U. S. Department of Housing and Urban Development 

Office of Inspector General 

Reconstruction of Public Housing 

Damaged by Hurricane Katrina 

On the Mississippi Gulf Coast 

Kenneth M. Donohue, Sr. 

Inspector General 

September 2008 

IED-08-003
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Executive Summary 

The Office of Inspector General, Inspections and Evaluations Division, conducts 

independent, objective examinations of the U.S. Department of Housing and Urban 

Development’s (HUD) activities, programs, operations, and organizational issues. 

We completed an evaluation of public housing reconstruction with HUD funds on the 

Mississippi Gulf Coast. Our objective was to determine the status of the recovery efforts 

and determine how the risks of building on sites located in designated flood plains are 

being addressed. 

Hurricane Katrina damaged 29 project sites. After Hurricane Katrina, FEMA revised 

floodplain guidance in the affected areas, and HUD made $100 million in grant funds 

available for public housing recovery through the State of Mississippi. As of August 31, 

2008, the State had approved or was considering using these funds on a total of 24 

developments proposed by the PHAs, 13 of which are in floodplain areas. The estimated 

total construction cost of the 24 proposed projects is $231 million, including estimated 

total HUD funding of $91 million. The State of Mississippi has followed a specific 

process in the major reconstruction of the five Gulf Coast public housing authorities 

severely damaged by Hurricane Katrina. 

The Mississippi Development Authority (MDA), the State agency responsible for 

assuring PHA compliance with floodplain construction regulations, followed HUD’s 

floodplain management and eight-step decision-making processes in its project funding 

decisions and is requiring necessary mitigating actions. MDA is also requiring PHAs to 

provide proof of each project’s total financing and future cash flows to sustain operations 

and to maintain 100 percent insurance coverage on replacement values for all hazard 

types. 

The Office of Inspector General will continue to monitor the use of these and other HUD 

disaster recovery funds allocated to the Gulf Coast as well as perform future inspections 

of other coastal recovery programs and related regulatory compliance. 

If you have any questions concerning this report, please call Special Agent in Charge 

Kenneth R. Taylor, Jr., at (202) 402-8416. 
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Table of Contents 

 

• Introduction .................................................................................................... 1 

• Scope and Methodology ................................................................................ 3 

• Observation 1: MDA Has Awarded HUD Recovery Funding to 

13 Projects and Is Reviewing 11 Proposed Projects ...................................... 4 

• Observation 2: MDA’s Environmental Assessments Identify 

Flood Risks at Project Sites and Specify Mitigation Requirements .............. 4 

• Conclusion ..................................................................................................... 8 

• Acknowledgements ........................................................................................ 9 
1 

Introduction On August 29, 2005, Hurricane Katrina struck the Mississippi Gulf Coast and inflicted massive damage from higand a storm surge that exceeded 20 feet. Five public housing authorities (PHA) served this area and suffered unpdestruction to housing developments at 29 locations. Total damage was estimated at more than $100 million, witand 1,700 damaged. Four of the PHAs are specific to coastal cities (Bay St. Louis, Biloxi, Long Beach, and Wav(Region VIII) serves the city of Gulfport and other coastal areas. HUD initially allocated $5 billion in community development block grant (CDBG) funds to the State of Mississi

relief, long-term recovery and restoration of infrastructure in the most impacted and distressed areas related to th

hurricanes in the Gulf of Mexico in 2005.” The Mississippi Development Authority (MDA) administers the StateDevelopment Block Grant (CDBG) funds and earmarked an amount not to exceed $100 million for public housinHUD’s hurricane CDBG allocation. MDA’s CDBG Disaster Recovery Action Plan for Public Housing

In the year following Hurricane Katrina, MDA developed its action plan for managing and disbursing the $100 mrecovery funding. The purpose was to provide funding to the five PHAs that suffered damages to their facilities f

Katrina. Funds were allocated to each PHA based on its damage relative to the total for all five. The resulting all

follows:  Biloxi: $41.164 million  Region VIII: $36.033 million  Waveland: $11.627 million  Bay St. Louis: $8.260 million  Long Beach: $2.914 million The intent of MDA’s public housing program is to provide long-term recovery assistance by replacing critical pu

and very low-income residents that existed before the storm on at least a “one-for-one” basis. The plan states thathe funds to rebuild and/or repair public housing units that existed before the storm. Subject to MDA’s approval 
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legal requirements, the PHAs receiving these CDBG funds can use the funds to leverage other available resourcetax-exempt debt, other grants) in developing affordable housing targeting low- and very low-income Gulf Coast 

In exchange for the CDBG funding, each PHA had to agree to a number of specific requirements, including the f

• Newly constructed units are to be elevated in accordance with Federal Emergency Management Agency (

flood elevations or subsequent FEMA permanent maps, and access needs for disabled persons are to be maccordance with CDBG requirements. 

• PHAs are to provide proof of total financing to the satisfaction of MDA and the State’s construction man• PHAs are to provide proof of future cash flows to sustain operations. 

