Congress Attaches Strings to Cities’ Hurricane Loans

WASHINGTON —  Congress on Friday attached unprecedented strings to legislation that would provide $750 million in federal loans for hurricane-damaged cities, reflecting a sharp change in the mood on Capitol Hill about the reconstruction effort.

The action by the House and Senate came just weeks after President Bush pledged to spend whatever it took to rebuild the Gulf Coast. The fight underscored growing concern about the cost.

Louisiana lawmakers were seeking direct financial aid to New Orleans and other cities to pay municipal workers.

But they ran into a wall of resistance.

The delegation was forced to accept a measure that, for the first time, explicitly forbade the federal government from forgiving loans to state or municipal governments. In the past, the federal government has often forgiven all or part of such disaster relief, offered under the 1974 Stafford Act.

Louisiana Gov. Kathleen Babineaux Blanco called the passage of the $750-million loan package “a bittersweet action.”

Referring to the repayment requirement, Blanco said, “In our time of greatest need, the Congress has added discriminatory language, singling out the victims of hurricanes Katrina and Rita for unfair treatment. Unfortunately, I do not believe enough members of Congress fully understand the desperate situation Louisiana governments face.”

After initially acting quickly to provide about $71 billion in cash and tax breaks for hurricane relief, the Republican congressional leadership wants to clamp down on costs.

It says it intends to offset spending with budget cuts and by requiring the Gulf Coast states to contribute to the rebuilding effort.

Republicans said they meant for the restrictions in the loan bill to send a message to the Louisiana congressional delegation and Blanco, who have asked the federal government to spend $250 billion over the next decade or two to rebuild.

“We need to say: What are you doing to help?” said one senior House GOP leadership aide, speaking on condition of anonymity. “There’s a sense that we need to have a very well-thought-out process for how to spend this money. We need to look very closely at requests.”

But one Louisiana lawmaker made it clear that he did not expect his state, or local governments, to pay back whatever money they borrow.

“I will go back home, look my local leaders in the eyes and tell them to take the money and run,” said Rep. Charlie Melancon (D-La.).

“Spend it, and don’t pay it back!” he roared from the House floor.

The people of Louisiana, Melancon said, “have been drowned by the water, whipped by the wind, and now ... failed by the House.”

One casualty of the political fight was the united front that Louisiana’s Senate delegation had presented since the disaster. Democrat Mary Landrieu and Republican David Vitter publicly sparred on the Senate floor over whether to accept the requirement that the loans be repaid.

Vitter urged Landrieu to accept the provision and Landrieu urged him to fight it.

In the end, Landrieu did accept the legislation -- but not before holding up passage of a defense spending bill overnight and decrying what she said was a double standard for Katrina victims.

“We have been basically forced by the Republican leadership in the House to accept help under conditions that have never been imposed on any state ... in the history of this country,” she said Friday, after the Senate passed the legislation by a voice vote.

Later in the day, the House also passed the measure by a voice vote.

President Bush was expected to quickly sign it into law.

Landrieu said she ultimately accepted the legislation because hard-hit cities were desperate. New Orleans Mayor C. Ray Nagin announced earlier this week that he had laid off 3,000 city employees -- about half of the work force -- because he could not pay them.

The loans will come from relief money Congress has already given to the Federal Emergency Management Agency.

Landrieu’s aides said some municipalities might not take advantage of the loans for fear they would be unable to repay them.

After the Senate passed the legislation Friday morning, powerful House Republicans were still taking a hard line.

House Appropriations Committee Chairman Jerry Lewis (R-Redlands) was prepared to block the bill, saying that he was not getting answers to his questions about how the money would be spent.

He changed his position only after acting House Majority Leader Roy Blunt (R-Mo.) personally appealed to him.

“We got rolled,” said John Scofield, Lewis’ spokesman, shortly before the House vote. “We were the only ones that didn’t want it.”

Lewis said he dropped his opposition once it was clear the legislation would include language requiring that the money be repaid.

“It just strikes me there is only so much money to go around. Where there is loan money available, then they ought to be planning to repay that loan,” he said.

Republicans said the bill contained the largest-ever federal offer to state and local governments for worker salaries after a natural disaster.

Normally, the Stafford Act allows the federal government to pay only overtime for state and local workers in such situations, and lend up to $5 million to pay operating costs.

But governments along the Gulf Coast said the hurricane so completely destroyed their tax base that they could not cover basic salaries.

Before Nagin announced New Orleans’ layoffs, the city’s monthly payroll was $20 million.