In 2010, one month after former Mayor Ray Nagin left office, new Mayor Mitch Landrieu announced that the city budget shortfall — which had been estimated between $25 and $30 million — was far worse than expected: New Orleans would have to cut nearly $100 million to balance its budget. The city had been on shaky financial ground since Hurricane Katrina and the levee failures of 2005, after which the credit rating agency Standard & Poor's (S&P) had lowered the city's bond rating to "B" — a non-investment grade or "junk bond" rating.
Most know Landrieu and the City Council were able to forge balanced budgets for that year and each year thereafter, as required by the city's Home Rule Charter. What's less known is that their fiscal stewardship paid off in other important ways. In addition to having truly balanced budgets, New Orleans' bond rating has steadily improved over the years. In 2015, S&P gave the city two credit upgrades, bringing it to "A+." Earlier this month, S&P raised the city's credit rating again — to "AA-," the highest ever awarded to New Orleans and the fourth-highest rating possible. S&P announced its credit upgrade based on what it perceived as the city's overall strong economic outlook, strong fiscal management, and recent increases in assessed real estate values, which form the basis for property tax collections.
In addition to the improved S&P rating, Fitch Ratings upgraded its long-term and underlying rating from "A" to "A+" on the city's general obligation bonds. Fitch noted, "The city's record during the current economic recovery — boosting reserves and increasing pension contributions — indicates a commitment by the current administration to bolster the city's financial profile during periods of expansion when economically sensitive revenues are increasing."
Essentially the ratings houses are high-fiving city leaders for restoring fiscal sanity at City Hall.
That may sound like economic jargon, but essentially the two ratings houses are high-fiving city leaders for restoring fiscal sanity at City Hall. It is also excellent news for taxpayers, who will be asked in November to vote for a millage hike for the Fire Department. The improved bond ratings mean the city will pay lower interest rates on its new debt, which in turn means more money will go toward important needs such as streets, lighting, public safety and infrastructure improvements, rather than being paid out as interest. Equally important, better bond ratings assure voters that city leaders are not squandering taxpayer dollars.
"Upon taking office in 2010, we confronted New Orleans' fiscal challenges head-on and with eyes wide open," Landrieu said in announcing the new ratings. The mayor thanked the council for its work and added, "The announcement is continued validation of the progress we have made, not only closing the huge $97 million budget hole we inherited, but also in reviving the city's finances by cutting smartly and reorganizing government and delivering better services."
It's too early to write the story of Landrieu's legacy as mayor, but that story should include mention of his good financial stewardship. He has made the next mayor's job that much easier.