State Guidelines, Accounting Issues Hold Up Disaster Relief Funds in Louisiana

State officials in Louisiana are delaying access to $7.5 billion in Gulf Opportunity Zone bonds (GO Zone) to public and private companies for nonresidential reconstruction and renovation projects until the state establishes new standards for these projects. The GO Zone bonds were set up by Congress to provide tax-exempt reconstruction loans with interest rates that are 1.5 to 2 percent lower than conventional loans.


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The state’s Department of Economic Development is reviewing Louisiana’s standards for loan applications because a legislator complained when developers sought funds for a $600 million office building in Baton Rouge, an area undamaged by Hurricane Katrina, neworleanscitybusiness reports. There is no deadline for finalizing the standards.

Bankers fear projects will be lost to Mississippi because of the delay. Mississippi has adopted a first-come, first-serve policy, except for casinos and major corporations that can afford conventional financing, the neworleanscitybusiness report says. Suzanne Mestayer, president of AmSouth Bank’s New Orleans region, said that once the flood plains are set and the levees have been repaired, GO Zone activity in New Orleans should pick up.

In St. Bernard Parish local officials are trying to find housing for an estimated 1,300 volunteers, many of whom are students on Spring break, who have come to help with debris removal. Federal Emergency Management Association (FEMA) spokesperson Rachel Rodi said requests to expand nearby tent cities to accommodate the volunteers are being reviewed to determine the cost. Councilman Tony “Ricky” Melerine organized temporary quarters for 500 volunteers in a local elementary school, but additional housing must be found, the New Orleans Time-Picayune says.

Other funds for the debris removal project have been held up by the state’s Office of Emergency Preparedness. The Legislative Auditor’s Office wants the St. Bernard Parish to clear up some accounting issues surrounding $31 million the parish received from FEMA in the first weeks after the storm.

Parish Chief Administrative Officer Danny Menesses said he is working to provide documentation to the Auditor’s Office. Parish president Henry Rodriguez says he has no idea how long it will take, Times-Picayune report says.

Lousiana’s governor Kathleen Blanco, testifying before the House Appropriations Committee last week, tried to hold onto the money promised to Louisiana by President Bush, as other states vied for a cut of the $4.2 billion housing recovery appropriation. Blanco told senators concerned about the possibility of fraud in her state that the state had hired Deloitte and Touche to oversee state spending of the housing funds.

But efforts by state officials to combat Louisiana’s reputation for corruption were undermined last week when the Internal Revenue Service filed a lien against the Bossier Office of Community Services for unpaid employees taxes for 2004 and 2005, the Shreveport Times reports. The agency owes $663,407.14 in taxes, penalties and interest. Five employees have been arrested in the scandal, including Executive Director Manuel Everado DuQue III, who was charged with maintaining false public records, malfeasance and theft. Bossier City is located in northwest Louisiana.

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