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No Forgiveness for Loans Borrowed by Cities to Help Recover from Katrina
Smaller Cities Especially Hurt

By Keith Burton - GCN      4/21/07

Over a year ago GulfCoastNews.com was reporting that cities and counties in the Katrina Disaster Zone were struggling to get by borrowing money to help them keep going and pay to restore services. At the time, they did not know for certain whether they would actually have to repay the money and hoped the loans would eventually be forgiven. Now they know.

Just this past week, reports the Sea Coast Echo, the Mississippi Development Bank announced it will not forgive millions of dollars in emergency loans made to local entities in the wake of Hurricane Katrina. While the decision will affect cities and counties throughout the area, the announcement comes as a particular blow to smaller towns such as Pass Christian, Bay St. Louis, Waveland and Pearlington in Hancock County.

The decision means that the cash-strapped governmental entities in Hancock County will now be forced to repay more than $35 million dollars they borrowed after Hurricane Katrina. After Katrina, the Mississippi Development Bank loaned money to communities throughout the coast. Waveland borrowed $4.5 million, Bay St. Louis borrowed about $8 million, Hancock County borrowed $5.4 million, the Port and Harbor Commission borrowed about $7 million, and the Bay-Waveland School District borrowed nearly $11.5 million, officials said. The entities are faced with an October 1 deadline.

Not all of the money will have to be paid by the cities and entities as FEMA will reimburse a considerable portion of the money, but not right away. Many of the cities have had to borrow money to pay their portion of the five to 10 percent local match to draw down federal rebuilding assistance funds made available by Congress. Even so, the amount of money that the cities and counties can obtain depends largely on what they can afford. Many communities have rebuilding expenses that exceed their ability to pay the matching money.

There is legislation in Congress that would ease the financial burden on local communities, but that legislation has yet to clear the full approval process. One bill that would let cities use community block grants to pay the 10 percent match was linked to a bill that called for the withdrawal of U.S. troops from Iraq, a measure that the president says he would veto.

While millions of dollars has been spent to help communities affected by the hurricane to clean up, the rebuilding process and the work to restore needed infrastructure, such as water and sewer services, has moved very slowly. Many of the communities have yet to rebuild the first public building. Waveland, and Pass Christian are still operating out of temporary trailers. Their fire departments, police and city halls remain slabs. Even Gulfport, the state's second largest city, has fire department stations without walls and roofs and many of its city functions are in trailers.

What is clear is that the financial burdens and costs are still not handled by local communities and that it is likely that whatever the city's cannot pay will result in higher taxes at some point on residents, who themselves are struggling to recover. County and city officials have promised not to raise taxes, but they may have to, even while cutting what services they currently provide.

What has been seen so far, is that routine road repairs, improvements to fire and police protection, as well as hiring needed city and county workers, all are on hold as the local governments seek to find ways to rebuild with ever-tightening budgets. What many people outside the Coast do not realize is that the federal assistance does not cover the community's routine operating costs, which have been skyrocketing since the hurricane. This is putting additional pressure on local governments to solve their rebuilding and Katrina recovery problems.

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