New Orleans got $388 million in federal pandemic aid. Was that money well spent?

Yahoo

03-05-2025

New Orleans Mayor LaToya Cantrell speaks at a Jan. 19. 2021, commemoration service for those who died of COVID-19 in New Orleans. (City of New Orleans livestream)
NEW ORLEANS – When Congress passed the $1.9 trillion American Rescue Plan Act (ARPA) in March 2021, it allocated $350 billion in assistance to state and local governments – providing the largest infusion of cash to local governments since the start of the COVID-19 pandemic. For New Orleans, that money represented a desperately needed lifeline.
The city had been hit particularly hard by COVID-19. It was an early hotspot for the virus. And Black residents, who comprise about 60% of the city's population, were disproportionately impacted, accounting for more than 75% of COVID deaths in the first few months of the pandemic. As New Orleans went into lockdown, the city watched its economy grind to a halt. Festivals were canceled. Hotels emptied out. Restaurants closed their dining rooms. Thousands were laid off.
For the city government, this represented a multi-pronged disaster: With tourism all but halted, the city was receiving dramatically less from sales taxes than usual, straining its finances. At the same time, the needs of its citizenry were at an all-time high. The city took out a certificate of indebtedness, which basically provided a $100 million line of credit, and partially furloughed its entire workforce.
But shortly after Congress passed ARPA, city leadership expressed cautious optimism.
'This is by no means a silver bullet or a panacea, but this funding will literally buy us time,' Mayor LaToya Cantrell said in a March 2021 press release.
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New Orleans would go on to receive nearly $388 million in ARPA funds – among the largest allocations in the country for a city of its size. The money was directly given to local governments and came with few strings attached. The recipient governments had to obligate all of the funding by the end of 2024 and spend it by the end of 2026.
The Cantrell administration would use that money not only to plug substantial holes in the city's revenues and build up its financial reserves, but also to fund a variety of initiatives across the city – from public safety to health to economic mobility.
Cantrell will leave City Hall next year after nearly eight years as mayor. And a big part of her legacy will be about how she handled the pandemic. Not just the lockdown months, the mask mandates and the various phases of reopening, but the huge opportunity that this federal windfall represented for the city, and whether she took it.
'ARPA funds were absolutely transformational for New Orleans,' a spokesperson for the city of New Orleans said in an email, pointing to a slew of programs the city funded, from catch basin cleaning to workforce development to technological upgrades.
But not everyone agrees.
Nellie Catzen is the executive director of the Committee for a Better New Orleans, a nonprofit focused on civic engagement, especially regarding the city's budget. She said that federal pandemic aid could have been transformational for New Orleans in meaningfully addressing inequities across the city, but city leadership decided to go another way.
'For me, the overarching legacy is one of missed opportunities,' Catzen said.
About $187 million, or nearly half of the $388 million the city was allocated, went to 'revenue replacement,' a purposely flexible spending category authorized in ARPA, which allowed local governments to shore up departments and services while tax revenues were down.
Dave Kamper at the Economic Policy Institute, a progressive think tank in Washington, D.C., said that for cities of New Orleans' size, spending approximately half of ARPA money on revenue replacement is fairly typical.
'One of the great successes of ARPA is that they just let the local authorities make the decisions that made the most sense to them,' Kamper told Verite News.
Kamper noted that money used for revenue replacement was probably most impactful in its ability to maintain or even build the public sector workforce.
New Orleans City Councilman Joe Giarrusso, who chairs the council's budget committee, agrees that revenue replacement played a key role in helping city workers.
Under the furloughs, enacted in late 2020, most city employees were being sent home without pay for one day per pay period. Some of them — political appointees often in managerial roles — were made to work through their unpaid furlough days.
'So, we were dealing with two issues: the tangible one of [city employees] making less money and then morale issues on top of that – because [employees] are being asked to work under psychological pressure, making less money and being in the pandemic, and being asked to serve the public while doing all of those things,' Giarrusso said.
The city used $32 million in ARPA money to unfurlough workers and pay them back for their lost wages, according to a 2022 report by the Bureau of Governmental Research. The money also allowed the city to raise the wages for city workers.
But Catzen said that far too much of that money went to the New Orleans Police Department, which, as it turned out, didn't need it.
'I think the city of New Orleans, like many municipalities, leaned too hard on revenue replacement, specifically revenue replacement for the police department,' Catzen said.
In 2021, more ARPA dollars flowed to the New Orleans Police Department than any other city department, BGR found. The money allowed the city to increase the NOPD budget by $17 million, to $181 million from $164 million. The following year, $22 million in ARPA funds initially brought the department's budget above $200 million, though it was later adjusted to about $170 million.
But the department, which had been bleeding employees and was at its lowest officer count in decades, ended up spending far less both years: $155 million in 2021 and $161 million in 2022, according to city budget reports.
Catzen noted that the police department didn't only receive federal money through revenue replacement. It also received tens of millions more for things like officer recruitment and police cars, all of which fell into the 'public safety' ARPA expenditure category.
'We did not then – and I'm not even sure that we do now – have the officers hired to drive these vehicles,' Catzen said.
In fact, public safety was the city's second most-funded category of ARPA expenditures — behind only revenue replacement — at $95.29 million, or about a quarter of the city's ARPA money. This was largely on account of some capital-intensive initiatives, including nearly $30 million toward the modernization of technology in the criminal justice system.
'The Sheriff's Office was literally running their programs on MS-DOS,' Giarrusso said, referencing an operating system released in the early 1980s. 'I think somebody said it was the same programming that gave us Donkey Kong.'
