigo says he hopes the agency will not have to draw down the line of credit but he wants to have it in place in the event it becomes necessary. For now, he says a contingency fund is in place and can be used to make up for shortfalls.
VBR is supported almost entirely by a 2 cent occupancy tax on local hotel rooms. The market has recovered somewhat since the early days of the pandemic, when occupancy was in the single digits on average.
More recently, occupancy has reached near full capacity after evacuees and workers flocked to the area in the wake of Hurricane Laura. But while the unexpected boon has been good for the hospitality market in general, many of the rooms—Arrigo cannot say how many just yet—are tax exempt, which means VBR won’t realize the benefit of them.
“Any rooms for employees paid directly by the federal or state government or the Red Cross are tax-exempt,” he says. “Contract workers are not exempt. But a lot of the people in our hotels are FEMA and government workers. It’s great they’re here but it’s not generating tax dollars.”
Hurricane evacuees, whose room tabs are being paid by FEMA, also are exempt from the tax.