On a scorching day last August, after months of haranguing Congress for flood recovery aid, Gov. Kathleen Blanco came to New Orleans to hail the opening of the first homeowner assistance center to serve beneficiaries of the newly minted Road Home program.
"Full speed ahead," the governor vowed, beaming over the impending recovery. "This is a most joyful day."
She promised to rebuild Louisiana "safer, stronger, smarter," with incentives for displaced homeowners to return, penalties for those who left and stringent protections against fraud.
Blanco seemed to have reason to rejoice: She had just emerged from a pitched political scrap with Republican-dominated Washington to secure the recovery money. She had boldly accused the White House of "choosing between our children" when the government told her to run a limited program with $6.2 billion. She had persuaded officials to increase that figure to $10.4 billion, using $7.5 billion of that for direct payments to homeowners.
But that sweltering August day might have been the last joyful one the Road Home ever gave Blanco. More important, the majority of flooded homeowners still await the joyful day when their check arrives -- if ever, given the budget shortfall in the program of up to $5 billion.
Nearly a year and countless bureaucratic foul-ups after Blanco's triumphant proclamation, the state lacks the money to pay more than a third of eligible applicants. And with the last day to file a Road Home application approaching, neither has the state succeeded in handing out the money already in hand: Only about a quarter of eligible applicants have collected grants, compared with 83 percent of eligible flood victims in neighboring Mississippi.
Blanco has countered that Mississippi, by virtue of its Republican ties to then-GOP-controlled Washington, received far more recovery cash and cooperation last year from the federal establishment. To date, Mississippi has collected about $5.5 billion in federal blocks grants, while Louisiana -- with four times the number of storm victims -- has received only about double that, at $10.4 billion.
Fairness questions aside, critics say the Blanco administration fumbled the handling of the federal aid it did secure. Hoping both to secure maximum money for rebuilding and ensure residents behaved properly by rebuilding their destroyed homes, she created the quintessential paternalistic government program: aiming to please every conceivable constituent, bloated by a micromanaging bureaucracy and bound in a thicket of attached strings.
In tackling what seemed the simplest of tasks -- handing out the federal government's money -- the state instead designed an expensive exercise in social engineering and forensic auditing of every cent paid out.
Over-sensitive to Louisiana's reputation for graft and seeking to reassure Washington, state officials crafted layer upon layer of verification to discourage fraud, including finger-printing. And fearing applicants would take the money and run, rather than rebuild, state officials gummed up the bureaucratic works with penalties for leaving the state and an installment program that dribbled out money to those who stayed, sending them jumping through more hoops -- even after they signed on the dotted line -- to prove work was being done on their homes.
"What the state created was a Rube Goldberg machine -- you drop a ball in the top, and it goes through all these tubes and levers and a wheel that spins," said Nell Bolton, a leader of the Jeremiah Group, a faith-based organization that has taken on the role of Road Home watchdog.
Each lever and wheel -- home appraisals, insurance payment verifications, fraud safeguards, spats with federal authorities about grant rules, and so on -- created a bottleneck that to this day keeps the bulk of grants stymied. The design of Louisiana's program, many argue, produced the opposite of the intended effect: repelling trustworthy homeowners who were already predisposed to rebuild.
Robby Knecht, an eastern New Orleans homeowner, is a case in point. During 10 months of delays over a dispute about his appraised value, he had to split his seven children between two FEMA trailers and move the family back into a still-unfinished house. He said struggles with Road Home did more to weaken their bond with Louisiana than Katrina ever did.
"It's depressing," he said. "I could have gone anywhere. ... We're both native New Orleanians, and we want to be here. But my wife, especially, she talks about leaving."
Because of the shortfall, an estimated 50,000 eligible applicants, out of an expected total of about 140,000, will have to depend on a bailout from a wary Congress.
At the time the state crafted Road Home rules, the Blanco administration might have had reason to believe a cavalry of federal cash would cover any shortfall. After all, President Bush's point man for Gulf Coast recovery, Donald Powell, had implied as much during tense negotiations about the initial federal commitment of $6.2 billion, which state officials at the time called grossly inadequate.
"After that plan is in place, and there is a need for more money, I can assure you we will go back after that's done and work hand in hand with the leadership of Louisiana to ask for more money," Powell said. The Bush administration "would be open to many more needs for housing and infrastructure, or any other needs that the good people of Louisiana believe are appropriate."
