Is the city of New Orleans facing a fiscal cliff? City officials disagree.
Earlier this month, when New Orleans Mayor LaToya Cantrell announced that she intended to renege on a $20 million settlement with the Orleans Parish School Board, she said the city couldn’t afford it.
The settlement with the school board was brokered last fall by the New Orleans City Council and Cantrell’s own top deputy, Chief Administrative Officer Gilbert Montaño. It would have ended yearslong litigation over the fees the city collected on property taxes intended for schools and provided an infusion of money for the cash-strapped district.
But City Attorney Donesia Turner said that the settlement wasn’t a done deal because the mayor hadn’t been actively involved and, further, that it would be too costly for the city. This was later echoed by Chief Financial Officer Romy Samuel.
“The city’s financial positioning has taken a major shift,” Samuel said at a special meeting to discuss the school board settlement on Feb. 11. “Budgetary obligations, the continued rise in inflation accompanied by unexpected expenditures beginning in 2025 and various other factors have weighed heavily on the city’s operating costs.”
The about-face from the city’s executive leadership caught both the school board and the council by surprise. The council had approved the deal with Montaño’s apparent approval and without any objection from Cantrell’s office. And Cantrell had just signed a 2025 city operating budget that was more than $200 million higher than the one she approved for 2024.
Now, councilmembers — and even a top official within Cantrell’s administration — are pushing back on the mayor’s claims, saying that the city is not only able to afford the school board settlement but also is prepared to handle the budgetary challenges heading its way.
“This is something that’s been manufactured, and is now trying to be reverse-engineered to explain where we are,” said Councilmember Joe Giarrusso, who chairs the budget committee. “And I am extraordinarily troubled that we’re going to hold the city captive for the next month or two because we’re saying we don’t have any money and we can’t move forward.”
Cantrell’s office, which has been criticized for a lack of transparency around budgeting and other matters, did not respond to requests for comment on this story.
‘The transparency is so bad around this stuff’
It’s no secret that the city of New Orleans has faced a slate of potential challenges since the year began.
First, following a New Year’s Day attack on Bourbon Street in the French Quarter, the city had to drastically ramp up its security – replacing old, insufficient bollards with new ones to better block high-speed vehicles, bringing in the National Guard to patrol high-traffic areas and even hiring a homeland security expert to evaluate their security plans – all in preparation to host a series of tourist-heavy events from the Super Bowl on through the rest of the Mardi Gras season.
The city has not yet released figures on the total costs of additional security in the wake of the attack, but it will likely be eligible for federal reimbursements for much of it. The city is also expected to receive a modest windfall of revenue from the increase in tourism from the Super Bowl. (Officials say they’ll have an exact figure at a revenue estimating conference in April.)
There are also lingering questions about federal funding. President Donald Trump’s administration pushed for an across-the-board federal funding freeze, threatening more than $400 million – or about 20% – of the city’s $1.8 billion budget, including programs that support public health, sustainability and emergency preparedness. Trump’s freeze on federal grants and loans has been tied up in the courts, where a judge has blocked the effort. But congressional Republicans are pushing for massive spending cuts in order to carry out Trump’s agenda over the next decade.
Finally, there’s the end of federal COVID-19 relief funds dollars, which had provided nearly $388 million in funding to New Orleans since 2022.
Altogether, it is not yet evident what the exact impact of all of these factors will be on the city’s 2025 budget. But in the midst of these challenges, New Orleanians have received mixed messages about the state of the city’s finances.
“The transparency is so bad around this stuff, it’s no wonder that nobody can make sense of it,” said Nellie Catzen, the executive director of the Committee for Better New Orleans, which runs programs educating residents on the city budget.
“We shouldn’t have to choose who to believe,” she added.
Cantrell’s decision to go back on the school board settlement has kicked off a series of escalations between the city’s executive branch and the city council as the council has moved to substantially limit the mayor’s travel and entertainment budget, then joined the school board in a lawsuit against the city – arguing that the school district is still owed that money and that the mayor can’t back out after signing off on the city’s 2025 budget, where that money had already been appropriated.
