[Senate Hearing 110-33]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 110-33

      HURRICANES KATRINA AND RITA: OUTSTANDING NEED, SLOW PROGRESS

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                FIELD HEARING IN NEW ORLEANS, LOUISIANA

                               __________

                            JANUARY 29, 2007

        Available via http://www.access.gpo.gov/congress/senate

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs












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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
             Donny Ray Williams, Professional Staff Member
              Brandon L. Milhorn, Minority Staff Director
                 Melvin D. Albritton, Minority Counsel
                  Trina Driessnack Tyrer, Chief Clerk


















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Landrieu.............................................     5
    Senator Obama................................................    10

                               WITNESSES
                        Monday, January 29, 2007

Donald E. Powell, Federal Coordinator for Gulf Coast Rebuilding, 
  U.S. Department of Homeland Security...........................    14
Hon. Steven C. Preston, Administrator, U.S. Small Business 
  Administration.................................................    16
Hon. Pamela H. Patenaude, Assistant Secretary for Community 
  Planning and Development, U.S. Department of Housing and Urban 
  Development....................................................    19
Gil H. Jamieson, Deputy Director for Gulf Coast Recovery, Federal 
  Emergency Management Agency, U.S. Department of Homeland 
  Security.......................................................    21
Gregory D. Kutz, Managing Director, Forensic Audits and Special 
  Investigations Unit, U.S. Government Accountability Office.....    24
Hon. C. Ray Nagin, Mayor, City of New Orleans....................    42
Walter J. Leger, Jr., Chairman of the Housing and Redevelopment 
  Task Force, Louisiana Recovery Authority.......................    47
Suzanne T. Mestayer, Chairman of the Board, Greater New Orleans, 
  Inc............................................................    51

                     Alphabetical List of Witnesses

Jamieson, Gil H.:
    Testimony....................................................    21
    Prepared statement...........................................   117
Kutz, Gregory D.:
    Testimony....................................................    24
    Prepared statement with attachments..........................   133
Leger, Walter J., Jr.:
    Testimony....................................................    47
    Prepared statement with attachments..........................   163
Mestayer, Suzanne T.:
    Testimony....................................................    51
    Prepared statement...........................................   189
Nagin, Hon. C. Ray:
    Testimony....................................................    42
    Prepared statement...........................................   152
Patenaude, Hon. Pamela H.:
    Testimony....................................................    19
    Prepared statement...........................................   114
Powell, Donald E.:
    Testimony....................................................    14
    Prepared statement with an attachment........................    85
Preston, Hon. Steven C.:
    Testimony....................................................    16
    Prepared statement with an attachment........................   104

                                APPENDIX

Letter from Melvin I. ``Kip'' Holden, Mayor-President, City of 
  Baton Rouge, dated January 26, 2007, to Senator Mary Landrieu..    63
Letter from Senator Mary Landrieu to R. David Paulison, Director, 
  FEMA, dated November 21, 2006..................................    64
Charmaine Caccioppi, President, Louisiana Association of United 
  Ways and the United Way for the Greater New Orleans Area.......    66
























 
      HURRICANES KATRINA AND RITA: OUTSTANDING NEED, SLOW PROGRESS

                              ----------                              


                        MONDAY, JANUARY 29, 2007

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                             New Orleans, Louisiana
    The Committee met, pursuant to notice, at 9:10 a.m., in the 
Louisiana Supreme Court Building, New Orleans, Louisiana, Hon. 
Joseph I. Lieberman, Chairman of the Committee, presiding.
    Present: Senators Lieberman, Landrieu, and Obama.

            OPENING STATEMENT OF CHAIRMAN LIEBERMAN

    Chairman Lieberman. Good morning. This hearing will come to 
order.
    First I want to thank the folks at the Supreme Court for 
giving the three of us the opportunity to realize a dream we 
will never realize to feel like justices----
    Unidentified Audience Speaker. Mr. Chairman, why don't you 
tell the victims of Hurricane Katrina why you will not probe 
the White House?
    Chairman Lieberman. I will be glad to----
    Unidentified Audience Speaker. In my hand, I have 100 
signatures of victims of Hurricane Katrina. Why don't you tell 
them why----
    Chairman Lieberman. We will----
    Unidentified Audience Speaker [continuing]. You will not 
probe the White House?
    Chairman Lieberman. Thank you.
    Unidentified Audience Speaker. Stand up for justice. We 
want somebody to stand up for justice. Probe the White House.
    Chairman Lieberman. We will be happy to accept those 
petitions and glad to deal with that question as this hearing 
goes on and, of course, in any questions and answers we would 
have with the media.
    I thank you all very much for being here. In some sense I 
want to respond to that expression of emotion because it is 
hard to come back to New Orleans more than a year and a half 
after Katrina without feeling that emotion.
    I came here about 2 weeks after landfall, and personally, 
it was hard not to be shaken by what I saw. In my time as a 
Senator, I have probably been to four war battlefields after 
the wars were completed, and I said after my visit to New 
Orleans on that day and to the Gulf Coast of Mississippi that I 
had never seen such devastation as I saw that day.
    I had never seen it so broad, so deep, so overwhelming in 
total. And it motivated a response from the Federal Government, 
State and local government. Our Committee did an investigation 
of the failures of government to act. But we are here today to 
say that we understand that the work is not done, to put it 
mildly.
    Last week this Committee organized for this 110th session 
of Congress. This is the first hearing we have held since that 
organization, and it is a way for us to say that we know that 
our work is not done.
    I know that a lot of people in New Orleans, and the Gulf 
Coast particularly, were disappointed that President Bush did 
not speak of or mention Hurricane Katrina and the unfinished 
work in the State of the Union speech. I was surprised and 
disappointed by that as well.
    But this Committee is here this morning, and we brought 
with us some of the leaders in the Administration who continue 
to work every day on the unfinished business of getting New 
Orleans and the Gulf Coast as close back to normal as possible. 
We are going to ask them to report. We are going to ask them, 
along with State and local officials, to tell us where we are, 
what more we can do, and we are going to ask them some 
questions about what we see has not been done yet.
    One of the leaders, the great leaders in the battle, I 
would say, for New Orleans has been my friend and colleague 
Senator Mary Landrieu. Her unyielding concern for the people of 
this State, city, and region, coupled with her unrelenting work 
to keep our government in Washington focused on the challenges 
and obstacles the people of this city, State, and region face, 
is a good part of what brings this Committee to this hearing in 
New Orleans this morning.
    As the new Chairman of the Homeland Security and 
Governmental Affairs Committee, I used an authority I have to 
create a new Subcommittee. It is a Subcommittee whose 
jurisdiction is on disaster recovery. This Subcommittee will 
have authority to examine the widest variety of issues and 
concerns related to how our government has helped and can 
better help communities hit by disasters, particularly 
disasters that are of such great magnitude as Hurricanes 
Katrina and Rita were that they really are catastrophes, and 
how we can better protect the people of our country from such 
catastrophes in the future.
    I could not think of a better Senator, a better Member of 
this Committee, to ask to Chair that Subcommittee than Senator 
Mary Landrieu, and she will be in that position, in a great 
position, to lead this Subcommittee, the Senate, Congress, and 
the Federal Government to face the reality of the challenges 
that people face every day in this city, State, and region.
    I think you know that the record shows that Congress has 
not been miserly. Congress has provided over $110 billion to 
the Gulf Coast since Hurricanes Katrina and Rita. That is an 
unprecedented amount of Federal money, but these were 
unprecedented disasters. Much of this money was intended to 
provide housing for the tens of thousands of displaced 
residents. Yet, as so many of you in this room know, for all of 
the funding Congress approved, the reality is that the money is 
not arriving fast enough or is sitting idly by for some 
bureaucratic reason while the people of New Orleans continue to 
suffer and lack adequate shelter.
    This morning we are going to try to shed some light on that 
problem to find out the reasons why this has happened and how 
we together can break the bureaucratic logjam that blocks too 
much of the humanitarian relief that all of us want to give to 
the people who are suffering.
    One of the most unsettling, shocking, unacceptable 
examples, of course, is in the distribution of the $7.5 billion 
the Federal Government has sent in Community Development Block 
Grants for the State's Road Home program, which was designed to 
help individual homeowners rebuild. The numbers are stunning. 
Over 101,000 homeowners have applied for assistance under this 
program, but less than 300 homeowners have actually received 
funding as of last week when I last checked.
    How could this be? That is the question I am going to ask 
over and over again this morning until we get an answer.
    Rental assistance is another concern we have. In Louisiana, 
almost 31,700 storm victims are still receiving rental 
assistance, and almost 65,000 victims are still in FEMA 
trailers and mobile homes. Until their houses are rebuilt or 
other provisions are made for shelter, a basic right in this 
country, we need to make sure that all those displaced people, 
homeowners and renters, have a roof over their heads. The needs 
here are as basic as that, and the rest of the country has to 
understand that.
    On Friday, January 19, I was encouraged that FEMA extended 
its Housing Aid Programs for victims of Hurricanes Katrina and 
Rita by at least 6 months. That is good news. But since it did 
not raise the $26,000 cap on housing assistance, many families 
may still soon and suddenly find themselves homeless. That is 
why this morning I want to hear from Mr. Jamieson, who is 
FEMA's Deputy Director for Gulf Coast Recovery, and Ms. 
Patenaude, who is HUD's Assistant Secretary for Community 
Planning and Development, how the Federal Government will make 
sure that we can protect these people from being homeless 
again.
    It is, as I said at the outset, a little more than a year 
and a half since Hurricane Katrina, and the unfinished work 
before us is still immense. I spent some time with Senator 
Landrieu yesterday, late afternoon and evening, driving around. 
Downtown looks pretty good. The Central Business District looks 
pretty good. And yet just go a little bit back and you see 
neighborhoods that are devastated still, and talk to people and 
you find that some of the basic services that people expect in 
a civilized society--shelter, public safety, health care--are 
still not there for too many people in this city.
    The Federal Government, I would say, finally, must continue 
to help. That is why we are here, and we will continue to come 
back to show what a great and good Nation does when its fellow 
citizens are struck by disaster and also, more broadly, to 
recover the trust and confidence of all Americans who saw their 
government fail while New Orleans and the Gulf Coast literally 
drowned.
    [The prepared statement of Senator Lieberman follows:]

           PREPARED STATEMENT OF SENATOR JOSEPH I. LIEBERMAN
    In January 1815, we fought and won the Battle of New Orleans and 
saved a crucial American city from occupation by the British.
    New Orleans is an important part of the commerce and culture, the 
past, present and future of America. That is why we have come here 
today. A year and a half after Hurricanes Katrina and Rita, it's time 
to redouble our efforts to win the new Battle for New Orleans and the 
Gulf Coast. I hope today's testimony will help us understand what is 
still needed to get this great American city and region--and most 
importantly its people--back to where they should be.
    One of the leaders in this Battle for New Orleans has been my 
friend and colleague, Senator Mary Landrieu. Her unyielding concern for 
the people of her State and region, coupled with for her unrelenting 
work to keep our government in Washington focused on the challenges and 
obstacles this area faces, moved me to call this hearing. As the new 
Chairman of this Committee, I have created a new Subcommittee on 
Disaster Recovery and asked Mary Landrieu to chair it. This new 
Subcommittee will have authority to examine a variety of issues and 
concerns related to how our government helps communities recover from 
disasters, especially ones of great magnitude--whether it is Hurricanes 
Katrina and Rita or manmade or terrorist disasters in the future.
    We are calling this hearing, ``Hurricanes Katrina and Rita: 
Outstanding Need, Slow Progress.'' Nearly a year ago this Committee 
visited New Orleans. We were stunned by the lack of progress from what 
we had seen on our visit two weeks or so after Katrina. And while some 
progress has been made since that hearing, we clearly still have a long 
way to go before your city returns to some sense of normalcy, and your 
country can feel it has fulfilled its responsibility to you.
    Congress has provided over $100 billion to the Gulf Coast region 
since Katrina and Rita. Much of this money was intended to provide 
housing for the tens of thousands of displaced residents. This was an 
unprecedented amount but these were unprecedented disasters.
    Yet for all of the funding Congress approved, the reality seems to 
be that the money is not arriving fast enough or is sitting idle while 
the people of New Orleans and the Gulf States continue to suffer and 
struggle. I hope that today's hearing will shed some light on the 
reasons why and on the way to break this bureaucratic logjam that 
blocks the humanitarian relief we all want.
    One major--and I should say startling--example of the funds having 
been made available, but not reaching the people who desperately need 
them, is the painfully slow distribution of Louisiana's $7.5 billion in 
Community Development Block Grants (CDBG) through the State of 
Louisiana's ``Road Home Program,'' which was designed to help 
individual homeowners rebuild.
    Nearly 99,000 homeowners have applied for assistance under the 
program but only 177 homeowners have received funding as of Martin 
Luther King Jr. Day. How could this be so?
    We must find a way to streamline this process to eliminate this 
extraordinary disconnect and I look forward to hearing from State 
officials on how we can improve this.
    In Louisiana, 31,688 storm victims are still receiving rental 
assistance, and 64,697 victims are still in FEMA trailers and mobile 
homes. Until we can rebuild their homes, we need to make sure all those 
displaced--homeowners and renters--have a roof over their heads.
    On Friday, January 19, FEMA extended its housing aid program for 
victims of Hurricanes Katrina and Rita by at least six months. That's 
good news. But since it did not raise the $26,200 cap on housing 
assistance, many families may still suddenly find themselves homeless.
    I want to hear from Gil Jamieson, who is FEMA's Deputy Director for 
Gulf Coast Recovery, and Pamela Patenaude, HUD's Assistant Secretary 
for Community Planning and Development, how we will make sure these 
people don't end up homeless again.
    We are on our way to the second anniversary of the storms and the 
challenges before us are still immense. While I have seen inspiring 
resolve on the faces of the people who are working to rebuild in New 
Orleans and across the Gulf Coast, I know they can't do it alone. The 
Federal Government must continue to help in timely and meaningful ways 
and, in doing so, do what a great and good Nation does when its 
citizens are struck by disaster, but it must also recover the trust and 
confidence of all Americans who saw their government compound the 
problems while New Orleans and the Gulf Coast literally drowned.

    Chairman Lieberman. I am honored to have two of my 
colleagues fellow Members of this Committee with me. Senator 
Landrieu is a dear friend. I want to say, as the Chairman of 
this Committee and as a colleague, when it comes to the needs 
of New Orleans, Mary Landrieu can be a real pest, and----
    Senator Landrieu. It is good to be a pest.
    Chairman Lieberman [continuing]. So I am proud to call on 
now the Chairman of our new Subcommittee on Disaster Recovery, 
your own Senator Landrieu.

             OPENING STATEMENT OF SENATOR LANDRIEU

    Senator Landrieu. I thank you, Mr. Chairman.
    And sometimes it is good to be a pest. My former colleague, 
John Breaux, called me a pit bull with Louisiana charm. 
Sometimes I may be a little short of charm, but we need a pit 
bull to kind of keep the Federal Government and all of us 
focused in working to restore this great city and great region.
    I want to begin by thanking Senator Lieberman, the new 
Chairman of the Homeland Security Committee. He has served on 
that Committee, helped to create that Committee, but he is now 
chairing that Committee. He could have chosen any place in the 
world to have his first hearing as Chairman, and he chose New 
Orleans, he chose this region, he chose the Gulf Coast to 
indicate a new focus on enhancing and accelerating the help 
from all different levels to help build this remarkable and 
unique and irreplaceable place on our planet.
    I want to thank Senator Obama who had many places to be 
this day, but he re-arranged his schedule when we confirmed 
this hearing to be with us this morning because of his 
passionate commitment to the issues that we are going to deal 
with this morning, and I thank him.
    I also want to say how grateful I am to be named as the new 
Chairman of a brand-new subcommittee that is going to be 
focused on disaster recovery--response and recovery, so that 
not only can we make better the situation that is facing us, 
but, as I have promised my Chairman, Senator Lieberman, and 
made a commitment to my colleagues, I intend to work with those 
present to build the best Federal Emergency Management response 
that this country has ever had and a response worthy of the 
people that paid for it, worthy of the American citizens that 
showed up every day to go to work, put the uniform on every 
time we asked them to, and now their government, with our 
partners in the private sector and faith-based institutions, 
need to step up and be there for them. They do not ask for 
much, but they do not have a lot right now.
    We lost--1,836 people died in the rising tides and the 
water. We have had thousands, Mr. Chairman and Senator Obama, 
die from broken hearts since. We have had 90,000 square miles 
flooded, which is larger than the size of Great Britain; 
650,000 people displaced; 275,000 homes destroyed, more than 
200,000 of which were in Louisiana; and thousands of renters 
who did not own homes but had some modest shelter that also 
lost their rental units.
    We had over a quarter of a million jobs lost, 875 schools 
ruined in Louisiana alone, 20,000 businesses destroyed, 
billions and billions of dollars of property damage, 22 levee 
breaks that put 20 feet of water in a city in an urban area 
that sat sometimes in two hurricanes, so we were flooded not 
once, but twice. For 6 to 8 weeks, the water stood in many 
places.
    Two million people lost power. We still have people without 
power, without lights, and without clean water; thousands of 
people still living in trailers with no permanent placement and 
resettlement options; 16 National Wildlife Refuges closed; 1.3 
million acres of forest destroyed, and etc.
    We had $4 billion donated by the public, private 
individuals--we are grateful for every check that was sent of 
any amount; $600 million by corporations; we are grateful for 
every corporation that stood up to help us. And over 70 
countries have pledged aid. To this unprecedented international 
enterprise and endeavor, we are grateful.
    But today we want to focus on how better FEMA can work with 
HUD, how better the Small Business Administration can step up, 
identifying what has not worked and making those changes.
    Breaking through as we hear this testimony, Mr. Chairman, 
of some of the real tight spots that we have got to break 
through. There has been a lot of lawyering going on in the last 
year, with all due respect to the lawyers present, but we need 
to break through some of this lawyering and get down to 
problem-solving to build a new hospital system, a new health 
care system, a new school system, and make this housing program 
work.
    There is no doubt that the Federal Government has sent us 
an extraordinary amount of money, but yet as you have heard me 
say before, and I will say it again, the people of this region 
and the Gulf Coast did not build the pipeline that the money 
came through. We are on the receiving end. When we build 
pipelines in Louisiana, the oil usually stays inside and so 
does the gas. But this pipeline that was built from the Federal 
Government had more holes, as my grandmother would say, than 
Carter had liver pills. And by the time the money got to us, it 
was a trickle coming out of the other end. And I intend to find 
out where those holes are and plug it; I intend to find out 
where at the other end what we--if we did not do what we were 
supposed to do at the other end, how to do that better and, as 
I said, help us create a better system.
    We have had a lot of good success, and I know my time is 
almost up, we have made some great progress in changing some of 
the FEMA and changing some HUD regulations, pushing money 
through Community Development Block Grants, doing a temporary 
handing out of checks so 360,000 kids got to go to school the 
year after all their schools were destroyed. We have some very 
positive things to say about what we did. But there is no doubt 
the road before us is tough and long, and to a lot of people it 
looks straight uphill. But with us there, I think we can walk 
up that hill and build a better city, a better region, and be 
proud of it.
    [The prepared statement of Senator Landrieu follows:]

                 PREPARED STATEMENT OF SENATOR LANDRIEU

                              INTRODUCTION

    Mr. Chairman, I would like to thank you and Senator Obama for 
taking the time to see with your own eyes the situation on the ground 
here in South Louisiana. It is vital for all of us to provide true 
context and texture to the decisions that are made in Washington. There 
is no substitute for first hand contact when it comes to understanding 
the challenge road ahead for this city and the entire Gulf Region.
    My time is short, so I will only be able to explore a few issues in 
these remarks. Let me clarify for the record though that I am not here 
not to complain or embarrass FEMA. As Director Paulison recently 
remarked, FEMA has helped more people than it ever has despite 
overwhelmed systems and huge work volume. The people of the Gulf Coast 
are not disputing that.
    However, I do believe that this hearing will highlight the central 
disconnect between the Federal response to Katrina and Rita, and the 
ongoing needs of the people of the Gulf. When Federal Officials excuse 
their agencies shortcomings, they always note the scope of the disaster 
and how it overwhelmed their limited capacity to respond. But on the 
other hand, when Katrina and Rita victims ask for flexibility given the 
scope of the disaster, the Federal Government retreats behind a massive 
shield of red tape and inapplicable precedent.
    If the Federal Government's ability to respond was overwhelmed, 
imagine how overwhelmed the victims feel!
    So the question remains, since we are dealing with the greatest 
natural disaster in our Nation's history, why--time and time again--
must we confront a business as usual attitude? In short, why are 
Federal agencies so reluctant to take the steps to make this recovery 
work?

