Lesson Learned from Katrina Recovery

After 2005’s Hurricane Katrina caused massive devastation in Mississippi, elected officials created the state’s Disaster Recovery Division. Afterward, Congress earmarked more than $5 billion in federal Community Development Block Grant (CDBG) funds for Katrina recovery projects in Mississippi. 

Catastrophic disaster recovery planning and execution is a rare event that many professional emergency managers will never experience. Emergency Management magazine conducted an interview with Mississippi DRD officials to share the state's challenges, successes and what they would do differently in the future. Below are excerpts from Eric Holdeman’s article.  


Question: What was the scale of the disaster impacts that Mississippi had to deal with following Hurricane Katrina?

There were an estimated 60,000 damaged or destroyed homes in the coastal counties, and this was largely due to the fact that Katrina’s storm surge sent water into places where no one, including FEMA, had ever envisioned water going. So Mississippians first saw that recapturing housing stock was going to be the biggest challenge. Since no one anticipated a surge of this scope, many of those households were not covered by flood insurance, a fact we addressed in our Homeowners Assistance Program.

Our infrastructure was almost completely inoperable along the coast. Key roads and bridges were destroyed. Police stations, fire stations, public works were severely hampered. On the economic side, recovering businesses were left without basic utilities, but even when those utilities were restored the workers were displaced. This destruction, although obviously most acute in the coastal counties, continued well inland as Hurricane Katrina’s winds sustained hurricane strength well over 150 miles inland. Of the three million people in our state, about one million suffered damages wrought by Hurricane Katrina. One-third of all Mississippians were touched directly by this storm.


Initial efforts to initiate long-term disaster recovery were not successful. What mistakes were made that limited the ability to jump-start recovery programs?

The state initially underestimated the complexities of disbursing federal assistance dollars on this scale, specifically the more than $5 billion in discretionary recovery funding Congress appropriated to the state through the Department of Housing and Urban Development’s (HUD) CDBG program. There was an assumption that we could administrate our housing, infrastructure and economic development recovery initiatives via the existing state CDBG structure and just do it on a larger scale. But that proved untenable. We needed more staff. And we needed a staff to specifically become adept in administrating what we call “KCDBG” or Katrina CDBG.

It really is a different animal entirely than the normal CDBG appropriation that each state gets. Having a staff dedicated to the specific task is crucial. Initially the state did not have enough supervision over contractors or a dedicated division solely responsible for disaster recovery. This situation combined with contracts that lacked performance requirements and strong remedies caused some major challenges for the state because victims were not receiving assistance in a timely or effective manner.

One of the first items on the agenda after establishing Mississippi’s Disaster Recovery Division was to inventory all contracts to ensure proper controls were included to provide for accountability and performance. We identified one large professional services contract that lacked key performance measures, remedies and detailed budgets. In the rush to get money flowing to victims, deadlines and penalties were not in place in the original contract. We immediately remedied that problem, renegotiating contracts and included protections to ensure the state, and more importantly Katrina’s victims, got the services on time and within budget. Our aggressive approach on contracting has saved the state more than $100 million in program and administrative delivery charges and most importantly caused programs to deliver projects on time and within budget. 


What type of budget did you have to work with in orchestrating the recovery effort, and how did you organize your staff to accomplish the work? Additionally, where did you draw from to obtain staff resources and how many personnel were directly reporting to you versus working as departmental representatives?

HUD allows you to go up to five percent on administrative costs when disbursing CDBG funds and we’ve tracked well below that at around four percent. We organized our division along a private-sector model. We view each of our 20 recovery programs as a product line. Whether it’s an initiative to recover housing stock, rebuild/harden infrastructure or retain and recruit jobs in the storm-impacted counties, each product has program managers that sit on top of the respective activity. They are responsible for that product’s performance.

Additionally, we had a chief financial officer, a chief compliance officer, communications officer and their respective staffs who served as tools to help the program managers achieve success. We also hold contractors and grant administrators accountable for meeting deadlines and budgetary requirements. 


What were some of the key principles you followed that provided for successful outcomes when organizing for the recovery work?

End-to-end accountability and community involvement: Accountability for dollars, action and people. We want to hold ourselves accountable just as we hold our contractors accountable. In turn, of course, HUD holds us accountable. Having program/product managers who track the day-to-day activities of their programs and report regularly helps us ensure accountability as well as various processes and controls we have in place to check each step from an audit perspective. We also invested a lot of authority in the local community. In Mississippi the coast is sort of a separate culture from much of the state.

There are some significant cultural and economic differences between the coast and the delta, for instance. The DRD is very cognizant of this, and we’ve been very deliberate in making sure that local communities don’t get the perception that every aspect of recovery is being run from Jackson.

We said to the municipalities and county: “Give us your project suggestions and we’ll work with HUD on the eligibility side. We don’t have enough money to fund every proposal, so list the projects and score them locally based on which ones you believe are most important.” 


Your involvement with the disaster recovery effort did not start until a couple years after the disaster. Given that, how did you avoid getting caught up in political turmoil and infighting that has marred many a disaster recovery effort?

Luckily for Mississippi, we had a strong commander in chief. The governor’s vision for recovery was defined in the immediate days after Hurricane Katrina: Not to merely rebuild to the way we were, but to go far beyond that. We were resolved to use this opportunity to make Mississippi better in every way, from a disaster readiness standpoint, from a quality of life standpoint and from a public services perspective too.

