The State Bond Commission's decision to back New Orleans' gap financing plan came after the City Council approved an ordinance last week giving Legislative Auditor Mike Waguespack veto power over how the bond proceeds are spent. The commission's approval will allow New Orleans to avoid having to make severe cuts in the short-term to basic city services.
New Orleans also averted a state-led takeover of city operations — at least for now — after a state panel earlier Wednesday opted not to recommend that a state fiscal administrator handle the city's affairs after Moreno and her council colleagues assured them the city's finances were headed towards surer footing.
"I just appreciate so much all of the state leaders working collaboratively with us," Moreno said after the back-to-back meetings. "The city of New Orleans will have to face some significant oversight requirements, but I welcome that, and this City Council welcomes that."
Gov. Jeff Landry , appearing at Wednesday's Bond Commission meeting, said the oversight measures New Orleans agreed to go beyond what the state usually requires of municipalities seeking emergency bonds.
"Some people say we're treating you all as different. We are. We're actually being more fiscally restraining in this process than not," Landry said. "Those are just the facts."
A Whirlwind Two Weeks
The approval of New Orleans' bond proposal Wednesday caps a whirlwind two weeks that tested the relationships between state officials and the elected leaders of the state's largest city.
New Orleans has worked for weeks to come up with revenues to meet its obligations after Mayor LaToya Cantrell's administration revealed last month that the city was on track to run out of cash by the end of the year, citing delayed payments on federal grants.
Moreno and council members identified the emergency bond funds as one solution. But the council withdrew its initial request for Bond Commission approval in late October, after council members said it became clear that state officials would only sign off on the proposal if they agreed to cede control of City Hall to a fiscal administrator. The council resurrected its request last week after Moreno, Council President JP Morrell and Council Budget Chair Joe Giarrusso hashed out an agreement with state officials to include additional oversight measures.
As part of that deal, the council approved an ordinance last week creating a special fund for the bond proceeds that can only be tapped with written approval of the state auditor, and only to cover payroll expenses or costs arising out of council-approved emergencies. The city also agreed to provide the auditor with view-only access to the city's financial management software and provide him with requested records or reports.
"I'm going to police that checkbook," Waguespack told the Bond Commission . "Nothing moves until I send a letter to the city and the bank saying they can transfer."
Waguespack will also investigate city spending from 2022 to present in partnership with the city's Office of Inspector General and provide written reports to the city and Bond Commission on any findings or recommended corrective actions. The city must provide a written explanation to the Bond Commission for any recommendations it chooses not to adopt.
Mayor LaToya Cantrell didn't appear at Wednesday's meetings, though the city's lobbyist, Paul Rainwater , told state officials that he spoke to her Tuesday night and she had no issue with the deal.
The state Fiscal Review Committee — tasked with reviewing the financial stability of municipalities, and when necessary, recommending that a court appoint an administrator to oversee a city's operations — also met on Wednesday to hear from city officials but took no action.
Still, state officials warned city leaders that if they don't abide by the agreed-upon oversight measures or if they fail to right the city's finances, the state could intervene at a later date.
"Even if you follow everything in the guidelines we've asked you to do, and it just doesn't work ... you can't cut what you want to cut ... you can't change the policies, then that's going to open the door for us to come in and do things that we're trying right now not to do," Senate President Cameron Henry , R- Metairie , said at Wednesday's Bond Commission meeting.
Other Cuts on the Table
The bridge funding approved Wednesday means New Orleans won't have to make significant cuts to essential services like public safety or furlough city workers through the end of the year, said Moreno, who serves as council vice president but takes office as mayor Jan. 12 .
But the mayor-elect said her transition team is exploring "every type of cost-cutting measure possible to ensure that we have a more efficient and operational government moving forward." In next year's budget, that will include cutting some of the nearly 660 unclassified positions at City Hall , she said. She has also said she will review overtime spending. The City Council must approve a budget by Dec. 1 .
Moreno said the city will need to dip into its rainy day fund to make payroll while it waits for the revenues from the bond sale, a move that will require a two-thirds vote of the council.
The city is expected to pay off much of the initial $125 million loan in January, when it receives the bulk of its property tax receipts.
But Waguespack said he expects that New Orleans will need to return to the Bond Commission at least two more times over the next three years for additional loans to dig itself out of the hole and build up its reserves to an acceptable level, which he pegged at $150 million.
As it continues to deal with a cash shortage and fill an estimated $160 million deficit in this year's budget, New Orleans has already paused payments to certain vendors, Moreno and Waguespack said on Wednesday, though Moreno said Cantrell's team hasn't provided a clear number on how much money the city owes.
Waguespack said a vendor told him this week that the city asked that he hold off on submitting a $4.8 million invoice for work already done. The auditor has asked vendors with outstanding payments to email his office.
Moreno said her team is also looking at a variety of revenue-raising measures, including selling unused city-owned properties. Asked whether she supports Cantrell's proposals to raise revenues, including increasing the sanitation fee or the sales tax targeting the service and tourism industries, Moreno said "no firm decisions have been made."
Waguespack said Wednesday that Moreno's incoming administration should also look into furloughing workers one day every pay period. He said that would save about $25 million per year on payroll expenses.
Morrell, the council president, said the council plans to ask voters to approve an amendment to the city's Home Rule Charter during next year's midterms that would put stricter controls on the mayor's spending abilities, a measure Moreno said she supports.
The moves she and the council are making are "necessary to gain the trust of state leaders, but also to regain the trust of the public as well," Moreno said.
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