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40–309 2008

KATRINA REDEVELOPMENT TAX ISSUES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

MARCH 13, 2007 

Serial No. 110–21 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

SUBCOMMITTEE ON OVERSIGHT 

JOHN LEWIS, Georgia, Chairman 

JOHN S. TANNER, Tennessee 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

STEPHANIE TUBBS JONES, Ohio 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

JOSEPH CROWLEY, New York 

JIM RAMSTAD, Minnesota 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of March 6, 2007, announcing the hearing ............................................ 2 

WITNESSES 

Milton Bailey, President, Louisiana Housing Finance Agency, Baton Rouge, 

Louisiana .............................................................................................................. 6 

Dianne Bolen, Executive Director, Mississippi Home Corporation, Jackson, 

Mississippi ............................................................................................................ 11 

SUBMISSIONS FOR THE RECORD 

Alabama Housing Finance Authority, Montgomery, AL, statement ................... 37 

Honorable William J. Jefferson, a Representative in Congress from the State 

of Louisiana, statement ....................................................................................... 37 

Kristina C. Cook, National Affordable Housing Management Association, Alexandria, VA, statement ...................................................................................... 38 

OMB Watch, statement ........................................................................................... 39 

State of Mississippi, statement ............................................................................... 40 

The National Association of Home Builders, statement ....................................... 40 


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(1) 

KATRINA REDEVELOPMENT TAX ISSUES 

TUESDAY, MARCH 13, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON OVERSIGHT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:04 a.m., in 

room 1100, Longworth House Office Building, Hon. John Lewis 

(Chairman of the Subcommittee), presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON OVERSIGHT 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–5522 

March 06, 2007 

OV–2 

Lewis Announces Hearing on 

Katrina Redevelopment Tax Issues 

House Ways and Means Oversight Subcommittee Chairman John Lewis (D–GA), 

today announced that the Subcommittee on Oversight will hold a hearing on housing tax issues related to the redevelopment of the communities affected by the 

Katrina, Rita, and Wilma hurricanes. The hearing will take place on Tuesday, 

March 13, 2007, in the main Committee hearing room, 1100 Longworth 

House Office Building, beginning at 10:00 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

FOCUS OF THE HEARING: 

In response to the extensive damage caused by a series of hurricanes in 2005, the 

Congress enacted the Gulf Opportunity Zone Act (P.L. 109–135). This Act provided 

additional low-income housing tax credits for the states in the Katrina Gulf Opportunity (GO) Zone, the Rita GO Zone, and the Wilma GO Zone. The states in these 

zones are authorized to allocate additional dollar amounts for low-income housing 

projects that exceed the amount allowed under the Internal Revenue Code. Also, the 

Act provided special rules for low-income housing tax credits and mortgage revenue 

bonds used in the zones. The Subcommittee hearing will examine the obstacles to 

timely and appropriate redevelopment in these areas and discuss possible options 

for facilitating recovery. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, 

‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). 

Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Tuesday, 

March 27, 2007. Finally, please note that due to the change in House mail policy, 

the U.S. Capitol Police will refuse sealed-package deliveries to all House Office 

Buildings. For questions, or if you encounter technical problems, please call (202) 

225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 


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The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman LEWIS. Good morning. This is a hearing this morning 

of the Oversight Subcommittee of the Committee on Ways and 

Means. 

I want to thank my friend and colleague, the Ranking Member, 

Mr. Ramstad of Minnesota, for being here. 

Today, we will examine housing tax issues related to the redevelopment of communities struck by natural disaster. In the days and 

weeks immediately after Hurricane Katrina and Rita, I shed many 

tears along with the rest of America. The Federal Government’s 

slow response to the devastation and human suffering of the Gulf 

Coast region was, and still is, a national disgrace. 

The world watched as the richest and most powerful nation in 

the world seemed helpless to answer the needs of its own citizens. 

Men, women, children, the elderly, and the sick pleaded to be rescued. Hundreds of people died needlessly because of the Government’s neglect. Many more were made homeless. That is not right. 

That is not fair. That is not just. 

Hurricanes Katrina and Rita caused more damage than any 

other natural disaster in the history of the United States. Over one 

million residents, many who thought they were protected by the 

benefits of homeownership in Alabama, Louisiana, Mississippi, and 

Texas were left outdoors to fend for themselves. 

Since Federal agencies have been unable to adequately support 

these citizens, Congress is using every possible means to step in 

and give our citizens some help. Adequate and affordable housing 

is a basic human right, especially to the American taxpayers who 

should be able to depend on the Federal Government for help in 

this disaster. 

In 2005, this Government provided $15 billion in tax relief to victims of the hurricane and to businesses willing to jump start the 


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recovery effort. The Gulf Opportunity Zone Act of 2005 (P.L. 109– 

135) and the Katrina Emergency Tax Relief Act (P.L. 109–73) that 

preceded it provided critical tax relief in support of this most urgent national effort. 

Two years later, it is clear that we must do more, particularly 

in the area of housing. 

Current law provides tax incentives to build low-income rental 

housing that requires these homes be ‘‘placed in service’’ by 2008. 

One more year is not enough time. These projects need more room 

to serve the citizens affected by Hurricane Katrina and Rita. The 

testimony we will hear today will make the case for extending this 

due date, possibly through 2010. I wholeheartedly agree. 

The special rules enacted to assist in the rehabilitation of severely damaged homes failed to consider the value of using mortgage revenue bonds to refinance existing loans—loans on homes 

that were totally destroyed. The testimony we will hear today will 

make the case for allowing mortgage revenue bonds to refinance 

homes that need to be rebuilt from scratch. 

We need to make some tax law adjustments in order to start the 

hammers pounding and get the bricks and mortar laid. That is one 

way that this Committee can help ensure that the families affected 

by Hurricane Katrina can get back home. Justice delayed is justice 

denied. We cannot delay any longer. It is our duty. It is our mandate. It is our obligation. It is our responsibility as Members of 

Congress. 

Now I am pleased to recognize the distinguished Ranking Member, my dear friend Mr. Ramstad, for his opening statement. 

Mr. RAMSTAD. Thank you, Mr. Chairman. Thank you for holding this hearing on Katrina redevelopment tax issues. Also, thank 

you for your leadership, Mr. Chairman, on rebuilding low-income 

housing in the Gulf States. 

As I have said many, many times, there is nobody in this Congress with more compassion for people in need than the distinguished Chairman of this Subcommittee. We thank you for that, 

Mr. Chairman. 

All of us as Americans, all the world continues to see and feel 

the tragic consequences of Hurricanes Katrina, Wilma and Rita, 

which brought unspeakable carnage and the loss of hundreds of 

lives in the Gulf States. As we know, hundreds of thousands of people lost their homes as a result of these hurricanes and tens of 

thousands of affordable rental units were destroyed or severely 

damaged. 

While we all know the Federal Emergency Management Agency 

(FEMA) dropped the ball miserably following the hurricanes, Congress acted quickly—that is, quickly for Congress, for the legislative branch—and decisively to help the people of the Gulf States 

with the challenge of rebuilding their lives. By the end of 2005, 

Congress had passed nearly $15 billion in tax cuts and incentives 

that were targeted to help the people of the hard-hit Gulf States. 

This Committee did what it could within its jurisdiction to get 

as many people into new homes as fast as possible, including expanding low-income housing credits for units built by 2008 in Louisiana, Mississippi, Alabama, Florida and Texas. In fact, affected 

areas were given almost 10 times their general State allocation for 


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these credits. We certainly owe our two colleagues, Mr. Jefferson 

of Louisiana and Mr. McCrery of Louisiana, a great deal of credit 

for—I don’t think anybody worked harder in a bipartisan, pragmatic way to get this done than our colleagues Mr. McCrery and 

Mr. Jefferson. 

At the time, Congress imposed a 2008 deadline for a good reason. 

We did not want developers to unnecessarily drag their feet on rebuilding low-income housing for the hurricane victims. The pace of 

the recovery and the unanticipated obstacles now show, as the 

Chairman pointed out, that much more needs to be done. As we all 

know, many displaced victims of the hurricanes are still living in 

FEMA trailers while others await even those modest accommodations. This is simply unacceptable. This is simply wrong and must 

be corrected as fast as possible. 

Today, we will hear from Louisiana and Mississippi housing 

agencies about some of the difficulties in getting the new facilities 

built. I know your testimony will be very, very helpful to this Committee. You have seen firsthand the devastation wrought by these 

storms. You have full knowledge of the barriers facing new construction. 

I certainly, as does the Chairman, look forward to your testimony 

because we should consider an extension of the deadline if there 

are assurances that doing so will not delay the building of any new 

housing. I think we can all agree that we should not approve legislation that would delay the opening of one single low-income housing unit. 

Once again, I thank my good friend, our distinguished Chairman, 

for holding this important hearing, for your leadership on this compelling issue. It really is, Mr. Chairman, a matter of basic justice 

and fairness to do what we can to help those who are still without 

homes, those who have lost so much. 

Thank you, and I yield back. 

Chairman LEWIS. Well, thank you very much, my friend Mr. 

Ramstad. Thank you for your statement. 

Mr. Becerra, you don’t have one? 

Mr. BECERRA. I am fine, Mr. Chairman. I wish to welcome the 

witnesses and look forward to their testimony. I yield back. 

Chairman LEWIS. Thank you very much for being here. 

[The opening statement of Mr. Neal follows:] 

Thank you, Mr. Chairman and Mr. Ramstad. I appreciate the opportunity to make 

a few comments today on the important issue of housing in the Gulf Zone. The Subcommittee that I chair, Select Revenue Measures, will be holding hearings soon on 

affordable housing opportunities, which can be hard to access in any part of the 

country. 

This problem is surely most acute for the hardest hit regions of the Gulf Zone. 

We are fortunate to have the local housing administrators with us today to explain 

the progress in rebuilding after Katrina. We hear time and time again—that the 

economy in the Gulf Zone simply cannot recover without housing. Businessowners 

tell us their workers and their families need housing. And now we are reading that 

a second hurricane called ‘‘Hurricane FEMA’’ has swept in to take away some of the 

temporary housing provided to many Gulf Coast families. 

It would be easy for us to assume that things are back to normal in the Gulf Zone. 

It would be easy for us to turn our attention to other matters and not talk about 

the problems in the Gulf Zone. But we must highlight these continuing problems 

and keep doing so until we get it right. Pope John Paul the Second once said, ‘‘Freedom consists not in doing what we like, but in having the right to do what we 

ought.’’ 


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I want to commend you, Mr. Chairman, for doing what we ought to do, what we 

must do, until these American families can once again know the comfort of home. 

f 

Now we will hear from our witnesses. I ask that each of you limit 

your testimony to 5 minutes. Without objection, your entire statement will be included in the record. I will have all of the witnesses 

give their statements and then the Members will ask questions of 

the panel. 

It is now my pleasure to introduce our first witness. Mr. Milton 

Bailey is the president of the Louisiana Housing Finance Agency. 

I believe he is joined by a longtime friend that I have not seen in 

many decades. As we would say in the South, I haven’t seen you 

since Buck was a pup, Mr. Wayne Neveu of the counsel. 

Mr. Bailey, welcome. 

STATEMENT OF MILTON J. BAILEY, PRESIDENT, 

LOUISIANA HOUSING FINANCE AGENCY 

Mr. BAILEY. Thank you very much, Mr. Chairman, and Members of the Committee on Ways and Means, Subcommittee on Oversight. I really appreciate this opportunity to present to you today. 

With me is Mr. Wayne Woods, the Chairman of the Louisiana 

Housing Finance Agency (LHFA), a resident of New Orleans, and 

a victim of the hurricanes. He has a compelling story to tell today 

and he and his family are still digging out of the cataclysmic effects 

of Rita and Katrina. 

Also with me is Brenda Evans, who is our program administrator. As the Chairman mentioned, Mr. Wayne Neveu, who is 

counsel to the LHFA. 

I appreciate you allowing me to present testimony today on housing tax issues on behalf of the State of Louisiana and Governor 

Kathleen Babineaux Blanco related to the redevelopment of the 

Louisiana communities affected by Hurricanes Katrina and Rita. 

As the Chair and the Vice Chair have made clear, Hurricane 

Katrina was by far the single most expensive disaster in American 

history, while Rita ranks third in the all-time disaster list. The 

magnitude of the infrastructure and socioeconomic damage has 

never been experienced by any other State. Together, the storms 

caused an estimated $100 billion in damages to homes, properties, 

businesses and infrastructure in Louisiana alone. 

About $40 billion of these losses are covered by private hazard 

and flood insurance. The Governor and the citizens of Louisiana 

sincerely thank the Congress and the American people for their 

generosity and for the estimated 26 billion appropriated to the 

State to help rebuild homes and physical infrastructure. This kind 

of aid was unprecedented, but we are still faced with unprecedented challenges and need Congress’s continued support. 

Even with the $26 billion appropriation, there is a remaining gap 

of unrecovered losses of approximately 34 billion, which amounts to 

$20,000 in uncovered losses for every household in Louisiana. The 

funding gap does not just include the 127,000 jobs and 4,000 businesses in southeast Louisiana that have not come back. Which 

shrunk Louisiana’s economy by $11.5 billion in 2006. 


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The magnitude of the housing, population and social service 

losses for the hurricanes is evidenced by a few statistics. I’ll only 

focus on those relating to housing in the interests of time. 

One hundred and twenty-three thousand homes in Louisiana 

were destroyed or suffered major damage. Eighty-two thousand 

rental properties were destroyed or suffered major damage. Of the 

total rental and ownership occupied units that are now uninhabitable, a substantial portion was occupied by low and modest income 

households. 

Affordable housing in New Orleans is virtually nonexistent. With 

over 35 percent of the city’s rental units either destroyed or severely damaged. Over 65 percent of the owner-occupied units that 

were damaged or destroyed in New Orleans belonged to low and 

moderate income families. Low to moderate income families in New 

Orleans rented 89 percent of the rental units that were damaged 

or destroyed. 

An estimated total of 119,000 owner occupied and rental units in 

New Orleans serving low to moderate income population or 88.7 

were damaged or destroyed. 

At this point, I’d like to thank the Committee on Ways and 

Means and its majority and minority counsels for supporting 

amendments to the Internal Revenue Code to extend the placed-inservice deadlines in connection with developing affordable housing 

in the Gulf Opportunity (GO) Zone and Rita Zone to December 31, 

2010, and simplifying the scope of bond financed qualified rehabilitation in the GO Zone and Rita Zone. These were the key provisions Governor Blanco asked the 110th Congress to consider during 

her visit to Washington last month. 

