New Orleans Mayor Ray Nagin proposed a 10-mill property tax increase earlier this week when he presented his 2009 operating budget to the City Council.

Nagin said the tax increase, which he called “modest,” would allow the city to bolster the emergency reserve fund that was almost depleted by expenses related to Hurricane Gustav in September.

Assistant chief administrative officer Cary Grant told the city’s revenue estimating conference that New Orleans spent $44 million for evacuation, debris removal, and other efforts related to the hurricane, while sales and hotel tax revenues declined during the month. The city has applied for reimbursement from the Federal Emergency Management Agency, but will probably receive only 75% of its expenses.

Nagin’s budget predicts that sales tax revenue will grow to $157 million in 2009 from $147 million in 2008. Property tax collections of $71 million in 2008 would increase to an estimated $102 million in 2009 if the increase is approved by the City Council.

New Orleans’ 2009 budget totals $1.2 billion, but only 43% is general fund money that is directly controlled by the mayor and council.

The city’s general fund spending will actually decline next year, to $485 million from $490 million. The 2009 budget includes more than $48 million in debt service on outstanding city bonds. Revenues are estimated at $500 million.

The council must approve a budget by Dec. 1. The city’s fiscal year begins Jan. 1.

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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