The New Orleans City Council voted unanimously on Thursday to approve Mayor Helena Moreno's proposal to sell several years' worth of the Caesars casino lease to a Texas investment firm.
The city will get $103 million to replenish its severely depleted fund balance.
Moreno said the city's financial crisis has lowered its fund balance to $35 million. She said a healthy balance would be in the neighborhood of $160 million.
The fund balance is cash the city keeps liquid to make payments for unexpected things like emergencies.
"These dollars are not to be used for recurring expenses, so we are going to make that explicitly clear in the ordinance approving this deal," Moreno said.
With hurricane season a little more than three weeks away, the mayor said the city cannot have an insufficient fund balance.
While some worry the city may be losing money on the deal, the city's chief administrative officer says the city will come out ahead.
"We are putting this in an interest-bearing account year over year," CAO Joe Giarrusso said during Thursday's meeting. "It will increase in interest every single year."
On paper, the city is sacrificing $50 million by selling the Caesars lease. However, says the interest that the funds from the sale will accrue will allow the city to make up those lost funds in the span of a decade
"The goal is this: to recoup the money that we have as a result of that interest," Giarrusso said. "If we have $100 million in that account and it has an interest rate above 4.375 percent and we don't have to touch it collectively--because let's be very clear about this, the administration is not going to move this money without council approval--instead of having $100 million, you can have close to $150 million in the account by year nine."
Giarrusso says this is a "smart financial move" for the city.
"So rather than worrying about do I get that park fixed or can I knock this blight down or can I do something else, you are adding as a council right now up to 50 million dollars into the life of this account by making it go into an interest-bearing account."
