I don't think it makes any sense for a municipality to build/rebuild any municipality with public funds in the current location that is New Orleans.
Given the failings already and the probability of ongoing failures of similar if not duplicate nature in the future, to rebuild the infrastructure seems madnes unless it is relocated to some other sensible geographical location.
The issue about individuals building in harm's way is often discussed and has been (Midwestern floods, earthquake faults, tornado-alleys, coastal erosions and storms, similar) and people should be able to build where they can and want but once they've been rebuilt and bailed out, it's not realistic to anyone to try to continue to repeat the same failed location building. There's a point when people have to get the point that they're not building in a habitable area, and shouldn't be able to in any numbers, if any at all.
And, about insurance, many of these repeat risks can't insure at the same locations for these very reasons. Yet some people insist on rebuilding and doing without certain insurance and then the taxpayers have to bail them out...yet again and again.
Flood-prone areas and coastal storm/erosion-prone areas are the most difficult to understand because they're predictable areas for ongoing destruction.
I don't see what harms are posed by just moving a ways inland and uphill, in the case of New Orleans currently. I can't imagine rebuilding there, beneath sea level, myself...if lost so terribly, seems like it's best to move elsewhere where all the time and money and hardwork could be better protected.