Louisiana Could Make First Levee Debt Payment Without Loan

By Melinda Deslatte | May 24, 2021

BATON ROUGE, La. (AP) — Rather than borrowing, Louisiana could make its first $400 million payment in cash to the federal government for upgrades made to the New Orleans region’s flood protection system after Hurricane Katrina, if lawmakers agree to the spending.

The state’s income forecast got a boost from better-than-expected tax collections in the current budget year that ends June 30. That gives lawmakers another $357 million to spend, and could be steered toward the levee system debt instead of taking out a loan that would require years of repayments with interest.

The House-approved version of the budget already proposed spending $45 million in cash toward the first $400 million debt payment. Gov. John Bel Edwards would like to use $355 million of the newly recognized cash to cover the full flood protection system debt payment owed this year.

Commissioner of Administration Jay Dardenne, the Democratic governor’s chief budget adviser, made the pitch Friday to the Senate Finance Committee.

Senate President Page Cortez said lawmakers are weighing the idea as the Senate works to craft its version of spending plans for the extra money available this year and a budget for next year.

“It’s certainly prudent to try to pay cash for it,” said Cortez, a Lafayette Republican. “It’s a debt we owe.”

The Senate is expected to unveil its budget proposal Monday, with fewer than three weeks to go in the legislative session.

Former Gov. Bobby Jindal struck the deal years ago that requires the state to pay anywhere from $1 billion to $3 billion for levee system improvements constructed across Orleans, Jefferson, St. Bernard, Plaquemines and St. Charles parishes after Katrina devastated the region in 2005. The size of the debt owed depends on how quickly Louisiana pays back the federal government.

The agreement finalized in 2009 called for the federal government to pay the full cost of rebuilding the U.S. Army Corps of Engineers’ flood-control system that failed during Katrina, along with additional structures authorized in 1965 that were not complete when Katrina hit.

But Louisiana had to pick up a 35% share of the cost for building new projects such as floodgates, pump stations and surge barriers. The bill is starting to come due.

Congress authorized forgiveness of the sizable interest that has been accruing if Louisiana makes an initial payment of $400 million before Sept. 30 and repays the entire $1.1 billion construction cost by Sept. 30, 2023. If the state can’t meet those terms, the 30-year repayment with interest is estimated to cost $3 billion.

Edwards initially proposed borrowing the money over several years through bond sales to investors for upfront cash to repay the federal government by 2023. But that would require debt repayments over decades _ and put a crimp in Louisiana’s ability to borrow money for other construction work.

Lawmakers worry about the cash crunch that could cause for other projects they want to finance. The straight cash payment this year could alleviate those concerns, but it also would take away all the new cash for one debt. Some legislators may have other ideas for spending that money.

Several ideas have been floated this session to pay down the federal debt with reduced or no borrowing, but they center mainly on trying to get the five parishes to come up with some of the cash. That’s drawing pushback from parish leaders and lawmakers who represent the areas.

Paul Rainwater was Jindal’s chief of staff and the former head of Louisiana’s hurricane recovery agency and is now a lobbyist representing New Orleans. He said the flood protection agreement always envisioned the state paying the cost share owed and the local governments covering the costs of maintenance and operations of the levees and pump systems.

“It was never contemplated that locals put up the match,” Rainwater said. “They do have skin in the game” because of the dollars they spend on upkeep of the flood protection systems.

Was this article valuable?

Here are more articles you may enjoy.