New Orleans lays off half of city workers

Mayor acts as revenues fall to nothing


NEW ORLEANS -- Underscoring the difficulties facing this devastated city, Mayor C. Ray Nagin announced with "great sadness" yesterday that New Orleans would have to lay off half its municipal work force because of the financial fallout from Hurricanes Katrina and Rita.

Nagin said cutting about 3,000 city workers would save up to $8 million of the city's $20 million monthly payroll.

No police officers, firefighters or emergency medical technicians would lose their jobs, Nagin said, but "non-essential" support workers in those departments would be cut.

"We searched high and low," the mayor said at a somber afternoon news conference. "We just can't put together the financing to maintain city staff. ... I wish I didn't have to do this."

With few residents having returned to the city and only a handful of businesses functioning, New Orleans has virtually no tax money coming in to pay employees and maintain operations.

The city has received $202 million from the Federal Emergency Management Agency, but federal law allows that money to go only to overtime, not to pay regular salaries and benefits.

Legislators are trying to revise that law, but it will not happen in time to save half the city work force's jobs.

"We would like it to be treated as an emergency matter," Louisiana Gov. Kathleen Babineaux Blanco said in an interview last night.

Nagin said he had secured a verbal promise of a $50 million line of credit from a bank. That money, he said, would enable a slimmed-down city to survive about two more months - in hopes of avoiding bankruptcy.

The mayor also has asked the state to take over payments on New Orleans' pre-existing debts.

"We have no revenue streams, and the prospect of getting any ... is dicey," Nagin said.

City workers said they were stunned by the cuts and disappointed that the federal government had not found a way to keep New Orleans running.

"If you're not able to keep the city operating, businesses and people might not come back at all," said Lt. David Benelli, president of the Police Association of New Orleans. "That's a tremendous Catch-22."

Stephen Perry, president of the New Orleans Metropolitan Convention and Visitors Bureau, said most business leaders understand that the mayor has been backed into a corner financially and believe that he is doing the right thing amid strong political pressure to preserve jobs.

Yesterday's announcement, Perry said, was also a signal to the Bush administration and Congress that the city is not looking for a wasteful handout.

"What he did today was to make a very prudent business decision," Perry said.

"With the tax base decimated for the next six to seven months ... [the city] has lost its basic revenue streams and customer base. You've got to pare down to a basic core and rebuild incrementally."

Nicholas Riccardi and David Zucchino write for the Los Angeles Times.

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