The New Orleans City Council approved amendments to the 2009 city budget earlier this week in a compromise with Mayor Ray Nagin.
The council adopted a budget in early December, but Nagin quickly vetoed the measure. The council voted to override the veto on Dec. 17, but the mayor said he would ignore several allocations in the council’s revised budget.
The amendments revise or eliminate some of the aspects of the council-approved budget that the mayor said would adversely affect the city’s credit rating. In his veto message, Nagin said the changes made by the council to his budget jeopardized plans to issue up to $135 million of general obligation bonds for recovery efforts and refinancing $171 million of taxable pension bonds issued in 2000.
Nagin last month said he was not required by law to spend money exactly as appropriated by the council, but the council’s special legal counsel said the mayor was wrong.
The final version of the budget calls for spending about $7.5 million of the $10 million remaining from a $240 million federal community disaster loan provided after Hurricane Katrina in 2005 to make up for revenue lost when a tax increase proposed by Nagin was rejected by the council.
The mayor wanted to reserve all $10 million for the 2010 budget. However, the city now expects to make up that money with $2 million in unspent funds and $8 million saved through a hiring freeze.
The council also restored the full $2 million requested by Nagin to buy vehicles for city agencies rather than the $300,000 in its revised budget. However, the council did not restore a $1.6 million cut in the fuel budget, which could result in the city being unable to purchase fuel by fall.
New Orleans’ GOs have unenhanced ratings of Baa3 from Moody’s Investors Service, BB from Standard & Poor’s, and BBB-minus from Fitch Ratings.