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Mon March 11, 2013
Funding Crisis Looms For $14 Billion Hurricane Protection System
Metro area residents probably know stories about consumers with big eyes and small wallets who become “house poor.” But in the years ahead they may become familiar with a new, more frightening term: “levee poor.”
By the June 1 start of hurricane season, the U.S. Army Corps of Engineers will be handing over the keys to the $14 billion hurricane protection system it has built around metro New Orleans since Hurricane Katrina. Yet as the deadline approaches, the agency responsible for the East Bank flood defense—the South Louisiana Flood Protection Authority-East—knows that the eye-popping $34 million annual bill it will soon face is beyond its means, and possible solutions are blocked by state and congressional politics.
The costs include $14 million for annual operation and maintenance of the system – a figure that does not include future levee raising — as well as $20 million a year for the next 30 years as part of the state’s cost-share for the whole project.
If the flood protection authority can’t find a fix, officials said, the only alternative would be bond issues at rates that could be ruinous to some communities.
“We’ll soon be facing a $600 million question,” the authority’s vice president, John Barry, said with reference to the 30-year cost sharing burden. “Who is going to pay?” Barry said the problem stems from the way the system was set up. “It’s a relic of an earlier political day.”
It wasn’t supposed to be this way in the reform-minded post-Katrina years.
In the wake of the system’s collapse, when engineers looked at the best way to protect the metro area east of the river from storm surge, they didn’t consider the political sovereignty of the three parishes because they knew water doesn’t, either. They’re all on the same, flat, sinking delta surrounded by the same body of water, and previous storms have proven that water pouring into one parish can eventually flood its neighbor.
The engineering solution was obvious: a perimeter defense surrounding the entire area. The result is the $14 billion, 220-mile chain of mud, concrete and steel walls that protect crabbers along Paris Road, jazzmen in the Ninth Ward’s Musicians’ Village, shop owners along Veterans Boulevard in Metairie and Garden District mansions.
But, due to local politics, the obvious one-for-all engineering fix was not paired with a similarly comprehensive source of funding.
Just as the corps was reforming its engineering standards for levees, Louisiana also embarked on reform of its traditionally balkanized system of patronage-heavy levee boards whose incompetencecontributed to the Katrina disaster. Calls for consolidation by region with professional engineers replacing political appointees led to the creation of the South Louisiana Flood Protection Authority.
But at the eleventh hour the long tradition of jealously guarding local tax receipts got in the way.
The Legislature agreed that to operate and maintain the system that protects Orleans, Jefferson and St. Bernard parishes, the authority should depend on property taxes raised by their respective levee districts – but it rejected the idea that the authority should pool those resources.
The final bill forbade the authority from using taxes raised in one district to cover costs in another.
That vestige of the old system automatically created funding problems because Jefferson and Orleans each have more than 330,000 residents while St. Bernard has just under 40,000. The flood protection authority says Orleans currently collects about $25 million a year, Jefferson $9 million and the Lake Borgne Basin Levee District — which covers St. Bernard — around $4 million.
Now, just four months before the payment book is handed to the authority, it finds the Lake Borgne District hopelessly in the red, and state law prevents it from using money from the other districts to cover the shortfall. Sticking to that restriction could ultimately lead to a dangerous deterioration of the perimeter sections in St. Bernard, posing serious risks to Orleans and Jefferson. And the only alternative under current law would be a large tax increase on property owners in a parish still trying to recover from Katrina’s hardest blows.
“I’ve said all along this system [of funding] makes no sense at all,” said Tim Doody, president of the flood authority. “My point is, if we all live behind a perimeter system, then it needs to be operated and maintained as a system. If you don’t have the money to operate and maintain any one part of the system, then you don’t have any system at all.
“Anyone who tells you they can protect New Orleans without protecting St. Bernard — or vice-versa — doesn’t know what they’re talking about. The system we have is a perimeter system, because that’s what we need.”
