The Associated Press

Wed, Jan 7, 2009 (7:21 p.m.)

Galveston officials pleaded with state lawmakers Wednesday for help in rescuing their island city from the dire financial straits it finds itself in nearly four months after the devastation of Hurricane Ike.

"We're getting to the point of being desperate for help," City Manager Steve LeBlanc told members of the House Select Committee on Hurricane Ike during a meeting on the island.

LeBlanc and Mayor Lyda Ann Thomas said that despite a hiring freeze and a 3 percent pay cut for all city employees, layoffs are imminent.

"If there is no help from the state, we might have to cut back on city services severely," LeBlanc said.

The city's property tax revenues are projected to drop by as much as 40 percent.

About 75 percent of the homes in Galveston, about 50 miles southeast of Houston, sustained some damage from Ike's 110-mph winds, rain and 12-foot storm surge on Sept. 13 when the hurricane came ashore near the city.

Galveston, which has an annual budget of about $80 million, also needs help to pay for the $178 million in damage Ike caused to buildings, roads and other infrastructure, LeBlanc said.

Thomas and LeBlanc suggested that lawmakers allow the city to temporarily keep most or all of the sales tax revenue it usually gives to the state. They also asked for long-term, low cost emergency loans.

LeBlanc said the city applied for help from the Disaster Contingency Fund, created by the Texas Legislature in 2007 to provide money and other help for local governments after a natural disaster.

But the city was turned down because lawmakers never appropriated money for the fund, she said.

LeBlanc also implored the committee to help the University of Texas Medical Branch at Galveston _ the area's largest employer and a major provider of indigent care in Southeast Texas _ recover from the damage Ike caused.

UTMB leaders told lawmakers that damages to the state's oldest medical school are now estimated to exceed $1 billion. Only about $100 million of that was covered by insurance.

The facility has laid off about 3,000 employees and reduced the number of beds from 550 to 200 since the hurricane.

Wednesday's hearing was the final one for the legislative committee, which plans later this month to issue its report on the response of local and state governments to the hurricane.