After Hurricanes Katrina and Rita, the federal government set aside $7.8 billion in low-interest, tax-exempt bonds, with $3.5 billion reserved for projects in the 11 Louisiana parishes hardest hit by the storms. The Gulf Opportunity Zone Act of 2005 (GO Zone) provides federal and state tax incentives for business development.
But according to a Jan. 10, 2010, story in the New Orleans Times-Picayune, some of the parishes hardest hit by the hurricanes lost their special pool status at the end of 2009 -- without protest from local governments -- and will now have to compete against less damaged areas for rights to sell bonds. As of the end of 2009, the Times-Picayune found, $1.1 billion of the $3.5 billion set aside for the hardest hit parishes (most in New Orleans) remained unused, and is now available for bidding from lightly damaged parishes.
The GO Zone program has been credited with getting some smaller projects off the ground, including two grocery stores, a Borders bookstore, constructing a new residential facility and opening a new car-rental terminal at Louis Armstrong International Airport.
According to the Times-Picayune report, however, a sizable percentage of the money earmarked for the hardest-hit areas has been unused due to some discomfort about investing in those areas and conditions in the bond market that have made the GO Zone bonds less attractive.
Asked about this promise, Obama administration officials said they have worked to strengthen tax incentives to promote rebuilding. Immediately after hurricanes Katrina and Rita, states affected by the storm were given additional Low-Income Housing Tax Credits (LIHTCs) to rebuild affordable housing. However, the mortgage crisis depressed the market for these credits, threatening permanent housing projects across the gulf.
The Obama-backed economic stimulus package provided $2.25 billion across the country for the Tax Credit Assistance Program, a grant program to provide funds for capital investments in affordable housing projects that have been stalled because of the decline in the market for LIHTCs. Gulf Coast states have tens of thousands of units under development through such LIHTC projects, White House officials said.
While some tax incentives in the economic stimulus package may have helped the New Orleans area, those programs were made available all over the country and were not targeted to areas hardest hit by the hurricanes. And the biggest tax incentive program for those hardest-hit parishes -- initiated under the Bush administration -- has struggled. And we found no evidence that the Obama administration has made changes to the program to turn that around. We rate this promise Stalled.