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Where's the Money?
Residents Wonder Why Katrina Recovery Moving So Slow

By Keith Burton - GCN 1/10/07    updated 1/30/07

Where is the money? Many people in the Katrina Disaster Zone are wondering where the money for the recovery is going as they see progress in the recovery moving so slowly. After nearly a year and a half, residents and businesses see the recovery appearing stalled. The answers are not simple.

Around the country, people are under the impression that progress toward rebuilding is well underway in the Katrina Disaster Zone. Regarding Mississippi, people have heard that the casinos are back up and that Mississippi must be okay. That is far from the reality. The casinos are back, but they are only a part of the Coast's economy and not reflective of the whole picture. Rebuilding homes, businesses, roads, libraries, city buildings and destroyed water and sewer systems are still far away from "recovery." Progress toward any actual rebuilding is proving to be nearly overwhelming.

Local governments are busy preparing plans for repairs. Each project, and there are thousands, has to be researched and plans made and then approved. This is a slow process made even more difficult as many local governments do not have the staff to move quickly through the process. Local governments have not been provided with money to pay for additional staffing and experts to move through the paperwork and have to use existing personnel.

One Harrison County supervisor told GCN recently that people are under the impression that the federal and state governments have sent manpower to the Coast cities and counties to assist with the paperwork and recovery requests to FEMA and other agencies. That is not the case.

The money approved by Congress, which totals nearly $110 billion, is money "approved' for spending, not money actually approved for projects. This money is provided to a variety of federal agencies such as the Department of Housing and Urban Development (HUD), the Department of Transportation (DOT) and others to administer. All of these agencies have had to develop rules and procedures to administer the disaster recovery money approved by Congress and the President. This takes time. This is also true at the state level. At every level, state and federal officials are wary of misspending and fraud, and as a result, elaborate and burdensome procedures are being built into how the money will be spent. This also includes the paperwork and checkpoints local officials must deal with to get every project approved and all of these "procedures" must be accomplished before the first dime hits the ground.

Before any money is spent on the actual rebuilding, which includes roads, libraries, water and sewer infrastructure and more, local officials have to go through a lengthy and difficult process to assess what they need, develop specific plans for the projects (also a lengthy process), and then submit the paperwork to the appropriate agency for approval. All of this would be a challenge for a large, well-staffed city or county government, which is not the case here.

There has not been a massive effort to help local communities with the staffing and personnel needs that have the expertise to do all of what is required. This has resulted in local governments having to learn what to do. In the meantime, these same local governments are having to deal with the day-to-day issues, attend meetings and solve the immediate problems that every community has, and all of which made even more difficult since Katrina.

What is apparent a year and a half after Katrina is that the money isn't here yet. While billions of dollars have been spent for the emergency recovery for such things as debris removal, both on land and in the water, emergency housing, and road and bridge repair, these elements are not  "recovery" but emergency needs that had to be met. The money and the work for "rebuilding" has yet to surface.

People around the country have heard that billions of dollars have been set aside for  Katrina recovery and think that situation has been handled and the Coast and other areas in the Katrina Disaster Zone are okay. The reality is that hardly anything has been accomplished toward rebuilding. The scope of the disaster is so large, and repairs to communities so extensive, that it is taking a considerable amount of time for governments to make progress. And all of the governments are working with limited financial resources, staff problems (which existed even before Katrina) and a complicated and burdensome process to get the aid they need.

In some cases, the federal agencies that are administering the money require a percentage of local financial commitment to obtain the money. That is, between 5 and 10 percent of the total project costs have to be supplied by the local government. Money that they don't have. In addition, FEMA aid starts to decline on projects as time moves forward from the start of the disaster. That is, if the local government doesn't meet deadlines, the actual dollars they can recover from FEMA for needed projects begins to decline.

There are efforts by both the federal and state governments to try to help local communities with 100 percent grant money to provide the local match to drawdown the federal aid, but that money also has to be applied for and the information needed is not always made known and the procedures are equally difficult. There is also resistance to provide funds for the 100 percent grants by lawmakers and bureaucrats who don't understand the need, or the challenges faced by cities and counties in the disaster zone.

But if the local officials cannot find a way to pay their matching money, the federal aid might as well be on Mars.

There is also the perception issue. People are so misinformed over what is truly happening in the Katrina Disaster Zone, that they see any additional help as greedy. There are growing comments that enough has been done when the reality is far from the truth. The public, both at the local and national level, have largely been misled over what it will take to rebuild. Governing officials at both the state and federal levels have made hundreds of announcements that money has been approved for projects, but absent from the announcements are when the money will actually result in work. As a result, a false picture of the recovery and rebuilding is being made.

