406 Dirksen EPW Hearing Room

Hon. Ray Nagin

Mayor, New Orleans

Mr. Chairman, members of the Committee, I would like to thank you all for inviting me to speak to you today about the City of New Orleans. To all the members of Congress, and in particular to our Louisiana delegation, thank you for all of your continued hard work and dedication in helping us in this time of need. I would also like to take a moment to thank the American people, most of all, for the compassion, support and generosity they have shown our city over the last couple of months. The outpouring from private citizens and corporations all over this country has been remarkable.


New Orleans is surrounded by the great waters of the United States. But while the waters surrounding New Orleans provide our lifeblood, they also threaten our very existence. A system of levees and pumps protects this city nestled in the crescent of the Mississippi River and extending north to the banks of Lake Pontchartrain. Although these systems ordinarily meet the water challenges facing the city, Hurricanes Katrina and Rita were extraordinary events that have changed life in New Orleans forever.

As you know, on August 29, 2005, Katrina, the most powerful Category 4 hurricane to hit the region, devastated New Orleans and the Gulf region causing unimaginable damage and breaching the levees that protect our city. This storm forced hundreds of thousands of people to flee, flooded thousands of homes and decimated many lives. The damage to homes, schools, businesses, hospitals, roads, water plants, communication facilities, and electrical power infrastructure was unprecedented and the economic and social fabric of the area was damaged in its entirety.

Our storm protection systems did not work against Katrina, a category four hurricane that made land fall near Buras, Louisiana. The City’s levees were overtopped and/or destroyed, which created a flood that would overtake much of New Orleans.

All business was immediately halted. Hospitals were forced to close; electricity, communications and fresh water services were disabled. Hundred of thousands had to be evacuated to different cities throughout the United States. Many who wanted to come home could not because their homes were destroyed; jobs were lost with no access to a workable health care system. Homes that did survive were inundated with contaminated and oil laced water. Some of these homes and businesses are ruined forever. Some of our hospitals may have to be torn down.

Now we have a great challenge before us. We need to rebuild this great City to bring New Orleans back and in order to do that, we need this committee’s help in a combination of structural and non-structural flood control measures.

Our first challenge is to ensure the safety and security of our citizens. The Chief of the Army Corps of Engineers has assured me that flood defenses for New Orleans will be restored by June of 2006 to the level where they were when the hurricane struck and overpowered them. The Corps Commander also acknowledged that this would provide little comfort in a city devastated by the storm and whose flood protection is not as strong as it should be. The Corps currently has no authority to rebuild the city’s flood protection from hurricanes stronger than a Category 3 storm. But more is needed. Now is the time for our country to make a commitment to the Category 5 levees that will enable us to bring New Orleans back. I ask this not just for the nearly half a million people who call the city home but indeed for the well being of our nation. Only with a plan to improve our critical levee and flood control systems can we expect citizens to come back and businesses to reinvest on a large scale.

New Orleans is an economic hub for the entire nation and is of great strategic importance. Four of the largest ports in the nation are in this area; half of the grain exported from the U.S. goes through New Orleans, the area contains a vast infrastructure for oil and gas exploration and production, petrochemicals, refineries and pipelines that serve much of the country and its fishery resources are among the largest in the U.S. Simply put, the nation cannot afford not to rebuild New Orleans and federal money must help the city to rebuild the right way this time.

But levees and floodwalls alone will not solve this problem. Drainage is an essential part of the flood control equation. The Southeast Louisiana Flood Control Project (SELA), our primary drainage enhancement program, must be expedited and completed as soon as possible so that the benefits can be realized as we rebuild the city.

Our water and sanitation system infrastructure was also badly damaged by Katrina. They need to be renovated or replaced in order to continue providing our citizens with safe drinking water and a healthy environment.

Another crucial component to our infrastructure needs lies outside Orleans Parish. A comprehensive plan to protect our city and the nation’s investment in our region includes rebuilding the marshlands of southeast Louisiana. Wetlands act as a natural buffer between this part of the United States and the Gulf of Mexico, reducing potential flooding and protecting southeast Louisiana from devastating storm surge. Two miles of rebuilt marshland will reduce surge up to 2 feet. With local, state and federal coordination on this issue we can protect the nations’ investment in New Orleans and the Louisiana coastal area.

Along with the rebuilding of our Levee System to help protect the City from another dangerous storm, we are also focused on the reestablishment of our businesses. We need to ensure that local workers and businesses have an opportunity to be a part of the rebuilding process. An initial investment can pay off multiple times for our nation if we invest in the people who will continue to reinvest in the local economy.

To bring New Orleans back, we must also revitalize our business climate with tax breaks to help stimulate re-investment and economic development.