                              GLOBAL MATCH

    Let me illustrate with an example that is high on the State's 
agenda before Congress right now. There are over 20,000 Public Works 
projects currently in different phases of completion in the State of 
Louisiana. Two-thirds of these 20,000 projects are under $50,000. When 
conducting business as usual, FEMA provides 90 percent of the funding 
for Public Assistance Eligible Projects, and the State/local 
governments must come up with the remaining 10 percent.
    Although we are grateful for all the help we received, Louisiana 
still faces an estimated $40 billion shortfall between the help we have 
received and the real costs of recovery. So, the business as usual 
approach does not make any sense. The $1 billion state match that we 
are required to come up with could be better spent on rental 
assistance, mental health, rebuilding our schools, and other unmet 
needs. It's the classic distinction between a hand out and a hand up.
    In case you think we are asking for something out of the ordinary, 
let me remind the Committee that since 1985, the Federal Government has 
granted waivers on the State match for public assistance in 32 
different disasters. Furthermore, according to the Congressional 
Research Service:

          ``If a state or a local government believes that the economic 
        impact from the disaster warrants, officials may contact FEMA 
        to request a reduction in their portion of the Federal cost-
        share. The regulations specify that an adjustment in the cost-
        share requirement may be made `whenever a disaster is so 
        extraordinary that actual Federal obligations under the 
        Stafford Act, excluding FEMA administrative cost, meet or 
        exceed' a specified threshold . . . that threshold is set every 
        year and is determined by damages on a cost per capita.''

    It has also been well documented that Katrina and Rita were the 
first and third-most costliest disasters in U.S. history. As such, 
Louisiana's cost per capita was approximately $6,700, as compared to 
damages on a cost per capita basis of $390 in New York after September 
11, or Florida after Hurricane Andrew where the cost per capita was 
$139. In both of those instances, the President waived the cost share 
for Public Assistance, but for Louisiana following these two 
devastating disasters, President Bush has not waived the cost share.
    So an obvious step--one that would show that the Federal 
bureaucracy is shedding its business as usual approach--would be to 
waive Louisiana's cost share for Public Assistance. There is a 
precedent from previous disasters, and there is still time to make the 
right decision. However, if that is somehow too high a hurdle to jump 
today, then at least we should be able to address the absurd amount of 
paper work with the 20,000 public works projects. The State of 
Louisiana has proposed a concept known as ``Global Match'' which would 
reduce red tape while still ensuring that Federal dollars were spent 
for their intended purposes and goals.
    Under a Global Match, the State would still accept responsibility 
for funding 10 percent of each Public Assistance project, but it would 
spread this total across the 20,000 projects currently underway in 
Louisiana. The State would guarantee that the funds obligated from the 
Federal Government, through FEMA and HUD, would be closely monitored to 
prevent duplication of benefits and ensure that 90 percent of eligible 
project costs be paid with FEMA funds and 10 percent be paid for with 
HUD funds. Rather than mixing resources from both programs to pay for 
each individual project, the State would use CDBG funds to pay 10 
percent of the aggregate cost of all Public Assistance projects at 
once.
    I believe this is a reasonable solution, and one that will save 
time and money for everyone involved. I understand that the State has 
been working with HUD and FEMA for over six months on this particular 
issue, and I am hopeful that we can work something out in the coming 
weeks to gain approval for the Global Match concept. This would help 
the recovery in South Louisiana move more quickly and streamline some 
of the current bureaucracy slowing down the process.

                        COMMUNITY DISASTER LOANS

    Another glaring example of the bizarre approach that the Federal 
Government has taken to recovery in the Gulf Coast can be found with 
the Community Disaster Loan program. In this case, it is not something 
we can lay at the feet of any agency. This was a mistake brought on by 
Congress. The Community Disaster Loan Act of 2005 contained a one time 
provision that forbid FEMA from forgiving any of the loans to local 
governments given after Katrina and Rita. Once again, we confront a 
brutal double standard for the worst disasters in American history. 
Over the last 25 years, the forgiveness rates for these loans has been 
between 60 and 70 percent.
    Do not misunderstand me. I want entities who are able to repay 
their CDL loans to repay them. We understand that they are loans and 
not grants. However, for the largest natural disasters in American 
history, basic equity dictates that the Gulf Coast be evaluated using 
the same standards that applied to all previous applicants.
    Does it really make any sense for the Federal Government to weigh 
down New Orleans' fragile health care infrastructure with debt? If we 
pull them under by compelling them to pay CDL loans, who is really 
going to be left holding the bag? Will the Federal Government really be 
able to stand idly by and leave a half a million people with no 
operating hospital? What about the New Orleans School system?
    This is a case of business worse than usual. Somehow, our best 
response for Katrina and Rita is to raise the bar for help. The Federal 
Government is overwhelmed by this disaster, but somehow the victims--in 
this case local government--should not be.

                     BROKEN PROMISES TO OUR SCHOOLS

    As we will see on our tour later today, individual houses were not 
flooded by Katrina but entire communities were destroyed. This was 
repeated in southwest Louisiana when Hurricane Rita struck in September 
2005--literally washing away almost the entire parish of Cameron. In 
neighboring Vermillion Parish, similar damage occurred and left many 
residents with only the clothes on their back. I believe that in these 
types of situations, with the resulting uncertainty that comes, one 
constant that victims should have is trust in the word of the Federal 
Government to help you recover. In some cases, that is all many of our 
constituents were left with--that the Federal Government would be there 
to help them rebuild.
    Well, unfortunately, one government agency broke promises to two of 
our Louisiana schools devastated by Hurricane Rita: Peebles Elementary 
in Iberia Parish and Henry Elementary School in Vermillion Parish. In 
2005, FEMA repeatedly told these schools that they would receive 
relocation funding to move schools to higher, less flood-prone areas. 
Because of this, the two school systems made irreversible decisions, 
including purchasing land outside the flood plain to build new schools, 
only to have FEMA reverse itself in November 2006. FEMA's reversal 
means that these school systems will receive less than half the funding 
that FEMA initially promised, leaving school officials scrambling to 
address a sudden shortfall in financing.
    I would like to submit for the record a letter I sent on November 
21, 2006, on this issue and also state for the record that my office 
has yet to receive a written response from FEMA on this important 
issue.
    For me, this is a prime example of FEMA's gross mishandling of its 
mission as it relates to rebuilding and re-establishing schools in the 
wake of an extraordinary natural disaster like Hurricane Rita. Its 
position in these two cases would actually encourage schools to rebuild 
in flood-prone areas, which is contrary to FEMA's central mission of 
hazard mitigation. It also creates a lack of trust between local 
officials and the Federal Government, because if you cannot count on 
them to keep their word following a disaster--who can you trust?

                            HOST COMMUNITIES

    There is a whole area of difficulty that is not even contemplated 
by the business as usual approach to this disaster--that is the role of 
host communities. Katrina and Rita caused the greatest human migration 
in this country in 150 years. Only the Civil War compares for 
dislocating people. But even comparisons to the Civil War miss the 
mark. The dislocation caused by war on our own soil occurred over a 4 
year period. Hurricanes Katrina and Rita forced a million people to 
leave their homes in 14 days. It was like the Civil War on fast 
forward.
    To the unending credit of local governments across the country, 
when these evacuees showed up in their communities, they did not summon 
their lawyers and accountants. They did not ask for advanced payment. 
They did not wonder about matching funds. They simply displayed the 
limitless generosity of the American people.
    They all understood that this was not business as usual, and they 
counted on the fact that the Federal Government would understand that 
as well. But we have not. So, under the Stafford Act, we still only pay 
overtime for first responders and other critical personnel. But look at 
the situation in Houston. Mr. Robert Eckels, the County Judge for 
Harris County, Texas, testified before this committee in 2005 regarding 
the huge disincentives that this rule provides host communities. 500 of 
Harris County's public health workers were reassigned to treat incoming 
evacuees. They were not working overtime. They were totally reassigned 
from helping the people of their county to helping evacuees. If the 
Stafford Act is not designed to cover circumstances like that, we 
clearly need to revamp the Stafford Act.
    Closer to home, we have the City of Baton Rouge. Overnight, it 
became the largest city in Louisiana, and its population grew by nearly 
a third. Imagine the traffic congestion, the strain on schools, and the 
strain on public health caused by this onrush of people. Yet, the 
Stafford Act and the Federal response contemplates very little help for 
cities grappling with this kind of situation. However, our public 
policy should be just the opposite. The Federal Government needs strong 
partners at the local and state level when combating a disaster. We 
need to be able to tell mayors, parish governments, and county 
governments who are doing the right thing, WE HAVE GOT YOUR BACK. We 
will not let you drown while trying to help. In short, we need to be 
able to look someone like Baton Rouge Mayor Kip Holden in the eye and 
say that he has a real Federal partner. We are not there today, but I 
hope that with the work of this Committee, we will get there. In light 
of this issue, I would like to submit a letter for the record from 
Mayor Kip Holden of Baton Rouge outlining his ongoing needs relative to 
this issue.

                                INEQUITY

    Finally, I want to take a moment to discuss an issue that has been 
making headlines in the papers here in Louisiana and across the Nation. 
When Mike Brown announced a couple of days ago that politics had played 
a role in the way the Federal Government responded to Louisiana's needs 
versus Mississippi's needs he made newspaper headlines. But he did not 
announce anything that people who have lived through these disasters 
did not know. When you think about it, what could be more business as 
usual than politics playing with the allocation of money. The numbers 
speak for themselves.
    Mississippi has received $5.5 billion in Community Development 
Block Grant money for their home rebuilding program. The latest 
estimates indicate that Mississippi will spend approximately $1 billion 
on that program. That leaves the State of Mississippi with $4.5 billion 
in very flexible dollars to pursue essentially whatever Governor Haley 
Barbour wants.
    It is well documented that the loss of Mississippi housing 
constituted 20 percent of all homes lost over the course of the two 
storms. Louisiana, by contrast lost 77 percent of all the homes lost in 
Katrina and Rita. If real equity and not politics had decided numbers, 
Louisiana would have $21 billion in CDBG funding. Instead my State 
received significantly less than half that amount. In fact, we were 
capped during the first traunch of CDBG funding of receiving no more 
than 54 percent. That cap served no other purpose than to ensure a 
disproportionate share of funding to Mississippi.
    This is not an attempt to diminish the real suffering of the people 
of Mississippi. The people of Louisiana do not begrudge them one dollar 
of Federal funding. But what we cannot abide is misplaced comparisons 
between recovery in the two states. That is not to say that officials 
in Louisiana are blameless for what happens here. But we do need to 
start with a common understanding of the context. Mississippi has 
received more resources to address less damage. It's an inequity that 
Louisianans have been grappling with for nearly two years now. It is 
time that the Federal Government restore a little balance to the 
equation.

                                CLOSING

    Mr. Chairman, I do not want to leave the people of Louisiana with 
the impression that everything is business as usual, and that all 
elements of the Federal Government are reacting the same way. Our 
people will always remember the United States Coast Guard literally 
descending like angels to rescue people off of roof tops. The Small 
Business Administration has taken some real steps forward in recent 
days--going so far as to lend personnel to our clerks of court to speed 
up Road Home paperwork processing. Our own Federal workforce at the 
National Finance Center performed heroically. The Department of Justice 
has really stepped forward in trying to help New Orleans combat the 
current crime wave. These are all people and agencies that understand 
that business as usual is not good enough. However, for recovery to 
work, we need more of them.
    In closing, let me thank you, Chairman Lieberman, once again for 
holding this field hearing, as well as my colleague Senator Obama for 
coming to Louisiana at this important time in the recovery phase. 
Thanks also to other Members of the State's delegation who have joined 
our Committee today.
    I believe that, as elected officials, we must ensure that the 
Federal Government is doing its part to speed up recovery in the next 
519 days, by becoming more efficient and more responsive to taxpayers. 
Disaster victims are victimized a second time by excessive bureaucratic 
requirements, and it is they who foot the bill in good times and 
deserve a hand up in bad times. I look forward to working closely with 
my colleagues on the Committee to achieve this goal, not only for my 
constituents here in Louisiana, but also for those in other parts of 
the country.
    I thank the Chairman and ask that a full copy of my statement be 
included in the record.

    Chairman Lieberman. Thank you, Senator Landrieu.
    The Committee was very pleased that Senator Barack Obama 
chose to come on the Committee this year. He is only a 
freshman, so many of you may not have heard about him yet. I 
was proud from a Committee point of view that he chose to 
become a Member of the Committee; next thing you know, he is 
running for President.
    I do want to say that, as Chairman of the Committee, I am 
grateful that Senator Obama has brought his considerable 
capabilities and his compassion and his competence and his 
commitment to get things done as a Member on this Committee. 
And as Senator Landrieu said--it is the obvious, but I want to 
thank him for it--he had a lot of other demands on his time, a 
lot of other places he could have been. I take it to be a 
measure of his commitment to work with us to bring New Orleans 
and the Gulf Coast back that he is here with us today. I am 
proud to introduce our new Committee Member, Senator Barack 
Obama of Illinois.

               OPENING STATEMENT OF SENATOR OBAMA

    Senator Obama. Thank you, Mr. Chairman.
    Good morning, everybody. I am happy to be back in New 
Orleans today. And I want to thank you, Mr. Chairman, for 
holding this hearing. I want to thank Senator Landrieu who is 
tenacious in her pursuit of equity with respect to the Gulf and 
Louisiana and New Orleans.
    She is an outstanding representative on behalf of this 
State, and I am grateful that she has not allowed those of us 
in the Senate to forget that there is more work to do.
    In my previous trips to this city, I have toured the Lower 
9th; I have toured St. Bernard Parish and Lakeview; I saw the 
broken landscape of a battered city; I walked around and 
visited shuttered businesses and empty homes; I listened to 
FEMA and local officials talk about the work that was left to 
do, the schools that were still closed, the hospitals that are 
not functional, the trailers that were meant to be temporary, 
but now seem disturbingly permanent; and I walked to the places 
where the levees breached and the waters rushed in and the 
flooding began.
    Now, as Chairman Lieberman stated, it was a humbling and 
heartbreaking scene. But I have also seen hope in New Orleans. 
I had the great privilege of giving the commencement address to 
the graduates of Xavier University, graduating only a few 
months late despite the unbelievable obstacles and great odds 
that had been placed before them. I met with students who 
survived the horrors of the hurricane and then spent the first 
half of their senior year scattered throughout the country, but 
who would later join together to form the largest class ever to 
graduate from that fine university.
    I toured Musicians' Village where hometown heroes like the 
Marsalis family and Harry Connick Jr. were working with Habitat 
for Humanity and met some of the young people from all across 
the country who were here painting and hammering nails and 
building homes, and it made me confident that the sweet sounds 
of New Orleans will ring from those streets once more.
    So I know that despite great odds and incredible 
challenges, New Orleans is still a place of hope. And there are 
many people in this room who have put their heart and soul into 
renewing and revitalizing this wonderful city.
    What I do not know and what I am hoping to find out today 
is whether those of us in the Federal Government are doing what 
we need to do to help the people of New Orleans rebuild. And I 
have seen the reports on the Housing Authority's plans to raze 
several low income housing developments, but I have not seen 
concrete plans to meet the long-term housing needs of all the 
people who have been displaced in the region.
    I know that the health infrastructure has not yet been 
rebuilt, and so I am trying to figure out how health care needs 
are being met or not being met and how we are dealing with the 
mental health needs of families here, especially children.
    I am concerned about the stories about the criminal justice 
system. Just coming into the courthouse today, I have heard 
stories from judges of the unbelievable difficulties that those 
in the criminal justice system are still facing, just basic 
things: Having enough beds to keep those who need to be 
detained, making sure that you have basic forensic labs and 
other equipment that will allow the criminal justice system to 
operate. It appears that public safety issues are dominating in 
part because people simply do not have the infrastructure to do 
what needs to be done.
    I continue to be unclear whether we have eliminated the 
waste, fraud, and abuse in Federal contracting processes. I 
have asked many times whether the no-bid contracts that were 
handed out in the wake of the hurricanes have been terminated, 
and unfortunately, I still have not received a clear answer. So 
I hope we get some answers to the questions that we have today 
because the rebuilding of the City of New Orleans is not just 
good for the Gulf Coast or the State of Louisiana, it is good 
for our Nation.
    In the weeks after Hurricane Katrina, I think all of us 
felt ashamed; I know I did. We looked at what had been allowed 
to happen here and we said: Never again. Never will we turn our 
backs on our fellow citizens. Never will we forget what 
happened here. And the American people, through their own 
initiative, were true to their word. The amazing outpouring of 
concern and concrete help that came from all across the country 
was encouraging.
    The President came down, and he said: We will do what it 
takes. We will stay as long as it takes to help citizens 
rebuild their communities and their lives.
    That is what the President said. Seventeen months later, we 
heard not a single word, not one word in the President's State 
of the Union Address about New Orleans, not a single word.
    And so I have one more set of questions to ask today, and 
that is: Were we being honest when we said we would do whatever 
it takes, that we would stay as long as it takes? I think it 
made a lot of people in New Orleans, in Louisiana, and those of 
us who are concerned all across the country wonder whether we 
are in danger of actually forgetting New Orleans. And that is 
shameful. We should be ashamed if we forget.
    And over 230 years ago, a fire raged in a major American 
city due, in part, to government incompetence. The fire was 
dismissed as a dying remnant from a fire the day before, so the 
response was slow and the result was disastrous. More than 200 
people lost their lives in that fire. Out of a population of 
300,000, 100,000 were left homeless, more than 2,000 acres were 
ravaged, and 17,500 buildings were destroyed.
    But that city was rebuilt. Through the determination of 
private and public partners, the city was rebuilt. And in less 
than 22 years later, that city, my hometown of Chicago, hosted 
the World Exposition and established its place among the 
world's greatest cities. That is what America can do when it 
puts its mind to it. We now live in a far wealthier Nation than 
we did then, so it is not as if it cannot be done.
    So I just want to remind people that while I know that the 
Bears are not overly popular around here these days, we have to 
remember that we have come together in the past to help great 
American cities like Chicago and San Francisco rebuild. It is 
not as if there is no precedent for it. What it requires is a 
sense of fellowship, a sense of common citizenship. New Orleans 
has to be one more example of the sense that we are one Nation. 
We all have a stake in this, and we have to ensure that we are 
all doing our part.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Senator Obama follows:]

                  PREPARED STATEMENT OF SENATOR OBAMA
    Good morning. I am happy to be back in New Orleans today and I want 
to thank Chairman Lieberman for holding today's hearing.
    In previous trips to this city, I've toured the lower Ninth Ward, 
St. Bernard Parish, and Lakeview. I saw the broken landscape of a 
battered city. I walked among the shuttered businesses and empty homes. 
I listened to FEMA and local officials talk about the work left to do, 
about the schools still closed and the hospitals that aren't functional 
and the trailers that were meant to be temporary but now seem 
frighteningly permanent. And I walked to the places where the levees 
breached and the water rushed in and the flooding began.
    But I've also seen the face of hope here in New Orleans. I had the 
great privilege of giving the commencement address to Xavier University 
last August, and I saw the faces of proud young men and women who 
overcame great odds and unbelievable obstacles. I met the students who 
survived the horror of the hurricanes and then spent the first half of 
their senior year scattered throughout the country, unsure of whether 
they would ever return to their school, but who would later join 
together to form the largest class to ever graduate from that fine 
university.
    I toured the Musician's Village, where hometown heroes like the 
Marsalis family and Harry Connick, Jr. are working with Habitat for 
Humanity to develop homes for displaced musicians and others, and I 
know that the sweet sounds of New Orleans jazz will ring from those 
streets once more.
    So I know, despite great odds and incredible challenges, that New 
Orleans is still a place of hope.
    But what I don't know, and what I hope to find out today, is 
whether we in the Federal Government are doing our part to help the 
people of New Orleans rebuild.
    I've seen reports on the Housing Authority's plans to raze several 
low-income housing developments, but I haven't seen concrete plans to 
meet the long-term housing needs of all the displaced people in New 
Orleans.
    I know the health infrastructure is still being rebuilt--so I want 
to ask, how are the health care needs of the city being met? How are 
the mental health needs of the city being met--especially the children?
    I'm also still unclear on whether we have eliminated the waste, 
fraud, and abuse in the Federal contracting process. I've asked many 
times whether the no-bid contracts handed out in the wake of the 
hurricanes have been terminated, and unfortunately, I still haven't 
received a clear answer.
    And so, I hope we get some answers today, because rebuilding the 
City of New Orleans is not just for the good of the Gulf Coast, or the 
State of Louisiana, it is for the good of our Nation.
    In the weeks after Katrina, an ashamed Nation looked at what had 
been allowed to happen here and said ``Never again. Never will we turn 
our backs on these people. Never will we forget what happened here.'' 
The President came down and said, ``We will do what it takes, we will 
stay as long as it takes, to help citizens rebuild their communities 
and their lives.''
    Just 18 months later, we heard not one word--not one word--in the 
President's State of the Union address about New Orleans. And so I have 
one more set of questions to ask today: ``Are we willing to do whatever 
it takes? To stay as long as it takes? Are we in danger of forgetting 
about New Orleans?''
    Over 230 years ago, a fire raged through a city. Due in part to 
government incompetence, the fire was dismissed as a dying remnant from 
a fire the day before, so the response was slow, and the result was 
disastrous. More than 200 people lost their lives in that fire. Out of 
a population of 300,000--100,000 were left homeless. More than 2,000 
acres were ravaged, 17,500 buildings were destroyed, and more than $222 
million in property was lost.
    But that city rebuilt. Through the determination of private and 
public partners--the city rebuilt. And less than 22 years later, that 
city, my hometown of Chicago, hosted the World Exposition and 
reestablished its place among the world's greatest cities.
    So, while I know our Bears aren't too popular around here these 
days, we must all remember, we have come together to help other great 
American cities rebuild. New Orleans must be one of those. We all have 
a stake in this, and we must ensure that all of us are doing our part.

