HUD: Mississippi wasted post-Katrina rebuilding funds

A new federal report criticizes Mississippi officials for mismanaging millions of federal dollars that flooded the state after Hurricane Katrina hit in 2005.

The audit, performed by the Department of Housing and Urban Development (HUD), found two chief areas of dubious spending. First, the report said state officials used unsupported population growth estimates to develop their plan for water and wastewater facilities. The result: The federal government spent more than $650 million on facilities that were in some cases way beyond what was needed, and in others, not needed at all.

The auditors discovered that within the space of one month, population projections swelled from an initially conservative 25 percent growth to 64 percent. The report alleges that the company hired by the state to produce the report, Mississippi Engineering Group, Inc., requested the increased population projections from the firm it sub-contracted to perform the actual demographic analysis, Angelou Economics. The firm’s principal executive officer, Angelos Angelou, said he was not aware of any pressure to increase the estimate. According to the audit, the company justified the higher projections on the theory that “infrastructure needed to be in place for the population to increase and it would be difficult to justify enhanced infrastructure if the projections were low.”

In Harrison County, several facilities are operating at less than 1 percent capacity. Landowners in the area, including Jim Walker Jr., have for years questioned the need for the massive plants. “They came in and took our property for a sewage plant that was not needed," said Walker, who is still involved in litigation with the utility authority. “They based it on inflated growth projects that were bogus. We’ve been fighting this for five years. … We’re headed for a jury trial. That’s the only way you’ll get justice.”

The report also highlighted inadequate appraisals of some land bought for construction projects. Officials did not get all the required title information, which resulted in a “lack … [of] assurance that land purchased for more than $2.1 million was appraised at a reasonable price,” according to the HUD report. In one instance, the government did not realize power lines ran across a property it bought, resulting in costly redevelopment in order to make it suitable for construction.

This is not the first time HUD has found questionable spending of the $29 billion Congress approved for Gulf Coast hurricane relief. In March, a HUD audit found inconclusive evidence that nearly $700 million designated for elevating homes in floodzones had been properly used. In its sample of 199 homeowners who received grant money, HUD auditors discovered only 41 had elevated their homes.

The Associated Press contributed to this report.