There is one other item that we would like to include for the 

record. The matter deals with a technical amendment relating to 

the combined use of block grant funds and GO Zone tax credits. We 

would like the Committee to consider making it clear that emergency block grant funds appropriate to the State will be treated as 

normal or regular block grant funds pursuant to the 1989 authorization. This technical amendment will allow the Community Development Block Grant (CDBG) funds to be made available in the 

GO Zone and incorporated in tax credit transactions as projectbased assistance without such funds being treated as either below 

market loans or Federal grants. 

Mr. Chairman, the LHFA and its developer partners are diligently working to address significant changes, including skyrocketing insurance premiums and rising construction costs. Notwithstanding the challenges that we’ve faced, we have been able to 

provide for the financing of roughly 17,000 units of affordable housing in the GO Zone. We have used our $170 million GO Zone tax 

credits, combined them with roughly $400 million of block grant 

funds, created a demand of $397 million and we are only able to 

forward allocate and fund all of our 2006, 2007 and 2008 tax credit 

projects up to a limit of $183 million. 

Again, demand was at $397 million, our supply at $183 million. 

Our efforts will produce 17,000 units of affordable housing. 

Tax credit investors and lenders are concerned about closing 

these projects in which—unless the credits that the 30 percent 

bump-up in credits are also pushed back from December 2008 to 


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December 2010. Developers have already invested significant 

amounts of time and money in getting these projects to the stage 

of development. 

As Governor Blanco explained in her recent meetings with the 

congressional leadership, the 30 percent basis and the boost the 

placed-in-service date to 2010 for low-income housing tax credits 

will expedite the closing of those 17,000 units of affordable housing 

that are now ready to be closed. 

Mr. Chairman, this concludes my oral remarks. I stand ready, 

along with my staff, to provide any follow-up questions that you 

may have. 

[The prepared statement of Mr. Bailey follows:] 

Statement of Milton Bailey, President, 

Louisiana Housing Finance Agency, Baton Rouge, Louisiana 

Honorable Chairman John Lewis and distinguished members of Committee on 

Ways and Means Subcommittee on Oversight, my name is Milton J. Bailey, President of the Louisiana Housing Finance Agency. Thank you for allowing me to 

present testimony today on housing tax issues on behalf of the State of Louisiana 

and Governor Kathleen Babineaux Blanco related to the redevelopment of the Louisiana communities affected by Hurricanes Katrina and Rita. 

First, permit me to share a few brief observations about the effects in Louisiana 

of the first and third most devastating and catastrophic disasters our country has 

ever faced, Katrina and Rita. Hurricane Katrina was by far the single most expensive disaster in American history while Hurricane Rita ranks third on the all-time 

list. The magnitude of the infrastructure and socio-economic damage has never been 

experienced by any other state. Together, the storms caused an estimated $100 billion dollars in damages to homes, property, businesses and infrastructure in Louisiana alone. About $40 billion dollars of these losses are covered by private hazard 

and flood insurance. The Governor and the citizens of Louisiana are sincerely thankful to Congress and the American people for their generosity and for the estimated 

$26 billion appropriated to the State to help rebuild homes and physical infrastructure. This kind of aid was unprecedented, but we are still facing unprecedented 

challenges and need Congress’s continued support. Even with that appropriation, 

there is a remaining gap in un-recovered losses of approximately $34 billion . . . 

amounting to about $20,000 in un-recovered losses for every household in the Louisiana. This funding gap does not include the 127,000 jobs and 4,000 businesses in 

Southeast Louisiana that haven’t come back, which shrunk Louisiana’s economy by 

$11.5 billion in 2006. 

The magnitude of the housing, population and social service losses caused by the 

hurricanes is evidenced by a few additional statistics: 

HOUSING 

• 123,000 homes in Louisiana were destroyed or suffered major damage. • 82,000 rental properties were destroyed or suffered major damage. • Of the total rental and owner occupied units that are now uninhabitable, a substantial portion was occupied by low income households. • Affordable housing in New Orleans is virtually non-existent with over 35% of 

the City’s rental units either destroyed or severely damaged by Katrina. Over 

65% of the owner occupied units that were damaged or destroyed in the City 

of New Orleans belonged to low to moderate income families. Low to moderate 

income families in New Orleans rented 89% of the rental units that were damaged or destroyed. An estimated total of 119,770 owner occupied and rental 

units in New Orleans serving the low to moderate income population, or 88.7%, 

were damaged or destroyed. 

POPULATION 

• The population of Orleans Parish which was 455,000 in June 2005 had fallen 

to less than 200,000 in September 2006. Plaquemines Parish lost an estimated 

25% of its population while St. Bernard decreased from 65,000 to 19,000 residents. By comparison, St. Tammany Parish north of the Lake and out of the 

direct path of the storms, gained 15,000 people and East Baton Rouge Parish 

had an influx of nearly 34,000 people. 

• In mid-November 2006, 66,000 FEMA trailers remained occupied statewide, and 

5,848 individuals remained on the FEMA waiting lists for temporary housing. 


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Louisiana citizens were displaced all over the state and country. Over 90,000 

are in Texas and significant numbers in Mississippi, Georgia and Florida. In 

total, approximately 296,000 Louisiana residents were living outside of the 

State as of November 2006. • The hurricanes displaced nearly 90,000 persons aged 65 and older, many of 

whom lived alone and had at least one disability. Displaced aged persons also 

were poor (an estimated 15%) and one quarter lacked vehicles. • The child poverty rates in the areas most affected by the hurricanes were estimated by the Congressional Research Service (CRS) to be over 30%. 

SOCIAL SERVICES AND HEALTH CARE 

The non-profit sector accounted for 5.6% of the State’s total workforce and 55% 

of all nonprofit jobs were in the heath care industry. 70% of these jobs were located 

in the parishes most devastated by the hurricanes. 

Second, permit me to share the observations of our State officials about how the 

costs of responding to the catastrophic disasters of Katrina and Rita (which have 

been extraordinary at all levels of government) have been shared. Much of the damage experienced in Louisiana has been the result of the failure of Federal levees 

which should have held in the face of a Category 3 event like Katrina. In addition 

to disaster costs unrelated to Federal relief programs, the State has paid to date 

approximately $400 million to FEMA to match costs associated with FEMA’s ‘‘Individual Assistance’’ program. For the State of Louisiana, the FEMA cost-share alone, 

even after being adjusted up to 90% Federal share for FEMA’s Public Assistance 

program, remains over $1.5 billion. Given that Louisiana generates only about $8 

billion in annual state tax revenues and has only 4.5 million residents, this match 

requirement further burdens Louisiana’s recovery. Governor Blanco and the State 

of Louisiana requests the Administration and Congress support an adjustment of 

the Federal cost-share to 100% for all FEMA programs in the Katrina and Rita disaster areas. In addition to providing New York with 100% federal cost share after 

the tragedy of 9/11, there is ample precedence for FEMA approving a 100% federal 

cost share . . . 32 other disasters, including Hurricanes Hugo, Andrew and Iniki, 

received a similar 100% federal cost share. The case for moving to 100% cost share 

is compelling for Louisiana since the projected per capita impact of Hurricanes 

Katrina and Rita exceeds the costs of prior disasters by many multiples—$6,700 per 

capita or more than thirteen times that of any other disaster in U.S. history. Let 

me take this opportunity to applaud Senator Landrieu for her continued hard work 

on this issue and express our thanks and appreciation to House Majority Whip Clyburn for introducing the Hurricanes Katrina and Rita Federal Match Relief Act of 

2007, which would grant Louisiana this waiver. We are hopeful Congress will move 

quickly and vote yes on this important legislation, thereby unleashing an estimated 

$775 million for local construction projects and enabling us to press the accelerator 

on our recovery. 

Third, let me commend the work of the Ways and Means Committee in shaping 

a range of federal tax incentives in 2005 to facilitate housing and population recovery in the aftermath of Hurricanes Katrina and Rita. The Katrina Emergency Tax 

Relief Act of 2005 (‘‘KETRA’’) and the Gulf Opportunity Zone Act of 2005 (‘‘GOZA’’) 

provided a range of tools and resources to finance the first phase of housing recovery 

in Louisiana, for affordable rental housing and for affordable owner occupied housing. By designating the GO Zone, Rita Zone and Wilma Zone as a difficult development area, the Ways and Means Committee first recognized that the cost of developing affordable rental housing in the GO Zone and Rita Zone would increase dramatically. By providing additional housing credits (‘‘GO Zone Credits’’) in an amount 

equal to $18 multiplied by the portion of the State population in the GO Zone as 

determined on the basis of the most recent census estimate of resident population 

released by the Bureau of Census before August 28, 2005, the Ways and Means 

Committee also recognized the magnitude of the population dislocation in the GO 

Zone and the importance of providing a stable source of credits to finance affordable 

and workforce housing in the GO Zone. By treating residences financed in the GO 

Zone and Rita Zone with the proceeds of qualified mortgage bonds as targeted area 

residences, the Ways and Means Committee recognized the importance of waiving 

the first-time homebuyer rule and increasing the family income limits for households qualified to benefit from low interest mortgages as such households purchased 

new principal residences to replace their prior principal residences damaged or destroyed by the hurricanes. By increasing the maximum amount of qualified renovation loans in the GO Zone or Rita Zones financed with the proceeds of qualified 

mortgage revenue bonds from $15,000 to $150,000, the Ways and Means Committee 

recognized that existing owner occupied housing suffered extensive damage and that 

the $15,000 limit was wholly inadequate. 


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Fourth, let me share with you the results achieved by the Louisiana Housing Finance Agency with the resources provided by KETRA and GOZA. 

• Since the spring of 2006, the Louisiana Housing Finance Agency has issued 

$336 million of qualified mortgage revenue bonds to finance owner occupied 

residences throughout the State, of which $100 million were GO Zone Bonds for 

owner occupied residences exclusively in the GO Zone. This represents a four 

hundred eighty percent (480%) increase over the historical average of $70 million per year. Over 2,052 households have benefited from the State’s low interest financing. Included in the last two issues is a pilot initiative to provide relief 

to low income home buyers from the increase in casualty and flood insurance 

premiums that deposits about $165 per month into the borrowers insurance escrow account for a portion of the increased insurance premiums. • As of December 2006, one hundred percent (100%) of the 2006, 2007 and 2008 

GO Zone Credits have been reserved by the Louisiana Housing Finance Agency 

to affordable housing developments in the GO Zone and one hundred percent 

of the State’s 2006 credit ceiling has been reserved. Out of the 401 applications 

seeking approximately $397 million in credits, the Agency reserved over $183 

million of credits to 240 developments that will produce 16,914 affordable housing units. These credit reservations went to developments that best meet the 

state’s housing priorities as articulated in the Qualified Allocation Plans. 

Significantly, the Louisiana Recovery Authority made $667 million in Community 

Development Block Grant funds available to applicants awarded tax credits from 

the LHFA. This ‘‘Piggyback Program’’ paired CDBG funds with LIHTC tax credits 

to make feasible mixed income development, deeply affordable units, and units for 

the elderly and disabled in permanent supportive housing. Thus far, $440 million 

in CDBG funds have been awarded to applicants under the Piggyback Program to 

assist 33 tax credit developments which will create 5,700 of the aforementioned 

units. In most cases, these mixed income developments will contain at least 60% 

market rate units and at least 20% deeply targeted units affordable to households 

earning less than 40% of the Area Median Income. In a few instances, most notably 

proposals for the redevelopment of public housing, a second mixed income model has 

been used in which at least 30% of the units will be market rate and no more than 

33% will be deeply targeted units. 

The Piggyback Program will also help special-needs populations achieve stable 

housing and successful lives by providing incentives for developers to create Permanent Supportive Housing (PSH) units. PSH households require rents affordable for 

households at 30% AMI down to zero income. All developments assisted with 2007 

and 2008 GO Zone Credits must provide at least 5% of their units for Permanent 

Supportive Housing (PSH). 

Fifth, permit me to thank the Ways and Committee and its majority and minority 

counsels for supporting amendments to the Internal Revenue Code to (1) extend 

placed-in-service deadlines in connection with developing affordable housing in the 

GO Zone and the Rita Zone to December 31, 2010 and (2) simplify the scope of 

qualified rehabilitation in the GO Zone and Rita Zone. This was one of the key priorities Governor Blanco asked the 110th Congress to consider during her visit to 

Washington last month. 

The Louisiana Housing Finance Agency and its developer partners are diligently 

working to address significant challenges, including sky-rocketing insurance premiums and rising construction costs, which have delayed the progress of many developments reserved credits in December of 2006. Now, tax credit investors and 

lenders are concerned about closing affordable housing developments in which credits were reserved based upon a 30% basis boost that will evaporate if the development is not placed in service by the end of December 2008. Developers have already 

invested a significant amount of time and money in getting these projects to this 

stage. As Governor Blanco explained during her recent meetings with Congressional 

leadership, extending the 30% basis boost AND the placed in service date to December 2010 for all GO Zone LIHTC projects will expedite closings and allow developers 

the time necessary to complete these high priority and urgently needed affordable 

housing units. Without these extensions, our recovery will be set back. 

The Louisiana Housing Finance Agency is also pleased that the rules for financing 

qualified rehabilitation in the GO Zone and Rita Zone with tax-exempt bonds will 

be simplified by the provisions of Section 2 of the proposed bill. Hurricanes Katrina 

and Rita did not distinguish between homes built 20 years or earlier and recently 

built homes. Measuring the percentage of outer and/or inner walls retained in connection with a home damaged in an area suffering a cataclysmic disaster is bureaucratic overkill and hinders population and economic recovery in an area suffering 

from a major disaster. In the aftermath of a major disaster, qualified rehabilitation 


smartinez on PRODPC61 with HEARING
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should only be based upon the expenditures for rehabilitation (25% or more of the 

mortgagor’s adjusted basis) so that homeowners will be permitted to not only finance the required rehabilitation of their homes but also to refinance the existing 

mortgage indebtedness at the time the home was either damaged or destroyed by 

the major disaster. 

Finally, permit me to cite several other provisions of the Internal Revenue Code 

relating to low income housing credits and qualified mortgage bonds that the Ways 

and Means Committee may wish to consider. 

• Per Capita Credits: The magnitude of the rental property loss in Louisiana coupled with the substantial population shifts to areas outside the GO Zone require 

additional credits to address the need that pre-existed the twin disasters as well 

as the increased need post-disaster. For a five year period, the per capita credits 

in Louisiana should be doubled. 