    Chairman Lieberman. Thank you, Senator Obama.
    We will go to the first panel of witnesses now.
    We appreciate very much the attendance of the witnesses. 
They are exactly the people that we wanted to have here today.
    We are going to ask the witnesses to limit their opening 
statements to 6 minutes, if at all possible, and then we will 
have plenty of time for questions and answers.
    The first witness is Donald E. Powell; I know he's now 
familiar here in this city as the Federal Coordinator for Gulf 
Coast Rebuilding through the U.S. Department of Homeland 
Security.
    Thanks for being here, Mr. Powell.

STATEMENT OF DONALD E. POWELL,\1\ FEDERAL COORDINATOR FOR GULF 
     COAST REBUILDING, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Powell. Thank you, Mr. Chairman. Chairman Lieberman, 
Senator Landrieu, and Senator Obama, good morning.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Powell with an attachment appears 
in the Appendix on page 85.
---------------------------------------------------------------------------
    Senator Obama. Morning.
    Mr. Powell. It is my pleasure to be here with you today.
    It is been nearly 18 months since Hurricanes Katrina and 
Rita ravaged this city and the Gulf Coast and about 15 months 
since President Bush asked me to oversee the Federal efforts to 
support the State and local leaders who are driving the 
rebuilding effort.
    I have spent countless hours with the good people of the 
Gulf Coast, and I have to say that this has been one of the 
most challenging, mind-boggling, and frustrating times in my 
life. It also has been the most exciting, important, and 
fulfilling work I have ever been part of, and I say that 
because I know that any frustrations or challenges I have faced 
pale in the comparison to what the citizens of Louisiana and 
Mississippi have endured over these 18 months.
    These citizens are counting on their government not just at 
the Federal level, but, more importantly, at the State and 
local level to help them rebuild their lives and communities. 
And I am humbled and inspired by their profound responsibility 
and the opportunity that comes with it.
    Fundamentally, my job is to ensure that the Federal 
Government provides thoughtful, coordinated, and effective 
support to the State and local leaders who are driving the 
long-term rebuilding and renewal of the Gulf Coast.
    What does that mean practically? Each day our staff and I 
work closely with those in the affected region, including 
public and private stakeholders, to identify and prioritize the 
needs for the long-term rebuilding. We communicate these 
realities to the decision-makers in Washington, advising the 
President and his leadership team on the most effective, 
integrated, and fiscally responsibile strategies to ensure the 
success of the long-term rebuilding.
    Finally, and this is really where we are in the process 
right now, we work with other Federal agencies and our State 
and local partners to help ensure the successful implementation 
of these strategies.
    Progress is being made. The President has stood in Jackson 
Square and vowed that the Gulf Coast would be rebuilt stronger 
and better, and we are following through on that commitment.
    As you know, thanks to the leadership of the President and 
Congress and the generosity of the American taxpayer, the 
Federal Government has committed more than $110 billion toward 
recovery and rebuilding. These funds are helping to lay the 
groundwork for a better and stronger future.
    Levees, housing, and infrastructure, it starts with safety 
and security. Since we are in New Orleans, let me focus on the 
levees. President Bush promised a better and stronger hurricane 
protection system and security, nearly $6 billion for the U.S. 
Army Corps of Engineers to repair and enhance the levees, make 
the entire hurricane protection system better and stronger by 
2010, and jump start the restoration of the wetlands 
surrounding the Greater New Orleans area. Today, for almost all 
of New Orleans metro area population, the levees are at pre-
Katrina levels or better, and they are on their way to being 
better than ever before.
    The President is also committed to helping rebuild lives 
and communities. And we have made significant investment to 
restore housing and infrastructure. Most significant are the 
$16.7 billion in Community Development Block Grants to help 
thousands of individual homeowners rebuild their homes and 
neighborhoods. I know my colleague from HUD will share more 
detail about the challenges Louisiana has faced with 
implementing this program, as we are certainly concerned that 
this money has not reached the hands of the citizens who need 
it.
    Infrastructure. FEMA has funded billions of dollars to 
repair and replace damaged public infrastructure on the Gulf 
Coast, including roads and bridges, schools, water systems, 
public buildings, and public utilities. And we continue to work 
closely with FEMA to improve the PW process and get this money 
into the hands of communities. The State also has a clear 
responsibility to expedite and speed up your process.
    Transformation work. These brick-and-mortar investments are 
critical, and we must do all that we can to ensure their 
success. But as I have said on many occasions, if all we do is 
rebuild the fixed environment then we have failed.
    The things closest to my heart, the work that gets me out 
of the bed every morning, is the opportunity to support the 
transformation of this entire region of the country, a region 
that in reality was facing significant challenges long before 
Hurricanes Katrina and Rita washed ashore.
    Although many of these woes are State and local in nature, 
we would be remiss if we did not embrace the opportunity to 
work alongside our friends at the State and local level to 
address these critical challenges. In New Orleans it means 
education, continuing to support the transformation of the New 
Orleans school system so that every child has an opportunity to 
top-notch education.
    Health care, working to achieve true reform of a flawed 
two-tiered system of care so that Louisiana citizens gain 
greater access to high quality care.
    Criminal justice, working to support the local leaders who 
are responsible for ensuring a more safe and just city for 
their citizens.
    Workforce development, helping to prepare workers for 
better jobs with higher wages.
    Affordable housing, giving more people the opportunity to 
move into home ownership.
    Jobs, helping to stimulate a more robust, diverse economy 
that will help build a broader middle class for all citizens.
    These are the elements of recovery that are truly the most 
important. They hinge on the work to transform the social 
systems that have failed people for years, and this does not 
happen overnight. But we are committed to doing our part.
    Let me reiterate that now is a time for leadership and 
action at all levels of government. We, at the Federal level, 
will continue to do everything we can to support our State and 
local partners, but as is the case for all these issues, if the 
local folks are not driving the change and leading the way, 
then we will ultimately fail.
    In conclusion, the pace of recovery is frustrating for 
everyone, and a great deal of work remains. But I ask you to 
remember that Hurricanes Katrina and Rita were some of the 
largest catastrophic events to ever hit the United States. This 
unprecedented disaster has required an unprecedented, 
unscripted response, and it is going to take a long time to 
complete.
    But I think it is important that we keep our eyes on the 
long-term vision. These past 18 months have been about getting 
through the recovery, clearing the path for rebuilding, and 
beginning to lay the foundation for a better and stronger 
future, and we have made significant progress.
    Senators, President Bush is committed to rebuilding the 
Gulf Coast and rebuilding it better and stronger than it was 
before Hurricanes Katrina and Rita. A tremendous amount of 
progress has been achieved, and a tremendous amount of work 
still lies ahead. We move forward each day determined to ensure 
that the Federal Government is doing all that it can to support 
and strengthen the State and local leaders who must drive this 
rebuilding effort.
    I am confident that when history writes the book on 
Hurricanes Katrina and Rita, it will be more than just a 
tragedy; it will also be a story of modern renaissance. The 
Gulf Coast States and their leaders have a chance to restore 
their communities to reverse decline, reject failure, and 
revive hope and opportunity. I look forward to working with 
these leaders to ensure that we do not let this opportunity 
pass.
    Thank you, and I welcome your questions.
    Chairman Lieberman. Thanks, Mr. Powell. We will go through 
the panel, and then we will come back to the questions.
    Stephen Preston is the Administrator of the Small Business 
Administration. I know, Mr. Preston, that you are relatively 
new in the office and came on after the onset of the 
hurricanes. We appreciate your effort and look forward to your 
testimony now.

  STATEMENT OF HON. STEVEN C. PRESTON,\1\ ADMINISTRATOR, U.S. 
                 SMALL BUSINESS ADMINISTRATION

    Mr. Preston. All right. Thank you. Good morning, Chairman 
Lieberman. Thank you, Senators Landrieu and Obama. Thank you 
for inviting me to discuss the recovery process both here in 
Louisiana, as well as in Mississippi, following the Gulf Coast 
hurricanes in 2005.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Preston with an attachment 
appears in the Appendix on page 104.
---------------------------------------------------------------------------
    This summer during my confirmation hearing, I pledged to 
address the challenges the agency faced in its disaster 
operation as job No. 1, and I appreciate the ability to provide 
you with a status report.
    As you probably already know, the SBA is responsible for 
making loans to disaster victims, both small business owners as 
well as homeowners. As of today, 98 percent of the approved 
borrowers have received all of their money, some of their 
money, or chosen not to borrow.
    Currently we have about $5 billion in SBA disaster 
assistance funds at work rebuilding the businesses and homes of 
hurricane victims in the Gulf. Approximately $2 billion in 
additional commitments are available to be disbursed. These 
remaining commitments are to about 25,000 borrowers, the vast 
majority of whom have already begun receiving disbursements; 
however, many of these borrowers, we believe, continue to 
experience a number of outside challenges in proceeding with 
their lives, which is resulting in a delay in their seeking to 
draw down those funds.
    I came to the agency almost 11 months after Hurricane 
Katrina. In that time, the agency had processed over 420,000 
loan applications and had worked very hard to address the 
unprecedented nature of the disaster by expanding capacity 
primarily in three areas: Information systems, people, and 
facilities.
    Building this capacity was absolutely essential in meeting 
the demands. By that time, while the loan approval process was 
largely completed, the agency faced a different challenge: 
Closing the loans and distributing the money. Over 120,000 
borrowers were still in our process representing over $7 
billion of loan commitments.
    So we set out quickly to dig into the issues and understand 
why. First, we listened very hard to our borrowers who are 
experiencing the difficulties. Next, we listened to our 
employees who are close to the action to get their perspective 
on what those issues were. And then finally, we dug very deep 
into our operational processes where we saw a number of issues 
leading to high error rates, steep backlogs, critical 
processes, and decisionmaking bottlenecks.
    So during August and September, we invested thousands of 
man hours to fully re-engineer our processes to eliminate our 
backlogs, to dramatically reduce our response times, and to 
improve the support we give to disaster victims throughout the 
process.
    We called every one of our borrowers to do two things: 
First, to introduce them to the new process where they would 
have a single relationship manager as a point of contact, and 
second, to ensure that we understood their status so that we 
could provide the right kind of support to them.
    This outreach enabled us to build a database so we could 
track what issues all of our borrowers have and to address them 
better. One example of this is that the database showed us that 
our customers were having difficulties obtaining title and deed 
records from the local clerks' offices. To better assist those 
borrowers, the SBA has now placed employees in the Land Records 
Office right here in Orleans Parish, and we have reached out to 
other parishes and counties offering the same support.
    Also because we have regular conversations with our 
customers, we can also informally poll our case managers on 
issues that the borrowers face. Our people have also become 
advocates for the borrowers, and we are now able to connect a 
loan and a document to a life and a story.
    One example of the challenges we have had was in a process, 
a very critical process, which we call loan modifications. This 
summer we had a backlog of 50,000 to 80,000 loans with an 
average age of over 70 days. This backlog was a major cause of 
the delays we experienced in disbursing funds. Today those 
modifications are down to under 5,000, and the average age is 
now 10 days, which very much represents cycle time just working 
through documents.
    I also believe we are seeing the benefit of the new process 
in our more recent disasters that we deal with where 98 percent 
of our loan approvals are being completed within the target 14 
to 16 days.
    I believe we are coordinating well both with Louisiana and 
Mississippi in support of their respective grant programs. In 
Mississippi we are turning around information requests in a 
matter of hours, and we look forward to being very responsive 
to the LRA as their process continues to ramp up.
    Nonetheless, we know we still face challenges. Frankly, we 
hear it directly from our borrowers. We continue to focus on 
better training for employees so they can serve the borrower 
needs more effectively. We also have issues to address on the 
information technology side. But we have put in place metrics 
and mechanisms to see these issues in a much more timely manner 
and to address them as they arise. And most importantly, we put 
methods in place for greater interaction with our customers so 
we can get that input directly.
    I would also like to highlight that the SBA is working to 
support the needs of small businesses in the Gulf in a number 
of other ways through our regular financial assistance programs 
7(a) and 504, as well as the Gulf Opportunity, or GO Loan pilot 
program, all of which are lending programs.
    Our GO Loan program, in particular, has expedited small 
business financing to communities along the Gulf Coast. To 
date, we have provided over 500 GO Loans totaling over $42 
million to small businesses.
    Additionally, we remain dedicated, along with our partners, 
to offer training and counseling while assisting small 
businesses in an effort to acquire government contracts. As we 
look forward to the coming months, our efforts will be focused 
on a number of activities: First of all, continuing to disburse 
the loans that we have made commitments to; second, ensuring 
that we are responsive in providing the State with information 
to support their grant programs; third, completing the process 
re-engineering work that we have begun and continuing to 
improve automation to ensure that it is fully in place for 
future disasters; documenting detailed search plans so that we 
have well-documented road maps and implementation models in 
place based on the size and nature of the catastrophe; and 
finally, exploring ways to work for the private sector should 
we determine that the private sector can provide more efficient 
and effective support in certain circumstances.
    So in closing, I would like to thank you for having me here 
to testify. The 2005 hurricanes overwhelmed disaster response 
at many levels, certainly the SBA was no exception. Our people 
worked very hard, often around the clock, to help provide 
disaster victims with the support they needed while their lives 
were torn apart by the hurricanes. However, I would like to 
highlight that those are the same people who have now come back 
and fixed the processes and are today enabling the SBA to play 
its part in rebuilding the Gulf and improved the agency's 
ability to respond in the future. And I am very thankful for 
their dedication and their resolve because without it, we could 
not have come this far. Thank you.
    Chairman Lieberman. Thanks, Mr. Preston. Appreciate your 
testimony.
    Pamela Patenaude is the Assistant Secretary for Community 
Planning and Development of the Department of Housing and Urban 
Development. Thank you for being here.

STATEMENT OF HON. PAMELA PATENAUDE,\1\ ASSISTANT SECRETARY FOR 
COMMUNITY PLANNING AND DEVELOPMENT, U.S. DEPARTMENT OF HOUSING 
                     AND URBAN DEVELOPMENT

    Ms. Patenaude. Good morning, Mr. Chairman, Senator 
Landrieu, and Senator Obama. I am pleased to be here today in 
New Orleans on behalf of Secretary Alphonso Jackson.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Patenaude appears in the Appendix 
on page 114.
---------------------------------------------------------------------------
    As the Assistant Secretary of HUD's Office of Community 
Planning and Development, I am responsible for the $16.7 
billion in Community Development Block Grant disaster recovery 
funds. On December 30, 2005, President Bush signed legislation 
providing $11.5 billion in CDBG disaster recovery funding. 
Within one month, Secretary Jackson allocated these funds to 
the five affected Gulf Coast States based upon unmet needs for 
disaster relief and long-term recovery. Six months later, the 
President signed legislation providing an additional $5.2 
billion in CDBG disaster funds, which the Secretary promptly 
allocated.
    Under both emergency supplemental appropriations, Secretary 
Jackson allocated the maximum amount of money allowed by law to 
the State of Louisiana, a total of $10.4 billion. Prior to the 
appropriation of the disaster recovery funds, HUD staff was in 
constant contact with State officials throughout the Gulf Coast 
region as they worked to design their housing, economic 
development, and infrastructure programs with existing 
resources.
    HUD granted an unprecedented number of waivers increasing 
the flexibility of the traditional HOME and CDBG programs to 
address the immediate needs of hurricane victims. Within 3 
weeks of the first CDBG disaster supplemental, HUD cut red tape 
to expedite funding so the Gulf States could effectively 
utilize the allocated funds. With citizen participation, the 
States developed creative solutions and submitted initial 
disaster recovery action plans for HUD's approval. Under 
Secretary Jackson's leadership, these plans were promptly 
reviewed, and the necessary waivers were identified, enabling 
States to execute their programs as quickly as possible.
    Throughout the implementation process, States continued to 
revise and amend their disaster recovery plans to make them 
more effective in meeting the changing needs of their 
communities. To date, HUD has approved recovery action plans 
totalling $10.5 billion. The five Gulf Coast States have spent 
approximately $1.2 billion in CDBG disaster recovery funds.
    I would like to highlight some of the examples of the 
progress made to date. More than 10,000 families in Mississippi 
have received checks under the State's Homeowner Grant Program. 
The State of Mississippi has used CDBG disaster recovery 
funding to complete a master plan for the long-term regional 
solutions to water, sewer, and storm drainage needs. This 
master plan is a necessary first step in the redevelopment of 
existing neighborhoods, as well as the creation of new, safer 
communities.
    Mr. Chairman, we recognize the enormous challenges that lie 
ahead, particularly for Louisiana. It has been nearly a year 
and a half since the storms hit. Like many of you here today, 
Secretary Jackson is not satisfied with the pace of recovery 
here in Louisiana.
    The Secretary has met and continues to meet with officials 
administering the Road Home program. Through this ongoing 
dialogue with recovery officials, obstacles in the recovery 
process have been identified.
    As Louisiana and the other Gulf Coast States develop 
solutions for their rebuilding efforts, HUD will continue to 
offer guidance and to assure compliance with the law, including 
the prevention of fraud, waste, and abuse.
    Congress was clear in its intent. The Federal Government 
would not dictate to local communities how to carry out the 
recovery and rebuilding process. The Gulf Coast States have the 
principal responsibility for the design, implementation, and 
performance of their rebuilding efforts.
    Mr. Chairman, distinguished Members of this Committee, I 
can assure you that Secretary Jackson and the entire HUD family 
remain committed to assisting the victims of Hurricanes Katrina 
and Rita as they rebuild their communities. I want to thank you 
for the opportunity to appear before this Committee today, and 
I look forward to answering your questions.
    Chairman Lieberman. Thanks, Ms. Patenaude. As you know, we 
want to come back and ask you some more questions about the 
Road Home program.
    Gil Jamieson is FEMA's person in charge of Gulf Coast 
Recovery, Deputy Director. Mr. Jamieson, before you start, I do 
want to indicate first, to thank you for that 6-month extension 
on the Housing Aid Programs for victims of the hurricane; 
second, to make clear, in my opening statement I referred to 
the $26,200 cap that was not changed. I understand that is a 
matter of law or statute, not anything within your 
administrative authority. And I would like, maybe in the 
question-and-answer period--because we have made one 
unsuccessful attempt at raising that cap legislatively--to come 
back and ask you if you have any estimates of what the impact 
of not raising the cap will be on people becoming ineligible 
for housing assistance.
    Please go forward with your testimony.

