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Disaster planning is a growth industry for local governments. As major weather disasters become more frequent, and disasters of all kinds become more expensive to handle, local governments are increasingly trying to protect themselves and their taxpayers against failure in the aftermath of a disaster. The stakes continue to grow, especially in view of the opportunities and challenges posed by dependence on technology and the need for support from higher levels of government.
Yet no amount of planning can fully prepare anyone for a disaster of great magnitude, one in which local services and infrastructure are not only seriously impacted but wiped out or suspended altogether. No recent examples demonstrate this better than Hurricanes Katrina and Rita, which slammed into the Gulf Coast in August and September 2005, triggering the flooding of most of the New Orleans metro area and causing widespread catastrophic wind damage in southern Mississippi. To prepare for disasters like these, planning must be accompanied by a wide-ranging locally led effort both before and after the fact to improve local government's financial and logistic ability to restart quickly and go on operating as closely as possible to normal.
GOVERNMENT DISPLACED
What set these hurricanes apart from most other natural disasters was their scale. Administratively, this meant the wholesale displacement of local government departments. During Katrina, administrators throughout metro New Orleans decamped en masse to Baton Rouge, the state capital, in order to be able to continue doing business. Non-essential personnel had already left before the storm; storm-affected areas of Louisiana were subject to mandatory evacuation.
Had they stayed, they would have been able to do very little. Two parishes, St. Bernard, which covers New Orleans' eastern suburbs, and Plaquemines, which covers the Mississippi delta, were totally underwater. St. Bernard sits on subsiding swampland left over from an ancient Mississippi outflow and does not have a single point more than 10 feet above sea level. Parish school district offices, in the words of superintendent of schools Doris Voitier, "escaped" with four feet of flooding.
Ten miles west of Voitier's flooded offices in Chalmette, New Orleans city officials confronted almost as bleak a situation on a far greater scale. While New Orleans's Vieux Carre and its river banks, a few feet above those in Chalmette, remained more or less dry, more than two-thirds of the city was underwater due mostly to structural failures in levees--most dramatically of all, the historic Lower Ninth Ward between central New Orleans and Chalmette.
The Mississippi Gulf Coast saw the worst of Katrina's surge, at up to 28 feet near Bay St. Louis between Gulfport and the Louisiana state line. The small saving grace for Mississippi is that with higher ground, the flooding did not penetrate as far inland as it did in Louisiana. Nonetheless, the damage here was also enormous, with most business districts and coastal neighborhoods devastated along the state's three-county Gulf coastline.
The public employees who remained in place were preoccupied more with keeping people alive than keeping them paid. The scale of the rescue effort was without precedent, with 24-hour shifts becoming routine among public employees. "The smaller storms we'd had before, we were hit on Friday and back on a Monday' Jefferson Parish Sheriff's Department finance chief Paul Rivera said. "With Katrina, for the first seven to 10 days we were just rescuing people and commandeering ice trucks and our motor pool department turned into a feeding station."
As for the general population, evacuees were routinely unable to return for several weeks. Some parts of the New Orleans metro, such as the Lower Ninth Ward, the low-lying neighborhoods near Lake Pontchartrain, and much of St. Bernard Parish, remain almost empty.
Two hundred miles west in Lake Charles, officials at the city and the Calcasieu Parish schools watched aghast--and made adjustments to the own plans that would prove invaluable when Hurricane Rita slammed into the area three weeks later. These included arrangements to protect assets such as school buses, back up electronic records off-site, and bring evacuated residents back as quickly as possible.
STAYING OPERATIONAL, MAINTAINING CASH FLOW
In administrative terms, local governments affected by the hurricanes had two big challenges--staying operational and staying solvent. The two proved to be closely connected. In the immediate aftermath of the storm, simply ensuring staff were paid kept local governments going. Governments needed offsite redundancy in terms of the data needed to generate payroll, and effective and efficient arrangements for getting employees paid in the absence of working ATMs and open local bank branches. Financial solvency was necessary to maintain those conditions through the months of severe disruption after the storms until local tax revenues (disrupted by the storm) and FEMA reimbursements started to arrive in quantity. Maintaining enough liquidity to meet short-term costs and insurance deductibles and effectively accessing low interest, short-term credit also helped. Notably, Calcasieu Parish Schools borrowed $9 million from the Louisiana Community Development Authority's Zone Academy Bonds program, at 0.38 percent interest--a loan the district has 10 years to pay off.
