(GCN Editor: The U.S. Department of Homeland Security and FEMA are proposing to forgive loans local governments received after the 2005 hurricanes Katrina and Rita. FEMA provided nearly $1.3 billion in community disaster loans in Louisiana and Mississippi after the hurricanes.)

From: Brian Martin - Policy Director for Rep. Gene Taylor   Filed 3/30/09  GCN

The Republican House Leadership had insisted on the language in the 2005 Katrina funding bill that said that the Katrina/Rita CDLs could not be cancelled. When the Democrats got the majority, the first supplemental appropriation in 2007 repealed the 2005 prohibition. The 2007 action restored the statutory forgiveness provision, which says the disaster loans shall be cancelled to the extent that the local government, school district, or other CDL recipient has not had sufficient revenues to meet its operating budget and the additional disaster-related expenses during the three fiscal years after the disaster.

The CDL forgiveness provision is Section 4502 of H.R. 2206, Public Law 110-28, U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007:

Sec. 4502. (a) Community Disaster Loan Act.--

  (1) In general.--Section 2(a) of the Community Disaster Loan Act of 2005 (Public Law 109-88) <<NOTE: 119 Stat. 2061.>>  is amended by striking ``Provided further, That notwithstanding section 417(c)(1) of the Stafford Act, such loans may not be canceled:''.

  (2) Effective date.--The amendment made by paragraph (1) shall be effective on the date of enactment of the Community Disaster Loan Act of 2005 (Public Law 109-88).

The 2007 bill restored the statutory formula for forgiveness (Sec. 417 (c) of the Stafford Act) will apply to the Katrina/Rita CDLs.

(c) Repayment -

(1) Cancellation - Repayment of all or any part of such loan to the extent that revenues of the local government during the three full fiscal year period following the major disaster are insufficient to meet the operating budget of the local government, including additional disaster-related expenses of a municipal operation character shall be cancelled.

However, the Katrina/Rita Community Disaster Loans were not covered by the regulation for the regular CDL program, so FEMA has to publish a new regulation.

Sec. Napolitano’s announcement today is that the new regulation is being published and the 60-day public comment period begins.