As New Orleans prepares for another large installment of federal pandemic relief funds, Mayor LaToya Cantrell and the City Council are putting forward different ideas about what to do with the windfall.
The administration, fearful of potential budget constraints in the next few years, is looking to bolster City Hall’s finances and staffing and is in no rush to commit the hundreds of millions of dollars to one-time causes.
But members of the council’s budget committee are wary of using the money for raises or other recurring expenses. They prefer to focus instead on infrastructure projects, including one in particular: construction of a new substation for the Sewerage & Water Board.
The Budget Committee on Thursday unanimously approved Council member Joseph Giarrusso’s actions to put $30 million in stimulus money into a special fund for the substation. The measures could be voted on by the entire Council as early as February 17.
Cantrell’s chief financial officer, Norman White, said the government is open to spending stimulus money but has not committed to it. He said the administration wants to consider other sources of funding for the substation before making a decision. Those comments echoed earlier ones by Ramsey Green, the government’s infrastructure chief.
Two days earlier, Cantrell had announced far-reaching plans for employee bonuses, hiring incentives and strengthening human resources. These plans would cost $18 million through next year, and at least $4 million each year thereafter. The mayor said federal stimulus money is an appropriate way to pay for it.
Council and administration do not argue about the respective goals – at least not yet. However, their proposals highlight potentially conflicting ideas about the purpose of stimulus money.
The proposals would all come from the $387.5 million New Orleans is entitled to under the American Rescue Plan Act, the stimulus law Congress approved a year ago. Plans for the substation originally called for Entergy New Orleans to prefinance it with approximately $30 million in construction capital that S&WB would repay over time. The New Orleans and Louisiana governments combined would provide an additional $40 million in infrastructure.
However, the deal fell through last month when Entergy withdrew from its funding agreement, all but eliminating the possibility that the substation would be ready for the 2023 hurricane season. Giarrusso and other council members immediately sought stimulus funds to fill the gap.
“We are acting quickly to avoid this and bring the substation online as quickly as possible,” Giarrusso said.
Administration agrees that a new substation to power drainage pumps is critical to New Orleans’ ability to withstand heavy rainfall and flooding. But it was cool about the council’s moves to force stimulus engagement after Entergy’s bombshell.
On one point the administration is adamant: If stimulus money is to be used for the substation, it must come from the second installment, which is expected to arrive in May. The first half came last year and administration officials insist it will be used to fill budget gaps.
Last year, the council approved the administration’s request to use $77 million from the first installment to stabilize the 2021 budget. The government says the remaining $107 million is now earmarked for expected deficits through 2025, that’s how long it could take for sales taxes and other revenues to return to pre-pandemic levels, the government says.
The council could decide to use the budgeted stimulus money for other capital purposes, such as the substation, before spending it on operations. White, the chief financial officer, said it was imperative for the council to resist this temptation.
“What you don’t want is to kill us on the front end,” White said. “We have all agreed since the beginning of this pandemic to secure the operating budget so we can keep services and citizens going. Let’s not play around with this strategy.”
A decision on how to pay for the substation will come “very soon,” White said, and it could involve a mix of sources, in addition to – perhaps – the second round of economic activity.
“We’re just trying to evaluate the different financing options to make the right decision. And until we have that, we can’t say this or that,” White said.
While the administration is reluctant to allocate incentive money to the substation, it has no qualms about using it for Cantrell’s recruiting and retention plan, which includes bonuses of up to $20,000 for experienced police officers.
Cantrell announced the plans on Tuesday, highlighting an 11% cut in local government payrolls since the pandemic began. Public safety agencies such as the Juvenile Justice Intervention Center — where more than half of the proposed posts are vacant — are suffering the most.
Council members were skeptical of Cantrell’s plans. During the budget committee, Councilman JP Morrell, a former state senator, said it reminded him of former Gov. Bobby Jindal’s penchant for using one-time windfalls to balance the state’s operating budget.
“I’m 100% against Jindal math,” Morrell said, adding that he would “vehemently” oppose any request to use stimulus “funds for recurring expenses, be it new positions or pay rises.”
Compensating for the loss of revenue caused by the pandemic is one of many eligible uses of the economic stimulus money. Stormwater infrastructure is another, and the White House is now advising cities to use it to boost projects that could receive additional funding from the $1.2 trillion federal infrastructure law passed in November. Cities will soon be able to apply for a first round of $60 billion in competitive federal grants under the Infrastructure Act, the federal government says.
Giarrusso, who has been campaigning for months to use incentives for infrastructure projects, said the recent federal guidelines have two pressing priorities: get funding for the substation and give New Orleans a competitive edge when it comes to federal infrastructure law.
Giarrusso’s position is supported by U.S. Representative Troy Carter of D-New Orleans and a trio of New Orleans-based state officials. State lawmakers said more bluntly than Carter in a letter to the council that New Orleans “needs to show its commitment” to spending infrastructure incentives.
“We’re constantly in battle after battle over why New Orleans doesn’t deserve to have something,” said Democratic Rep. Aimee Adatto Freeman, one of the letter’s signatories. “People up in Baton Rouge know we get all this federal money. And we need to show them that we’re going to spend some of our federal money on infrastructure to help get the matches we need.”