The New Orleans Sewerage & Water Board is so low on cash that it hasn't been able to pay its contractors and some are threatening to walk off the job, potentially hobbling an agency that is already in the midst of multiple operational and financial crises.
That revelation came in an offhand remark on Wednesday by Executive Director Ghassan Korban as he responded to questions from the utility’s board of directors about whether needed pump repairs would be made before the start of hurricane season on June 1.
Despite months of discussion of the S&WB’s dire financial straits, it was the first time Korban or anyone else in Mayor LaToya Cantrell’s administration has said that the utility was unable to keep up with its bills.
The S&WB owes contractors almost $33 million in unpaid invoices. Officials didn’t say whether they would be able to make those payments anytime soon. Tens of millions of dollars of the agency’s reserves were poured into a spree of emergency spending after much of the city was flooded in August 2017.
As of November, the S&WB had only about 67 days of cash available, down from 227 days of cash a year earlier.
Korban said the issue of missed payments has become so bad recently that officials are now trying to persuade contractors to keep working, in some cases making partial payments here and there.
“Some of our vendors are facing difficulties of their own by not getting paid,” Korban said.
That could slow down progress on some projects or create the possibility of contractors “walking off the job,” he said.
Since his first few weeks on the job as executive director of the Sewerage & Water Board, Ghassan Korban has sought to warm New Orleanians…
Cantrell, who serves as president of the S&WB, made clear she was aware of the payment issues.
“We’re making progress, but it's shifting a little bit because vendors are getting reluctant to stay on the job without getting paid,” she said.
As of Wednesday, the S&WB owed contractors about $19.2 million in operating expenses and $13.6 million in capital expenses, spokesman Rich Rainey said in an email.
About $14.9 million of that is for work on the drainage system, which saw its reserves depleted by emergency repairs in the wake of the 2017 flooding. The drainage system officially ran out of cash in September; the shortfall has been plugged with cash from other sections of the utility.
The drainage operation won't have money to pay its bills until property tax revenues come in this March.
It was not immediately clear how many companies are waiting on payments or how the cascading effect of those debts may be hurting the smaller subcontractors and individual workers hired to work on S&WB projects.
Boh Bros., one of the largest contractors in the state, is owed about $850,000 by the S&WB, company spokeswoman Ann Barks said. That represents the full amount the company billed for two projects, an emergency water line replacement the company took on last year and major repairs to sewer lines that started in 2017, she said.
“We have had issues getting bills paid. We’re working through the process with them, and we hope to have it resolved,” she said.
Boh Bros. is not currently doing any work for the S&WB, Barks said. If another request for bids comes up, “we’ll ask the questions and examine the opportunity and take it from there,” she said.
The S&WB has been grappling with financial problems throughout the past year, in part because of more than $80 million in emergency spending on repairs and upgrades to its equipment after the August 2017 flood depleted its accounts.
Ironically, the need to refill its coffers caused the agency to crack down on customers who were several months late in paying their bills. A policy of shutting off water to delinquent customers continues even as the utility has fallen behind on its own bills.
The agency's financial woes, which include widespread billing problems, are just one of the issues for an agency that has also been trying to recover from popular mistrust over the state of the drainage system. It also is still dealing from the fallout from a boil-water advisory in November, when an Entergy outage cut power to its water plant and it was later revealed that workers responsible for handling the situation had been sleeping on the job.
While Korban said the utility is now “pivoting” from an emergency mode to more normal operations for the first time in more than a year, he also said dealing with the financial shortfall means juggling the demands for payment from its contractors.
“Our goal is to constantly balance what we can do for all our vendors to keep them all somewhat satisfied until we have the ability to pay them in full,” said Korban, who began work at the utility in September.
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