Once awash in oil dollars, New Orleans faces $10 million deficit

The city of New Orleans, facing a budget deficit of $10 million, is laying off more than 200 employees, cutting most city salaries by 20 percent, and blaming it all on oil. The problem is the price of oil, down from more than $30 per barrel a year ago to less that $15 today, and the drop-off in state and city revenues resulting from the oil glut. Economists say that every dollar decline in oil brings Louisiana a potential revenue loss of $30 million.

``This has not been a good time for our city,'' said Democratic Mayor Sidney Barthelemy after he recently announced the layoffs. These follow a layoff of 700 city employees this summer. ``It's just a very difficult situation for us.''

Until the spring of 1985, the city had a full operating hospital system and fully staffed police and fire departments. All city offices, including the library system with more than a dozen satellites, used to be open five days a week. Now they are open Monday through Thursday.

Mayor Barthelemy, who took office in May, has tried to cope with the revenue losses by drastically cutting the city's budget and proposing new methods of taxation. In both efforts his success has been limited.

Voters resoundingly defeated a Barthelemy proposal in September for a $195 service charge on all commercial and residential property in the city, and the mayor was booed last week when he announced the layoff of 205 employees and the beginning of a four-day workweek for city employees.

There was even little positive public reaction when Barthelemy said he would take a 20 percent cut in his salary of $75,000.

``The city government in New Orleans is in a very difficult situation,'' says Timothy P. Ryan, the director of the University of New Orleans' Division of Business and Economic Research.

``They have a budget deficit of more than $10 million and limited means of raising revenue,'' he adds.

The state constitution restricts New Orleans from using many taxes other cities use. For example, the city cannot use a property tax to raise revenues.

In addition, New Orleans cannot turn to either the federal government or state government, because both are reducing aid to cities.

This spring, efforts to set up three casinos in the city were defeated in the Legislature, while at the same time the state budget cuts cost New Orleans more than $5 million.

Unemployment within the state is near 15 percent, while a recent earnings tax proposed by the City Council is being challenged in the courts.

But the biggest financial burden for New Orleans concerns oil. ``The thing that really drives the New Orleans economy is drilling and exploration activity in the Gulf of Mexico,'' Mr. Ryan says.

``If the prices continue to go down in oil, we'll probably have more layoffs, and we may find that even more people may leave New Orleans, which, of course, decreases spending in the area even further.''

But some experts see silver linings in the dark financial clouds. ``Despite all the trouble, there are some high expectations,'' notes Lee Madere, executive director of the New Orleans-based Bureau of Governmental Research. ``Tourism is up over last year, which is up over the year before. Hotels are renting out more rooms than before.''

The financial crisis has led some city leaders to contemplate bankruptcy, while others are hoping for another voter referendum on a property service charge. ``One way or the other, we are rethinking our philosophy,'' says Barthelemy's executive assistant, Terry Alarcon.

``What does government mean to people? What kind of services should we provide? What services can we really afford to provide? These are all things we're going to have to answer in the coming months.''

Although New Orleans's economic woes are the most challenging since the Great Depression, a certain numbness has settled over the city in which the streetcar still operates 24 hours a day, jazz clubs in the French Quarter operate late into the evening, and tourists continue to flock to such landmarks as the Superdome, and the recently opened Charles Rouse Riverwalk urban development.

Barthelemy in his State of the City address sounded an even more optimistic note. ``We are not down and out by a stretch of anybody's imagination. There is a good spirit out there, and we have to capture it. That's the role I think I play.''