New Orleans banks on casino deal as fiscal crisis persists
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New Orleans leaders are moving to shore up the city's finances ahead of hurricane season with a $103 million casino deal.
Why it matters: Mayor Helena Moreno inherited a $160 million budget deficit that drained the emergency fund, limiting how officials can respond if another devastating storm hits southeast Louisiana.
The big picture: The city currently has $35 million in emergency savings. It should have $140 million to $160 million, state auditor Mike Waguespack says.
- To close the gap, Caesars will pay $103 million to cover the next nine years of rent, Moreno and chief administrative officer Joe Giarrusso announced Tuesday.
- The lump sum reflects a discount of 8.75%, which is roughly $4.7 million less per year than the standard payments.
- Moreno says she hates to give up that money, but it's worth having cash on hand in case there's another pandemic or Hurricane Ida.
- Waguespack called it a "genius move" at a press conference Tuesday, and said state leaders appear to be onboard.
Between the lines: It would quickly replenish reserves, but it won't resolve the city's budget gap.
The fine print: The city has a lease with Caesars until 2058.
- Rent is about $16 million annually, along with about $11 million more in other payments.
- The deal would not affect rent payments after 2035.
Zoom in: If the deal closes, the money will go into the city's general fund and would require City Council approval to be tapped during emergencies.
- Moreno said the bigger bank account should also help the city's credit rating, which has been downgraded recently.
- Waguespack said it normally takes agencies about six months to review improvements like this, which could help when the city seeks to borrow in the future.
Yes, but: The Caesars payment won't end furloughs or other austerity measures, Moreno says.
- Officials are pursuing new revenue options — increased sanitation fee, new parcel fee — along with cracking down on enforcement.
- The city also tightened rules for overtime, which was blamed for a large portion of the original deficit. There's a new public dashboard for tracking the spending.
- Plus, leaders say they expect to request another operating loan this summer.
What's next: The City Council will vote on the plan at its meeting next week. Four council members — a majority — joined Moreno Tuesday in support.
- If the deal passes as expected, the financial paperwork should be finalized "shortly after," says Annie McBride of the New Orleans Building Corp.
- Hurricane season officially starts June 1.