In The News › Council weighs budget concerns

Nov 30, 2007

Source: Times-Picayune

Council weighs budget concerns

Council weighs budget concerns
Panel signals intent to exceed Nagin total
Friday, November 30, 2007
By Bruce Eggler
Staff writer

Responding to a Bureau of Governmental Research report questioning whether the 2008 capital budget proposed by Mayor Ray Nagin’s administration meets City Charter requirements, the New Orleans City Council has asked the city attorney’s office for an opinion on the issue.

The request was disclosed Thursday at a meeting of the council’s Budget Committee, which also passed a resolution stating the council’s intention to increase the size of the operating budget Nagin proposed Nov. 1 to cover “additional funding priorities,” even though it also will reject a 2-mill property tax “roll forward,” or increase, that he requested.

The full council is expected to approve the resolution when it meets today to vote on the operating and capital budgets and to set the 2008 millage rates for the city and other local agencies.

In a report issued Wednesday, the BGR, a private watchdog group, said: “For the second year in a row, the city administration has produced a capital budget and a capital improvement plan that provide only a partial report of where the city is investing the public’s money. This falls short of the City Charter requirement for a comprehensive capital budget and program.”

Administration officials have disputed the allegation, saying that even though the 2008 capital budget ordinance they submitted a month ago is expected to be increased today by about 500 percent, they have been open about their spending plans and have kept the council and other agencies informed.

The city attorney’s opinion, which was requested by council President Arnie Fielkow, is expected to be ready when the council meets.

The operating budget Nagin presented to the council calls for spending $912.5 million, but only $459.6 million of that would be in the general fund, the portion of the budget that covers day-to-day governmental operations under the city’s direct control. The rest of the money would be in dedicated federal and state grants, many of them for Hurricane Katrina recovery projects.

Possible budget boost

Councilwoman Cynthia Hedge-Morrell, chairwoman of the Budget Committee, said the council might end up increasing the operating budget by about $10 million, which would provide about $2 million more than Nagin recommended for the new Office of Inspector General and additional money for several other departments, such as the district attorney’s office.

Hedge-Morrell said the council might also decide to “encumber,” or escrow, some of the money for certain programs, leaving the money in the budget but saying it cannot be spent until the council receives more information or performance guarantees.

But she cautioned that discussions were continuing Thursday evening among council members and that nothing was certain.

The resolution passed by the Budget Committee says the council intends to pay for the extra 2008 spending out of the “fund balance” expected to be left in the city’s treasury at the end of 2007.

Noting that his budget calls for using more than $40 million in federal loans made available to the city after Hurricane Katrina, Nagin told the council Nov. 1 that it was “critical to take calculated risks to make 2008 the break-out year” in the city’s recovery.

But when Fielkow suggested borrowing a few million more to replace the extra 2 mills of property tax that Nagin proposed, the mayor called for “extreme caution” and suggested that such a move could alarm the Wall Street firms that determine the city’s bond rating.

He called on the council to stick to a five-year plan, drawn up last year, that calls for the city to gradually reduce its reliance on borrowed money in time to be self-sufficient by 2011.

Seeking to reassure

Council members said the resolution presented Thursday is designed to reassure Wall Street that even though the council plans to increase spending next year, it still intends to end use of borrowed money by 2011.

To do that, Fielkow said, the council will cut spending or, if necessary, approve millage increases in future years.

Finance Director Reggie Zeno warned that using one-time revenue, such as the 2007 fund balance, to pay for recurring operational expenses would create a hole in the five-year plan that the city would have to report to the firms that set its bond rating. That rating helps determine how much interest the city must pay when it sells bonds.

But council members brushed aside his objections.

Hedge-Morrell said the council was “making a commitment to Wall Street” that by the end of the revised five-year plan, the city will be in the same financial posture as was envisioned in the original plan.

Councilwoman Jacquelyn Brechtel Clarkson said she thinks that with the help of new Inspector General Robert Cerasoli, the city will be able to save several million dollars in 2008 by reducing wasteful spending.

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Bruce Eggler can be reached at or (504) 826-3320.

Nov 30, 2007

Source: Times-Picayune

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