• Income Limits: Eliminate language in Section 1400N(a)(5)(B)(iii) disregarding 

subparagraph (A) in Section 143(f)(3) in connection with the use of GO Zone 

Bonds to finance owner-occupied residences in the Gulf Opportunity Zone. If an 

area is to be treated as a targeted area or area of chronic economic distress 

(‘‘ACED’’) for a period of time following a major disaster, State and local authorities should have the flexibility of using tax-exempt bond resources to finance owner occupied homes that will accelerate population and economic recovery. This flexibility will be tempered by the retention of the purchase price limitations applicable in such targeted areas. 

• Ten Year Rule For Existing Buildings: Waive the restriction on allocating credits to the acquisition costs of buildings in the GO Zone and Rita Zone for existing buildings until January 1, 2011. This waiver is particularly required in connection with bond financed projects that receive the so-called 4% credit in order 

to generate sufficient credits to complete necessary rehab in a cost effective 

manner. 

• Housing Credits for Mixed Income Housing: Concentrating low-income households in dense developments should be avoided. In the redevelopment of disaster areas where population and economic recovery in a short period of time 

is extremely critical, credits should be used to redevelop or build new rental 

units that promote mixed incomes. Incentives for mixed income projects should 

be provided by increasing the numerator in the unit fraction and floor space 

fraction to include a limited number of market units for developments in the 

GO Zone, Rita Zone or Wilma Zone to provide the State flexibility of promoting 

mixed income housing until January 1, 2011. 

• Apply Special Rules under Section 42(i) to qualified residential rental projects 

under Section 142(d): The definitions and special rules under Section 42(i) for 

projects receiving low income housing credits from a State’s credit ceiling should 

be available to projects receiving credits as a result of a bond financing under 

Section 142(d). These special rules under Section 42 that are not available 

under Section 142(d) include (a) permitting units designated as transitional 

housing for homeless to qualify as a low-income unit, (b) single-room occupancy 

units, (c) units occupied by certain students receiving assistance under Title IV 

of the Social Security Act or enrolled in a job training program receiving assistance under the Job Training Partnership Act or similar Federal, state or local 

laws and (d) units occupied by full time students if such students are single parents and such parents and children are not dependents of another individual. 

Thank you, Mr. Chairman, for permitting me to provide these comments and recommendations. 

f 

Chairman LEWIS. Thank you very much, Mr. Bailey, for your 

statement. 

Our next witness is from the Mississippi Home Corporation. I am 

pleased to welcome the Executive Director, Dianne Bolen. Thank 

you. 

STATEMENT OF DIANNE BOLEN, EXECUTIVE DIRECTOR, 

MISSISSIPPI HOME CORPORATION 

Ms. BOLEN. Thank you, Mr. Chairman, Representative Ramstad, and distinguished Members of the Subcommittee. 


smartinez on PRODPC61 with HEARING
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I want to thank you for the opportunity to appear before this 

Subcommittee to discuss tax issues related to the rebuilding of 

communities in the aftermath of Hurricane Katrina. I would ask 

that you enter my full written testimony as part of the record. 

Chairman LEWIS. Without objection, it will be done. 

Ms. BOLEN. Thank you. 

The Mississippi Home Corporation is committed to rebuilding 

single family homes and affordable rental developments. To do so, 

Mississippi needs Congress to extend the housing credit relief it 

provided in the Gulf Opportunity Zone Act of 2005, to help us overcome unprecedented housing challenges in our State. 

The corporation is utilizing the additional housing bonds and 

housing credits that Congress provided in the GO Zone Act. To 

date, we have issued 158 million in GO Zone bonds for single family homes. We have allocated 55 million in GO Zone credits. These 

55 million in credits will fund 3,000 affordable rental units. 

When the hurricane hit, Mississippi had approximately 8,500 

units that were either destroyed or severely damaged. Developers 

are currently encountering many impediments to the affordable 

housing development. The cost of insurance has risen 280 percent. 

Some insurance companies are pulling out of the State. Cost of 

land has risen. Developments must conform to new elevations and 

the International Building Code. Infrastructure is an issue in some 

parts of the State. Local communities still have zoning and building code issues to address before developers can move forward. 

Shortage of labor is a big issue. This in turn leads to a higher cost 

of labor. Current conditions make it nearly impossible to develop 

housing credit properties in many areas under the two-year credit 

development cycle. 

The Mississippi Home Corporation respectfully asks Congress to 

amend the GO Zone Act to allow all housing credit developments 

in the GO Zone to qualify for a 30 percent basis boost if placed in 

service by December 31, 2010. This 30 percent basis boost is necessary to offset the increased costs associated with rebuilding in a 

disaster area. Without the GO Zone Act’s boost, which is set to expire December 31, 2008, developers cannot make their projects cash 

flow due to the high costs of rebuilding, combined with rent and 

income restrictions placed on credit developments. An extension of 

this relief through 2010 is crucial. 

In addition, the Mississippi Home Corporation needs Congress to 

extend through December 31, 2010, the placed-in-service deadline 

for all credit developments that are allocated credits in 2006, 2007 

and 2008 in the GO Zone area. This is necessary because developers in some areas of our State cannot meet the credit program’s 

two calendar year deadline. 

The Mississippi Home Corporation does have procedures in place 

to ensure developers complete housing credit properties in a timely 

manner. Developers will be monitored to ensure timely completion 

of their development and that any delays are genuine and unavoidable. It is the goal of Mississippi Home Corporation to have developments placed in service as soon as possible in order to get workforce that’s needed on the Gulf Coast so that the rebuilding can 

continue. 


smartinez on PRODPC61 with HEARING
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Again, I would like to thank the Subcommittee for the opportunity to appear before you today. 

[The prepared statement of Ms. Bolen follows:] 

Statement of Dianne Bolen, Executive Director, 

Mississippi Home Corporation, Jackson, Mississippi 

Mr. Chairman, Representative Ramstad, and Distinguished Members of the Subcommittee: 

My name is Dianne Bolen, and I am the Executive Director of the Mississippi 

Home Corporation (MHC). MHC was created by the State of Mississippi as a nonprofit housing finance agency to provide the opportunity for safe, decent and affordable housing for low and moderate income Mississippians. MHC accomplishes this 

mission through federal, state and corporate housing programs. 

Thank you for the opportunity to appear before this subcommittee to discuss tax 

issues related to the redevelopment of communities in the aftermath of Hurricane 

Katrina, which struck our State on August 29, 2005. The storm wrought significant 

devastation not only to Mississippi’s Gulf Coast communities, but also throughout 

the southern half of the State. Many residents find themselves with homes having 

sustained significant damage or completely destroyed. A majority of these residents 

had no flood insurance. 

Impediments to Development 

Developers in Mississippi currently encounter many impediments to affordable 

housing development. The cost of insurance on the Gulf Coast greatly concerns all 

residents of Mississippi. Developers must pay higher insurance premiums for any 

development on the Gulf Coast, and this cost adversely affects the affordability of 

all housing. It is estimated that the cost of insurance has risen 280% since Hurricane Katrina, and some insurance companies plan to leave Mississippi altogether. 

With less competition between insurance companies, costs will not go down in the 

foreseeable future. 

Developers find it difficult to find affordable land outside the FEMA proposed 

flood zones. Due to the short supply of land, the cost has increased, thereby increasing total development costs. New construction must now conform to new elevation 

standards and the International Building Code, which increases design and building 

costs. These costs particularly impact affordable housing developers, who cannot absorb these increases. 

The lack of affordable housing on the Gulf Coast discourages the return of a workforce sufficient to complete the rebuilding process. This has led to a shortage of contractors and subcontractors in the area, which in turn leads to higher labor costs 

for skilled and unskilled labor. The lack of professionals such as city engineers, architects, and building inspectors make delays lengthy and often times unforeseeable. 

The lack of infrastructure in many areas still limits the location of developments 

funded by GO Zone tax credits. While the larger communities on the Coast have 

largely rebuilt their infrastructure, the high land costs in these communities forces 

developers to search for available land in outlying areas that have not rebuilt their 

infrastructure sufficiently to sustain developments of 35 units or more. Most coastal 

communities still lack basic services such as fire/rescue and local police forces. The 

smaller medical facilities have not returned to their communities, forcing large segments of the population to rely on the larger functioning hospitals further away. 

Local communities still have many zoning and building code issues to address before developers can move forward on their respective projects. When finally resolved, 

these important measures will govern where tax credit developments will be placed. 

In the meantime, developers must wait for the respective zoning boards and city 

councils to come to a consensus. 

GO Zone Tax Credits 

The Gulf Opportunity Zone Act provided Mississippi with an additional $106.2 

million in Low Income Housing Tax Credits with which to replenish the State’s 

rental housing stock lost to hurricane Katrina. It is estimated that as many as 8,500 

affordable rental units were destroyed or severely damaged by the storm. These 

units housed the majority of the Mississippi Gulf Coast’s workforce, and we cannot 

complete the rebuilding process without these families. To date, the Mississippi 

Home Corporation has allocated approximately $55 million of its GO Zone tax credits, approximately $35.4 million in 2006 and approximately $19.6 million in 2007. 

The $55 million tax credits will help fund over three thousand affordable housing 

units for families who earn at or below 60% of the area median income. 


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Immediately after the hurricane, Gulf Coast communities were not prepared to 

begin rebuilding. Katrina wiped entire communities off the map, and the cleanup 

process and rebuilding of infrastructure has taken some time. Only now are some 

communities ready to begin accepting developments. 

As the population begins to return to the Gulf Coast, we must provide affordable 

workforce housing for the communities. 

Difficult to Develop Areas 

The GO Zone Act designated the 49 Mississippi counties eligible for FEMA individual and public assistance as Difficult to Develop Areas (DDA), which allows developers who receive GO Zone tax credits a 30% boost in eligible basis. This basis 

boost offsets the increased cost of building in the disaster area, which includes increased costs for labor, materials, land, and insurance. Without the boost provided 

by the DDA designation, developers cannot make their projects cash flow due to the 

high cost of rebuilding combined with the rent and income restrictions placed on developments funded with Low Income Housing Tax Credits. The GO Zone Act provides that the GO Zone shall be treated as DDA for properties placed in service by 

December 31, 2008. 

It typically takes a tax credit developer 18 to 24 months from the time an allocation is received to reach placed in service status. MHC is authorized to allocate approximately $35.4 million annually in GO Zone tax credits for 2006, 2007 and 2008. 

If the GO Zone DDA designation expires on December 31, 2008, due to the current 

placed in service language, and HUD subsequently fails to designate the GO Zone 

counties as DDA, the developer will lose the 30% basis boost and be exposed to a 

risk in development cost. MHC expects this will discourage developers from applying for GO Zone tax credits in 2007 and 2008. MHC’s last application cycle ended 

on March 9, 2007. The scoring of these applications is expected to take up to 120 

days, which means developers would receive notification of their awards in July of 

2007, leaving them only eighteen months in which to place their developments in 

service and receive the 30% basis boost provided by the DDA designation. This 

deadline would be difficult, if not impossible, under ideal circumstances, let alone 

in current conditions. 

Proposed Extensions 

The Mississippi Home Corporation respectfully asks Congress to extend the 

placed in service deadline for GO Zone tax credits to December 31, 2010. In addition, Congress should extend the GO Zone Act’s Difficult to Develop Area designations from December 31, 2008 to December 31, 2010. These extensions will provide 

developers with valuable time to overcome the myriad delays listed above. Without 

the extension, increased costs and delays, both foreseeable and unforeseeable, would 

rob Mississippi of the benefit intended by the GO Zone Act’s additions tax credit 

award. I have attached to my testimony a copy of a letter from Mississippi Governor 

Haley Barbour to Chairman Rangel and Congressman McCrery in which the Governor expresses his support for the extensions mentioned above. 

MHC has measures in place to ensure developers complete tax credit properties 

in a timely manner. Developers will be monitored to ensure timely completion of 

their respective developments and that any delays are genuine and unavoidable. 

MHC continues to strive to provide affordable housing as soon as practically possible. 

In summary, I would respectfully ask the subcommittee to remember that entire 

communities were leveled by Katrina. This requires a monumental act of rebuilding, 

taking into account many small pieces to an enormous puzzle. Affordable housing 

remains an integral part of that puzzle, without which we cannot rebuild sustainable Gulf Coast communities. 

Again, I thank the Subcommittee for the opportunity to appear before you today. 

February 28, 2007 

Congressman Charles Rangel 

Chairman, House Committee on Ways and Means 

Congressman Jim McCrery 

Ranking Member, House Committee on Ways and Means 

The Gulf Opportunity Zone Act provides Mississippi with additional tax credits 

for 2006, 2007, and 2008. These additional tax credits will provide much needed 

housing for Gulf Coast residents in the form of affordable rental units. 


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The GO Zone legislation provides that properties financed by tax credits placed 

in service in the calendar years 2006, 2007, and 2008 will be treated as Difficult 

to Develop Areas (DDA), which provides a 30% boost in eligible basis for the properties. This boost in eligible basis provided by the DDA designation helps developers 

overcome increases in costs associated with development in the areas most affected 

by Hurricane Katrina. 

The DDA designation for tax credit properties on Mississippi’s Gulf Coast helps 

offset the increased costs of insurance, labor, and materials. Many insurance issues 

still wait to be resolved, and demand for labor outpaces the supply, thereby increasing the cost. 

The DDA designation as written in the GO Zone legislation is set to expire on 

December 31, 2008. It generally takes a developer 18 to 24 months from allocation 

of tax credits to placed in service status under ideal conditions. The Go Zone deadline threatens to repeal the DDA status for any project not placed in service by December 31, 2008, thereby increasing the overall cost of development and reducing 

the affordability of the individual units. For developments receiving tax credits in 

2007 and 2008, the fastest development timeline of 18 to 24 months still places the 

placed in service date outside the timeframe provided by the GO Zone legislation. 

In addition, there is one additional item that I would place as the highest priority 

to be addressed immediately so that the investment in affordable housing in Mississippi is not curtailed: 

To alleviate the pressures, I ask you to extend until December 31, 2010 

the deadline for placing Low Income Housing Tax Credit developments in 

service, as well as the deadline for benefits to these housing developments 

available through the and GO Zone LIHTC Basis Boost. 

This additional time would allow developers to overcome the increases in development cost while providing ample time to work with government agencies and local 

communities to provide affordable housing to areas of greatest need. 

