DALLAS -Louisiana will have 30 years rather than three to pay its $1.8 billion matching share of a multi-billion levee-building project in the New Orleans area after President Bush agreed to issue an executive order setting the longer term.
Gov. Bobby Jindal announced the decision at a news conference in New Orleans on Thursday night. He was accompanied by Bush's Gulf Coast hurricane recovery chief, retired Maj. Gen. Douglas O'Dell.
"This flexibility will relieve us of a heavy financial burden that would have been very difficult to meet," Jindal said. "It is a real commitment to the rebuilding of our levee protection system and allows us to work aggressively on other hurricane protection and coastal restoration projects."
Congress passed a bill in June providing supplemental funds for the war in Iraq with a provision appropriating $5.8 billion to protect low-lying areas in the New Orleans region by building and extending 360 miles of levees. However, the measure called for a 35% local matching share rather than the 25% for previous levee projects, and required the state to make annual matching payments through 2011, when the levees are to be finished.
After the bill was signed into law, Jindal called on Bush to issue an executive order under provisions of a 1986 water resources act that allows the president or the secretary of the army to authorize a 30-year match payback period.
The executive order allowing the longer term will not reduce the state's 35% contribution to the 25% required for levee projects before Hurricane Katrina hit the state in late August 2005.
Jindal said that without the longer period, the state would have to provide $500 million for the levee effort in 2009 and more than $1 billion in 2010. That would have forced severe cuts in state services, including health care, higher education, and highway construction.
The more favorable terms indicate Bush's strong support for Gulf Coast recovery efforts, the governor said.
"This announcement marks a significant step in the recovery of this region and our state," Jindal said. "Not only do our citizens rightly deserve the flood protection they were promised, but just as importantly, they deserve this protection in a way that will not financially undermine our state budget."
Current plans call for the state to finance its share of the levee project and other coastal protection efforts with proceeds from revenue bonds supported by Louisiana's revenues from energy production in deep water tracts opened to drilling in 2006. The revenues will not start flowing until the new areas begin commercial production in 2016 or 2017, but could total $400 million to $900 million a year.
Chris Macaluso, spokesman for the governor's office of coastal activities, said the longer payback period would free up $500 million in surplus state funds that Jindal set aside for coastal protection efforts. The money, which includes $300 million from the state's fiscal 2007 surplus and $200 million from the fiscal 2008 surplus, has awaiting settlement of the levee repayment schedule.
"We've been sitting on the edge of our seats for a while," Macaluso said. "This is very, very good news, because it will allow us to move forward with our coastal protection work."
Macaluso said it was unclear if the state would begin its annual installment payments on its $1.8 billion share immediately, or not until the levee projects are completed in 2011.
The annual payment will be about $90 million to $110 million, he said, depending on the interest rate charged by the federal government.
The levees will provide an enhanced level of protection for the region when they are completed, Macaluso said.
"We know we are going to get hurricanes in this state," he said. "It is not a matter of if, but of when."
The U.S. Army Corps of Engineers is working diligently to complete the improved levee system on schedule, according to Macaluso.
"They are on a breakneck pace," he said. "It's a lot of work, but the engineers are insisting they will meet the 2011 deadline."
