Grammer help!?

Question:"I wasn't sure where I was, and I knew that New Orleans is referred to as a quote, "checkerboard city", one minute a safe neighborhood and the next a bad," she says.

I know this is wrong, but how do you put a quotation in a quotation, or can you?

Answers:
1) drop the word QUOTE
2) use single ' instead of " to insert quotation marks within a set of quotation marks:

"I wasn't sure where I was, and I knew that New Orleans is referred to as a 'checkerboard city', one minute a safe neighborhood and the next a bad," she says.

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