Preliminary Information on Rebuilding Efforts in the Gulf Coast  
(29-JUN-07, GAO-07-809R).					 
                                                                 
The size and scope of the devastation caused by the 2005 Gulf	 
Coast hurricanes presents the nation with unprecedented 	 
rebuilding challenges. These storms destroyed wide swaths of	 
housing, infrastructure, and businesses and displaced hundreds of
thousands of people from their homes. Today, nearly two years	 
since these hurricanes made landfall, rebuilding efforts are at a
critical turning point. The Gulf Coast and the nation are facing 
the daunting challenges of rebuilding. Our recent work in	 
southern Louisiana and New Orleans confirms that some communities
are still without basic needs, such as schools, hospitals, and	 
other infrastructure, while the doors of many businesses remain  
closed. Over the coming years, perhaps decades, many		 
neighborhoods and communities will need to be rebuilt--some from 
the ground up. At the same time, major decisions will need to be 
made regarding a wide range of issues including coastal 	 
restoration, levee protection, infrastructure, land use, and	 
economic recovery. Agreeing on what rebuilding will be done,	 
where, how, and--particularly important--who will bear the costs 
will be key to moving forward with the rebuilding process. To	 
assist Congress in its oversight responsibilities, GAO briefed	 
Congress on several occasions during the past few months on the  
results of our preliminary work in Louisiana and Mississippi--the
two states most directly affected by the 2005 Gulf Coast	 
hurricanes. This letter transmits information provided during	 
those briefings. Specifically, this letter (1) places the federal
assistance provided to date in the context of the resources	 
likely needed to rebuild the Gulf Coast; (2) discusses two key	 
federal programs that provide rebuilding assistance to the Gulf  
Coast states, with an emphasis on the Community Development Block
Grant (CDBG) program; (3) describes differences in Louisiana's	 
and Mississippi's approach to using CDBG funds; and (4) provides 
some observations on planning activities in Louisiana and	 
Mississippi and the role of the federal government in		 
coordinating Gulf Coast rebuilding efforts.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-809R					        
    ACCNO:   A71686						        
  TITLE:     Preliminary Information on Rebuilding Efforts in the Gulf
Coast								 
     DATE:   06/29/2007 
  SUBJECT:   Capital gains or losses				 
	     Disaster recovery					 
	     Disaster recovery plans				 
	     Disaster relief aid				 
	     Federal aid programs				 
	     Federal aid to states				 
	     Federal funds					 
	     Federal grants					 
	     Hurricane Katrina					 
	     Hurricane Rita					 
	     Strategic planning 				 
	     Federal aid for housing				 
	     Block grants					 
	     Cost estimates					 
	     FEMA Public Assistance Program			 
	     Gulf Coast 					 
	     HUD Community Development Block Grant		 
	     Program						 
                                                                 
	     Louisiana						 
	     Mississippi					 

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GAO-07-809R

   

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June 29, 2007

The Honorable Joseph I. Lieberman
Chairman
The Honorable Susan M. Collins
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate

Subject: Preliminary Information on Rebuilding Efforts in the Gulf Coast

The size and scope of the devastation caused by the 2005 Gulf Coast
hurricanes presents the nation with unprecedented rebuilding challenges.^1
These storms destroyed wide swaths of housing, infrastructure, and
businesses and displaced hundreds of thousands of people from their homes.
Today, nearly two years since these hurricanes made landfall, rebuilding
efforts are at a critical turning point. The Gulf Coast and the nation are
facing the daunting challenges of rebuilding. Our recent work in southern
Louisiana and New Orleans confirms that some communities are still without
basic needs, such as schools, hospitals, and other infrastructure, while
the doors of many businesses remain closed.

Over the coming years, perhaps decades, many neighborhoods and communities
will need to be rebuilt--some from the ground up. At the same time, major
decisions will need to be made regarding a wide range of issues including
coastal restoration, levee protection, infrastructure, land use, and
economic recovery. Agreeing on what rebuilding will be done, where, how,
and--particularly important--who will bear the costs will be key to moving
forward with the rebuilding process.

