A draft audit by a federal inspector general recommends taking back most of the $2 billion for repairs to streets and underground pipes that the Federal Emergency Management Agency awarded to New Orleans in a global settlement for damage related to Hurricane Katrina.
The award was meant to pay for harm done to the city’s streets and other infrastructure by the flooding caused by 2005’s levee breaches. But the audit — first reported Friday by nola.com — says there’s little evidence that the poor condition of streets and pipes around the city is attributable to the floodwaters.
“We found strong documentary and other evidence that New Orleans’ sewer and water systems were in very poor condition before the hurricanes due to years of deferred maintenance,” the audit says in part. It does not allege any misspending by the city.
It adds that “the city’s failure to maintain streets adequately after Katrina is the most likely cause of street damage that exists today.” City officials have spent an average of about $2 million a year maintaining the city's streets during the last decade, the audit says, when they should have been spending about 16 times that much.
It’s hard to say whether the audit will endanger the massive award. The spigot of federal money is the major source of funds city officials plan to tap as they begin to tackle a $9 billion backlog of street and sewer repairs.
“We’ll never get another shot like this in our lifetime to rebuild our infrastructure,” said Zach Butterworth, the city’s lobbyist in Washington.
More than $2.5 billion in road, water, sewerage and drainage work is planned in New Orleans …
Meanwhile, according to Butterworth, the city has already spent as much as $350 million of the money — a sum New Orleans taxpayers would be hard-pressed to pay back if the money had to be returned.
FEMA officials are not bound by the audit’s recommendations, and the current leaders of the agency strongly disagree with them — as do the members of Louisiana’s congressional delegation.
But the audit, written in September and expected to be released this spring, has city officials nervous nonetheless, especially with a change in presidential administrations set to occur next week.
Said Butterworth: “When you have $2 billion at risk, you have to take every precaution. No one can tell us what’s going to happen next with the Trump administration. So we’re going to take every precaution here.”
FEMA Administrator Craig Fugate has written a letter strongly defending his agency’s decision to award the money. But Fugate will presumably be replaced after President-elect Donald Trump takes office.
While he’s concerned because of the high stakes, Cedric Grant, executive director of the Sewerage & Water Board and leader of all infrastructure projects for the city, said the audit — undertaken by the inspector general for the Department of Homeland Security, which oversees FEMA — is almost laughable in its methodology.
“The truth of this is that the audit they conducted had no basis in technical fact,” Grant said. “They did not use engineering experts to do any analysis. They just say the city should not receive the money because they wanted us to produce maintenance records for 10 years before the storm. Many of those records did not survive the storm. But even with that, we gave them what we had.”
By contrast, Grant said, federal, state and city officials did an immense amount of work to justify the award.
“We were very thorough and very rigorous in what we did,” Grant said. “We provided almost half a million documents that we had been in need of repairs for this road system. It's a very strange outcome to this.
“The truth of the matter is this is the most comprehensive review of a road system for damage that FEMA has ever done. We had teams that went over every mile of street in the city.”
In a letter Tuesday to U.S. Rep. Cedric Richmond, D-New Orleans, Fugate also defended the work done to justify the huge award, saying that FEMA “used an exceptionally rigorous approach based on sound engineering principles and technical expertise” to ensure the award was appropriate.
The inspector general’s report is more philosophical than technical. It says the city cannot specifically document the damage done to its underground infrastructure and streets by the storm, and notes there is ample evidence they were in lousy shape before Aug. 29, 2005.
“There is no evidence that Congress passed the Stafford Act as a vehicle to bail out states, municipalities and other grant recipients that have neglected to maintain their infrastructure,” the auditors write. They go on to call the award “an irresponsible use of taxpayers’ funds.”
It’s hard to predict how the next administration will treat the report. But pulling back the award would go over poorly with Louisiana’s largely Republican congressional delegation.
Four members of the group — U.S. Reps. Steve Scalise, Garret Graves and Richmond and U.S. Sen. Bill Cassidy — sent a letter to Fugate in December saying they supported FEMA’s “thorough analysis” leading to the original award, and asking him to respond to the draft audit.
While he’s concerned about the report, Butterworth said he’s hopeful that the united front of the delegation, and the clout of some of its members — led by Scalise, who is the House majority whip — will keep the wolves at bay.
“Anytime you have folks in leadership roles, it helps,” he said.