On Tuesday, four New Orleans residents filed suit against Mayor C, Ray Nagin arguing that he repeatedly violated the New Orleans City Charter by authorizing the seizure of private property and the closure of public streets for the proposed Department of Veterans Affairs Medical Center. The petition charges that the Mayor abused his authority in signing agreements with the VA without seeking the approval of City Council and the City Planning Commission and seeks to have those obligations nullified.

In examining the petition itself, it would appear that the City is poised to put New Orleans taxpayers on the hook for damages owed to the VA that the Mayor may have been unlawfully authorized in the first place.

The suit raises a number of serious problems regarding the Mayor's exercise of power, but let's take a closer look at the issue of taxpayer-financed damages.

Within the Memorandum of Understanding (MOU) between the City of New Orleans, the Department of Veterans Affairs, and the State of Louisiana signed in 2007, the City of New Orleans signed up to fulfill certain requirements. The City agreed to physically acquire the 34-acre Lower Mid-City footprint and to render the land to the VA construction-ready within a year's time after the site was selected.

Essentially, that means that by the end of this November, the City is to have had completed the acquisition of site property, the relocation of affected residents and historic properties, the demolition of structures on the site, and the removal of all city infrastructure including streets, sidewalks, and sewers.

The Mayor agreed that the City of New Orleans would pay heavy damages in the event "there is a material breach by the City of its obligations that in the VA's view rises to the level that veteran care will be adversely and significantly affected by the City's lapse(s) under MOU." The document then sets penalties at $1,000 per day for the first week, $2,000 per day for the second week, and so on - with a maximum total penalty of $5,000,000.

The MOU deadline is just months away and the City has not yet acquired a single property in the 34-acre VA footprint. In fact, we cannot confirm they have even sent a single letter of appraisal to owners of homes or businesses in the affected area, let alone begun the drawn out process of actually obtaining title. The City certainly can't begin to demolish houses or dismantle infrastructure until they've completed the expropriation process.

Thus, it would appear that the City is going to be in violation of the MOU and on the hook for significant monetary damages to the Department of Veterans Affairs. According to section 6-308 of the Home Rule Charter:

"Prior to signature, contracts involving financial obligations by the City shall be approved also by the Department of Finance as to the availability of funds in the amounts and for the purposes set forth therein.Such contracts shall not extend beyond the term for which an appropriation to finance such obligations shall have been made."

The suit explains that City Council has not appropriated funds to pay for damages and that the Director of Finance has not made the certification of availability of appropriated funds.

Though it appears that the City is going to have to pay damages to the VA for failure to uphold its end of an MOU that may not have been legally executed in the first place, but it is unclear that the City has any plan to provide for damage payments.

Regardless, the penalties for the City's failure to meet the terms of the unlawful MOU will fall on the shoulders of New Orleans taxpayers.

If this lawsuit succeeds in nullifying the original Memorandum of Understanding, New Orleans residents will be released from the burden of paying up to $5 million for the City's inability to execute its own half-baked plan. Given the tough financial times and the shoestring budget on which many poor cities operate even during times of overall prosperity, those savings could prove crucial for propping up critical city services that might otherwise experience painful cuts.