In The News › Watchdog group unsure of bankruptcy option

Apr 10, 2006

Source: New Orleans CityBusiness

Watchdog group unsure of bankruptcy option

Watchdog groups unsure of city bankruptcy option
04/10/2006

Would it be better for Louisiana governments struggling financially in the wake of last
year’s hurricanes to file for bankruptcy or not?

That’s the central question explored in a joint report released last week by the Bureau
of Governmental Research and the Public Affairs Research Council of Louisiana.

The state has not allowed distressed parish, city and other local governments to file
for bankruptcy in the aftermath of 2005’s hurricanes due to the stigma and impact it
could have on other governmental bodies in the state, the report says. The report
does not take a stance on the bankruptcy rule.

In New Orleans, local taxes are expected to make up only 59 percent of the general
fund revenue in a projected budget where 2006 tax revenues are expected to fall
anywhere from $110 million from $260 million. It will cost $369 million to maintain the
current amount of services, which means finding $147 million. The city’s debt is
reaching $1 billion.

Local governments don’t have to file for bankruptcy, the report says. Spending can be
cut, taxes raised, payments postponed and reserves drawn down, among other
options. Raising taxes, though, can stifle recovery in the long run by discouraging
investment.

On the other hand, municipal bankruptcy, though rare, can help a municipality by
providing immediate relief to make debt payments, the report says.

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Phone: 504.834.9292 Fax: 504.832.3550 Email: terry.oconnor@nopg.com

Apr 10, 2006

Source: New Orleans CityBusiness

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