STATEMENT OF GIL H. JAMIESON,\1\ DEPUTY DIRECTOR FOR GULF COAST 
RECOVERY, FEDERAL EMERGENCY MANAGEMENT AGENCY, U.S. DEPARTMENT 
                      OF HOMELAND SECURITY

    Mr. Jamieson. Senator, I am happy to say in relation to 
that we have found a way to get around that cap so that we can 
get financial assistance to those that need it, so we are 
proceeding along that line.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Jamieson appears in the Appendix 
on page 117.
---------------------------------------------------------------------------
    Chairman Lieberman. Well, I welcome that news. And anytime 
you can make a legal end-run that has a good result for people, 
even Members of Congress will welcome it.
    Mr. Jamieson. Senator, I am the Reggie Bush of New Orleans 
in terms of end-runs.
    Senator, it is a pleasure to be here. And, Senator 
Landrieu, it is great to see you. Senator Obama, it is my 
pleasure to be here.
    I am FEMA's Deputy Director for Gulf Coast Recovery. I will 
update you today on our progress in Hurricanes Katrina and Rita 
along the Gulf Coast with particular emphasis in Louisiana.
    A year ago, Director Paulison appointed me as FEMA's Deputy 
Director for Gulf Coast Recovery. In that position, I lead and 
coordinate FEMA's Gulf Coast Recovery efforts and serve as the 
principal point of contact between myself and Mr. Powell. Prior 
to that appointment, I served as the Deputy Principal Federal 
Official to Commandant Thad Allen of the Coast Guard during the 
responses to Hurricanes Katrina and Rita.
    And I also served as the Principal Federal Official for 
last year's hurricane season down here in 2006. I am a longtime 
FEMA civil servant, and I have worked in the agency since its 
inception in 1979.
    To administer FEMA's programs, I established Transitional 
Recovery Offices in Alabama, Mississippi, Louisiana, and Texas. 
The TROs were established to ensure that FEMA's programs are 
administered correctly and delivered consistently and 
aggressively across the Gulf. Each TRO is led by a director who 
reports to me. We have over 3,300 people working in TROs in the 
four States.
    Over 70 percent of the Louisiana workforce are from the 
local area, and many were disaster victims themselves. The 
Louisiana TRO is headquartered here in New Orleans with field 
offices in Baton Rouge and Lake Charles.
    Through our TROs, we have worked diligently to balance 
expediency and accountability. The collaboration has--with our 
State and local counterparts, and this collaboration has 
resulted in significant progress; although, clearly challenges 
remain.
    Our focus in Louisiana, as well as other States, is in 
three programmatic areas: Public assistance, individual 
assistance, and mitigation. I will take this opportunity to 
highlight our progress in each of these areas in Louisiana.
    The Public Assistance Program provides funding for the 
repair of roads, bridges, buildings, and utilities. Funds are 
provided by FEMA to the State who administers the program. 
Local governments receive funding through the State. All of the 
damages to eligible projects in Louisiana will eventually be 
described by approximately 23,000 project work sheets. FEMA has 
obligated over $4.5 billion to Louisiana under the Public 
Assistance Program. This represents 72 percent of the total 
public assistance claims in Louisiana.
    More than 21,000 project work sheets have been written for 
Hurricanes Katrina and Rita applicants, over 90 percent of the 
expected total; $4.5 billion has been obligated to the State, 
and the State has disbursed $2 billion of these funds to local 
applicants.
    FEMA has listened to the criticisms of State and local 
parish officials about the pace of public assistance. In 
response, we have modified our approach to public assistance 
activities in Louisiana to improve accountability and 
streamline our processes. We have established a new management 
team. We have retrained staff. We have established mentoring 
programs for newer staff. We have retained program experts, 
maintained maximum continuity with applicants. We have refined 
the cost estimates of projects. We have placed 28 teams in 
Orleans and St. Bernard's parishes to assist them in the 
condemnation and demolition process. And we are working with 
the parishes to identify projects on a priority basis that are 
critical to recovery so that we can focus on these high 
priority projects.
    There are many keys to the recovery in the Gulf region, but 
public safety is paramount among them. The FEMA Transitional 
Recovery Office representatives are working with Louisiana law 
enforcement officials to support the rebuilding of the criminal 
justice system and to assist local law enforcement with their 
crime-fighting efforts.
    FEMA is augmenting security at travel trailer group site 
parks with reportedly high crime activity, and we are assessing 
our options for security at commercial sites. FEMA is 
expediting public assistance related to criminal justice. We 
have streamlined our process for processing information to law 
enforcement officials to help identify known felons and sex 
offenders. We have met with law enforcement officials to 
explain these streamlining procedures for sharing information 
on residents at FEMA trailer sites, and we have worked closely 
with law enforcement at our sites for drug sweeps and sting 
operations, and to date, there have been more than 200 
evictions for criminal activity in FEMA parks.
    FEMA has increased the number of park managers from 25 to 
77. To date, we have obligated more than $194 million to 
Orleans Parish for damages to its criminal justice system. This 
amount includes over $7 million used to construct temporary 
jail facilities, $120 million has been obligated to NOPD, New 
Orleans Police Department, for such costs as the replacement of 
their vehicles, the preservation of case documents, the repairs 
to facilities including their headquarters' building.
    Debris removal and demolition continue to be a significant 
project for the public assistance. To date, the Corps of 
Engineers under mission assignment from FEMA has removed over 
50 million cubic yards of debris in Louisiana. This amount of 
debris would fill the Superdome 10 times over.
    FEMA has completed more than 10,500 home demolitions in 
Louisiana. Over 90 percent of the remaining demolitions are in 
St. Bernard and Orleans Parishes where an estimated 12,000 
demolitions are still expected. FEMA has deployed a significant 
number of resources and is actively assisting Orleans and St. 
Bernard Parishes to address delays with demolitions.
    Many city and parish departments are facing severe staffing 
problems and are operating with reduced staff. While FEMA 
cannot provide operating expenses for these offices, we have 
co-located FEMA staff with State and local counterparts 
wherever possible.
    Providing assistance to individuals is at the forefront of 
our recovery efforts. To date, FEMA has provided more than $5.4 
billion to individuals and families in Louisiana. This funding 
has provided more than 857,000 households from Louisiana with 
housing assistance for home repairs and rental assistance, and 
there are 314,000 Louisianans who have received funding to meet 
other needs including personal property, transportation 
assistance, medical and dental assistance, and other expenses 
such as moving and storage.
    In Louisiana, FEMA has housed over 87,000 households in 
temporary housing units, travel trailers, and mobile homes. In 
a sign of progress, the number of households currently living 
in temporary housing has decreased to 62,000. Eighty percent of 
the temporary housing units are in private sites where 
individuals are living in these travel trailers while they are 
rebuilding their homes.
    For predisaster renters or those without a private site, 
FEMA has constructed 115 group site parks in Louisiana. Travel 
trailers and mobile homes are intended only as short-term 
solutions. To fill the need for emergency housing, FEMA and the 
State have continued to face challenges in transitioning 
individuals back to permanent homes.
    President Bush has directed FEMA to provide an extension of 
the direct housing and financial assistance programs supporting 
the victims of Hurricanes Katrina and Rita. The new extensions 
will allow the Administration to continue to provide housing 
assistance through August 31, 2007.
    This extension will give us additional time to work with 
the disaster victims, Federal, State, local partners, and 
voluntary organizations to transition victims to more permanent 
housing.
    Our mitigation program offers opportunities to build back 
stronger and smarter. The National Flood Insurance Program has 
paid out over $13 billion against 187,000 claims in Louisiana 
alone. To date, 99 percent of all claims filed have been 
closed. We see that as a significant step toward recovery.
    The Hazard Mitigation Grant Program funding is available to 
States following a disaster to fund cost-effective mitigation 
projects. Funds may be used to do such things as floodproofing 
properties, evauating and acquiring homes. In Louisiana, over 
$1.47 billion will be available for this purpose. We will 
continue to work with the State to align this program with the 
Road Home program.
    While there are obstacles, they are not insurmountable. 
FEMA is poised to work with the State to successfully 
administer the program in a fair and equitable manner.
    Although I focus my comments on recovery programs in 
Louisiana, I would like to highlight some of our Gulf Coast 
initiatives. I am pleased to say that all of our new contracts 
in place along the Gulf Coast have been fully and openly 
competed with an emphasis on local and minority firms.
    Finally, in 2006 Congress approved an emergency 
supplemental for $400 million to FEMA for a Pilot Program that 
could identify and evaluate new disaster housing alternatives. 
Alabama, Florida, Louisiana, Mississippi, and Texas are invited 
to submit applications for what they consider to be the most 
innovative disaster housing solutions. FEMA used a competitive 
grant process to ensure projects would maximize the selection 
criteria and receive first consideration in the funding for 
those awards. HUD will manage this evaluation of the Pilot 
Program, and we look forward to learning from these pilot 
projects so that FEMA can find new ways to do emergency housing 
better in future disasters.
    In conclusion, the President is committed to the recovery 
and the rebuilding of the Gulf Coast, and FEMA will remain here 
on the ground until the job is finished. In our TROs, we have 
piloted many new initiatives, and they have contributed not 
only to the recovery of the Gulf Coast, but have also 
contributed to the retooling and improvement of FEMA.
    I look forward to your questions and discussion about 
FEMA's efforts. Thank you very much.
    Chairman Lieberman. Thanks, Mr. Jamieson.
    I thank you for the comment you made at the end. I suppose 
it is obvious, but sometimes it is important to say the 
obvious, which is that FEMA is committed to staying here on the 
ground until the job is done, and obviously, the job is not 
going to be done for some time to come, so I thank you for 
that.
    Our final witness on this panel is Gregory Kutz. His formal 
title with the U.S. Government Accountability Office is 
Managing Director, Forensic Audits and Special Investigations 
Unit. Mr. Kutz is well-known to our Committee, and I would say 
that his title, in my mind, is one of the best friends American 
taxpayers have.
    Thanks for coming to New Orleans this morning, Mr. Kutz.

