PAR Says Help Fund Local Redevelopment and Road Home

After a hard-fought battle by the Louisiana Recovery Authority (LRA), a waiver of the state’s cost share for rebuilding projects finally was passed by Congress and signed by the President last week. The LRA, the Legislature and the administration now are exploring the state’s options for using the $775 million in Community Development Block Grant (CDBG) funding that originally was set aside as state matching funds for FEMA aid.

One of the options apparently under consideration is to re-direct all or part of that money to make up a portion of the shortfall in the Road Home program. The problem is that local governments have been counting on this funding for rebuilding projects otherwise ineligible for FEMA aid. As the fight was on to get the matching fund requirement waived by federal authorities, the $775 million was tentatively earmarked for recovery-related, local infrastructure projects in the hurricane-affected parishes. No official action was taken to dedicate the funds to those projects, however, so their use remains flexible.

New Orleans officials were expecting around $350 million to help fund the city’s long-term redevelopment plan, which may cost well over $1 billion. That plan would fund rebuilding and renewal projects in 17 target zones around the city, in addition to park improvements, street and traffic signals and other programs designed to spur investment and enhance the quality of life.

This CDBG funding freed by the match waiver should be invested in the infrastructure needs of New Orleans and other local governments impacted by the hurricanes. In addition, the state should dedicate to the Road Home a portion of the $1.3 billion in additional revenues available to spend in the current budget year. The supplemental spending bill(s) still under development in the House will establish the budget for that additional spending.

Passage of the match waiver also makes available a new pot of state funding that can be dedicated to helping to fill the Road Home funding gap. Because the waiver was granted for FEMA individual assistance as well as infrastructure rebuilding aid, the federal government will have to reimburse the state around $400 million that was paid as the state’s cost share for emergency payments made to individuals shortly after the storms.

Unless Louisiana makes a clear good-faith effort to spend a substantial portion of its recovery-related excess revenues on filling the housing program gap, federal officials will have an excuse to continue opposing additional aid. Even if the full $1.3 billion were redirected toward the housing program, there would still remain a $3-billion- to $5-billion-shortfall.

While the Road Home program is being administered by the state, by all practical standards it is a federal compensation program – designed according to federal regulations and intended to be funded with federal dollars. The only justification for Louisiana to invest in the shortfall is to make a good-faith effort to satisfy the political reality that the rest of the nation expects it.

The state’s current-year supplemental budget should reflect a high priority on housing recovery. But, even a fully funded Road Home program alone cannot bring back devastated communities. The additional CDBG funding available because of the match waiver should be allocated to the affected parishes for projects in their long-term redevelopment plans. Without this additional investment, communities like New Orleans will remain broken and so will Louisiana.