New Orleans’ city government is likely to end 2015 having brought in more than $60 million more than planned due to money from legal settlements, including over the Deepwater Horizon oil spill, plus the auction of tax-delinquent properties and increases in tax collections, officials said Monday.
Most of that money amounts to one-time windfalls, rather than long-term revenue growth, though officials on the city’s Revenue Estimating Conference are expecting that with moderate growth in sales taxes and other collections, the city will see $30 million more in recurring revenue next year than was initially expected this year.
The city now expects to take in about $598.2 million by the end of this year, a dramatic increase over the $536.8 million it had budgeted for 2015, according to estimates endorsed by the Revenue Estimating Conference. Without the one-time sources of money, and with growth in both sales tax revenue and population expected to slow in the coming year, the city can expect about $566.4 million in revenue in 2016, according to the panel.
The Landrieu administration is preparing to present its 2016 budget next month. Another meeting of the Revenue Estimating Conference will be held before the budget is released to adopt final numbers.
The bulk of this year’s increase came from a settlement BP reached with local governments this summer to resolve claims over the economic impacts of the BP oil spill. The city’s share of that settlement amounted to $45 million, though only about $36 million will be available after attorney fees and other costs are taken out.
Despite this year’s revenue increases, Chief Administrative Officer Andy Kopplin urged caution, noting that the BP money was a one-time event. The city does not have any other lawsuits that would bring in significant amounts of money working their way through the courts, he said.
“We need to make sure as we set that (BP money) aside it doesn’t slip into the abyss but that we focus specifically on using that money in a way that will be significant and impactful for the city in creating more resilience,” Kopplin said.
On the other side of the ledger, the city faces two lawsuits from firefighters over unpaid back pay and pension system funding — which together amount to more than $200 million — as well as costly consent decrees for reforms to Orleans Parish Prison and the New Orleans Police Department.
The city also is working to build a reserve that could be tapped into if needed in an emergency, such as a natural disaster.
Bond rating agencies suggest that should amount to about $60 million. Several years ago, the city was nearly $20 million in the red when it came to that balance, and it is currently at about $25 million, Kopplin said.
The city’s auctions of tax-delinquent properties have had a double effect. About $9 million is expected in proceeds from the auctions, with City Hall receiving $4 million to $5 million of that, Finance Director Norman Foster said. The rest will go to other taxing agencies in the city.
In addition, because those properties have not been paying taxes but now belong to owners who presumably will pay taxes, the city also is expecting to collect more revenue in future years, Foster said.
New Orleans has been benefiting from a dramatic 9 percent growth in sales taxes, in part due to the opening of several major new retailers in the city. While City Economist James Husserl said he expects those collections to continue to grow, a more moderate 4 percent increase is expected.
The city is not banking on a significant increase in property tax revenue next year because it is a reassessment year, which means the government must “roll back” its property tax rate to offset expected growth in property values. The City Council can override that decrease in the tax rate, but the numbers in Monday’s estimates do not assume that will happen.
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