While in New Orleans last week, Vice President Joe Biden said the federal government will allow local governments in Louisiana and Mississippi to seek forgiveness of special community disaster loans they received after the hurricanes of 2005.

Biden said the governments seeking forgiveness must have operating deficits for the three full fiscal years following the storms.

The loan program provided operational funding to communities with a significant loss in revenue due to storms to pay for essential services such as schools, sanitation, and fire and police.

Following hurricanes Katrina and Rita, the Federal Emergency Management Agency distributed more than $1.27 billion in special community disaster loans. Before the new policy announced by Biden, FEMA was prohibited from forgiving repayment of the disaster loans.

New Orleans borrowed $240 million from the loan program, with other agencies in Orleans Parish borrowing an additional $218 million. City officials said the repayment amnesty program would allow it to wipe the debt from its books, which could lead to a better rating and lower borrowing costs.

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