Sincerely, 

f 

Haley Barbour 

Chairman LEWIS. Thank you very much, Ms. Bolen, for your 

statement. Thank you for taking the time to be here, you and Mr. 

Bailey. 

Without objection, I would like to include two recent Washington 

Post articles in the record. One from February 21, 2007, called 

Mostly Black Mardi Gras Event Shows a City in Pain, and one 

from March 12, 2007, called We Called it Hurricane FEMA. 

[The information follows:] 

Mostly Black Mardi Gras Event Shows A City in Pain 

‘Under the Bridge,’ Joy Masks Despair 

By Peter Whoriskey 

Washington Post Staff Writer 

Wednesday, February 21, 2007; A03 

NEW ORLEANS, Feb. 20—The Mardi Gras celebration that took place ‘‘under the 

bridge’’ today wasn’t broadcast live on TV. It didn’t appear on tourist brochures. Indeed, it hardly seemed to exist, to judge by the absence of attention. 

But the predominantly African American tradition that goes on in the shadows 

of the Interstate 10 overpass draws more than 10,000 people, boasts its own proud 

and bizarre spectacles—Zulu warriors, brass bands and Day-Glo feathered Indians 

among them—and in its own separate reality offered a stark contrast to the hopeful 

hype that attended the more official, more publicized part of the city’s Fat Tuesday. 

Mayor C. Ray Nagin (D) and others touted the ample Mardi Gras crowds and 

packed hotels elsewhere in the city as a sign of New Orleans’s vitality. 

‘‘This is what Mardi Gras is about is New Orleans—it’s back, y’all, it’s back!’’ he 

told a largely white Canal Street crowd to kick off the festivities. 

But among those celebrating Under the Bridge, many noted the far smaller 

crowds in that area compared with pre-Katrina years, a product of the lingering 

devastation in African American neighborhoods. Moreover, people said, among those 


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who have returned, the sense of celebration often masked the personal hardships 

of post-Katrina New Orleans. 

‘‘All that other stuff—all that they’re saying on TV about us coming back, about 

us rebuilding—it’s just a front,’’ said Bennie Pete, the tuba player and band leader 

for the Hot 8 Brass Band, a local institution, a few hours before taking the stage 

beneath the overpass. ‘‘It’s terrible here. People are struggling. Just look around.’’ 

He pointed to the nearby Lafitte housing complex, which has been closed since 

the storm. Metal shutters cover the windows of hundreds of units to prevent residents from returning. Notices posted warn passersby that anyone entering could be 

fined or jailed. Within view, many other buildings have been similarly abandoned. 

‘‘People need places to live,’’ he said. ‘‘Now ask yourself: Why can’t they reopen 

that?‘‘ 

For the day at least, people at Under the Bridge where hugging and dancing and 

watching the peculiar spectacles, intentional or not, that abounded. Crawfish could be had for $4 a pound, turkey necks or pigs feet for $3; other cooks 

stirred roadside vats of gumbo. Brass bands, a local tradition, played. Men sporting 

bright feathers—a tradition supposedly started to honor the American Indians who 

once aided runaway slaves—roamed and periodically shimmied to the music. Members of the Zulu krewe, whose parade ends nearby, sashayed about, wearing Afro 

wigs and grass skirts. 

Beneath the masks and costumes and smiles, however, lurked tales of postKatrina dislocation and ongoing struggle. 

Jack Humphrey, 58, a construction worker who had just finished parading with 

the Zulu krewe as a ‘‘walking warrior’’—he was dressed in rabbit and cow skins, 

a grass skirt and a helmet affixed with bullhorns—lost his home. ‘‘It’s been really 

rough,’’ he said. 

Blair Conerly, 33, a barber and Mardi Gras Indian, had to commute from Dallas, 

where he now lives. 

Pete, the tuba player, comes in from neighboring Kenner because his home in the 

Ninth Ward was destroyed. Just a few months ago, in the midst of one of the city’s 

crimes waves, a member of his band was shot and killed while driving with his wife 

and child. 

Asked whether the hard-hit Ninth Ward would ever come back, Pete exhaled 

forcefully enough to billow his cheeks. 

‘‘If it ever does, it will be a really, really long time,’’ he said. ‘‘The answer is, I 

really don’t know.’’ 

The city is still half-empty, by most estimates, and the toll has been heaviest on 

black residents. The proportion of African Americans residing in the city is estimated to have slipped from nearly 70 percent before Katrina to about 55 percent 

now. The Lower Ninth Ward remains almost desolate, with only a handful of trailers 

to signal any intention of residents returning. On some blocks nearest the canalwall breaches, nearly all of the homes already have been torn down. 

In New Orleans East, once a vast area of middle-class African Americans, there 

are just a few more trailers and a lingering wonder about whether the community 

will come back. On one typical block, only about four of 24 homes are occupied. 

‘‘We’re pioneers out here,’’ said Leroy Thomas III, a cable installer fixing up his 

New Orleans East home. ‘‘We don’t really know what’s going to happen here. But 

right now, I don’t have time for Mardi Gras.’’ 

Even among those who have returned, the struggles in post-Katrina New Orleans 

have cut any appetite for celebration. 

Ernest Penns, 74, a church deacon living in a Federal Emergency Management 

Agency trailer in a nearly deserted street in the Lower Ninth Ward, said he couldn’t 

think about Mardi Gras now—at least until he could get back into his home or at 

least get the heater fixed in the trailer. 

‘‘There’s no peace of mind for us yet,’’ he said. 

‘We Called It Hurricane FEMA’ 

Trailer Park Was Quickly Emptied 

By Peter Whoriskey 

Washington Post Staff Writer 

Monday, March 12, 2007; A01 

HAMMOND, La.—Shortly after noon, FEMA agents began rapping on the trailer 

doors, their knocks resounding inside the tinny white homes. Everyone in the park, 

the agents announced without warning, would have to pack and leave within 48 

hours. 

Where do we go now? 


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Why? 

What about school? 

To the residents of the Yorkshire Mobile Home Park, all of them families displaced by Hurricane Katrina, the Federal Emergency Management Agency crews offered answers that were uncertain and sometimes contradictory. As residents spilled 

out of their homes to meet their similarly bewildered neighbors, the adults wondered where they would be sent next, and how far they might wind up from their 

jobs. Some began sobbing. Then the children, seeing their parents’ tears, began crying, too. A woman fainted, and an ambulance came. 

‘‘It was like shock and awe,’’ recalled Ron Harrell, 40, a tenant. ‘‘We called it Hurricane FEMA.’’ 

The Yorkshire residents were eventually scattered to other FEMA parks. But 

their sudden evacuation last weekend illustrates the upheavals that still accompany 

life in a government trailer park 18 months after the hurricane struck the Gulf 

Coast in August 2005. 

About 12,000 households in Louisiana live in such settlements, temporary arrangements that only out of desperation are being stretched out indefinitely. 

Almost all of the trailers’ occupants were renters before the storm; unlike homeowners, they received no direct rebuilding assistance from the federal government. 

Some parks are rife with crime. Others are in isolated rural areas, far from schools 

and bus routes. Some trailers are in poor condition. 

Park tenants are keenly aware that they are not particularly welcome where they 

have ended up. Fearing blight, many local communities have tried to block FEMA 

trailer parks, and several are trying to enact deadlines for the removal of trailers. 

FEMA itself seems torn between closing the parks and serving the poor evacuees 

squeezed out by the scarcity of housing since the hurricane. Several times since 

Katrina, the agency has threatened to close the parks, only to grant an extension. 

Under the latest deadlines, tenants have until August to find other homes, but 

many seem unsure what they will do then. 

‘‘People say we shouldn’t still be living in a FEMA park,’’ said one former Yorkshire tenant, a Wal-Mart worker who wanted to be identified only as ‘‘P.’’ ‘‘But take 

a look at the rents people have to pay in New Orleans now— who can afford that?’’ 

The evacuation of Yorkshire March 3–4 had its roots in the three-way political 

and legal wrangling among the site’s owners, local officials and FEMA. That tension 

is mirrored across Louisiana and Mississippi, where scores of trailer parks have 

opened since Katrina. 

Before it was emptied, 58 families lived at the Yorkshire park. Their trailers were 

arranged on either side of a gravel road in a rural area about an hour north of New 

Orleans. 

Under a contract initiated the month after Katrina, owners Frank Bonner and 

Ken Albin were to get $42,700 per month in rent from FEMA. 

The residents began arriving about 6 weeks after the storm. 

Eventually, some found jobs as aides for the elderly or the mentally retarded, 

some as workers at Wal-Mart, and some as housekeepers. Some are disabled. Many 

are single mothers. 

The appearance of such parks in Tangipahoa Parish, as elsewhere, was not entirely welcome. For months, Tangipahoa officials sought to slow the growth of 

FEMA trailer camps. At one point, parish President Gordon Burgess called on Rep. 

Bobby Jindal (R–La.) to intervene with FEMA. 

Trailers ‘‘were moved in the middle of the night,’’ Burgess explained. ‘‘People woke 

up and they’d have a FEMA site next door.’’ 

At about the same time FEMA and the property owners were fighting over the 

terms of the contract, the owners clashed with the parish over approval for their 

trailer parks. 

A newspaper article appears to have precipitated the mass evacuation. Two days 

before the evacuation, the Daily Star of Hammond published a story about the latest 

power outage at Yorkshire. It was the third in recent months, the newspaper reported, and it happened because the electric bill had not been paid. 

Owners Bonner and Albin, who are responsible for the bill, which ran about 

$15,000 a month, blamed FEMA for not paying rent on time; FEMA officials have 

said they paid promptly after they were invoiced. 

‘‘Quite frankly, we received press earlier that week that pointed the finger at 

FEMA for not paying the bills. We were getting beaten up,’’ said Jim Stark, director 

of FEMA’s Louisiana Transitional Recovery Office. ‘‘At this point, we said, ‘Enough 

is enough.’ ’’ 

The park would be evacuated, and quickly, FEMA officials decided. Officials began 

telling tenants to pack up even before the agency had decided where they would go. 


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FEMA told residents and reporters that the people had to be moved for their own 

protection: The agency feared another power outage, officials said, and the trailer 

park’s sewage system, which sometimes smelled, posed a health hazard. 

But at the time of the evacuation, the power was on, the bill paid. State health 

officials deemed the sewage plant, for which the owners are responsible, free of violations, according to Brian Mistich, who oversees state inspections in the area. Although some complained of the stench from the plant, state officials said some odors 

from the facility are unavoidable—and legal. 

In an interview Friday, Stark said he made the decision to vacate the park based 

largely on the possibility of more power outages. Although many residents said they 

were told they had to leave within 48 hours, Stark said it was not meant as a deadline. 

‘‘Could we have done a better job on this? Absolutely,’’ he said. ‘‘We just wanted 

to be out of there.’’ 

Nearly all tenants interviewed said there was no reason to have moved, or at 

least no reason to have moved so suddenly. 

Several tenants fought back tears last week as they explained why they would 

rather be back at Yorkshire. Even those who said the park did at times stink preferred it to their new location. 

Shametha LaFrance and her five children were moved from Yorkshire into another FEMA mobile home, where, on the second day, the toilet backed up and the 

water stopped running. 

Darcelin Turner, 49, was relocated to a trailer in Belle Chasse, more than an hour 

away. She commutes every morning to bring her children to their school in Hammond; she does not want to transfer them again. 

Several others who moved to a site near the Hammond airport said that the new 

park is crime-ridden and that they would prefer to be back at Yorkshire. Out of fear, 

they said, they venture outside less and keep a close watch on their children. 

‘‘They took us from bad to worse,’’ said Lekesha Vernon, 27, a mother of two, one 

of those moved to the site near the airport. ‘‘But when you have no other place to 

go, you have no choice.’’ 

The tenants said the sense of rootlessness that comes with the trailer life is affecting their children. 

‘‘I’m tired of tossing my kids around like a bouncing ball,’’ LaFrance said. ‘‘And 

I hate waking up every day wondering what’s going to happen next.’’ 

When she brought her 5-year-old to school last week, he would not let go of her 

and began crying. 

He asked her: ‘‘Mama, are you going to be there when I get home?’’ 

f 

Chairman LEWIS. Both show the severe ongoing human suffering that still remains in Louisiana and all over the Gulf Coast. 

Neighborhoods in New Orleans remain abandoned aside from a few 

brave pioneers. Communities have not been rebuilt. People cannot 

return home and remain scattered around the southeast. Families 

are being bounced from trailer park to trailer park. Children who 

can’t understand why they don’t have a stable place to live are having emotional problems and are afraid that after school, even their 

temporary homes will have disappeared. Their whole world has 

turned upside down. These people are being treated with such a 

lack of respect for their human dignity. 

I would like to ask the two of you, do you believe that some of 

the changes to the tax law that we have discussed will solve some 

of these problems? Do you think that we need to be doing more? 

What else do you need to get people into stable homes? 

Mr. Bailey, Ms. Bolen? 

Ms. BOLEN. Okay. Yes, I do. 

One of the things the housing credit does is help in the rebuilding and get more affordable housing units on the ground. As I said, 

8,500 units were either severely damaged or destroyed. By making 


smartinez on PRODPC61 with HEARING
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the changes that I requested, this would allow us a little more time 

to get those developments. 

We would not provide the additional time if it was not needed. 

Chairman LEWIS. Mr. Bailey. 

Mr. BAILEY. Mr. Chairman, I appreciate that question because 

it gives us an opportunity to take a look at not only what the immediate need is, but we also have an opportunity to take a look at 

what the prospective need is. I think that once we, as policymakers, decide what the objective of affordable housing really is 

and mixed income communities really is, the next phase of development, both in Mississippi as well as Louisiana, has got to take into 

consideration what we are going to do down the road. 

Now, with that having been said, allow me to offer these observations. When over 200,000 people are dislocated, they are dislocated 

all over the State, all over the United States, and they typically 

move into residences provided by family members, friends, and the 

like. The dislocation of 200,000 folks from the GO Zone has caused 

an in-migration problem for our other metropolitan areas throughout the State. 

We have been using our per capita tax credits as well as our GO 

Zone tax credit to provide for the rehabitation of the GO Zone 

areas, but there was a preexisting need prior to Katrina that we 

are not able to fulfill with the resources that we currently have. 

The fact that GO Zone tax credits can only be used in the GO Zone, 

we are not addressing and must continue to address in the future 

how we are going to go about stabilizing those communities that 

have seen an influx in housing. 

