By Ariella Cohen, staff writer — In the months after Hurricane Katrina, traumatized New Orleanians turned out in droves to discuss the fate of their neighborhoods. They gave hours of their time with the understanding that their input would guide the rebuilding of their city – and help secure the federal disaster grants needed to start reconstruction. When the resulting plan was approved by the state, many were excited to see their ideas on what they were told was the blueprint for the new New Orleans.
Two and a half years have passed since the plan was approved in June of 2007 and the state opened the spigot on $411 million in federal Disaster Community Development Block Grants. Yet in that time many of the publicly blessed programs have stagnated and, in some cases, received little more than token funding.
Though budget documents released last week by the city show that 75 percent of the $411 million — $308 million — has been set aside for specific projects, nearly half have not received necessary state approval. Without that, the programs and the money set aside for them exist as little more than ideas, vulnerable to cuts by Mayor Ray Nagin’s administration without any public input, an investigation by The Lens and Fox 8 News has found.
Critics, particularly some on the City Council, say legislative input is required by law, and that check-and-balance system is being ignored.
“The administration is moving millions of dollars from one project to another without the council having oversight,” said City Council member Stacy Head. She worries that projects are moving forward “in a way that is inconsistent with the will of the people.”
Head recently saw $2 million stripped from a $4.5 million project on South Claiborne Avenue near Toledano Street in her district. The money, appropriated in a budget for Land Acquisition presented to the City Council in July, was slated to go towards the purchase and redevelopment of blighted lots in the area, one of the 17 target neighborhoods included in the state-approved recovery plan for New Orleans. By the time the next version of the Land Acquisition budget appeared before the council in November, the appropriation had shrunk to $2.5 million. Head said she was never informed that the money had been cut – and she never noticed it in the reams of budget documents distributed by the city’s finance department.
Meanwhile, a similar project in eastern New Orleans near Lake Forest Plaza doubled, ballooning to $8.9 million from $4.5 million in August set aside for the city to buy up abandoned lots for redevelopment. Lake Forest Plaza is being developed by Cesar Burgos, a friend of Nagin who was appointed by the mayor to the chairmanship of the Regional Transit Authority board in 2006.
In an interview Wednesday with The Lens, Burgos said he had not heard that more money was appropriated for land acquisition near the plaza. “It’s a good thing,” he said. ”We need more citizens in the east. Now we are 50 percent at what we were before Katrina.”
Burgos said he is “very close to an agreement with Wal-Mart” on locating a retail store at the Lake Forest Plaza site.
Nagin says political alliances have nothing to do with the decision to move money. Some cuts were necessary because the city was facing a $68 million shortfall and spending had to shrink in all areas in order to close the gap. Shifts in funding, he said, were done in the name of expediency.
“Most of the projects have been in the works for three or four years, what we are doing now is funding the projects that are ready to go,” he said. “They are moving to the front of the line.”
“The projects I’ve been focused on …are moving forward. We’re ready to go and we can’t have those funds diverted to other areas,” she said.
Unfortunately for the council member and her Central City constituents, the City Charter does not require the mayor to seek approval from the council before making changes to the city’s operating budget.
It’s worth understanding the unique bureaucratic process for spending this money and how it’s different than normal.
Generally, bricks-and-mortar projects are included in the city’s capital budget, a separate spending plan from the city’s general fund budget.
The charter, indeed, requires council approval for capital budget spending. But for the general fund, the council simply approves spending in very broad categories, not line-by-line.
The Nagin administration has chosen to put the disaster-recovery money in the operating budget, essentially giving the council less control over specific projects. Under the current arrangement, the administration is free to move monies between projects as long as the projects are under the same broad budget category.
A category can be as specific as Land Acquisition or as vague as Economic Development or Healthy Communities — a category that includes money for a bioremediation program as well as an initiative that would give grants to grocers who sell fresh produce in low-income neighborhoods.
What’s up for debate, however, is the oversight requirements written into the final approval granted by the state. It says the council’s Recovery Committee and the full council must approve “specific project expenditures.”
