It is useful to view the federal assistance provided to the Gulf Coast within  the context of the overall costs of the damages incurred by the region and  the resources necessary to rebuild. For example, early damage  estimates from the Congressional Budget Office (CBO) put capital losses  from Hurricanes Katrina and Rita at a range of $70 billion to $130 billion  while another estimate put losses solely from Hurricane Katrina— including capital losses—at over $150 billion. Further, the state of  Louisiana has estimated that the economic impact on its state alone could  reach $200 billion. These estimates raise important questions regarding additional assistance  that will be needed to help the Gulf Coast rebuild in the future—including  how the assistance will be provided and by whom. Two Key Federal Programs That Provide Long-Term Rebuilding Resources Use Different Approaches

The federal government has so far used two key programs—FEMA’s  Public Assistance and the Department of Housing and Urban  Development’s (HUD) CDBG programs—to provide long-term rebuilding  assistance to the Gulf Coast states. These two programs follow different  funding models. Public Assistance provides funding on a project-by- project basis—involving an assessment of specific proposals to determine  eligibility, while CDBG—a block grant—affords broad discretion and  flexibility to states and localities. Community Development Block Grants

HUD’s Community Development Block Grant program—so far, the largest  federal provider of long-term rebuilding assistance—received $16.7 billion  in supplemental appropriations to help the Gulf Coast states rebuild  damaged housing and other infrastructure. Louisiana and Mississippi Target the Majority of Their CDBG Funds to Homeowners, but Differ in Policies and Procedures

With the vast number of homes that sustained damage in Louisiana and  Mississippi, each state had opted to direct the vast majority of their  housing allocations to homeowners, although each state tailored its  program to address the particular conditions in its state. Referred to as the Road Home, this  program is designed to encourage homeowners to return to Louisiana and  begin rebuilding. Of those, the program  awarded payments to 4,808 homeowners with an average award amount of  $74,250. Mississippi developed a two- phase program to target homeowners who suffered losses due to the  storm surge. Of those, Mississippi awarded payments to 11,894  homeowners with an average award amount of $69,669. Louisiana and Mississippi Are Engaged in Planning Activities, While the Federal Government Has Assumed a Coordination Role

Restoring the region’s housing and infrastructure is taking place in the  context of broader planning and coordination activities; in Louisiana and  Mississippi, state and local governments are engaged in both short- and  long-term planning efforts. Coordination at the Federal Level

In light of the magnitude of the Gulf Coast hurricanes, the administration  recognized the need to provide a mechanism to coordinate with—and  support rebuilding activities at—the federal, state, and local levels. Selected Questions for Congressional Oversight of Gulf Coast Rebuilding

Rebuilding efforts in the Gulf Coast are at a critical turning point—a time  when decisions now being made in community rooms, city halls, and state  houses will have a significant impact on the complexion and future of the  Gulf Coast. As states and localities begin to assume responsibility for  developing plans for rebuilding, there are difficult policy decisions  Congress will need to make about the federal government’s contribution  to the rebuilding effort and the role it might play over the long-term in an  era of competing priorities. Based on the preliminary work I have  discussed today, the Subcommittee way wish to consider the following  questions as it continues to carry out its critical oversight function in  reviewing Gulf Coast rebuilding efforts:    How much will it cost to rebuild the Gulf Coast and how much of this  cost should the federal government bear? How can the federal government further partner with state and local  governments and the nonprofit and private sectors to leverage the  public investment in rebuilding? February 28, 2007. May 4, 2006. March 28, 2006. November 2, 2005.
Why GAO Did This Study

The size and scope of the devastation caused by the 2005 Gulf Coast hurricanes presents unprecedented rebuilding challenges. Today, more than a year and a half since the hurricanes made landfall, rebuilding efforts are at a critical turning point. The Gulf Coast must face the daunting challenge of rebuilding its communities and neighborhoods--some from the ground up. This testimony (1) places the federal assistance provided to date in the context of the resources likely needed to rebuild the Gulf Coast, (2) discusses key federal programs currently being used to provide rebuilding assistance, with an emphasis on the Department of Housing and Urban Development's (HUD) Community Development Block Grant (CDBG) program, (3) describes Louisiana's and Mississippi's approach to using CDBG funds, and (4) provides observations on planning activities in Louisiana and Mississippi and the federal government's role in coordinating rebuilding efforts. GAO visited the Gulf Coast region, reviewed state and local documents, and interviewed federal, state, and local officials.

What GAO Found

While the federal government has provided billions of dollars in assistance to the Gulf Coast, a substantial portion was directed to short-term needs, leaving a smaller portion for longer-term rebuilding. It may be useful to view this assistance in the context of the costs of damages incurred by the region and the resources necessary to rebuild. Some damage estimates have put capital losses at a range of $70 billion to over $150 billion, while the State of Louisiana estimated that the economic impact on its state alone could reach $200 billion. Such estimates raise important questions regarding additional assistance that will be needed to help the Gulf Coast rebuild in the future. To date, the federal government has provided long-term rebuilding assistance to the Gulf Coast through 2 key programs, which follow different funding models. The Federal Emergency Management Agency's public assistance program provides public infrastructure funding for specific projects that meet program eligibility requirements. HUD's CDBG program, on the other hand, provides funding for neighborhood revitalization and housing rehabilitation activities, affording states broad discretion and flexibility. To date, the affected states have received $16.7 billion in CDBG funding from supplemental appropriations--so far, the largest share of funding targeted to rebuilding. With the vast number of homes that sustained damage in Louisiana and Mississippi, each state allocated the bulk of its CDBG funds to homeowner assistance. Louisiana developed an assistance program to encourage homeowners to return to Louisiana and begin rebuilding while Mississippi developed a program to target homeowners who suffered losses due to Katrina's storm surge that were not covered by insurance. As of March 28, 2007, Louisiana has awarded 4,808 grants to homeowners with an average award amount of $74,250. Mississippi has awarded 11,894 grants with an average award amount of $69,669. Restoring the region's housing and infrastructure is taking place in the context of broader planning and coordination activities. In Louisiana and Mississippi, state and local governments are engaged in both short-and long-term planning efforts. Further, the President established a position within the Department of Homeland Security to coordinate and support rebuilding activities at the federal, state, and local levels. As states and localities begin to develop plans for rebuilding, there are difficult policy decisions Congress will need to make about the federal government's contribution to the rebuilding effort and the role it might play over the long-term in an era of competing priorities. Based on our work, we raise a number of questions the Subcommittee may wish to consider in its oversight of Gulf Coast rebuilding. Such questions relate to the costs for rebuilding the Gulf Coast--including the federal government's share, the effectiveness of current funding delivery mechanisms, and the federal government's efforts to leverage the public investment in rebuilding.