ATLANTA -- After a key New Orleans businessman urged the city to file for bankruptcy if the upcoming referendum on its general obligation bond refinancing fails, Mayor Sidney Barthelemy said Friday that he has no intention of using insolvency to solve the Big Easy's fiscal crisis.

Mayor Barthelemy's comments came two days after James R. "Jim Bob" Moffett, chairman of the city's largest company, Freeport-McMoran Inc., and key supporter of the refunding proposal, said the city faces "fiscal meltdown" and should declare bankruptcy if voters reject the refinancing.

The refunding proposal, which will be placed before voters on Saturday, would extend the maturity of the city's $368.8 million of general obligation debt, freeing up about $19 million a year New Orleans now pays in debt service on these bonds. This, officials say, would allow the city to continue providing services in the face of its currently projected $13.5 million deficit.

"I know Mr. Moffett thinks he is being helpful by raising the specter of bankruptcy, but I want to assure financial markets and holders of our bonds that I am not considering this as an option," Mayor Barthelemy said in a telephone interview.

"I am hopeful the referendum will pass, but if it doesn't I have made several recommendations that I think would allow us to deal with the financial problems the city would encounter if it doesn't."

He said the most likely option would be increasing the fee the city charges on water and sewer usage by about $20 a month per customer, raising about $15 million between now and the end of the city's fiscal year on Dece. 31. This option, he said, is viable because it could be imposed by the city council and does not require a voter referendum.

Mayor Barthelemy said another option would be to cut the city's 6,400 work force by about 1,200, which in addition to other cuts would free up about $15 million.

The mayor said another revenue-raising measure he has considered -- a 1-cent increase in the city's sales tax that would raise about $36 million a year -- would be more difficult to impose because it requires a citywide vote. New Orleans currently imposes a 10-cent sales tax, one of the highest such levies in the nation.

The mayor said the city has spent most of a recently identified $7.5 million cash surplus and now has only about $1.5 million on hand.

Mr. Moffett, in a telephone interview, said filing for bankruptcy would be the best alternative for the city if the GO refinancing is not approved by voters.

"If the referendum does not pass, I think bankruptcy would be the best road to take, because I have no doubt we would otherwise be faced with a total fiscal meltdown," he said.

Investment bankers who dicussed New Orleans' situation on Friday on condition that they not be identified, said the referendum was unlikely to pass because voters do not want to postpone paying off the city's debts.

Mr. Moffett said the mayor's plan to lay off workers or add the surcharge on water is "not acceptable.

"Maybe other cities would put its citizens through that kind of wringer," he said, "but New Orleans deserves better and should consider what Bridgeport has done."

If New Orleans decides to file for bankruptcy, it would become the second city to do so this year. On June 6, Mayor Mary C. Moran of Bridgeport, Conn., filed a petition for Chapter 9 protection under the U.S. Bankruptcy Code, provoking a wave of concern in the credit markets.

Mr. Moffett said bankruptcy could shield the city from unrealistic state and federal mandates. In addition, he said, bankruptcy is a "two-by-four" that would catch the attention of the unions, which he said have not been responsive.

He also said that if the city files for bankruptcy, he would urge it to continue to pay debt service on its outstanding general obligation debt. "The one thing I don't want is for us to lose our credit rating," he said.

New Orleans' general obligation debt is rated Baa by Moody's Investors Service and A-minus by Standard & Poor's Corp.

According to sources close to city hall, some city officials -- particularly council members -- have been gathering information on bankruptcy as an option. One of the names mentioned was James Singleton, the city council's finance committee chairman. Council members, including Mr. Singleton, were unavailable for comment.

Dennis Stine, Gov. Buddy Roemer's commissioner of finance, said the governor is aware of Mr. Moffett's ideas but does not endorse bankruptcy as a possible solution to New Orleans' fiscal problems.

"Jim Bob has a point in saying that citizens will not like the consequences of a referendum not passing in New Orleans," Mr. Stine said. "But I can assure you that neither I nor the governor would find bankruptcy a good strategy."

Mr. Stine noted that for a city to declare bankruptcy in Louisiana, it must first receive permission from the attorney general. And to default on bonds, the city must go before the bond commission, of which he is a member.

Peter Kessenich, a vice president at Public Financial Management Inc., financial adviser to the New Orleans Board of Liquidation, City Debt -- the city agency that oversees the city's debt -- said that, in any event, bankruptcy would be unlikely to affect debt service payments on the city's GOs.

"From a technical standpoint, I would say the city's GO bonds, which are payable from property taxes, for which the liquidation board can set rates, are insulated from bankruptcy," he said.

Officials at Standard & Poor's Corp. and Moody's Investors Service, which were closed Friday, were unavailable for comment. But a recent report issued in Standard & Poor's CreditWeek has discouraged municipal governments from turning to bankruptcy as a strategy for solving financial crisis.

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