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For the past year, a legal struggle between the RTA and leaders of the city's hospitality industry has blocked the tax, which transit officials say is crucial to securing tens of millions in federal aid for the $156.6 million streetcar project.

RTA executives said the court fight should draw to a close this afternoon, after an agreement signed by all parties in the dispute is submitted to Civil District Judge Terri Love, who also must approve the arrangement.

If she endorses the plan, the agency will be able to satisfy the demands of the Federal Transit Administration, which has a June 30 deadline for the RTA to show it can come up with its 20 percent share of the streetcar project's costs, transit officials said.

Under the agreement, the RTA would share more than $7 million a year in revenue with the city's tourism industry.

Salvador Anzelmo, the lawyer who handled the sales-tax case for the RTA, told board members Thursday that their persistence had paid off.

"This journey started some time ago as a legal theory," Anzelmo said. "When we started on this, it was like going through a jungle with no road or path. We had to cut through a lot of foliage because of the obstinacy of some people."

RTA officials said they had hoped to impose the tax in July, but they agreed to a request by hotel leaders to delay collection until Aug. 1. The annual Essence Festival set for the first week of July is expected to draw tens of thousands of visitors, many of whom have already booked rooms, and hotel officials asked that the tax take effect after the event.

Though first-year revenue from the tax won't be sufficient to meet the RTA's financial obligation to the federal government, officials said the removal of all legal impediments clears the way for the agency to borrow as much as it needs for the Canal Street proposal and other planned light- rail projects.

On Thursday, the RTA board of commissioners voted unanimously to accept the terms of the "cooperative endeavor agreement" negotiated with hotel industry officials and other tourism leaders.

The board also authorized its financial consultant to seek a line of credit from a state agency established by the Legislature to provide low- interest loans to local government entities. The RTA expects to secure a credit line for up to $100 million before month's end, which transit officials said will prove to the federal government that the agency is capable of paying its share.

Barring unforeseen delays, preliminary construction on the streetcar project will begin this year. By late 2003, the RTA hopes to have streetcars running along Canal Street's 4.1-mile length, terminating near the cemeteries at City Park Avenue.

RTA Chairman Robert Tucker credited Mayor Marc Morial, who has made the streetcar project a top priority, with bringing together all sides in a thorny dispute that threatened to jeopardize more than $100 million in federal assistance.

"But for his (Morial's) efforts, we'd be going to court not to make peace, but to make war," Tucker said.

The dispute that led to the RTA lawsuit erupted last summer when the cash-strapped transit agency, seeking a way to pay its share of the Canal streetcar project, decided to try to lift the exemption granted to hotels and motels when New Orleans voters approved the 1985 sales tax for public transit.

Saying the exemption was invalid to begin with, the RTA went to court seeking permission to impose the tax on hotel and motel bills. Initially, hotel leaders fought the effort, saying the RTA had no legal right to lift the exemption and that adding the tax would hurt the city's thriving tourism industry.

But under a deal brokered by Morial that calls for using part of the sales-tax revenue for tourism-related purposes, all sides announced in February that they had reached an agreement in principle. It has taken until now for lawyers to put that into written form, Anzelmo said.

Under the agreement, the first $7 million a year in revenue from the tax would be divided by giving:

- 60 percent to the RTA to pay its share of projects, including the Canal streetcar line, a new North Rampart Street-St. Claude Avenue streetcar line and other similar projects, such as a proposed light-rail line from the Central Business District to the New Orleans International Airport.

- 20 percent to the New Orleans Tourism Marketing Corp. to expand its advertising budget to market New Orleans to potential visitors from other cities. Morial has said the $1.4 million or more a year would give the agency the largest advertising budget in its history.

- 20 percent to a trust fund for New Orleans' share of the cost of a fourth phase of the state-owned Ernest N. Morial Convention Center. Morial has said the trust fund will demonstrate the city's commitment to expanding the center when approaching state officials for help.

If, as expected, annual revenue from the tax rises above $7 million as hotel room rates rise and more rooms are built, the agreement calls for 40 percent of the take to go to the RTA for capital needs, with the balance split between the Tourism Marketing Corp. and the Convention Center trust fund.