November 3, 2006
Dear LRA:
This is a challenge to the proposal to count the $200 million to Entergy
towards the requirement that over 50% of CDBG funds benefit low and
moderate income people. We have no objection to the LRA giving $200
million to Entergy, just do not try to count it towards the legal
requirement that at least 50% of the CDBG funds go to low and moderate
income communities. It is unjust and illegal to bail out a large
corporation and the business community with CDBG funds and then say you are
going to count it as helping the working poor and deduct that money from
the funds that are supposed to go to the low and moderate income community.
LRA submitted Amendment 6 on October 25. It proposes to use $200 million
(of the $1.1875 billion allocated for infrastructure under the initial
Action Plan) as grants to Entergy to repair electricity and natural gas
infrastructure in New Orleans . Total estimated costs are $842 million and
estimated insurance reimbursement is $250 million.
LRA casually asserts that this use of $200 million will benefit low and
moderate income people because a HUD web site indicates that 54.6% of the
total population of New Orleans is low and moderate income (above the
minimum threshold of 51% for “area benefit activities”).
This “lower income benefit” claim is challenged on several grounds.
LRA must be much more specific of how it arrived at the 54.6% figure and we
challenge that. It is unclear whether the 54.6% figure is merely an
extrapolation from the 1999 Census, or whether it somehow reflects the
post-hurricane population. Did LRA count business usage of electricity?
With the elimination of public housing and the slow recovery of other
affordable housing for low income people, a future New Orleans might have a
significantly reduced percentage of lower income people.
This is not allowable under CDBG law and regulation. For such “area
benefit activities” (i.e., like a road or a park, infrastructure is likely
to be used by all residents of an area – unlike a “housing benefit”
activity where judging benefit is based on the income of the household
living in the CDBG-assisted housing unit) the law states that in order to
be considered of benefit to low and moderate income people, the area must
not only have at least 51% low and moderate income residents, but the
activity itself must be “clearly designed to meet identified needs of
persons of low and moderate income”. [42 USC 5305(c)(2)(A)]
The regulations make this provision even clearer. Area benefit activities
“will be considered to benefit low and moderate income persons unless there
is substantial evidence to the contrary. In assessing any such evidence,
THE FULL RANGE OF DIRECT EFFECTS of the assisted activity will be
considered”. [24 CFR 570.208(a)]
LRA states in Amendment 6 (page 4, bottom paragraph) that “The objective of
the Ratepayer Mitigation Plan is to protect BUSINESS and residential
customers from bearing the entire cost of the utility infrastructure
restoration and rebuilding.”
LRA does not propose that the $200 million be targeted to lower income
household meters. Consequently the “full range of direct effects” are very
likely to disproportionately benefit businesses and above-income households
that have already been able to return to New Orleans .
Can LRA demonstrate that 54.6% is a current figure?
Can LRA demonstrate that the amount of rate savings realized by business
and above-income households will not exceed 49% of the total rate savings?
Certainly some lower income households will benefit, but won’t the
preponderance of dollar benefit accrue to businesses and above-income
households? (We recognize that HUD usually measures area benefit on the
basis of population, but the “full range of direct effects” clause warrants
a more nuanced analysis. Businesses – often staffed by people who do not
live in New Orleans – are likely to be major beneficiaries of the rate
mitigation program so should some how be figured in the calculus of the
area benefit assessment.)
LRA’s casual assertion that Amendment 6 will benefit lower income people
echoes its assertions to regarding other projects such as the “State
Buildings Program” which will give top priority to projects that are
“symbols of our state or are recognized cultural or historical artifacts”
or outlandish Amendments such as the “Research Commercialization and
Education Enhancement Program."
Low and moderate income people cannot be used as an excuse to funnel money
to others. If LRA wants to give Entergy $200 million, go ahead. Just do
not count that as helping low and moderate income people.
Peace and Justice,
Bill Quigley
Loyola Law School New Orleans