Friday, February 16, 2007

Financial distress of the city of New Orleans

The New Orleans Times-Picayune has a story detailing a finance package the city has put together to keep the city running for a couple of years until the city recovers enough to pay its bills through tax revenue. Some key points:

-The city's tax revenue is projected to shrink from "$151 million in 2004 to $69 million in 2006. Officials also are projecting huge declines in revenue from property taxes, sanitation service fees and parking meter fines."

-"the city is expected to spend more on basic services than it takes in through tax revenue for each of the next five years, with deficits expected to total $618 million by the end of 2010."

-the city's optimistic forecast projects that its population will recover to 320,000 in three years. The article quotes an outside study forecasting that the city won't reach a population level of "272,000 residents, or slightly more than half its pre-Katrina population" until 2008.

These facts hammer home how grim New Orleans' situation is. If the city raises taxes down the road to help pay off the debts it is going to incur, that will likely drive away residents and business. If the city cuts back on services to reduce the cash burn, that too is likely to drive away residents and businesses. The city may never fully recover from the damage of Katrina.

No comments: