By Ariella Cohen, The Lens staff writer |
New Orleans began this year operating $28.7 million in the red, an audit of the city’s 2010 books released Thursday shows.
The news comes as a stark reminder of the challenges facing Mayor Mitch Landrieu as he attempts to maintain a balanced budget without making significant cuts to programs, or further increasing taxes. Reflected in the deficit is an $11 million shortfall in the general fund that finances the city’s day-to-day operations, as well as an assortment of smaller deficits in a number of smaller revenue funds used by the city. Among these unplugged holes is a $2.1 million gap in the Municipal Court Judicial Expense Fund. The judge-controlled court fund is one of a number of criminal justice bodies with discretionary budgets decided by elected officials.
Auditors blamed the $11.1 million general operating deficit on a 2.2 percent increase in expenditures funded by the $454 million 2010 fund. Though no breakdown of departmental budgeting was providing, the audit highlighted public safety expenditures, including pay raises, that contributed to the deficit.
The audit was originally due to the state legislative auditor on June 30. The city released the audit on Sept. 29, one day before the state’s 90-day extension deadline of Sept. 30.
Other challenges confronting the city include a decline in federal recovery and antipoverty grants, as well as $26 million debt to the U.S. Department of Housing and Urban Development for three loans dating back to 1998. HUD gave the Section 108 loans to the city to help finance private economic development projects. All three projects went belly-up after Hurricane Katrina, leaving the city on the hook to repay the federal government. The debts include $7 million loaned to a nonprofit for the construction of the Louisiana ArtWorks complex near Lee Circle. The nonprofit Louisiana Artists Guild made no payments on the loan in 2010 and has since closed the building and stopped operations. The city owes another $3.7 million for the private development of a 52,000-square-foot megaplex movie theater at the Lake Forest Mall in eastern New Orleans. The movie theater never reopened after Katrina and no payments were made on the loan in 2010, according to the audit.
The largest HUD loan balance on the city’s books is a whopping $8.8 million for the development of Jazzland amusement park in eastern New Orleans. No payments were made on the loan in 2010, and the city is now attempting to cover its debt by selling the abandoned amusement park, or redevelopment rights to it.
If a borrower fails to repay a Section 108 loan, HUD can withhold federal grant money the city would otherwise be entitled to, HUD spokesman Lemar Wooley said in an email Friday. “HUD cannot forgive Section 108 loan balances as it does not have the statutory authority to forgive the loans,” Wooley wrote.