Two overriding questions confront City Hall as Mayor Mitch Landrieu begins his second term in office: How much money will the city need to meet all of its many financial obligations, and where will it come from?
The mayor will take his oath of office Monday at the Saenger Theatre and then go back to fighting on both the expenditure and the revenue fronts, trying to hold off big potential bills due on the city’s jail and firefighters pension fund while also pushing the Legislature to at least give voters in New Orleans the option of raising taxes on hotels, cigarettes and their property.
With millions of extra dollars already earmarked each year for reforms at the Police Department, it seems that decades of alleged neglect and mismanagement on many fronts are catching up with the city’s elected officials all at once. And those aren’t the only priorities with looming financial needs.
City Park has scant extra cash for cleaning up after the next big storm strikes. The Regional Transit Authority is quickly burning through its reserves. So is the public library system, which is on track by early next year to run out of the surplus it accumulated when many of the city’s libraries were closed after Hurricane Katrina.
For all of the pressing needs, the situation is not as dire as it might be, and the mayor’s top deputy, Chief Administrative Officer Andy Kopplin, rejects a comparison with the outlook Landrieu confronted when he arrived in office four years ago — when the city was “hurtling toward bankruptcy,” facing a nearly $100 million shortfall in 2010 alone.
Negotiations continue over exactly how much more the city will need to give Sheriff Marlin Gusman for running the jail or the firefighters for their retirement fund. The $40 million budget hole that Landrieu is warning lawmakers about in Baton Rouge is a worst-case scenario and would more likely appear in next year’s budget than this year’s.
Yet officials agree that New Orleans needs to move quickly to sort out its priorities and decide how to pay for them.
“Right now, Landrieu’s at a crossroads,” said lawyer Bernard Charbonnet, chairman of the New Orleans Public Library board. “He’s got to prioritize what little money he’s got.”
Charbonnet is as passionate an advocate for his own cause as any. The library system gets a small property tax that brings in roughly $8 million annually. Until Katrina, the libraries also got at least a little money from the city’s general fund each year, Charbonnet said, but since then, they have relied on a reserve fund that will run out in the first quarter of 2015.
Charbonnet doesn’t know whether more money for the system will come from a new dedicated tax or from the general fund, but he said he trusts Landrieu to come up with the answer. “At the end of the day, we have to rely on his creativity,” he said.
The mayor will have to get creative quickly if costs come due this year at the jail. The federal court order, or consent decree, governing reforms at the jail requires improvements in medical and mental health services, which the Sheriff’s Office has decided to outsource. The Landrieu administration is waiting to see how big that contract will be and whether the city will have to cover some of the cost out of this year’s budget, which includes a cushion of only a few million dollars.
Ultimately, Landrieu is bracing for extra jail costs of as much as $22 million beginning in 2015, and he likely will have to pay at least a large portion of the $17.5 million that the courts have decided the city owes firefighters for overdue pension obligations. So he is asking state lawmakers for a variety of potential taxes.
A hike in the dedicated property tax for police and fire protection could bring in as much as $30 million more a year. An increase in the local tobacco tax could produce another $27 million. A higher hotel tax could bring as much as $18 million.
The idea is not necessarily to go after all of that revenue at once. Even after legislative approval — still an uncertain prospect — and, in some cases, authorization by voters statewide, the City Council and the mayor would have to decide which of those tax hikes to put in front of local voters, and whether to go for the full increases allowed by whatever legislation is approved or to ask for more modest increases. And then Orleans Parish voters would have to say yes.
Debate over the hotel tax at the Legislature last week offered a foretaste of a debate that is likely to continue in one form or another for months. Landrieu made a case that the extra fire and police protection made possible by a tax hike would be critical for the continued success of the tourism industry that hotels rely upon. He asked lawmakers to envision what might have happened if last year’s notorious Mother’s Day mass shooting had happened among visitors in the French Quarter instead of in the 7th Ward.
Stephen Perry, CEO of the New Orleans Convention and Visitors Bureau, said a hotel tax increase would cripple the city’s tourism industry, causing price-sensitive corporate customers to take their conventions to other cities. He predicted a higher tax rate would hurt business so much that city tax revenue would actually drop.
“You will lose 3,000 to 4,000 jobs minimum,” he said. “And we’re going to see the next set of 4,000 jobs that we were going for absolutely go away.”
Still, a higher hotel tax — paid almost exclusively by visitors— would likely be an easier sell to voters than a higher property tax, even if the latter was specifically dedicated to police and fire protection. If there was a canary in that coal mine, it was the March vote on a new property tax for the Audubon Nature Institute — a dead bird if there ever was one. It failed by a 2-to-1 margin.
Still, the idea of at least keeping the city’s options on tax increases open has support on the council.
Stacy Head — who is likely to serve as council president over the next year and who has never been a dependable Landrieu ally — supports most of the mayor’s tax proposals. She also would like to see the city get more aggressive in collecting what is already owed. She is looking in particular at the city’s nonprofits, arguing that many enjoy tax exemptions on properties that are producing income without serving any real nonprofit mission — a position with which the administration generally concurs.
“The easiest way to get money is to raise taxes on those who are already playing by the rules,” Head said. “The hard thing to do is to go after people who aren’t paying.”