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Gulf Coast governors press Congress for aid

Appeal for economic and tax incentives to help states rebuild

WASHINGTON -- Gulf Coast governors pleaded with Congress yesterday to provide economic and tax incentives to bring back investments and jobs needed for their states to recover and rebuild after hurricanes Katrina and Rita.

Governor Kathleen Blanco of Louisiana told the Senate Finance Committee that her state lost 25 percent of its business economy when Katrina hit Aug. 29 and left New Orleans flooded. After Rita hit the western part of the state last weekend, and reflooded parts of New Orleans, Blanco said the estimated loss increased to a third of the business economy.

''It's very important to have incentives for our workers to return, and in order to do that, we have to have incentives for business to return," Blanco said, asking specifically for business tax write-offs for new investments, low-interest bonds for business borrowing, and emergency business loans.

Appearing before the panel, Blanco passed up an opportunity to respond to assertions by Michael Brown, the former director of the Federal Emergency Management Agency, who on Tuesday had accused state and local officials in Louisiana of fumbling the immediate relief effort after Katrina, which left hundreds dead in New Orleans.

''We are looking forward, not backward," she said.

In New Orleans, residents will be allowed to return to the driest areas of the storm-battered city at the end of the week, many for the first time since Katrina hit, according to a new timetable announced yesterday by Mayor C. Ray Nagin.

Under Nagin's plan, only areas still flooded -- specifically the city's hardest-hit Ninth Ward -- will remain off limits to residents by the middle of next week. Residents can return Friday in areas that did not flood or flooded very little, including the French Quarter, the Central Business District, and the Garden District.

It's unclear how many of the city's estimated 1 million displaced residents will return. The mayor said houses have been inspected and those deemed structurally unsafe will sport red stickers, and people should not stay in them, he said. Most of the problems that returning residents will encounter will be structural.

At a House hearing, meanwhile, lawmakers decried early signs of abuse in the awarding of billions of dollars in hurricane-related contracts, most without competitive bidding. And a Senate panel heard local officials in Louisiana, Texas, and Mississippi plead for help in caring for hurricane evacuees.

Testifying before the finance committee via a teleconference hookup, Governors Haley Barbour of Mississippi and Bob Riley of Alabama echoed Blanco's plea for help in revitalizing their private sectors.

Barbour also requested expanded business tax write-offs, particularly for investments in new equipment, $15 billion in tax-exempt private activity bonds, and the elimination of capital gains taxes for business investments in the Gulf Opportunity Zone proposed by President Bush.

Riley said a hurricane bond package is needed to help Alabama businesses recover. He also endorsed accelerated tax write-offs for business investments and urged Congress to step in to resolve the growing dispute over whether flood damage is covered by private hurricane insurance.

The Finance Committee is crafting a long-term package to help the Gulf Coast states recover and rebuild. Congress has provided $62 billion in emergency aid, and the Louisiana congressional delegation estimated last week that it will take an additional $250 billion in federal aid for that state alone to recover.

White House budget director Joshua B. Bolten said the administration is talking with Congress about cutting spending more in entitlement programs such as Medicare and Medicaid to pay for the Katrina costs.

He said the administration is reluctant to propose specific cuts until Congress acts on Bush's still pending requests to end about 150 federal programs to save $90 billion in the first year and to reduce entitlement spending to save an additional $70 billion over five years.

At a Senate Homeland Security and Governmental Affairs hearing, Mayor Melvin L. ''Kip" Holden of Baton Rouge, La., said a quarter-million evacuees from Katrina have ended up in his city, more than doubling its size and stressing public services to the limit. The airport, for example, has been the second busiest in the nation for the past three weeks.

''We desperately need help from the federal government to restore families, rebuild lives, cope, and heal," he said.

At the House hearing on contract abuse, lawmakers pointed in particular to the early approval of multimillion-dollar contracts for emergency housing -- including a $236 million deal with Carnival Cruise Lines for cruise ships that later sat mostly empty -- and the Bush administration's recommendation of a $250,000 purchase limit on government credit cards despite a history of abuse of such cards.

''We have seen several examples of how these no-bid or quick-bid contracts are being given to friends of the Bush administration," said Representative Bart Stupak, Democrat of Michigan. ''We need to have a detailed plan for reconstruction before any monies are doled out or contracts signed."

Several inspectors general told the panel that additional review is unnecessary. Inspectors general from the Government Accountability Office and the Homeland Security Department have promised to examine no-bid contracts that may have been unfairly awarded based on political connections. And Pentagon auditors have announced a broad-scale review of their defense contracts.

Information from Reuters was included in this report.

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