Mississippi plans Katrina grant diversion

State wants $600 million from housing program for huge port expansion


By Mike Stuckey, Senior news editor
MSNBC Jan. 25, 2008

While thousands of Mississippians who lost their homes to Hurricane Katrina remain in FEMA trailers, the state intends to spend $600 million in federal grants originally earmarked for housing on a major expansion of the state-owned port — a project that could eventually include casino and resort facilities.

Despite strong objections from housing activists and the threat of hearings from two powerful congressional Democrats, the U.S. Department of Housing and Urban Development is expected to approve the diversion of the funds on Friday. A HUD spokesman says the agency has little discretion at this point to block the switch.

Opponents of the move see it as a prime example of Mississippi’s Republican lobbyist-turned-governor, Haley Barbour, favoring rich and powerful interests over the region’s less fortunate.

“It’s just insanity, true insanity,” said Sister Martha Milner, a Catholic nun and board member of the Steps Coalition, the loudest voice on the Gulf Coast against the diversion of the funds.

Supporters see the money switch as sound economic policy that will help the port capture additional business and provide a bonanza of high-paying jobs.

“In order to remain a viable port, we have to do a good job with this repair and redevelopment,” said Gulfport Mayor Brent Warr.

The money in question is part of $5.5 billion in HUD Community Development Block Grants (CDBG) that Congress authorized for Mississippi after Hurricane Katrina struck on Aug. 29, 2005. Administered by the Mississippi Development Authority, about $3.4 billion was allocated to replace and repair some of the nearly 170,000 owner-occupied homes destroyed or damaged by the storm. Another $600 million was set aside for programs to replace public housing, help small landlords fix their units and foster construction of new low- and moderate-income housing.

Waiver request
When it became clear that homeowners, who had to meet specific criteria on damage and insurance, would not tap all of the grant money, Barbour instructed the state development agency to seek a waiver from HUD to redirect $600 million for work on the port.

Mississippi, with the highest poverty rate of any state by several measures, already had won HUD waivers of rules that require the funds to benefit low- and moderate-income residents. Critics see the waivers as a product of the unparalleled influence with the Bush administration enjoyed by Barbour, a former Reagan White House political director, Republican National Committee chairman and legendary fixer who continues to receive checks from the Washington lobbying shop that still bears his name.

‘Absolutely no oversight’
Barbour “basically has free wheel,” said Milner of the Steps Coalition. “Unless we have a different administration (in the White House) he’ll do whatever he wants to do. There’s absolutely no oversight over any of this. Whatever he sends up there, they say OK to.”

The third busiest port on the Gulf of Mexico, Gulfport was planning expansion long before Katrina struck, hoping to grow as a result of new shipping traffic through the Panama Canal, which is being widened. In a 2003 master plan, the port also envisioned expanding casino operations, which have historically accounted for half of the port’s revenue.

After the storm, an update to the master plan found that Katrina had “accelerated redevelopment of port areas and opened new opportunities for the growth of the maritime and gaming markets.” The plan raises the prospect of new casino-resort development on port land as part of a public-private partnership, financed separately from the CDBG money.

It wasn't until early December, six months after the update was adopted by the port authority, that the state development authority sought a waiver from HUD to divert $600 million of the housing grant money to the port — more than double the net dollar damage reportedly sustained by the port from Katrina.

Barbour maintains that some of the federal grant money always was intended for port expansion. But the state development authority did not provide any documentation to support that. And despite repeated requests, agency spokeswoman Melissa Medley did not respond to other msnbc.com questions about the fund diversion and housing programs.

Conflicting versions
Barbour’s current position that part of the housing grant pool was always intended for the port is at odds with his March 2006 testimony before a Senate committee, in which he emphasized that the CDBG money was mostly committed to housing and sought new funds for the port. A year later, Gray Swoope, executive director of the Mississippi Development Authority, did not mention port funding in testimony before Congress about the use of grant funds a few months before the new port master plan was adopted.

"The governor has stated since the earliest days after Katrina that the port is crucial to the overall recovery of the Mississippi Gulf Coast because of its huge economic impact in terms of jobs and commerce," Barbour Press Secretary Pete Smith told msnbc.com in an e-mail.

