It's now official, the Veterans Administration and LSU announced plans to build new hospitals near downtown New Orleans.

"The site selected is the Mid-City location proposed by the regional planning commission," said VA Deputy Secretary Gordon Mansfield.

Mansfield says the VA considered other sites in the New Orleans area, but settled on a 70-acre site in Mid-City, not far from the LSU Health Science Center because it's in the best interest of the 350,000 veterans that would use the new hospital.

"This hospital site is going to be located as you heard in the middle of a medical complex that will provide for health care, provide for medical education, provide for medical research," said Mansfield.

The new hospital would replace the Katrina shuttered VA facility downtown.

It will have 200 patient beds, out-patient clinics and a mental health wing.

Mayor Ray Nagin says the VA stepped up big time.

"This investment by the VA of somewhere between $650 million and $1 billion dollars is going to our recovery and making sure that we ride out this recession in fine fashion," said Nagin.

LSU plans to build a 424-bed teaching hospital on the same campus.

"What we have here is first rate," said LSU President John Lombardi. "It's outstanding. It's what we need to do and we're not going to give an inch on this while there's any possibility of making it happen."

But, there's a possibly it won't happen.

Right now, FEMA and the state are miles apart on how much money the state should get from the federal government to replace the old Charity Hospital severely damaged during Katrina.

"The number in the newspaper's been $23 million FEMA, $492 million from the state," said Louisiana Recovery Director Paul Rainwater. "That's the difference. That's where we're at."

"We've come to a point where we feel that there is more money that we can obligate for eligible repair work," said FEMA Regional Director Jim Stark.

Sources say FEMA may be able to come up to $150 million dollars, still not enough to keep the LSU part of the project on track.

"There will come a point where we will have to slow up our work if we haven't gotten that commitment from FEMA, but we're not at that point yet," said Dr. Fred Cerise, LSU's Health Services vice president.

The state may wait until the new president, Barack Obama, takes office to launch a new appeal for the money.

"I believe that we're going to have a more receptive ear come next year," said State Speaker Pro-temp Karen Carter, D-New Orleans. "This administration has said the president-elect has said that he's going to take a different course and he wants to regain the trust of the folks in Louisiana and all along the Gulf Coast."

While it appears the LSU portion of this project still has a ways to go, the VA part is now on a fast track. The clock is now ticking and the city has 365 days to deliver a clear piece of property so construction can begin on the new VA Hospital.

"While that clean site is being delivered, clearly there are things that can be done," said New Orleans Recovery Director Dr. Ed Blakely. "Much of the infrastructure and so forth can be planned. Much of the design work can be done. We will begin tomorrow."

The city is prepared to spend up to $79 million dollars to buy up homes and buildings now on the 70-acre site. The state plans to kick in another $74 million for land acquisition in what leaders hope will be a new bio-medical corridor in New Orleans.