Louisiana residents who received U.S. Small Business Administration loans for their post-flood home repairs will not be able to pay off those debts with a new state program funded by federal recovery dollars, federal agencies have determined.
But the U.S. Department of Housing and Urban Development may be willing to play ball on lowering the share of the $ 1.67 billion state recovery program that must go to low-to-moderate income households and on working with the state to avoid costly environmental reviews required before home repairs can start.
The findings came Thursday afternoon as part of a multi-agency written response to Gov. John Bel Edwards on a number of his requests for the federal response to the 2016 floods. Edwards’ office did not have an immediate comment Thursday evening, nor did members of the Louisiana congressional delegation.
The response does not directly address Edwards’ request for an additional $ 2 billion in federal recovery dollars nor for the $ 125 million needed to finish the long-stalled Comite River Diversion project, noting only that U.S. Army Corps of Engineers funds its projects on a competitive, performance-based basis.
But the federal response did give an definitive answer on the SBA loan question, stating flatly that it wouldn’t be allowed.
The U.S. Department of Housing and Urban Development and the SBA, the response says, have “administratively prohibited the use” of disaster recovery money through the Community Development Block Grant program “to repay SBA disaster loans.”
The CDBG program is funding the state’s $ 1.67 billion recovery plan. About 80 percent of it is going to programs to help people repair their flooded homes.
The document, which was attached to a brief letter from Robert Fenton, acting administrator of the Federal Emergency Management Agency, notes that SBA loans cannot duplicate aid provided by other federal sources like flood insurance, FEMA grants or the disaster recovery block grant dollars, known as CDBG-DR.
The lack of financial assistance for SBA loan recipients has become more of an issue in recent months, prompting questions from flooded residents at public meetings. Recipients have noted that the loans must be paid back, with interest, although some received reduced rates. They have questioned why that would be considered a duplicated benefit when they must pay back the loan.
Residents with the loans have argued that they should get at least some portion of the state’s federal recovery dollars to help defray SBA loans; otherwise, they are being penalized for pursuing loans to which FEMA had directed them.
The request for SBA loan relief was among the most common to Office of Community Development officials, state officials said, when they solicited comments on the state recovery plan late last year and earlier this year.
Even though the agencies agreed in 2011 to treat the situation as a duplication of benefits, the rules requiring this also allowed for the opportunity for a waiver “on rare occasion and in extraordinary circumstances.”
But the federal response says that if the agencies allowed the use of the state recovery dollars to reimburse SBA loans, people still in need of home repairs would not have money they need. The response underlined that point Thursday by noting Louisiana officials continue to say they still need an additional $ 2 billion to meet post-flood needs.
“Furthermore, the State already indicated that they believe the amount of CDBG-DR assistance is not sufficient to fully assist all homeowners in need, and directing CDBG-DR funds for the purpose of reducing SBA loan principal would reduce the number of individuals across the State that can ultimately be assisted,” the response says.
Edwards and the state’s legislative delegation have petitioned Congress for nearly $ 4 billion for the state’s flood recovery but have received about $ 1.67 billion. State is also slated to receive a share of another $ 400 million for disaster recovery among several states that was recently appropriated by Congress.
Even before this latest response, Edwards had gone to the state congressional delegation and proposed legislative fixes. Among them, Edwards has asked either for the creation of a loan forgiveness program or appropriations language that would specifically allow federal disaster recovery dollars in the state plan to pay off SBA debt.
Regarding the income requirements, Pat Forbes, executive director of the state Office of Community Development, asked HUD in a Feb. 1 letter for a waiver so only half of the state recovery dollars must be spent on low-to-moderate income households, instead the 70 percent requirement now in place.
He noted that as a matter of “historical fact,” HUD granted just such a waiver after Hurricane Katrina and Rita due the extensive damage caused by those storms that affected residents of varying incomes. Forbes wrote the 2016 floods were no different.
“In the floods, entire communities were affected and in order to ensure entire communities are able to recover and rebuild, it is imperative unmet needs are addressed in a holistic manner,” Forbes wrote.
In the multi-agency response Thursday, HUD did not make a commitment but says Louisiana “must demonstrate a compelling need for the waiver.”
HUD added that the waiver request would not be “timely” until residents’ applications to the state recovery plan are submitted so the state “could accurately assess the need for a potential reduction” in low-to-moderate income requirement.
The states estimates that 57,600 households had major to severe damage in the August and March floods. Of that total, Forbes in his Feb. 1 letter said they believe 44 percent of homeowners are low to moderate income.
Even if the waiver request were granted, Forbes added, about 65 percent of state recovery program fund dollars for home repairs would go to households in that income range.
Households that fall under income benchmarks set up in the plan will be eligible to have 100 percent of their home repair costs paid for while those over the income benchmarks will be eligible for up to half of the costs.
HUD also indicated Thursday it would be willing to provide technical assistance to relieve the state from environmental reviews required for home repairs paid for by the state plan.
The agency added a legislative fix proposed by Edwards and the delegation that would modify the National Environmental Policy Act would not address requirements imposed by other environmental laws.
“It is HUD’s analysis that a great majority of the $ 3,500 (per home) costs associated with environmental reviews are required not by NEPA, but by reviews associated with toxic substances, such as lead-based paint and asbestos,” the federal response says.
HUD offered its help in finding a solution.