For its part, New Orleans has $2 billion in outstanding debt, according to this piece in yesterday's New York Times. Much of that is backed by taxes on property that now has no real value, hotel taxes on rooms that are sitting empty, and sales taxes on shops that won't have customers for some time. As the Times put it:
In the annals of municipal finance - with its share of bankruptcies, defaults and financially distressed cities - nothing comes close. Previous hurricanes, floods and earthquakes have had a more limited impact, affecting mainly residential areas and not damaging the business underpinnings of a city the size of New Orleans and the coastal areas around Biloxi and Gulfport, Miss.
The bond ratings agencies have put between $8 billion and $9.4 billion worth of municipal debt from the region on their various watch lists. Meanwhile, Congress is working on a measure that would relieve affected states and localities from bond defaults. "There is no question that some of these municipalities and counties are wiped out,'' Mississippi Sen. Trent Lott said.