 STATEMENT OF GREGORY D. KUTZ,\1\ MANAGING DIRECTOR, FORENSIC 
    AUDITS AND SPECIAL INVESTIGATIONS UNIT, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. Kutz. Thank you, Mr. Chairman, Senator Landrieu, and 
Senator Obama for the opportunity to discuss fraud, waste, and 
abuse related to Hurricanes Katrina and Rita.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kutz with attachments appears in 
the Appendix on page 133.
---------------------------------------------------------------------------
    Today I will discuss lessons learned from our work that can 
help to minimize fraud, waste, and abuse for ongoing recovery 
efforts. Given limited resources, every dollar that is wasted 
is one less dollar that is available to help those that are 
truly in need.
    My testimony has two parts: First, a summary of our past 
findings, and second, the key elements of an effective fraud 
prevention program.
    First, we estimated that through February 2006, $1 billion, 
or 16 percent, of individual assistance payments made by FEMA 
were fraudulent and improper. We also reported on fraud, waste, 
and abuse related to the use of purchase cards by the 
Department of Homeland Security.
    Some examples of our findings include: Millions paid to 
individuals using Social Security numbers belonging to deceased 
individuals; millions paid to individuals using bogus damaged 
property addresses such as above-ground cemeteries here in New 
Orleans; $12 million paid to Federal and State prisoners 
incarcerated at the time of Hurricanes Katrina and Rita; 34 
percent of the property bought by FEMA with purchase cards is 
lost or stolen, including laptops, boats, and GPS units; and 
finally, the Meals Ready-to-Eat, or MREs, that I have in my 
hand is another example of waste. Tens of thousands of these 
MREs were bought with purchase cards in 2005 to support relief 
efforts. However, today they remain in storage in a warehouse 
in El Paso, Texas. According to DHS and FEMA, they are taking 
actions to address our recommendations to improve fraud, waste, 
and abuse prevention controls.
    Let me move on to my second point, the importance of fraud 
prevention to ongoing recovery efforts. Our work across the 
government has shown that fraud prevention is the most 
efficient and effective means to minimize fraud, waste, and 
abuse. The examples that I just described are symptoms of an 
ineffective fraud prevention program.
    Examples of fraud prevention controls include validation of 
eligibility, system edit checks, and fraud awareness training. 
These controls should happen before taxpayer money is 
disbursed. Once taxpayer funds are improperly disbursed, the 
government can only hope to recover a few pennies on the 
dollar.
    Prior to implementing any fraud prevention controls, they 
should be field-tested. Why? To ensure that they are working 
appropriately and that legitimate victims are not denied 
benefits. As fraud prevention controls increase, the risk 
increases that legitimate victims will be rejected, thus a 
safety net must be in place to quickly handle exception cases.
    Although more costly and less effective than fraud 
prevention, fraud detection, monitoring, and investigations are 
also critical. Key elements of the detection process include 
data mining for fraud and the establishment of fraud hotlines. 
Aggressive investigation and prosecution of individuals who 
commit fraud sends a message that the government will not 
tolerate individuals stealing disaster money.
    The Hurricane Katrina Fraud Task Force has investigated and 
indicted over 500 individuals to date. We have referred over 
20,000 individuals that we believe committed fraud to the Task 
Force. Schemes identified through these investigations should 
be fed back into the fraud prevention program for future 
disasters.
    In conclusion, the good news is that the vast majority of 
individual assistance payments went to qualified people; 
however, our work shows that tens of thousands of individuals 
took advantage of the opportunity to commit fraud. As several 
of you have mentioned, Americans are generous as demonstrated 
by their support for victims of these disasters; however, 
continued widespread fraud, waste, and abuse will erode public 
support for these efforts.
    Effective government fraud prevention programs can provide 
the Congress and American taxpayers with confidence that fraud, 
waste, and abuse will be minimized for ongoing recovery 
efforts.
    Mr. Chairman, that ends my statement. I look forward to 
your questions.
    Chairman Lieberman. Mr. Kutz, thanks very much for your 
excellent work on behalf of the taxpayers and our government.
    Always infuriating to hear about people taking advantage of 
programs when they do not really deserve to or need to, and we 
are going to respond to the suggestions, as I believe the 
Administration has, and I will ask some questions about that to 
make sure we minimize that fraud. But thanks for your excellent 
testimony.
    Before we go to this first round of questions, I want to 
thank Louisiana Supreme Court Chief Justice Pascal F. Calogero, 
Jr., Justice Catherine D. ``Kitty'' Kimball, Justice Bernette 
J. Johnson, Justice Chet D. Trayler, who ae here, Justice 
Jeffrey P. Victory, Justice Jeannette T. Knoll, and Justice 
John L. Weimer, for hosting us today. It is an honor to be here 
in this great chamber.
    I note the presence and want to welcome our colleague in 
Congress from Louisiana, William Jefferson, as well.
    It happens that the three Members of the Committee who are 
here happen to be Democrats. This is a Committee that has 
functioned in a very non-partisan way.
    The Ranking Republican, immediate past Chairman, Senator 
Susan Collins, Republican of Maine, sends her regards. She 
could not be here today. We worked very closely on our 
investigation of governmental response to Hurricane Katrina on 
our report, which was tough, and on our recommended 
legislation, which has now passed and is being implemented to 
reform FEMA.
    We also invited Senator Landrieu's colleague, Senator 
Vitter, to be here today, but he could not be here.
    We are going to do 6-minute rounds of questions.
    Ms. Patenaude, I want to go to you first about the Road 
Home program because I know there is a lot of concern about it, 
and it stands out for being both the extension of what 
certainly seems like a lot of money from the Federal 
Government, $7.5 billion to the Road Home program, and yet the 
numbers show 101,000 homeowners applied for assistance, only 
300 have actually received funding as of last week.
    What happened? And what can we do to get that money moving 
to the people who need it?
    Ms. Patenaude. Thank you, Mr. Chairman.
    That is not an easy question to answer: What happened? If I 
can just go over the dates.
    In the spring, in April 2006, the State of Louisiana 
submitted an action plan, a disaster action plan, to HUD, and 
in that plan,they make mention of the Road Home program, but 
the details had yet to be worked out. HUD immediately approved 
that initial action plan that did provide money for 
infrastructure on May 9. On May 12, Louisiana submitted a 
detailed Road Home action plan to HUD for review, and that plan 
was approved on May 30 making those funds available.
    The Governor of Louisiana obviously had the responsibility 
for the design and implementation of the program, and policy 
decisions were made as to how that program would be 
implemented. And the original design was not the program that 
is currently being implemented.
    So the State came back to HUD with a plan in August 2006. 
We immediately turned that plan around with the approval within 
2 weeks, identified the necessary waivers, and granted those 
waivers so that the State could execute that plan.
    Chairman Lieberman. So the original design just was not 
working?
    Ms. Patenaude. The original plan, I believe, could have 
worked, but there were longer delays involved in it. It was not 
a compensation program; it was a rebuilding----
    Chairman Lieberman. Right.
    Ms. Patenaude [continuing]. Program that would have 
required additional environmental reviews. That is one of four 
areas that we do not have the authority to waive.
    Chairman Lieberman. So the revised plan was approved by HUD 
in August, did you say?
    Ms. Patenaude. Correct.
    Chairman Lieberman. All right. So here we are now at the 
end of January, and it is still only 300 homeowners receiving 
funding out of over 100,000 applicants. What is happening?
    Ms. Patenaude. The State of Louisiana actually started the 
Pilot Program in the late summer with the initial population of 
about 400 people, and the design of the program obviously took 
time, but also the ramp-up time to be able to handle 100,000 
applicants took significant time to build the systems for 
verification.
    And although we have identified some of the obstacles, I do 
not think that I am in a position to be able to explain what is 
happening. I believe that HUD has done everything to facilitate 
that program being expedited.
    Chairman Lieberman. So you would say that the delays and 
the very small percentage of people that have received 
assistance is not the fault of HUD?
    Ms. Patenaude. That is correct, Mr. Chairman.
    Chairman Lieberman. All right.
    I am going to ask Mr. Leger, who is Chairman of the Housing 
Redevelopment Task Force for the State, who is on the second 
panel, that same series of questions.
    Mr. Jamieson, tell me a little bit, because I am 
encouraged, about how you are going to be able to continue the 
housing assistance to people who hit that $26,200 cap, and, 
just briefly, if you can explain to everybody here why that is 
so significant.
    Mr. Jamieson. Senator, it is extraordinarily significant. 
The cap is talking about all moneys that FEMA can provide to 
individuals who receive direct Federal assistance, people who 
are in rental units that we are paying their monthly rental. It 
also includes other needs expenses that FEMA can provide in 
terms of direct Federal assistance.
    Chairman Lieberman. So these are people--we are talking 
about tens of thousands of people, of course?
    Mr. Jamieson. Yes, sir, we are. Right.
    Chairman Lieberman. And these are people that have been 
receiving rental assistance since right after the hurricanes?
    Mr. Jamieson. Yes, sir. That is correct. There are----
    Chairman Lieberman. I do not know if you have a number. I 
am curious about how many have hit that cap or are close to it.
    Mr. Jamieson. Sir, what we are doing is we are not looking 
at the cap, just to put it in plain English. Those folks who 
are receiving rental assistance from us, quite frankly, that is 
one of the better solutions.
    One of the stories here that is a hard story is that with 
the devastation, the housing stock, particularly rental units, 
have been completely devastated.
    Chairman Lieberman. Right.
    Mr. Jamieson. So when we find a rental unit for someone 
whose rental unit before has been destroyed, we are able to put 
them in it, we are able to continue those payments and help 
them with their monthly rental payments. We think that is the 
greatest solution.
    Now, what we have to do is that we have to not continue 
that assistance as long as the ability for those folks to 
repay, it represents a permanent housing alternative to them. 
But we are not asking people to leave, we are not terminating 
assistance for those who clearly have had their primary 
property affected, there is no housing alternative for them. We 
are continuing that assistance.
    Chairman Lieberman. Well, I appreciate that very much. That 
is a very humane and just response.
    Just for the record afterward, I am interested in knowing 
how many thousands of people here in the Gulf Coast, as a 
result of your willingness and capacity not to apply that cap, 
will continue to receive this assistance, which effectively 
stops them from being homeless. So I appreciate what you have 
done.
    Let me ask you a final question. I received a call from a 
man named Harold Shapeburger, who is the head of the 
International Association of Firefighters, represents 
firefighters here in New Orleans, when he heard I was coming 
here for this hearing. You are not going to be surprised to 
hear that the firefighters, according to Mr. Shapeburger, are 
very agitated by the dilapidated conditions in more than half 
of the fire stations in New Orleans, some of them operating out 
of trailers, etc.
    What can FEMA or any of us at the Federal Government level 
do to overcome that basic disability to carrying out a 
fundamental public safety responsibility here in New Orleans?
    Mr. Jamieson. Senator, you know that Chief Paulison, the 
fire service, there is no dearer cause to his heart----
    Chairman Lieberman. Right.
    Mr. Jamieson [continuing]. Than ensuring that we have 
public safety preserved. What FEMA can do, if there are damages 
to those buildings, those public buildings, we can create 
temporary offices and areas for them to work out of as we have 
with NOPD, in terms of their crime lab, for instance. If the 
building was damaged as a result of the disaster, we can, 
certainly through our Public Assistance Program, write a 
project work sheet and repair that building that was caused as 
a result of disaster damage.
    In some of the instances here and in the fire service, 
there is issues of our not being able to cover those basic 
operating expenses, which are fundamentally a municipal 
responsibility.
    Chairman Lieberman. Right.
    Mr. Jamieson. Anything that is disaster related, we can, 
sir, cover that under our Public Assistance Program.
    Chairman Lieberman. So you are able to--he was not talking 
to me, as I heard it, about operating costs, but it was more 
about the actual fire stations. So FEMA is able to help with 
the reconstruction or repair of those stations?
    Mr. Jamieson. Yes, Senator, that is correct.
    Chairman Lieberman. So why then at this point are there 
still more than half of the stations, I gather, that are not 
able to be used?
    Mr. Jamieson. Sir, I do not have a very specific answer to 
that question. Part of what is going on right at the moment is 
our support that is needed to help them characterize those 
damages, write those scopes of work.
    Chairman Lieberman. Right.
    Mr. Jamieson. We are doing that wherever we can. And in 
many instances, we are also doing what are called alternate 
projects, and that is, where you have a number of different 
structures that have been damaged by the storm, as opposed to 
repairing those structures, they may want to create one newer 
facility. So in some instances, they are not coming forward yet 
to us to decide exactly what they want to do, but we stand 
prepared and ready to engage with them in any of those damages.
    Chairman Lieberman. I would like to keep in touch with you 
on that one.
    Mr. Jamieson. Yes, sir.
    Chairman Lieberman. Thanks. My time is up. Senator 
Landrieu.
    Senator Landrieu. Thank you.
    Let me begin, if I could, with Mr. Powell. And begin by 
saying, I have been with you in countless meetings and in many 
hearings, and I want to thank you for your sincere commitment 
to New Orleans and to the region.
    But I do want to ask you a big-picture question because for 
all the challenges before us, this is, to me, one of the things 
at the heart of this situation. As you know in the first few 
weeks of the storm, it became apparent that the Federal 
Government in some ways had been caught flatfooted in this 
disaster. It was overwhelming all of our systems.
    Our military systems, while they did a beautiful job, there 
was some initial complications. FEMA, the Stafford Act, was 
woefully inadequate to handle the breadth of this disaster. So 
we scrambled with you to come up with a new approach or--not a 
new approach, but an added approach, and that approach came 
through the Community Development Block Grant that had been 
used before in disasters but in a very limited scale.
    Your testimony says, the Community Development Block Grant 
program was chosen because it is a well-tested mechanism that 
provides States with the greatest flexibility on how funds may 
be spent. It allows those closest to the problems to make 
direct CDBG grants. In fact, that is the greatest attribute, 
they are flexible and allow State leaders to make decisions 
where best to use the money.
    I have two problems I want to ask you about, and this will 
come in the testimony of the second panel. When we got the 
total amount of Community Development Block Grant funding, 
which was our way to move around to FEMA that was not designed 
to handle our situation to try to move money down to 
Mississippi and Louisiana, these are how the dollars came out: 
$10 billion for Louisiana, $10.4 billion, and $5.2 billion for 
Mississippi. Let me repeat that: $10.4 billion for Louisiana, 
$5.2 billion for Mississippi.
    According to every estimate I have seen, Louisiana has 
seven times the damage in terms of loss of homes, displacement 
of people, schools, hospitals, etc. If you read other charts, 
it is three times. So I have done the numbers, and they are as 
follows: If we got parity with Mississippi, assuming 
Mississippi is the right model, which I could argue, but let us 
just take your word for it and the President's word that 
Mississippi is the model--I will accept it--if we accept them 
as the model, we are either short $18 billion for Louisiana if 
you multiply by seven, or --I'm sorry--$42 billion if you 
multiply by seven or $18 billion if you multiply by three.
    Now, my question to you is: How are you delivering this 
news, and when, to the President of the United States?
    Mr. Powell. Senator, as you recall, when the CDBG was 
agreed upon as the best vehicle, as I described in my 
testimony--and you and I had numerous conversations about--
because of the flexibility that the States have to spend their 
money, I still believe that was the right decision.
    Congress allocated the first tranche of CDBG money. 
Congress restricted the CDBG money that no State would receive 
more than 52 percent. Thus, because of that restriction made by 
Congress, we came back down to Louisiana, sat down with the 
leadership in Louisiana, determined what the needs were as it 
related to the destroyed housing, built consensus, and 
determined that there was an additional $4.2 billion needed for 
housing in Louisiana.
    Senator Landrieu. Can I stop you right there----
    Mr. Powell. Sure.
    Senator Landrieu [continuing]. Because that was an honest 
answer, but I need my colleagues, because the basis of this 
record has to begin with a fundamental understanding, despite 
this Senator's repeated protest and the protest of our 
delegation, our voices were not heard. And there was a cap, an 
arbitrary cap that cannot be justified by any objective measure 
of the damage.
    And then our State leaders, both at the local and State 
level, were given the bad news that you have to build a model 
with a third of the money and do not complain about it and just 
go about doing it. And that is the card--the hand that was 
dealt to us. I have never accepted that hand, and I will not 
accept it today.
    Now, having said that, I want to move to some things that 
we can help, given this situation, to move our people through, 
but I do expect that message will be brought to the President 
and the Office of Management and Budget. And I just want to 
say, if I can have your allowance, Mr. Chairman--you are very 
gracious with me with this time. But I am also going to deliver 
a message to the President that when he presents a supplemental 
spending bill to rebuild Iraq, which we expect to receive 
shortly, that there better be some additional funding to 
rebuild Louisiana and Mississippi. Let me just ask this.
    Mr. Jamieson. Senator, let me----
    Senator Landrieu. Just one thing.
    Chairman Lieberman. Come to order.
    Senator Landrieu. I just want to ask a second thing. FEMA 
and HUD have been given a tremendous responsibility, and I 
realize that your agencies that you had before the storm were 
not sufficient, and you are struggling under how to operate 
together.
    Are you located together right now in the State? Are FEMA 
and HUD located in a building together where you can work, or 
are you still in your separate buildings?
    Mr. Jamieson. Senator, during the early days of response, 
FEMA established us a joint field office----
    Senator Landrieu. But right now where are you?
    Mr. Jamieson. We are on the West Bank in Orleans, in 
Orleans Parish, and Lake Charles and then Baton Rouge.
    Senator Landrieu. Where is HUD?
    Ms. Patenaude. Our HUD office is here downtown, Senator 
Landrieu.
    Senator Landrieu. OK. One thing I might suggest, since this 
is unprecedented, is we figure out a way to get these offices 
at the Federal level at least either in the same building, or 
in a closer proximity, also with SBA about where they could 
work better because our people are really depending on that.
    Third, one of the things we would like to correct--and the 
State will testify to this, and the city, that will really 
help--is we also were shortchanged by not having the 
opportunity to get our 10 percent waiver. Now, first of all, we 
are grateful. Normally in a disaster--everybody should know--
the locals have to pay 25 percent, the Federal Government pays 
75 percent. If it is bad, we are supposed to pay 10 percent, 
the Federal Government pays 90 percent.
    But our problem, this disaster, Mr. Chairman, is so huge, 
and the numbers are so huge, $110 billion, that both 
Mississippi and Louisiana are struggling with our 10 percent. 
And it has been waived for Florida. It was waived for every 
storm when their proportionate per capita was much less. And my 
staff will hand me these numbers, but I vaguely remember one 
storm being $139 per capita. Our storm is $6,000 per capita.
    So the 10 percent, Mr. Powell, was waived for other storms, 
but we still have the added responsibility to pick up a $1 
billion match. We have asked--first of all, we have told you we 
cannot afford it. Nobody listens to us. So we said, OK, well 
maybe we will pay it. Let us just write you a check for $1 
billion, because we have $2 billion sitting in an account in 
Baton Rouge, our surplus money, which is a whole other story, 
but, no, I am sorry, we cannot receive your check.
    You have to file--how many, Walter--45,000 individual 
reimbursement documents in order for us to receive your 10 
percent match. So I am going to say this for the record: I am 
going to ask you to forgive the 10 percent, which we have every 
right. If you will not, I am going to demand that you allow us 
to pay it globally because, otherwise, the taxpayers are going 
to really be ripped off, Mr. GAO, if I have to go through every 
single document to justify 10/90, 10/90, 10/90. It is a horror 
story that our people are living through.
    I have run out of time, but obviously I have many other 
questions, Mr. Chairman.
    Chairman Lieberman. And we will do a brief second round of 
questions.
    Thanks, Senator Landrieu. Senator Obama.
    Senator Obama. Thank you, Mr. Chairman.
    Mr. Powell, I just want to make sure I understood a bit of 
the testimony that--back and forth between you and Senator 
Landrieu.
    Am I correct that statutorily you are not able to ensure 
that Louisiana is getting the same amount of per-capita 
spending or per-damage spending as Mississippi is, that was 
locked into the statute originally authorizing the expenditure 
of money?
    Mr. Powell. The original CDBG money, as approved by 
Congress, restricted no State could receive more than 52 
percent, and that is the reason we came and worked with the 
local people to determine how much more money the State of 
Louisiana would need in CDBG money. We went back to the 
President and told him that number was about $4.2 billion. 
Under his leadership, under his insistence, Congress approved 
the additional $4.2 billion for the State of Louisiana to bring 
it up to $10.4 billion.
    Senator Obama. Right. But I guess what I am understanding 
from Senator Landrieu is that despite that additional $4.2 
billion----
    Senator Landrieu. It is still short.
    Mr. Powell. Correct.
    Senator Obama [continuing]. That it is still substantially 
short relative to what would be fair if you just looked at the 
amount of damage and you allocated the money proportionately.
    I am correct, Senator Landrieu, that is the argument you 
are making?
    Senator Landrieu. Yes.
    Mr. Powell. Well, we responded, again, when we came back to 
Louisiana to look at the facts, the damage. I am an old banker.
    Senator Obama. Right.
    Mr. Powell. And so the integrity of the numbers were very 
important to our office. We came back, looked, and determined 
what were the actual damages in Louisiana. We worked very 
closely with representation from the LRA to determine what the 
damages were. We came to a consensus that the damages were X. 
We did the multiplication----
    Senator Obama. OK. Well, let me just----
    Mr. Powell [continuing]. And so we came back.
    Now it was based upon the facts, not based upon how much 
money some other States got. It was based upon the facts.
    Senator Obama. Well, fair enough. I just want to make the 
record clear. Senator Landrieu, as I understand it, is 
asserting that there was much more damage in Louisiana than 
Mississippi, and if you look at the amount of money allocated 
between Louisiana and Mississippi, that Louisiana's been 
shortchanged.
    Now, what I am hearing from your testimony is you believe 
that the $4.2 billion----
    Mr. Powell. Additional money.
    Senator Obama. Additional money that was provided actually 
put the two States on even footing relative to the damage that 
they experienced.
    Either Louisiana did not get a sufficient proportion of the 
money, or based on your best assessment after the $4.2 billion 
was allocated, it did. And I am just asking which do you think 
that is?
    Mr. Powell. The latter.
    What I am saying is, it was based upon the actual damages, 
not based upon the comparison of other States. The original 
CDBG money that Congress allocated--because of the shortfall, 
that is when we came back and worked with the people in 
Louisiana, LRA, looking at the facts, how many homes were 
destroyed, what was the infrastructure, how much additional 
money would Louisiana need to meet their damages, meet their 
needs, that number was $4.2 billion.
    Senator Obama. All right. Mr. Powell, I am running out of 
time, so I do not want to belabor this. I just wanted the 
record to show there seems to be a factual dispute here because 
what I am understanding Senator Landrieu to suggest is that 
experts who have looked at it have concluded that there was far 
more damage in Louisiana, and yet the amount of money that is 
being allocated to Louisiana, as opposed to Mississippi, is not 
sufficient to deal with that disproportion of damage that was 
created.
    Now, what I think you have just testified is that based on 
the facts and your assessment on the ground, you think that, 
actually, the allocation is fair. I think it is important at 
some point for us to pursue this because we may have 
opportunities to modify this statute, and I want to establish 
that for the record.
    Mr. Powell. We have also been very responsive in saying, 
should there be needs for more money, show us evidence of that, 
let us understand those, and we will be happy to discuss that.
    Senator Obama. Right.
    And I want to make clear for the record, by the way, I do 
not think that Mississippi is unduly benefiting in the sense 
that they have got a lot of work to do, too, and there are a 
whole bunch of small towns in Mississippi that have been 
devastated, and they are still having problems rebuilding. So I 
am not interested in a situation where we are robbing Peter to 
pay Paul; I am just suggesting that it appears that Louisiana 
may be experiencing a shortfall in terms of the amount of 
resources.
    Let us focus on the resources that have been allocated. 
There has been a lot of discussion about the Stafford Act. 
Senator Landrieu's point, I think, is fairly straightforward.
    I am reading from a Wall Street Journal article just this 
weekend discussing the fact that: 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 percent 
match from local governments under the theory that localities 
will not misspend if their money is also on the line. 
Similarly, FEMA will cover only 75 percent of a project's costs 
until the job is complete. The Stafford Act has been waived in 
the past. It did not apply to Manhattan in September 2001 or 
South Florida following Hurricane Andrew, but it remains in 
place along the Gulf.
    Why have we not shown more flexibility on that?
    Mr. Powell. I think there are two things. The 
Administration has shown flexibility. The Federal Government 
paid for 100 percent of the debris removal in most of the 
parishes, most of the hardest hit parishes in Louisiana, as 
well as some in Mississippi. So I think there was some 
flexibility.
    Second issue is, there was about $1 billion of the CDBG 
money that was given to Louisiana that could be used for the 
match, for the local parishes.
    Senator Obama. I would just recommend you take a look at 
this article because it is depressing to see the degree to 
which local communities are having an extraordinarily difficult 
time coming up with the match money. Even when they come up 
with the match money, there is great difficulty processing, 
just to get basic infrastructure in place. And it strikes me 
that whatever flexibility has been shown, it is not enough 
flexibility.
    I know I am over my time, but I am going to go ahead and 
ask more questions. Hopefully we will have a final round.
    I want to just focus a little bit on the day-to-day 
experience of ordinary homeowners in dealing with this 
devastation because obviously if you go into the 9th Ward or 
St. Bernard Parish or other areas, it is a brutal situation for 
ordinary homeowners. They are paying rent to live somewhere 
else; they are still paying their mortgage; they are still 
paying flood insurance because they are afraid that if their 
insurance lapses that they will not be able to get insurance in 
the future. In some cases, the insurance companies, if they 
were lucky enough to have private insurance, have not paid up 
the way they should, and they are tied up in litigation. It 
appears that basic infrastructure in many of these communities 
is still not forthcoming. Not to mention the problems that the 
criminal justice system is still having, which I think are 
apparent to many in the area.
    For the individual homeowner, for the average homeowner who 
is living in a trailer, maybe coming back and forth from 
another city, what prospects do they have to see some immediate 
improvement in the rebuilding of their homes given that, for 
example, the Road Home program seems to be clogged, there does 
not seem to be that much movement in terms of long-term 
housing? What are we doing to actually kick-start the process 
of getting folks back in their homes in these communities?
    And I am happy for anybody to answer it. If you want to 
start, Mr. Powell, and then we can maybe get an answer from HUD 
and FEMA as well.
    Mr. Powell. That is a tough question and a complex 
question.
    Let me speak to three or four issues. One is, as it relates 
to housing--I think housing is very important to everybody in 
Louisiana--as we talked about the CDBG money and the Road Home 
program, under the Governor's Road Home program, that money is 
set aside to reimburse up to $150,000 for those people in 
Louisiana that have lost their homes. Our office sits down with 
all the components of the Road Home program on a weekly basis 
to make sure that the Federal Government is not an impediment 
to anything that would restrict the Road Home program getting 
money into the hands of the recipient, but at the end of the 
day, it is a contractual obligation between the State, and in 
this case, ICF. It is a contractual obligation. We do 
everything we can to make sure that we can speed that up, 
including talking to the contractor, talking to the locals, 
talking to the State government.
    The second thing is, the Congress, under the leadership of 
the President, has some tax incentives for affordable housing. 
I think we are beginning to see some of those begin to start. I 
talked to a developer last Friday that is going to build 1,000 
units in New Orleans because of the tax incentive that the 
Federal Government has allowed developers to use.
    I think, also, the basic core infrastructure, the project 
work sheets, as someone testified, there is about $6.3 billion 
estimated for the State of Louisiana; 71 percent of that has 
been obligated to the State. Only 44 percent has come from the 
State to the locals. That is critically important.
    SBA has committed just in the State of Louisiana $6.3 
billion to assist homeowners in small businesses. As also the 
testimony--the flood insurance has paid a tremendous amount of 
money to homeowners in Louisiana.
    I would also say that we are beginning to see--and I think 
it will be revealed this week--the Unified New Orleans Plan, 
which I think is critical to the rebuilding of New Orleans. But 
I think the Federal Government has laid the foundation, and the 
CDBG money and the public assistance moneys and tax incentives 
to rebuild the Gulf Coast.
    Senator Obama. Thank you, Mr. Chairman. I know we are 
running out of time. We will have the second round of 
questions.
    I just want to point out--and I know you are deeply 
concerned about this--that this money that has been allocated 
is still not reaching ordinary folks here in New Orleans and in 
Louisiana, and until it does, all the numbers and the meetings 
and the planning that is being done is inadequate. So I know 
you have been working very hard on this, and I am not trying to 
single you out.
    Mr. Powell. I share your frustrations.
    Senator Obama. Well, you and I, I can only imagine, are not 
as frustrated as the folks who are living in those trailer 
homes.
    Mr. Powell. Right.
    Chairman Lieberman. Thanks, Senator Obama. You are 
absolutely right, and that is part of why we came here today.
    Because, as I said at the outset, the first reactions up 
until now by the Federal Government have not been miserly, they 
have been generous, $110 billion. I do not mean it is up to the 
need, but a lot of money has been put forth from the rest of 
America. And the really frustrating part, and I know you feel 
it as we do, but the recipients are the worst victims of it. It 
is just not moving quickly enough, and I know some of this is 
the obstacles we set up; that is, the government sets up to 
avoid waste and fraud. But we have got to figure out how to 
honorably and efficiently get money out to where Congress and 
the President want it to go.
    Mr. Powell, I wanted to just put this in this context in 
terms of time. I spoke to somebody recently who was working on 
recovery from Hurricanes Katrina and Rita for the Federal 
Government perspective who said nobody in America would 
probably believe this, but we are going to be involved in this 
for probably a decade, for 10 years, to really do a recovery. 
And this was not a disaster, but a catastrophe.
    Does that sound right to you? Is this--will it take a 
decade to get New Orleans and the Gulf Coast back to where we 
want them to be?
    Mr. Powell. Senator, I do not know. I just know that this 
President is committed to stay as long as necessary to rebuild. 
It is complex. It is, as you said, a catastrophic event that is 
undescribable. I do not know, but I do know that our office 
every day we wake up making sure that every component, every 
department, every agency of the Federal Government is doing 
what they can and should be doing to assist the long-term 
rebuilding of the Gulf Coast.
    Chairman Lieberman. I appreciate that.
    But I guess maybe I would just ask this question because 
you talked about the Administration: You would say that the 
Federal Government will continue to be involved in the recovery 
of New Orleans and the Gulf Coast beyond the next 2 years of 
the Bush Administration----
    Mr. Powell. Absolutely.
    Chairman Lieberman [continuing]. Right?
    Mr. Powell. Yes, sir.
    Chairman Lieberman. Mr. Jamieson, how does that 10-year 
projection seem to you from the FEMA point of view?
    Mr. Jamieson. Senator, I think it is reasonable. Other 
large disasters, Hurricane Andrew, Northridge earthquake, we 
have had--certainly FEMA has had a presence out there. We have 
talked a lot today about the money that has flowed through the 
Public Assistance Program, and quite frankly, we are just 
starting now with the bricks-and-mortars phase of that. So the 
monitoring of those projects, the actual building of those 
projects, we will be here to see those through, working with 
our State partners.
    Chairman Lieberman. OK. I think that is very important for 
us to have said. It is important for us in Congress to 
understand that this is a commitment and a responsibility that 
we have to the Gulf Coast and New Orleans that will go on, in 
my opinion, that is right, for at least a decade, and we have 
got to be able to educate our constituents around America that 
this is the responsibility we have to part of the American 
family that suffered a grievous loss, and it is not going to be 
done. Patience comes hard often in matters like this.
    What we will see in our tour that we will take afterward is 
not on the mind of the people of our country understandably. 
They have gone on to other matters. They remember the horrible 
suffering that they saw in the first days after landfall, but 
it is our responsibility, and our Committee takes it on as 
leaders, to not turn away from the continuing need of this 
region.
    And I thank you, Mr. Powell and Mr. Jamieson, for being 
direct and honest about the length of the commitment that is 
going to be required by the Federal Government.
    Senator Landrieu.
    Senator Landrieu. Let me do this quickly.
    Mr. Preston, thank you very much. I know you were not the 
SBA director when this catastrophe happened, and because I hope 
in large measure of our delegation expressing our views of the 
previous administrator, he is no longer there and we have a new 
administrator and you are it, and we are happy to work with 
you.
    But one of our major problems with SBA is that even though 
you have given out a good number of your loans, it seems as 
though--and this is what I would like to resolve--when people 
get their Road Home money, and these average grants are, let us 
say, $78,000, it is a maximum of $150,000, they are being 
required to pay back their SBA loan. Now, I have written 10 
letters and had many meetings on this subject, and I am 
determined to get this changed.
    If people have to pay you back and then pay some of their 
back credit card bills, there is not going to be any money left 
to build any homes, and I have got a quarter of a million of 
them to build. So I need you to answer: Why are you requiring 
them? Is it something we are requiring of you, and if so, what 
would you recommend for us to change?
    Mr. Preston. Yes. Thank you for the question, and also I 
would just like to thank you and the support your staff has 
given us in understanding the issues as you see them, Senator 
Landrieu.
    We are, under both the Small Business Act and under the 
Stafford Act, required to look at what is called a duplication 
of benefits calculation. We can extend loans to people for 
rebuilding of real estate and for personal property on the 
residential side to the extent that they have not already been 
compensated for that damage. So for example, if there is 
$100,000 loss on a home and the combination of the SBA loan and 
a grant exceeds that, a portion of that grant needs to repay 
the loan.
    Now, one of the issues I want to address--and this is 
something that concerns me very much; I have heard it from 
people down here, as I have done town halls down here; 
certainly I have heard it from your staff--is that it is very 
important that we understand that the original estimates that 
were made for the calculation of these loans do not always 
reflect the reality in the marketplace today in terms of cost 
to rebuild.
    So for example, we may have done a calculation a year ago 
to say the damage was $100,000, when in reality today it is 
$120,000 or $130,000. So we have done a number of things to 
address that. First, we have taken a look at external 
indicators, and we continue to increase our cost estimates to 
accommodate what we think the market is saying today. That 
expands the total benefit for the disaster victims. It reduces 
the amount of the loan they would have to repay.
    Second, to the extent that it is still not sufficient, 
every person who gets a Road Home grant we call; we explain the 
benefit to them; we let them know the benefit has been 
expanded; and if it is still insufficient, we allow them to 
come back to us to show evidence that they need more money, and 
we will work with them on that.
    Senator Landrieu. OK. And let me say for the record, that 
is why when you read the newspaper and they say how 
dissatisfied people are, it is because they have been waiting 
for a year and a half, Senators, to get a check to help them 
only to be told before they walk out the room, they have to cut 
a check either to their mortgage holder or their banker for the 
mortgage or the SBA for the loan they have. No wonder people 
are complaining and the articles are in the paper.
    But thank you for what you are doing, but let me say this 
for the final, when we created the Community Development Block 
Grant--and you can go back and read the congressional 
testimony--at least from our delegation and some Republicans in 
Congress as well and Republicans in our delegation, it was 
meant to be in addition to everything that had been created 
because we recognized that what had been created was not 
working. So it was not Congress' intention--and I have 
challenged that phrase that you cannot duplicate benefits--we 
meant for these benefits to be duplicate because we knew that 
what we were giving people was not enough. We put CDBG on top 
only to be trapped in the Stafford Act--no duplication.
    Now, I have as good a lawyer as you do, but I am tired of 
talking to my lawyers. And I am going to be talking on the 
floor of the Senate to get this finished because it was never 
Congress' intention to get us caught in that--that is a general 
phrase--and you do not want people double-dipping. I understand 
that. But this was a meant double-dip because the one dip was 
not enough. You see what I am saying? We knew it was not 
enough, so we made a second dip, and now we cannot get to the 
second dip.
    But I have to ask one more question. This is for FEMA. This 
is just one little example, but it is systematic. Peebles 
School and Henry Elementary School, two elementary schools not 
in Orleans Parish--one is Vermilion and one is Iberia--to give 
the scope of this disaster, miles away from where we sit, there 
are two little elementary schools--there are hundreds of 
schools in this condition--your people told them 6 months ago 
that you would rebuild their schools. I went down and cut the 
ribbon, as any smart politician would do, to say thank you, 
FEMA's done a good job, trying to be positive, went down to 
these schools. Six months later my phone rings and says, FEMA 
said they are not building our schools.
    Now, tell me: How do you change a work order and what gives 
you that right?
    Mr. Jamieson. Senator, this is clearly an example of where 
we had some folks out there who were inexperienced. And Peebles 
Elementary School, what we have to do is if there is 50 percent 
of the rebuilding cost of that school, we can replace that 
school. The inspectors who were out there told the school 
officials that the school would be replaced, that the damages 
were over 50 percent, and quite frankly when we got experienced 
inspectors in there, we were not able to come close to that 50 
percent threshold.
    But I will say that we are able to put temporary school 
facilities there; we are assisting with the rebuilding of that 
school at a different location.
    The school officials will be able to sell the property 
value for where they are now, use it toward that other school, 
and all of the costs of the repairs that would go into that old 
school will be able to be attributed to the rebuilding of the 
new school.
    Senator Landrieu. OK. My time is up, and I thank you, but 
we are going to press that issue for those two schools and the 
many others in their same category.
    Chairman Lieberman. Thanks, Senator Landrieu.
    And I note for the record that the Stafford Act is 
specifically part of the jurisdiction given to the new 
Subcommittee we have created that Senator Landrieu will be 
chairing, so I presume--I know you will get into that.
    Senator Obama.
    Senator Obama. Let me ask a question to Mr. Jamieson.
    It was recently announced that FEMA would be cutting off 
100 percent funding for debris removal in temporary facilities 
in the five most damaged parishes in southeast Louisiana and 
that State and local officials would have to start picking up 
the tab on January 1, 2007.
    Now, my understanding is there is still thousands of homes 
that need to be demolished and removed.
    Why are we cutting off aid now? If I am not mistaken, this 
was not done after September 11, it was not done after 
Hurricane Andrew. What is different here?
    Mr. Jamieson. Senator, it is important to say that we are 
not cutting off aid. We are working with the city officials on 
the demolition process. There are very difficult issues there 
with homeowners in terms of right of entry, and that is just 
individuals struggling with whether or not they want their 
properties to be demolished and how they will be compensated if 
they are demolished.
    Senator Obama. All right. So the report was incorrect that 
you are cutting off the funding?
    Mr. Jamieson. No, sir. The 100 percent for debris removal 
did end on the end of December. It moved to a 90 percent, 10 
percent cost share. As we have indicated before, that CDBG 
dollars----
    Senator Obama. So this is part of the Stafford Act----
    Mr. Jamieson. Yes, sir, it is.
    Senator Obama [continuing]. Issue that we have been raising 
generally?
    Mr. Jamieson. Yes, Senator. Yes, it is.
    Senator Obama. OK.
    So I am still not clear why we have shifted to that 10 
percent at this particular juncture in time. Was the sense that 
somehow New Orleans was in such great shape at this point--
these parishes were in such good shape that we did not need 
to--that we could go ahead and sock them that extra 10 percent?
    Mr. Jamieson. Well, Senator, I do not think it is socking 
them the 10 percent. Literally, within the State, over 90 
percent of the debris has been picked up, and 100 percent by 
the Corps of Engineers.
    Senator Obama. Why not just finish the job I guess is what 
I am wondering, why ask for the 10 percent at this point? Is it 
just a matter of principle or--why not just continue the 
waiver?
    Mr. Jamieson. Not so much a matter of principle, Senator, 
as it is a partnership with our State partners. That is not 
necessarily getting passed on to the local governments. The 
State has agreed to pick up that 10 percent.
    Senator Obama. OK.
    Mr. Jamieson. You can use Federal dollars to pay for that 
10 percent match, but it is an indication that this is not 
strictly a Federal rebuilding effort; it is a partnership with 
State and local governments.
    Senator Obama. OK.
    Ms. Patenaude, I would like to just ask quickly about HUD 
and the Disaster Voucher Program. My sense is that there have 
been some significant waits in the Disaster Voucher Program. We 
are using essentially the Section 8 model when there is just 
not a lot of rental housing, period, here in the area. And so I 
am just wondering how is that program going? Is this a program 
that your office is going to continue to rely on as an approach 
to getting people in permanent as opposed to temporary housing?
    And while we are on it, why don't you go ahead and talk 
about the fact that a lot of public housing now is being razed, 
but it is not yet clear what plans exist to house those persons 
who previously lived in those units. So could you just talk a 
little bit about those issues?
    Ms. Patenaude. Thank you, Senator Obama.
    I am not the Department's subject expert on the matter of 
public housing, but I will attempt to answer your question to 
the best of my ability.
    Senator Obama. OK.
    Ms. Patenaude. The public housing issue, that is in 
litigation right now, so what I can tell you is that the 
Department--HANO is in receivership, HUD is running the Housing 
Authority of New Orleans--has rehabilitated 2,000 of the units. 
Prior to the storm, there were 7,000 units, but 2,000 of those 
units were not occupied. To date more than 1,000 families have 
returned and are occupying those units.
    On the Disaster Voucher Program, the Congress--I believe 
that was part of the first supplemental. The Disaster Voucher 
Program was developed to assist those families that were 
currently receiving HUD Section 8 assistance. That 
supplemental, I believe, was the only supplemental for the 
Disaster Voucher Program.
    I am just going to look to Mr. Powell for confirmation on 
that.
    Mr. Powell. That is correct.
    Ms. Patenaude. And as Mr. Powell stated earlier, the Road 
Home program, the grant component to homeowners is only one of 
four components. So we have the low income housing tax credits 
that will develop future affordable housing units, including 
public housing, and they will be using CDBG to leverage that. 
We have a small rental program in which landlords will be given 
incentives to keep rents affordable. And the Road Home is 
starting to accept applications today on that program for 
landlords to apply. So there are several components to the Road 
Home program, not just the 100,000 families that are eligible 
to date for the grant.
    Senator Obama. Well, it sounds like we may need to talk to 
somebody who is specifically in charge of some of these issues 
to get more details.
    I know I am out of time, but I want to just ask one last 
question to Mr. Kutz. I am very pleased with the work that your 
office has done in terms of ferreting out waste and abuse. I 
want you to address what has been a larger theme in some of the 
testimony and hearings and some of the reports and articles 
that I am reading, and that is: How do we appropriately strike 
the balance between wanting to prevent fraud and abuse and the 
risk of creating a bureaucracy that is so cumbersome that 
ordinary folks who are just trying to access help to rebuild 
their lives can do so?
    The fraud and abuse that I have been most concerned about 
has to do with, for example, no-bid contracts, tarps that are 
overbilled by 50, 100, and 150 percent, the Federal Government 
overpaying on a whole host of issues. I will not belabor some 
of these points that I have made to FEMA directly.
    On the other hand, I would hope that we have got a way of 
dealing with fraud and abuse that does not leave people waiting 
for a year or 2 years to get applications processed. And I am 
wondering whether you just have some suggestions in terms of 
best practices based on what you have seen in terms of what are 
useful anti-fraud and abuse provisions and steps that can be 
taken that do not hinder our ability to help legitimate small 
businesses or homeowners in their effort to rebuild their 
lives.
    Mr. Kutz. Yes. We do not believe that there is necessarily 
a trade-off between having effective fraud prevention and 
getting money quickly to victims, and so oftentimes when you 
hear about delays, it is issues related to planning, human 
capital, ineffective processes, or lack of automated and 
integrated systems. So we certainly believe that if you have 
those types of things that you can do both because it is just 
as important to protect American taxpayers----
    Senator Obama. Absolutely.
    Mr. Kutz [continuing]. As it is to get money to victims. 
Both of those are important things because we want to see 
support from the public continue for these recovery efforts.
    Senator Obama. Does your office give advice to some of 
these other agencies in terms of how to set up those systems? 
Because I completely agree with you that there should be no 
contradiction, and yet I think oftentimes prevention of fraud 
and abuse is used as the excuse for failing to provide prompt 
customer service to folks who need help.
    Is your office involved with helping to facilitate and 
execute this planning and putting automated systems in place 
and so forth?
    Mr. Kutz. Yes, I would agree it is used as an excuse 
oftentimes to cover up for bigger problems. But, yes, we have 
issued, with respect to the work we have done so far, dozens of 
recommendations to the Department of Homeland Security and FEMA 
that can get an effective fraud prevention program in place and 
get money quickly to disaster victims. And we work with their 
contractors, too, like ChoicePoint, who they are using to do 
some of the automated up-front checks because one thing you 
should understand, some of these verifications can be done in a 
matter of seconds, so it is difficult to understand how things 
can get bogged down.
    Senator Obama. How from a matter of seconds it ends up 
being three or four----
    Mr. Kutz. Or 9 months or a year----
    Senator Obama [continuing]. Weeks, months, years?
    Mr. Kutz. Because, again, Social Security numbers can be 
validated instantaneously, properties can be validated 
instantaneously, and matches can be validated. So I mean, that, 
again, is something that needs to be worked on.
    Senator Obama. Thank you for your indulgence, Mr. Chairman. 
I thought that is an important point to get on the record so 
that these issues do not get confused.
    Chairman Lieberman. Thanks, Senator Obama, very important 
point. I appreciate the exchange.
    I thank the witnesses very much for your testimony this 
morning. Thank you for what you do every day. You are our 
representatives. You are the people charged with the very 
difficult task of implementing and realizing the hopes that the 
Federal Government has to help the Gulf Coast recover. And as 
we said a moment ago, this is not a year's work; this is many 
years' work.
    I want you to know that this full Committee and 
particularly Senator Landrieu's Subcommittee are very eager to 
do at least two things: First, is to continue to oversee how 
these programs are working, and the second is to be there for 
you, for the residents and leaders of the Gulf Coast. Let us 
know when you think something is not working, and let us figure 
out how we can work together to produce results. That is what 
we are all about.
    We thank you for your testimony today.
    We will probably want to come back and visit with you in a 
few months either here or in Washington, and then I know the 
Committee and Subcommittee will return to New Orleans and the 
Gulf Coast regularly. Thanks for your testimony. Thanks for 
your work.
    I will call the second panel, the Hon. C. Ray Nagin, Mayor, 
City of New Orleans; Walter J. Leger, Chairman of the Housing 
and Redevelopment Task Force of the Louisiana Recovery 
Authority; and Suzanne T. Mestayer, Chairman of the Board of 
Greater New Orleans, Inc.
    I think the three of you heard the first panel. I want to 
restate that this is not the beginning of the end of the 
interest of our Committee; this is the beginning and the 
continuation of the interest the Committee has had through our 
investigation report, legislation, but, again, we know, as I 
said, this is a long journey we are on together, and your role 
for State and local government is critically important to it, 
so we thank you for being here.
    Mayor Nagin, good friend, welcome and appreciate your 
testimony now.

