A majority of the New Orleans City Council oppose Mayor Ray Nagin’s call for a property tax increase in 2009, opening a potential $25 million hole in his proposed $500 million general fund revenue estimate.

Nagin asked for a 10-mill hike to help build up the emergency reserve fund that was almost depleted by expenses related to Hurricane Gustav in September.

Councilor Cynthia Hedge-Morrell, who chairs the budget committee, had expressed tentative support for the increase when Nagin first sought it. However, at last week’s council meeting, she said middle-class taxpayers and small businesses in New Orleans should not be burdened with a tax hike at this time.

“I am completely and utterly opposed to a tax increase,” she said. “Our community simply cannot afford it.”

Council President Jackie Clarkson said the City Council would not raise taxes.

Nagin said the 10-mill increase would bring in about $24.5 million and is necessary to keep the city’s finances healthy. He warned the council that rejecting the increase could cause the city’s bond ratings to fall.

Assistant chief administrative officer Cary Grant told councilors that the administration had not prepared an alternative budget in case the tax hike was not approved.

The council must approve a budget by Dec. 1 for the fiscal year that begins Jan. 1.

Nagin proposed a $1.2 billion budget for 2009 with general fund spending of $485 million. General fund revenues are estimated at $500 million.

New Orleans’ general obligation bonds have unenhanced ratings of Baa3 from Moody’s Investors Service, BB from Standard & Poor’s, and BBB-minus from Fitch Ratings.

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