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Statement of Need: This rulemaking is needed to address the needs of the communities affected by Hurricanes Katrina and Rita in 2005. This rule would provide for the alleviation of financial hardship on those communities who can demonstrate that in the three full fiscal years after the disaster they have not recovered to the point that their revenues are sufficient to meet their operating budget. This rule is needed to help those communities recover from that catastrophic disaster by offering the potential for relief of an additional financial burden.

Summary of the Legal Basis: This rulemaking is authorized by the Community Disaster Loan Act of 2005 (Pub. L. 109-88), the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006, (Pub. L. 109-234), and the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (Pub. L. 110-28).

Alternatives: FEMA considered creating new and different cancellation application requirements for these communities but decided against that method as the cancellation authority is the same as the authority for traditional CDLs and the regulations currently used to cancel traditional CDLs has been in place and working for 19 years. New requirements may be confusing, additionally burdensome, or insufficient. FEMA is also considering the alternatives proposed by the commenters in drafting the final rule.

Anticipated Costs and Benefits: The overall impact of this rule is the cost to the applicant to apply for the cancellation, as well as the impact on the economy of potentially forgiving all Special Community Disaster Loans and any related interest and costs. As the total amount of loans approved in the SCDL program reached almost $1.3 billion, therefore, the maximum total economic impact of this rule is approximately $1.3 billion. However, without knowing which communities will apply for cancellation and the dollar amount of the loans that will be cancelled, it is impossible to predict the amount of the economic impact of this rule with any precision. Although the impact of the rule could be spread over multiple years as applications are received, processed, and loans cancelled, the total economic effect of a specific loan cancellation would only occur once, rather than annually.

Risks: This action does not adversely affect public health, safety, or the environment.