ATLANTA -- New Orleans will ask voters on July 13 to approve a referendum to restructure the city's general obligation debt, now that Louisiana officials and city business leaders are endorsing the plan.
The restructuring, which revives a refinancing plan that was scrapped in April, would stretch the final maturity of the city's $368.8 million GOs to 2021 from 2004, freeing up about $19 million of debt service annually. This money will be used to close the city's current $15 million operating deficit and provide for a 30-year capital improvement program. Under the current arrangement, the city will run out of operating funds after June 30.
In return for the endorsement by the New Orleans business community, Mayor Sidney Barthelemy has pledged to revamp city government, which critics have accused of being inefficient. Business leaders and state officials opposed the original plan because they felt it was vague, and extended the debt repayment schedule without providing clear benefits.
"The earlier proposal had thrown around a lot of big numbers, but didn't provide much in the way of specific details on spending," Lloyd A. Tate, chairman of the New Orleans area council of the Chamber of Commerce, said yesterday.
The latest proposal, approved last Thursday by the city's Board of Liquidation -- City Debt, which reviews all of New Orleans borrowings, departs from the earlier version because it envisions a more conservative use of the freed-up money.
The new plan calls for only $70 million in new-money capital improvement bonds, compared with $162 million in the earlier proposal. In addition, officials estimate that in its first year, the plan will free up a one-time windfall of about $35 million in debt service savings, rather than the $28 million anticipated in the prior plan.
The board of liquidation's vote followed approval of the plan by the city council on May 23. The approvals come after two months of intense negotiations between city officials and business leaders.
"We support this plan because it is much more reasonable and concrete," Mr. Tate of the city's chamber of commerce continued. "It can work because it's part of a long-term strategy to bring financial stability to New Orleans." Mr. Tate expects the referendum to pass narrowly, because "even if people don't understand the details of the financing, they will vote for the improvements, like parks, the affect them."
In exchange for the support of the business community, Mayor Barthelemy agreed to abide by the findings of a panel that will assess the need for a restructuring of city government, Mr. Tate said. In addition, the mayor agreed to establish two other independent committees. One will advise how to spend the $3 million the refinancing plan will provide for housing. The other will counsel spending the $3 million for economic development.
"The mayor is committed to carrying out the formulations of the advisory committees," said Jinx C. Broussard, the mayor's spokeswoman.
Mr. Tate said the five-member panel to study the city's government will be headed by former New Orleans mayor Moon Landrieu and will initially focus on reforming the city's justice system, which many have criticized as wasteful. That system, which spends $30 million annually, is unusual in that it provides for entirely separate court systems for criminal and civil matters critics of New Orleans's government say combining the court systems could save $10 million annually.
Mr. Tate said the panel also will include two Barthelemy advisers -- Jim Thorns and Ron Nabonne -- and two representatives of Gov. Roemer -- John Kennedy, the governor's legal counsel, and Dennis Stine, his commissioner of administration.
"We will be looking at how to make New Orleans run more efficiently and save money on its operating expenses," said Mr. Stine. "The justice system is one area that will receive a lot of attention."
He said Gov. Roemer also discussed the prospect of long-term state funding for the financially strapped city with Mayor Barthelemy.
The governor is supporting a plan currently being debated in the legislature that would that provide money for local justice systems. Mr. Stine said that, if approved, New Orleans's portion of the proposed $100 million in funding might be about $20 million. The source of that funding, however, remains in doubt.
Separately, state officials are also discussing a plan to provide local governments with part of the money collected by the state's newly approved lottery, Mr. Stine said. He said New Orleans might get as much as one-third of the funds generated by the lottery.
Approved in 1990, the lottery will not begin operations until 1992, and money cannot be spent until it is collected. State officials estimate the first-year collections could total about $50 million.
To move the refinancing plan forward, voters must approve each of the separate ballot items, all of which must be approved in order for the refinancing to move forward.
The first item asks for approval of up to $385 million of GO bonds "for the purpose of refunding, readjusting, restructuring, extending, and unifying a portion" of the city's GOs.
The other five items concern the use of funds that that would be available from the freed-up debt service now being paid on the city's existing bonds. That funding would comprise a lump sum of $35 million for courts, jails and health clinics in the second half of 1991; $6.5 million a year for $70 million of 30-year bonds to fund street repairs and building renovations, and a total of 9.9 mills of property taxes a year for housing programs, economic development, and the city's parks system.