LaToya Cantrell's proposed 2025 budget aims to stabilize city finances after COVID swings (2025)

New Orleans Mayor LaToya Cantrell’s administration is preparing for a tighter fiscal reality in 2025, with federal pandemic aid drying up, a slowing economic recovery and soaring costs of sanitation, city pensions and sheltering homeless residents.

Cantrell will present her proposed 2025 budget on Tuesday to the New Orleans City Council, which is required to approve a final budget by Dec. 1. The $1.8 billion budget— up from $1.6 billion last year — is the final of a three-year fiscal plan, with priorities largely aligned with the last two years: public safety, infrastructure, and improving quality of life.

The three-year plan has included annual 2.5% raises for all city employees, plus additional raises for NOPD officers, and a restricted emergency reserve fund that is now $133 million.

Chief Administrative Officer Gilbert Montaño said in an interview Monday that the budget represents an effort to “stabilize” the city’s finances after the highs and lows of the pandemic recovery.

Montaño— who spoke days after he was implicated in the federal indictment of a city contractor who allegedly bribed Cantrell and others with football tickets— also emphasized the importance of the large reserve fund being maintained in this year’s budget, which he has said should be tapped only in dire circumstances.

“This is what maintains our structural and financial integrity. Having that amount of money stowed away will set the city up for generations to come, with solvency and stability,” said Montaño, adding that he is developing a formal policy designed to protect the reserve fund.

A little more than half the spending plan is covered by federal and state grants and other funds dedicated to specific purposes. The rest comes from recurring revenue such as sales taxes and license and permit fees that go to the general fund.

The city will take in about $124 million less than the $900 million its departments wanted to spend. City Hall's initial proposal fills the gap in part with a fund balance that has grown fat in recent years from federal pandemic aid, and it does not fulfill about $84 million in requests.That would put the city at a general fund budget of $816 million.

The city’s fund balance has drawn criticism from advocates, who say that the city should use the money it has to address issues facing residents. When asked Monday, Montaño said he did not have the most up to date figure for the city’s total fund balance on hand.

The fund balance will require a “conversation on what is the excess amount and how can we use and leverage that,” Montaño said.

Cost increases

The budget accounts for significant increases in costs of some expenses, including sanitation contracts, which are budgeted at more than $70 million this year, up from $51 million in 2024.

Some costs – and plans for paying them – are yet to be determined. The city is currently negotiating with the Sewerage and Water Board to transfer maintenance of catch basins, but they have to agree on what that might cost.

The S&WB has broadly estimated it will need $30 million annually at a minimum. Traffic camera revenue is expected to cover a portion of that, but it won’t be nearly enough. Montano said he is confident the long-awaited transfer will happen by Jan. 1, but that he is worried about sustaining the needed funding every year.

“I think everybody's leaning in and trying to make sure it does happen,” Montaño said. “I do worry where that money comes from, and where we have to decrease it from.”

Pension obligations are another major concern. The New Orleans Firefighters’ Pension and Relief Fund is one of the worst funded in the country, and benefit cuts enacted in 2016 haven’t done much to improve things. The statewide Municipal Police Employees’ Retirement System, meanwhile, is demanding payment of a $38.5 million fine.

Pandemic funds come to an end

The nearly $400 million in federal funding came as an unprecedented boost to the city’s revenues in recent years. But with all of that money set to be dedicated by the end of 2024, Cantrell’s proposed 2025 budget shows a drop off in spending on many city programs.

Montaño has emphasized that those funds have been used to support one-time costs, rather than recurring costs such as salaries.

For example, the budget reflects a 28% reduction in the budget for the Department of Parks and Parkways, because that department has used up a one-time $3 million pot of federal funds dedicated to complete a backlog of tree trimming work, officials said.

The city has signed contracts to spend 91% of the pandemic relief funds, Montaño said Monday. The city is required to contract the remainder of the funds by the end of 2024, and it has until the end of 2026 to get the money out the door. Montaño has said that the city is on track to meet those deadlines.

Farrell indictment

Before he began discussing the budget Monday, Montaño addressed the recent indictment of business owner Randy Farrell. Montaño is named multiple times in the indictment as “Public Official 2,” according to multiple sources with knowledge of the case. Cantrell and that official are described as accepting tickets to football games that Farrell purchased.

Neither Cantrell nor Montaño have been charged with a crime in connection to the case.

Montaño reiterated comments on Friday that he was “shocked” to be implicated in the indictment. He said that his focus was to “make sure the work is getting done" at City Hall.

“I know and am confident that my integrity for all my years and service means something,” Montaño said.