So we are recommending that the per capita tax credits be increased for a period of five years in the State of Louisiana to help 

right the affordable housing imbalance created as a result of outmigration from the GO Zone. 

We are also recommending that the income limits, particularly as 

it relates to areas of chronic economic distress, that the States be 

given or provided flexibility in using tax-exempt bond resources to 

finance owner occupied homes that will accelerate population and 

economic recovery. There are several amendments to the Code that 

we would ask the Committee to consider. 

There is also the matter of the 10-year rule for existing buildings. We are recommending that Congress consider waiving the 10- 

year rule covering existing buildings located in the GO Zone and 

Rita Zone until January 1, 2011. This change will permit the acquisition cost of a building to be included in the eligible basis in connection with bond financed projects that receive the so-called 4 percent credit. 

The other is in the area of mixed income housing. I think that 

we can all agree that conventional wisdom recognizes that concentrating low-income households in dense developments should be 

avoided as a public policy matter. In the redevelopment of disaster 

areas where rapid population and economic recovery is essential, 

credit should be used to redevelop or build new rental units that 

promote mixed income communities and not provide for the reconcentrations of poverty and the reentrenchment of despair. 

Incentives for the GO Zone, Wilma Zone and Rita Zone as it relates to mixed income projects should be provided. The States, 


smartinez on PRODPC61 with HEARING
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given the flexibility of promoting on a strategic basis the development of mixed income communities that include market rate units 

at least until 2011. 

There’s one more item, Mr. Chairman, that I would like to offer 

for consideration. That applies to the special rules under section 

142(i) to qualified residential projects under 142(d). Now, the definitions and special rules under 142(i) for projects receiving low-income housing tax credits from a State’s credit ceiling should also 

be available to projects receiving credits as a result of bond financing under 142(d). 

There are special rules under the tax credit side of section 42 

that will permit special needs populations to occupy low-income 

units that are not available under the bond financed side of 142(d). 

The special populations that, under the tax credit side, would be 

eligible for financing include financing for homeless persons, singleroom occupancy, for certain students receiving Federal assistance 

under the Social Security Act or enrolled in job training programs 

receiving assistance, or full-time students with kids. 

Those provisions are not embedded in the provisions of the bond 

financing authority. Those are the elements that we would recommend additional consideration be given to going forward, Mr. 

Chairman. 

Chairman LEWIS. Thank you, Mr. Bailey. Thank you, Ms. Bolen, 

for your response. 

Now I turn to the Ranking Member, Mr. Ramstad, for his questions. 

Mr. RAMSTAD. Well, thank you, Mr. Chairman. Thank you to 

both the witnesses for your helpful testimony. 

I want to ask you both, and both of you know well, at the end 

of 2005, we increased the per capita low-income housing tax credit 

from $1.90 per person to $18 per person in the GO Zone for properties that were built before the end of 2008. You alluded to that, 

Mr. Bailey, in your testimony. 

The primary objective, as I think we all know, was to build housing as quickly as possible, to get it up fast for displaced residents 

who wanted to come home to Louisiana and Mississippi. The idea 

was to put a roof over these people’s heads, not to maximize returns to investors in low-income housing projects. 

The idea was to get housing built so these people had a roof over 

their heads, not to fatten the pockets of investors in such projects. 

Now, my question is this to both of you. If the so-called placedin-service deadline were extended so that developers had five years 

instead of three years to build housing, do we run a risk of actually 

encouraging delay in building housing? Can you give us any assurances that a two-year extension would not discourage the development of housing that otherwise would have been finished by the 

end of 2008? That’s my concern. 

Ms. Bolen, start with you, please? 

Ms. BOLEN. We have procedures in place that say the development must be completed in two years, and we go out and monitor 

on a regular basis. We look at them when they first begin, we look 

at them at six months, and at 15 months, if they’re not 50 percent 

complete in their construction, then we go to them and find out 

why. Of course, we’ve been talking to them all along. 


smartinez on PRODPC61 with HEARING
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Now, if it is something that is within their control, then we do 

not grant any type of extension. They still have to meet that twoyear deadline, but if we come along and they’re not 50 percent complete, we have a stiff monetary policy which gets those developers 

going, because money talks in their world and they do not like the 

penalties. So, they will keep the projects moving along and we will 

keep the procedures in place, because our goal is to get the housing 

done as quickly as possible. 

Mr. RAMSTAD. That sounds to me like a pretty strong assurance. I appreciate that response. 

Ms. BOLEN. You’re welcome. 

Mr. RAMSTAD. Mr. Bailey, please? 

Mr. BAILEY. Mr. Chairman, I’d like to join my colleague’s comments. We have embedded within our Quality Assurance Plan 

(QAP) very strict timing requirements. We have our regulatory 

monitoring responsibilities that we take very seriously. 

We have gone so far as to make sure that, to the extent that 

there is any indication that those projects do not meet the time line 

as imposed within the QAP, that we have an opportunity to recover 

those tax credits and cycle them back through our projects that did 

not receive tax credits. 

Mr. RAMSTAD. Well, not surprisingly, those were the responses 

I had hoped for and expected. You are doing your jobs well and we 

appreciate those assurances. 

I also want to ask both witnesses another question. As you know, 

Congress declared the entire GO Zone a difficult to develop area as 

part of the December 2005 tax relief package. This, of course, gave 

a 30 percent bonus credit for low-income projects placed in service 

in the GO Zone. The bonus was intended to offset the increased 

costs of building these low-income housing units quickly. Again, to 

get them up, to get a roof over people’s heads. They included paying premiums for materials, labor and insurance. 

I note that you have asked for an extension of time to place these 

units in service, which you mentioned again here today. If we are 

going to extend the placed-in-service deadline through 2010, is a 30 

percent bonus still needed? Is it still needed and would it make 

sense to only offer the bonus through the end of 2008, so we can 

maximize the number of units going up quickly? Or perhaps give 

less of a bonus the longer it takes to place housing in service, 

thereby creating an incentive to get the housing built quicker? How 

would you respond? 

Ms. BOLEN. I would say the boost is definitely needed, especially in those areas that are along the Gulf Coast. One of the 

things that you do on a tax credit application is once—once they 

have completed a development, all the costs that that developer incurs from that development is certified by an independent third 

party. So, he only gets the boost in basis if he has actually incurred 

those increased costs. 

I would say we definitely need it. We have procedures in place 

to ensure that the developer moves along in a timely fashion and 

completes the development in a two-year timeframe. We are just 

asking for some flexibility for those that might run into difficulty 

that is beyond their control. 

Mr. RAMSTAD. Which I think makes eminently good sense. 


smartinez on PRODPC61 with HEARING
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Mr. Bailey. 

Mr. BAILEY. I would agree. I would suggest that we keep it in 

place because the cleanup after a cataclysmic event that we are 

talking about now, just in being able to develop on pristine land 

takes 18 to 24 months. When you are talking about developing on 

land that has been contaminated and heaped with debris and you 

are talking about an absence of a workforce both in the construction supply, service, to build those facilities, then you are going to 

be paying a premium. 

The purpose for which that premium was provided by the Congress, and we are grateful for that, is in recognition of those additional costs, but, as my colleague said, there are cost certifications 

at the end of the day that must be met. To the extent that we can 

recover some of that, yes. 

It is imperative that those bonus points be included as we move 

forward in the extension. 

Mr. RAMSTAD. Let me just conclude by saying you two have 

certainly reassured this Member in a very articulate way that flexibility is very much important and is very important and much 

needed. So, thank you again for being here today and for your helpful testimony. 

Yield back. 

Chairman LEWIS. Thank you very much, Mr. Ranking Member, 

for your question. 

Now, I turn to Mr. Becerra of California for his questions. 

Mr. BECERRA. Thank you, Mr. Chairman, and thank you for 

holding this hearing. 

I thank the witnesses for being here. I am glad you are here. I 

hope you will continue to leave us additional information so you 

can make the case. I think many of us believe that this is 2 years 

too late and that we should have been on the ball from the very 

beginning. So, once again, to all the residents who stayed and who 

did everything they could to try to rebuild, please send along not 

only our congratulations but every measure of support that we can 

provide to make it possible for folks to return. 

I keep hearing these messages that a lot of folks don’t want to 

come back and that a lot of folks aren’t interested in taking up 

some of the housing stock that might become available. I think that 

if folks knew that they had a chance to go back to a job and to a 

safe environment, they would be going back in droves. So we want 

to make it possible for folks to not only get their life back together 

but to do it the way they had it before. 

I have a couple of questions. I think many of us here want to be 

as supportive as possible. You are the folks on the ground who 

know what you need to do, especially with regard to housing, but 

I want to make sure that none of the programs that we authorize 

are abused, because there will be another Katrina at some point, 

and hopefully the government will be more prepared to respond in 

a more direct and efficient way. We want to know that we can use 

these types of programs that we are now extending to folks in the 

affected areas by Katrina so we can do it again and do it better. 

So, you, in essence, become the paradigm. If we end up finding 

there is an abuse of some of these tax benefits, then it makes it 


smartinez on PRODPC61 with HEARING
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tough in the future to believe that Congress will extend them to 

others. 

So, my question to you is this, if we extend these tax benefits a 

bit more, whether it is under the Low Income Housing Tax Credit 

by extending the date on which the units become serviceable, or if 

we allow there to be some liberalization, continued liberalization on 

the mortgage revenue bonds, tell me what is being done to ensure 

that there is no abuse of the system? 

For example, on mortgage revenue bonds, I don’t know if this can 

happen or not, but my concern would be some developer, not low 

income, but some developer goes to someone who is low income and 

says, I can help you purchase a property, let us get it fixed, get a 

mortgage revenue bond, and then we will sell it and I will give you 

a cut of whatever we get, so you cause this flipping activity to perhaps occur, the speculation to occur in the real estate market, 

which ultimately hurts the folks we want to help most, the low-income folks who want to try to purchase homes. If all of a sudden, 

speculation causes prices to go up because you’ve got short-term developers going in there to try to make a profit, how can we make 

sure those types of abuses cannot occur? 

Maybe it is already an existing law, or maybe there are certain 

things that are being done just through the oversight, but give us 

some sense of confidence that as we move to extend to you some 

of these tax benefits further, that we won’t hear in a year or two 

or three later that the program was abused, which makes it tough 

in the future to extend these types of opportunities to other affected communities in the future. 

Ms. BOLEN. On the mortgage revenue bond, a couple of neat 

features about that program is, of course, it waives the first-time 

home buyer and it targets a slightly higher income individual. 

Across the board, people lose their house, no matter what their income is. 

The rate—— 

Mr. BECERRA. Ms. Bolen, do me a favor. Just focus on things 

that either you are doing through oversight or what you know exist 

in law so that we know what will prevent those types of abuses 

from occurring in the system. 

If there aren’t certain protections in the law that we need to 

have in place, let us know that as well. Perhaps as we move forward trying to extend these provisions, we include something. 

I just want—I am not saying that anyone is abusing, taking 

wrong advantage of this. I am just asking, is it possible? If so, how 

can we prevent it? 

Ms. BOLEN. I know when we look at the monthly reports from 

the service and lenders and one of the things you can look for is 

if they paid that loan off within a month or two. We have not seen 

that. 

What remedies there are in the law to prevent someone from 

flipping, that I am unclear on. 

Mr. BECERRA. Mr. Bailey, did you want to? 

Mr. BAILEY. Yes, sir. There is protections under 143 of the 

Code. 

Mr. BECERRA. One forty-three of the Tax Code? 


smartinez on PRODPC61 with HEARING
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Mr. BAILEY. Tax Code, as it relates to the use of mortgage revenue bonds for single family homeownership, that requires that an 

individual, when they purchase a home and they go to sell it, must 

sell it to another person of the same income category. 

If they do not sell it to a person of the same income category, 

which would then allow them to pass on that benefit, then there 

is a recapture provision associated with that sale. 

Mr. BECERRA. That lasts only for a certain amount of time? 

Afterward, the property is available on the open market? 

Mr. BAILEY. That is correct. That would be roughly 5 years. 

Mr. BECERRA. Mr. Chairman, I know my time has expired. So, 

I will conclude with this. 

When we raise the limits, when we allow those who are more— 

I want to say they are better off. Right now, the mortgage revenue 

bonds are typically limited for those who are low income and whatever the income level is, but we are going to try to raise those caps 

because we know under these circumstances of Katrina, there are 

a lot of families that were affected who could easily fall into very 

low income because of the fact that they have now lost their home, 

for example. 

Mr. BAILEY. That is correct. 

Mr. BECERRA. So, you have liberalized the standards. So, you 

now allow a higher income, at least on paper, family to be able to 

use these mortgage revenue bonds. 

Mr. BAILEY. That is correct. 

Mr. BECERRA. They then turn them over, let us say they flip 

the property to somebody who has a higher income but qualifies 

under this special circumstances. Then all of a sudden, the time expires and now they get to sell. If it is just a flipping process that 

occurs, there may be—there is a chance of abuse. 

So, I will close by saying this, Mr. Chairman. If we could just 

have the witnesses give it some thought, please provide to us anything that makes it clear to us that you have thought about whether there could be abuse of this program and how you either are 

preventing it, can’t prevent it or provide us with some suggestions 

on what we can do in passing any extension to you that will have 

provisions that will prevent it. 

So, I would like to make sure that in 3 years you are not coming 

back here and we are saying, so what happened. 

Mr. BAILEY. I understand. I appreciate that. We can always go 

back to the shop and come up with some innovative ways, but I 

think that, if you take a look at the Tax Code and the penalties 

associated with abuses under that code, and the mechanisms that 

are in place to prevent those abuses, the type of monitoring that 

both her agency and mine are involved in, there has got to be a 

trace amount of instances where the abuses have escaped. 

Mr. BECERRA. If we have got the protections in place, great. If 

they are being utilized and administered, great. That is what you 

can say. 

I just want to make sure, you have been forewarned. In three or 

four years—— 

Mr. BAILEY. I appreciate that. 


smartinez on PRODPC61 with HEARING
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Mr. BECERRA. Just so that way we can feel confident that as 

we extend these provisions to you, it’s not because a lot of folks 

who shouldn’t have taken advantage did. Thank you very much. 

Chairman LEWIS. I thank the gentleman from California for his 

questions and I am sure these distinguished Members of the panel 

would be guided by what you suggested. I think it can be most 

helpful. 

I now recognize the young lady from the State of Ohio, Ms. 

Tubbs Jones. 

Ms. TUBBS JONES. Mr. Chairman, thank you for hosting these 

hearings. It is an important issue for me and many people across 

the country. 