To assist you in your oversight responsibilities, we briefed your staff on
several occasions during the past few months on the results of our
preliminary work in Louisiana and Mississippi--the two states most
directly affected by the 2005 Gulf
Coast hurricanes.^2 This letter transmits information provided during
those briefings (see enc. I). Specifically, these slides (1) place the
federal assistance provided to date in the context of the resources likely
needed to rebuild the Gulf Coast; (2) discuss two key federal programs
that provide rebuilding assistance to the Gulf Coast states, with an
emphasis on the Community Development Block Grant (CDBG) program; (3)
describe differences in Louisiana's and Mississippi's approach to using
CDBG funds; and (4) provide some observations on planning activities in
Louisiana and Mississippi and the role of the federal government in
coordinating Gulf Coast rebuilding efforts. We also raise a number of
questions that the committee may wish to consider in carrying out its
oversight function in reviewing rebuilding efforts in the Gulf Coast. We
have since updated some of the information in enclosure I, using new
information, which became available after the briefings.

^1In this report, unless otherwise noted, we refer to Hurricanes  Katrina,
Rita, and Wilma collectively as the Gulf Coast hurricanes.

In 2005, Hurricanes Katrina, Rita, and Wilma battered the Gulf Coast
region, devastating whole communities and neighborhoods, leaving hundreds
of thousands of people without shelter and employment. Hurricane
Katrina--the first of these storms--made landfall in Mississippi and
Louisiana in August 2005 and alone caused more damage than any other
single natural disaster in the history of the United States. Katrina
destroyed over 300,000 homes--nearly ten times the number of homes
destroyed by Hurricanes Camille and Andrew combined--and affected
approximately 90,000 square miles--an area larger than the size of Great
Britain.^3 Hurricane Rita followed shortly in September 2005, making
landfall in Texas and Louisiana. Hurricane Wilma was the last of these
disasters to strike the region, making landfall in southern Florida in
October 2005 and inflicting widespread damage across the state.

Our work largely focused on rebuilding efforts in Louisiana and
Mississippi--the two states most directly affected by the 2005 Gulf Coast
hurricanes. In conducting our work, we toured affected parishes in
southern Louisiana and several affected cities along the coast of
Mississippi. Further, we interviewed officials from the Department of
Homeland Security's (DHS) Office of the Federal Coordinator for Gulf Coast
Rebuilding and from the Federal Emergency Management Agency (FEMA). We
also met with a range of state and local officials in these states and
representatives from private and nongovernment organizations.

In addition, to place the federal assistance provided to date in the
context of the resources likely needed to rebuild the Gulf Coast, we
reviewed the funds designated for hurricane relief and rebuilding in the
four emergency supplemental appropriations acts enacted between September
2005 and June 2006. We also drew on our previous work that examined
federal funding for the 2005 Gulf Coast
hurricanes.^4 Further, we reviewed two studies on the estimated costs of
the impacts of the 2005 hurricanes.^5 Although we found no study that
comprehensively estimated costs, these studies--which estimated selected
categories of losses--were generally the broadest in scope based on our
search of readily available studies. We did not independently verify the
accuracy of information included in these studies.

^2 We  also testified  before your  Subcommittee on  Disaster Recovery  on
April 12, 2007, about  a number of issues  resulting from our  preliminary
work in  the  Gulf  Coast.  For additional  information,  see  Gulf  Coast
Rebuilding: Preliminary Observations  on Progress to  Date and  Challenges
for the Future, GAO-07-574T (Washington D.C.: April 12, 2006).

^3Hurricane Camille--a  category 5  hurricane--struck  the Gulf  Coast  of
Louisiana  and  Mississippi  in  1969.  Hurricane  Andrew--a  category   5
hurricane--made landfall along the coast of Florida in 1992.

To discuss two key federal programs that provide rebuilding assistance to
the Gulf Coast states, we reviewed federal statutes and HUD regulations
governing the CDBG program and FEMA written policies and procedures for
disbursing funds to public assistance grantees. We also obtained data from
FEMA on the amount of Public Assistance funds obligated to Louisiana and
Mississippi and reviewed state documentation from Louisiana and
Mississippi related to each state's use or planned use of CDBG funding. To
describe differences in Louisiana's and Mississippi's approach to using
CDBG funds, we analyzed key documentation from Louisiana and Mississippi
regarding each state's homeowner assistance programs and criteria for
disbursing CDBG funding. We focused on the states' homeowner assistance
programs, given that Louisiana and Mississippi allocated the vast majority
of their share of CDBG funding to homeowner assistance.