 STATEMENT OF HON. C. RAY NAGIN,\1\ MAYOR, CITY OF NEW ORLEANS

    Mayor Nagin. Good morning, ladies and gentlemen of this 
Committee. I am C. Ray Nagin, Mayor of New Orleans, one of 
America's most beloved and culturally distinctive cities and a 
city which is facing the challenge of recovering and rebuilding 
after the worst natural and manmade disaster to occur in the 
United States of America.
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    \1\ The prepared statement of Mayor Nagin appears in the Appendix 
on page 152.
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    I am also here representing my other parish leaders, the 
parish presidents from the damaged areas. We have similar 
challenges, and this story is not unique to New Orleans but is 
one that is being experienced in just about every parish that 
has suffered some form of devastation.
    To the Chairman, Senator Lieberman, to Senator Landrieu, 
Senator Obama, distinguished Members and guests of the U.S. 
Senate Committee on Homeland Security and Governmental Affairs, 
thank you for coming to New Orleans to continue your support 
for the rebuilding of our city. I also applaud the actions you 
took to establish subcommittees that will focus more thoroughly 
on recovery and preparedness issues.
    I am eager to work with the Disaster Recovery Subcommittee 
under the leadership of Senator Landrieu to better coordinate 
the recovery of this area.
    I would also like to thank the American people and people 
all over the world for the generosity they have shown in 
responding to our needs with donations, supplies, and human 
labor to help us restore our city and our hope.
    In the spirit of restoration, let me take a few moments to 
describe the economic conditions and the progress that was 
taking place pre-Katrina, as we now refer to those times before 
the event. I also would like to remind you that we are 5 months 
from the next hurricane season that will start shortly.
    Prior to Hurricane Katrina, New Orleans had a population of 
455,000 residents, more than $3 billion in construction 
activity, 215,000 housing units, and a viable and growing 
Central Business District. Tourism, which has always been the 
main economic driver of the city, hit a record with 10.1 
million visitors coming to the city each year and thousands of 
people cruising from our port.
    Adding color and vitality to our city was Hollywood South, 
one of the newest and most exciting activities taking place in 
our city. It was rapidly making its mark, bringing in 
multimillion dollar films to the Crescent City.
    The economic landscape was also looking better for working 
class families. We moved 38,000 people off the poverty rolls in 
the city, and an estimated 40,000 businesses were in operation, 
representing $8 billion in annual revenues.
    I have just mentioned a few indicators showing that we were 
moving New Orleans in a positive direction, and as far as we 
were concerned, the future was positive. Then Hurricane Katrina 
hit, and that happened 17 months ago.
    Where are we today? Today we have been able to overcome 
some obstacles to stabilize our city so that our residents can 
return if they choose to or have the ability to return. Since 
the flood, we have undertaken many critical infrastructure 
repairs that most cities take for granted, which include street 
light replacement and repairs of over 7,000 street signs and 
12,000 potholes and counting. Utilities have been restored, the 
critical utilities to all sections of the city.
    Hurricane Katrina also led to the largest cleanup in U.S. 
history. I think those statistics have been already quoted. To 
date more than 90 percent of storm-related debris has been 
removed from the city, and over 8,000 vehicles have been towed 
from public right-of-ways.
    The New Orleans Recreational Department sustained more than 
$60 million in damage to parks and facilities, and today we 
only have four multi-service centers, 33 playgrounds, and two 
stadiums that are now open for our children, senior citizens, 
and the like.
    Because of this experience, New Orleans is in a different 
place than it was in 2005. We cannot use traditional government 
and business methodologies in a post-Katrina environment and 
expect to successfully expedite this recovery. The executive 
level of city government has been reorganized to reflect a 
paradigm shift that has occurred in this city and this region. 
In addition to operations, planning and development, and law, a 
new Office of Recovery Management has been added to my 
executive team.
    In addition, we are focusing our own limited funding in a 
direction that will speed up the recovery and the rebuilding 
process in the city to aid working families, seniors, and small 
businesses. The top priorities for this Administration are 
recovery, public safety, repopulation, infrastructure repair, 
responsible fiscal management, and the enhancement of the 
quality of life of our citizens.
    Today, we maintain a very delicate balance of all of our 
limited general fund dollars. We have produced a 5-year budget 
plan that keeps costs in line with spending, ensures 
responsible management of the community disaster loans, and 
focuses on responsibility and realistic budget initiatives 
which center on public safety and recovery of our city.
    Our population has grown steadily over the past 17 months 
since the storm. According to GCR, a local firm, and the 
University of New Orleans' survey, we estimate there are now 
between 230,000 and 250,000 people living in New Orleans.
    I have committed to leveraging the limited resources we 
have that are available to accelerate our recovery. To that 
end, we have launched several new programs to make it easier 
for citizens to repair their homes so that they can return.
    Recently, the One New Orleans Road Home Fast Track Program 
was launched to provide our citizens who are registered with 
the Road Home program with no-interest $50,000 expedited loans 
that are administered by two local banks in this area.
    We have taken $11 million in CDBG money that comes to us 
annually, we have direct funding from HUD on an annual basis, 
and we have leveraged that 5-1 to create a pool, a self-
replenishing pool.
    Other programs will provide assistance to seniors and low 
to moderate income families for gutting, remediation, and 
demolition. Our target is 5,000 homes for gutting and 
remediation and 10,000 demolitions by year end.
    Our new Office of Recovery Management is a centerpiece of 
our recovery efforts. It will guide recovery and set 
strategies. It is led by a world renowned recovery expert, Dr. 
Ed Blakely, who is here with us today. It also will coordinate 
all Federal funds for the parish and will interact with and be 
the primary contact for entities such as the Louisiana Recovery 
Authority, FEMA, HUD, Fannie Mae, and others.
    It has been mentioned that we are in the final stages of a 
three-part unified planning process. I would submit to you it 
is the most comprehensive planning process that any city has 
gone through in this State and, I would submit to you, probably 
in the country. The first phase was centered on the Bring Back 
New Orleans Commission, which I started 30 days after Katrina's 
landfall. Key focus areas for the Commission were land use, 
flood protection, public transit, culture, education, health 
care, economic development, and government effectiveness. This 
Commission gave us its final presentation in December 2005.
    For the next phase, the City Council focused on the flooded 
areas and did neighborhood plans. And now we are receiving the 
unified plan, the final version, which takes all elements of 
those plans and has gone through an exhaustive public input 
process that we are really proud of.
    Once we have this plan formally accepted, which we expect 
to expedite, we will then move quickly to overhaul our zoning 
ordinance to put forward a comprehensive zoning ordinance and a 
master plan so that everybody clearly understands the rules of 
engagement for operating in the City of New Orleans.
    Let me quickly move to challenges to the recovery. While we 
remain committed to accelerating our own recovery, several 
challenges remain. First, our highest priority is to ensure the 
safety and security of our citizens. Our recovery will not be 
complete until the government can certify the level of 
hurricane and flood protection committed to us.
    We ask Congress to fulfill the Federal commitment made for 
100-year protection and to ensure that future protection levels 
are planned, funded, executed properly, and achieved.
    The Federal investment alongside our local commitment to 
mitigation and risk management will ensure that we, as a 
Nation, never again face a horrific and expensive situation 
that Hurricane Katrina, the failed levees, and the flood 
brought to us.
    Next, the public infrastructure of the City of New Orleans 
experienced damages estimated to be over $1 billion. The 
primary resource for the reconstruction of public 
infrastructure is public assistance in the Robert T. Stafford 
Act, which is a reimbursable program. The extent of the damage 
to our economy and the multitude of the damage to our 
infrastructure makes it impossible for us to finance our own 
recovery up-front. As of January 18, FEMA has written 815 
project work sheets just for the City of New Orleans totalling 
$334 million.
    The city has received $145 million in reimbursements from 
the State. These figures reflect only the city government's 
needs. This is much larger when added to the other major 
agencies, such as the New Orleans Public School System, the 
Sewerage and Water Board, and Regional Transit Authority. A 
needed change to the Stafford Act would establish a definition 
of catastrophic disaster for events such as Hurricane Katrina 
to be differentiated in a scale from major disasters and to 
amend the time frames and formulas for assistance that a 
catastrophic disaster would call for. The extent of the 
devastation should determine the level of response. This 
trigger should automatically provide up-front funding, extend 
deadlines for applications for assistance, extend the 100 
percent reimbursement time frames for emergency work, increase 
assistance calculated for all grant programs, and make 
provisions for rapid delivery of operational funds for 
devastated jurisdictions and their critical agencies that are 
totally shut down after such an event.
    Our criminal justice system provides an excellent 
illustration of FEMA's systemic problems of undervaluations. 
FEMA has obligated a total of $98 million for the rebuilding of 
our criminal justice facility, most of which was for emergency 
costs immediately following the storm. The city estimates it 
will cost $68 million to restore our criminal justice system. 
FEMA has obligated only $14 million for permanent repairs to 
these facilities, 20 percent of the amount needed. And based 
upon our local laws, we cannot put forth a contract until we 
have the dollars available for that contract to move forward.
    We had a big challenge--and I would ask this Committee to 
look at this--FEMA uses a calculation that is called R.S. Means 
which is about the replacement costs that it takes to fix a 
public facility. That was being incorrectly calculated, causing 
much of the struggle that we have. This does not include the 
city's estimates for police district stations or any allowances 
for mitigation under Section 406 of the Stafford Act, which 
could add an additional $35 million to $45 million in eligible 
costs for the criminal justice system.
    Even in the face of these daunting realities, ladies and 
gentlemen--and I am running low on time--we continue to find 
creative solutions for leveraging the limited resources that we 
have to rebuild our city and help our citizens return home. 
Working with the City Council, we have been able to pass 
ordinances last year to allow us to use approximately $30 
million of our own limited funds slated for other projects, 
such as libraries and recreational facilities, and apply them 
to the critical structures, such as the criminal court 
buildings, to accelerate our recovery. But our recovery cannot 
continue in this manner.
    I strongly urge you to return responsibility and 
accountability to the local government. Local government cannot 
be effective without the dollars and the resources necessary to 
affect change. You can also greatly assist us in our recovery 
by ensuring that we receive some direct funding of Community 
Development Block Grants and hazard mitigation funding. Because 
New Orleans received 57 percent of all the damage in Louisiana, 
we should receive 57 percent of all funding.
    If that percentage is hard coated, there would be less 
temptation to start talks about what is going to be left over 
and how those funds can be used in other non-disaster areas.
    We have established an ethics review board that is in the 
process of selecting an inspector general.
    My administration's track record of transparency and 
responsible fiscal management will continue.
    In the last Congress, as I close, a special provision was 
made to lift the cap of the amount available through the 
Community Disaster Loan Program. We thank you for that. At that 
time, an additional change was inserted to remove the 
President's discretion over loan cancellation based upon need. 
We now ask you for a provision to put back into law to allow 
the cancellation of these loans. This is a remedy that has been 
available to other jurisdictions that have suffered a disaster, 
and we ask you for the same.
    Ladies and gentlemen of the Committee, I do not want to 
take up any more of your time. I have many other things that we 
can talk about. I look forward to a discussion in answering 
your questions, and I really appreciate your being here. This 
recovery is not moving as fast as it needs to move, and you are 
going to hear lots of justifications for why it is not 
happening. But from my perspective, not having resources at the 
local level is the absolute killer of this recovery.
    There is an African proverb that says: When elephants 
dance, all the grass gets trampled. Well, two elephants are 
dancing right now, the Federal Government and the State 
Government, and New Orleans and the devastated parishes in this 
community are being trampled. Thank you.
    Chairman Lieberman. Thank you, Mayor. Thanks for your 
testimony. And we will accept your full statement for the 
record insofar as you were not able to deliver it.
    I want to say in passing that you make a very important 
point, several, but what I want to point to is that what we saw 
here with Hurricanes Katrina and Rita, that these were not just 
disasters, not just major disasters, they were catastrophes.
    Mayor Nagin. Yes.
    Chairman Lieberman. And the law does not recognize that 
difference. And the legislation reforming FEMA that came out of 
the Senate Committee and the Senate, we, in fact, had a whole 
section with greatly altered authority on waivers for FEMA in 
the case of a catastrophe. Unfortunately, the House would not 
go along with it so it was not in there, but I have confidence 
that Senator Landrieu will revisit that through her 
Subcommittee.
    Mr. Leger, I know that--actually, I have read some 
statements you have made along these lines, about the fact that 
this was not just a disaster but a catastrophe, and that is 
part of the problem in the implementation. We thank you for 
being here and look forward to your testimony now.

