City of New Orleans officials are expecting a giant budget shortfall this year, largely due to lower sales tax revenue as a result of coronavirus-related business restrictions that were put in place in March. But according to a new revenue report from Mayor LaToya Cantrell’s administration, the latest tax and fee collection numbers are better than initially feared.
“It’s better than we thought,” City Economist Randall McElroy told The Lens in an interview. “When I saw the most recent sales tax numbers I too was pleasantly surprised.”
Cantrell administration officials submitted the new revenue collections numbers at a Tuesday meeting of the City Council’s budget committee. The report showed that the city collected $42.3 million in sales taxes from January through April, about 19 percent less than the $52 million it collected during the same period last year.
McElroy warned that despite the better than expected numbers, “we’re definitely still looking at a big loss.”
Also at the meeting, the council advanced a measure that would allow Cantrell to allocate $35 million in funds from the federal government and the state of Louisiana to fund ongoing affordable housing projects, “micro grants” for small businesses with five employees or less, rent and utility bill assistance and services for homeless residents.
The city is getting $25 million from the federal government. Half of that is the result of the federal Coronavirus Aid Relief and Economy Security, or CARES, Act. The rest of the federal money is coming from unspent funds that were previously granted to the city through the federal Department of Housing and Urban Development, according to Ellen Lee, Director of Community and Economic Development
The city is also getting $10.3 million from the state in disaster community development block grants leftover from Hurricanes Katrina and Rita. Lee said the money will go to support nine projects that will provide 800 new affordable housing units.
The ordinance to allocate the $35 million will now be considered by the full City Council. The next full council meeting is on Thursday.
‘Remember when we all thought we were gonna run out of toilet paper?’
The Cantrell administration has estimated that the city could collect $130 million to $170 million less than it expected to have this year. That represents 18 to 24 percent of the city’s entire general fund budget.
Estimates from last month projected that 2020 sales tax collections would be down about 42 percent from last year.
The biggest loss is expected to come from lower sales tax collections. Tourism was brought to a grinding halt by the business and travel restrictions starting in March. Conventions and festivals that support the city’s vital hospitality industry were cancelled altogether.
The estimate is more than $6 million lower than preliminary figures in a similar report from last month. Then, the administration said that the city had collected $48.6 million in sales taxes from January through March. Now, in the new report covering January through April, the administration says the city only collected $42.3 million. McCelroy said that was due to revised collections from January.
But even with the lower overall figure, the new report appears to show that the month of April was better than officials feared.
April, in particular, was expected to show big losses. The economy was still in full swing for much of March, and the city and state started loosening business restrictions last month. But the city’s lockdown lasted the entire month of April. On top of that, April is normally one of the city’s busiest times for tourism. Major festivals, including Jazz Fest and French Quarter Fest, were cancelled.
“April we definitely expect to be the low point,” McElroy said. “We expected April to be the low point because we were shut down the entire time.”
According to a revenue report from the Cantrell administration, year to date sales tax collections from January to April were down about $10 million, or about 19 percent from 2019. Hotel and motel tax collections are down $1.5 million, or 24 percent, from last year.
“April was good. No doubt it was better than we thought it would be,” McElroy said. “But we’re still down and we still don’t have a very clear picture and we’re trying to be cautious. We’re not out of it yet.”
He said that there could be a few reasons for the better-than-expected numbers, including the direct stimulus payments of $1,200 for most adults provided through the CARES Act, as well as an initial spending spree from residents trying to stock up on supplies earlier in the crisis.
“The drop off was not as severe as it could have been, in part due to the stimulus and in part due to people who could still work. There was also, in March, we saw this slight burst of people stocking up on stuff. Remember when we all thought we were gonna run out of toilet paper?”
But McElroy warned that the situation is still bleak.
“The bottom line is that it’s still bad. This pandemic has definitely thrown us off and it’s definitely bad,” he said. “And if that adjustment to consumer behavior continues it might be better than we initially feared. But it still looks like at the end of the year we’ll be way down from where we’d thought.”
McElroy said there was still a lot of uncertainty that made it difficult to revise the earlier estimate of a $130 million to $170 million budget shortfall.
There were more than 100 public comments submitted for Tuesday’s budget committee meeting. None of them, however, had to do with the ordinances and motions under consideration by the council. Instead, residents took the opportunity to express their discontent with the NOPD’s budget.
In the 2020 budget, the city allocated $175 million in funding from its general fund to the New Orleans Police Department, representing 27 percent of the $723 million general fund budget. Public comments were submitted online, and some were read out loud during the virtual meeting. Many called for a reallocation of the NOPD’s budget.
“This money should be allocated to departments that support community residents not oppress them, such as the health department, libraries, parks and parkways, community development and sanitation,” Sarah Bird said in a public comment.
Almost all the comments made explicit references to George Floyd, the Minneapolis resident who was killed in police custody after a police officer kneeled on his neck for nearly nine minutes. The officer, Derek Chauvin, has since been charged with third degree murder and manslaughter. Floyd’s death has kicked off days of protests and riots throughout the country. Although there have been violent clashes between protesters and police in other cities, demonstrations in New Orleans have remained relatively calm.
“We especially don’t need more heavily militarized, fully trained officers simply for the sake of some sort of law and order theater aimed at making the upper crust feel more comfortable,” Jonathan Curtis said in a public comment. “Read the room, look at the window. Across the nation we’re watching an uprising unfold.”