State Bond Commission moves favorable on New Orleans’ $125 million revenue notes with strict auditor oversight

The State Bond Commission on Nov. 12 moved favorable on a City of New Orleans request to issue up to $125,000,000 in revenue anticipation notes to cover payroll and other operational needs, contingent on terms that place withdrawals under the written concurrence of the Louisiana Legislative Auditor.

The move, made by President Henry and seconded by Speaker de Villiers, was approved by unanimous consent after members were given a packet with cash‑flow projections and a legislative auditor analysis. The motion was explicitly made contingent on acceptance of the packet’s terms and conditions; the commission recorded no roll‑call vote tally, approving the motion by unanimous consent.

Why it matters: The request responds to a projected cash‑flow shortfall in New Orleans that, under the packet’s projection, could exceed $125 million before December and show the city returning to a cash shortfall by May 2026. The notes would be repaid from future tax collections; under the terms described in the meeting, an auditor‑controlled special fund would receive proceeds and those proceeds could be used only for payroll obligations, benefits and borrowing costs tied to the issuance.

Louisiana Legislative Auditor Mike Waguespack, who outlined the terms, told commissioners the packet includes cash‑flow projections showing an October beginning cash deficit of more than $14.6 million and that the December projection is materially affected by an accrual item of about $56.6 million that will not be received until December. "The cash deficit could... actually be projected to go above $125,000,000," he said, and the city could return to a cash deficit beginning in May 2026.

Waguespack described the oversight structure the city has agreed to: a dedicated special fund into which note proceeds would be deposited; withdrawals, transfers or disbursements from that fund would require the prior written concurrence of the Legislative Auditor; noncompliance could trigger suspension of withdrawals and referral to the fiscal review committee. He said the auditor’s office will be embedded in the city’s weekly payroll approval process and will invoice the city at $125 per hour for audit staff time.

On causes of the shortfall, Waguespack and commission members pointed to several factors, with overtime spending a major driver. The auditor said the city budgeted roughly $9–10 million for overtime in 2024 but spent about $44 million; he said 2025 overtime could be about $50 million while the budgeted figure was far lower. Waguespack also cited expanded post‑COVID recurring positions, increased headcount and budget practices that treated one‑time federal money as recurring revenue.

Mayor‑elect Beck told the commission her transition team has two privately funded consulting firms working at City Hall to "rebuild the city budget from scratch" and said unclassified employees will be required to reapply for positions to help "right‑size" government. She said the incoming administration expects a difficult multiyear process to restore reserves and balance recurring costs with available revenues.

Commissioners pressed for an investigative review of prior years’ practices. Waguespack said his office will conduct an investigative audit of 2022–25 and, if evidence of irregularities emerges, pursue forensic work; he estimated the investigative audit could be completed in roughly three months. He also told commissioners that inclusion of bond‑document language and review by bond counsel (referenced in the meeting as Jason Acres) and the lender (identified in discussion as JPMorgan Chase) have supported market interest and produced a competitive rate.

The motion approved by the commission is explicitly contingent on the city’s acceptance of the packet’s terms and conditions. Commissioners and the governor’s representative stressed that this level of auditor control is more restrictive than prior revenue anticipation notes and said it may serve as a blueprint for other jurisdictions facing similar fiscal stress.

Next steps: The Legislative Auditor will proceed with the investigative audit, the city will implement the agreed terms to allow the issuance and the commission expects the city may return for additional revenue anticipation notes if cash‑flow issues persist during the recovery period.