And Powell's comments, of course, came on the heels of Bush's own commitment at Jackson Square to do "whatever it takes" to rebuild Louisiana.
After Powell lent his support, Congress allocated an additional $4.2 billion, bringing Louisiana's recovery kitty to $10.4 billion, for everything from housing relief to infrastructure.
Still, documents and interviews with state and federal officials show the state knew or should have known from the start that even that increased allocation would never cover the program they promised back home.
The state's own early estimates -- based on FEMA damage estimates later found to be too low -- pegged the program at about $2 billion short of covering the cost. The problem would get worse, as Louisiana added more benefits for overlooked niche constituencies and as the devastation and costs to repair it all proved worse than anticipated.
In early 2006, during the negotiations with Powell for additional housing money, the Louisiana Recovery Authority used consultants to work up a detailed cost estimate for its planned homeowner assistance program. Working with the FEMA data, the consultants concluded that Louisiana would need $9.4 billion to compensate 128,000 homeowners, at a rate of about $70,000 per grant, along with some money to pay a private contractor.
Yet the Blanco administration settled for a $7.5 billion housing program and profusely thanked the American taxpayers and their congressional representatives. Last July, Blanco praised Congress and the Bush administration for "the funding we need to run our full program."
A year later, it turns out the "full program" will really cost up to $5 billion more.
One Democratic congressional aide, who declined to be quoted by name opposing Blanco, said Democrats on Capitol Hill puzzled over the governor's gleeful acceptance of the lower amount offered by Powell and Congress -- and wondered how the state would make it work.
"Some of us were really surprised the governor was so happy," the unnamed aide said. "We were also surprised they (the state) were able to drop their number and make the program work. ... The way to do it was to take that and immediately say, 'OK, we still need more.' "
Instead, the state started designing programs that ultimately would cost far more -- in some cases ignoring the financial parameters set by Powell in closed-door meetings. Blanco's administration made a series of politically popular promises, vowing to help seemingly every storm victim: landlords, business owners, the New Orleans power company and a university hospital.
Two decisions in particular made the tab skyrocket, ensuring an eventual shortfall. The state added loans of as much as $50,000 for low-income homeowners, a decision that added an estimated $1.7 billion to estimated Road Home payouts.
And a controversial decision by state leaders to cover homes damaged only by wind -- which many argued should have been shouldered by insurance companies -- put an even heavier dent in the Road Home budget. The state made that call even after Powell declined its plea for money to cover wind damage, Powell said in an interview.
The state's initial request specifically calculated wind-only compensation costs for 19,000 homes at $1.1 billion, a figure that would prove far too low. The FEMA estimates used at the time underestimated the number of wind-damaged homes by about 20,000, according to the latest figures, a gaffe that doubled the state's estimated obligation to homes that didn't flood.
Amy Liu, an analyst at the Brookings Institution, said Blanco defied the White House's calls for a limited flood-relief program because of political pressure from south-central and southwest Louisiana. Liu said Blanco's team deserves credit for creating a smart program early on, but the local politics compromised the original design.
"I don't doubt the political pressure they were under, but in the myopia of serving such a broad demand, they may have undermined their credibility in Washington," she said.
Last summer, Steve Alison, who lost his Gretna home in Hurricane Katrina, kept a close eye on the state's housing aid plans and rushed to be one of the first to apply when Blanco announced the birth of the Road Home.
"I thought it would be within 30 days," he said. "At first it moved really quickly, I had the interview, they came in and estimated my damage, took pictures, but then they started the snafus."
While the state proved adept at adding beneficiaries to the aid program, it couldn't manage to get most of them paid. Struggling to speed payments while complying with hundreds of intricate policies and procedures, ICF International, the private contractor, soon found itself the early scapegoat for delays and screw-ups that started even before the state could write its first check to a flood victim.
In response, the contractor, under pressure from Blanco over delays, devised "preliminary award letters." The letters backfired, immediately infuriating applicants, both because they seemed to mean nothing -- they promised no specific amount of cash, by no specific date -- and because more than a quarter of the first letters included errors, often obvious assaults on common sense.
In one case that became a cause celebre, Saul and Mildred Rubin, who are in their 90s, received a letter denying the grant claim on the basis that their Lakeview house -- which had taken on 9 feet of water -- had no damage.
A second backlash came at the roughly 60 steps of verification, which added months to the process.
