New Orleans withdrew a bond application before the Louisiana State Bond Commission in what might be the latest chapter of an intensifying political struggle between the city and state governments.
"I made the decision to withdraw our application before next week's bond commission meeting because it had become clear that denial was imminent," said New Orleans Mayor Helena Moreno. The city had planned to seek approval for $110 million bonds to be used for operating expenses the rest of the year as it tries to recover from a difficult financial situation left by the previous mayor and actions by the federal government last fall.
"Fortunately, we have identified a path to get us through 2026 without needing bond commission approval for a third-party loan, but it won't be easy," Moreno said.
The bonds would likely carry a 7.3% interest rate, "making it a very expensive loan," said Republican State Treasurer John Fleming, chairman of the bond commission. The bond commission and the Treasury department "are not a party to plans for punitive actions," Fleming said.
The withdrawal of the bond plans comes amid tensions between the Democrat-dominated city and the Republican-dominated state government that go back at least to October, when the city council discovered a major gap for the remainder of the fiscal year. The city faced some resistance from Republican state leadership to its request for
The tensions started when state officials moved to eliminate nine judgeships, revoke funding for 10 assistant district attorneys and erase the position of criminal district court clerk in the city.
When the city council tried to counter the clerk elimination, State Attorney General Liz Murrill threatened council members. A city-based grand jury recently indicted Murrill on 16 counts of malfeasance and intimidation.
Murrill successfully asked the state supreme court to intervene. State officials were reportedly upset by the indictment, which Moreno reportedly said she had nothing to do with.
While the indictment is an issue, said John Mousseau, Cumberland Advisors executive vice president and chief investment officer, "the bigger picture is the conflict between the city and the state. Big Democratic city versus Republican state house. We see this in other states."
While New Orleans needs the money, Mousseau said, the criticism is "the city is using long-term bonds to plug short-term funding gaps. There is going to need to be a meeting of the minds and this may be an overseeing agency to be involved with the city's financings. Clearly there needs to be some expense reduction to reflect the drop in city revenues that have been affected with a drop in tourism to the city."
On Tuesday, Gov. Jeff Landry sent Moreno a letter saying, "The city's ongoing inability to meet cash flow requirements is unacceptable and raises serious concerns about management and transparency."
In her statement, Moreno said, "We are hearing warnings that some state leaders may pursue separate efforts to target the city's finances, including
"Any state leader seeking to defund New Orleans to punish, weaken or destroy it must face the harsh truth and consequences that, ultimately, doing so is self-harm to Louisiana," Moreno said.
