With a huge bill about to come due, state will ask feds to forgive debt for new levees

Louisiana soon will be asking the rest of the nation for some love.

About $3.5 billion worth.

That’s what Louisiana will owe the U.S. Army Corps of Engineers over the next 30 years as its share of the new $14.5 billion hurricane defense system due to be completed by 2018.

The state wants that debt waived so it can spend the money on stopping the rapid loss of its bottom third to the Gulf of Mexico from subsidence and sea level rise, said Johnny Bradberry, Gov. John Bel Edwards’ executive assistant for coastal activities.

“If the state has to come out of pocket with $100 million a year for the next 30 years for this debt, that puts a pretty big hole in what we are trying to accomplish with the coast,” Bradberry said.  “That’s why we’re asking to have this forgiven.”

He said forgiveness would likely require Congressional action. “However, our hope is that the president can spearhead the effort — we are asking for his help.”

Louisiana already is struggling to fund its Coastal Master Plan, a 50-year blueprint scientists consider its last chance to keep much of its lower third dry by 2100.

The plan debuted in 2007 with a $50 billion price tag, but recent estimates adjusted for inflation place the bill at about $91 billion. The cost share for the $14.5 billion hurricane protection system is included in that figure.

That’s a steep climb for a state that annually ranks among the 10 poorest in the nation and last year faced a nearly $2 billion budget deficit.

The 2006 Congressional action authorizing the $14.5 billion project required the state to pay 35 percent of the cost. But the corps was charged with paying 100 percent of the first $11.1 billion needed to rebuild its original system that collapsed during Hurricane Katrina due to corps’ poor design, construction and maintenance.

The state’s 35 percent cost only applies to the remaining $3.4 billion, most of which was used to bring the system up to standards for national flood insurance. That share will come to about $1.5 billion, according to the corps.

Typically, a state must begin paying its share at the start of a project. But Louisiana, facing enormous rebuilding post-Katrina, was allowed to delay payments until this project was completed. The corps paid everything up front and is letting the state spread its payments out over 30 years, with interest, much like a homeowner’s mortgage.

However, interest on the debt began accruing at the time of each congressional appropriation.  That will add about $2 billion to the final bill, according to the corps and the state.

Bradberry said the state would try to convince Washington that restoring the coast should take priority because that effort will benefit the entire country.  Louisiana officials often point out the wetlands that are sinking and crumbling protect the nation’s largest port that, 50 percent of the country’s refining capacity and an infrastructure of rigs and pipelines that supply the nation with 90 percent of its offshore oil and gas supply.

“If you look at that, what we’re trying to do for the coast helps protect the nation’s investment in that hurricane protection system – because wetlands protect the levees,” he said.

“We can make a very good case that forgiving this debt is good for the whole country.”

Louisiana’s coastal effort received a boost recently when the state was awarded about $8 billion in fines related to the Deepwater Horizon oil spill. Payment will be spread out over 15 years, and almost all of the money must be spent on coastal restoration.

The master plan’s designers have long said to achieve its goal of building more land than the state is losing by 2061, the effort needs to be building projects at a pace costing about $1 billion per year.

And when the Deepwater Horizon windfall ends, the recurring revenue stream for the coast will drop back to about $110 million per year.

There is precedent for forgiving loans applying to disaster recovery. The Federal Emergency Management Agency forgave $391 million loaned to Louisiana governments after Katrina.

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