The status of the pension fund for New Orleans firefighters — already a drain on the city’s finances after years of failed investments — deteriorated sharply last year, which may ramp up demands on a delicately balanced city budget.

According to the latest independent audit, the fund took a roughly $40.2 million loss on its investments in 2013, in large part because it was forced to acknowledge the deteriorating value of real estate and other investments on its balance sheet.

On top of that, Mayor Mitch Landrieu’s administration has refused to hand over enough money from the city’s general fund during the past few years to entirely make up for declining assets, forcing the fund’s managers to cannibalize investments in order to pay current beneficiaries.

That left the fund with about $84.8 million in net assets available to pay retirement benefits at the end of 2013, a 41 percent decline from a year earlier. In 2011, that figure stood at $158.5 million.

Moreover, a good portion of what remains is in the form of real estate and other investments that could not be sold off quickly, should the extra cash be needed.

A source who is familiar with the fund’s operations, but who was not authorized to speak publicly, said perhaps $20 million of what’s left in net assets could be readily converted to cash, while the fund continues to burn through about $800,000 of it each month.

In sum, the new audit drove home the pressure city leaders will be under to find more money soon — either by raising taxes or cutting services — in order to keep the fund in good standing, barring some dramatic turnaround in the performance of its investments.

“We’re beyond crisis,” said Louis Robein, the fund’s attorney. “It’s huge.”

The fund’s performance has a direct impact on the city’s budget because the courts have ruled that City Hall must keep the fund afloat to comply with state law, with enough cash on hand to pay current retirees and invest for future ones. So the worse the fund’s investments perform, the more money City Hall owes.

With the fund’s assets deteriorating quickly, the city has been on the hook for bigger and bigger sums each year, but the Landrieu administration has put off paying the full amount in order to balance the city’s budget and to put pressure on the fund’s managers to make changes.

Former trustees for the fund won a $17.5 million judgment against the city in early 2013, a Civil District Court ruling that survived appeals all the way to the state Supreme Court, but which the city has yet to pay.

Yet that amount covers only the shortfall for 2012. Added up, fund officials expect the city will owe it roughly $75 million by the end of this year, although it would take more legal wrangling to force the city’s purse strings open for the rest.

The bill for next year should amount to another $35 million or so.

The firefighters argue that Landrieu should have seen these bills coming and has been kicking the can down the road, all while flouting state law. The mayor cut back the city’s regular monthly payments to the fund shortly after taking office and hasn’t budged since.

Landrieu places blame for the fund’s woes on its past trustees, most of whom were elected by the city’s firefighters. He argues that taxpayers shouldn’t be responsible for bad investment decisions made by a board that is largely beyond the control of the mayor and City Council, which are responsible for raising local taxes and making difficult budget decisions.

Many of the loans the fund has made recently are in default. It is unclear whether it will be able to recover any of its $15 million investment in a hedge fund that went bankrupt. And many of its real estate investments have been written down sharply.

For instance, the fund’s 99 percent stake in a partnership called Lakewood Restoration Partners, which owns the Lakewood Golf Club in Algiers, is now valued by auditors at about $21.7 million, down from $39.2 million a year earlier.

On top of that, the fund incurred about $1.8 million in “golf course operating losses” last year, according to the audit.

Those types of write-downs and costs are eating into the assets the fund has available to pay benefits for retired firefighters. The fund paid out about $22.1 million in retirement benefits last year, while collecting only about $1.4 million in retirement contributions from active members.

At the same time, current and retired firefighters have about $65.5 million in special retirement accounts with the fund — the Deferred Retirement Option Plan and Partial Lump-Sum Option Payment Account — that are meant to supplement their pensions. That total is not subtracted from the fund’s net assets, but withdrawals from those accounts are. Last year, retired firefighters took out roughly $9.1 million, up from $8.1 million the year before.

The debate over how to pay for all of this is likely to gear up soon. The Legislature this year passed a bill that would allow property tax hikes to benefit both the Fire Department and the Police Department, but the increases must clear a statewide vote, a City Council vote and a citywide vote in order to become law.

Landrieu last month told Nick Felton, the head of the firefighters union, that it will be up to the firefighters to convince voters they deserve more tax money.

But the mayor is in a difficult legal position. Civil District Court Judge Robin Giarrusso told Landrieu’s administration recently that it could not simply ignore the $17.5 million judgment against City Hall, as with a typical lawsuit judgment in state court.

The firefighters filed for a writ of mandamus, a legal petition aimed at forcing the government to perform one of its basic functions. As such, the judge ruled, the firefighters must be paid ahead of other parties that have successfully sued the city, and city officials could be held in contempt of court for refusing to do so.