Those concerns are shared by Garret Graves, head of the state’s Coastal Protection and Restoration Authority. As the state agency that has signed the cost-share contract with the corps, Graves’ agency has ultimate legal responsibility for the bill.
“The entire levee district model needs a new look,” Graves said. “Keep in mind that many of these districts were set up decades ago under entirely different conditions. Federal law now requires that the [Coastal Protection and Restoration Authority] represent the state on these projects.
“We are looking at a number of consolidation options to reflect these changing conditions. This includes changes to the law and consolidating levee districts around the state.”
Anyone looking at the flood authority’s current assets might wonder what all the fuss is about, Doody said. While Lake Borgne currently is “bankrupt,” Doody said the agency holds about $60 million from Orleans and $9 million from Jefferson.
“But a lot of that is already spoken for,” Doody said. “We’re finishing up construction projects to consolidate offices in Jefferson, and we’re starting to rebuild the [Lake Pontchartrain] seawall in Orleans.”
And the bills that will come due as the feds hand over the system will quickly remove any surplus, Barry said.
“People look at what we have in the bank right now and say, ‘Oh you have a tremendous reserve; you’re wealthy,’ ” Barry said. “Well, if you look down the road not that far, the money disappears very rapidly … Our surplus turns into a $15 million deficit.”
One hope of improving that picture lies in the state’s claim that the federal government should operate and maintain the two shipping gates in the Lake Borgne barrier and the one at Seabrook where the Inner Harbor Navigation Canal joins Lake Pontchartrain near the Lakefront Airport. Doody estimates the operation and maintenance cost of those three components at somewhere between $4 million and $4.5 million a year.
The Corps traditionally operates and maintains navigation infrastructure. For example, it has long assumed responsibility for the Inner Harbor Navigation Canal, Plaquemines and Algiers locks and other structures on the Intracoastal Canal.
Graves said the corps has indicated it would be agreeable to taking over the gates, but the legislation authorizing the new metro area system did not spell that out or provide funding for it.
“We agree that the Corps has the law right,” Graves said. “The appropriations bills do require us to operate these structures; however, we also believe that the Corps should take them over. A number of senior folks within the Corps would like to operate them, but are somewhat challenged with how vocal they can be on this.”
The flood protection authority, meanwhile, says there is no other choice.
“This is a flood protection system, and the only reason we have holes in it is for navigation and commerce,” Doody said.
“Those were clearly built for navigation and commerce, which means they should be operated and maintained by the Corps of Engineers, not us. These are big, complicated pieces of the system that take a lot of manpower to train and operate – for commerce. Yet, our job is flood protection and they’re being given to us.
“Listen, if it’s up to us, we’ll close those things at the beginning of the hurricane season in June and not reopen them until it ends in November. If we do that, I think we’d get a solution pretty quick, because shipping speaks louder than we do in Washington.” In fact, Barry has been to Washington on this issue and said he couldn’t find a member of congress who didn’t agree with Louisiana on the issue. What stands in the way is politics. The problem in the current political climate is the resistance to earmarks, the traditional way in which appropriations for local projects have been funded.
“Everyone I talked to – Democrat and Republican — thinks this is a federal job, not the state’s, Barry said. “But because they can’t do earmarks, we can’t get this done now.
“It’s a real problem. There are many things around the country that need to be done, but every congressman in the country is hamstrung by this.”
Without the immediate fix of an earmark, moving the annual cost for the gates will have to wait until the next Water Resources Development Act. The good news is that a bill that often takes seven years to cobble together may actually be passed this year, Barry said.
But even if that $4 million-to-$4.5 million responsibility is lifted by congressional action, the costs for maintaining the system may continue to outstrip income, authorities said.
For example, the estimated $14 million annual operating and maintenance bill—$10 million without the gates – does not include the cost of “levee lifts” (raising the height of the levees) that are certain to be required as the delta continues to sink.
“Projections done [by the RAND corporation] didn’t include future lifts, or the $3 million a year we have to spend on police,” said Barry. “We know that maintaining levees and floodwalls here is expensive.”