Sky lanterns were invented somewhere between 300 BC-200 AD in China and were used for military signals at first. Silk was cultivated well before then. What if this idea was scaled up and used for air balloons? I can see the military uses. They were used for surveillance during the US civil war.
I'd say New Orleans for two reasons. It is in a fairly central (in the east/west direction) and easy to get to location. It is both a port city and it's on the Mississippi River. Also that House of the Rising Sun song fits quite well.
