New Orleans will make budget cuts because of shortfall from last year

The city will use $12.4 million in unanticipated one-time-only revenue to fill part of the gap, Chief Administrative Officer Andy Kopplin told the City Council , but the other $16.2 million will have to come out of the 2011 operating budget of about $485 million.

Both Landrieu and Kopplin said they do not plan layoffs or furloughs to help close the gap, and they said the budgets for police, other criminal justice agencies and recreation programs will not be cut.

"We will continue to fill potholes, fix streetlights, clean drains" and carry out other key services, Kopplin said.

After announcing in July that they had inherited a $67.5 million budget gap two months earlier from Mayor Ray Nagin's administration, city officials said in August that they had discovered a further $11.6 million shortfall, creating a total shortfall of about $79 million.

They said at that time they had found ways to close the entire gap, but Kopplin said Thursday that only $68.8 million of the shortfall was in fact covered by actions taken last year. In addition, work on the city's 2010 audit has disclosed a further gap of $18.3 million, meaning that the total 2010 shortfall amounted to $97.4 million.

The actions taken in 2010 included reducing overtime, cutting and renegotiating sanitation and other major contracts, reducing take-home cars by half and furloughing city employees 11 days each. The administration also used $23.2 million in one-time proceeds from an insurance settlement.

Kopplin said two factors accounted for the most recently discovered gap: General fund revenue for 2010 ended up $9 million below projections, and expenditures, primarily on health care for city workers, came in $9.3 million higher than budgeted.

Officials announced recently that because health care savings projected a few years ago had failed to materialize, the city was having to increase its contribution per employee this year from $4,200 to $6.900, but without increasing the overall city budget. Kopplin said each department would have to squeeze the extra money out of its previously enacted 2011 budget.

The $12.4 million in one-time revenue to be used to help plug the budget gap includes $10.6 million from FEMA to cover direct administrative costs the city incurred after Hurricane Katrina and a $1.8 million federal reimbursement for the Early Retiree Reinsurance Program. The city has not received either payment, but Kopplin said he is confident it will get them this year.

Hurricane projects fueled economic boom for New Orleans area ...

CHRIS GRANGER / THE TIMES-PICAYUNE Just one small section of a long metal and cement wall, crewmen work on top of a giant metal door over the Caernarvon Canal that will help protect St. Bernard Parish from hurricanes and storm surge. The U. S. Army Corps of Engineers, Team New Orleans, achieved a major risk reduction milestone in St. Bernard Parish with a concrete pour at the final section of floodwall along the Mississippi River Gulf Outlet between Bayou Dupre and Highway 46. The approximately 7.5-mile stretch of floodwall is now able to defend against a storm surge event that has a one percent chance of occurring in any given year, or a 100-year storm surge event. The media was given a tour on Wednesday, May 4, 2011 near Caernarvon. Lately, the company has been mixing and delivering concrete 24 hours a day as the corps tries to finish a floodwall around St. Bernard Parish before the start of hurricane season Wednesday.

"It was major. They wanted so much in such a short time," Ditta Vice President John Uhl said of trying to keep up with the work. "It's coming to an end shortly. We wish it would never stop. It was a good run."

The $14.6 billion undertaking by the Corps of Engineers to deliver true 100-year storm surge protection by the start of hurricane season this year has been a bonanza for the construction world, helping to buoy the local economy in the face of a national recession, adding new capacity to the local construction industry and making it more competitive as national players flocked to Louisiana in search of work.

Some $10.4 billion in work has been obligated so far in Greater New Orleans Hurricane and Storm Damage Risk Reduction System projects, with 205 construction contracts worth $2 billion completed and work continuing on 126 construction contracts worth $6.6 billion. The work has meant thousands of new jobs for construction workers who pay rent, dine at local restaurants, shop and pay taxes.

In fiscal year 2010, "this system created 58,000 jobs in the greater new Orleans area, so we kind of have a mini-stimulus project here in the greater New Orleans area," Col. Ed Fleming, commander of the corps' New Orleans District, said on April 15.

Loren Scott, professor emeritus of economics at LSU, said the corps spending and the Gulf Opportunity Zone construction have been the two major drivers of economic activity in the New Orleans area since Hurricane Katrina . As evidence, Scott notes that the New Orleans area performed the best out of the state's eight metropolitan areas during the so-called "great recession," losing only 1.2 percent of employment while the nation lost 6.3 percent of its jobs.

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