Finance is fun!

The local news lately is loaded with examples of creative things that can be done with public money. Ordinarily I try to stay current with the economic and financial news by reading YRHT, but recently there are more than a few fun things to be gained simply by drowsing browsing through the T-P.

For example, the ongoing LIFT scandal teaches us that there is a burgeoning secondary market in State tax credits. Film productions operating in Louisiana in order to take advantage of the much-ballyhooed "Hollywood South" tax credits don't simply spend their own money and write it off at tax time, they sell the tax credits to brokers for upfront cash which then (theoretically) goes back into the production. It's a convenient way to raise a bunch of money real quick-like.

Ed Blakely hopes to accomplish a similar feat following the Louisiana Recovery Authority's decision this week to approve the UNOP and thus make available $117 million in community development block grant funds for Blakely's $1.1 billion rebuilding plan.

Wait stop. Before we go any further, let us note that Blakely has given his plan a new name. It is from this point forward to be known as the New Orleans Strategic Recovery and Redevelopment Plan (NOSRRP) at least until such time as circumstances demand the addition of yet another confusing acronym to an already crowded field... probably another month or so. Also this reminds me that someone should be working to update this chart before the next change goes through.

Now... back to Blakely and his money. Federal law stipulates that the block grants must be distributed on a project-by-project basis. But Blakely is planning to circumvent these rules by using the approval as a "letter of credit" against which the city may borrow the full sum immediately. Although probably a violation of the spirit of the law, it's a creative move. However, there is no indication of what kind of interest rate would be involved in such a transaction. And, of course.. even if this happens $117 million is pretty far from the $1.1 billion Blakely wants to spend overall. Those cranes aren't cheap.

Tuesday's T-P report on the LRA approval looks into the other various proposed funding sources. Some of them are more promising than others. But I still don't see how.. under the best of circumstances they add up to $1.1 billion. From what I can glean so far, the possible NOSRRP funding looks like this:

• $117 million: The above discussed CDBG money turned into a borrowed lump sum... minus future undisclosed interest payments.



• $260 million: To be culled from a Capital Improvements bond issue approved by voters in 2004. This is tricky because Blakely is trying to finesse money already dedicated to a list of certain "pre-Katrina" projects to fit his recovery zone plan. In fact, it's not a stretch to say that the bulk of the projects slated for the target zones are cribbed directly from the terms of this bond issue. The legality of this is still being disputed. For its part the city is claiming that the capital improvements projects reside nebulously on a "living list" that will continue to be altered as the city sees fit. A large chunk of NOSRRP relies on the amount of discretion Blakely will be allowed with this money.



• $300 million, $200 million or possibly far far less: The much discussed "blight bonds" scheme wherein the city would borrow money against the value of adjudicated property. Predictably, this is isn't proceeding quite as well as originally planned. Quoting Tuesday's T-P:

  Blakely early on suggested the city easily could leverage $300 million using abandoned properties as collateral. But the windfall has proved elusive, and Mayor Ray Nagin instead has been trying to cobble together $40 million in private grants to use as security to borrow $200 million.

  So right now the "blight bonds" are at best worth $200 million... but only if a sizable chunk of cash can be found up front. Doesn't say much for the potential value of the properties does it?



• $324 million: This is from the pot of money recently made available to the State when the Feds.. after a great deal of pleading... finally agreed to waive the 10 percent local match required for Federal disaster reconstruction funds. Currently LRA is holding this money as part of a "rainy day fund" in case it is needed to help plug the Road Home money hole. Um.. it might be a while before this money again.



• $57.4 million: Various funds held up by disputes between the State and Feds over disbursement rules. Should shake out sooner or later.

So let's see. Taken together, the most optimistic projection (counting the full $300 million for the blight bonds) adds up to about $1.05 billion which admittedly sounds close to the NOSRRP target. But I think it should be obvious how tenuous much of this money actually is.

I'd say it's likely that most of the "living list" money will eventually go where Blakely wants it... although it may take a while.

I'm far less confident about the "rainy day" fund particularly as the State government becomes increasingly hostile toward New Orleans over the next few years.

Even worse is the "blight bonds" scheme which is already showing signs of becoming a waste of time.

So far, only Blakely's plan to borrow against the CDBG approval seems likely to generate any of the magical up front cash on hand that he's looking for. From the looks of the rest of it, well I don't know how soon those cranes will be here.

Related: Almost forgot... The latest Suspect Device strip is fun.