New Orleans eyes 2026 ballot measure as bonding capacity tightens

New Orleans eyes 2026 ballot measure as bonding capacity tightensThe Sewerage and Water Board of New Orleans (SWBNO) approved its fiscal year 2026 budget, but leadership warned that expiring millages and stagnant rates necessitate a consolidated revenue vote to maintain infrastructure investment.

Board approved a FY2026 budget totaling $364 million, including $280 million for operations and $52.6 million for debt service.

A 6-mill drainage tax expires in 2027, requiring a renewal vote in 2026 to avoid jeopardizing bonding capacity.

Projections show the water system risks breaching bond covenants by 2029 without new rate revenues.

A protest over the Lead Service Line program management contract has delayed the start of large-scale construction to Q3 2026.

Smart meter installation is 95% complete with over 133,000 units installed.

The Sewerage and Water Board of New Orleans (SWBNO) Board of Directors approved a US$364 million budget for fiscal year 2026 on 17 December 2025, comprising operating expenses, debt service, and Pay-Go capital. However, the meeting was dominated by warnings regarding the utility’s tightening bonding capacity and the urgent need for rate or tax actions before 2027. CFO E. Grey Lewis presented the budget, which allocates US$280 million for operations and maintenance (O&M), US$52.6 million for debt service, and US$32 million for Pay-Go capital. While the utility expects to meet its bond covenants for the upcoming fiscal year, Lewis highlighted a looming "call to action" regarding revenue. The utility relies on property tax millages for drainage funding, with a 6-mill tax set to expire in 2027 and a 9-mill tax expiring in 2031. To avoid a funding gap, the board must pursue renewal in 2026. "It means that action has to happen in 26 relative to the millage approval," outgoing Board President and Mayor LaToya Cantrell stated. She warned that failure to act could jeopardize bonding capacity, citing historical precedent from 1991 where failed approvals contributed to current infrastructure deficits. The financial outlook for water and sewer systems also faces pressure. Lewis noted that the utility has not raised rates since 2020. Projections indicate that without revenue adjustments, the water system risks breaching its additional bonds test covenant by 2029. "We need to make the ask of the community to invest in better services," Lewis said, suggesting that a "stormwater fee, taxes combination" could generate an additional US$50 million annually. Discussions pointed toward a consolidated ballot measure. "It may even be where we structure it... to where it is their vote on drainage across the board," Cantrell suggested, proposing a package including the stormwater fee and both millage renewals. **Capital Programs and Delays** The board also reviewed the status of major capital initiatives. The utility has completed its smart meter rollout eight months ahead of schedule, with over 133,000 units installed, covering 95% of the population. However, the Lead Service Line (LSL) replacement program faces delays. The Executive Director reported that a protest regarding the procurement of a project management firm has forced a re-advertisement of the contract. While the utility has secured US$86 million in State Revolving Fund (SRF) loans and anticipates closing on another US$66 million in Q1 2026, the "start of the large scale construction is delayed approximately by one year," pushing the award date to the beginning of Q3 2026. Compliance with the EPA’s Lead and Copper Rule Improvements requires full removal by 2037, an effort estimated to cost US$1 billion. **Creative Financing** The Executive Director, referred to as "Randy" by the CFO, emphasized the need for "creative financing" and aggressive federal lobbying. He noted recent meetings with financial advisors to discuss non-traditional funding mechanisms, referencing "100 year century green infrastructure bonds" utilized in Philadelphia as a potential model. While Philadelphia is a benchmark for large-scale investment, its US$2.4 billion "Green City, Clean Waters" program is primarily funded through dedicated stormwater charges and state loans rather than century bonds, mirroring the revenue mix of fees and taxes SWBNO is currently exploring. The approved FY2026 budget represents a 3.7% increase over the 2025 budget, driven largely by inflationary costs in chemicals and materials, which are up 19%. Personnel costs are projected to rise 4.9%.