To provide observations on planning activities in Louisiana and
Mississippi, we reviewed state and local planning documents on long- and
short-term planning rebuilding activities in each state and met with a
range of representatives from nonprofit and private agencies involved in
various planning efforts across the state. Further, in Louisiana, we
observed local planning meetings in Orleans Parish, while in Mississippi,
we observed planning activities in the city of Biloxi.

We conducted our work between July 2006 and June 2007 in accordance with
generally accepted government auditing standards.

Summary

While the federal government has provided billions of dollars in
assistance to the Gulf Coast, a substantial portion of this aid was
directed to short-term needs, leaving a smaller portion for long-term
rebuilding. It may be useful to view this assistance in the context of the
costs of damages incurred by the region and the resources that may be
needed to rebuild. While there are no definitive or comprehensive
estimates of costs, the various estimates of aspects of these costs offer
a sense of their magnitude. For example, estimates from the Congressional
Budget Office (CBO) put capital losses resulting from Hurricanes Katrina
and Rita in the range of $70 billion to $130 billion^6 while another
estimate from the Center for Business and Economic Research at Marshall
University put losses solely from Hurricane Katrina--including capital
losses--at over $150 billion.^7 In addition, the State of Louisiana
estimates that the economic impact on its state alone could reach $200
billion. Such estimates raise important questions regarding additional
assistance that will be needed to help the Gulf Coast rebuild--including
how the assistance will be provided and by whom.

^4See GAO, Disaster Relief: Governmentwide Framework Needed to Collect and
Consolidate Information to Report on  Billions in Federal Funding for  the
2005 Gulf Coast Hurricanes, GAO-06-834 (Washington, D.C.: Sept. 6, 2006).

^5For additional information see,  Macroeconomic and Budgetary Effects  of
Hurricanes Katrina and Rita,  Statement of Douglas Holtz-Eakin,  Director,
Congressional Budget  Office, before  the Committee  on the  Budget,  U.S.
House of Representatives, Oct. 6, 2005, and Mark L. Burton and Michael  J.
Hicks, Hurricane Katrina: Preliminary  Estimates of Commercial and  Public
Sector Damages (Huntington, W.Va.: Marshall University, September 2005).

To date, the federal government has provided most long-term rebuilding
assistance to the Gulf Coast states through two key programs, which follow
different funding models. Specifically, FEMA's Public Assistance program
provides funding primarily to state and local governments to repair and
rebuild damaged public infrastructure for specific projects that meet
program eligibility requirements, as defined by the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (Stafford Act).^8 The Housing
and Urban Development's (HUD) CDBG program, on the other hand, provides
funding for neighborhood revitalization and housing rehabilitation
activities, affording states broad discretion and flexibility in deciding
how to allocate these funds and for what purposes. To date, the affected
states have received $16.7 billion in CDBG funding from supplemental
appropriations----so far, the largest share of funding specifically
targeted to long-term rebuilding.^9

With the vast number of homes that sustained damage in Louisiana and
Mississippi, both of these states allocated the bulk of their CDBG funds
to homeowner assistance.^10 Specifically, each state developed an
assistance program to compensate homeowners whose homes were damaged or
destroyed by the 2005 hurricanes. With many of its residents living in
other states and debating whether to return to Louisiana, Louisiana's Road
Home program aims to encourage homeowners to return
to the state and begin rebuilding.^11 Mississippi's homeowner assistance
program--administered in two phases--aims to compensate homeowners who
suffered losses due to Katrina's storm surge. Phase I is targeted to
homeowners located outside FEMA's designated flood plain who were
otherwise insured, while Phase II is targeted to uninsured or underinsured
homeowners located in or outside the flood plain. As of May 30, 2007,
Louisiana has received 141,235 applications and awarded 23,043 grants to
eligible homeowners. For Phase I of its program, Mississippi has received
18,965 applications and awarded payments to 12,950 eligible homeowners.
Mississippi has received 11,529 applications for Phase II of its program
and awarded 28 grants to eligible homeowners.


^6According to  CBO,  capital  losses include  housing,  consumer  durable
goods, and energy,  other private-sector and  government losses. For  more
information see, Macroeconomic and Budgetary Effects of Hurricanes Katrina
and Rita, Statement of Douglas Holtz-Eakin, Director, Congressional Budget
Office, before the Committee on the Budget, U.S. House of Representatives,
Oct. 6, 2005.

