It's time to 'make some hard choices,' mayor says, and 'get back to basics'
Saying the city needs to handle its finances responsibly and "make some hard choices," Mayor Mitch Landrieu on Thursday proposed increasing property taxes and boosting sanitation fees in 2011 to cover an operating budget that he said would pay for the services New Orleanians most want, while eliminating needless jobs and programs.
View full sizeMayor Mitch Landrieu's $483 million spending plan is his first since taking office in May, Landrieu's $483 million spending plan, his first since taking office in May, increases the money allocated to fight blight, repair potholes and street lights, and to pay for playgrounds and recreation programs -- all areas that residents in a recent series of public meetings said the city must improve.
The budget proposal also lays the foundation for replenishing the city's rainy-day fund, which former Mayor Ray Nagin and the City Council depleted to pay for daily operations.
"The city needs to get back to basics and to fix a broken budget process once and for all," Landrieu said during a speech at Gallier Hall. "We will stop the overspending and, for the first time in over 30 years, we will create a city budget that all city government will live by."
Key to accomplishing that goal is boosting the city's property tax rate for the first time since Hurricane Katrina. The proposed increase of 8.74 mills next year would generate an additional $23.1 million, and would cost the owner of a $150,000 house an extra $75 a year. The owner of a $350,000 home would pay $250 more, while a $1 million business would pay an extra $874 a year.
If the City Council approves the increase, as appears likely, New Orleans' tax rate would remain below the current rate in much of St. Tammany Parish but would far exceed millages in Jefferson and St. Bernard parishes. The increase would show up on tax bills due in early 2011.
Landrieu also wants to increase the residential sanitation fee from $12 to $20 a month to cover more of the actual cost of trash pickup and disposal. The monthly fee for small businesses would jump from $24 to $40. The increases would bring in $11.6 million a year, officials said.
The mayor also said he may seek new bids as soon as next week should he fail in his months-long effort to renegotiate the city's controversial trash-collection contracts with Metro Disposal and Richard's Disposal, which collect trash everywhere in the city except the Central Business District and French Quarter.
If the city can find a new vendor that charges less, the administration would seek to boost user fees only enough to cover the city's costs, Chief Administrative Officer Andy Kopplin said.
Landrieu said his budget proposal bucks a long-standing City Hall habit of presenting vague, unrealistic spending plans that rely on one-time revenue sources for recurring costs.
Though Landrieu's proposal includes tax and fee increases, it also calls for expenditures to shrink by nearly $20 million. The city spent more than $500 million on day-to-day operations in each of the past three years, the mayor said.
More than one-fifth of the proposed budget comprises pension and debt costs that the city has no choice but to pay, he said.
"This budget is lean. This budget is fiscally responsible. This budget reflects citizen priorities. This budget provides a solid foundation for us to grow into the future. And this budget does not rely on savings, bailouts or other one-time funds," the mayor said.
"There is no free lunch. Now, we have to pay for it," he said. "We can no longer pass the buck to future generations because the future is now."
If the council doesn't approve the tax and fee increases, Landrieu said he would either have to lay off hundreds of police and other first responders, or cut all non-public safety departments by 25 percent.
"Without taking these actions, we would not be able to make smart investments in NORD, street repairs, customer service, blight reduction, and other priority projects that you said you want and need," he said, adding that "most homeowners can expect their annual property tax bill to go up by less than 40 cents a day."
Council President Arnie Fielkow said he expects the council will vote to approve the millage and sanitation fee increases, which together would produce almost $35 million, though that could change if public opposition is great enough.
Landrieu's proposed budget would:
• Double the Recreation Department budget to $10 million.
• Restore the popular 311 information hotline.
• Pay for filling 30,000 potholes, cleaning 8,000 catch basins and replacing 5,000 street lights with energy-efficient technology.
• Finance 19,000 property inspections, 1,000 demolitions and grass-cutting at 1,500 lots.
• Launch a system, dubbed NOLAStat, to measure the performance of city departments.
"We are going to hold people accountable. Every line item in the budget is tied to outcomes," he said. "If programs do not deliver, they will be cut. If employees are not hitting their marks, they will be replaced."
The budget also would eliminate some programs, including crime cameras, a highly touted Nagin initiative that cost millions but delivered little.
While the proposed budget does not call for layoffs or furloughs, Kopplin said it assumes a major overhaul of the city's civil service system in 2011 to update job classifications throughout government. Employees whose jobs are consolidated or eliminated would be laid off and allowed to reapply for newly created positions, Landrieu said.