Therefore, I am asking for the establishment of the New Orleans/Katrina Tax Recovery and Jobs Incentive Zone that would give people a 50 percent credit on their taxable wages. This zone would cover the entire city, along with other similarly affected areas, and would consist of several main components:

· The credit would be capped at $50,000 for single tax payers and $100,000 for joint returns.


· Employers would also receive a 50 percent income tax credit based on their total payroll for all employees who live and work in the zone. Credits would not carry back or carry forward for sales to third parties.

· There would also be an income tax free zone within these areas for any manufacturing companies creating jobs and adding value to any of the top five raw materials (coffee beans, steel, raw metals, rubber and plywood) imported through the Port of New Orleans with a focus on advanced robotic utilization. The same tax free zone would also be created for medical research, clinical trials, pharmaceutical manufacturing, and related patent development.

· To ensure that we bring back businesses and individuals who were forced to relocate, we need a full Relocation Tax Credit that should be allowed for uncompensated expenses incurred in relocating individuals or businesses to their location prior to the storm. Relocation expenses should include those related to leases of temporary facilities, along with everyday expenses such as lodging incurred on behalf of employees. The credit should apply for both the regular and minimum tax and be eligible to carry back for three years and forward 20 years.

These incentives would last for seven years, or until the population in the target areas reaches pre-Katrina levels, whichever comes first. To ensure that this nation’s investment in the region has maximum lasting impact, aid must be delivered to the areas that need it most. I urge you to establish a minimum funding formula that is based upon the number of people displaced or affected and the number of buildings or residences either flooded or damaged.


Our City government knows the uphill battle local businesses, institutions and workers face, because we too face difficult decisions as we continue operating. The City laid off approximately 50 percent of our workforce, about 3,000 people, because of a total loss of revenue streams. The Stafford Act must be amended so governments facing crises of this magnitude have more flexibility to pay workers. While the Community Disaster Loan Act of 2005 will allow the city to begin to address our financial needs, I remain concerned that restrictions imposed by Congress will make it difficult for us to fully respond to the challenges ahead. We need the restrictions lifted that limit loan amounts to 25 percent of our revenue, and that take away the authority of the President to forgive the loans if a local government cannot repay. The Stafford Act must be fixed.

Transportation repairs and restoration are yet another crucial aspect to recovery. Our transit system suffered heavy losses of busses, rail and associated infrastructure that will require federal assistance to repair and replace. Without restoration of these transportation systems, our recovery efforts will be severely impacted. A light rail system linking Louis Armstrong International Airport, New Orleans and Baton Rouge would provide another needed tool for the rapid evacuation of thousands of people in the event of another major storm, and for rebuilding the regional economy.

Our Community is already moving to bring New Orleans back. The foundation of this effort is a 17-member commission I appointed to draft a master plan for rebuilding the city. The representatives on the Bring New Orleans Back Commission will work with hundreds of committee members, both residents in the city and people displaced by the storm, to draft a detailed recovery plan. I have charged this commission with a weighty task, but I am confident that members are up to the challenge. Each was chosen to enrich the scope of voices necessary to rebuild our diverse city. Co-chairs Mel Lagarde, a successful investor and entrepreneur, and Barbara Major, a community activist and advocate for the poor, are representative of the types of input we need to be successful.

By the end of the year, the commission will develop a blueprint for New Orleans’ recovery. However, we are facing a critical point when businesses and residents are making life-altering decisions about whether to stay in the area. Recently, we sponsored a Back to Business Workshop in conjunction with the Department of Homeland Security to help local companies become more involved in the building process, but our city needs an immediate infusion of resources and tax incentives to encourage growth. I am encouraged by President Bush’s promise of federal assistance for locally directed projects because I truly believe the best people to rebuild New Orleans and Louisiana are the people who call the area home. This mayoral administration’s track record shows our understanding of the responsibility that will accompany significant federal aid and our commitment to spending every penny wisely and in a manner that is in the best interests of all Americans.

In closing, I would like to remind the committee of the critical areas I have addressed today:

· Building flood control measures to protect against a Category 5 hurricane
· Repairing or replacing our water and sanitation system infrastructure
· Rebuilding the marshlands of Southeast Louisiana
· Establishing a minimum funding formula

· Ensuring that local workers and businesses have an opportunity to participate in the rebuilding of New Orleans
· Revitalizing the business climate with tax breaks
· Fixing the Stafford Act

I want to thank you again for allowing me to be here with you today. New Orleans must be rebuilt and must be made a safe place to live, work and do business. I am confident that by working together, we can achieve a common vision: a vibrant New Orleans with a thriving economy, prosperous citizens, and the chance to once again contribute to our great nation. Thank you