The Nagin administration contends that this requirement was met when the council approved the initial plan, full of specific projects. Mayoral spokeswoman Ceeon Queitt said the city fulfills this requirement in the annual budgeting process and through the approvals necessary for all capital expenditures.
“We cannot use any money until the city council appropriates it for a certain department,” Quiett said.
Head and others claim this provision means the council should be consulted on all final project spending, not just the overall department budgets.
The state-approved recovery plan does not specifically address what approval is necessary if the initial plan is changed.
The state says the shifts in spending are allowed as long as the money moves to programs within the overall recovery plan.
“We want local governments to do what is best for their communities,” said Louisiana Recovery Authority spokeswoman Christina Stephens. “If they want to put money towards a project and it meets (federal) requirements, it’s OK with us. Our goal is to approve the projects as quickly as possible.”
“The public and the council had its discussion when the plan was approved,” she said.
Created after hurricanes Katrina and Rita, the recovery authority is the state proxy for the U.S. Housing and Urban Development Department. It acts as a conduit for the federal money, receiving the cash for local governments and ensuring that the money is spent in accordance with HUD rules. HUD did not respond for requests for comment.
District A City Council member Shelley Midura says that her experience of the Recovery Committee, of which she is a member, does not include approving specific project appropriations.
“I am not aware that specific requests on specific projects are being run by the committee,” she said. “I know they aren’t being put before the entire council on a specific project-by-project basis.
“We have limited disaster relief funds, and the spending is not being done in a democratic fashion. It has morphed into a process that is in the hands of such a few number of people you can say the public is being left out,” Midura added.
Case in point: After Katrina, city recovery officials created a program that would provide loans and grants to small businesses and developers to rehabilitate damaged property and make it more energy efficient. As of August, $14 million was specifically earmarked for privately-held cultural and commercial assets that were identified in the City’s initial recovery plans. By fall, $9 million had vanished from the program’s budget, leaving a major post-Katrina commercial renovation grant program with $5 million. Despite that $9 million cut, overall spending in that budget category shrank by less than $2 million because of a fresh $4 million allocation for the redevelopment of the riverfront and a $2 million redirection of funds to the Gentilly Woods Shopping Center, which was previously given $4 million. The money all was contained in the Economic Development budget category.
The shifting of money means losses for school projects as well. In August, the city planned to give $9.8 million in disaster money to the Recovery School District to build two new schools, one in the Central Business District focused on international business and another in Algiers’ Federal City focused on maritime themes. By November, the mayor had cut funding for both schools and added $4.5 million for the Louisiana Children’s Museum.
“It’s always disappointing when you plan on securing money and those monies get pulled…but we move on,” said Recovery School District Superintendent Paul Vallas.
Vallas said if the city provided the money, both schools would have been built by now. District operating money will now have to be tapped to finish those schools. And any time a project is delayed, Vallas said, the price increases.
For his part, Nagin says money is being shifted because certain projects are shovel-ready.
“I don’t know of any money that’s been moved from any one area,” he said. “We try and make sure that any money’s been allocated to a (council) district stays in that district…so it’s very rare that that would happen.”
The mayor believes there is enough cash to go around. He says that the state has another $2 billion to $3 billion earmarked for the city’s recovery and that as time goes on, the money will reach projects that aren’t now far enough along to be financed.
“Whatever is moving to the back of the line at this moment will probably get funded later,” he said.
The mayor did not offer any further detail on how this would be accomplished. One recently bumped program is the Neighborhood Loan Loss Reserve Fund. The program, created by recovery officials and approved by the state under the 2007 citywide plan, was intended to help people secure loans for rebuilding.
The program is mentioned in a city press release marking a 2007 mayoral address to the council. The release is titled “City reaches tipping point in third year of recovery.” Nagin mentions the $10 million for the program as one of four critical successes for Recovery and Livable Communities.
A July budget shows $4 million set aside for the program. By November, the program had been decimated to $500,000. And because the money has not been officially dedicated, or “encumbered,” there is no guarantee the money will not be shifted to another program before it is spent.
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