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New Orleans in the Red: The $2.1 Billion Debt Struggle

 New Orleans Faces Financial Struggles: What You Need to Know

New Orleans, a city known for its unique charm, is facing serious financial trouble. In 2023, the city had a $2.1 billion shortfall, meaning the city owes more money than it has to cover its bills. If the city were to pay off this debt by taxing its residents, each taxpayer would face an $18,300 burden. This has earned New Orleans a "D" grade for its finances and has put it on the "Sinkhole City" list in Truth in Accounting's latest report.

What Is Taxpayer Burden?
The Taxpayer Burden shows how much each taxpayer would need to contribute if the city had to pay off all of its debts today. So, while residents don’t have to pay this amount directly, it reflects the city’s overall financial situation. In New Orleans' case, that burden is $18,300 per taxpayer. According to Truth in Accounting’s grading system, cities with a Taxpayer Burden between $5,000 and $20,000 get a "D" grade. With an $18,300 burden, New Orleans is on the higher end of that scale, showing how serious the city’s debt problem is.
How Does New Orleans Compare to Other Cities?
Here’s how New Orleans compares to other cities of similar size:
  • Louisville, KY: About 620,000 people. The city has a shortfall of $121.6 million, or about $700 per taxpayer.
  • Memphis, TN: About 650,000 people. The shortfall here is $777.2 million, or about $4,000 per taxpayer.
  • Lexington, KY: About 325,000 people. The city faces a $342 million shortfall, but their Taxpayer Burden is much lower than New Orleans.
This shows that New Orleans has a larger financial gap compared to these cities, making its situation more urgent.
The Pension Problem
One of the main reasons for New Orleans' financial struggles is the Firefighters’ Pension Fund. The city found out that the fund doesn’t have enough money to cover all the benefits it owes. To fix this, the city lowered the expected return on the fund’s investments, which increased the city's debt.
Revenues and Shortfalls
On the bright side, New Orleans saw an extra $4 million in revenue in 2023, mostly from fines like red-light tickets and traffic violations. However, this extra money isn’t nearly enough to cover the city’s huge debt, which includes $1.5 billion in unpaid pension benefits and another $388.6 million for retiree healthcare.
Key Points to Remember:
  • New Orleans has $1.5 billion to cover $3.5 billion in bills, leaving a $2.1 billion shortfall.
  • The $18,300 Taxpayer Burden reflects how much each taxpayer would need to contribute if the city paid off its debt today.
  • Pension problems are a major part of the city’s financial troubles.
What Needs to Happen?
To fix this, New Orleans needs a plan for better managing its finances. The city must figure out how to pay its bills without overburdening taxpayers, while still providing essential services.

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