I have had an opportunity to visit Louisiana and Mississippi 

since the terrible storm two or three times, trying to raise the 

awareness and attention of this country on the issue. 

Also, Mr. Chairman, I want to thank you for calling me the 

young woman. I love it. I am going to keep talking to you on a 

daily basis. 

When Katrina struck, I introduced legislation expanding the lowincome housing tax credit in the affected region allowing for greater tax credits and benefits to be utilized so that more affordable 

housing could be built. That is why I was pleased to see in the Gulf 

Opportunity Zone Act that the Congress passed in ’05, additional 

low-income housing tax credit for the affected States were provided. 

Needless to say, as you have already said, our work is cut out 

for us, and we still need additional housing for low income folk. Although the additional low-income housing tax credits allocated 

have been effective, I would say that we need to do more. 

I recently introduced H.R. 1043, the Community Restoration and 

Rehabilitation Act of 2007, which improves the existing historic 

preservation tax credit, reap credit, for the restoration and rehabilitation of underutilized historic buildings. Senator Mary 

Landrieu is a Senate co-sponsor. 

The reap credit has been a great economic development tool 

throughout the country, including Louisiana and Mississippi. In 

New Orleans alone, the National Trust for Historic Preservation 

estimates that Katrina damaged more than 38,000 historic structures across the city’s 29 districts registered as historic. The city’s 

historic district encompassed half of its total area, the largest concentration of historic buildings in the United States. 

Along Mississippi’s 90-mile coastline, approximately 300 historic 

properties have been completely lost and another 1,200 remain that 

are mostly damaged. This includes historic districts like Bay St. 

Louis and Pass Christian. 

So, there is an abundance of historic buildings in the region that 

can be rehabbed and turned into businesses or affordable housing. 

However, under the—as the tax code is written now, if a developer 

tries to combine both the rehab credit with the low-income housing 

tax credit in one project, for example, developing an historic site for 

affordable housing purposes, the tax benefits are decreased. 

My tax legislation prevents this from happening and encourages 

projects to utilize both credits, increasing affordable housing. 


smartinez on PRODPC61 with HEARING
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Do you think allowing developers to combine both the rehab and 

low-income housing tax credit would assist you in your reconstruction efforts, Mr. Bailey, Ms. Bolen? 

Mr. BAILEY. Without a doubt. 

Ms. BOLEN. I definitely agree. 

Ms. TUBBS JONES. Although I understand as the law is written 

now, the same negative effects occur when housing projects utilize 

both low-income housing tax credit and community development 

block grants. That is when you combine both Federal programs, 

you are forced to take a lower tax benefit. Which does not make 

sense, since we should encourage the full use of both programs. 

How has this program affected you, if at all, Mr. Bailey, Ms. 

Bolen? 

Ms. BOLEN. It hasn’t. Our agency doesn’t administer the community block grant fund, so I am not as familiar with the ins and 

outs. I do know that I have not seen any tax credit applications 

come through with community block grant funds. I know that is 

one of the reasons, is that it is reduced because it is a Federal subsidy. 

I also know that there is a great need for it and if you have community block grant funds combined with the 9 percent credits, it 

would allow you to target even lower income individuals than you 

already are. 

Ms. TUBBS JONES. Thank you. Mr. Bailey? 

Mr. BAILEY. Yes, ma’am. You might have recalled from my earlier testimony that we have been successful in combining with our 

$183 million in tax credits roughly $450 million or so in block grant 

funds. That has been helpful, a very useful tool in terms of developing the 17,000 units of housing that will be going into the GO 

Zone. 

As I also mentioned, there is a technical glitch associated with 

the use of those block grant funds that we would ask Congress to 

consider resolving. That has to do with being able to use those 

block grant funds or treat those block grant funds that were provided under the emergency relief effort as normal block grant funds 

under the ’89 provisions. 

Ms. TUBBS JONES. You’re good, Mr. Bailey. I wouldn’t be trying to speak over all these buzzers for anything in the world. Just 

a moment. 

Now, okay. Go ahead. 

Mr. BAILEY. Essentially, so that they would not be treated as 

a below market loan or a Federal grant for purposes. I think once 

you eliminate that glitch, then your objectives are achieved tremendously. 

Ms. TUBBS JONES. Mr. Chairman, if you would allow me, I was 

in a meeting with Secretary of Housing Jackson and he said that 

you have housing units in New Orleans that people don’t want to 

come back and use. Is that—I don’t want to go into a war on this, 

but I found it hard to believe that people didn’t want to come back 

and take advantage of opportunities. 

Do you have housing units that nobody is using, sir? 

Mr. BAILEY. Madam Chair, that is probably an issue that we 

need to really spend some time thinking about, in terms of public 

policy and housing policy in this country going forward. 


smartinez on PRODPC61 with HEARING
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Now, yes, there are units that people want to reoccupy. There is 

no question about it. The Housing Authority of New Orleans 

(HANO) is in the process of making those units available. 

We have got to step away from the issue and ask ourselves a 

moral question. That is, do we want to recreate centers of poverty 

or do we expect to build within new communities opportunities that 

will give people hope, that will give people examples, living examples to live by and aspire to in their lives. 

The reconcentration of poverty in public housing units without 

including the opportunity to develop mixed income communities, 

like we did very much here in Washington, D.C., under the HOPE 

6 program, where we tore down public housing, gave public housing residents an opportunity to come back—— 

Chairman LEWIS. Do you have a HOPE 6 program? 

Mr. BAILEY. Sir? 

Ms. TUBBS JONES. Turn your mike on—— 

Chairman LEWIS. Do you have a HOPE 6 program? 

Mr. BAILEY. Yes, sir. I was the former director of the Housing 

Finance Agency here in Washington, D.C. We participated in the 

financing of over eight HOPE 6 redevelopments. 

Ms. TUBBS JONES. No, he was asking do you have HOPE 6 in 

New Orleans. 

Mr. BAILEY. Yes, ma’am, we do. I apologize, but using the 

HOPE—my point being this. Using the HOPE 6 model in the reconfiguration, redevelopment of affordable housing for persons who 

are coming from public housing circumstances gives them an opportunity to repopulate the area within a more improved and holistic 

community, a community that builds within struggling communities the same social, economic and educational framework that 

exists in thriving communities. 

So, as we think in terms of public policy, the future of public policy as it relates to housing, it is not just putting people back in 

their homes. It is thinking about what is the best way to achieve 

this in a holistic and supportive way. 

Ms. TUBBS JONES. Mr. Chairman, I know my time is up, but 

if I could get a written response from both of you? One of the 

things in my travel to New Orleans, I just saw acres and acres and 

acres of housing that was gone. I wonder what is our strategy in 

terms of there needs to be water lines, sewer lines, electrical, the 

whole nine yards. Is there a strategy in place to address that issue 

as well? 

Without doing that, we might as well—ain’t nothing going to 

happen. There is not anything going to happen, excuse me. 

I would be interested in hearing if there is a strategy, how we 

address the infrastructure of those communities that are devastated. 

I thank you for your time, Mr. Chairman. 

Chairman LEWIS. Thank you, the young lady from Ohio, Ms. 

Tubbs Jones, for your questions. 

I recognize my friend and colleague, the gentleman from New 

Jersey, Mr. Pascrell. 

Mr. PASCRELL. Thank you very much, Mr. Chairman. 

I’m glad it took us to the end of the hearing to talk about HOPE 

6. That model is excellent. It has worked, it worked in my district. 


smartinez on PRODPC61 with HEARING
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It is interesting that the President has tried to almost zero out 

these moneys. So, you have a lot of folks competing for the dollars 

that are shrinking. 

HOPE 6 is a very important concept that I think would be tremendously useful in southeast Texas, Mississippi, Louisiana and 

Alabama. I think we should take a look at that, in terms of where 

do we get the biggest bang for our dollar. 

Now, this hearing is not only about what has happened, but it’s 

prospective. You both seem to indicate that the mortgage revenue 

bonds which are tax exempt—I love mortgage revenue bonds. I 

think a lot of good comes out of that for everybody. You want to 

make them available for substantial renovations, not just new 

housing. To refinance existing residential mortgages, particularly 

loans, mortgage loans. 

Would you address that? I think this is an area that we need to 

take a real good look at. Rather than talking about new housing, 

substantial renovation to the housing that is existing, which is a 

better opportunity to keep people where they were and where they 

want to be. 

Ms. BOLEN. I know that currently in Mississippi what we are 

seeing a lot of right now, I know that there is a rehab loan where 

Congress extended the dollar amount of that rehab. One of the obstacles was that the house had to be at least 25 years old. So, that 

product didn’t really get used a lot. 

We are seeing a lot of individuals that are something in and getting temporary financing through the bank. They might be using 

the Federal Housing Administration’s (FHA) 203(k), which is a 

rehab loan. Then since it is short-term financing, then they are 

coming to us for a bond loan to take the short-term financing out, 

so they are staying in their existing homes. 

Mr. PASCRELL. I think that should be a priority, shouldn’t it? 

Ms. BOLEN. Exactly. 

Mr. PASCRELL. Mr. Bailey, do you agree with that? 

Ms. BOLEN. I agree. The majority of people want to stay where 

they are. 

Mr. PASCRELL. So, if that is the case, then we should expand 

legislation that is already on the books to include those homes that 

can be salvaged, but they will need major renovations. The tax-exempt bonds, mortgage bonds are an important part of doing that. 

Would you agree to that? 

Ms. BOLEN. I would definitely agree with that. 

Mr. PASCRELL. My next question is, if the placed-in-service 

date, if we extended that date to 2010, because you both spoke 

about that, how many more low-income rental housing units would 

be created? How many families would be provided housing? Have 

you planned this, if we can move to the next step? 

Ms. BOLEN. I know we have done a very preliminary, cursory 

survey of where developers are. I know with the 2006 GO Zone 

credits, there are only one or two developments that seem to have 

some trouble that are on the Gulf Coast. 2007, there is one. 

We are in our final cycle. We just took applications for about 51 

million of ’07, ’08 GO Zone credits. We will complete the analysis 

of those applications in July, so that will only leave them an 18- 

month window to complete their development and in good times, 18 


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to 24 months is pretty normal, but these are not normal circumstances. 

That 51 million would generate probably about 3,000 units of affordable rental units. 

Mr. PASCRELL. How does that stand up against what is needed? 

Ms. BOLEN. When you compare the 3,000 we funded, and the 

3,000 we will fund in July 2007, you get 6,000 units, and totally 

the State had about 8,500 severely damaged or destroyed that we 

need to replace. So, there is a little gap there. 

Mr. PASCRELL. Seventy-five percent, 80 percent of the way 

there? 

Ms. BOLEN. Exactly. 

Mr. PASCRELL. Mr. Bailey, what about your situation? 

Mr. BAILEY. Our situation is a little bit more intense from this 

perspective, sir. We have forward allocated everything we have. All 

of our 2006, all of our 2007, all of our 2008 GO Zone tax credits. 

That will produce, provided that this Congress allows us to extend 

the placed-in-service date, 17,000 units of housing. 

Without any more resources, we still have a need of 123,000 

units of affordable housing. 

Mr. PASCRELL. So, it is very different in Louisiana than it is 

in Mississippi with that regard, anyway. In that regard. 

Mr. BAILEY. That is correct. So, it could be that we are going 

to be asking the Congress to consider, based upon what we already 

know we can deliver and will deliver, extra allocations of tax credits and funds to break even with what the existing demand is. That 

17,000 is only 10 percent of the real need. 

Mr. PASCRELL. Mr. Chairman, it would seem to me, and I am 

not convinced of this and maybe you could convince me, that both 

States that we are talking about here, and thank you for your testimony today, are both States, are each of these States committed to 

getting people back to where they want to be and where they came 

from? I don’t know if that is the case, particularly in Louisiana 

with the tremendous gap between what we are doing and what 

needs to be done. Mississippi, although we are closer to our goal, 

obviously, you still are going to have specific needs. 

Are you committed to getting people back to their original domicile? 

Chairman LEWIS. Mr. Bailey and Ms. Bolen, can you convince 

this Member from New Jersey that you are committed, dedicated 

to the proposition that—— 

Mr. PASCRELL. I am sure they are committed. I don’t know 

about their governors. That is what I am talking about. 

Mr. BAILEY. I can assure you that Governor Blanco is absolutely committed, sir. So much so that she has been to Congress 

on several visits and she has made the case very clear. 

I think though, sir, that what you have got to look at is what we 

have done, measure our commitment by what we have done. We 

don’t have any more tax credits to allocate, sir. All of our tax credits—— 

Mr. PASCRELL. We hear you. 

Mr. BAILEY. We still have 120,000 units of affordable housing 

to build. Yes, we are abundantly committed to this effort and would 


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like the Congress to consider providing us with additional resources. 

Mr. PASCRELL. I am not trying to be facetious, but we have a 

long way to go here. We are going to be helpful. You can be assured 

of that. 

Mr. BAILEY. Thank you, sir. 

Mr. PASCRELL. That is our job, that is our responsibility. This 

is not free lunch here, but on the other hand we know what our 

responsibilities are. With the Chairman’s sensitivities, we are going 

to get it done. 

Thank you for your testimony this morning. 

Chairman LEWIS. Mr. Bailey, I just want to inform my friend 

from New Jersey, I can hear the ads on the local radio from your 

governor, the road back home. Come home. Come home. There are 

a large number of people from New Orleans that are living in Atlanta. They’re trying to get them to come home. 

They have to have a place to live and a place—something to do, 

something to work. We must try to help. 

Thank you very much for your question. Thank you very much. 

Now we will hear from the gentleman from Massachusetts, Mr. 

Neal, the former mayor of Springfield. Mr. Pascrell is the former 

mayor of Paterson, right? So they have some knowledge of what to 

do with cities. 

Mr. Neal. 

Mr. NEAL. Thank you very much, Mr. Chairman. Just by way 

of note, my ears perked up when community development block 

grant moneys were being discussed, because it still remains the 

best tool that local officials have. You both nod your heads without 

looking at each other, and that would be universal whether it was 

a Republican mayor sitting there or a Democratic mayor. Those initiatives work. 

Mr. BAILEY. Yes, they do. 

Mr. NEAL. I know we have heard in previous testimony that the 

tax incentives that were outlined earlier may be reduced by other 

Federal subsidies. That is an area that my Subcommittee, the Subcommittee on Select Revenue Measures, plans to look into. We are 

going to view particularly how these tax incentives complement 

other Department of Housing and Urban Development (HUD) programs. So, I hope that we will have an opportunity to hear from 

you at the right moment. I certainly thank Mr. Lewis for proceeding in a timely manner on these issues. 

