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Times Picayune: Nine years after Katrina, federal government has forgiven $391 million worth of federal disaster loans

August 27, 2014

Nine years after Hurricane Katrina, the government has forgiven $391 million in disaster loans for Louisiana, according to the Federal Emergency Management Agency. That's 95.5 percent of the Katrina-related disaster loans.

In 2005, the House authorized disaster loans for communities hit hard by Hurricane Katrina, and the failure of federally built levees, but, in a break from past precedent, barred loan forgiveness. Two separate bills, sponsored by Sen. Mary Landrieu, D-La., and backed by the entire Louisiana and Mississippi delegations, in 2007 and 2013, allowed the loans go be written off.

"Communities across Southeast Louisiana suffered once from Katrina and levees collapsing, but then they suffered again when the federal government saddled them with unfair debt," Landrieu said. "But with years of persistence and support from local leaders, we worked together to create a commonsense formula that has rightly cancelled more than $391 million in community disaster loans from Hurricane Katrina."

Among the loans cancelled were $179 million for Orleans Parish, including $61.956 million for the Sewerage & Water Board; $59.5 million for the parish School Board; $47.2 million for the Regional Transit Authority and $9.6 million for the Orleans Levee District.

St. Tammany Parish had $117.4 million worth of loans forgiven, including $67.8 million for the parish school board; $23.5 million for parish Hospital District #2; $12.2 million for the parish government; $9.9 million for the parish sheriff's department and $2 million for the city of Slidell.

Jefferson Parish had $63.8 million in loans forgiven, including $54.8 million for the parish government, $6 million for the parish government and $2 million for the city of Gretna.

In 2005, when Katrina struck, disaster loans were limited to $5 million per jurisdiction. But the damage was so overwhelming, that Louisiana lawmakers argued that the cap needed to be lifted.

Republicans, who controlled Congress and the White House, agreed to lift the cap, but only after inserting a provision barring loan forgiveness.

Landrieu and other Louisiana lawmakers argued that never before had Congress barred loan forgiveness. To require full repayment, local government officials said, would delay recovery efforts, and divert funding from necessary government services.

But in October, 2005, Sen. David Vitter, R-La, said he spoke directly with top Republicans in the House of Representatives who insisted the program remain a loan problem, subject to change, via subsequent legislation, if communities could not repay repay them.

"I followed up with the chairman of the House Appropriations Committee," Vitter said. "It was crystal clear to me from my conversation with him that significant elements of the House of Representatives needed to see that at least at the front end, this was a loan program. We can talk later about what we will do at the back end, how things proceed, what the financial picture looks like in the future, but at least in the front end, it is very clear that they want to frame it as a loan program."

Some House Republicans said that with large federal deficits, it would be wrong for Congress to allow for forgiveness.

Landrieu and Sen. Carl Levin, D-Mich., among others, argued that this ban on loan forgiveness, without subsequent congressional action, was discriminatory.

"We have never imposed this restriction that is in this bill on any community in this country," Levin said. "We have lent money to Rexburg, Idaho; we have lent money to Johnstown, Pa., we have lent money to Clifton, Az., we have lent money to Albion Borough, Pa; we have lent money to Vassar, Mich., in my home state.  But now we are telling the victims of the worst disaster we have had in this country that the Stafford Act provisions, which, under certain circumstances, could permit the forgiveness of a loan, will not be available to them."

Metro New Orleans government leaders said that without the loan forgiveness, services would have declined and/or taxes increased.

"This loan cancellation is a huge weight off our shoulders and will ensure that this $7.2 million stays right where it belongs -- here in Jefferson Parish, where it can be used to better protect the citizens of the Parish," said Jefferson Parish Sheriff Newell Normand, said, after his department's loan was forgiven. "I thank Sen. Mary Landrieu for her leadership on this issue and the entire Louisiana congressional delegation for their clear commitment to getting us relief from this debt."

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