Thanks in part to the opening of several new stores late last year, the city brought in almost $20 million more than expected in 2013 revenue, which officials expect will wipe out a longstanding general-fund deficit and give New Orleans its first true surplus since 2009.
Even though revenue exceeded spending in some years since then, the difference was not great enough to eliminate the holdover deficit.
“I strongly believe, based on the unaudited information, that when the books on 2013 are closed, for the first time since 2009, the city of New Orleans will no longer have a negative fund balance,” Chief Administrative Officer Andy Kopplin said Wednesday during a meeting of the city’s Revenue Estimating Conference. “And that is indeed terrific news, because it puts us in a tremendously different posture than we’ve been in for the last four years.”
When the committee last met in November, the city’s 2013 revenue was projected to total $494.8 million.
In fact, final unaudited figures show the revenue totaled $514.5 million, nearly $20 million more than the earlier estimate.
The change was due in part to an unexpected increase in sales tax revenue, driven by the opening of several new retail stores toward the end of the year, city economist James Husserl said.
“We have succeeded in creating growth when the city has historically had a very difficult time with that,” Mayor Mitch Landrieu said during the panel’s meeting Wednesday. “We should take a minute and think about how good that feels. It is a dramatically different place than the city was many, many years ago. We can feel good about that. We can claim success. We can take a breath for a moment.”
Provided no unexpected expenditures show up when the city’s 2013 financial statements are audited, the additional revenue will give the city a “positive fund balance,” or surplus, at the end of the year, which could lead rating agencies to improve its bond rating.
New Orleans has had a negative fund balance in recent years, beginning with a negative balance of about $20 million in 2010, Chief Financial Officer Norman Foster said.
The city had expected to reduce that amount to about $4.5 million by the end of 2013. The latest figures mean that in fact it eliminated the debt, with several million dollars to spare.
The good news is tempered, however, by the city’s persistent budget squeeze as it tries to find money to pay for two expensive consent decrees and court-ordered back payments to the New Orleans’ firefighters pension fund, Landrieu said.
Landrieu attended only the first five minutes of Wednesday’s hourlong meeting before leaving for Baton Rouge, where the Legislature has been considering various bills aimed at giving the city more revenue.
The Revenue Estimating Conference — whose members include Landrieu, Kopplin, Foster, City Councilwoman Stacy Head and Tulane University finance professor Peter Ricchiuti — meets several times each year. The conference sets the city’s official revenue forecast, which in turn determines the size of the general-fund budget proposed by the mayor and enacted by the council.
In his report to the panel, Husserl said half of the revenue increase was caused by a rise in tax revenue. The city collected $307.7 million in taxes in 2013, $9.5 million more than had been expected. Most of the increase, $7 million, came from a jump in sales tax revenue, primarily in the latter part of the year, over expectations. Sales tax revenue was expected to total $144.4 million, but the unaudited figures show collections of $151.4 million.
Husserl said a big reason for the increase in sales tax revenue was the robust growth of retail shopping in Orleans Parish. Costco, H&M and Tiffany & Co. all opened stores in New Orleans in the latter part of 2013.
“During the last quarter we saw some of the largest and most successful chains coming into the city,” he said. In the final quarter of 2013, sales tax revenue totaled $40.7 million, compared with $36.3 million in the same quarter of 2012.
Total revenue from taxes increased despite the collection of only $110.3 million in property tax revenue in 2013, $1.3 million less than had been expected in November.
Also contributing to last year’s bright revenue picture was a $5.9 million positive change in actual, rather than expected, revenue from licenses and permits and a $6.9 million positive change in revenue from service charges.
The licenses and permits figure was driven up, in part, by higher-than-expected revenue from a fee paid to the city by Entergy based on what it collects from customers. Last year’s colder winter weather meant higher Entergy bills for customers and a larger cut for the city.
Building permits revenue also was higher because the number of permit applications increased as residents tried to get permission to build before a state-funded elevation program ended and before the building code changed at the end of the year.
Meanwhile, revenue received through various service charges, including public safety and general government fees, increased from an expected $71.6 million to $78.5 million.
Because of last year’s unexpected increases, Husserl also revised his estimate for 2014 revenue, both recurring and nonrecurring, upward by $6.2 million to a total of $511.4 million.