The New Orleans City Council on Wednesday (Oct. 29) withdrew its request for an emergency $125 million bond loan from the state, balking at a demand by Gov. Jeff Landry’s administration to indefinitely control the city’s finances.

Mayor-elect Helena Moreno and City Council president J.P. Morrell said they had come to rare agreement with Mayor LaToya Cantrell’s administration that the need to fund city employee salaries through the end of the year with the loan was not worth the cost of surrendering control of city spending to a state-appointed financial administrator who might remain even after the loan was repaid.

"The entire delegation is lock-synched with us, as far as trying to find a solution moving forward that does not require a fiscal administrator,” Morrell said. “What we did today was a yeoman’s task of bringing the council and the mayor together to have a proposal that was fiscally sound, that met all the requirements that were let out to us.

“What happened in the interim, between that meeting and now, is that we were told, ‘No matter what you present, unless you give us exactly what we want the way we want it, we will not accept it.’ Simply put, it is not in the City of New Orleans’ best interest to be under state control indefinitely for a loan we would repay in January.”

City Council Budget Committee chair Joe Giarrusso III said a hiring freeze and several other austerity measures are on the table as the council and administration work to close the budget gap and keep thousands of city employees paid through the holidays.

They include tight restrictions on overtime, including for public safety agencies, and pursuing money owed the city by entities including the Sewerage and Water Board ($9 million) and the state’s GOSEP (about $30 million from a federal FEMA reimbursement). Cantrell’s administration also has returned $9 million that had been disbursed to the mayor’s Cultural and Recreation Fund.

An additional $45 million in federally funded ARPA money (American Rescue Plan Act) directed to the city to help its recovery from the COVID-19 pandemic also is being examined for its potential to help cover payroll. For now, the council says it has identified roughly $70 million of city money that can be redirected to the payroll crisis.

“We’re going to move forward without the $125 million and we’re going to make cuts accordingly,” Morrell said.

Gov. Jeff Landry, at his own Wednesday press conference, said the city’s reversal of the bond request shows the situation might not be as dire as the city thought.

“Their lack of preparedness does not constitute an emergency on our part,” Landry said.

The Republican governor insisted the state was asking no more of Democrat-led New Orleans than it would of any municipality seeking state financial assistance after mishandling its budget.

“We’re not treating the City of New Orleans any different than all of the other municipalities and political subdivisions around the state have been treated,” Landry said. “We’re not going after them in an aggressive manner. We’re not strong-arming, using any of those types of tactics. We’re treating them like everybody else. They’re normally not used to being treated like everybody else, let’s be fair. But it’s time that they do.”

"However, Morrell said internal discussions with state leaders painted a different picture of tighter strings attached to the bond approval than the city could not accept.

“We received word, through numerous sources, that the Attorney General had taken a position that was immovable: That unless a fiscal administrator was appointed, that she would not support any effort by the city to get the bond,” Morrell said. “It created an impasse where we did not see a path forward at this time.”

Murrill said the state’s condition comes with good reason, given that New Orleans only last week discovered its projected $100 million budget deficit was actually closer to $160 million.

Moreno said, “That looks like the hard line that the Attorney General would not move away from. The City of New Orleans should not, and I will not stand for, having a fiscal administrator come in. That is, essentially, the state coming in and taking over the city. This is really like having a consent decree on city government … This fiscal administrator would be coming in for an indefinite amount of time.”