Hurricane Katrina slammed into the Mississippi Gulf Coast August 29, leaving in its wake significant housing, business and infrastructure damage, and curtailing Mississippi’s economic recovery.
“Prior to Hurricane Katrina, the state’s economy was stable and growing,” state treasurer Tate Reeves explained to Wall Street investors and analysts during his Mississippi Investor Conference Call September 22. “Tax revenues increased by approximately 7% in fiscal year 2005, spending was reduced 1.7% from fiscal year 2005 to fiscal year 2006, the structural deficit was reduced significantly without raising taxes, and for the first time since 1987, more debt was retired than issued.”
Even though the anticipated effects of Hurricane Katrina include reduced personal income and sales tax receipts, ad valorem taxes, school taxes and other revenues, and a decrease in real property values, Reeves anticipates federal funds will play a significant role in the recovery and rebuilding effort.
“Already, $62 billion has been appropriated to FEMA for emergency recovery efforts in Mississippi and others affected in Gulf Coast regions, with Congress contemplating an additional $200 billion,” Reeves pointed out. “FEMA generally reimburses 75% to 100% of recovery-related costs. Both houses of Congress have passed legislation providing unemployment assistance and emergency tax relief. Freddie Mac is expanding relief to homeowners affected by Katrina.”
The national media has focused on Mississippi’s loss of $500,000 in tax revenue every day that coastal casinos are closed, but gaming revenues comprised only 4% of the state’s revenues in fiscal year 2005. “The impact on gaming revenues is not expected to exceed $8 million per month,” said Reeves.
Overall, the Mississippi Tax Commission projects $213 million to $272 million in revenue losses from September to December, making the shortfall “manageable from a financial standpoint,” he added.
Concerning the state’s $3 billion in total bond indebtedness, Reeves said he doesn’t believe the state will have “any problem meeting all of our debt service obligations.”
“We haven’t seen any missed bond payments from the state’s standpoint,” said Reeves. “We wired debt service prior to the storm to ensure that September 1 payments were made. From a local standpoint, we’ve seen no defaults or missed payments.”
Reeves pointed out that local governments could borrow from Mississippi Development Bank’s $100-million pooled program to provide interim short-term financing for emergency cash flow needs. His staff is also seeking alternative methods to help devastated municipalities meet payroll.
It’s too early to estimate the financial impact of storm damage to government property in Mississippi, Reeves said. “We still have teams on the ground assessing office building damage, but we’re anticipating the $500-million range,” he said. “FEMA may pick up 90%, possibly 100%, but even at match level, it’s a very manageable number.”
Wall Street investors were curious about whether Republican-led Mississippi and Democratic-led Louisiana were working together or competing for federal dollars.
“I haven’t seen Louisiana’s draft package submitted to Congress, but I’ve been in touch with (state) treasurer John Kennedy to ensure we are focused on some of the same things, but there are going to be disagreements on the best mechanism in Congress to fund this particular process,” said Reeves. “My personal view is that we’ll see significant federal money flowing into the state, and an awful lot of insurance money flowing in, but at the end of the day, I’m convinced the way for Mississippi and the Gulf Coast to rebuild bigger and better than before is private sector capital. We hope the environment will be created to encourage private sector involvement. That’s where you’ll see the involvement of the Mississippi Legislature.”
Contact MBJ contributing writer Lynne W. Jeter at email@example.com.