The Community Disaster Loan (CDL) Program, managed by the Federal Emergency Management Agency (FEMA), provides loan assistance to local governments to help them overcome a loss in revenues. The CDL program was first authorized by the Disaster Relief Act of 1974, which was later renamed the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). These loans also had some different provisions for eligibility and size, as will be discussed, and will be referred to as the 2008 CDLs for the purposes of distinguishing them in this report. An approximate total of $1,615 million in principal was offered to local governments through the program, with roughly $1,326 million borrowed. FEMA has cancelled approximately of $896 million of the $1,326 million of principal advanced to the local governments since program inception. In sum, 249 loans were issued to 200 local governments under 26 different disaster declarations from 1974 to 2010. Following Hurricanes Katrina and Rita in 2005, FEMA issued 157 special loans to 109 local governments. The limited use of the program may be attributable to a number of reasons, including, but not limited to:
A general lack of awareness of the program among local governments impacted by disasters, or limited advertisement of the program by FEMA to those governments; The eligibility provisions of the loan program may exclude many potential applicants; The size, interest rate, or others terms of the loan may be unattractive to local governments; The procedures for applying and managing the loan may be considered too cumbersome or intrusive by local or state governments following a disaster; There is relatively little need for the program overall, except in particular disaster situations, in comparison to other programs. The program is instead funded through the Disaster Assistance Direct Loan Program (DADLP) account. Of note, there were 64 traditional loans issued between 1976 and 1998, with no loans issued between 1998 and 2005. Though it has been amended, this provision's intention was included in the original authorization in 1974. FEMA may consider requests for an extension on the repayment of the loan, based on the local government's financial condition. Summary of Traditional Loan Cancellation Rates

The total dollar amounts and percentage rates of cancellation for TCDLs are displayed by government type in Table 8 and Table 9 . Though collectively the loans from both laws are called special community disaster loans (SCDLs), each law had slightly different statutory provisions for how the loans could be issued and administered by FEMA. After the change in law in May 2007 that allowed SCDLs to be cancelled ( P.L. Legislative Proposals in FY2013 Homeland Security Appropriations and in the Disaster Relief Appropriations Act, 2013 Bills

As reported out of the Senate Appropriations Committee, the Department of Homeland Security Appropriations Act, 2013 ( S. 3216 ) includes a general provision that would alter existing procedures for cancelling SCDLs. This provision is also included, almost verbatim, in the draft Senate version of the disaster relief supplemental appropriations bill for Hurricane Sandy, as released by the Senate Appropriations Committee. If passed by Congress, this provision is likely to reopen the cancellation application and review process for most, if not all, remaining loans that have not been fully cancelled. There are 71 special loans, issued to 54 different local governments, that could be reviewed again by FEMA with new procedures. Table 8 and Table 9 provide several measures for comparing the cancellation rates of TCDLs to SCDLs. In summary, TCDLs had a lower percentage of loans fully cancelled or with some level of cancellation than SCDLs (33.9% and 46.4% versus 50.0% and 59.7%, respectively). On average, TCDLs also had lower dollar amounts of principal forgiven per loan than SCDLs (38.9% versus 54.1%). However, as a function of total dollar amount of principal cancelled in each loan category, TCDLs had a much higher cancellation rate than SCDLs (97.2% versus 68.9%). FEMA has not issued new regulations in response to the unique provisions of the 2008 loans. Options Regarding the Use of Loan Funds

As discussed in the " Use of Funds " and " Purpose of the Special Loans " sections of the report, there has been only one major policy change to how funds could be used in the history of the program. Converting the disaster loan program into either a full or hybrid grant program may also involve modifying the current appropriation account, the Disaster Assistance Direct Loan Program account. Considerations for Eliminating the CDL Program

The core purpose of the CDL program is to provide financial assistance to local governments that are having difficulty providing government services because of a loss in tax or other revenue.
The core purpose of the Community Disaster Loan (CDL) program is to provide financial assistance to local governments that are having difficulty providing government services because of a loss in tax or other revenue following a disaster. The program assists local governments by offering federal loans to compensate for this temporary or permanent loss in local revenue. The CDL program is managed by the Federal Emergency Management Agency (FEMA). First authorized in the Disaster Relief Act of 1974 (P.L. 93-288), the Community Disaster Loan program is currently codified in Section 417 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. §5184, as amended). The program is funded through the Disaster Assistance Direct Loan Program account, rather than the Disaster Relief Fund (DRF) that funds the majority of other Stafford Act programs. In sum, 249 loans were issued to 200 local governments under 26 different disaster declarations from 1974 to 2010. An approximate total of $1,615 million in principal was offered to these governments in loans, of which roughly $1,326 million was borrowed by the governments. Through the program, FEMA may also cancel the repayment of the loans if certain financial conditions prevailed after the three fiscal years following the disaster. Through its cancellation authority, FEMA has forgiven approximately $896 million of the $1,326 million in principal advanced to local governments since program inception.
This report compares and analyzes three different categories of loans issued in different time periods in the program's history: "traditional" loans issued between 1974 and 2005, in 2007, and between 2009 and June 2012 (TCDLs); "special" (SCDLs) loans issued in 2005-2006 following Hurricanes Katrina and Rita; and loans issued under unique provisions in 2008 (2008 CDLs). As authorized by Congress and administered by FEMA, the SCDL and 2008 loan categories had different provisions than traditional loans to guide the eligibility of local governments and dollar size of the loans. SCDLs also had unique provisions that slightly altered the purpose of the loans, lowered the interest rate charged on the loans, and clarified the cancellation procedures for the loans.
In the original legislation authorizing and appropriating the SCDLs, repayment of the loans was not allowed to be cancelled by FEMA. However, Congress later amended the law to allow cancellation for SCDLs. Some controversy has arisen over FEMA's administration of the cancellation authority for these special loans, with many suggesting that FEMA has not cancelled the appropriate amount of loan balances. Table 8 and Table 9 provide several measures for comparing the cancellation rates of TCDLs to SCDLs. In summary, TCDLs had a lower percentage of loans fully cancelled or with some level of cancellation than SCDLs (33.9% and 46.4% versus 50.0% and 59.7%, respectively). On average, TCDLs also had lower dollar amounts of principal forgiven per loan than SCDLs (38.9% versus 54.1%). However, as a function of total dollar amount of principal cancelled in each loan category, TCDLs had a much higher cancellation rate than SCDLs (97.2% versus 68.9%). As reported out of the Senate Appropriations Committee, the Department of Homeland Security Appropriations Act, 2013 (S. 3216) includes a provision that would alter existing cancellation procedures for SCDLs. This provision is also included, almost verbatim, in the draft bill entitled the Disaster Relief Appropriations Act, 2013, as released by the Senate Appropriations Committee. The provision may require FEMA to reopen the review process for 71 special loans, issued to 54 local governments, that have not been fully cancelled in existing procedures. If passed into law, this provision may result in higher rates of cancellation for the SCDLs. All statistical figures provided in this report are accurate as of June 15, 2012.
Congress may consider changes to the overall CDL program in the future. Options could include altering future authorization and appropriations for the program in favor of more tailored disaster assistance programs, or converting the loan assistance into a grant program. There are also options for amending the program less significantly, including changing the way loan funds may be used by local governments, changing the total dollar size of the loans, and altering how the cancellation authority can be applied by FEMA.