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In what was described as a close vote, the board of the New Orleans Metropolitan Convention and Visitors Bureau agreed to drop its legal challenge to the Regional Transit Authority's decision last year to lift the exemption for hotels and motels that voters approved when they authorized a one-cent sales tax for transit in 1985.

The bulk of the proceeds from the hotel room tax, expected to raise about $7 million in its first year, would be used for the 20 percent match the RTA must provide to free up tens of millions of federal dollars pledged to the streetcar project.

The RTA, which is controlled by Morial appointees, failed last year to convince the Legislature to provide financial aid for the project, leading the agency to try to impose the hotel tax. Transit officials are facing a June 30 deadline to assure Washington they can come up with the local share or risk losing the federal money.

Besides the Convention and Visitors Bureau, the Greater New Orleans Hotel-Motel Association and 16 individual hotels also filed challenges to the RTA's action. They agreed earlier to drop their opposition, said Leland Lewis, president of the Hotel Association and general manager of the Hotel Inter-Continental.

Morial said he hopes to have a signed agreement with the hotel industry to present to federal officials by early June. Collection of the tax, which has been on hold while the matter was tied up in litigation, could begin as early as July, hotel executives said.

Morial, who has made the streetcar project one of his top priorities, brokered an agreement with tourism leaders in February under which 40 percent of the tax's proceeds would be dedicated to tourism projects. At the time, hotel executives said they could start collecting the tax by May.

But despite the agreement, some hospitality leaders raised questions about the legality of collecting the tax and distributing some of the proceeds to other agencies. Their opposition became public last week, leading to reports that the deal was in trouble.

Morial met with tourism leaders and RTA officials in his office Monday in an attempt to put the agreement back together, apparently leading to Tuesday's vote.

After the vote, Morial said he is happy that everyone is now on board.

"I'm pleased and anxious to move this forward because it represents a great opportunity for the city," he said. "I'm glad everyone recognized the importance of this project which will let us re-create a piece of New Orleans history."

Lewis, who also sits on the Convention and Visitors Bureau board, said Monday's meeting with Morial was instrumental in the board's decision to withdraw its opposition to the tax, despite some members' doubts about its legality.

"Before we could take an intelligent vote, all the parties involved needed to hear the mayor's side of the story," Lewis said.

"Now, we are where we should have been some time ago, working together to make this thing happen without any resistance or opposing points of view. We're all on the same page now. Before, the opponents were creating an environment that focused on why it can't happen rather than why it can."

Under the "agreement in principle" brokered by Morial in February, 20 percent of the tax proceeds will go to the New Orleans Tourism Marketing Corp. to expand its advertising for New Orleans, and another 20 percent will be placed in a trust fund for New Orleans' share of the cost of a fourth phase of the state-owned Ernest N. Morial Convention Center.

If, as expected, revenue from the tax exceeds $7 million in a few years, 60 percent of the additional revenue would be divided between the Tourism Marketing Corp. and the Convention Center trust fund.

Although the Convention and Visitors Bureau would not share in the proceeds from the tax, it became a player in the dispute after it intervened in the RTA's lawsuit to impose the tax along with the Hotel Association and the individual hotels.

Steve Ferran, general manager of the Omni Royal Orleans Hotel and chairman of the Convention and Visitors Bureau, declined to discuss details of Tuesday's meeting or to reveal the exact vote, saying only that a majority of the 13 members who attended agreed to go along with the tax. The board has 16 members.

But a board member who asked that his name not be used said the vote was "reasonably close. Let's just say it won by more than one vote."

As a result of Tuesday's action, Lewis said, the Hotel Association has directed its legal advisers to meet with RTA lawyers to hammer out the wording of a consent decree to wrap up the case. Salvador Anzelmo, the RTA's chief attorney, has prepared a preliminary agreement that is being reviewed by the association.

RTA Chairman Robert Tucker said he is confident a final version will be ready in time for an early June court date before Civil District Judge Terri Love, who has been assigned the case.

Now that all challenges to the tax have been dropped, Morial and Tucker said they think a legal opinion that the RTA had sought from Attorney General Richard Ieyoub no longer will be necessary.