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With Huge Bill Due to Army Corps of Engineers, Louisiana to Ask Feds to Forgive Debt for New Levees

Posted on August 4, 2016

By Bob Marshall, The New Orleans Advocate

Louisiana soon will be asking the rest of the nation for some love — about $3.5 billion worth.

That’s what the state will owe the U.S. Army Corps of Engineers over the next 30 years as its share of the cost of the New Orleans area’s new $14.5 billion hurricane defense system that’s due to be completed by 2018.

Louisiana wants that debt waived so it can spend the money instead on stopping the rapid loss of the bottom third of the state from subsidence and a rising sea level, said Johnny Bradberry, Gov. John Bel Edwards’ executive assistant for coastal activities.

“If the state has to come out of pocket with $100 million a year for the next 30 years for this debt, that puts a pretty big hole in what we are trying to accomplish with the coast,” Bradberry said. “That’s why we’re asking to have this forgiven.”

He said forgiveness likely would require congressional action. “However, our hope is that the president can spearhead the effort,” he said. “We are asking for his help.”

Louisiana already is struggling to fund its Coastal Master Plan, a 50-year blueprint that scientists consider the state’s last chance to stave off major land loss by 2100. The plan debuted in 2007 with a $50 billion price tag, but recent estimates put the bill at about $91 billion. The state’s share for the $14.5 billion hurricane protection system is included in that figure.

That’s a steep climb for Louisiana, which annually ranks among the 10 poorest states in the nation and last year faced a nearly $2 billion budget deficit.

Under the 2006 congressional authorization, the Corps of Engineers was charged with paying 100 percent of the first $11.1 billion needed to rebuild the area’s original hurricane protection system, which collapsed during Hurricane Katrina due to poor design, construction and maintenance.

The state was responsible for 35 percent of the remaining $3.4 billion, most of which was used to bring the system up to standards for national flood insurance. That share ultimately will come to about $1.5 billion, according to the Corps.

Typically, a state must begin paying its share at the start of a project. But Louisiana, facing enormous rebuilding costs after Katrina, was allowed to delay payments until the improvements were completed. The Corps paid everything up front and is letting the state spread its payments over 30 years, with interest, much like a homeowner’s mortgage.

However, interest on the debt began accruing at the time of each congressional appropriation. That will add about $2 billion to the final bill, according to the Corps and the state.

Bradberry said the state will try to convince Washington leaders that restoring the coast should take priority over paying the debt because the restoration effort will benefit the entire country.

Louisiana officials often point out that the wetlands that are sinking protect the nation’s largest port, 50 percent of the country’s refining capacity and an infrastructure of rigs and pipelines that supply the nation with 90 percent of its offshore oil and gas supply.

“If you look at that, what we’re trying to do for the coast helps protect the nation’s investment in that hurricane protection system — because wetlands protect the levees,” Bradberry said. “We can make a very good case that forgiving this debt is good for the whole country.”

Louisiana’s coastal effort received a boost recently when the state was awarded about $8 billion from fines related to the BP oil spill in the Gulf. Payment will be spread out over 15 years, and almost all of the money must be spent on coastal restoration.

When the BP windfall ends, the state’s revenue stream for the coast will drop to about $110 million per year.

There is precedent for forgiving loans applying to disaster recovery. The Federal Emergency Management Agency forgave $391 million loaned to Louisiana governments after Katrina.

Source: The New Orleans Advocate

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