^7This  estimate  includes  damages  only  to  commercial  structures  and
equipment, residential  structures  and  contents,  electrical  utilities,
highways,  sewer  systems,  and   commercial  revenue  losses.  For   more
information see, Mark L. Burton  and Michael J. Hicks, Hurricane  Katrina:
Preliminary Estimates of Commercial and Public Sector Damages (Huntington,
W.Va.: Marshall University, September 2005).

^8The Stafford  Act,  as amended,  establishes  the primary  programs  and
processes for  the  federal  government  to  provide  major  disaster  and
emergency  assistance  to  states,  local  governments,  tribal   nations,
individuals, and qualified private  nonprofit organizations. 42 U.S.C.  SS
5121-5207.

^9Pub. L. No. 109-148,  119 Stat. 2680, 2779-80  (Dec. 30, 2005); Pub.  L.
No. 109-234, 120 Stat. 418, 472-73 (June 15, 2006).

^10A portion  of these  allocations  also was  directed to  other  housing
programs such as rental housing and public housing, as well as to projects
intended to alleviate  expenses associated with  housing, such as  utility
and insurance costs.

Restoration of the region's housing and infrastructure is taking place in
the context of broader planning and coordination activities. In Louisiana
and Mississippi, state and local governments are engaged in both short-
and long-term planning efforts. For example, the Louisiana Recovery
Authority has coordinated a statewide rebuilding planning effort and has
developed a comprehensive rebuilding plan that will help direct rebuilding
policy and Louisiana's long-term spending over the next 50 years.
Mississippi created an overall plan to serve as a framework for subsequent
planning efforts in affected areas of the state, based on the work of the
Governor's Commission on Recovery, Rebuilding, and Renewal.^12 Moreover,
the President established the position of Coordinator of Federal Support
for the Recovery and Rebuilding of the Gulf Coast Region within the
Department of Homeland Security (DHS) to coordinate and support the
rebuilding activities at the federal, state, and local levels.

As states and localities begin to develop plans for rebuilding, there are
difficult policy decisions Congress will need to make about the federal
government`s contribution to the rebuilding effort and the role the
federal government might play over the long-term in an era of competing
priorities. Based on our preliminary work, we raise a number of questions
the Committee may wish to consider in carrying out its oversight of Gulf
Coast rebuilding efforts, to include the following:

           o How much will it cost to rebuild the Gulf Coast and how much of
           this cost should the federal government bear?
           o How effective are current funding delivery mechanisms--such as
           Public Assistance and CDBG--and should they be modified or
           supplemented by other mechanisms?
           o How can the federal government further partner with state and
           local governments and the nonprofit and private sectors to
           leverage the public investment in rebuilding?

^11Although not  discussed in  this  report, the  Road Home  program  also
provides assistance  for rental  property owners  and renters  to  address
housing needs of low- to  moderate-income individuals in the most  heavily
damaged areas. The objectives  of the rental  assistance component of  the
program include providing capital to owners of small rental properties  to
repair and  reconstruct  damaged  units, providing  affordable  rents  for
working families, and supporting redevelopment in impacted communities.

^12 The  commission's work  culminated in  238 recommendations  that  were
included in a final  report entitled After  Katrina: Building Back  Better
Than Ever (Dec. 31, 2005).

We provided the Secretary of DHS with a draft of this report on May 11,
2007. In its oral response, DHS informed us that it had no formal comments
on the report. We also provided Louisiana and Mississippi officials an
opportunity to review relevant aspects of this report. Any technical or
clarifying comments that they provided as part of that review have been
incorporated where appropriate.

We are sending copies of this report to the Chairman and Ranking Member of
the Subcommittee on Disaster Recovery, the Secretary of the Department of
Homeland Security, the Federal Coordinator for Gulf Coast Rebuilding, and
interested congressional committees. We will make copies to others on
request. In addition, the report will be available on GAO's Web site at
[4]http://www.gao.gov .

If you or your staff have questions regarding this report, please contact
me at (202) 512-6806 or by email at [5][email protected] . Individuals
making key contributions to this report include Charlesetta Bailey, Dean
Campbell, Roshni Dave, Peter Del Toro, Laura Kunz, Brenda Rabinowitz,
Michael Springer, and Diana Zinkl.

Stanley J. Czerwinski
Director, Strategic Issues

Enclosure

(450576)

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