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LRA poised to distribute rebuilding cash

Section: Business

David Hammer, Frank Donze and Michelle Krupa

With the official release Monday of $3 billion from the federal government to plug the Road Home gap, Louisiana's hurricane recovery leaders can finally dole out a half billion to local governments they have been holding on to just in case.

The Louisiana Recovery Authority is expected to allocate the recovery cash to 23 affected parishes at its monthly meeting in Baton Rouge today, in what will amount to a huge shot in the arm for the state's most ravaged parishes.

New Orleans is expected to collect the lion's share of the money, at $294 million. If approved, it would be the largest single allocation of hurricane relief sent to a local government to date.

Ed Blakely, the city's recovery director, as well as a delegation that will include several City Council members, will appear before the board to outline how the city plans to spend the additional recovery money.

The LRA is expected to distribute the $500 million the same way it doled out $200 million in infrastructure funding earlier this year -- using a formula based on relative damage. Orleans Parish is the biggest beneficiary under that formula, taking 59 percent of the pot. In the first allocation, the city walked away with $117 million in infrastructure aid.

St. Bernard Parish is expected to be another winner, collecting about $65 million.

But the LRA will not be able to distribute the money immediately. Board approval of the allocations will trigger state legislative review and a public comment period. The final plan for distributing the money will likely come back before the LRA at its January meeting.

Blakely said April is the earliest the city can expect to draw down on the cash. With only about half of the money needed for his $1.1 billion target zone redevelopment plan in hand, he said the LRA cash could be the linchpin to the city's rebound.

While most of the city's initial $117 million allocation is slated for repairing roads, schools and community facilities, Blakely said his office plans to aim the additional dollars at a different goal: eradicating blight and providing incentives for property owners to reinvest in homes, rental properties and businesses, possibly through tax credits or other sorts of gap financing.

"With this money, we'll be looking to make neighborhoods investment-ready," said Ezra Rapport, Blakely's top aide.

The $500 million is part of a larger pool of $750 million that was originally budgeted to cover a local match requirement for FEMA funds.

For nearly two years, the White House told Louisiana it would have to pay 10 percent of FEMA's public assistance bill, despite waivers granted in some previous disasters. But the new Democratic Congress managed to pass a waiver as part of a recent war spending package, freeing Louisiana officials to finance other recovery needs with money that had been set aside for the match.

Gov. Kathleen Blanco immediately redirected $277.5 million of the total to filling the Road Home's multibillion-dollar deficit. In all, the state put up $1 billion to cover the gap, a move that helped persuade Congress to send another $3 billion to eliminate the whole Road Home shortfall.

Blakely said Monday that in addition to the $500 million, he believes two separate pools of unused federal Community Development Block Grant dollars totaling an estimated $285 million may also be available from the LRA.

But Kopplin said that money may have already been spent. The only unallocated money not counted in the half billion the LRA will consider today is about $25 million in a reserve account, he said.

Any new money allocated to New Orleans will be directed to three priorities, Blakely said: cleaning up blight; repairing damaged infrastructure to accommodate major development projects, such as the proposed downtown medical complex; and addressing basic neighborhood needs from debris piles to crumbling streets.

Last month, Blakely and his staff told an angry City Council that the city has done a poor job of policing blight since the storm.

According to Blakely, many abandoned structures belong to owners who are waiting for evidence of progress in their neighborhoods before reinvesting in them. While they wait, he said, several billion dollars in insurance reimbursements and Road Home awards sit idle in bank accounts.

What the city needs, Blakely said, is to make physical improvements that will encourage private investors to put their own cash in the game.

"Those people will come into the neighborhoods if they're in good shape," Blakely said. "They want to see some appreciation in the market before they make an investment. That's the trickle-up process. As they move in, others will move behind them."

Blakely said the extra grant money also will allow the city to bolster existing financial aid programs designed to cover the gap in restoring housing -- especially rental housing. City officials have said the recovery has been slowed in large part by soaring construction costs that have forced landlords to raise rents that are squeezing out middle-income renters and hampering commercial redevelopment.

"We would basically provide some financing for the banks, enabling them to make loans they couldn't otherwise make simply because the numbers don't add up," Blakely said.

Once the loans are approved, he said, everyone benefits because the banks "get a customer, and we've got a stronger community because they're making their loans to build grocery stores and improve the housing market."

Another part of the city's recovery strategy is a plan to crack down on absentee property owners.

For more than a year, City Council members have criticized the Nagin administration for moving too slowly to rid the city of rotting, vacant homes and commercial structures that blight the landscape and represent a psychological impediment to private rebuilding efforts.

Rapport, Blakely's aide, has promised major changes in 2008, telling the council that Blakely's office plans to add inspectors and to place a top priority on enforcing property laws and propose tough, new rules. He said the recovery unit has completed a top-to-bottom management audit of the code enforcement division and will offer a package of reforms for the council to consider next week.

Blakely emphasized that his office will not launch these efforts citywide, in part because a full-fledged push in every part of town would cost far more than the LRA has available. Also, he said officials want to focus their initiatives on the precise needs of specific areas, including several of 17 target recovery zones.

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