But in addition to disagreement about the legality of the settlement, there also is a disagreement between the council and the mayor’s office over whether the city’s finances are actually in trouble.
Giarrusso has said that the city has long anticipated these cuts at both the federal and state level – and prepared for them by improving its bond rating and keeping a large unassigned general fund balance.
‘That doesn’t suggest a crisis’
There even appears to be disagreement about the state of the city’s coffers within Cantrell’s executive branch. Montaño has acknowledged the challenges the city is facing but maintains that the city is not at risk of defaulting on its financial obligations. Samuel has repeatedly insisted that the city is facing the possibility of financial instability.
The dispute between the two offices has appeared in two recent council meetings: the first, a special meeting called to discuss the school board settlement on Feb. 11; the second, a regularly scheduled budget meeting on Feb. 20.
At the first meeting, Samuel gave a budget presentation warning that “financial instability is imminent” for the city.
In her presentation, Samuel cited a slate of issues contributing to the city’s budget woes, like an estimated $14 million in lost traffic camera revenue due to recent changes in state law limiting traffic camera hours and requiring local governments to share ticket revenue with schools and another $50 million in unexpected overtime pay for personnel. (Samuel has repeatedly said these numbers are projections, not actuals.)
But when Councilmember Oliver Thomas asked Montaño if the city was at risk of not being able to pay any of its bills, Montaño said no.
“I’m confident, based on our analysis and the preliminary numbers in the future, with the proper operational containments and guidelines and adjustments if necessary, that we will be fine,” Montaño said.
Then, at the budget meeting on Feb. 20, Samuel again sounded the alarm.
This time, Giarrusso pushed back. “The first time I received notice that there was a fiscal cliff was before the council meeting on Jan. 30,” Giarrusso said to Samuel, referencing a recent special meeting held in response to the city backing out of the settlement payment to the schools. He also noted that he had yet to get clear information from her office about the exact dollars-and-cents deficits to the budget.
“If the administration is going to say we have a fiscal cliff – that we have new obligations about which we were unaware, that we have recurring expenses that were aware of and or are going up – the concomitant duty is to explain what those are,” Giarrusso said.
Among the budget impacts debated were the increased security costs related to the city playing host to a handful of high-profile events, including both the Sugar Bowl and the Super Bowl, in the immediate aftermath of the New Year’s Day attack on Bourbon Street.
In at least one case, the city was off the hook for an additional security cost: The New Orleans Police and Justice Foundation footed the bill for the hiring of Bill Bratton as a temporary security consultant for the city.
But, according to those familiar with the process, there probably is an array of additional security costs distributed across many departments, including not just first responders like the New Orleans Police Department and Emergency Medical Services, but also the Department of Public Works and the Office of Homeland Security and Emergency Preparedness, among others.
“What are the increased expenses since Jan. 1 for safety?” Giarrusso asked Samuel.
“I’ll defer to the CAO’s office,” Samuel said.
“But I thought you guys were the ones responsible for reporting and paying the bills?” Giarrusso said.
Giarrusso, in a statement given to Verite News, cautioned against some city officials’ fearmongering over the budget. He noted that the city has at least $133 million currently sitting in unassigned reserves, which is more than enough to pay for the $50 million owed in overtime pay. He also noted that the Montaño has repeatedly said that the city passed a balanced budget just three months ago.
“That doesn’t suggest a crisis,” Giarrusso told Verite News. “Knowing the federal and state governments might limit allocations or tax collections, we can and should kick the tires on financial responsibility – but without being alarmist.”
But for Catzen, the issue is bigger than just whether the city’s budget is in crisis. For her, the issue is that the public is not given sufficient information about the budget to engage in the debate. Instead, they have to follow the back-and-forth between city officials.
“It’s ridiculous that the people of New Orleans are having to pick sides when this should be a black-and-white answer,” Catzen said. “The data should be available to us to make a reasonable decision or assessment of where we’re at.”
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This story was originally published by Verite News and distributed through a partnership with The Associated Press.