The New Orleans money pit

NY Times:

Somehow, some way, at some point in the future, city officials here will need to pay back all the money they are borrowing. In the meantime, though, the Mardi Gras parades must still be protected, the police must still patrol the streets and the garbage must be picked up.

And so, even though the city has already racked up $120 million in debt, officials here are scrambling for loans of as much as $200 million more so that New Orleans can continue to pay its bills through the end of the year.

"We can't keep borrowing money," said Oliver M. Thomas Jr., the president of the New Orleans City Council. "But the need for fire protection doesn't just go away. At some point, we need to rebuild our parks and restart recreation programs as children and families start coming back."

Youth programs, however, are the least of the city's problems right now. With its credit rating downgraded to junk-bond status, it is not clear how the city will even find the money to maintain its most critical services, like police and fire protection. Though the city has already laid off nearly half its work force, New Orleans still needs $150 million to $200 million in 2006 to fill the huge hole that Hurricane Katrina blew in its budget, said Reginald Zeno, the city's finance director.

The lost revenues include tens of millions of dollars in property taxes that will go uncollected in a city in which more than 80,000 homes, according to state estimates, were severely damaged or destroyed. With more than half of New Orleans's populace still living elsewhere, sales tax collections are less than half of last year's levels.

"We put together a bare-bones budget last fall, but we still don't have the resources to fund it," Mr. Zeno said.

...


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