State officials are planning to push the Trump administration this spring to forgive $2 billion in interest the state estimates it is on the hook to pay for the multibillion-dollar New Orleans-area flood prevention system.
The move marks a retreat for state leaders, who previously asked to have both interest and principal — a total of about $3 billion — forgiven. But that was a nonstarter in Washington, according to Chip Kline, the governor's executive assistant for coastal affairs.
If the new push fails, however, state leaders are contemplating more adversarial ways to try to get some of the debt written off, such as demanding that a third party inspect the projects or even filing lawsuits.
Gov. John Bel Edwards had hoped to meet with administration officials, U.S. Army Corps of Engineers leaders and members of the state's congressional delegation this month as part of a trip to Washington, Kline said, but schedules could not be lined up to make the meeting happen. State leaders now are looking at a possible March or April date.
The payments, whatever their final level, are part of the state's obligation to pay a portion of the costs for the Hurricane and Storm Damage Risk Reduction System, a system of more than 350 miles of levees, pump stations and other flood reduction and prevention measures built by the Army Corps in a five-parish area in and around New Orleans.
The project, conceived in the aftermath of hurricanes Katrina and Rita in 2005, involved building and armoring levees, upgrading pump stations and adding gates where needed.
Under an agreement signed in 2009, the state is obligated to pay about $1.1 billion of the cost of what was projected to be about a $15 billion project. Its payments were to be deferred over a 30-year period, during which interest accrues.
But Kline noted that the state is not required to pay back any of the money until the Corps hands over the system to the state for operation and maintenance, something that can't be done until the project is fully complete.
That handover, originally projected for 2011, is now projected for the second half of 2020. The nine years of delays have cost the state an additional $519 million in interest, Kline said.
That interest, combined with the principal and the other interest that will accrue over the 30 years, will bump the state's total tab to nearly $3 billion, meaning Louisiana will have to pay about $100 million per year for 30 years, Kline said.
"We are willing to pay our fair share," he said, referring to the $1.1 billion in construction costs Louisiana pledged to pay, before describing the interest amounts as "insane."
"Our approach has now changed to the forgiveness of the interest," he said.
Going through the Trump administration may be the simplest way to get that done: All that is required is a "stroke of a pen," Kline said. But should that effort prove fruitless, state officials are also looking at other ways to get relief. Going to Congress is one option, he said.
Kline and other state coastal officials have also cited design flaws in some of the projects. Some of the levees have sunk below the 100-year-flood level required by the agreement, and some walls have corroded faster than expected, he said. That has led the officials to consider alternative ways to get the debt reduced.
The state could refuse to take control of the system until an outside party reviews the completed projects to make sure they fit the criteria outlined in the agreement, Kline said. That could buy the time needed to persuade the administration to forgive the interest.
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Yet another alternative would be to seek to renegotiate the 2009 agreement that stipulated what the state was required to pay. To gain added leverage in those negotiations, Edwards administration officials have discussed filing a lawsuit against the Corps alleging breach of contract because of the design flaws, according to documents obtained by The Advocate.
U.S. Rep. Garret Graves, R-Baton Rouge, who often champions state coastal causes in Congress, said he hopes the state and the Trump administration can come to an agreement.
"I do think there is some culpability on the part of the Corps" for the delays and problems, Graves said. "Our best strategy is to find something to bridge us for several years" until a solution can be worked out, he added.
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