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STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne. Good morning.

A year ago today it became clear that New Orleans was going underwater. Hurricane Katrina seemed to spare the city at first, but by the next day, August 30, the collapse of the levees was widely known and thousands of New Orleanians knew they had to leave.

A year later, as many at 150,000 still live in Houston, Texas. That's where we'll visit this morning. It's part of our series, Katrina: Where the Money Went. On the radio and on npr.org this week we're tracking the spending that followed the storm.

Today NPR's Wade Goodwyn reports on the price that Houston paid to help.

WADE GOODWYN reporting:

There are moments in a city's history, usually catastrophic moments, when its citizenry is given the opportunity to define itself: the San Francisco earthquake of 1906, New York City on September 11th. For Houston, it was the days and weeks following the drowning of her sister 325 miles down Interstate 10.

Mayor BILL WHITE (Houston): Well, it was something I'll never forget, although it's hard to recall a particular moment because we were all working 20-hour days.

GOODWYN: Bill White is the mayor of Houston. Like many across the country, people in Houston were horrified at the humiliating chaos of the New Orleans Superdome and Convention Center. But unlike most cities, White says Houston was in a position to really do something about it. It became New Orleans's shock absorber.

Mayor WHITE: The people in this country want to help their fellow Americans. There but for the grace of God could many of us be. And the key was making sure that each person or organization was assigned an identified task.

GOODWYN: If the spectacle in New Orleans revealed a glimpse of government at its worst, in Houston it was different. White says that as evacuees began pouring in, he got on the phone and asked the local business community for big money. Nobody said no.

Mayor WHITE: Two afternoons I called six energy companies asking them a million bucks and they said - each of them said yes.

GOODWYN: The other big wallet was, of course, the federal government. But FEMA did not make things easy for Houston. FEMA was fine with paying the city to keep the evacuees in shelters and hotel rooms, but it didn't want to pay for apartments. That drove the Houston mayor crazy. White and the city went ahead anyway and put evacuees into more than 35,000 vacant apartments.

Mayor WHITE: We took the initiative and did what made common sense. It makes no sense to encourage people to stay in shelters.

GOODWYN: While the hurricane turned FEMA into a stranded fish, Houston hoisted the evacuees on its big shoulders. By moving the evacuees into vacant apartments, the city spent a fraction of what it was costing FEMA in Mississippi and Alabama.

Thus far, Houston has spent $137 million in reimbursable expenses. White estimates another $100 million was donated free and clear of any expectation of repayment. The mayor says getting FEMA to settle up has been excruciatingly time consuming, but White says the federal government has been, grudgingly, paying Houston back.

Mayor WHITE: It's always delay and has taken an inordinate amount of effort. That's all. It's like pulling teeth. Funds arrived at the last possible minute. But so far we've been able to recover the vast majority of the expenses we've incurred.

GOODWYN: But it's not all red ink in Houston. Local apartment owners have been significant beneficiaries. Larry Hill is the CEO of Sumar Realty and owns thousands of apartments around the city.

Mr. LARRY HILL (CEO, Sumar Realty): Thirty-five thousand units times, let's say, $600 a unit times eight or nine months. Whatever that number is, it's big.

GOODWYN: It is big - around $200 million and climbing. At a time when occupancy was not that great, Hurricane Katrina injected millions into the Houston economy, mostly into the accounts of the city's big apartment owners. It's been money well spent - tens of thousands of poor and working class New Orleanians live with a measure of dignity.

(Soundbite of crowd noise)

GOODWYN: And many are children. An estimated 21,000 elementary, middle and high school students had to be integrated into Houston and its surrounding suburbs.

Terry Abbott is the press secretary for the Houston schools. Required by city and state laws, the school district had a contingency fund of $60 million. Houston and the other school districts began to go deep into their emergency accounts.

Mr. TERRY ABBOTT (Press Secretary, Houston School District): If this were to happen somewhere in the country, there's really not much better place than here. Houston is a big school district accustomed to doing things on a big scale.

GOODWYN: How much did this cost? If you take the 21,000 Katrina students enrolled in the Houston area and multiply that times the $6,500 Texas spends per student per year, it's $136 million.

But Houston has actually been spending more than that per pupil. Texas has rigorous essential skill testing in elementary, middle and high schools. When the New Orleans students took the tests, many didn't do very well.

The Texas educators knew they wouldn't. The Katrina children had never seen or experienced that test before.

Mr. ABBOTT: It's going to take a lot of effort and a lot of time to get the kids caught up to the Texas standards. Time after school, after school tutorials, in-school tutorials, all the extra bodies we can get in the classroom working individually with kids. Because there is a big gap there, a big achievement gap.

GOODWYN: The task at hand is about to get even more difficult beginning tomorrow because that's when FEMA is scheduled to stop paying rent subsidies to some 5,000 households of Katrina evacuees in Houston. Thousands more are expected to lose their subsidies on October 31st. Even if they get extensions, the FEMA assistance for all the evacuees will end in February, one way or the other.

For these families and for Houston, the ramifications are likely to be profound. Politicians, the business community, nearly everyone in Houston is concerned about what's going to happen when the subsidies end, especially Houston Police Chief Harold Hurtt.

Chief HAROLD HURTT (Chief, Houston Police Department): People don't have anywhere to live. They don't have food. They invent ways to get money to do that. And on the short-term, most of the time people turn to crime.

(Soundbite of police radio)

Unidentified Woman: (Unintelligible) advise a black male standing with a gun at 10-555 (unintelligible) number (unintelligible)...

GOODWYN: Police officer R.T. Lewis(ph) has been patrolling southwest Houston for 13 years. This is where the majority of Katrina evacuees have settled: A section of the city where there are large tracts of middle and low-income apartments for rent.

Officer R.T. LEWIS (Houston Police Department): This is a street called Sandpiper. We've had several incidents over here, homicides, shootings. It's pretty heavily saturated with evacuees at this time, so this is a high volume call apartment complex right here.

(Soundbite of police radio)

Unidentified Woman: (Unintelligible)

GOODWYN: The police department is spending a million dollars a month in overtime to intensely patrol southwest Houston. Initially, the murder rate jumped dramatically.

The police department has narrowed some patrol beats to a single high crime apartment complex. That strategy has worked and the crime rate has started to come back down.

Officer Lewis says that based on his conversations with Katrina evacuees, they're planning on staying in Houston.

Officer LEWIS: The ones I've talked to said they're not going back. It's different out here and they like it out here. I've had some that say, you know, we have apartments with washer and dryer connections and air conditioners and stuff, and they say they didn't have that at home.

GOODWYN: Up to now, the vast majority of the Katrina evacuees in Houston have been supported by the federal government. In addition to the rent money, the government has extended Medicaid coverage, and for many it's the first time they've ever had health insurance. But the clock is ticking on these benefits.

If the first chapter of the Katrina evacuees in the city of Houston is full of tales of generosity, brilliant organizing, and inspired local government, the city is about to turn the page.

The second chapter of the Louisiana diaspora and the great Texas city is likely to be a much darker drama.

Wade Goodwyn, NPR News.

MONTAGNE: Just how much of Houston's Katrina-related bills is FEMA picking up? You can find out at npr.org.

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