Since you have just been through so much in administering these 

tax credits, can you explain what external factors have caused you 

to request an extension of the placed-in-service date, such as cleanup delays, and so forth, and the complications that have settled in 

because of it? 

Ms. BOLEN. A lot has to do with permitting, zoning, lack of infrastructure in certain areas. Given the elevation requirements 

along the coast, you see more developments moving further inland 

to areas where there is no infrastructure, so they are having to 

place them and put the infrastructure in place. 

Of course, the insurance costs. Finding an insurance company 

that is going to insure your development, just to name a few. 


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Mr. BAILEY. I would have to echo my colleague’s observations. 

That is exactly right. 

The only additional thing I would add would be the increased 

cost of labor supply, borne as a result of out-migration. You need 

to recapture your workforce in order to build the units. 

Mr. NEAL. Much of that is skilled labor? 

Mr. BAILEY. Sir, it is. 

Ms. BOLEN. Unskilled. 

Mr. NEAL. Unskilled labor as well. 

Well, thank you both. I hope we will have a chance to talk more. 

Ms. BOLEN. Thank you. 

Mr. BAILEY. Thank you, Mr. Neal. 

Chairman LEWIS. Thank you very much, Mr. Neal. 

Let me just ask you, Mr. Bailey and Ms. Bolen, in New Orleans 

and also along the Gulf Coast of Mississippi, places like Biloxi, I 

guess Waveland, where there existed at one time, you have many 

historic properties, buildings that was on the National Register and 

others. 

Do you think there should be something special, some type of 

special tax credit for historic places and buildings? Is there something that we can do to produce something very special? 

Mr. BAILEY. Those antebellum homes are national treasures. To 

preserve a part of our legacy, a part of the American legacy, I think 

is tremendously important as well. Not just because they’re pretty, 

but because they identify who we are as Americans. So, yes. 

Chairman LEWIS. Ms. Bolen. 

Ms. BOLEN. I would definitely agree with my colleague. You 

want to preserve your history, your heritage. Along the Mississippi 

Gulf Coast, a good many of our antebellum homes, especially the 

ones that lined Highway 90, which is right there on the beach, 

were totally wiped out. They had been there 100, 200 years. Anything that Congress can do to help restore the ones that are left 

would be greatly appreciated. 

Chairman LEWIS. Do you have anything that would stand out, 

a particular home that existed or a particularly historic building, 

say in New Orleans or along the Gulf Coast? I’ve visited that area 

over the years and I know in New Orleans you had—is it a customhouse? What is that old building called? 

Mr. BAILEY. Customhouse—— 

Chairman LEWIS. But it was not destroyed, it was not damaged? 

Mr. BAILEY. It wasn’t, but you have other communities in Louisiana that did have damage to the historic landmarks. To the extent that this Committee is considering or has influence to consider 

appropriations or allocations for restorations of national treasures, 

that should be considered. 

Chairman LEWIS. I appreciate that. 

Mr. Ramstad, did you have further questions or comments? 

Mr. RAMSTAD. Thank you, Mr. Chairman. 

Just a final question. Mr. Bailey, you cited in passing the need 

for the development of mixed income housing. Last year, Mr. Neal, 

who is a real expert in this subject, and I introduced a package of 

reforms. They were incorporated in H.R. 4873. That package of reforms would allow the low income housing tax credit to be used for 

mixed income developments as you recommended here today. 


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Could you just elaborate why this would be a useful tool, a useful 

reform? 

Mr. BAILEY. Thank you, Mr. Chairman. I would. 

I think that while this is a tremendous disaster, it is also a tremendous beginning. It is a tremendous beginning because it gives 

us an opportunity to think strategically and futuristically about 

what we want affordable housing to look like in America. So while 

there is a need to redevelop affordable housing instantly, it has got 

to be tempered with the need to develop affordable housing based 

on what the human dynamic is going forward. 

HOPE 6 projects are a good example of what the future is. They 

take a modern day example of what works in thriving communities 

and applies it to struggling communities. Mixed income housing, 

the combination of mixed income housing and affordable housing 

tears down the barriers that have restricted individual growth, individual aspirations as a result of public housing. When you tear 

down those barriers, another Milton Bailey 20 years from now 

might be sitting in front of you providing testimony that would not 

have been given the opportunity but for the ability to integrate economically, socially and educationally our communities. 

Mr. RAMSTAD. Well, let me just say I love your response and 

certainly agree with it. With somebody as capable and dynamic and 

knowledgeable as Mr. Neal chairing the Subcommittee on Select 

Revenue Measures, I am hopeful that we are going to move this 

bill. If we have a hearing, you would be the best possible witness. 

So, thank you, Mr. Bailey. 

Mr. BAILEY. Thank you, sir. 

Chairman LEWIS. Thank you, Mr. Ranking Member. 

Mr. Neal, do you have any further comments? 

Thank you very much. 

Let me thank you for being here. I think your testimony has 

been very, very helpful to Members of the Committee and everything that you have said will be in the record and other Members 

will have an opportunity to view and hopefully we will be able to 

move some legislation out of this Committee to the full Committee 

and to the Floor of the House. 

So, thank you for taking the time to come to Washington and to 

testify when you have so much work to do back in Louisiana and 

back on the Gulf Coast. So, we really appreciate your effort to be 

here and to testify. 

Is there any other business to come before the Subcommittee? If 

not, there being no further business, this hearing is adjourned. 

[Whereupon, at 11:16 a.m., the hearing was adjourned.] 

[Questions submitted by the Members to the Witnesses follow:] 

Question from Mr. Becerra to Mr. Bailey and Ms. Bolen 

Question: Please provide suggestions for how to prevent abuse if the provisions are expanded (e.g., rebuilding properties and then flipping them). 

Response from Ms. Bolen: Mississippi Home Corporation appreciates Congress’ 

concern about potential abuse. MHC is committed to using the federal resources at 

its disposal to help Mississippians who would not have affordable homeownership 

or rental options without the Mortgage Revenue Bond (MRB) and Low Income 

Housing Tax Credit programs, and MHC takes its stewardship of these resources 

seriously. 

In the MRB program, eligible home buyers receive below-market rate home loans, 

allowing low- and moderate-income families to save more of their income. Congress 


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established in 1988 the MRB recapture provision to discourage ‘‘flipping’’ and use 

by borrowers who could soon afford a conventional mortgage. Congress created the 

provision out of concern that upwardly mobile professionals were using MRBs to 

purchase homes even though their rising incomes would permit them to soon purchase homes conventionally. 

The MRB recapture provision applies to borrowers who sell their MRB-financed 

residence within 9 years of the date the loan is made. The recapture amount is 

based on the number of years the loan is outstanding (0–9), the gain on sale, and 

the borrower’s income at the time of sale. The recapture amount cannot exceed 6.25 

percent of the MRB loan or 50 percent of the gain realized on the sale if less. Treasury requires MRB borrowers subject to recapture to file IRS Form 8828. 

For example, assume an MRB loan of $100,000 sold during the second year of the 

loan (40 percent holding period), at a gain of 20 percent ($20,000), and an increase 

in borrower income of at least $5,000 over the applicable income limit (as adjusted 

by a 5 percent annual inflation factor allowance). The recapture amount cannot exceed the lesser of $6,250 (6.25 percent of the tax-exempt financed loan) or $10,000 

(50 percent of the gain). The recapture amount is then 40 percent (the holding period percentage) of $6,250 (the federal subsidy), which equals $2,500. 

The recapture provision, as detailed above, forces the borrower to effectively repay 

the interest benefit received from using the MRB program. The negating of this benefit discourages borrowers from buying homes using the MRB program with the intention of selling them within the 9 year recapture period, thereby helping ensure 

that the bond proceeds are distributed to families who genuinely need the program. 

Response from Mr. Bailey: 


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f 


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[Submissions for the Record follow:] 

Statement of Alabama Housing Finance Authority, Montgomery, AL 

Mr. Chairman, Representative Ramstad, and members of the Subcommittee, 

thank you for the opportunity to comment on issues regarding Katrina redevelopment. 

As you know, H.R. 4440, the Gulf Opportunity Zone Act of 2005, among other 

things, allocated additional Low-Income Housing Tax Credits to Alabama to aid the 

11 counties declared disaster areas in the wake of Hurricane Katrina. In addition, 

the legislation designated the GO Zone as a Difficult Development Area. The DDA 

designation allows a new construction development to receive a 30 percent increase 

in eligible basis to offset added costs. The cost savings conferred by the boost is 

passed on to the lower-income residents in the form of lower rents. 

H.R. 4440 provides that DDA developments receiving the increased credits must 

be placed in service by December 31, 2008. This deadline should not be a problem 

for projects funded in 2006, but will prove inadequate for projects receiving credit 

awards in 2007 and 2008. While we understand Congress’ intent to get units operational as quickly as possible, the shortened deadline will make construction in a 

demanding market unfeasible and will remove one of the primary incentives for 

building in this area—ultimately reducing the number of available affordable housing units. 

The recommendation of the Alabama Housing Finance Authority is that the December 2008 deadline be amended to match existing IRS Code Section 42 regulations which state that a developer has two years from the time an allocation of 

Housing Credits is made to place in service. Developers awarded GO Zone Credits 

in 2007 and 2008 would then have until 2009 and 2010, respectively, to place their 

developments in service and maintain the 30 percent boost in basis. 

Thank you for your attention. 

f 

Statement of the Honorable William J. Jefferson, a Representative in 

Congress from the State of Louisiana 

I am extremely grateful to Chairman Lewis and the members of the Subcommittee on Oversight for the attention they are giving the matter of tax policy 

relating to the recovery of the Gulf Coast Region. Today’s hearing on housing tax 

issues related to redevelopment of the communities affected by Hurricanes Katrina, 

Rita and Wilma is very important to the rebuilding and renewal of my region and 

my city, the great city of New Orleans and its surrounding communities. 

Developers and homeowners in the Katrina, Rita and Wilma Go Zone areas face 

seemingly insurmountable challenges as they try to bring their homes and businesses back to the torn Gulf Coast region. Insurance premiums, building material 

prices and the value of land in the region have risen sharply increasing the cost 

of rental properties and homes. The increases have essentially made many of the 

properties in our area unaffordable. 

Few needs are greater in the city and surrounding areas today than affordable 

housing. One New Orleanian, who currently resides in a FEMA trailer about an 

hour north of the city, surmises that many people want to move back to the city 

but after looking at the rent prices is quoted in The Washington Post as saying, 

‘‘Who could afford that?’’ 

Post-Katrina, the average rent in New Orleans has risen 70%. A standard $1000 

per month apartment in August of 2005 would cost $1700 per month today. Prior 

to Katrina, New Orleans has a population of 437,000 residents. However, over oneyear later, there are only 235,000 people living in the city. It is not because residents do not wish to return, it is because many cannot afford to return. The lack 

of affordable housing has caused not only a problem for residents wishing to return 

home but is also a problem for developers and investors in affordable housing. The 

lack of quality affordable housing that is sustainable discourages the return of a 

workforce to build and rebuild the community. 

The Low Income Housing Tax Credits (LIHTC) is of great assistance in helping 

New Orleanians return home. The credits are given to qualified investors who are 

then put under the constant scrutiny of the state to insure quality affordable housing. The safeguards within the system provide for thirty years of high housing 

standards. Furthermore, there are provisions in this system that guarantee affordable housing for fifteen years. Here if the property does not do continue to meet the 


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criteria it specified when receiving the tax credit award, the IRS will recapture the 

tax credits. 

In December 2005, Congress passed the Gulf Opportunity Zone Act (the GO Zone 

Act) and, among other much-needed tax incentives, it included a significant increase 

in Housing Credits for the Gulf states, and a 130% ‘‘basis boost’’ in which they treated all regions of the GO Zone as Difficult to Develop Areas, thus allowing them 

more funding for the rebuilding. New Orleans and the Gulf Coast region face many 

obstacles for redevelopment. However, as legislators we can ease the process and 

strain on those trying to make a difference by extending deadlines for the GO Zone 

Act of 2005. By extending the placed in service deadline for both the credits and 

for the treatment as Difficult to Develop Areas, we would effectively give the people 

in these communities a reasonable time to reinvest in their communities. The Low 

Income Housing Tax Credit has a history of success in the Gulf Region and throughout the Country. It is imperative that we as legislators vote to extend the placed 

in service deadlines to help with the rebuilding efforts and allow the citizens of the 

Gulf region return home. 

A further issue with the additional low income housing tax credit authority is that 

as written they would be treated under Code Section 42 as federally sourced financing and not covered by Community Development Block Grants (CDBG) financing exception. Instead of receiving a 9% credit for LIHTC projects, investors would only 

receive 4%. In effect, this would cut down the amount of money available for project 

financing and the number of projects for the areas it is intended to benefit. 

It is necessary to clarify how Katrina CDBG Funds are treated as such under 

Code Section 42(i)(2)(D), that the funds are not classified as below-market federally 

sourced financing. The Authorizing Acts specifically allow waivers and alternative 

requirements only in such provision are not inconsistent with the overall purpose 

of CDBG statutes. 

Finally, Mortgage Revenue Bonds (MRB) have provided over 3.5 million lower-income American with affordable homeownership and another one million with rental 

housing opportunities. Every year, 100,000 families buy their first homes with MRB 

mortgages. These bonds are typically for first time home buyers but there is a provision in GO Zone legislation that waives this requirement for those who’s homes 

were damaged by the hurricanes. This would assist with the rebuilding efforts, allowing these bonds to go towards refinancing home loans. 

Homeowners in the region would be allowed to refinance at a lower interest rate. 

There could be two possible results from this. The lower interest rate puts more 

money in the pockets of the homeowner and the homeowner could use this money 

to improve his monthly cash flow. The other option would be to refinance the home 

using the equity in it to take care of other expenses or to rebuild the home. Both 

bring greater cash flows to the homeowner that could be used to help spur economic 

development. 

Immediately following the hurricanes, the affected communities were not prepared to rebuild. Entire areas were damaged so severely that it effectively changed 

the landscape of the area. Only now are some areas ready to begin redevelopment. 