• PHAs are to maintain 100 percent insurance coverage on replacement values of the property for all hazar

• MDA will be the responsible entity for obtaining compliance with HUD environmental laws and implem

provided at 24 CFR (Code of Federal Regulations) 58.5 and 58.6. MDA will be responsible for ensuring environmental review is completed and approved by HUD before requesting a release of funds before HUcommitted to the project. To assist in this review, MDA will engage an environmental contractor to perfowork necessary. 

All five PHAs chose to participate in the recovery program and agreed to MDA’s conditions. HUD approved MDprogram CDBG disaster recovery action plan on August 31, 2006. HUD Policy on Construction in Flood Hazard Areas We researched HUD’s policy for construction in flood hazard areas. Hurricane Katrina’s heavy rain and storm s

flooding. Our research focus was on the eligibility for CDBG recovery funding when the proposed project sit

flood and storm surge hazards. Projects with HUD funding that are located within a flood hazard area or designated wetland are subject to E(Floodplain Management) and Executive Order 11990 (Protection of Wetlands). HUD must avoid financiaprojects under the provisions of these executive orders unless it can demonstrate that there are no practicable a

floodplain or wetland. The requisite eight-step decision making process is set forth at 24 CFR 55.20 and include
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the proposed project is located in a floodplain, identifying and evaluating practicable alternatives, and mitigation 

if there is no alternative. Owners of HUD-assisted properties that are located within special flood hazard areas must purchase and maprotection as a condition of approval of any HUD financial assistance for proposed property acquisition, reha

repair, or construction. Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Ialso cited in HUD regulations. It applies to low-income or minority neighborhoods where the HUD-assisted acquisition of existing housing, the acquisition of land for development, and new construction. The envirodetermine whether the proposed site or neighborhood suffers from disproportionate adverse health and environto the community at large. If it does, the environmental review must consider mitigation or avoidance of advproject to the extent possible. MDA’s action plan specifically requires that each project proposed for CDBG recovery funding receive an envi

that includes HUD’s flood hazard area factors and be approved by HUD before the funds are committed to the pr

MDA’s Process for CDBG Recovery Funding The PHAs develop and propose their own projects. This activity is often conducted in cooperation with pr

developers that specialize in public housing projects and funding options. The PHA submits a letter of intent to MDA for each project it proposes for CDBG recovery funding. This ac

request an environmental review from Camp, Dresser & McKee (CDM), a professional engineering and 

contractor. CDM works directly with the PHA to gather information needed for the review. MDA also noti

Environmental Officer in Atlanta, GA, of the proposed project and the start of the environmental revicomprehensive final environmental assessment report to MDA for each project, which is provided to HUD for apScope and Methodology 
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We inspected project sites that were damaged by Katrina at all five Mississippi Gulf Coast PHAs as well as ot

sites, interviewed the executive or deputy directors of the five PHAs, and examined their administrative records 

and recovery process. We examined official FEMA floodplain and flood insurance rate maps. We reviewed Cassessments for 16 projects proposed for CDBG recovery funding. We interviewed the CDM supervising engiscope of work section of its contract (CDM is also responsible for the environmental reviews, screening the CDB

developing the procurement packages, and monitoring contract construction). We spoke to one developer workin

several projects. We were briefed by HUD Jackson Office of Public and Indian Housing and Community Plann

staff on the status of Katrina recovery at five Gulf Coast public housing authorities. We discussed our field obser

Atlanta Regional Office Environmental Officer, who reviews and determines the acceptability of the environm

each proposed project. We conducted the inspection in accordance with the Quality Standards for Inspections issued by the President’s 

and Efficiency. 
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Observation 1: MDA Has Awarded HUD Recovery Funding to 13 Projects and Is Reviewing 11 PAs of August 31, 2008, MDA had awarded CDBG funds totaling $24.5 million to 13 projects and was reviewing 

projects. The initial CDBG funding requests for the 24 projects total $81 million. If all 24 projects are approved, 

the total CDBG funding that will be requested is $91 million of the total $100 million available. The five PHAs s

intent to MDA for eight additional projects proposed for CDBG funding but later withdrew them. 

Hurricane Katrina damaged projects at 29 sites. Sixteen of these were repaired (two with CDBG recovery funds)

proposed for rebuilding (all with CDBG funds), and there are no plans to rebuild at four sites. Observation 2: MDA’s Environmental Assessments Identify Flood Risks at Project Sites and Sp

Requirements We examined the completed environmental assessments for 16 of the 24 proposed projects at MDA (the other eiand unavailable for review). CDM performed the environmental reviews, and each reported on all of the HUDfactors (statutes, executive orders, and regulations) identified at 24 CFR 58.5. 

