Katrina: Sea change on the Gulf Coast - Part 2 • Money

Katrina disaster aid is the nation's most expensive recovery program ever.

On a hot and humid July day, cranes lift gigantic concrete slabs out of the water – the remains of the Biloxi Bay bridge, which collapsed like a deck of cards after hurricane Katrina. Its replacement will be quite a sight.

It will be wider than San Francisco's Golden Gate Bridge, although it connects a population one-tenth the size. It will sport a bike lane, but with a grade so steep Lance Armstrong would have trouble climbing it, a local politician grumbles. If the mayor of Ocean Springs, Miss., gets her way, it will have fleurs-de-lis embossed on its buttresses.

Total cost: $338.6 million, courtesy of the American taxpayer. The new bridge is just part of the flood of federal money destined for the region – some $110 billion, equal to $73,333 for each person affected by Katrina's hurricane winds.

It's easy to see some of that money at work. Besides large public works projects, individuals are getting checks to rebuild their homes. It's hard to find a parking spot at the local Lowe's or Home Depot as builders stock up on supplies. White House officials say the record aid will revive the region's economy.

But local officials complain that the aid is not landing in the pockets of those who need it most. Less than half of the money – some $45 billion – has been spent, according to a recent White House analysis. Parts of Louisiana look as if Katrina roared through yesterday, not a year ago.

So, where is the money going?

"There is a vast amount stuck between Washington and the folks on the ground who need it," says Rep. Charlie Melancon (D) of Louisiana, who represents St. Bernard Parish, where almost every home was sullied by floodwaters. "Congress has authorized the money, but the agencies are not spending it."

White House counsels patience

Federal officials are well aware of the grousing.

"People are still asking for funding and speeding up the mission," says Donald Powell, federal coordinator for Gulf Coast rebuilding. "But that additional funding has been allocated – it's just a matter of implementation, execution, preparing the proper paperwork, all the things you might expect that a parish should complete before they get the money."

The amount of aid promised is huge. It's double the total federal dollars doled out for all US natural disasters since 1989. Even adjusting for inflation, Katrina aid tops the spending for the Marshall Plan, which helped postwar Europe recover. It's a commitment equal to $840 for every US household that filed an income-tax return last year.

That economic jolt should be especially noticeable on America's blue- collar coast, where even before Katrina median household incomes trailed the US median by 22 percent in Louisiana and 25 percent in Mississippi.

So far, federal money is not providing that much of a boost, especially for metropolitan New Orleans, where most of the significant Katrina damage resided.

Even with all the rebuilding under way, the area's job picture looks bleak. Immediately after Katrina, the region lost 215,100 jobs, and the latest job reports show it is still down 182,800.

"The recovery is really slow compared to a place like Lake Charles, [La.], which didn't have the flooding," says Loren Scott, a private economist in Baton Rouge, La.

Earlier this month, CorpWatch, a nonprofit watchdog, blamed big out-of-state corporations for "disaster profiteering."

"Ninety percent of the reconstruction money has gone to companies outside the three states affected," says Rita King, author of the group's report on Katrina spending.

The White House says the largest amount of money – $63.4 billion – has been authorized for Federal Emergency Management Agency disaster relief, which continues to provide debris pickup and apartment rental income for displaced people. Katrina – and hurricane Rita one month later – destroyed or seriously damaged an estimated 354,000 homes and created more debris than the 9/11 attacks and hurricane Andrew combined. This direct housing assistance, which now totals nearly $13 billion, may continue for another six months, according to FEMA spokesman James McIntyre.

Included in FEMA's budget is $17.6 billion already paid out to individuals under the National Flood Insurance Program. About 50 percent of the people in Louisiana and 22 percent in Mississippi, if they lived in a 100-year flood plain, had NFIP insurance.

Flood insurance is a bright spot

The flood program appears to be a bright spot in the federal response, paying claims relatively quickly. To date, about 98 percent of the program's claims have been settled, say officials.

