They need to rebuild the city and condemn land on the West Bank of the River to create a Spillway to Relieve the Mississippi. The Lake Side will be a bit more difficult. Perhaps build a canal and locks between the two bodies of water where you could relieve the lake into the river.
I'm sure you know the logistics of the situation a lot better than I. However, as long as the city's infrastructure is built below sea level, there will always be the potential for big problems.
Rebuilding a mass quantity of low income housing in a concentrated area does not make any kind of sense to me. Yes, poor people need places to live, but NO does not need to build a new Cabrini Green, which is something I fear will happen if/when you rebuild housing in the city again. Building the city for the same size population on less land almost makes that more likely. No?