Under present civil service rules, employees cut from one department are allowed to move anywhere else in city government, "bumping" workers in similar jobs who have less seniority. Landrieu said he wants the Civil Service Commission to eliminate that rule. If it doesn't, he will name new members who will go along with his ideas, he said in an interview with The Times-Picayune.
"By the end of the first quarter of next year, every department in City Hall will be reorganized," the mayor said in his speech, adding that all departments also have been instructed to reserve 5 percent of their 2011 budgets as savings.
In addition to tax and fee increases, the administration intends to generate $3.8 million by selling blighted and tax-delinquent properties. More aggressive sales tax collections are expected to rake in another $2.4 million, while shifting operation of the city's three health clinics to private operators should save $700,000, according to the administration.
Officials also anticipate saving $10 million on employee health care by increasing premiums and by shifting eligible retirees to Medicare as their primary insurer.
Landrieu said he will appoint a committee to "take a hard look at our property tax structure," which allows for broad tax exemptions for nonprofits, such as the Archdiocese of New Orleans and local universities. Those tax breaks often are extended to commercial operations run by those institutions.
"We are the only municipality in the state that is so completely unbalanced. It's got more holes than Swiss cheese," Landrieu said of the city's property tax system, adding that he wants the panel by June 1 to deliver recommendations that would be applied to 2011 assessments.
In proffering his budget, Landrieu faces a City Council that includes four members -- Fielkow, Jackie Clarkson, Stacy Head and Cynthia Hedge-Morrell -- who twice in the past three years rejected Nagin's requests for property tax increases.
Landrieu said he's hopeful that council members will support his spending plan, which he said emphasizes their priorities as well as residents' wishes.
"It's not just about how much money you have. It's about how you spend it," Landrieu said during an interview Wednesday. "Perhaps the council ... did not feel comfortable that the past administration would spend the money in ways that they thought was productive, so why give it to them?
"They may have a different opinion about us," he said. "I think, notwithstanding what happened in the past, that we've been able to outline exactly what we would do with that money."
After the council turned down Nagin's requests for tax increases, the former mayor tapped federal recovery loans and the city's reserve fund to help finance city government, ultimately driving City Hall $80 million into the red this year and leaving it with no emergency reserves.
Speaking at a news conference after Landrieu's speech, Hedge-Morrell admitted that if the council had increased the millage rate in recent years, as Nagin requested, "maybe Mayor Landrieu would not have the great deficit that he had."
But council members concluded that residents struggling to recover from Katrina could not endure tax increases, she said.
"I think we're in a better posture as a city. We're now going from a recovery mode in the budget process to a growth mode for the city of New Orleans," she said. "This budget is right on target."
Fielkow, who took over this year for Hedge-Morrell as chairman of the council's Budget Committee, said that while "nobody wants and likes increases in taxes," Landrieu's budget proposal also shows a commitment to cutting the fat from city government.
"People will hopefully agree that an enhanced quality of life is going to bring a return on investment to this city and to our citizens that will significantly outweigh the relatively minimal cost of the property tax millage and the sanitation fee increase," Fielkow said.
A few hours after Landrieu's speech, the city's Revenue Estimating Conference, of which Fielkow is a member, voted 5-0 to approve a $483.4 million revenue estimate for 2011 that includes the millage and sanitation fee increases. Fielkow said voting for the figure did not necessarily commit him to voting for the increases as a council member, but he said he is leaning toward supporting them and thinks most of his colleagues are as well.
Council members, who must adopt a balanced budget by Dec. 1, will receive the mayor's spending plan during a 10 a.m. meeting today in the council chamber. Landrieu aides also will detail a $207 million capital budget.
The presentation will mark the earliest delivery of a city budget by a mayor in memory. In response to complaints by council members that they had too little time to review the document each year, Landrieu promised shortly after he took office that he would deliver his budget by Oct. 15, two weeks sooner than the Nov. 1 deadline set by the City Charter.
In crafting the 2011 budget, the Landrieu administration adhered to a process known as "budgeting for outcomes." Instead of simply building a budget that slightly modified the one from last year, officials prioritized programs that align with six goals they said the public endorsed during recent town-hall sessions in each council district: public safety, enhanced well-being of children and families, economic development, sustainable communities, open and effective government, and innovation.
Staff writer Bruce Eggler contributed to this report. Michelle Krupa can be reached at mkrupa@timespicayune.com or 504.826.3312.