Is New Orleans the next Flint, Michigan?

Will New Orleans become the next Flint, Michigan?

 

Everyone who isn’t living under a rock has heard about Flint, Michigan’s Water Crisis.

Veolia has provided services to the Sewage and Water Board of New Orleans (SWB) since 1992.  In 2010, when Mitch Landrieu became the President of the S&WB, a series of “revenue generating” changes took place. In 2012 an ordinance which allowed the S&WB to increase rates by 10% a year for 8 years. This would mean that by 2020, customers will be paying 214% more for their water services.

Even Council Member Stacy Head voted against the rate increases, stating “I didn’t like the process. I’m disappointed that there’s still a lack of understand of what this rate increase will go for.” Residents spoke out against the increase, having a general distrust of the S&WB because its history of political patronage. Ray Manning (of Manning Architects), the S&WB President at the time, said that most of the $583 million in revenue generated would go to pay off the S&WB’s debt. Yet, this explanation was not detailed and Stacy Head attempted to delay the vote for further explanation. Landrieu was accused by Head of attempting to muscle through a rate increase through City Council, while Diana Bajoie was still a member, whom Landrieu had appointed while waiting for the results of a runoff election between Cantrell and Kaplan. The Bureau of Governmental Research also wanted the delay, lamenting the agency’s “dysfunctional governance.” Ultimately, the vote proceeded and the ordinance was passed. Yet since this time, the debt has increased.

 

Now in 2015, Veolia renewed a 10 year contract with the SWB. Right after this renewal, FEMA Agreed to pay $1.2 Billion in disaster aid for streets and water pipes. When added to $800 million FEMA had already promised and $1 Billion in revenue that the City and SWB had collected through additional fees, grants, and bond sales, this is intended to be a $3 Billion investment into the city’s decrepit infrastructure. But it should be noted the structure of the debt that has been passed.

Dated Year Bond Description Dollars Raised Interest Rate Total Repaid
2011 Sewerage Service Subordinate Revenue Bonds, Series 2011  $            8,995,000.00 0.9550% $10,004,938.50
2014 Sewerage Service Revenue and Refunding Bonds, Series 2014  $      172,670,678.80 3.5270% $248,055,452.70
2014 Water Revenue and Refunding Bonds, Series 2014  $      111,224,454.15 4.3095% $202,672,392.36
2014 Drainage System Refunding Bonds, Series 2014  $         15,549,216.40 1.8883% $16,779,929.31
2015 Water Revenue Bonds, Series 2015  $      112,686,115.20 4.0524% $204,479,020.00
2015 Sewerage Service Revenue Bonds, Series 2015  $      112,826,409.80 4.0599% $204,090,277.78
$533,951,874.35 Total Pay $886,082,010.65
Int Paid $352,130,136.30
Avg/YR $17,606,506.82

 

So, for the $534 million raised in debt for the S&WB, the City will be paying out just $17.6 million per year in interest expense for this debt. This is approximately 3% of the General Fund expenditures, or rather the equivalent of which is spent on Children and Families.

 

There is more to this. Veolia has a horrible track record. It manages water services nationwide, where it has a reputation of mismanagement and corruption. In Michigan, the Attorney General is suing them for “botching” their role in Flint’s drinking water crisis. Pittsburgh Mayor Bill Peduto puts the blame for the high levels of lead in drinking water squarely on Veolia. Massachusetts officials have sued Veolia. And these cities are not alone. So why is Mayor Landrieu continually going back and helping to fund this company as they tear up the streets? Does it have anything to do with the concrete that’s needed to be used when repaving the streets? Time will tell.

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