House bill sets up corporation for Katrina redevelopment

Despite opposition from some conservative Republicans, the House Financial Services Committee approved a bill Thursday that would establish a government-operated corporation to redevelop areas of Louisiana hit by Hurricane Katrina.

The measure also would direct the spending of $17 billion already appropriated for hurricane relief to rebuilding communities and providing temporary housing for evacuees.

The bill (H.R. 4100), sponsored by Rep. Richard Baker, R-La., cleared the committee on a roll call vote, 50-9, with a handful of conservative Republicans voting to defeat it. Several GOP members put forth amendments that they say would have added increased accountability to the measure, but those provisions were largely defeated by a bipartisan group of lawmakers, including Committee Chairman Michael Oxley, R-Ohio.

Baker called the measure a necessary first step in rebuilding Louisiana's infrastructure. He said it provides "urgently needed financial options to tens of thousands of Louisiana citizens who right now face terrible choices, between continuing to pay the house note on a destroyed home they will never live in again or accepting foreclosure and an impaired credit record."

Rep. Jeb Hensarling, D-Texas, put forth five amendments that he said were aimed at making sure "a human tragedy for this generation does not turn into a fiscal tragedy for the next." Four were defeated.

The bill establishes the Louisiana Recovery Corporation, which supporters say would act as a public corporation. The start-up money for the corporation, $100 million, would be financed using dollars already appropriated this year to the Federal Emergency Management Agency for Katrina relief. After those funds are spent, the corporation would be financed through Treasury bonds, not appropriations. The president would decide how much money could be issued for the bonds. The corporation's authorization would sunset after 10 years.

The agency would buy properties destroyed by the hurricane from interested original owners at approximately pre-Katrina values. It would then work with local governments to refurbish the land. The original owners would be given the first shot at repurchasing their land - or a property comparable to the one they had owned - after it has been refurbished. If they declined, the property would go to the highest bidder and the proceeds of the sale would be returned to the Treasury.

The corporation would be run by a board of directors, consisting of seven members appointed by the president, three of which would be nominated by the governor of Louisiana. No more than four of the members could be from the same political party.

Under an amendment introduced by Hensarling and modified by Baker, the corporation would not be able to issue more than $30 billion in bonds at any one time. Hensarling's original amendment would set the $30-billion cap throughout the corporation's existence, but Baker argued that amount would be too restrictive. But he agreed that the corporation should not have more than $30 billion in outstanding debt at any given period. The revised amendment passed on voice vote.

Oxley introduced a substitute amendment, drafted in consultation with committee Democrats, including Rep. Melvin Watt, D-N.C., the head of the Congressional Black Caucus. The amendment would direct the use of $17 billion in funds already appropriated to FEMA for disaster relief. The money would finance housing and community development programs in the Gulf region. It would provide $13 billion for Community Development Block Grants, $100 million for reconstructing public housing structures damaged by the storm, $100 million in grants to local public housing officials to rebuild properties, $1.5 billion in grants to low-income homebuyers and $2.5 billion in emergency housing vouchers for individuals displaced by the storm.

Rather than specifying these amounts for the funds, the original version of the measure simply allowed appropriators to determine how much funding would be necessary, a committee aide said. The substitute passed by voice vote, although a handful of GOP members audibly voted against it.

Rep. Jim Leach, R-Iowa, put forth an amendment, modified during the markup by Watt, that would have deducted any insurance payments from the amount the corporation would give homeowners for their property. Leach's original provision had instructed the corporation to subtract any assistance money the property-owner had received. Watt asked him to revise the amendment so that homeowners would not be penalized for getting public assistance or charitable donations. Still, the amendment failed on voice vote.

Leach put forth another amendment that would have removed the language in the bill allowing the original owners the first right to repurchase their property. Leach said the provision could lead to excessive profits for some homeowners and make the properties less attractive to potential buyers, lowering its value. Baker said there were already provisions in the bill prohibiting "windfall profits." Leach withdrew his amendment.

Rep. Scott Garrett, R-N.J., sponsored an amendment that would require the corporation to repay any money it borrows to the Treasury. He said the provision would encourage the agency to be more cautious in spending the bonds. But Baker said the provision could needlessly inhibit recovery. The amendment failed on a roll call vote, 40-12.

Hensarling put forth four additional amendments. One would have shortened the sunset provision for the corporation's authorization from 10 to five years. That amendment was withdrawn when Baker asserted that it could take a substantial amount of time to appoint members to the Board and get the corporation up and running. The second proposal, defeated 43-11, would have prohibited the corporation from making payments to property owners who chose not to purchase flood insurance prior to Hurricane Katrina.

Another Hensarling amendment would have lowered the authorization for community development block grants from $13 billion to $1.5 billion. That amendment also failed on a roll call vote, 43-12. Finally, the fourth would have required states and municipalities to provide a 25 percent match for the CDBG funds. Rep. William Lacy Clay, D-Mo., argued that would be nearly impossible for local governments, since most of their tax base was destroyed by the storms. The amendment was defeated on voice vote.

Rep. Barbara Lee, D-Calif., put forth an amendment that would have allowed funds already appropriated for the Department of Housing and Urban Development to be used to provide housing counseling to families displaced by the storm. The amendment was accepted on voice vote.

In an interview after the markup, Baker said he was not sure whether the measure would be enacted before Congress adjourns for the year. He said it could be attached to a broader bill and was working with House leaders to determine the best way to proceed.