Hurricane Aftermath: Quantifying the True Cost of Katrina

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ABSTRACT
The recent natural disaster of Hurricane Katrina devastated wastewater utilities in Louisiana, Mississippi, and Alabama. Many treatment systems suffered catastrophic damage. Compounding the problem, some of the affected utilities lost over half of their rate base, undermining their ability to generate sufficient revenue to meet operations and maintenance costs and bond payments. Public health has been placed at risk; without an official assessment of conditions there could be a prolonged period before the utilities receive sufficient funding to prevent financial insolvency and ensure their ability to maintain essential infrastructure and services.

Wastewater utilities are among the nation’s top protectors of public health. While their committed employees are working to meet immediate needs, some utilities will need long-term financial support from federal and state agencies. In order to address this financial requirement, elected officials needed an official assessment of the wastewater system damage across the Gulf States.

Water Environment Federation is a highly respected voice of the industry and an appropriate vehicle for providing this assessment to Congress and other governmental agencies. Black & Veatch, in collaboration with WEF and select utilities, provided the technical and financial basis for this assessment—the Assessment of Reconstruction Costs and Debt Management for Wastewater Utilities Affected by Hurricane Katrina.

This paper looks not at the hurricanes, but what was left in their wake and the task of a recovery that will take years. It presents the methodology for the development of the assessment, high level findings, and logistical difficulties in working in a heavily damaged zone. For additional findings and recommendations related to the assessment, the reader is referred to the Assessment of Reconstruction Costs and Debt Management for Wastewater Utilities Affected by Hurricane Katrina, at http://www.wef.org/NR/rdonlyres/DF8D6AED-D72E-49A3-9711-E956D750E720/0/katrinafinal.pdf.

EXECUTIVE SUMMARY
Hurricane Katrina, widely regarded as the worst natural disaster to ever hit the United States, devastated wastewater utilities in three states—Louisiana, Mississippi, and Alabama. A tidal surge of 15-to-25 feet stretching across 3 states inundated the entire coastline of Mississippi, a large portion of Louisiana, and the western coast line of Alabama. Homes and businesses were destroyed across hundreds of square miles.

The hurricane also devastated wastewater utilities, with some treatment systems suffering catastrophic damage. Compounding the problem, affected utilities in the surge area lost 25-80% of their population rate base, undermining their ability to generate sufficient revenue to meet operating costs and bond payments.

Total damages to wastewater utilities from the assessment were estimated to be close to $1.4 billion: $1.2 billion for infrastructure damage and an addition $163 million in needed subsidies to maintain a minimal level of financial solvency. A significant portion of the damage is not expected to be covered under current Federal Emergency Management Agency (FEMA) guidelines.

Louisiana accounted for 78% of the total damage estimate. This was attributed to the fact that Louisiana had a higher population in the surge damage zone than did Mississippi or Alabama (New Orleans and neighboring parishes were considered to be in the surge zone due to strong similarities in damages between New Orleans and other utilities in surge zones).

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