New Orleans scraps $125M request after state’s takeover threat

(The Center Square) — New Orleans on Wednesday withdrew its request for help paying its bills after it became clear the city would need to hand over control of its finances to the state.The city had sought $125 million in short-term revenue bonds, but Gov. Jeff Landry urged state lawmakers to deny the borrowing and pressed the state’s Fiscal Review Committee to consider appointing a court-supervised fiscal administrator to manage the city’s money.“It is imperative that the city address its financial matters promptly,” Landry wrote in a Tuesday post on X. He called on the state treasurer, attorney general and legislative auditor “to convene an emergency meeting of the Fiscal Review Committee” and “utilize all necessary measures” to probe the city’s books and, if warranted, “appoint a fiscal administrator.”Attorney General Liz Murrill backed that stance, arguing the city has “been substantially over-spending” for three straight years and budgeting far too little for overtime.In a statement on X, Murrill said New Orleans Mayor-elect Helena Moreno “has adamantly refused to consent to a fiscal administrator as a condition of obtaining Bond Commission approval,” contending that “the City Council has failed to carry out its duties to the people of New Orleans and I cannot in good conscience trust it with another $160 million without meaningful budgetary reform.”In an Instagram video, Moreno said statements that she had refused to put safeguards in place for the funding were “absolutely false.”“I’m willing to do all types of oversight measures, but I’m not going to have a state fiscal administrator come in and take take over the city of New Orleans,” Moreno said, adding that the city faces “severe cuts” if it can’t find the funding.Murrill told WWL radio that the state would not be guaranteeing the bonds but had a responsibility to protect its fiscal position and bond ratings. The fiscal-administrator process would be overseen by a judge and designed to “stabilize the budget” and exit quickly once reforms were in place, she said. “The state is on the hook. At the end of the day, if they don’t put themselves in a better fiscal posture and stop overspending, then the state has to come in and rescue them,” Murrill said in the interview. “We have seen that over and over again, when they get into financial trouble they come begging for a bailout because nobody can let New Orleans go belly-up.”The objections had prompted the city council to pass a series of measures intended to show it is capable of managing its finances, with guardrails. The council agreed to confine any borrowed dollars to payroll expenses and to open the city’s finances to state scrutiny. Council members voted to set up a dedicated fund for the revenue-bond proceeds, restrict any transfers to other accounts and mandate that every withdrawal be approved only after reviewing a detailed spending plan. The council ordered monthly budget-to-actuals, weekly payroll tallies, department-level overtime reports and projections, biweekly expenditure-reduction updates, cash-flow forecasts and reconciled bank balances, while granting the state legislative auditor “view-only” access to the city’s financial software. The legislative auditor told The Center Square that was at odds with the office’s legal authority, which gives it full access to the books. Other measures passed by the city council formally asked the legislative auditor, the state inspector general and the New Orleans Office of Inspector General to investigate city fiscal practices from 2022 through 2025.“We’re ensuring that every dollar can be publicly accounted for,” Council President J.P. Morrell said, calling the measures a show of “transparency and accountability.” Budget Chair Joe Giarrusso said the legislation would “provide the council and the legislative auditor with more financial reports so everyone can regularly see what is happening.”Moreno, who serves as vice president of the council, said it was “taking proactive steps to identify and resolve any outstanding payroll issues swiftly, while ensuring proper oversight and tight guardrails.”It’s not clear how the city will cover year-end payroll and vendor costs in the absence of new borrowing.Moreno predicted cuts to “everything from overtime to public safety agencies, which means potentially we’ll have cancellation of events. We’re taking a look at pausing vendor payments, we’re taking a look at potentially lax city services. I mean, there are a lot of implications to all of this.””I’m certainly hoping that cooler heads will prevail and that we can all get into a room and figure this out,” she added.