City revenues won’t keep pace with costs

Here’s a stark reminder of the budget headaches facing New Orleans in the next few years: Even though the city expects revenue to increase by between $4 million and $11 million each year for the next five years, that probably won’t be enough to keep some services at their existing level.

City officials unveiled their latest revenue projections on Monday, and at first blush they looked upbeat.

A combination of rising sales and property tax collections, driven by continued population growth, should boost revenue by an average of 2.1 percent each year through 2018, giving the city about another $9 million to work with each year.

Yet, given urgent funding priorities across city departments — everything from police reforms to water pipe repairs — officials warned that such modest growth may not be enough to ward off more cutbacks at various city agencies.

“Some of the cost pressures are just relentless,” Chief Financial Officer Norman Foster said at a meeting of the city’s Revenue Estimating Conference. He singled out two factors that have afflicted cash-strapped municipalities across the country: pension and health care expenses for retired city workers.

Foster pointed out that Mayor Mitch Landrieu’s administration took steps early in his term to bring health care costs down, such as shifting some eligible beneficiaries over to the federal government’s Medicare program.

He warned that continued growth in pension and health care expenses, combined with the cost of implementing court-ordered reforms at the Police Department and Orleans Parish Prison, could eat up much of the increase in revenue.

Deputy Mayor Andy Kopplin drove the point home further, singling out the trustees who run the city’s pension fund for firefighters and Sheriff Marlin Gusman, who has signed a court agreement with the U.S. Justice Department on jail reforms that could cost the city millions of dollars, though exactly how much is still in dispute.

“We have the firefighters asking for $17.5 million, the sheriff asking for $22 million,” Kopplin said.

“Trying to find one if not both of those amounts of money requires offsetting reductions in other programs the city delivers,” he continued. “That’s just the way the mathematics work.”

Kopplin’s remarks could be read in part as an effort to manage expectations. Whether the city actually will have to pay those sums to the firefighters and Gusman will depend on a handful of judges presiding over lawsuits against the city. And Landrieu has been relentless about reminding the public that those decisions are out of his hands.

In any case, the latest revenue projections do give a first indication of how little wiggle room the Landrieu administration will have heading into another budget season of painful choices, and perhaps a second term filled with many more. The mayor will present his 2014 budget proposals to the City Council next month.

The city expects core taxes, both sales and property, to provide most of the expected revenue growth. Money from licences and permits, fines and charges for services like EMS calls is expected to grow only modestly and has already disappointed in some areas.

Officials said Monday that the city expects to take in about $2.4 million less in revenue this year than previously forecast, mostly because less money than anticipated is coming in from the city’s traffic cameras, EMS collections and other secondary sources.

Still, it’s a relatively modest shortfall compared with some previous years, when faulty assumptions about how much the city could expect to bring in led to midyear cost-cutting. Overall, the city now expects to bring in about $494.3 million in 2013, compared with a previous forecast of about $496.7 million. “We’re within a half a percentage point of the forecast, which is a pretty good trend,” Kopplin said.