On Dec. 18, 2006 -- before even one-tenth of 1 percent of Road Home applicants had made it to a grant closing -- state Rep. Cedric Richmond, D-New Orleans, met with state legislators and the governor's staff about the delays. He walked out in a huff over Road Home's seemingly endless checks and balances.
"You're treating homeowners like thieves and children," Richmond recalled telling the assembled officials.
The administration had worried, understandably, about reassuring federal politicians that Louisiana would prove a good steward of their money, given the state's legendary history of corruption. But the Blanco administration seemed to have grafted that reputation -- earned by the state's politicians -- onto work-a-day homeowners, generally the most law-abiding and trustworthy citizens in the state, Richmond said.
"People called us thieves for so long, the governor began to believe her people were thieves," Richmond said in an interview.
Neither could Richmond and other critics understand the complex array of incentives, penalties and auditing procedures that sought to ensure residents rebuilt their destroyed homes. They viewed Louisiana residents, and particularly those in New Orleans, as already deeply rooted to their communities, both by family ties and unique culture. Their collective recommendation: Just compensate people for their loss -- as quickly as possible -- and most will decide to stay.
According to the 2000 U.S. census, 77 percent of New Orleans residents were born in Louisiana, the highest nativity rate of any major U.S. city. What's more, geographer Richard Campanella finds Katrina's flooding was worse in the parts of New Orleans with the fewest out-of-state transplants.
That makes it all the more confounding that Blanco designed a Road Home program geared so much toward keeping New Orleanians from fleeing, said John Lovett, associate law professor at Loyola University.
"The silver lining was those people were the most likely to stay, if only you would have given them a chance," Lovett said. "It's just tragic that Blanco and her consultants didn't appreciate this unique affinity New Orleanians have for their long-time community."
According to interviews with hundreds of frustrated Road Home applicants, many grant delays seemed driven by simple confusion about program rules, both on the part of applicants and program managers -- confusion that often extended to senior state officials who enacted and enforced the policies.
Road Home applicants also report being treated with skepticism every step of the way, and they resented the implication that they needed to be prodded to rebuild their lives in the same communities where they grew up.
Knecht, one of thousands whose application dragged on for months -- despite scores of promises, misinformation and unreturned phone calls -- looked at Mississippi's record of faster payouts with envy.
"And their homeowners weren't fingerprinted, with a mug shot -- like we're going to prison," he said.
The Louisiana Recovery Authority's own surveys had shown in March 2006 -- months before the administration finalized policies -- that the vast majority of Louisianians wanted to rebuild in place. Yet the Road Home still created complex functions to keep homeowners from leaving and, once they chose to stay, to make sure they used the grants only to rebuild.
"I had no problem with verifying that I deserved the money, but then they're going to be Big Brother about how I spend it? That's where I got upset," Alison said.
Mississippi's similar homeowner assistance effort has always served as a bellwether for Louisiana's recovery efforts, with Blanco's administration alleging the state has gotten political favoritism and Louisiana's critics holding up Mississippi as a model of efficient government.
For a while this spring, Louisiana leaders avoided comparisons with Mississippi, which seemed to be a dead end in Washington. But finally, with the Road Home budget falling flat in the past two months, state leaders are back to comparing the states again, wailing about Mississippi's privilege and alleging GOP plots to make Republican Gov. Haley Barbour into a hero and Democrat Blanco a failure.
"God bless them, they suffered too, but not to the extent that we did," Blanco said of Mississippi in a recent interview.
Blanco has a point: Katrina and Rita hit larger population centers here and exacted an extra punishment on New Orleans because of the failure of federally built levees.
Donna Sanford, the disaster recovery director at the Mississippi Development Authority, said she feels for Louisiana's Road Home predicament but is proud that her state has generally avoided the same fiscal fate. Sanford attributes it to more than just the politics cited bitterly by Blanco. She credits Barbour's leadership and willingness to make hard choices about which victims would be prioritized for speedier payouts.
The plan, as Sanford describes it, was to split the homeowner aid program into "buckets" of beneficiaries and start paying the next bucket only once it was clear how much money was left over.
The first bucket paid for homes outside the flood plain damaged by flood surge. That amounted to about 16,000 homeowners with insurance, who should get a little more than $1 billion in grants. With $3 billion budgeted for homeowner relief, the state then confidently moved onto the next bucket, expected to be about 14,000 insured properties within the flood zone. From the beginning, it refused to cover uninsured homeowners, while Louisiana simply assessed a 30-percent penalty for those without coverage.
