In Katrina's Wake: Where Is the Money?

The Wall Street Journal

In Katrina's Wake: Where Is the Money?

Congress authorized billions to rebuild, but only half has been spent. Worrying about fraud
By CHRISTOPHER COOPER
January 27, 2007; Page A1

In August, 2005, Hurricane Katrina flattened two bridges, one for cars, one for trains, that span the two miles of water separating this city of 8,000 from the town of Pass Christian. Sixteen months later, the automobile bridge remains little more than pilings. The railroad bridge is busy with trains. The difference: The still-wrecked bridge is owned by the U.S. government. The other is owned by railroad giant CSX Corp. of Jacksonville, Fla. Within weeks of Katrina's landfall, CSX dispatched construction crews to fix the freight line; six months later, the bridge reopened. Even a partial reopening of the road bridge, part of U.S. Highway 90, is at least five months away.

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It's been almost 17 months since Hurricane Katrina pounded coastal Mississippi and southeast Louisiana, and about a year since Congress authorized the bulk of its rebuilding aid for the region. More than four months have passed since President Bush visited New Orleans on the anniversary of the storm and extolled the "amazing" reconstruction effort. But a review of the devastated region shows that rebuilding is in a deep stall. Tens of thousands of residents remain displaced as authorities dither over how to disburse housing assistance. Many crucial infrastructure projects have yet to start. Of the tens of billions appropriated by Congress, half remains unspent.


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The state and federal anti-corruption regulations offer a glimpse as to why reconstruction efforts are going so slowly. The White House has kept in force a set of rules known as the Stafford Act. Under its guidance, rebuilding funds must be accompanied by a 10% match from local governments, on the theory that localities won't misspend if their money is also on the line. Similarly, FEMA will cover only 75% of a project's cost until the job is complete. The requirement has delayed projects while cash-strapped towns in two of the U.S.'s poorest states try to rustle up financing.

Meanwhile, both Louisiana and Mississippi have been so keen to burnish their images that they created their own set of lumbering regulatory bureaus and antifraud audit shops. The Stafford Act has been waived in the past -- it didn't apply to Manhattan in September 2001 or South Florida following Hurricane Andrew in 1992 -- but it remains in place along the Gulf. President Bush dropped the Act for a time for certain projects, such as emergency repairs and debris removal, only to reinstate it later. The region's reputation for corruption is one reason why. Influence peddling on the coast has a long history, from 1930s Louisiana Gov. Huey Long to Edwin Edwards, a three-term governor currently serving a 10-year prison sentence. Recently, Mississippi was named the most corrupt state in the nation by Corporate Crime Reporter, a Washington, D.C., publication.

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Meanwhile, a $7.5 billion pot intended for washed-out homeowners sits virtually untouched as applicants are forced to run a gauntlet of requirements, this time imposed by Louisiana. To prevent false claims, applicants must attend two personal meetings with state bureaucrats, provide fingerprint verification and mug shots, as well as supporting documentation, including letters from insurance companies and banks. To date, Road Home, as the program is called, has drawn nearly 100,000 applicants. As of this week, it had disbursed only 258 grants for a total of $14.4 million. Mississippi, which operates a similar but far less restrictive grant program, has distributed $665 million to 11,827 homeowners.

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I can't believe that Edward's house occupies the minds of DUers more than this story.