By Kathy Finn

NEW ORLEANS (Reuters) - A last-minute action by the Louisiana Supreme Court saved New Orleans Mayor Mitch Landrieu from being placed under weekend house arrest over a decades-old dispute with local firefighters who are owed $75 million in back wages.

The standoff arose from a decades-old dispute over back wages that went unaddressed by the city through several mayoral administrations. The local firefighters union recently asked a court to hold the city in contempt for not paying the judgment.

Civil District Court Judge Kern Reese last week granted the union's request and said he would order Landrieu to be confined to his home during weekends if the case was not resolved by the end of business on Friday.

Landrieu initially said he would rather accept weekend house arrest than agree to a deal he considers devastating to the cash-strapped city.

The city on Friday morning appealed Reese's rulings to both a state appellate court and the state Supreme Court. The appellate court denied the requests but the Supreme Court issued its stay just minutes before the house arrest deadline.

Firefighters union President Nick Felton said the ruling does not change the debt owed to the firefighters. "This is far from being over," he told Reuters.

After the Supreme Court ruling, Landrieu briefly addressed reporters, saying he had made several proposals to the firefighters, including paying a portion of the wages owed upfront and the rest over 10 to 30 years.

"I never imagined in my wildest dreams ... that I could lose my freedom for doing my job and fighting hard to protect the taxpayers of the city," he said.

"I want to solve this problem, but the firefighters union has rejected every reasonable plan," he said.

Under a 1980s judgment, the city owes firefighters $75 million in back wages, plus $67 million in interest, due to delays in giving firefighters raises required by state law.

New Orleans is under federal consent decrees that mandate costly reforms to its prison and its police department, and it is struggling to afford more police officers and make street repairs.

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"The firefighters insist on cutting to the front of the line ahead of everybody else," said New Orleans Chief Administrative Officer Andy Kopplin.

Felton has called that unacceptable, though he noted that putting the mayor under house arrest will not help.

(Editing by Lisa Lambert and Sandra Maler)