Port Executive Director Don Allee agreed to an interview with msnbc.com, then canceled it and did not schedule another despite repeated requests.

Cindy Singletary of Living Independence For Everyone, one of 50 nonprofit, religious and social advocacy groups that make up the Steps Coalition, sees the move to divert the housing funds as a bait-and-switch maneuver. “I have nothing against the port itself,” she said. “The main thing I’m against is the priority of it. … We have jobs on the coast. There’s ‘help wanted’ signs everywhere. But we don’t have homes, we don’t have apartments. … That, to me, should be the No. 1 priority for Mississippi.”

Democratic Reps. Barney Frank and Maxine Waters agree. In two letters to HUD Secretary Alphonso Jackson, the veteran House members urged him to deny Mississippi’s request to use the money for the port. Using CDBG funds for the port expansion, “when so many families have yet to be able to return home, is misguided and disregards the continued need for available housing in Mississippi,” Frank, D-Mass., chairman of the House Financial Services Committee, and Waters, D-Calif., chairwoman of the Subcommittee on Housing and Community Opportunity, said in October, shortly after the state’s plans to divert the funds came to light. The two upped the ante in a second letter this week, threatening to hold hearings on “any waivers approved by the secretary.”

35,129 still in FEMA housing
In its “Mississippi CDBG Recovery Fund Report Card,” the Steps Coalition reported that as of mid-January more than 13,000 Mississippi families — or a total of 35,129 people — remained in FEMA housing, nearly 90 percent of them in small travel trailers and most of them ineligible for the CDBG-funded grants.

Another 15,500 households — more than 40,000 people — have open case files with long-term recovery organizations and need assistance to repair their homes and replace belongings, according to the report. Replacement of low-income rental housing also is moving very slowly, and government programs and incentives will restore fewer than half of the 28,514 units damaged and destroyed by Katrina, according to the coalition.

But Warr, the Gulfport mayor, said housing activists’ figures are inflated. “We do have a severe need for affordable housing, but that need is being addressed,” he said. “We will have, I would expect, 1,000 units more on the books just in Gulfport than we had before the storm.”

Warr said the port expansion is not nearly as divisive a local issue as it may appear to outsiders. “I think it’s being used as political fodder by individuals with perspectives other than what’s necessarily best for the coast,” he said. “Most of them are not down here, they are outside the coast, typically from other states.”

Smith, the Barbour spokesman, said the state's estimates of how much low-income or "workforce" housing will be built are higher than the coalition's at 17,000 to 21,000 units. Also, he emphasized, "none of the more than $1.2 billion in grants awarded to nearly 20,000 homeowners are in jeopardy."

That misses the point that plenty of homeowners who didn't qualify for that program and many non-homeowners still need help, say Steps Coalition members. “There’s no other explanation except that the state doesn’t think the lower income storm victims are as important a priority as the port," said Reilly Morse, an attorney with the Mississippi Center for Justice, part of the coalition.

The arguing and pressure on HUD to deny the waiver may be for naught, said Brian Sullivan, a spokesman with the federal agency. Once Congress votes to send the money, “We only have the ability to say yes or no purely on the eligibility of the project,” said Sullivan, adding that CDBG funds are often used for economic development. “HUD doesn’t really have a dog in this fight. They do try and suck us into that vortex. But by statute we really have no discretion.”

Crossing the T's
Sullivan said HUD’s job now is to make sure that Mississippi gathered community input before deciding how to spend the funds and that other criteria for the program also are being met. Friday is the deadline for HUD to act, Sullivan said, adding that “the people making the decision are not best friends of Haley Barbour, but career professionals.”

Steve Adamske, a spokesman for Rep. Frank, questioned Sullivan’s characterization of HUD’s authority. “I don't believe we would be that wrong in the letter that we sent" in October imploring HUD Secretary Jackson to intervene, Adamske said. As to Barbour’s assertion that the money was always intended for the port, "We would dispute that pretty strongly."

© 2008 MSNBC Interactive

URL: http://www.msnbc.msn.com/id/22805282/

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