Katrina Aid Program Is $2.9 Billion Short

By Peter Whoriskey
Washington Post Staff Writer
Saturday, May 12, 2007

NEW ORLEANS, May 11 -- The massive federally funded program for rebuilding Louisiana homes is short nearly $3 billion, administrators told a state legislative panel here today, leaving uncertain for now how the owners of roughly 100,000 flood-wrecked houses here will be compensated.

The report represented the latest crisis for the aid effort initially created to distribute $6.9 billion in federal money to the owners of homes destroyed or damaged by Hurricane Katrina who lacked enough insurance money to rebuild.

More than 20 months after the Katrina catastrophe, tens of thousands of houses remain vacant, in part because of administrative delays in the aid program, the largest single source of direct federal help for homeowners. To date, only 16,000 of 130,000 applicants have received money.

Now, ICF Consulting, the Fairfax firm hired to administer the claims as part of Louisiana's Road Home program, projects that the allotted aid budget of $6.9 billion will fall $2.9 billion short of the claims from homeowners who have been promised checks.

The report set off a flurry of negotiating and political posturing over the origins of the shortfall and source of the additional money for the program.

State officials said they had already turned to Washington leaders for more help, but whether that will be forthcoming is unclear.

Gov. Kathleen Babineaux Blanco (D) met Wednesday with the Bush administration's Gulf Coast recovery coordinator, Donald E. Powell.

"The first conversation Governor Blanco initiated on this was with Donald Powell," Andy Kopplin, director of the Louisiana Recovery Authority, a state agency, said. "To be successful, the recovery effort in Louisiana must have a multiyear -- over a decade -- commitment from the state and federal government."

Powell said it is "premature" to decide whether more federal money should be forthcoming.

"I don't know what the numbers are yet and if there is a gap," he said.

Sen. Mary Landrieu (D-La.), chair of the Senate disaster recovery subcommittee, has scheduled a hearing for May 24 to focus on what led to the shortfall and what might be done next.

She said that from the beginning of the effort, she "suspected that Louisiana received less than its proportional share" of the federal money spent to rebuild Gulf Coast housing. But she said it is too early to say what the federal government might be asked to contribute to fill any gap.

"I'm not going to go there," she said.

The Road Home program was developed after hurricanes Rita and Katrina in negotiations between state officials, the White House and the Gulf Coast recovery coordinator. After months of delays, it was approved in July 2006.

As designed, the program promised as much as $150,000 for homeowners to rebuild their storm-wrecked residences here. But then the bureaucratic delays set in, and they continue today. For months, frustrated applicants, many of them living in Federal Emergency Management Agency trailers, have been waiting for a check so that they can complete their repairs.

"We're still waiting," said Kim Arnold, 49, a real estate agent whose New Orleans East home was flooded for weeks with nearly six feet of water. "It'll come some day -- well, I hope."

The shortfall arose, state officials said, largely because far more homes were damaged than had been estimated, and the magnitude of the uninsured damages has been greater than anticipated, Kopplin said.

In reaching their aid figure, they relied on FEMA estimates that showed 120,000 homes with "major" or "severe" damage. Kopplin added that the state had asked originally for $9 billion for homeowners, but that fell in negotiations with Powell.

"FEMA spent a ton of money inspecting houses," Kopplin said. "They had the most robust data at the time. We negotiated on the basis of 120,000 homes."

By last month, the number of Road Home applicants had exceeded that estimate. There are now 133,000 applicants, with many more expected. More than 700 applications were received in a day last week.

Making matters worse, the amount of uninsured flood damage to each home -- essentially the amount the Road Home is supposed to cover -- is far greater than anticipated.

When the program was launched, administrators assumed the average payout would be about $60,000 per home; so far, however, the average has been $74,000.

Powell said he wants to take a closer look at the figures before deciding what to do. He said the initial estimate of the number of destroyed homes was based not just on FEMA figures but on data from satellites and the Department of Housing and Urban Development.

"I feel good about the process that we used," he said. "We want to understand where the new numbers are coming from."

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