Scalise Announces Long Awaited FEMA Loan Forgiveness Regulations

Monday, March 30, 2009

Washington, DC -- Congressman Steve Scalise today announced that the U.S. Department of Homeland Security’s Federal Emergency Management Agency has released draft loan forgiveness guidelines for Hurricane Katrina Community Disaster Loans (CDL).

“This is a very positive development on an issue we have been pushing FEMA to address for years,” Scalise said. “Historically FEMA has forgiven 90 percent of loans they have issued since the CDL program began in the 1970’s. This is the first formal step in the process to allow our local communities to apply for forgiveness of more than $600 million in loans issued by FEMA as a result of hurricane Katrina.”

Local governments, fire departments, universities, and hospitals have been waiting for these regulations for more than two years. Most of them have continued to face large debts and continue to struggle with their recovery from Hurricane Katrina as a result.

In February, Congressmen Scalise and Cao, and Senator Vitter sent a letter to President Obama urging him to forgive these loans. Scalise also submitted a statement, in which he urged FEMA to issue these regulations, to the House Transportation and Infrastructure Committee, Subcommittee on Economic Development, Public Buildings, and Emergency Management hearing on post-Katrina disaster response and recovery. 

Below is the text of Congressman Scalise’s letter and the official statement submitted for the House Transportation and Infrastructure Committee Hearing.


February 23, 2009


The Honorable Barack H. Obama
President of the United States
The White House
Washington, DC 20500

RE: Community Disaster Loan Forgiveness

Dear Mr. President:

Hurricanes Katrina and Rita left Louisiana’s most severely-affected parishes and municipal governments with very little or no local tax revenue for the foreseeable future. Typically, local tax revenue generated on a monthly basis is used to pay parish employees and keep local governments operating.  In response to these storms, Congress passed legislation to allow for Community Disaster Loans (CDLs) to support the most severely-affected parish governments and other public organizations that otherwise would have had to layoff their employees and, in some cases, shut down operations entirely. 

Congress further amended that legislation in 2007 to allow the President to forgive these loans.  In 2007 and 2008, the Louisiana delegation worked with the Bush Administration on implementing regulations to allow for CDL forgiveness. However, FEMA has yet to establish these regulations despite their continued assurance to the Louisiana delegation that the regulations are being drafted. It has been almost two years since Congress passed this authorization and it is imperative that these regulations be finalized as quickly as possible.

School boards, fire districts, sheriffs’ offices, hospitals, and other local government entities along the Gulf Coast relied on these CDLs to sustain municipal operations, and they face large debts and struggle with their recovery as a result. As they continue to move forward with their recovery efforts, they must have the ability to apply for loan forgiveness under the CDL program and be able to remove that debt from their books. The absence of a regulatory structure has left these communities and organizations without any guidance to prepare them for independent audits and has restricted their ability to conduct out-year budget planning.

We have made significant progress since Hurricanes Katrina and Rita, but the uncertainty and delay associated with this program has caused major problems for local government entities. We urge you to expedite this process and make it a priority of the agency to issue these regulations as soon as possible. The future of our communities depends on it.

We are willing to help in any way possible and would appreciate your support and prompt consideration to this matter.

Sincerely,

Sen. David Vitter
Rep. Steve Scalise
Rep. Ahn “Joseph” Cao

Ms. Norton and Mr. Diaz-Balart, thank you for having this important hearing.

I also want to thank Paul Rainwater with the Louisiana Recovery Authority and the officials from FEMA who are today. I look forward to working with you as we resolve the issues that are delaying Louisiana’s recovery, and identify reforms that will improve disaster response in the future. 

The goal for today’s hearing should be to evaluate FEMA’s current activities in the Gulf Coast and throughout the country, to identify successes as well as reasons for continued recovery delays, and to find solutions for fixing these problems. I hope this hearing also evaluates the lessons FEMA has learned from Katrina and Rita and other disasters, develops a clear picture of how to reform and expedite the recovery process in the State of Louisiana and establishes concrete objectives to prevent these same delays from occurring again.

It has been over three and a half years since Hurricanes Katrina and Rita struck Louisiana, yet we are still experiencing recovery delays. Local governments and other organizations who serve the public continue to wrangle with FEMA over the approval of thousands of project worksheets, which is delaying crucial federal assistance from Washington to the local level.

In addition, FEMA has yet to establish loan forgiveness regulations for special Community Disaster Loans (CDLs) that were issued in the wake of Hurricanes Katrina and Rita to local governments and other organizations that serve the public. In 2007, Congress passed legislation authorizing FEMA to issue regulations for CDL forgiveness. While FEMA officials have continued to assure the Louisiana delegation that these regulations are being drafted, these rules have yet to be finalized and issued. It has been almost two years since Congress passed this authorization and it is imperative that these regulations are finalized as quickly as possible. Our local governments, fire departments, universities, and hospitals continue to face large debts and struggle with their recovery as a result.

The delays we are experiencing with project worksheets and community disaster loans are unacceptable. I am extremely concerned about the delays and am disappointed that we continue to revisit these same problems three and a half years after these storms devastated South Louisiana. We must find answers so our citizens, as well as our state and local governments can move forward and complete their recovery. And we must cut through the red tape that hinders the funding and progress of recovery projects. I hope states like Kentucky, Oklahoma, Texas, and Iowa that have recently experienced disasters are not experiencing these same delays.

I am committed to working with my colleagues, FEMA, local governments, and officials from other states to resolve these delays. This is not a partisan or regional issue. I know that Members of Congress on both sides of the aisle are committed to making the necessary reforms so our citizens and local governments can move forward and preventing these problems from occurring again. 

Wherever the fault is, we need to fix it. Louisiana does not need more discussion and delays – the citizens of our State need, and deserve, solutions. One which has been brought up before is reforming the Stafford Act. Clearly, this law does not adequately meet the recovery needs of a major catastrophic disaster, and I have been working with other members of Congress from across the county to identify the necessary improvements we need to make to the Stafford Act.

I would like to hear from FEMA, the LRA, and officials from other states who are hear today and have you identify regulatory or legislative barriers preventing Public Assistance projects from being completed. If there are statutory changes that need to be made, I would like FEMA and the LRA to submit concrete proposals detailing where these changes should be made.

These problems we’ve encountered over the past three and a half years are not issues exclusive to Hurricanes Katrina and Rita. They are issues that any community and any state would face if confronted with a catastrophic disaster of the magnitude we’ve faced. We all understand that we are working toward the same goal. We should leave this hearing with clear steps that we can take to improve the process and prevent similar delays in the future.

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Contact: Luke Bolar
202-226-4309