The initial FEMA estimates in December 2005, which have come into serious question now, showed 331,070 Louisiana homes damaged by the storms and 157,914 in Mississippi. Even with more than $5 billion in the first congressional handout, Mississippi decided it didn't have enough to cover them all.
Rather than using the FEMA numbers to exclude those with minor damage -- as Louisiana did, only to have to add an estimated 15,000 homes classified incorrectly by FEMA -- Mississippi excluded wind-only claims and prioritized those who weren't required to have flood insurance. From there, Mississippi also cut out wealthier families, limiting eligibility within the flood zone to about 9,500 families making less than 120 percent of the area median income, or about $58,000 for a family of four.
And one more bucket of spending in Mississippi provides a stark contrast to Louisiana: its $48 million Phase One contract with Resnick Group. That accounts for less than 2 percent of the state's $3 billion housing aid package.
Louisiana will pay contractor ICF International as much as $756 million to run a $7.5 billion homeowners budget and an $869 million small rental aid program. That's 9 percent of the total budget going to the contractor.
Twenty-two months after Katrina, more than 127,000 Road Home applicants -- more than the total number of homeowners FEMA initially found eligible -- still have no federal aid. And that reality will likely make it more difficult to get quick action from a Congress in the throes of budget constraints and Katrina fatigue, and, to be sure, less than impressed by the state's management of Road Home.
Only recently, and under federal pressure, did the state reform the verification process, and then only to reduce the number of steps from 60 to 42. That action appears to have speeded payments considerably.
In another sea change, the federal Department of Housing and Urban development pressured reluctant state officials, abandoned the practice of parceling out grants in stages from an escrow account -- with the first installment no more than $7,500, an amount exasperated rebuilders said couldn't even get them started.
Soon, the state changed to a lump-sum compensation grant, similar to Mississippi's. With that and other changes, money finally started to flow in April, when the program closed 8,000 grants, followed by 10,000 in May and 10,300 in June. But when the money started moving, it then became clear the federal spigot would run dry long before the state fulfilled its promises to victims.
Shaken by the shattering of a signature piece of her program and the firestorm of criticism it prompted, Blanco quit her re-election bid a few days later, saying she hoped to remove politics from the state's recovery efforts.
Blanco recently went to Washington, asking Congress to kick in another $3 billion to $4 billion, and has offered to match it with $1 billion in state money.
At the least, the state will have to wait until a congressional spending bill this fall, which means more uncertainty for weary homeowners, many of whom can't rebuild without the promised help or have already given up and left the state.
Susan McClain said she's giving Louisiana, the state her family has called home "forever," one more chance -- but she isn't optimistic.
She got a Road Home check this month, but the day before the closing it was cut by $55,000. The Road Home suddenly decided to cut her home's estimated square footage by a third, with no explanation. Closing agents told her she had better take the money or risk getting nothing because of the shortfall, something she called "the bait-and-switch with threats." The surprise slashing forced her to scrap plans to raise her Gentilly house above the 7-foot level that Katrina inundated.
"The next flood will destroy my home, and then I'm leaving this state," she said. "The corps flooded me last time, but now the state won't let me rebuild to where it needs to be."
Some of the other 39,000 who have been lucky enough to get a Road Home check have also reported a "bait and switch," but the state doesn't disclose how many grants are challenged at closings. The average award has been steadily dropping in the two months since the state first acknowledged the shortfall.
Even those who have found eventual success are weary of the Road Home. Take the case of Knecht, who proved more dogged than most in the pursuit of a reappraisal of his home's value.
An appraiser, one who also works for the Road Home, certified four months ago that Knecht's house is worth enough to get a grant, but the program never accepted the document, despite repeated reassurances from the Road Home staffers Knecht harangued for months. Then, just last week, came a breakthrough that would mean the difference between no Road Home grant and getting about $60,000 to replace the house's flimsy Tylex paper exterior with real siding.
Knecht, after months of frustration interactions with Road Home advisers, finally managed to get the ear of a top supervisor and told him he had shared his tale of woe with the newspaper. He suddenly got an e-mail Friday saying his appraisal would be accepted and that he could close on a grant within weeks. Though ecstatic, Knecht kept it in perspective.
"For the average person who doesn't get to talk to the top people, I don't know if they could ever get their money," he said.
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