Giarrusso also noted that the city allocated about $26 million in ARPA funds for public safety vehicles, which paid not only for the new police cars, but also new ambulances.
'So many times, people focus on NOPD, but EMS really got a bunch of money for ambulances, like their fleet was in need of upgrading,' Giarrusso said.
The Mayor's Office defended the decision to dedicate so much money to public safety.
'These investments are vital to ensuring that public employees can efficiently and effectively do their jobs,' a city spokesperson said. 'Upgraded equipment, facilities, and vehicles directly impact their ability to respond quickly, operate safely, and serve the community, leading to better outcomes for residents and safer working conditions for frontline workers.'
Kamper, who has studied how different cities and states have spent ARPA money, said that, in his opinion, cities may have chosen to direct their money towards public safety and policing because that is where they are used to directing money.
'To spend it on public safety strikes me as a small-c conservative measure that probably doesn't have as much of a return as getting money in the pockets of working families through housing help or premium pay or through things like setting up community grocery stores or assisting tenants or building housing,' Kamper said.
Getting money into working families' pockets is precisely what a group of local nonprofits asked the city to do in April 2023.
At the time, the city had yet to allocate about $55 million in ARPA money. It was also sitting on about $300 million in surplus funds.
So three nonprofit groups — the Vera Institute of Justice, the Louisiana Fair Housing Action Center and the New Orleans Workers' Center for Racial Justice — came to the council with a plan: They wanted the city to spend $147 million to build thousands of units of affordable housing, expand youth programming and offer free public transit, among other items.
'This was an opportunity cities could use to be inventive and transformative, to do things that they always had on their to-do list and never had the resources to do,' Kamper said. 'I think upgrading vehicles and building new law enforcement facilities isn't particularly inventive.'
Kamper pointed to a handful of examples elsewhere that he thought were particularly inventive uses of ARPA money. He said that Charleston, West Virginia, opened a community-run grocery store to address food insecurity. A county in Massachusetts used the federal money to make bus transit free, doubling ridership and cutting complaints in half. Austin, Texas, spent more than $100 million of its ARPA funding addressing homelessness and housing.
In New Orleans, the City Council did not adopt the groups' $147 million plan.
However, the city did fund a number of equity-minded projects across the city, providing funding for community solar panels and batteries, guaranteed income pilot projects, free transit for youth, and medical debt relief, among other projects. City leaders also dedicated at least $5 million to reducing homelessness in the city, providing funding to close encampments, support low-barrier shelters and rapidly re-house individuals.
And the City Council made substantial investments in affordable housing. The council created a $30 million housing trust fund to help provide gap financing for affordable and workforce housing developments, using $8 million of ARPA money. Voters later approved an amendment to the city charter that made the housing trust fund permanent, this time using money from the general fund, not ARPA.
Despite the many wins, which Catzen happily acknowledges, she still thinks that the city didn't do enough to involve residents in decision-making and address their fundamental needs.
'We had an opportunity to really flip that script and say in response to the major desperation that Black and brown people and working people were facing that we are going to invest in equity and choose to put our money towards lessening that disparity,' Catzen said. 'They had the mandate in the federal policy to do that, and they had the data behind that. And the fact that they really didn't do that meaningfully is a real missed opportunity.'
But Giarrusso added that everyone wanted a piece of the ARPA pie, and the City Council worked hard to include many different projects in its annual budget. He said that the council was hearing from people on all sides who had big ideas for the money, from poverty reduction to housing to infrastructure to even support for religious communities.
'[ARPA] felt like the Stanley Cup in that we had this money and it passed from stakeholder to stakeholder, because everybody had an interest in it,' Giarrusso said.
The impact ARPA had on New Orleans might be a little boring, Giarrusso admits, but it was still a boon for the city: Not only did the city avoid financial catastrophe, but it also managed to build up its financial reserves and bonding capacity.
'My view is that the city is as financially healthy as it's ever been,' Giarrusso said, 'which then for the next administration gives them way more runway to do bigger, more visionary capital project things and even nuts-and-bolts projects that just need to be done.'
But Rebecca Mowbray, president of the Bureau of Governmental Research, cautioned that some of the ARPA spending may have given residents the wrong impression about the state of the city's finances. While she acknowledged that the city did avoid financial catastrophe, she said that it also used ARPA money to fund things it should've already been funding, like catch basin cleaning. And by funding so many new initiatives, the city may have created more financial obligations in the future, Mowbray cautions.
'It's interesting that this program, which was supposed to give money out to local jurisdictions to help them stay liquid and insulate governments and residents from some of the risks of the pandemic, could actually end up creating some financial risk if we're on the hook for new programs even if the city doesn't have the money on a recurring basis,' Mowbray said.
But as New Orleans prepares for a number of challenges, including the potential withdrawal of federal funding by the Trump administration and threats of further attacks by the state government, Catzen said she hopes residents still feel empowered to advocate for how they want the city to spend the money it does have.
'This period of austerity means that what we do with our money that we raise here – and that we can do whatever we want with – will be all the more important,' Catzen said. 'And so it is within the jurisdiction of the city and within their responsibility to spend the money that we have to meet the needs of the people.'
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This article first appeared on Verite News New Orleans and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.