Within three weeks of Katrina, Terrence Robinson of Boothville, La., had a check for $97,000. "It was easy for them to pay out," says Mr. Robinson, whose home was flooded by 25 feet of water. "They took a satellite picture and saw it was still under 10 feet of water."

Officials say one of the keys to recovery is the federal payout to a different population: homeowners who were not in a flood zone but who were inundated anyway – a situation common in New Orleans. To help those hurt by hurricanes Katrina and Rita, Mississippi and Louisiana enacted a program to give cash to those who suffered. In Louisiana, Gov. Kathleen Blanco's program, called "The Road Home," allocates up to $150,000 to these homeowners.

Housing aid applicants want to rebuild

As of Aug. 9, 100,000 people had registered for the program and early indications are that 85 percent of the applicants want to rebuild, says Sean Reilly, a board member of the Louisiana Recovery Authority. Those who do rebuild have to agree to live in their new home at least three years or forfeit their grant.

Many residents view the money as a form of supplemental insurance. A month ago, Katherine and Randolph January drove two hours from Lake Charles, La., to Baton Rouge to see if a pilot program could offer financial assistance to repair their home of 54 years. They had insurance on their home, which was damaged by hurricane Rita, but it was not enough.

"We'd like to get some extra money and let the work get done," says Ms. January, ticking off such projects as kitchen cabinets and the need for a new hot-water heater.

Federal money is also flowing for new sewer plants, roads, bridges, and other infrastructure destroyed by the storms. In Biloxi, Miss., for example, federal funds will help rebuild city-owned buildings that suffered about $140 million in damage. Mayor A.J. Holloway says he's heard there's up to $600 million for the water and sewer system.

But it's the planned bridge that's getting the most attention – and causing some cross-bay sniping. It will be 95 feet high – nearly three times as high as the old bridge's center span, which had a drawbridge. It will have twice as many lanes – six for traffic and two for breakdowns – as well as a 14-foot-wide pedestrian walkway and bicycle path.

The walkway and bike trail "is stupid," says Mayor Holloway. "It was the mayor of Ocean Springs' idea."

Across the bay, Ocean Springs' Mayor Connie Moran says the bridge is "too dang wide." But she aims to eliminate car lanes, not bikeways. "We don't want 10 lanes of traffic in our town," she says. "I've already had calls from bike clubs who want to cross it."

Mr. Holloway says he expects Biloxi to be in "good shape" in five years and back to pre-Katrina levels in eight to 10 years.

Reconstruction booms take time

Such delays are not unusual, historically speaking, says Lawrence Vale, a Massachusetts Institute of Technology professor and coeditor of "The Resilient City: How Modern Cities Recover from Disaster."

In San Francisco, for instance, it took a full year after the 1906 earthquake and fire for its building boom to begin, three years to reach the real height of development, and six years for massive new civic projects to begin, he says. "One of the lessons I take from that is we need to be patient in order to understand how resilient a city is going to be.... Large-scale reconstruction, like large-scale construction, takes years under the best circumstances."

With all the Katrina money sloshing around, an army of accountants, backed up by a special federal antifraud task force, is mounting an unprecedented oversight effort with 500 to 600 auditors and investigators.

At the Road Home, "there is a big emphasis on antifraud," says Fred Tombar, director of Louisiana's homeowners assistance program.

"If the government just turns over large chunks of money, whether it's grant money or contract money, we will end up with a huge windfall for contractors and a potential for abuse," says Scott Amey, a senior investigator at the Project on Government Oversight in Washington.

As of Aug. 8, 369 individuals had been charged with some form of Katrina wrongdoing – from bribery to theft of government property, the Department of Justice reports. The public can expect many more cases.

According to a Justice Department official, the task force receives 150 to 200 tips and leads each week.

Staff writer Kris Axtman contributed to this report.

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