Financing Feud Mires Katrina Cottages

By Bill Barrow
Times Picayune- Capital bureau

BATON ROUGE — Eight months after FEMA announced plans to distribute $388 million for alternative housing along the hurricane-battered Gulf Coast, Louisiana’s $74.5 million share stands untapped because of bureaucratic haggling and, more recently, a dispute between the state housing board and a group of private contractors slated to build the structures.

Those circumstances leave the state several months away from handing any storm victims the keys to the so-called Katrina Cottages named for the killer hurricane of two summers ago.

The latest rub, said an organizer of the private consortium, is what cut the Louisiana Housing Finance Agency will take as the state’s coordinating entity for the program, which Congress approved in 2006 to test alternatives for the FEMA trailers that still dot the coastline two years after Hurricanes Katrina and Rita.

Ben Dupuy, a partner in the Cypress Group, the lead of four firms in Cypress Cottage Partners, said Tuesday that housing agency executives have proposed an administrative fee of as much as 10 percent, an amount that would come in addition to whatever management fee the private partnership collects as part of its contract.

Louisiana officials are aiming to build 450 to 600 structures that are designed to withstand hurricane-force winds but not necessarily serve as permanent housing. The higher the housing agency’s cut, Dupuy said, the fewer units available to the thousands of Louisiana residents still living in trailers or out of state, waiting for an option to return.

Dupuy said Cypress and LHFA walked away from a daylong negotiating session late last week without an agreement. The budget outline, described by varying officials as conceptual, remains on the preliminary agenda for the agency’s board meeting scheduled for today at its Baton Rouge headquarters.

“The LHFA has not yet shared what they’re planning to go ahead with” at today’s meeting, Dupuy said. “If it’s the last thing we spoke about last week, then the two parties are not in agreement.”

Gov. Kathleen Blanco selected LHFA as the coordinating agency in January, weeks after FEMA announced preliminary award amounts for the program and about the time federal authorities began budget negotiations with the four participating states.

A housing agency spokeswoman did not return messages Tuesday, though an attorney for the agency described the process in a recent interview as long but fruitful. “We are still waiting on some last-minute budget issues,” said Keith Cunningham. “They are going to be resolved before (today’s) board meeting.”

Individual units average about $54,600, including site acquisition, construction and administrative costs estimated in the Cypress proposal submitted to the state last fall. The number of units actually built will vary according to what size families are selected as recipients. Larger families get larger, more expensive units.

Dupuy said he wants a $66 million construction budget, which he said would include a program management fee of about 7.5 percent, though he said that is not necessarily all profit. That amount assumes that the remainder of the state’s $74.5 million grant would be divided this way: $3 million to LHFA; $2 million for the Louisiana Family Recovery Corps, for its role in helping identify potential recipients; and $3.5 million for research, development, environmental fees and reimbursement costs to Cypress for what the partners have already put into the program.

Any budget outline is subject next to FEMA’s endorsement. Because FEMA has been involved in the negotiating loop since January, that step might ordinarily be viewed as a formality. But it is unclear whether federal officials would approve a budget if it entails terms that left the Cypress Group unwilling to sign a contract.

Diane Perry, a spokeswoman in FEMA’s New Orleans office, said she could offer no details, adding that the negotiations are being handled out of the agency’s national headquarters.

Also left unsettled are the qualifications and selection process for recipients and the exact locations of four planned Katrina Cottage communities. They are penciled in for Jackson Barracks, the Treme neighborhood, Abbeville and Lake Charles.

Besides portending a longer wait for potential cottage recipients, the circumstances underscore the complexities and contention that have marked the program since FEMA first invited Gulf Coast states to submit proposals to compete for a $400 million allocation.

From the outset, Louisiana officials decried FEMA’s decision to make the program competitive, rather than based on need. The state’s politicians ratcheted up the rhetoric after FEMA announced Dec. 22 that Mississippi was getting $281 million to Louisiana’s $74.5 million and about $15 million each for Texas and Alabama.

Top FEMA executives initially defended the distribution, but later retreated, telling a congressional panel convened by U.S. Sen. Mary Landrieu, D-La., that the agency could have spread the awards more evenly considering Louisiana lost 3 1/2 to four times as many residences as Mississippi.

The award amounts have stood, nonetheless, with Mississippi’s budget outline winning FEMA approval in April after four months of negotiation. Mississippi placed its first home on a recipient’s property in June and as of Tuesday had identified 753 potential recipients, with 108 already in new housing units.

Separately, the Cypress consortium has lost one of its members, ICF International, the private firm often hammered for its handling of the state’s Road Home program for displaced homeowners. Dupuy said ICF opted out in January, about the time budget negotiations began. Asked whether ICF’s public relations troubles involving Road Home contributed to its departure, Dupuy replied, “It was a mutual agreement.”

Recent letters among Louisiana and FEMA officials illuminate additional frustration of recent months. Several Louisiana members of Congress urged FEMA Director David Paulison on July 12 to expedite the release of the state’s grant, and they noted Mississippi’s April approval in their appeal.

Paulison answered July 30 by pointing to FEMA’s continued participation in talks. But he also tacitly acknowledged difficulties between Cypress and LHFA by informing the members of Congress that FEMA by law could meet only with the housing agency. Cypress, Paulison said, remained nothing more than a “potential contractor” that had yet to ink any document tying it to the deal.

Louisiana Recovery Authority Director Andy Kopplin, whose agency coordinated Louisiana’s original proposal to FEMA, chimed in on Aug. 8 with a letter to Housing Agency President Milton Davis. Kopplin lamented a “lack of coordinated and constructive communications between the LHFA and Cypress and to a lesser extent FEMA regarding budgetary and programmatic issues.”

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Bill Barrow can be reached at bbarrow@timespicayune.com or (225) 342-5590.

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