New Orleans proceeds with loan request amid "very bad" fiscal situation
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Mayor-elect Helena Moreno and other City Council members head to Baton Rouge Wednesday in hopes of getting a $125 million loan to keep the city afloat.
Why it matters: Leaders previously said they'll run out of money Wednesday to pay employees.
The big picture: City Council and state leaders reached a compromise last week to move the deal forward.
- City officials agreed to open their books and allow more state oversight. Meanwhile, state lawmakers backed off their requirement for a fiscal administrator, which the council said was a non-starter.
- Moreno compared the initial proposal to a state takeover of city operations, with the power to hire, fire, reorganize departments and cancel contracts.
What she's saying: "We were more than willing to accept an appropriate level of oversight" and to work in partnership with the legislative auditor, Moreno says.
- "This is a major crisis in the budget right now so we are looking for all different types of solutions."
How it works: The council, at the request of the Cantrell administration, is asking the state for permission to get $125 million in revenue anticipation bonds.
- The State Bond Commission must approve the request. The city will then work with Chase Bank to issue the bonds.
- The loan is not coming from the state, Council President JP Morrell emphasized, but it does require state approval.
- He estimates they'll be able to pay off the bonds by next summer.
Yes, but: Moreno says the city will likely need to request another loan in June.
- "This is a very bad situation that I'm being left with," Moreno told reporters last week.
- She says it may take "a couple years to dig us out of all of this."
Catch up quick: The city is facing a two-pronged budget problem — cash-flow issues and a $160 million operating deficit.
- Chief administrative officer Joe Threat says the cash flow issue is partially related to the federal government shutdown.
- The operating deficit is from overtime spending and poor revenue forecasting. The city is responding with a freeze on hiring, travel and other expenses. Proposed 2026 operating budgets are being cut 30%.
- The requested $125 million in bonds can't be put toward the deficit, officials say.
The fine print: The council unanimously approved an updated ordinance last week with the new state-approved guidelines for the money. They include:
- Putting the $125 million into a separate fund that requires council approval before money can be spent from it.
- Weekly approval from the council on expenses. The first meeting is scheduled for Thursday.
- Threat "will have to have a chat with the legislative auditor" before any funds are released, budget chair Joe Giarrusso says, noting the state is looking for collaboration.
- The city's finance department will also provide detailed reports each month to the state legislative auditor. Go deeper.
What's next: Moreno says the council will likely tap the $37 million rainy day fund to pay employees while the bond funds are processed.
- Council members will have to vote to unlock the account first.