(The Center Square) − New Orleans officials told the City Council this week the a struggle to meet payroll is possible before year’s end, blaming a convergence of delayed federal reimbursements, runaway overtime and weaker-than-expected revenue.
Chief Administrative Officer Joe Threat said the city has relied for years on upfront “advances” from FEMA to keep its post-Katrina Joint Infrastructure Recovery street and drainage work moving. The city fronts costs and later gets reimbursed; recent advances typically arrived in $90 million to $120 million tranches.
But with a federal government shutdown and the Federal Emergency Management Agency’s Katrina program facing a hard stop on Dec. 31 unless extended, the latest large advance hasn’t materialized. Regional FEMA officials have endorsed pushing New Orleans’ deadline to 2028, Threat said, but the final sign-off is stalled at FEMA headquarters.
Without that cash bridge, the General Fund has had to cover construction invoices, program management and payroll for project teams – just as operating pressures mount.
Finance Director Romy Samuels said overtime blew past budgets across multiple departments in early 2025 – police, fire and special events among them – while revenue softened in the second half of the year due to state policy changes that reduced city collections mid-fiscal-year and normal late-year dips in sales and tourism.
“It was a perfect storm,” Samuel said.
Council members pressed why the administration didn’t raise alarms earlier. Officials said the FEMA extension request went in Aug. 7 and, until the shutdown, they believed approval was imminent.
Since early September, Threat said he has imposed a hiring freeze, slashed travel and discretionary spending, restricted overtime to prior approvals, and begun daily cash-management meetings. He warned that while October payroll appears covered, November and December are at risk without short-term financing.
Some immediate steps are underway.
The city sent a 30-day demand letter to the Sewerage & Water Board over an $87.5 million receivable – some of it dating back more than a decade – for paving and other shared costs.
Council leaders said any borrowing request will need a detailed, credible plan to curb spending through Mardi Gras and avoid a repeat in 2026.
They also urged aggressive collections on outstanding fines and reimbursements, and insisted overtime controls remain in place.
