New Orleans needs to improve financial management, report says

The Bureau of Governmental Research issued a report Monday outlining concerns with the city of New Orleans’ finances. According to the report, the city needs to create better financial management practices to ensure the city’s fiscal stability. The report claims that the city does not have a policy to guide and limit spending from its reserves and also does not have a multi-year financial planning strategy between the mayor’s office and the New Orleans City Council. The BGR report also pointed out “troubling disagreements” within the administration regarding the extent of the city’s financial troubles. In the report, several problems were outlined like incorrect projections that lead to a $42 million deficit in the New Orleans Police Department’s 2024 budget. As a result, the 2025 budget does not include funding to close the gap and is already on pace for another large deficit, according to the report. According to the report, the city’s reserves may also fall below recommended levels by the end of the year due to dwindling COVID-19 funds. The BGR recommends the city develop a policy for the use an preservation of the general fund reserves, as well as create a five-year financial plan with the city council. The report also suggests the city review its spending projects in an effort to prevent errors. The BGR urges the city to create a detailed annual report on the state of its general fund, and create monthly reports to provide to the city council. The city of New Orleans issued the following statement regarding the BGR report: “The City appreciates the work of Bureau of Governmental Research (BGR). However, the narrow lens through which BGR portrayed the City’s financial picture needs further context.”First, the Administration would like to assure the public that the City is on a solid financial footing and provide a more complete picture of the realities of running a city. The City would certainly benefit from maintaining a higher dollar amount in reserves, as discussed. The Administration has worked to secure an unprecedented and historic amount of reserves that still allows the competing priorities of meeting the current needs of the community and preparing for future contingencies, all while done without an increase in taxes.”Following the increase in the City’s unassigned fund balance in the General Fund from -$33.3 million in 2018 to $245.1 million in 2022, the City has thoughtfully appropriated these one-time dollars to build an unprecedented $100 million in Emergency/Disaster Reserve. The City has replaced lost revenues following the pandemic, increased compensation for City employees, and funded dozens of important projects and initiatives to invest in the city’s future. As our three-year plan to deploy these accumulated reserves comes to an end in 2025, the City plans to maintain the $100 million Reserve and the $33 million Savings Fund and reduce fund balance expenditures to restore structural balance in 2026, along with maintaining current tax rates. “Managing a city comes with significant and varied costs, especially when executing long-term strategies and responding to emerging needs. The City has dedicated $150 million to improve police recruitment and retention, modernize technology, upgrade vehicles and equipment, and provide better facilities. The amount of $60 million was spent on infrastructure improvement, maintenance, and enhancement projects across New Orleans, leading up to Super Bowl LIX, which will benefit communities for years to come.”Significant funding is also regularly provided to external agencies that provide key services, including $168 million to the Sewerage and Water Board over the last few years and $132 million to criminal justice agencies in 2025 alone. Investing in public safety, improved infrastructure, successful large-scale events, and the modernization of City services is costly, however, these investments bring real and essential benefits to New Orleans by reducing crime, creating economic opportunity, and enhancing quality of life.”The City has weathered several incredible challenges in recent years, including the cyber-attack, COVID-19 pandemic, great resignation, extreme weather events, and the New Year’s Day terrorist attack. Meanwhile, this Administration has grown City employee wages, made key investments, and maintained a stable budget.”BGR’s advocacy for spending less on current needs in order to prepare for future contingencies stands in stark contrast to what the Administration has heard from the community. People are in need now, they do not want higher taxes, and they expect a high level of service and responsiveness from the City of New Orleans. When both ends of the advocacy spectrum are disappointed in a policy decision, that usually means that the policy has found an appropriate middle ground.”Regarding the New Orleans Police Department’s (NOPD) preliminary deficit numbers for 2024, BGR provided an incomplete picture. Projections and actuals provided prior to the City’s audited annual financial statements being released are preliminary. Projection methodologies often omit anomalous transactions, and reconciliations during annual audits often result in revisions to surpluses or deficits reported during the ongoing budget year. Characterizing a projection compared to a preliminary actual as “impossible” shows a misunderstanding of the numbers being reported, and conclusions should not be drawn until final, audited numbers are available, which is usually on June 30 of the following year. “The Administration agrees with some of the recommendations in BGR’s report and has been actively working to draft a policy on the use of fund balance, but the reality is that fund balance policy and multi-year financial planning must be balanced with the real necessity of meeting the needs of the community without overburdening taxpayers. As the Administration continues to both prioritize fiscal responsibility and adequately fund essential City services and initiatives, safeguarding the City’s fund balance remains a top priority.”To read the full BGR report, click here.

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