A New Orleans City Council committee unanimously advanced measures on Thursday to allocate $30 million in federal pandemic relief funds to build an electrical substation that would allow the city’s drainage pumps to utilize power from Entergy New Orleans, rather than relying on internal generators owned by the Sewerage and Water Board.

The project is widely seen as vital to shore up the city’s flood defenses. But it was thrown into limbo earlier this year when Entergy New Orleans reneged on its commitment to provide $34 million in upfront financing. That dashed hopes that the substation would be ready by the 2023 hurricane season as originally planned. But the council is now trying to replace that lost Entergy funding and finish the project as soon as possible.

Thursday’s measures still have to be passed by the full City Council. At Thursday’s budget committee* meeting, Councilwoman Helena Moreno said the new funding presents an even better deal than the original plan. She pointed out that under the financing plan in the original proposal, the Sewerage and Water Board would have to pay Entergy back $85 million over 15 years. 

“This to me is a no-brainer,” Moreno said. “If we look at this project, and compare it to the original deal that we had with Entergy, this is actually much more beneficial to the Sewerage and Water Board.”

There is some apprehension, however, from Mayor LaToya Cantrell’s administration. While the administration says it’s supportive of using federal funds for the substation, it had concerns about the exact financing model proposed by the council.

“The Cantrell administration has led the way on infrastructure investments for our City since day one — and has championed the plan for a new substation to provide reliable power for the S&WB,” Cantrell spokesman Beau Tidwell said in a statement. “But as stewards of taxpayer dollars, we have an obligation to perform extensive due diligence around this project. We will continue to work to identify the best financing structure to protect the City’s finances.”

The council’s plan would allocate federal pandemic relief funds from the American Rescue Plan Act, or ARPA. The city expects to receive $388 million total from the program. It has already received the first half of that, and expects the second half, or “tranche,” to come in May. 

From the beginning, the Cantrell administration has planned to use the ARPA funds to help balance the city’s budget until 2025, when it expects tax collections to recover from the economic shock of the pandemic and return to pre-pandemic levels. 

The ARPA dollars are unusually flexible compared to many other federal appropriations, including the CARES Act, an earlier coronavirus rescue package. The city is allowed to use ARPA dollars to make up for lost tax revenues and simply dump the money in the city’s general fund. Most federal allocations, including CARES Act funds, come with more specific rules outlining exactly how they can be spent. 

On Thursday, the city’s Chief Financial Officer Norman White said that the administration planned to use the entire first tranche on replacing lost revenues, but that it would use at least part of the second tranche for more specific projects once the city received it. He said that the administration had no problem using ARPA funds for the new substation, but that it wanted the council to wait until May, when the second tranche is expected to land. 

“We’re not suggesting don’t use ARPA dollars, we’re just suggesting using the second tranche,” White said. 

Council members questioned the logic of waiting, saying that any delays would risk getting the project done in time for the 2024 or 2025 hurricane season. In addition, the city isn’t currently at risk of running out of operating funds before May. 

But White said the council shouldn’t commit currently available ARPA funds for new projects until they know the second tranche is secure.

“If tranche two doesn’t get here, and for some reason something happens at the federal level, we would expose ourselves to operating cuts that we can’t absorb,” White said. “I’m simply saying, let’s not risk that.”

White said he was “confident” the money would come in, but that it was impossible to be certain. He pointed out that the city received much less than it expected from another federal relief bill — the CARES Act.

“You nor I can predict what can happen at the federal level,” White told The Lens in an interview after the meeting.

He also stressed that the ARPA funds provide flexibility that other funding sources don’t. He said if the second ARPA tranche never materializes, the city has other funds it can use for the substation, like recent bonds proceeds. The city does not, however, have another source of funding to fill the hole in operating revenues.

“If we use the money now, the first tranche, what we do is make the operating ability risky because we have no other revenue to replace it with,” White said. “We only have one bucket to replace this revenue loss category. … That’s why we’re asking to use the second tranche.”

But some council members questioned whether the city was truly at risk of losing that second tranche. Councilman J.P. Morrell said there didn’t appear to be a compelling reason to believe it wouldn’t come. And he said there was a much larger risk of waiting to build a vital component of the city’s flood defenses.

“The entire system is compromised,” Morrell said. “We cannot afford to wait any longer.”

Councilwoman Moreno questioned whether asking the council to wait until May was simply “a delay tactic.” She pointed to a Times-Picayune article from last month in which an administration official raised concerns over whether the city would be using its own federal funds and ultimately have to hand ownership of the substation over to its operator, Entergy.  

“Are you just bringing up this issue of utilizing the second tranche to try and delay the project so there could be more time to look at other options or ownership stuff?” Moreno asked.

In response, White said the motivation was “simply to protect the operating budget.”

Moreno also pointed out that Cantrell recently announced an $18 million crime plan, the bulk of which is dedicated to police bonuses and raises. The plan, according to White, will be funded with the second tranche of ARPA dollars. 

Moreno asked whether the crime plan would also have to wait until May. White didn’t directly answer the question, saying that other administration officials knew the plan better than he did, and that the council would soon receive a complete presentation on the details

Morrell also questioned the Cantrell’s administration’s use of ARPA funding for the crime plan. He said that one-time revenues like ARPA shouldn’t be used to pay for recurring expenses, such as police raises. According to The Times-Picayune, Cantrell’s crime plan would lead to $4 million a year in recurring costs.

Morrell pointed to his time in the legislature, when former-Governor Bobby Jindal created a deep budget deficit, in part by funding recurring costs with one-time funds.

“I spent tremendous time in the legislature dealing with the challenge of misguided executives using one-time money for recurring expenses,” Morrell said. “As we get other requests or other ideas through this budget committee, if it includes ARPA funds for a recurring expense, whether it be new positions or pay raises, I will vehemently oppose it. Because I will not leave this city in a position in a year or two from now when the same people who so eagerly misspent money are now cutting essential programs.”

*Correction: The original version of this story incorrectly reported that the council vote took place at a Governmental Affairs Committee meeting. (Feb. 10, 2022)

Michael Isaac Stein

Michael Isaac Stein covers New Orleans' cultural economy and local government for The Lens. Before joining the staff, he freelanced for The Lens as well as The Intercept, CityLab, The New Republic, and...