To a great extent, local governments must depend on their own resources due to slow reimbursement and extensive auditing from federal and state agencies. Louisiana communities are still waiting for many reimbursements from Hurricanes Katrina and Rita. The Jefferson Parish Sheriff's Department did not get reimbursed for the initial round of $8 million in hurricane-related overtime for 14 months due to multiple state audits. The state's federally supported Road Home program for reconstructing flood-damaged houses is severely behind schedule in part due to a lack of performance incentives for the contractor managing the program; Rivera noted the legislature had to hold a special session to put penalties on the contract for failing to meet targets for issuing checks to homeowners.
"We won't even look at the Louisiana Recovery Act," he said. "A lot of elected officials think they're going to see another boom. Financial people won't even touch it, won't budget it, won't anticipate it?
Another severe impact on local authorities was Governor Kathleen Babineaux Blanco's decision to defer property taxes in hurricane-affected areas. Money that local governments had been counting on in December 2005 did not arrive until the end of April 2006.
UNDESIGNATED FUNDS KEEP COMMUNITIES GOING
Undesignated fund balances proved to be essential in managing the aftermath of the hurricane. Calcasieu Parish Schools' CFO Karl Bruchhaus noted his district had a cash reserve of around 10 percent at the time Hurricane Rita hit--a higher than normal level at the time--and that the district is making this a standard because of the speed with which it enabled the district to reopen its schools. In St. Bernard, Voitier was working with a slightly tighter 8 percent--still sufficient to pay salaries and health insurance premiums for employees until cash from disaster relief loans was available.
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With the exception of New Orleans, which only had enough in reserve for one payroll, municipal governments had bigger reserves than school districts, though they also had more extensive extraordinary costs due to their prominent role in search, rescue, and infrastructure work.
Gulfport, Mississippi, typified the stronger local governments. It had a 24 percent undesignated fund balance prior to the storm, and its retail base was located inland and away from floodplains and consequently was less affected by the storm than retailers in other cities that sustained comparable damage. More than two-thirds of Gulfport's fund balance was spent by the time emergency funding finally started to trickle through; meanwhile, the city's local option sales tax enabled it to take full advantage of the fact that retailers were ready to re-open shortly after the storm. For fiscal 2005 (October 1, 2004, to September 31,2005), Gulfport had brought in $18 million from the sales tax; for fiscal 2006, that went up to $26.7 million in a city with approximately a $50 million budget.
The City of Lake Charles, Louisiana, has an established policy of maintaining a 35 percent fund balance. This turned out to be more than double the city's peak out-of-pocket expense. In heavily sales-tax dependent Louisiana, Lake Charles was also well positioned with its 2.25 percent local option tax -65 percent of city revenue--to take full advantage of the boom in tax revenues from people replacing storm damaged structures and personal property. "I don't know of anyone that has adopted a higher standard," Mayor Randy Roach said." But it sure was nice on Saturday afternoon of the storm to realize that we had all the money we needed to keep operating."
Longer-term, local government finances on the Gulf Coast have depended more on how many people returned after the storms. While Lake Charles' population and that of the Mississippi Gulf Coast and the Florida parishes of Louisiana (north of Lake Pontchartrain) have almost fully recovered, the New Orleans area--in particular St. Bernard Parish--has sustained a long-term demographic hit (see Exhibit 1).
The demographic impact demonstrates the importance of resuming operations as soon as possible after a disaster, in order to ensure that evacuees--taxpayers--return quickly Voitier says the situation would be much worse in her parish had the St. Bernard schools not borrowed heavily to ensure sufficient temporary buildings were in place for a November 14,2005, re-opening of school--a key development in getting people to return as fast as they did.
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