The New Orleans City Council voted unanimously Thursday (April 20) to ask the state Legislature, now in session in Baton Rouge, to reimburse more than 400 families who paid back some or all of their Hurricane Katrina recovery grants to the state after facing legal action for allegedly misusing the money. The state recently forgave thousands of others who had not paid them back.
The resolution, sponsored by District D City Councilman Eugene Green, passed 6-0. It stemmed from a series of stories by WWL-TV, The Times-Picayune | The Advocate, Verite News and ProPublica that showed how the state — under pressure from the federal government, which funded Road Home — sued thousands of its own residents to recover allegedly misused money.
The stories exposed how Road Home officials acknowledged that $30,000 grants intended to be used for home elevation were not sufficient to raise houses off the ground on footings. In some cases, officials told the homeowners they could use the money to finish repairs. But residents who used the money that way were later accused of misspending the grants.
State leaders said they never wanted to sue the residents in the first place, and in February, Gov. John Bel Edwards, flanked by local and federal officials, announced that a deal had been reached with the U.S. Department of Housing and Urban Development, which was demanding the state return misused grant funds to the federal government. The state would use money from a settlement with its third-party contractor and a legislative appropriation. And the suits, which had been widely criticized, would be dropped.
But the deal left out those who had already repaid or partially repaid the state, in some cases taking on barely affordable payment plans or cashing out savings. They would not get any money back.
“Since the money should have never been collected in the first place, it’s only appropriate that the homeowners who paid back monies to avoid liens being placed on their homes be reimbursed,” Green said Thursday.
‘We’re not asking for a payment that has no purpose’
Earlier this month, the news organizations showed how the state recovered $6.8 million in Road Home elevation grants from 425 families and has declined to reimburse them, even though it agreed to end its lawsuits seeking almost $100 million from about 3,000 other recipients of the Road Home elevation grants.
About 1,400 elevation grant lawsuits, or 40 percent of the 3,500 lawsuits statewide, were filed against homeowners in New Orleans, according to state data.
City Council President JP Morrell called out state leaders for forgiving homeowners who rebuffed the state’s debt collection efforts, but not those who immediately complied or bowed to the pressure.
“The ones who fought tooth and nail because they couldn’t afford to pay or just said, ‘I’m not going to do this,’ or were obstinate and rolled the dice, they came out with a windfall because now it’s forgiven,” Morrell said. Meanwhile, he said, the ones who “spent all this money to try and do the right thing, now the state tells them to go pound sand.”
Edwards has asked the Legislature to dedicate $20.5 million in taxpayer funds to pay back the federal Housing and Urban Development Department for grants it considers “misspent.” That allowed Edwards to announce the end of the lawsuits in February, but he said nothing could be done to help homeowners who had already agreed to pay the money back.
Green said the fact that state leaders weren’t considering reimbursing those who already paid until the news organization’s story was “the motivation for my resolution.”
Green said he will send the resolution to members of the New Orleans legislative delegation, after which he believes they will try to convince their colleagues to appropriate the $6.8 million in the current session, on top of the $20.5 million already requested in a supplemental House appropriations bill.
“I hope that they’re able to appeal to state officials beyond New Orleans to recognize that this is an issue of fundamental fairness,” he said. “We’re not asking for a payment that has no purpose. This is a reimbursement in regards to a program that wasn’t working the way it should have been working.”
But an appropriations measure, House Bill 551, that only includes the $20.5 million to close out Road Home but no money for reimbursements, sailed through a House committee this week without amendments. It is currently scheduled to go to the House floor on Monday.
Morrell slammed the state’s “obsession” in “punishing and criminalizing Road Home grantees” and for hiring the Baton Rouge law firm Shows, Cali & Walsh to “egregiously pursue residents using some of the most vicious and reprehensible credit collection tactics.”
The state has paid Shows, Cali & Walsh $11.1 million since 2009 to litigate claims of fraud and waste for all Road Home programs, including the elevation lawsuits.
Morrell also called the Legislature’s inaction on this issue “beyond reprehensible” when it is sitting on a historic surplus of more than $1.5 billion.
“The amount of money to reimburse these homeowners, it’s a drop in the bucket,” Morrell said. “Legislators from around the state need to do the right thing. And I hope this resolution is the first step.”
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