 STATEMENT OF WALTER J. LEGER, JR.,\1\ CHAIRMAN OF THE HOUSING 
   AND REDEVELOPMENT TASK FORCE, LOUISIANA RECOVERY AUTHORITY

    Mr. Leger. My pleasure. Mr. Chairman, Senator Landrieu, 
Senator Obama, I have been challenged by my staff to hold my 
comments to 6 minutes. Some have said it takes me more than 
that to say my name. So I am going to work real hard and speak 
very fast and try not to be too repetitive.
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    \1\ The prepared statement of Mr. Leger with attachments appears in 
the Appendix on page 163.
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    I am a volunteer member of the Louisiana Recovery 
Authority. I guess, actually, we did not volunteer; we were 
drafted by the governor. And with me today are several other 
members of the Board, including John Smith, Donna Fraiche, and 
Calvin Mackie.
    I am also, prior to August 29, 2005, or was, a longtime 
resident of St. Bernard Parish. I am now a resident of the 
great City of New Orleans as a refugee and fly the flag of St. 
Bernard on my home as the St. Bernard embassy in exile. And by 
the way, we are on higher ground here, the great City of New 
Orleans, but I hope to get back home soon.
    I want to thank you for letting me speak to you today, and 
let me first express my personal--and on behalf of other 
homeowners, like myself, who have lost their homes, members of 
the Recovery Authority, and public servants and otherwise 
express our gratitude to Congress and the American people for 
their unprecedented generosity, both emotionally and 
financially, since the two storms here in Louisiana in 2005.
    As you know, Hurricane Katrina was by far the single most 
devastating and expensive disaster in American history. What 
you might not know is the storm that hit Louisiana 3 weeks 
later, Hurricane Rita, was the third most expensive in history. 
Many of us in the Lower 9th Ward of New Orleans and in St. 
Bernard were actually inundated by waters from both storms. As 
we basically dried out, more water came from another storm, 
from a second breach in the same levees.
    Hurricanes Katrina and Rita caused an estimated $100 
billion in damages to homes, property, businesses, and 
infrastructure in all of south Louisiana. About $40 billion of 
these losses are covered by private hazard and flood insurance, 
and we sincerely are thankful for the estimated $26 billion 
that is flowing to various parts of the State to rebuild our 
homes and our infrastructure.
    But that still leaves a gap of $34 billion, or put another 
way, that is about $20,000 in uncovered losses for every 
household in the State of Louisiana.
    This funding gap does not include the 127,000 jobs and 
4,000 businesses in south Louisiana that simply have not come 
back. Louisiana's economy shrunk by $11.5 billion last year. 
This does not count all of the emergency and social service 
requirements incurred by State and local governments.
    So while Federal aid and private donations have been great 
and unprecedented, Louisiana still has enormous unmet needs, 
and we need your help, Congress' continued strong support, 
going forward. But I now want to start with the billions that 
have already been appropriated, and I am going to go right to 
the point, if you do not mind. To spend the funds already 
appropriated more quickly and efficiently, we desperately need 
your help to cut the red tape and face our crisis of what I 
call federalism with strings.
    There are three areas we need quick and immediate 
intervention: First, Congress needs to instruct FEMA to allow 
us to use our CDBG funds to provide a global match for FEMA 
programs. The easy solution would be: Get rid of the match that 
Louisiana has to make. That will save us $1 billion we can use 
on other programs. But short of that, we have been told no.
    So we propose, consistent with congressional intent, the 
State has committed a portion of our CDBG funds to cover the 
cost share FEMA has assessed Louisiana under the Public 
Assistance Program for local governments. The best way to do 
this is use CDBG funds to pay for a few dozen large projects 
that represent 10 percent of the overall cost of our FEMA-
approved projects. We propose, then, use the FEMA funds to 
cover the other 20,000 projects, Senator Landrieu, that 
represent the other 90 percent of costs.
    Instead of spreading CDBG among 20,000, put it aside into a 
few selected, put the FEMA moneys into the rest, and we are 
done. If global match is not approved, we face a situation in 
which 20,000 projects, not a few dozen, will have to be funded 
and monitored by two State bureaucracies and two separate 
Federal bureaucracies of HUD and FEMA at the same time.
    Our plan is clearly allowed under FEMA regulations and the 
Stafford Act. If implemented, it will cost the Federal 
Government no additional expense. The other solution, as I 
mentioned, is for FEMA or Congress to authorize 100 percent for 
cost share, 100 percent cost share by the Federal Government 
for Hurricanes Katrina and Rita, which we have repeatedly 
requested of the Administration and which was granted with 
respect to September 11, for Hurricanes Andrew and Hugo, but I 
did not even remember Hurricane Iniki in Hawaii. But that would 
resolve our global match issues completely and would allow the 
State to invest that nearly $1 billion in other programs.
    Second, Congress needs to direct FEMA to approve our use of 
hazard mitigation funds in support of the Road Home housing 
program as requested, required, and negotiated by Mr. Powell in 
the early stages in negotiations in 2006. The State did not 
want to use HMGP, Housing Mitigation Grant Program, moneys in 
this way. But we were told the Administration would not support 
our request for additional CDBG funding at the level needed, 
and we were instructed to use HMGP to fill our funding gap.
    As of today, FEMA has been unwilling or, potentially, 
legally unable to approve nearly $1.2 billion of funding that 
is desperately needed for the already slow Road Home program. 
Without that funding, the Road Home program can come to a halt.
    Third, Congress needs to instruct the SBA on the difference 
between a loan, Senator Landrieu, as you pointed out, and a 
grant. Right now, homeowners who receive a homeowner grant are 
required to pay their loan back with the grant. There are about 
$2.3 billion in loans out by SBA now that we have a limited 
amount--$10 billion sounded like a lot of money to me when I 
first heard about it--that we are supposed to give to help 
homeowners. If we have to take those grants that we give to 
homeowners, have them pay off their loans, we are really down 
to $8 billion, $7 billion, and the homeowners have lost the 
capital needed to build homes. There is no duplication. A loan, 
Members of Congress, is different than a grant. I do not need 
high-price lawyers to tell me that, and certainly the 
homeowners in the State of Louisiana do not either.
    Next, we would like to request that Congress take immediate 
action to address what we consider--and, Senator Landrieu, you 
mentioned it again--disproportionate distribution of recovery 
aid. Our State received between 75 and 80 percent of all 
damages along the Gulf Coast from these two devastating storms. 
Yet time and time again, we have received less than our 
proportionate share of funding and assistance.
    I would like to talk to you more about it on your 
questioning, but the examples are numerous, just to hit a few, 
and are demonstrated in our written testimony, which we have 
already submitted at length.
    Congress initially capped our CDBG funding at 52 to 54 
percent, and we were told they could not--there was no 
discretion to do otherwise. In a 6-month fight and with the 
help of Mr. Powell, we were able to get another $4.2 billion. 
Some of you will recall that you had to defend that $4.2 
billion from other States who wanted a piece of it also, but we 
ultimately got it.
    Congress appropriated equal amounts to Louisiana and 
Mississippi for colleges and universities even though our State 
had three times as many colleges and universities severely 
damaged and destroyed. Federal departments allocated funds for 
schools, historic restoration, and hospitals without 
recognition of the fact that our damages were far greater in 
all of those categories.
    We lost 2,600 hospital beds; Mississippi lost 79 beds. Both 
States got the same allocation in that allocation. That took 
place just a few weeks ago. FEMA, on a smaller program but 
significant to many, stopped funding our Louisiana Swift bus 
service from Baton Rouge to New Orleans. Yet they had continued 
previously similar service in Houston for medical students for 
more than 3 years in Texas after Tropical Storm Allison.
    Most recently, Louisiana received only $74.5 million from 
FEMA for the $400 million Alternative Housing Pilot Program 
while Mississippi, a State with approximately one quarter the 
need, received four times the money, at $280 million dollars.
    We have, as you pointed out, Mr. Chairman, more than 64,000 
people still living in FEMA trailers. They are not trailers as 
you might imagine; they are travel trailers. They are useful 
for weekend excursions by people who take weekend trips, but 
our citizens, 64,000, are living in them and calling them home 
every night. We need to get them out of there.
    Even the issue of cost share match shows how this 
catastrophe has been treated differently. The States impacted 
by Hurricanes Andrew, Iniki, Hugo, etc., and in the context of 
September 11, in those efforts the maximum requirement was 
eliminated. Louisiana, hit by the first and third most 
expensive disasters in U.S. history, which were caused by 
Federal levee failures, must pay a 10 percent cost share that 
will cost us $1 billion.
    We are not asking for handouts. We have been paying our 
share. We have been fighting the fight, and many of you have 
been fighting for us. We ask for fairness and parity. We want 
cost share taken into account with respect to the magnitude of 
the damage caused by these two horrible hurricanes, and we 
would like to see relative levels of damage computed, 
mathematically, objectively, for our sake and for the sake of 
future events. Hopefully one like this will never occur again.
    In conclusion, I would just like to suggest to you that we 
know, we homeowners, we in south Louisiana, the Mayor, Ms. 
Mestayer, and those of us here know we are at war here. Our 
enemies are not Mideastern terrorists; our enemies have names: 
Hurricanes Katrina and Rita. And they have field marshals, they 
have generals, and those generals and field marshals are red 
tape and government restrictions. They are darkened streets and 
mold in our houses, but the one we fear the most is apathy and 
indifference.
    Abraham Lincoln once said: If this country is ever 
vanquished, it will not be by aggression from without, but by 
the failure of the citizens to do their duty from within. I can 
assure you, Senators, our citizens are doing their duty in this 
war every single day. They are fighting every single day.
    Our concern is and has been--and you represent something 
other than our concern--that those in Washington have forgotten 
about us and will forget about us. We need you as our allies in 
our war because I can assure you we will fight this war, and we 
will win this war, but we need your help and your assistance in 
those regards that you can do so.
    And I thank you for allowing me to be here, and I did not 
live up to my promise.
    Chairman Lieberman. But you gave a stirring ending, and you 
are absolutely right, and I assure you we have not forgotten, 
and we will not let apathy triumph in this case over the desire 
of a great part of our country to return to normal.
    Ms. Mestayer, thank you for being here.

  STATEMENT OF SUZANNE T. MESTAYER,\1\ CHAIRMAN OF THE BOARD, 
                   GREATER NEW ORLEANS, INC.