We need to do everything we can to facilitate rebuilding. I respectfully ask the Committee pass legislation that would 1) extend the placed-in-service deadlines for the 

GO Zone Housing Tax Credits; 2) extend the placed-in-service deadline for the Difficult to Develop Area designation; 3) clarify that the use of CDBG funds will not 

reduce the allowable credit rate from 9% to 4%; and 4) allow the use of MRBs for 

rehabilitation of property suffering more than 25% damage, even if the property has 

not been in existence a minimum of 20 years. 

f 

Statement of Kristina C. Cook, 

National Affordable Housing Management Association, Alexandria, Virginia 

Thank you, Chairman Lewis and Ranking Member Ramstad for this opportunity 

to present the views of National Affordable Housing Management Association 

(NAHMA). 

NAHMA represents individuals involved with the management of privately-owned 

affordable multifamily housing regulated by the U.S. Department of Housing and 

Urban Development (HUD), the U.S. Rural Housing Service (RHS), the U.S. Internal Revenue Service (IRS), and state housing finance agencies. Our members provide quality affordable housing to more than two million Americans with very low 

and moderate incomes. Executives of property management companies, owners of affordable rental housing, public agencies and vendors that serve the affordable housing industry constitute NAHMA’s membership. 


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Affordable rental housing is a cornerstone of redevelopment efforts in the Gulf 

Coast region. It is imperative to rebuild affordable multifamily housing for evacuees 

who wish to return home. Likewise, affordable rental properties, especially Low Income Housing Tax Credit (LIHTC) developments, provide essential workforce housing. 

With these principals in mind, NAHMA respectfully requests extensions of two 

key LIHTC-related deadlines. NAHMA concurs with testimony the Subcommittee 

has received about the necessity of extending the placed-in-service date for the GO 

Zone LIHTC properties to December 31, 2010. Even under the best of circumstances, there is no ‘‘perfect’’ development deal. With the many challenges that 

remain in the Gulf Coast, our members are concerned that failure to extend this 

deadline would be detrimental to rebuilding efforts. Another important deadline 

that should be extended is the temporary grace period against recapture of LIHTC 

credits, which was provided in the IRS Rev. Proc. 95–28 for Section 42 properties 

in major disaster areas affected by Hurricanes Katrina, Rita and Wilma. A number 

of our members with properties in the Gulf Coast have voiced concerns that the 24- 

month temporary relief from recapture and loss of credit provided in Rev. Proc. 95– 

28 section 7.01 may not allow sufficient time to bring low-income units back online. 

We respectfully request that this relief be extended to 48 months, with an option 

for the IRS to provide additional extensions upon expiration. Although the IRS has 

the authority to extend this deadline, our members believe it is in the public interest to include this extension as a component of hurricane relief legislation. 

Thank again you for allowing me to share NAHMA’s position on these important 

issues. Our members remain committed to providing quality affordable housing in 

the Gulf Coast and across the nation. 

f 

Statement of OMB Watch 

OMB Watch, a nonpartisan government watchdog that promotes responsible and 

equitable fiscal policy, has investigated the IRS’s private debt collection program, 

and concluded that it is demonstrably wasteful, puts taxpayer privacy rights in jeopardy, and has fostered illicit activities by private companies. We believe the program 

should be ended. 

The IRS private tax collection program is not fiscally sound. Taxpayer 

money is being used to pay private companies 21 to 24 cents for every dollar they 

collect, while IRS employees could do the same job for 3 cents on the dollar. Former 

IRS Commissioner Charles Rossotti told the IRS Oversight Board in 2002 that assigning more revenue agents to debt collections could see a return of $30 to every 

$1 invested. Indeed, the wastefulness of the program is not disputed. In testimony 

to Congress, IRS Commissioner Mark Everson has repeatedly admitted that IRS 

employees could perform this work at far less cost than private collection agencies. 

Nina Olson, the head of the Office of Taxpayer Advocate, which operates independently from the IRS and recommends changes in the tax collection system, has 

made ending the private collection program a top priority for the year. She has said 

in testimony to Congress that the tax collection program may become ‘‘vastly more 

expensive than we ever imagined,’’ since it requires significant investments in IRS 

oversight and management personnel. 

In point of fact, the IRS administered a pilot private tax collection program in 

1996 that failed to produce a return on investment. Contractors did not bring in 

nearly as much money as projected, and the program amounted to a $17 million net 

loss for the government. As a result, a follow-up tax collection program was canceled. 

The IRS private tax collection program also lacks safeguards for taxpayer privacy—and will allow the IRS to hand over personal information 

of 2.5 million taxpayers to private companies. The 1996 experience regarding 

the tax collection pilot program raised concerns over privacy and taxpayer abuse. 

A 1997 IRS Internal Audit Report found that contractors engaged in behavior prohibited by the Fair Debt Collection Practices Act, and did not protect the security 

of sensitive taxpayer information. Ms. Olson, the National Taxpayer Advocate, has 

expressed concern that the IRS has not set up sufficient safeguards to prevent the 

same experience from being repeated under the current program. According to Ms. 

Olson, private collectors have opportunity to use ‘‘trickery, device, and belated Fair 

Debt Collection Practices Act warnings to take advantage of taxpayers,’’ and yet 

they are not obligated to disclose their ‘‘operational plans’’ regarding practices, letters, or scripts they will use. 


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The IRS private tax collection program was enacted under circumstances 

that gave unfair and wasteful advantages to contract bidders. The most important terms of the private collection contracts—commission rates by which contractors are paid for their services—were never put up for competition. The IRS set 

commission rates at 21 to 24 percent of the revenue collected by contractors, denying bidders an opportunity to make offers on terms that would have resulted in the 

IRS getting a greater share of the collected revenue. Consequently, two of the companies who lost their bid for the contract filed complaints with GAO over the contract competition. GAO has also reported that the IRS did not established a mechanism by which it could evaluate the cost-effectiveness of the program, or a mechanism for incorporating lessons learned during the program’s first phase. 

Illicit conduct by one of the private collection agencies IRS contracted 

with raises questions about the integrity of the private tax collection program. A 2006 New York Times article reported that one of the winning bidders— 

Linebarger Goggan Blair & Sampson—had a former partner sent to jail for bribing 

the San Antonio municipal government in exchange for debt collection contracts. In 

addition, a Linebarger competitor is now suing the city of Brownsville, TX, charging 

that the municipal government gave a debt collection contract to Linebarger in exchange for campaign contributions to city commissioners. Linebarger has reportedly 

been forced to give up the IRS contract to collect federal debts, but for reasons that 

the IRS has not disclosed. 

For these reasons, we believe that this program should be terminated. 

f 

Statement of State of Mississippi 

The Gulf Opportunity Zone Act provides Mississippi with additional tax credits 

for 2006, 2007, and 2008. These additional tax credits will provide much needed 

housing for Gulf Coast residents in the form of affordable rental units. 

The GO Zone legislation provides that properties financed by tax credits placed 

in service in the calendar years 2006, 2007, and 2008 will be treated as Difficult 

to Develop Areas (DDA), which provides a 30% boost in eligible basis for the properties. This boost in eligible basis provided by the DDA designation helps developers 

overcome increases in costs associated with development in the areas most affected 

by Hurricane Katrina. 

The DDA designation for tax credit properties on Mississippi’s Gulf Coast helps 

offset the increased costs of insurance, labor, and materials. Many insurance issues 

still wait to be resolved, and demand for labor outpaces the supply, thereby increasing the cost. 

The DDA designation as written in the GO Zone legislation is set to expire on 

December 31, 2008. It generally takes a developer 18 to 24 months from allocation 

of tax credits to placed in service status under ideal conditions. The Go Zone deadline threatens to repeal the DDA status for any project not placed in service by December 31, 2008, thereby increasing the overall cost of development and reducing 

the affordability of the individual units. For developments receiving tax credits in 

2007 and 2008, the fastest development timeline of 18 to 24 months still places the 

placed in service date outside the timeframe provided by the GO Zone legislation. 

In addition, there is one additional item that I would place as the highest priority 

to be addressed immediately so that the investment in affordable housing in Mississippi is not curtailed: 

To alleviate the pressures, I ask you to extend until December 31, 2010 the deadline for placing Low Income Housing Tax Credit developments in service, as well 

as the deadline for benefits to these housing developments available through the GO 

Zone LIHTC Basis Boost. 

This additional time would allow developers to overcome the increases in development cost while providing ample time to work with government agencies and local 

communities to provide affordable housing to areas of greatest need. 

f 

Statement of The National Association of Home Builders 

The National Association of Home Builders (NAHB) and its 235,000 members appreciate the opportunity to comment on ‘‘Katrina Redevelopment Tax Issues.’’ The 

tax resources allocated by Congress as part of the Gulf Opportunity Zone Act of 2005 

(the Act) are crucial to redeveloping housing on the gulf coast. The additional Low 

Income Housing Tax Credit (LIHTC) allocations are especially critical for the construction of affordable rental housing. 


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The Act established a special allocation of LIHTCs for the Gulf Opportunity Zone (GO Zone), with each State allocation equal to $18 multiplied by the state’s population residing in the GO Zone. The cap applies for years 2006, 2007, and 2008. Further, a credit amount equal to $3.5 million for 2006 is available to the states of 

Texas and Florida. Qualified basis for all LIHTCs (including the regular LIHTC allocation) in the GO Zone is determined by applying the 30 percent basis boost. However, there is no carry forward of unused credits from year to year. 

Congress established a December 31, 2008 placed-in-service deadline for utilizing 

the additional GO Zone LIHTC resources to ensure that affordable housing is developed as quickly as possible. However, in the eighteen months since the hurricanes 

it has become apparent that the development process in the gulf coast region will 

take much longer than under normal circumstances. Indeed, the unprecedented devastation from the hurricanes has created significant obstacles for builders and greatly extended the time it takes to bring an affordable housing property from inception 

to being occupied. These obstacles are so significant that many LIHTC developers 

are in jeopardy of missing these statutory deadlines and losing their tax credits. The 

cost of this will be measured in terms of the loss of affordable housing desperately 

needed in the region. 

In the immediate term following the hurricanes it was unknown as to how the 

breadth and depth of the damage would impact the recovery and redevelopment 

process. Now, with the benefit of on-the-ground experience, it is appropriate to consider an extension of the placed-in-service deadlines for LIHTC-financed properties 

to accommodate for the unusual development environment in the GO Zone. Given 

the challenges associated with reconstruction, it will be extremely difficult for developers to meet the current statutory deadlines for these tax incentives. 

Factors Impacting Development of Housing on the Gulf Coast 

There are many factors that have acted to slow down the development process in 

the GO Zone. The five factors summarized below are not an exhaustive list, but are 

among the most significant. 

Availability of Predevelopment and Engineering Professionals—NAHB 

members report a scarcity of predevelopment and engineering professionals in the 

GO Zone which in turn impacts otherwise reasonable development timelines. There 

is a significant backlog of work for civil and soil engineers, surveyors, environmental 

analysts, etc in the GO Zone. This backlog is in part the result of a workforce depleted by the departure of residents who lost homes in the hurricanes and have 

since left the region. Builders attempt to work around this issue by employing third 

parties from outside the region, but this comes with additional cost, delays in their 

mobilization and unfamiliarity by third-party professionals with the local physical 

and bureaucratic landscapes. 

A second factor contributing to a scarcity of predevelopment professionals for 

housing redevelopment is the sheer amount of infrastructure repair needed in Louisiana, which absorbs a limited resource of skilled professionals. Federal and state 

governments initiated this repair work very soon after the hurricanes and ahead of 

reconstruction of affordable housing. Many firms are committed for weeks or even 

months at a time and are precluded from being able to accept additional work now 

for housing construction. 

Availability of Construction Labor—The same factors creating delays in the 

availability of predevelopment and engineering professionals apply to construction 

labor. Amplifying this situation is the fact that the majority of residents who left 

southeastern Louisiana were employed in the labor and service industries. Further, 

the labor shortage for construction will be compounded even further as governmentsubsidized residential repair and construction projects cycle into the actual rehabilitation and building phase. Numerous LIHTC projects are entering their construction 

phase simultaneously and all will compete for the same limited number of laborers. 

Availability and Cost of Construction Materials—Again, affordable residential construction demand is about to hit a crescendo, which means shortages and 

higher costs for building materials. Costs also are exceeding anticipated levels due 

to astronomical flood and wind insurance premiums forcing developers to seek out 

construction methods and materials that are outside their normal practices. There 

is both a learning curve-based delay associated with this shift, and material-related 

cost inflation due to establishing economies of scale from suppliers. Material costs 

that are high on a national level—brick and fuel, for example—contribute to rising 

expense as well. 

Insurance—Builders report a dearth of available insurance in the GO Zone and 

a drastic escalation in premiums (by as much as 400 percent in some cases) for insurance that can be secured for both flood and wind risks. Housing projects cannot 

move forward without insurance coverage and finding a provider slows down the deVerDate Aug 31 2005 23:45 Mar 05, 2008 Jkt 040309 PO 00000 Frm 00045 Fmt 6633 Sfmt 6621 E:\HR\OC\40309.XXX 40309

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velopment process. Also, the premiums required are most often not what were anticipated at the time many properties were originally underwritten. As a result, 

these properties cannot financially sustain the additional cost. In order to bring the 

insurance cost down as well as to meet more stringent FEMA requirements, many 

projects must be redrawn with higher elevations and the addition of other mitigation elements such as stronger wind-resistant windows or structural components. 

Drawing up new architectural plans sets back every aspect of development that follows from engineering evaluations to local permitting. 

Local Regulatory Delays—Many local jurisdictions in the GO Zone are significantly understaffed in inspectors, plan reviewers and other permitting professionals 

to meet demand. Inspectors brought in from outside the region are helping to meet 

the shortage, but struggles remain. In addition, the high level of redevelopment activity has set back the review process so much that it can take months to even secure a design review hearing with local planning entities. 

Conclusion 

For all of the factors noted above, NAHB would recommend an extension in the 

placed-in-service deadlines for properties in the GO Zone financed through LIHTCs. 

As currently written, these placed-in-service requirements could result in many of 

the tax credits going unused because properties cannot be completed within the time 

limits set by law. 

Thank you for the opportunity to submit the views of NAHB on these important 

issues. We look forward to working with the committee to ensure that resources allocated by the Congress are used most efficiently and effectively to aid in the recovery on the gulf coast region. While this statement focuses on the Katrina redevelopment tax issues, NAHB also looks forward to working with the committee as it considers other key matters related to the recovery of the impacted region. We stand 

ready to work with Congress and the federal government in delivering safe, decent, 

affordable housing in the Gulf Coast. 

Æ 


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