Following Hurricanes Katrina and Rita, Congress provided additional loan authority to FEMA to assist communities impacted by the hurricanes. FEMA provided over $1.27 billion in Special CDLs to communities in Mississippi and Louisiana. At the time the loans were granted, Congress prohibited FEMA from forgiving any special CDLs.
The decision to change the rules came as a result of Secretary Napolitano's trip to the Gulf Coast earlier this month, and is part of a series of new initiatives put forth by the Department of Homeland Security to address the challenges facing the region, the department said.
The proposed regulation allows for the forgiveness of all or part of a community's special CDL if local government revenues following a disaster are insufficient to meet the operating budget for the local government.
"Tremendous progress has been made to help the Gulf Coast region recover, but it is abundantly clear that communities are struggling to meet the challenges faced by the economy and the remaining challenges posed by Hurricanes Rita and Katrina," said U.S. Homeland Security Secretary Janet Napolitano. "We look forward to hearing feedback on this proposal in order to maintain essential municipal services following hurricanes Katrina and Rita. With this effort, we are closer to helping our Gulf Coast communities rebuild, recover and get back on their feet."
Once comments are adjudicated, FEMA will issue a final regulation establishing the Special CDLs forgiveness procedures. FEMA cannot begin accepting forgiveness applications or begin forgiving loans until that final rule goes into effect.