Then-Governor Barbour unapologetically said at every turn that Mississippi would use this disaster to strengthen itself. Having that overall vision spelled out so clearly and having a direct line to report to the governor on its implementation curtailed countless hours of would-be infighting.  


The awarding of contracts, some very large contracts, could make for an interesting process with challenges of favoritism being leveled by unsuccessful bidders. How did you keep everything on the up and up?

One of the issues that surfaced early on within Mississippi was the use of local contractors. And at every turn we’ve made it clear that local contractors, when available, are preferred. Of course, with a $5 billion recovery program, there are some activities that are beyond the capacity of state firms. In those instances, we’ve contractually compelled out-of-state contractors to maximize the use of local subs.

One example is our Neighborhood Home Program (NHP), a housing program targeted at Katrina’s most needy victims. These are very, very low income, mostly elderly and disabled people whose homes need repair beyond their financial capacity to fund. Even though many of them got initial assistance, they had to use that assistance to live on and could not repair their home. Today their homes remain damaged and, in some cases, unfit for habitation.

With NHP we’re providing grants to make the homes habitable or move the people into adequate housing. Today we have five Mississippi-based construction companies performing repairs and one Mississippi-based company performing eligibility processing. In an area where they don’t have capacity we have an out-of-state, international company, URS Corp., which is performing the thousands of individual environmental reviews that are required by the federal government.  


Rebuilding the individual housing stock destroyed by large-scale geographical disasters might be one of the more difficult aspects of disaster recovery. How did you approach this issue?

This was our biggest recovery challenge. In fact we’ve dedicated $3 billion of the $5 billion to housing recovery. About $2 billion of that was for the Homeowners Assistance Program. Through compensation grants of up to $150,000, this program has helped 28,000 homeowners whose primary residence was damaged or destroyed by Katrina’s unprecedented storm surge.

By the nature of Katrina’s surge devastation, we had no choice but to address housing first so people could come back and businesses could find employees. We had the Homeowners Assistance Program geared toward single-family homeowners and we had our Small Rental Program, a grant program for “mom and pop” property owners with rental properties, people who own duplexes, etc. We gave them subsidies up to $60,000 to restore their rental property, convert or build small rental units. In return they agreed to pass their savings down to low and moderate-income renters via affordable rents for five to 10 years, depending on the type of property.

Our Long Term Workforce Housing Program is geared toward the larger housing developers. This program aims to provide affordable housing that is near schools, employers, public services — places where people need to be. As its name suggests, it’s geared toward the workforce and getting homes near jobs. We also have a workforce housing initiative that, through a sub-recipient, is providing down-payment assistance and soft second mortgages to home buyers, mostly to offset the disproportional cost of post-Katrina insurance in the coastal counties.

In some cases, we’ve seen annual insurance premiums in excess of $5,000 for a basic 1,500 square-foot home. To get working people back into these areas, you have to offset that. Finally, we’re trying to replace our traditional public housing stock with units that are anything but traditional. We’ve leveraged our KCDBG funds to remake our lost public housing stock into developments that look no different from market rate multifamily and single-family housing. We’ve worked with the local housing authorities to ensure that our reconstructed or refurbished public housing sites complement the surrounding community and are something to which both the residents and the neighbors can point to with pride. 


How did you negotiate the mutual challenges of getting the workforce back to work and businesses open?

Housing is the first step. Without a place to live, workers aren’t around and businesses either can’t open or can’t fully function. Getting a workforce in place is critical, particularly for the large-scale employers. Those big employers have business continuity plans in case of disasters. So they can do a lot of their logistics in getting the business ready to open in-house. However, even if they get all their property and equipment in full working order the day after the disaster, without an available workforce, they still can’t function. That’s why Mississippi had to tackle the housing issue first. Virtually the entire economy from casinos to shipyards along the coast is labor intensive and is dependent on a local labor pool, the majority of which had been displaced. 


What other key points would you emphasize to states planning for a large-scale disaster recovery effort?

If there is one thing we would have done differently is to do more loans instead of grants. On a small scale right now, we’re doing a revolving loan program for down-payment assistance through one of our sub-recipients. It’s working great. The loans are being repaid, and then the money is eligible to be redistributed perpetually, without all the federal requirements after it revolves the first time. That’s something we could have done on a larger scale for a variety of projects.

Also, states need a dedicated staff. This is not something for existing staff to do as a sideline. Have processes and controls in place that compel end-to-end accountability of your employees, contractors and everyone with a role in these programs that identifies and resolves problems well before someone in Washington has to step in.

Don’t underestimate the importance of housing. If the disaster is big enough, housing will be a major challenge if not the first hurdle to overcome. And finally, involve and communicate with the community, the media and all stakeholders about what you’re doing. Involve local contractors/businesses; visit the communities regularly; be visible and candid about what you’re doing. Admit your mistakes while also communicating your success. Disaster recovery programs and policies can’t be formulated or implemented in a vacuum, especially when you’re talking about billions in taxpayer dollars coming down from a federal agency. It’s a lot of money, a lot of responsibility and it requires a lot more effort at every level to administer than typical grants.


This article was written by Eric Holdeman and originally published in Emergency Management magazine.