The challenges of financing the Harvey recovery

After the initial response to a large natural disaster, the difficult and often politically-fraught work of long-term recovery begins. Particularly daunting challenges exist in trying to finance repairs by calibrating changes in taxes and spending and prioritizing resources to rebuild local economies.

The estimated cost of the damage wrought by Hurricane Harvey has produced a range of estimates, from $190 billion, eclipsing the $160 billion cost of Hurricane Katrina, to lower estimates of $60-$70 billion from economist Bernard Weinstein. Many of these estimates fail to incorporate the indirect costs such as healthcare costs, or the cascading impact of oil refinery shutdowns. The cost of responding to Hurricanes Harvey and Irma forced FEMA to freeze funding for Hurricane Matthew recovery. In order to facilitate the immediate response, Congress allocated $15 billion in early September to a disaster aid package specifically for Harvey, with money allocated towards FEMA to aid people in disaster affected areas with damaged properties, as well as other agencies such as the Small Business Administration, which provides low-interest disaster loans to business owners. Further federal funding is likely to be delayed, and could take an estimated seven to 32 months for Housing and Urban Development disaster relief funds to be approved through the bureaucratic process.

The process of dividing funding has also created conflicts over which channels the funding should be distributed through. Currently, the state General Land Office plans to work with metropolitan planning organizations to distribute funds; Southeast Texan officials that administer smaller counties and cities want to receive direct funding out of the fear that they will receive “crumbs” compared to the Greater Houston metropolitan area.

At the local level, recovery spending has been more divisive. Houston’s Democratic Mayor Sylvester Turner requested that Republican Governor Gregg Abbott use Texas’s $10 billion Rainy Day Fund to help fund recovery, and warned that without help Houston would have to raise property taxes by an average of $48 per house in order to bring in $50 million. This is because the damage wrought to properties threatens to reduce city revenues after the next round of assessments, and reduce funding streams for schools, and other local government services such as hospitals, or prisons.  Governor Abbott argues that Houston has received sufficient resources to address needs between this and the next legislative session, with $100 million for debris removal and an accelerated reimbursement program. Mayor Sylvester Turner has also met resistance in the city council; after negotiating a generous 90% reimbursement rate for debris removal from FEMA, the city council has delayed $60 million in funding to contribute to debris removal on their end.

Other, more unexpected financial issues have cropped up. Three churches in Texas that were damaged by flooding from Harvey have sued to receive disaster relief funds from FEMA that are available for non-profits but are denied to religious organizations. FEMA maintains a policy that buildings which use at least half of their facility for religious activities are banned from receiving funding, in order to respect the separation of church and state; the churches argue that this discriminates against them on the basis of religious status, violating the First Amendment.

 

Sources and Further Reading:

1. Abbott: Houston has enough funding for Harvey recovery – Texas Tribune
2. Federal Harvey relief funds might take years, officials tell legislators – Texas Tribune
3. Analysis: A storm brings distinct changes in the political winds – Texas Tribune
4. Hurricane Harvey: Who Pays for Damage – NBC
5. Hurricane Harvey’s costs “may blow Katrina out of the water,” according to the government’s lead expert – Quartz
6. Mayor, council clash over Harvey debris removal questions – Houston Chronicle
7. Texas churches sue FEMA for disaster relief after Harvey – Reuters