Government & Politics

For first time in 5 years, New Orleans closes out budget with cash in piggy bank

New Orleans city government ended last year with an unexpected, multimillion-dollar surplus, officials in Mayor Mitch Landrieu’s administration told the City Council budget committee on Wednesday.

Deputy Mayor and Chief Administrative Officer Andy Kopplin said the city had $8.3 million left after paying its expenses last year. The numbers aren’t official until an audit is finished later this month.

“We believe we are going to be $8.3 million in the good, which is a significant turnabout,” Kopplin said.

Not only is the surplus good news for the city’s credit rating, he said, it provides a cushion for what he called “unexpected events.”

Those could include costs for truly unexpected events like hurricane evacuation and recovery, but also for more expected “unexpected events,” such as reforming Orleans Parish Prison to comply with a federal court judgment and shoring up the firefighters pension system with $17.5 million.

Kopplin said the city still has a long way to go before its reserves are at ideal levels.

“$8.3 million is a couple days’ spending for a city with a $500 million general fund budget,” he said. “Folks estimate that you want to have a fund balance of 10 to 20 percent.” That’s between $50 million and $100 million.

The city has not had a surplus since the end of 2008, when it stood at $36.8 million. It used that money to pay bills in 2009, ending the year $8.7 million in the red. By the end of 2010, the shortage had grown to $25.1 million.

The city expected to end last year with a deficit of $4.5 million. But increased sales collections helped to put the city in the black by $8.3 million.

The 2014 budget forecast an $8 million surplus at the end of the year. If that bears out, the city would have more than $16 million in the bank.

But $2 million of that has already been committed to the Sheriff’s Office for hiring and upgrades mandated by the jail consent decree.

That’s just a stopgap. The city and Sheriff Marlin Gusman have yet to reach a deal on a final price tag for jail reforms, which could require hiring hundreds of additional guards and adding medical and mental health facilities to a new jail set to open later this year.

The Department of Justice has estimated that the reforms will cost at least $10 million per year.

“What is coming our way in the next six months is the need to fund additional medical and mental health at the jail. The questions are, how much is that going to be, and who pays?” Kopplin said.

He noted that the Sheriff’s Office opted to pay back a $17 million Gulf Opportunity Zone loan in full last year rather than request a five-year extension. “He had $17 million in his bank account that last year,” Kopplin said. “He wrote a check to the state and paid that money back.”

Kopplin said the city wants to know if Gusman has any other sources of funds that could be used to pay for the consent decree. He said the federal judge overseeing the consent decree has signed off on a working group to assess Gusman’s financial situation and negotiate funding.

“I do think it’s probable that we will come to you sometime before the end of the year” and recommend dipping into the surplus, he said.

As for the firefighters pension fund payment, Kopplin said the city has exhausted its legal options. “And so the mayor has asked the council to put that on the list of judgments” against the city.

That puts the firefighters at the end of a long line, Kopplin said. According to its 2012 audit, the city had about $389 million in anticipated long-term liabilities due to legal claims and judgments.

At Landrieu’s request, the Legislature passed a constitutional amendment to allow New Orleans voters to raise property taxes. It will face the first of two votes in November. Landrieu has said he needs the money to pay for the jail and the firefighters’ pension fund.

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  • AmyGeorge

    Is now a good time to ask the city about how they plan to repair the side “roads” throughout town?

  • NOLABrown

    The current increase in revenues should cover the consent decrees, not burden New Orleans’ pensioners and disabled with doubled property taxes. It is the wrong type of tax, regressive and insensitive to those who have a difficult time financially living in this city.

  • nickelndime

    PLEASE SEND HELP. My car and I are in a hole on Touro St. and we can’t get out!

  • Nick Kindel

    Please tell me that all of the City’s funds are kept in a piggy bank in Andy Kopplin’s office