Louisiana has opted for binding arbitration to resolve its dispute over the replacement value for Charity Hospital in New Orleans, wich was severely damaged by Hurricane Katrina in 2005.

The state said it should receive $492 million in federal reimbursement because the public hospital suffered damage amounting to half of its replacement value. The Federal Emergency Management Agency said not enough was done after the hurricane to protect the facility and its equipment, and offered $124 million as partial reimbursement.

The state is relying on the full reimbursement from FEMA to provide a large portion of the $1.2 billion cost for the new University Medical Center.

Financing for the new Louisiana State University medical center in New Orleans will include $400 million of revenue bonds. It is to be operated by a nonprofit corporation, which will issue the bonds.

Jerry Jones, assistant commissioner at the state Department of Administration, sent a letter last week notifying FEMA of the state’s decision to drop its pending appeal in favor of arbitration.

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