Mayor: New Orleans’ Disaster Loans Will Be Forgiven

The City of New Orleans has received word that the federal government is forgiving its $240 million in disaster loans received after Hurricanes Katrina and Rita, Mayor Mitch Landrieu said.

Storm-ravaged local government agencies across Louisiana – sheriffs, school boards, parish councils, fire districts and more – borrowed federal funds after Katrina and Rita to help cover the costs of regular operations and services after the storms wiped out much of their local tax bases and government income.

Several have been deemed to be so financially struggling after the 2005 storms that their federal disaster loans, called “community disaster loans,” were forgiven by FEMA, while others have to repay the money.

“This loan forgiveness is great news for the City of New Orleans,” Landrieu said in a news release. “Removing this burden will allow us to focus on righting New Orleans’ budget and on continuing to move our city forward with over 100 priority capital projects in the pipeline.”

Congress agreed not to require loan repayment if agencies met certain criteria involving operating deficits and revenue losses, based on 75 pages of rules devised by FEMA. Local governments apply to FEMA for the loan forgiveness and have to show deficits in their operating budgets for three fiscal years following the storms.

The Jindal administration is arguing more of the loans should be forgiven, saying state and local recovery officials disagree with some of the ways FEMA calculated the revenue drops and are requesting that the rules governing the repayment criteria be tweaked.

The loans had a five-year repayment period, but included provisions for getting extensions.