New York state asks Washington to cover all storm costs

An aerial photo shows the John B. Caddell, a 700-ton water tanker, grounded in New York October 31, 2012.

NEW YORK/WASHINGTON (Reuters) - New York state on Wednesday asked the U.S. federal government to pay all the costs of cleaning up and repairing damage from massive storm Sandy that tore through the Northeast this week and crippled New York City.

Governor Andrew Cuomo said he is asking fellow Democrat, President Barack Obama, to pay 100 percent of the estimated $6 billion bill, at a time that state and local government budgets remain constrained by a weak economic recovery.

That would be a significant change from last year when the federal government covered about 75 percent of the $1.2 billion cost paid by New York to clean up after storm Irene hit the region.

The two U.S. senators from neighboring New Jersey, the other state hit hardest by the storm, also asked that the federal government cover more than the usual share of the cost, given the size of the disaster and the financially strapped local coffers.

"Recent storms in New Jersey have already placed a significant burden on our state and local governments, which have been forced to pay for disaster response and will need federal assistance for recovery from Hurricane Sandy," Senator Frank Lautenberg and Senator Robert Menendez, both Democrats, wrote in a letter to Obama.

"While we understand the federal share is typically 75 percent of these total costs, the unprecedented and extraordinary extent of damage Hurricane Sandy has caused to our state merits an adjustment to this cost-share to 90 to 100 percent federal coverage," the two senators said.

New Jersey Governor Chris Christie, a Republican, did not reply to request of comments.

Obama and Christie toured storm-stricken parts of New Jersey on Wednesday, taking in scenes of flooded roads from the air and telling residents they were moving quickly to get them help.

'WE CAN'T PRINT MONEY'

New York top finance official, Comptroller Thomas DiNapoli, said Washington should foot the bill, because of lingering financial pressures on state and local governments from the 2007-09 recession.

"I think the focus will have to be on Washington, for obvious reasons," DiNapoli told Reuters in an interview.

"They have greater resources. They can print money; we can't do that here. And given the fact this is not just a New York disaster, it's really a national disaster, it's probably for the federal goverment to step up and play a significant role."

"The problem is the state is limited in its resource capacity. We just put out the mid-year report a week or two ago and it really showed tax revenues are down," DiNapoli said.

Most U.S. states must balance their budgets, unlike the federal government, and it is up to Obama to decide if federal funds can cover all the costs.

"The president has the discretion to go higher. Seventy-five percent is a floor not a ceiling," said Matt Mayer, a former senior official at the Department of Homeland Security.

If Obama accepts covering all the costs, this would be announced by Federal Emergency management Agency, Mayer said.

Former President George W. Bush allowed 100 percent reimbursement of costs in some states after Hurricane Katrina struck in 2005, Mayer, who worked at DHS during Bush's presidency, told Reuters.

Cuomo said in a letter to Obama that "initial estimates project up to $6 billion in lost economic revenue in the greater metropolitan area and the state" due to disruption to business in the world's financial hub.

Cuomo added that "the significant impact from Hurricane Sandy plainly warrants providing this assistance."

The state, he said, was still battling multi-building fires, tunnel closures, and power outages at hospitals and other vital facilities. Plus there are destroyed homes and people needing shelter.

"Moreover, the cost to restore the complex electrically driven subway and rail transportation systems after total inundation from saltwater flooding will place a tremendous financial burden on New York state," Cuomo said in the letter.

In New York alone nearly 2 million homes and businesses are still without power.

Cuomo said federal support is key to making sure state and local governments can respond effectively to the disaster.

New York state is rated AA by Standard and Poor's and Aa2 by Moody's and its outstanding debt is the second highest among states, after California.

(Additional reporting by Michael Connor in Miami; writing by Tiziana Barghini in New York; Editing by Mary Milliken and Bob Burgdorfer)