    Ms. Mestayer. Yes. Thank you. Greater New Orleans, Inc. is 
an economic development organization that represents the 10 
parishes in the Greater New Orleans region. I am here today 
representing that organization, and I am going to skip over 
most of my introductory remarks for the sake of time, but I do 
want to thank you, our Committee Chairman, Senator Joe 
Lieberman, as well as Senators Landrieu and Obama, for holding 
this session here in New Orleans, which is very meaningful to 
us to address our needs and to check on the status of the 
progress that we are making in response to this storm.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Mestayer appears in the Appendix 
on page 189.
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    The progress has been painfully slow. I think we would all 
agree with that. And we ask for your assistance as we are 
trying to deal with such critical issues as infrastructure, 
insurance, workforce, HUBZone designations, marketing issues, 
and many things that are not getting quite as much attention as 
others. We hope that we can get some cooperation and assistance 
from the Federal Government in these areas.
    The hurricane-stricken areas are struggling to repair and 
rebuild billions of dollars of infrastructure. And while it 
crosses all of the industries in which we operate, not just 
one, I do want to specifically mention the importance of our 
port. It is fundamental to this city and critically important. 
Every time I hear about the dramatic infrastructure needs, it 
reminds me of why we are located here and the importance of our 
port.
    Our need for infrastructure dollars so far exceeds anything 
that we have access to at this point in time that it really is 
an enormous concern, and I know that a tremendous amount of 
dialogue has already gone on today about the 10 percent match. 
Needless to say, if our government would treat this situation 
consistently with past disasters, then clearly that extra 10 
percent would be available. We so desperately need it. We hope 
that you can figure a way to waive that 10 percent so that we 
can invest additional money into our infrastructure.
    One of the greatest challenges with which we are dealing is 
one that has not been spoken about in depth this morning, and 
that is insurance.
    Many businesses are experiencing five-fold premium 
increases on their insurance policies and ten-fold deductible 
increases on renewals. It is impacting all sectors in which we 
are operating and all size employers in this region.
    Greater New Orleans, Inc. has an insurance task force which 
is comprised of representatives from the insurance industry, 
the real estate industry, banking, and many other private 
sector leaders from our community who are developing potential 
solutions to this problem.
    However, I must tell you, there are no easy solutions, and 
there are no silver bullets.
    Work is ongoing to develop a comprehensive strategy 
involving Federal and State legislation, as well as the obvious 
private sector initiatives which need to happen. I must tell 
you, we desperately need some sort of a backstop commitment on 
a temporary basis from the Federal Government because without 
affordable insurance, we cannot renew this community. We ask 
that you remain open to discussions as to how the Federal 
Government can help us on a limited basis with this enormous 
obstacle as we try to put this community back together again.
    Hurricane Katrina also created a dire need to replenish the 
region's workforce. We are woefully short on skilled workers to 
fill the needs of our employers, and along with the Louisiana 
Department of Economic Development, we urge the Federal 
Government to consider increasing the current number of Guest 
Work Visas which are available over the next few years within 
this region. It is not anyone's intention to replace domestic 
workers with foreign substitutes, but instead to fill these 
short-term gaps in our current workforce, which has decreased 
so dramatically since the storm.
    As an example to you, we are currently working with a 
foreign-based flooring company, which is considering investing 
in this region. They need to bring foreign workers in to 
construct their facility and do intend to engage and hire 
American workers, as they become available, to operate this 
business. The workforce required to build this facility is not 
currently available, and the extended Visas would accelerate 
the development of this business here. And as a flooring 
company, it is particularly important to our rebuilding 
process. This is just one illustration of the type of work that 
we are looking at and the things that could enable us to more 
quickly rebound from an economic development standpoint.
    Another one is to expand the Historically Underutilized 
Business (HUB) program to the entire Gulf Opportunity Zone. Our 
smaller businesses need to have this kind of an enhancement to 
ensure that they benefit from the opportunities of the growth 
and rebuilding of this region.
    Finally, the disasters of Hurricane Rita and Hurricane 
Katrina have caused tremendous damage to our tourism section. I 
do want to mention that industry in particular. It is causing 
conventions to turn away, vacationers to choose other 
locations, and hindering our economic development overall. We 
are urging the Federal Government to assist us in providing 
funds to help us to remarket our region and rebuild our 
cultural economy.
    Our cultural assets, such as arts and music, are 
intrinsically linked to the very important tourism industry 
that we have here in this city. We must find the funds to 
restore these cultural assets and attract our wonderful 
visitors back to this area.
    Greater New Orleans, Inc. would like to offer its 
expertise, its energy, its resources to this Committee with a 
firm commitment to work with you and your staff to narrow the 
Federal relief options for consideration in the upcoming 
congressional sessions, which are very ambitious but critically 
important to the renewal of this great city and the Gulf Coast 
region.
    Thank you very much.
    Chairman Lieberman. Thanks, very much, Ms. Mestayer.
    Thanks to all of you for excellent testimony.
    We are just going to do one round of questions because we 
do want to leave plenty of time to go out to the neighborhoods 
to see with our own eyes what is happening there and also to 
listen to some of the people who live there. But I assure you, 
again, that this is not the last of the hearings that our 
Committee or Subcommittee will hold.
    Mr. Leger, let me give you a chance to give us a little bit 
more testimony on the Road Home program. You have heard me ask 
the representative of HUD on the first panel, $7.5 billion of 
Federal money, 101,000 applicants for housing assistance, less 
than 300 actually received it so far. Ms. Patenaude from HUD 
essentially said it is not HUD's fault.
    Is it the State's fault? If not, whose fault is it?
    Mr. Leger. Let me tell you, it is the fault of Hurricanes 
Katrina and Rita, and it is the fault of a catastrophe of 
historical proportions. There are a lot of faults, and there 
are a lot of things that can be done to fix it.
    Now, let me give you a little bit of historic perspective, 
if I may. Our chairman, Dr. Norman Francis--who could not be 
here--often says when people say it is slow, he says: Compared 
to what?
    We homeowners were able to apply for SBA loans in October 
2005. The SBA representative explained to you and we understand 
there is some 30,000 SBA loans that still have not been 
disbursed 16 months later. That infrastructure to deliver long 
preceded Hurricanes Katrina and Rita. But what we are a victim 
of is, I would submit to you, what I called in my opening 
remarks ``federalism with strings.'' We love federalism; it is 
fundamental to our government. But the Federal Government says: 
We are going to give you money, and you do it, you solve it. 
But it wraps that money in red tape, and the strings are held 
in Washington.
    HUD, by the way, has been outstanding, and particularly Mr. 
Jan Opper, who was here today, head of Disaster Recovery, has 
been outstanding in helping us maneuver legally around the 
regulations. But nonetheless, those regulations on CDBG moneys 
exist, and they are HUD regulations, and the maneuvering itself 
has caused delay.
    Let me give you a couple of examples. The HUD 
representative explained to you that we submitted a plan, then 
we submitted an alternative plan.
    Chairman Lieberman. Right.
    Mr. Leger. Once the initial plan was submitted, we were 
told: Whoa, you have a construction program; therefore, on 
every single 124,000 properties, you are going to have to do 
environmental impact statements on properties that were already 
owned by homeowners who were living in them before the 
environment was impacted by broken Federal levees. So we had to 
adjust and maneuver around that and change the whole program.
    Lead abatement, 25,000, the Federal Government wants to 
give it to us, we would love to abate lead.
    Chairman Lieberman. Is the answer to suspend or in some way 
modify those kinds of ongoing requirements in the case of a 
recovery from a catastrophe like this?
    Mr. Leger. Yes, and how does that bring us to the problems 
we are having today?
    Now do not get me wrong, our contractor has had some 
difficulties in performance.
    Chairman Lieberman. Because the State hired somebody to run 
the program?
    Mr. Leger. Yes. But in all fairness, Mississippi started 
their program in January 2006 and now has 10,000 grants out. We 
started--this program really started--was not fully funded 
until June 2006. We are 6 months behind. We are rapidly 
catching up with them. Our program is five to six times bigger. 
Our problems reach from Texas to Mississippi. We have people in 
flood zones, inside levees, outside levees, communities like 
St. Bernard and Cameron totally, 100 percent, destroyed.
    But what the difficulty in the regulations is that, now 
that we have modified the program, Mr. Opper and his staff have 
helped us maneuver around, we have other problems, and that 
is--and the big holdup, I would submit, in the program itself 
is verifications.
    I heard Mr. Kutz, the----
    Chairman Lieberman. Yes, GAO.
    Mr. Leger [contuing]. Accounting representative point out 
that verifications should take place instantly. They should. 
They do not.
    Chairman Lieberman. Let me interrupt because my time is 
done. I want to ask the Mayor.
    So I hear what you said about the red tape, that the 
contractor you hired had some problems. Let me just ask you for 
a quick answer. Are you over the problems now? Do you think 
that the housing assistance is going to flow more quickly under 
the Road Home program?
    Mr. Leger. Well, what we are seeing is a pickup. I am 
hopeful that we are over the problems. The LRA, which is really 
policy driven----
    Chairman Lieberman. Right.
    Mr. Leger [continuing]. And largely volunteers, we have 
engaged, the Office of Community Development is engaged with 
the contractor. I think we have solved a lot of the holdups.
    One big one that we are still stuck with is doing title 
examinations required under the program and verifications by 
insurance companies of what HUD calls duplication of benefits. 
We cannot--you cannot force the insurance companies to 
cooperate with us.
    Chairman Lieberman. I thank you for that answer. We will 
stick with you on it.
    Mayor Nagin, you were not here on the first panel. I 
mentioned to the representative from FEMA that Mr. Shapeburger 
from the firefighters union had called about the conditions in 
more than half of the fire stations. Mr. Jamieson from FEMA 
said that he thought FEMA money could be used for the repair 
and reconstruction of it, not for operation.
    Give me your quick response to what is going on there and 
how that could be fixed.
    Mayor Nagin. The issue is tied up in a fundamental problem 
that we are having, and that is the designation or the 
estimation of what it costs to repair a particular facility. 
Using my example of the criminal justice system where we think 
it takes 80 percent more than what FEMA thinks to restore the 
criminal justice system; the same issue is slowing down the 
recovery in the fire stations also.
    Chairman Lieberman. Thank you. I want to keep working with 
you on that.
    This last question invites a big answer, so let us just 
agree that it is the beginning of a conversation.
    Mayor Nagin. OK.
    Chairman Lieberman. Part of what galvanized, embarrassed, 
infuriated the Nation in the days after Hurricane Katrina hit 
landfall was obviously not just the enormity of the natural 
disaster, but that Hurricane Katrina, in essentially breaking 
apart the civil society--the governmental structure of a great 
American city--revealed something that we do not get forced to 
focus on every day in most of our cities and in a lot of rural 
areas, and that is poverty.
    Mayor Nagin. Yes.
    Chairman Lieberman. There are two Americas. That is part of 
the suffering that we saw at the Superdome and the Convention 
Center.
    And so the question--and therefore, you have people who are 
already struggling now totally upended. The disaster hurts 
everybody, but it hurts the poor more.
    Mayor Nagin. Yes.
    Chairman Lieberman. As we think about not only this 
disaster recovery, but in the future recovery from 
catastrophes--this is why I say it is an unfair question to ask 
without a lot of time--just give me the beginning of your 
thoughts. What specially should we put into the law to 
recognize the reality that there are two Americas?
    We are not going to make one America in disaster recovery; 
that requires a lot of other work in a lot of other areas like 
education and job training, etc. But give me a beginning of an 
answer to that question.
    Mayor Nagin. That is a big question. When we solve that 
one, we all can go home.
    Chairman Lieberman. Yes.
    Mayor Nagin. You know, Senator, from my perspective, 
Hurricane Katrina exposed an ugly underbelly of our country 
that most people were shocked to see around the world, and I 
think it is more class than anything----
    Chairman Lieberman. Yes.
    Mayor Nagin [continuing]. But there are racial issues 
associated with it also. You know me, I am going to speak 
directly, so if you ask me a question, I am going to try and 
answer it to the best of my ability.
    Chairman Lieberman. That is what I expected.
    Mayor Nagin. But I think the tragedy of Hurricane Katrina 
has lingered for so long, and I just do not see the will to fix 
it. I do not see the will to really fix New Orleans. I hear all 
these numbers, the hundreds of billions of dollars that are 
flowing. I hear the arguments about why they are not flowing. 
And then I look at what we are doing in Iraq and how we can 
spend money at an unprecedented level there, how we can set up 
temporary hospitals and designate money to rebuild their 
economy, and we have this dance going on in New Orleans, and it 
is hurting.
    We do not have mental health beds right now. There is lots 
of post-traumatic stress disorder that nobody is talking about. 
Stress is up, heart attacks are up, strokes are up. We cannot 
track suicides very effectively, but I can tell you, pre-
Katrina compared to post-Katrina, we have 50 percent more 
deaths in the City of New Orleans.
    And I keep waiting for somebody to step forward and say: 
Look, this was a disaster, but let us fix it and let us apply 
all the resources we have.
    And I am not asking you for any more money. I just want the 
money that you have already allocated to go to my citizens to 
make their lives better.
    Chairman Lieberman. Thank you. Good beginning of an 
important conversation.
    Look, we have the resources. We are a great Nation.
    Mayor Nagin. Yes.
    Chairman Lieberman. And the question is whether we have the 
will.
    And on another measure, the will and the competence to 
break through the red tape that is keeping the aid that we have 
already authorized and appropriated from getting to the people 
who need it. Thank you, Mayor.
    Mayor Nagin. Thank you.
    Chairman Lieberman. Senator Landrieu.
    Senator Landrieu. First to Mayor Nagin, and then to Mr. 
Leger and Ms. Mestayer, thank you very much for your testimony.
    Mr. Mayor, we all have a job to do at the Federal, State, 
and local level, and as you know, we have tried to step up--and 
you have, as well, and the Governor--to do everything we can. 
But I would like to get back to the question that I started the 
hearing with because I am a little bit troubled about a 
comment--and I do not know if you meant it in this context--
about not needing any additional money, just getting the 
portion of what we have.
    To bring back that if the State was not given its 
proportional share, which I think has been well-documented in 
this hearing--and I do not think we need any more testimony--
then it will follow that New Orleans will not get its 
proportionate share, St. Bernard will not get its proportionate 
share, St. Tammany, if you start with the State of Louisiana 
not getting its proportional share. And just really more as a 
comment than a question, it might be really helpful for the 
parish presidents and the mayors to come up with a solid, sound 
request on that.
    Because if we all put our shoulder to the wheel to get the 
general fund of money that is necessary, like Ms. Mestayer 
said, through Community Development Block Grant, that covers it 
all. That is for housing, schools, hospitals, and 
infrastructure. And if we start out so far behind, it is hard 
then--and I can most certainly appreciate the difficulty that 
you and the Governor, as the largest city to the State, going 
through because New Orleans was so hard hit. Now, it is not 
harder hit than St. Bernard----
    Mayor Nagin. Yes.
    Senator Landrieu [continuing]. That lost 95 percent of the 
homes.
    Mayor Nagin. I agree.
    Senator Landrieu. And it is about the same as Cameron 
Parish, which is a little parish that nobody ever talks about--
they only have 10,000 people and about a million ducks--but 
Cameron Parish was basically wiped off the map, Senators Obama 
and Lieberman, a poor little parish--I mean actually a big 
parish, rich, a few people, a lot of ducks, and Hurricane Rita 
kind of wiped that community and the southern part of that 
parish out.
    But the point is, if we cannot get the right amount to come 
into the State----
    Mayor Nagin. Right.
    Senator Landrieu [continuing]. It is very difficult for us 
to again then get the fair amount to everyone. That is No. 1.
    But my question is this: With respect to police and fire, 
which is directly under the jurisdiction, Mr. Mayor, of you and 
the City Council--and I know you all are really struggling--the 
work sheets have become an issue with the Fire Department. In 
other words, we need $20 million to build a fire station. FEMA 
says, you have to sign this work order; I am only giving you $5 
million.
    Mayor Nagin. Right.
    Senator Landrieu. I can understand why the work order is 
not signed. I would not sign it either. Because once you sign 
that paper and submit it, you are agreeing that your fire 
station only costs $5 million----
    Mayor Nagin. Yes.
    Senator Landrieu [continuing]. When you know it actually 
costs $20 million. So I want to put the Federal Government on 
record that I am going to do an investigation of these work 
sheets in my Subcommittee because I cannot have my people 
criticized for not filing them when I understand why they are 
not filing them because they know the fire station costs $20 
million to build, but FEMA's assessment is $5 million. I am 
going to tell them not to sign the work sheets.
    But having said that, Mr. Mayor--and I realize we have a 
problem--what are your specific plans for this Police 
Department? Because our phone has been ringing off the hook 
about the situation with violent crime, and I know that--and I 
am helping send you resources--but could you just say three 
things that you think that you are doing that we could help you 
with to get to the bottom of this crime situation either in 
resources through the Police Department or through the 
prosecutor's office or through the court system and the 
juvenile court system that we could help you to get a handle on 
this crime situation?
    Mayor Nagin. Three things, very quickly: PWs, making sure 
that the project work sheets use replacement costs so that we 
can get the work going on the facilities that we need.
    Second, the things that the Federal Government has already 
recently agreed to do, providing us with more resources as it 
relates to DEA, FBI, crime labs, you name it. Those two things 
can help us the most.
    And then, third, we had started an initiative prior to 
Hurricane Katrina to do crime cameras, and we only have a 
limited amount of money to spend. So any financial support to 
put more crime cameras that are digital that can record 
activity and can be used against criminals would be tremendous. 
So those three things would be great.
    But, Senator, let me just clear up what I am talking about 
as far as the money. I recognize and appreciate and agree with 
you that Louisiana does need more money to complete this 
rebuild. That is not where I am. What I am more interested in 
is getting these dollars flowing quicker. That way I think we 
can make an even stronger case, once the dollars are being 
spent, to go back to the Federal Government and get what we 
actually deserve.
    Senator Landrieu. OK.
    And, Mr. Leger, real quickly, could you explain for the 
record as briefly as you can--and this could take a whole 
hearing--why the differences. We have talked about this, 
Mississippi and Louisiana. But their Road Home program, I 
understand, allocated just checks to people; literally checks 
were written to people with--they did not have to commit to 
rebuild; they did not have to commit to stay; they could have 
taken that check and gone to live in New York or Connecticut or 
Chicago. But our plan was designed specifically to incentivize 
people to return. They do not have a flood zone; we do.
    Could you give just a minute of testimony about that? And, 
again, this is not a criticism of Mississippi. We just have to 
acknowledge that their situation was different and act 
accordingly.
    Mr. Leger. And you are exactly right, Senator Landrieu. And 
it is a long, complicated answer. But the short answer is this: 
Mississippi was given plenty of money. We were given money that 
we had to leverage with. Mississippi's problems, as terrible as 
they were, were not nearly as complex or as devastating as ours 
from coast to coast.
    Mississippi's program, for example, the phase of the 
program that everyone says moves so quickly, gives money only 
to people outside of the flood zone, people that were not 
required to have flood insurance. If we implemented the same 
program here, that means people in Lakeview, in Gentilly, in 
Broadmoor, in New Orleans East, and in 80 percent of St. 
Bernard Parish would be getting zero. Their program was 
simpler.
    With the money that we had to leverage and with the Federal 
restrictions on duplication of benefits, we had to create 
leverage, and with the concept, also, that with a city like New 
Orleans, 80 percent devastated, a parish like St. Bernard, and 
I beg you not, 95 percent destroyed, all but three of the 
27,000 homes destroyed, still looking for those three, with 
that kind of infrastructure devastation, we had to leverage, 
and our philosophy was--demanded by local government, by 
legislators, and otherwise, was: We want to incentivize the 
rebuilding of our cities and our infrastructures, and, 
accordingly, consistent with the expenditure with CDBG and CDBG 
regulations in order to incentivize and replace what we insist 
on being pre-storm equity, it calls for a little bit more 
complication and for protection.
    And, Senator Obama, I just wanted to add that prevention of 
fraud is a major factor here in Louisiana. We heard ad nausea 
at the beginning that people in Washington did not trust us, 
that we could not spend it. And we decided you will not have 
the problem that unfortunately FEMA had with the loss of $1.6 
billion to fraud. We cannot--with the limited funds we got, we 
cannot afford it. So we have built in a number of safeguards. 
One point--every dollar that goes to a criminal or a fraud 
could have gone to a homeowner to help rebuild.
    So there are some things in there. I do not think they are 
a big slowdown on the program, but there are multiple layers of 
complications caused largely, Senator, I would submit, by the 
fact that we did not get full funding proportionate to the 
need.
    Chairman Lieberman. Thank you. Thanks, Senator Landrieu.
    Senator Obama.
    Senator Obama. Well, first of all, thank you all for your 
testimony.
    I want to indicate for the record that Mayor Nagin, I agree 
with you that the amount of money that we are spending in Iraq 
and the sense of urgency and the unwillingness to concede 
defeat there if it were matched with respect to what we did 
here would I think mean that we would be doing more and be more 
focused on it at the Federal level and be investing more 
resources.
    So I think that is an important point for us to underscore 
for the record here, that you get a sense at the Federal level 
that although boxes are being checked and plans are being 
submitted, there is not a sense of urgency out of this White 
House and this Administration to get this done. And if nothing 
else, I hope that this hearing helps restore that sense of 
urgency. This is not something that is impossible to accomplish 
if we all determine that it needs to be accomplished. And you 
get a sense that will has been lacking over the last several 
months, despite some good efforts by Federal officials here on 
the ground. Having said that, I think, obviously, there is 
still work that has to be done by local officials as well, so I 
just want to touch on a couple of things.
    Mr. Leger, your testimony, I think, gave a number of 
excellent recommendations in terms of steps that the Federal 
Government can take. You did acknowledge that, with respect to 
the Road Home program, that the contractor had some initial 
problems.
    Just very briefly, at what point would you consider firing 
the contractor?
    Mr. Leger. Well, Senator, that is not my prerogative. But I 
will tell you----
    Senator Obama. At what point would you consider your group 
recommending firing the contractor?
    Mr. Leger. The Louisiana legislature passed a resolution 
suggesting that the contractor be fired. I immediately, again 
as a volunteer, met with a number of those legislators that had 
authored the resolution, and my question was: Now what? Where 
do we go from here? Do we hire a new contractor, and will that 
cause unnecessary delays?
    Senator Obama. So your feeling is you are too far down the 
road with them to fire them?
    Mr. Leger. We may be.
    Our choice is: Do we change the pilot because the ship is 
having difficulty navigating the channel, or do we work with 
the pilot and make sure we get this ship home? That seems to be 
the choice of everyone at this point.
    Senator Obama. I am just curious: Are there any penalties 
for them failing to perform in the way that I assume the 
original contract spoke to?
    Mr. Leger. I am not familiar with the contract itself. It 
was negotiated through the Office of Community Development of 
the State of Louisiana. There are benchmarks, and the State, I 
am sure, has considered its alternatives.
    Senator Obama. OK.
    Mr. Leger. But that is not my field.
    Senator Obama. All right. Mayor Nagin, just on the issue of 
public safety, you mentioned getting the facilities up and 
running?
    Mayor Nagin. Yes.
    Senator Obama. And it strikes me that it is going to be 
very hard to get folks back if they feel like crime is out of 
control, and I know that it is a priority for you to make sure 
that folks come home.
    Mayor Nagin. Yes.
    Senator Obama. Two specific questions. Are there specific 
things that the Federal Government should be doing right now 
and that you are working with Senator Landrieu's office that 
you want to mention--or Senator Vitter's office that you want 
to mention for the record so that when we go back to 
Washington, we can say: Here is some specific things that we 
can do to make sure that there are cops on the streets, that 
the DAs are doing their job, that there are detention 
facilities, things that we can do at the Federal level? That 
would be point No. 1.
    Point No. 2: Are you still having problems in terms of 
police officers having to worry about their own situation, 
still living in trailers, their families disrupted, and so 
forth? And if that is the case, have you prioritized providing 
assistance to firefighters, police officers, DAs, the public 
safety infrastructure so that at least they are stabilized and 
they can start helping the residents here?
    Mayor Nagin. Everything that we are doing from a 
prioritization standpoint starts with public safety. So we 
focus on a real-time basis, what are the needs of the Police 
Department, what are the needs of the firefighters, EMS, you 
name it, and other critical city workers.
    So we have come up with all sorts of programs. We have 
adjusted their pay to reflect the realities of the post-Katrina 
environment. We have worked with the Police Foundation, for 
example, to put together programs to help officers to find 
homes that have had their homes damaged. We have also enhanced 
our recruiting efforts to try and market New Orleans as a good 
place for police officers to work. We have streamlined our 
civil service procedures to make it easier for post-certified 
officers to join our organization. And we work with the 
firefighters on a lot of different fronts also.
    As far as what we can do to show that the Federal 
Government continues to support us, the things I have talked 
about earlier, everything that is slowing us down deals with 
project work sheets and housing assistance to make sure that 
our firefighters and our police officers can stabilize their 
families. We have an attrition challenge right now. We are 
losing about 17 officers a month on the police side. So what 
has happened with the U.S. Attorney, FBI, DEA, continuing to 
push for that.
    And I floated an idea. I think when President Clinton was 
in office, he helped to fund 100,000 police officers around the 
country.
    Senator Obama. Right.
    Mayor Nagin. And I remember that was very effective. So a 
similar program like that--we are talking to Senator Landrieu 
about it--to see if there is a way to reimplement that, it 
would be great for us.
    Senator Obama. That would be specifically targeted.
    I know we are out of time. I want to just make a comment 
about Ms. Mestayer, your testimony. You provided some important 
insights into the struggles that businesses have in regaining 
their footing here.
    You mentioned bringing in foreign workers as stopgap 
measures. I am sympathetic that there may be circumstances in 
which that is necessary. I would hope that whatever planning is 
being done, including with the business community, includes the 
notion that there are a whole bunch of New Orleans residents 
that could benefit from training and do some of this work. And 
I do not know how much of that is built into all the planning 
that has been done, but it strikes me that there are Gulf Coast 
residents who could be trained to do the work--and I do not 
know how technical and complicated floor contracting is. I have 
trouble putting a nail in a wall--but it strikes me that over 
the last year we could have been training a whole lot of young 
men and women who had been displaced by the hurricanes in some 
of these jobs, and they could be doing the work.
    I know your intent was not to suggest that the workers were 
not available. I am making a larger point. I know there is a 
shortage of contractors here. That is part of what is driving 
up costs. Had there been a system in place to make sure that 
these training opportunities were available, some of that 
shortage might have been relieved.
    Ms. Mestayer. If I could respond to that, please.
    Absolutely. And, in fact, there are programs that have 
rolled out within the past 12 months, which in phases over a 3-
year period, I believe the number is 20,000 worker trainings 
within the construction--workforce training programs----
    Senator Obama. I know what you mean.
    Ms. Mestayer. You know what I mean--over the next 3 years. 
So that, in fact, training is in place and has been funded 
through the Federal Government. And so that is all happening.
    My comment was made with reference to accelerating some of 
the redevelopment when we have an investment that is ready to 
go, except today, right now, they do not have workers 
available. So that is a temporary solution and not intended to 
be a retrenchment away from doing our own workforce 
development.
    Senator Obama. Thank you very much, Mr. Chairman.
    Chairman Lieberman. Thanks, Senator Obama. I do want you to 
know, and notwithstanding your statement of modesty--I have 
seen you and heard you hit the nail on the head.
    Thank you for laughing, witnesses. I appreciate that.
    Listen, thank you. This has been a great panel. You have 
been very helpful to us. We came to listen. We came to learn. 
We did both. Most important of all, I want the witnesses and 
the people of this region to know that we shall return and 
continue to return until this job, a national responsibility, 
is completed.
    I want to again, in closing, thank the Justices of the 
Louisiana Supreme Court for their hospitality. I particularly 
want to thank the Clerk of Court, John Tarlton Olivier, and his 
staff for their extraordinary support of this hearing, which 
was way beyond the call of duty. Also, I want to thank the 
Louisiana National Guard and the New Orleans Police Department 
for their time and efforts. Thanks to all the witnesses.
    The record of this hearing will remain open for 15 days for 
any additional comments you wish to file.
    The hearing is adjourned.
    [Whereupon, at 12:25 p.m., the Committee was adjourned.]





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