NEW ORLEANS, LA – Today, the City’s Revenue Estimating Conference (REC) met to discuss updated 2012 budget projections, as well as adopt a formal revenue estimate for the 2013 budget. The REC adopted an operating revenue forecast of just over $491.4 million for 2013.
“The good news is that we are projecting revenues to grow in 2013,” said Deputy Mayor and Chief Administrative Officer Andy Kopplin. “The bad news is that this $491 million figure is about $6 million below what was initially budgeted and approved in 2012. And in 2013, we are going to have to deal with the added obligations for the consent decree, as well as the rising costs for employee health care, pensions, and workers compensation claims. The 2013 budget is going to be a challenge.”
Mayor Landrieu will present his administration’s 2013 budget proposal to the City Council on Monday, October 29, 2012.
The Revenue Estimating Conference prepares and publishes initial and revised estimates of money that is to be recognized for the current and next fiscal year by the City general fund and all other City operating funds. These estimates are based on industry best practices and currently widely accepted economic principles and methods.
Because of budget reforms made by executive order by Mayor Landrieu, the conference meets at least quarterly.
Jerome Lomba, Chief Economist for the City of New Orleans, made the presentation to the REC.
The Revenue Estimating Conference is made up of the following individuals:
The Mayor, who serves as chair;
Deputy Mayor & Chief Administrative Officer Andy Kopplin;
Chief Financial Officer Norman Foster
Councilmember-at-Large Jacquelyn Brechtel Clarkson; and
Peter Ricchiuti of Tulane University.
Mr. Lomba noted that no national recession is anticipated over the course of the forecast period and that the City’s economic and revenue forecast is predicated on modest growth in national employment and income. Locally in Orleans Parish, Lomba noted that payroll employment is anticipated to grow at an annual average of 1.4 percent, while wages are projected to grow by 3.5 percent and personal income by 3.1 percent.
“These are positive trends, but there is no greater engine for generating revenue growth than increasing population and home sales,” said Lomba.
The 2012 adopted budget forecasted revenues of $497.5million. In March 2012, the Revenue Estimating Conference reduced projected 2012 revenues by nearly $14.5 million due to lower than expected sales tax growth, declines in traffic camera revenues due to policy changes and improved driver behaviors, and reductions in utility and franchise taxes paid by Entergy New Orleans and its customers. By the Revenue Estimating Conference’s late June meeting, City revenues had improved modestly leading the Conference to revise upward its forecast and lower the projected deficit to $13.1 million. Revenue was adjusted down to $483.6 million in at the Revenue Estimating Conference meeting held today. To manage the budget, most City departments and agencies saw a 3.8 percent cut in their 2012 discretionary allocations earlier this year. The NOPD was not cut. The City also refinanced debt service payments to prevent further cuts to departments.
Revenues for 2013 are projected to be $491.4 million, which is $7.8 million over current estimates for 2012, or a 1.6 percent growth. Total tax revenues are projected to grow by $12.3 million, or 4.3 percent, and constitute almost 61 percent of General Fund revenues, with practically the entire amount attributed to growth in property and sales taxes. Many other revenues, most notably traffic camera collections, are expected to decline significantly. For 2012, the initial forecast for traffic camera revenues was $19 million. For 2013, because of sweeping changes made by the Landrieu administration including new thresholds for issuance of tickets and a new appeals process, traffic cameras are projected to decline to $12.5 million.
After taking office in May 2010, the Landrieu administration learned it had inherited a budget gap between projected revenues and expenditures which grew to more than $97 million. In 2010, Mayor Landrieu oversaw a plan that closed that spending gap by nearly $70 million by significantly reducing overtime, cutting and renegotiating contracts including MWH recovery management and sanitation collection contracts, reducing take-home cars in half, and furloughing all city employees 11 days. In its first full budget year, the Landrieu administration balanced the 2011 budget without relying on a fund balance for the first time since Hurricane Katrina. Since taking office, Mayor Landrieu has reduced annual general fund spending by more than 8 percent from 2009, the year before he took office.
The Revenue Estimating Conference presentation is attached.