For example, in vast areas of the Coast, Katrina destroyed the water and sewer systems throughout neighborhoods and business areas. When Katrina's storm surge moved across the Coast, these systems, which include electrical pumps, and hundreds of miles of pipe, were devastated. Before any homes and businesses can be rebuilt in those areas, the pipes in the ground have to be replaced. This is work that takes up to several years to rebuild, and with each passing month of no work in the ground, the day when people can actually rebuild moves farther into the future.

Governor Haley Barbour announced Jan. 9,  that a master plan to develop and enhance water and wastewater infrastructure in Mississippi's coastal region has been submitted for approval to the U.S. Department of Housing and Urban Development. Under the plan, which was revised and expanded after additional needs were identified during a public comment period, $630 million in disaster recovery funds would be available to provide reliable water, sewer and storm water infrastructure. While this announcement is a positive move, it is typical of the misleading nature of the "rebuilding" that has yet to start. It is still only a "plan" at this point and "plans" are not "rebuilding."

Faced with the huge recovery needs, local officials worry that they cannot really talk about their problems without the public becoming alarmed. They are also concerned about people leaving the area, and businesses deciding not to reinvest in the areas affected by Katrina. The recent pullout of vacuum maker Oreck in Long Beach alarmed many on the Coast. One highly placed development official admitted that even talking about the Oreck departure sends a negative signal to businesses that the Coast is not a place to invest. While his concern is not accurate, that perception is being noted by some. Even with the losses from Katrina, there are large sections of the Coast that are doing well and have moved beyond Katrina, and businesses and services have plenty of people here to do well.

The Coast has really two Katrina zones. The inland areas, which are largely back to normal, and the shoreline areas along the Gulf and the many bays and bayous that have yet to see any real progress, but reflect what most people see as "the Coast." This duality of life is difficult to deal with for many residents and politicians. Many Coast residents still do not frequent the devastated areas as it is emotionally painful and an instant reminder that life is not "back to normal."

Our state's Congressional representatives are becoming aware of the slow pace of the rebuilding. Sen. Thad Cochran recently told GCN in part of an interview that he will be looking at ways to speed the bureaucratic process, but those efforts will also take more time.

As so many people are still displaced and not back in their homes there is also a growing political realization. Many of the current political leadership will soon face re-election. In many areas most affected by the hurricane, the voting residents are no longer in the same districts they were before the hurricane, if they are on the Coast at all. These changes will eventually result in major redistricting. But in the short term, with nearing elections, many of the most experienced leaders will face the strong likelihood of defeat. Especially as voter's become more angry over the pace of the rebuilding. This has resulted in many of the local officials acting in a "hunkered down" position, often avoiding the public and failing to answer questions fully.

But there is another issue too. Local officials are tired. This also includes city and county employees who have been working, often overtime for months at low pay and with no increase in pay or recognition. Fatigue is also a factor in the slow speed of the rebuilding.

Rebuilding is also tied to two major issues that have stopped the money flow. Those are the sharply higher costs of insurance, regardless of whether the business or resident lives on the immediate coastline; and new build height requirements. Since Katrina, insurance companies have sharply increased wind coverage costs, to the point that insurance is no longer affordable. One business owner, a Biloxi city councilman, told GCN that he had to drop wind coverage for his eight businesses as it was too much for him to afford. He could do this, he said, because he had no mortgages on the property. But his situation is not like many others.

Along the long beachfront in Harrison County, the new build height requirements are sure to block reconstruction of restaurants, small shopping centers and gas stations. Two councilmen told GCN that gas stations are likely never to be allowed on the beach highway, which is heavily traveled by visitors.

The problems for those in the Katrina Disaster Zone have a direct relationship to many other areas around the country that face potential catastrophes. It appears so far, that almost no one is heeding the lessons that Katrina's stalled recovery is teaching.

The insurance issue is especially grievous. Many policy holders received nothing from their insurers following Katrina. While there are indications that the insurance industry is beginning to recognize their mistakes, in light of State Farm's recent announcement to try to settle hundreds of lawsuits stemming from the disaster, it is clear that reforms starting at the federal regulatory level need to be made. Insurance companies act as if they operate with 50 independent subsidiaries in the states throughout the country. In reality they are national companies where their risks and premium costs should be spread out across state lines rather than insulated and protected by state lines.

Everyone knows that the Coast will eventually move past the problems it is facing. That is not to say the problems will be solved, but because they know they will have to get on with their lives. For many, time is not on their side. As for the money, it isn't here.

More Information:

Where's the Money - Sun Herald/Wall Street Journal - Published 1/30/07

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