[StBernard] Louisiana officials ask federal government to forgive disaster loans

[Westley Annis]

Louisiana officials ask federal government to forgive disaster loans

Published: Monday, May 23, 2011, 8:15 AM     Updated: Monday, May 23, 2011,
8:18 AM

 By Jonathan Tilove, The Times-Picayune 

WASHINGTON -- On Jan. 15, 2010, before an audience brimming with state and
local officials at the St. Bernard Recreation Center, Vice President Joe
Biden delivered some very good news: The federal government was going to
forgive hundreds of millions of dollars in special disaster loans granted to
struggling communities in the aftermath of Hurricanes Katrina and Rita.

"It sure looks like to me you're still rebuilding," Biden said. "So I want
to tell you something, it will be ..." At that point he stopped, and after a
pregnant pause, added with a casual, cut-to-the-chase assurance, "You're
gonna get the money."

"I advise you to apply quickly, because when you apply you're going to get
the right answer," the vice president said.

In the nearly year-and-a-half since, about 52 parishes, school systems,
hospital districts and other governmental entities have applied for the
relief the vice president promised. Only 13 have had their loans canceled,
10 have had them partially canceled, but 29 -- more than half the total --
have been told by FEMA that their loans won't be canceled at all.

Though their appeals are not exhausted, there is a growing sense of
frustration among communities facing daunting loan repayments.

"We've been around and around and around with FEMA, including me speaking on
several occasions directly, in person, with (Administrator) Craig Fugate,
and we've hit a dead end," said Sen. David Vitter, R-La., who said the time
had come for the Obama administration to "do what the vice president said
would be done, which is grant forgiveness."

Vitter, joined by 14 local officials, is sending a letter today to Biden,
asking to meet with him and Fugate "to discuss in detail the CDL forgiveness
process and our frustrations. Given your strong, crystal-clear commitment to
the residents of Louisiana during your January 2010 visit, we would again
request that you be personally involved in this meeting to help us cut
through the red tape and find a solution that treats our communities
fairly."

Joining Vitter on the letter are Lafourche Parish President Charlotte
Randolph; Plaquemines President Billy Nungesser; St. Tammany Parish
President Kevin Davis, Sheriff Jack Strain and Superintendent Trey Folse;
Jefferson Parish President John Young, Sheriff Newell Normand and
Superintendent Doris Voitier; Cameron Parish Police Jury President Charles
Precht and Sheriff Theos Duhon; Grand Isle Mayor David Camardelle; Jean
Lafitte Mayor Tim Kerner; Orleans Levee District President Timothy P. Doody;
and Harahan Mayor Vinny Mosca.

Less than half of the $822 million in Community Disaster Loans granted in
Louisiana after Katrina and Rita have been fully forgiven. The city of New
Orleans alone had $240 million in loans canceled, as did other New Orleans
boards, authorities and other entities, including the Criminal Sheriff's
Office, the Port of New Orleans and the New Orleans Aviation Board. But
communities outside New Orleans have not fared as well.

"It's just hanging over our heads," said Nungesser, whose parish has
entirely struck out in getting any forgiveness. The parish government owes
$8.9 million, and the schools and sheriff together owe about the same
amount.

Vitter's request follows a letter that Sen. Mary Landrieu, D-La., and Rep.
Cedric Richmond, D-New Orleans, wrote Fugate on Friday pleading for
reconsideration of its denial of forgiveness for $18 million in loans for
the Orleans Parish School Board, and $64 million for the Jefferson Parish
Government and the Jefferson Parish Sheriff's Office. Landrieu and Richmond
opened their letter with a reference to Biden's speech, "wherein he assured
the area that it would have a clear pathway to its post-Katrina Community
Disaster Loan forgiveness."

Biden's sweeping promise appears to have been the consequence of an
unscripted moment.

The statement issued that day by the White House does not describe blanket
forgiveness, but the unveiling of "new procedures to allow local governments
in Louisiana and Mississippi that received Special Community Disaster Loans
following Hurricanes Katrina and Rita to apply for loan forgiveness. To
qualify, these municipalities must have experienced operating deficits
during the three full fiscal years following the storms."

On the day Biden made his announcement, Vitter cautioned that the
requirement that loan recipients show three years of operating deficits
might undo the vice president's promise.

Landrieu's response that day also was measured.

"At least we now have the possibility some of these loans can be forgiven,"
she said.

Nonetheless, Paul Rainwater, who in January 2010 had just left the helm of
the Louisiana Recovery Authority to become Gov. Bobby Jindal's deputy chief
of staff, said he took Biden's promise as a meaningful signal of how the
cancellation applications would be treated.

But FEMA spokeswoman Rachel Racusen said the agency is restricted in what it
can do.

"Under current law, FEMA is authorized to forgive loans for those applicants
who had an operating deficit during the three full fiscal years after the
disaster, " Racusen said. "While these eligibility requirements are set by
Congress, FEMA has used what little flexibility the law gave us to develop
regulations that made it easier for local governments to qualify for
forgiveness. We have worked extensively with the applicants, as well as with
our partners in Congress, and we will continue to do so as this process
moves forward."

But Vitter and Landrieu do not think that FEMA has been either sufficiently
flexible or fair in its application of the three-year analysis.

"We don't agree that the law limited FEMA's ability to develop fair
regulations, that the regulations developed were themselves as flexible as
they should have been, or that the agency interpreted and applied those
regulations as flexibly as they could have," a Landrieu aide said.

For example, in a five-page letter last November to Attorney General Eric
Holder, Landrieu wrote that "a deficit calculation that includes all types
of revenue, but which cherry-picks the types of expenses that may be
included, is inherently unsound."

Vitter said that the administration should override the three-year test,
which, he said, "penalizes the most responsible governments who immediately
undertook massive budget cuts."

Meanwhile, asked about the CDL controversy and his own role, Biden
spokeswoman Elizabeth Alexander said, "the vice president's office is
looking into this matter."

Jonathan Tilove can be reached at jtilove at timespicayune.com or 202.857.5125.