The Louisiana Senate passed a $20.5 million appropriation Wednesday (May 17) that will allow the state to close out the Road Home program after 17 years and stop pursuing about 5,000 lawsuits against homeowners accused of misusing recovery grants after hurricanes Katrina and Rita. 

But legislators have failed to appropriate an additional $6.8 million to reimburse more than 400 families who already made payments to the state as reimbursements for allegedly misspent grants. 

The appropriations bill, House Bill 551, passed the Senate on Wednesday without discussion in a 38-0 vote. It now appears poised for final passage in the Louisiana State Legislature.

The bill was already overwhelmingly approved by the state House in a 97-0 vote last month. However, because of an unrelated Senate amendment adding $6 million to pay for technology upgrades at the state Capitol, it must now go back to the House for a concurrence vote before landing on Gov. John Bel Edwards’ desk. 

The $20.5 million is part of a deal to settle a $300 million debt the state owed the U.S. Department of Housing and Urban Development, due to its mismanagement of the HUD-funded Road Home program. Under pressure from the federal government to repay those funds, the state sued thousands of its own residents. About 3,500 of those lawsuits targeted families who received a total of $103 million in grants to elevate their homes to safe levels but did not do so, often using the money for hurricane-related home repairs instead.

Behind the scenes, the state and HUD were trying to negotiate a way out of the lawsuits, which drew heated criticism from residents, housing advocates and elected officials. They finally announced the deal with HUD in February following an investigation by The Times-Picayune | The Advocate, WWL-TV and ProPublica that found that the Road Home elevation grant program had been beset with problems from the start.

The deal allowed the state to repay just $32.5 million in misused Road Home funds and release homeowners from “unpaid judgments and payment plans,” according to a HUD spokesperson.

To pay off the reduced debt, Louisiana will be using two separate pots of money: $12 million from a settlement with ICF Emergency Management Services, the third-party contractor the state sued for mismanaging the recovery program; and the $20.5 million appropriation approved by the Senate on Wednesday. 

Left out of negotiations between Louisiana and HUD were 425 families who had made full or partial payments to the state worth $6.8 million. The New Orleans City Council passed a resolution in April asking the Legislature to repay those families in light of a historic state surplus.  

“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,” said District D City Councilman Eugene Green who sponsored the resolution.

Green pointed to the news organizations’ investigation, which found that the $30,000 grants provided to homeowners were not enough to elevate a house, a requirement of the grant. At the time, it cost at least three times that amount to put a home onto raised footings, something the state later acknowledged. 

The state also failed to double-check whether people were eligible to receive the grants, or that their homes needed to be elevated, before sending out the money. When some of those homeowners contacted the state to say they didn’t need or want to elevate their homes, they were told by Road Home representatives they could use the funds for repairs, so that’s what they did, according to court records and the news outlets’ investigation.

State officials, however, expressed concern that appropriating additional money to reimburse those 425 homeowners would potentially violate the state constitution, which explicitly prohibits public money being “loaned, pledged or donated to or for any person.”

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Before coming to Verite, Richard A. Webster spent the past two and a half years as a member of ProPublica’s Local Reporting Network. He investigated allegations of abuse against the Jefferson Parish...