Jefferson must repay Katrina loan

While Jefferson Parish officials debate the proposed 2013 budget and all of its reductions and eliminations, there are growing signs that the parish’s 2014 budget could be even more austere in part due to the need to repay a $55 million loan related to Hurricane Katrina.

When Parish President John Young presented the 2013 budget, he noted that because of operational costs, he was not setting aside any new money to help repay a community disaster loan the parish received from FEMA following Hurricane Katrina. In fact, Young’s budget actually removed nearly $8 million from the $14 million the parish had set aside to repay that loan because of an initial $13 million budget shortfall.

Jefferson Parish has been seeking forgiveness of its community disaster loan since 2009, but its request was denied by FEMA in 2011. The parish has appealed that decision, and parish officials have managed to secure an extension on repaying the loan.

Young said obtaining forgiveness is crucial for the parish. If Jefferson Parish is forced to repay the loan, it could result in severe service cuts in 2014 and put the parish in a precarious financial position, he said. He’s cautiously optimistic about the parish’s chances to get forgiveness with the assistance of its federal delegation and hopes that with the conclusion of the presidential election, a decision will be made soon.

“We feel that based on the documentation we have provided to FEMA the loan should be forgiven,” Young said. New Orleans had $200 million in disaster loans forgiven, he noted.

Earlier this month, Councilman Ricky Templet expressed concern at the parish’s decision to tap into the loan repayment fund to pay for current operations, noting that using one-time funds to fund operations is a dangerous habit to develop.

“I don’t want us to get into the practice of using one-time money for recurring expenses,” Templet said. “Our school system got into doing that, and we had to look at massive layoffs.”

Chief Operating Officer Chris Cox said he’s meeting with department heads to discuss ways to further decrease spending to make future cash infusions unnecessary. However, he said right now it appears that 2014 could be a tough year.

“I said 2013 is going to be a challenge, and 2014 is going to be outright difficult,” Cox told the Parish Council.

Part of the problem for Jefferson Parish is that immediately after Katrina the parish’s finances improved drastically, with sales tax revenues growing by more than $50 million from 2004 to 2006 and remaining healthy for two more years. FEMA considers an area’s finances in the three years following a disaster when it’s determining whether to forgive a loan.

But, parish officials argue that sales tax revenues were skewed immediately after Hurricane Katrina because Jefferson Parish became the epicenter of disaster recovery for New Orleans, Plaquemines Parish and St. Bernard Parish. That revenue spike, which included $171 million in sale tax revenues in 2006, created a false picture of the parish’s financial situation.

In fact, sales tax revenues have declined precipitously since 2006. In 2013 parish officials are projecting about $137 million in sales tax revenue. That’s a 13 percent increase compared to 2004 but well below the 23 percent increase officials were projecting prior to the storm.

The appeal noted that the parish used excess sales tax revenue to make several capital improvements to improve emergency preparedness and pay for increases in code enforcement activities needed because of storm blight. In addition, Young has established a new policy for maintaining reserves in all of its funds, and repaying FEMA could jeopardize that plan.

Many Jefferson Parish municipalities also received community disaster loans, but their current situations vary. Westwego and Jean Lafitte received $1.8 million and $200,000 respectively from FEMA. Westwego had its loan forgiven, while Jean Lafitte has already repaid its debt. The city of Kenner never needed to seek disaster loans, said Chief Administrative Officer Mike Quigley.

But officials in Gretna and Harahan are facing some of the same tough decisions that parish officials are discussing.

In Gretna officials have been fretting for months over how the city will repay roughly $1.2 million from a $2 million loan the city received from FEMA. Gretna’s budget has been particularly tight in recent years, but Mayor Ronnie Harris said the city created a special repayment fund for the loan.

Unfortunately, that fund was raided for expenses related to Hurricane Isaac and is now empty. Harris hopes to develop a repayment plan with the Gretna City Council during budget discussions in February, but he said the city isn’t rushing to pay back the loan since it’s not due until 2016.

“We’re not making any payments until it’s due,” Harris said. Although that increases the interest the city will owe on the loan, Harris said it creates more financial flexibility. “We’ve got to respond to emergencies.”

Harahan Mayor Provino “Vinnie” Mosca said his city received about $900,000 from FEMA after Katrina and has only repaid $200,000. In order to repay the remainder, it would mean a wholesale slashing of the city’s already meager $5.3 million budget, Mosca said.

“A lot of high schools have a bigger budget than us,” he quipped. “It would deplete the departments … All the departments’ budgets would be cut.”