Of the 16 proposed projects’ sites, nine were located in floodplain areas. We focused on the factors co

(floodplain management and environmental justice) and the determination and compliance documentation. Wmitigation measures adopted by MDA as the responsible entity and reported as conditions for approval that per

in a floodplain and resident safety. Each of the 16 environmental reviews thoroughly assessed whether the proposed project site was in a flood plaiwere the latest available from FEMA and were identified and documented in appendixes to the environmental re

could include the advisory base flood elevation (ABFE) area and wave zones mapped by FEMA (both pre-KaKatrina), the FEMA Hurricane Katrina surge inundation map, the 100-year floodplain, FEMA’s pre-Katrina floo(FIRM), and the post-Katrina preliminary revised FIRM. For the nine sites located in a floodplain, the status of the required eight-step decision-making process environmental assessment, and it was included in the appendix. Documentation was provided for each of the com
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The environmental justice factor generally reported on the minority population in the area of the site before aproject. However, any potential safety-related issues affecting the residents because of the location of the sexample, “residents would have to evacuate their homes at times when storm surges could occur. This problem 

all income levels in Biloxi’s East End. The proposed buildings would be elevated on columns, reducing the 

residents and damage to their property.” All of the proposed floodplain projects with new construction require elevation to meet the revised ABFE or 

revised FIRM. In every case but one, the projects are being elevated on fill soil being brought to the site. 

Region VIII housing authority’s Regency Way Ap

example, is being built on elevated fill within brick retaiformer Camelot Apartments site in Gulfport that was flooThe East End Homes project must have its living spaces sea level and will be built on columns. Below is the archi9 of the 15 buildings in the project will look. 
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These elevated structures are also not the only example of taxpayer-funded housing recovery on the MiApproximately two miles west of the East End Homes project, the Department of Defense is spending $287 new homes for Keesler Air Force Base personnel in Biloxi on coastal lowlands devastated by Hurricane Katrinbeing built on 18-foot elevations and with walls designed to withstand 140-mile-per-hour winds. Example of Analysis for the Eight-Step Process The East End Homes project has been awarded CDBG recovery funds. The site required the eight-step decisio

special mitigation measures because of its location. Step three–identify and evaluate practicable alternatives to project in a floodplain–reports that three alternatives to the proposed project were considered. First, the no 
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rejected because of the need for low-income units in Biloxi. Second, reducing the size of the project was rejecte

housing unit would increase and the project objective was to alleviate the shortage of low-income housialternative considered was to relocate the project to another site. A survey of available land in Biloxi identifiethat appeared to have a reasonable likelihood of providing an alternative site that was zoned for multifamily 

ABFE and FIRM floodplains, not in a wetland, and not adjacent to the CSXT rail line. The analysis reports th

difficult to obtain city approval for public housing projects in zoning districts where multifamily housing is nFurther investigation indicated that none of the three potential alternative sites is likely to be available for use bAuthority at reasonable cost, and the alternative of moving the proposed project to a different site was, therefore, MDA also required special mitigation measures to reduce potential disaster impacts because the project is locazone of the ABFE mapped after Katrina. These measures include the following: 

• Obtain approval of the City of Biloxi for construction in the 3-foot wave zone of the ABFE floodplain. 

• Obtain flood insurance for the total project at the maximum level allowed under the National Flood In

maintain flood insurance at that level for the economic life of the project. 

• Elevate the buildings above the ABFE using columns or piles. • Mark the advisory base flood elevation in a prominent location on each building. 

• Distribute to each resident a written description of the risk from flooding and wave action at the site. 

• Require each resident of the building to sign a document acknowledging the risk of flooding at the site. • Prepare an emergency evacuation and relocation plan and distribute the plan to each resident. • Participate in an early flood and storm warning system. 

HUD and PHA officials stated that the rigor of MDA’s environmental review process has impacted moving 

reconstruction. An MDA official advised us that PHAs subsequently withdrew eight projects submitted for CDB
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Conclusion After Hurricane Katrina, FEMA revised floodplain guidance in the affected areas, and HUD made $100 m

available for public housing recovery through the State of Mississippi. As of August 31, 2008, the State considering using these funds on a total of 24 developments proposed by the PHAs, 13 of which are in floodplaitotal construction cost of the 24 proposed projects is $231 million, including estimated total HUD funding of $91 MDA, the State agency responsible for assuring PHA compliance with floodplain construction regulatio

floodplain management and eight-step decision-making processes in its project funding decisions and is requirin

actions. MDA is also requiring PHAs to provide proof of each project’s total financing and future cash flows to to maintain 100 percent insurance coverage on replacement values for all hazard types. The Inspections and Evaluation Division will continue to monitor the use of these and other HUD disaster recovethe Gulf Coast as well as perform future inspections of other coastal recovery programs and related regulatory co
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Acknowledgements This inspection was conducted and the report prepared under the responsibility of Ruth A. Ritzema, Deputy Assi

General for Investigations, Office of Investigation.This inspection was conducted under the direction of Kenneth R. Taylor, Jr., Special Agent in Charge, InspecDivision. The fieldwork was supervised by and the report prepared by Anthony Putzulu, Supervisory Forensic Auditor. 

Robert Fisher, Forensic Auditor, and James Hoogoian, Forensic Auditor, conducted the fieldwork.