HIGHLAND, Ind. (AP) _ The woes of 120 homeowners forced out by floodwaters have been worsened by discovery of PCB contamination in their neighborhood.

Test results shared by the U.S. Environmental Protection Agency led the state to declare the houses off-limits to residents hoping to return for personal effects.

However, residents of Wicker Park Estates in Highland and other areas hit hard by flooding last week got some good news today when President Bush declared Lake County a disaster area.

Sen. Richard Lugar, R-Ind., received word about 9 a.m. that Bush had signed the disaster declaration, Lugar aide Kevin Kellems said by telephone from Washington, D.C.

''The senator is very pleased with the speed with which the administration has responded to this request,'' Kellems said. ''It's important that northern Indiana be treated with the same seriousness that southern Indiana was earlier in the year'' when tornadoes and flooding struck.

The declaration will enable Lake County's flood victims to get low-interest loans and other assistance on a case-by-case basis, Kellems said.

Meanwhile, Jerome Hauer, director of the Indiana Emergency Management Agency, said Wednesday that the section in Wicker Park Estates will remain closed indefinitely while EPA investigators search for the source of the PCB contamination and recommend a course of action.

The level of contamination was twice the acceptable level for health safety, Hauer said.

''Those are relatively high concentrations of PCBs, and it's unusual to find them in a residential area,'' said Walter Nied, emergency response coordinator for the EPA's Region 5 office in Chicago.

Hauer said he ordered the homes off limits at the recommendation of the EPA.

Residents in the 270-home Wicker Park subdivision had begun returning Monday to gather personal effects from homes damaged last week when 6 inches of rain caused heavy flooding.

Utilities had been shut off to the subdivision and emergency officials were uncertain when residents would be allowed to begin repairing and rebuilding. Gov. Evan Bayh has asked the White House to declare Lake County a disaster area and make affected residents eligible for low-cost federal assistance.

But the discovery of cancer-causing polychlorinated biphenyls cast further doubt about the future of the neighborhood and its residents. Hauer said the EPA has not determined whether the contamination existed before the flooding.

The EPA told state officials the relatively high level - 1,100 to 1,200 parts per million - suggests the contamination occurred from a local source, Hauer said. PCBs washed in by an outside source would probably have been more diluted, he said.

The EPA sent 2,500 gallons of oil and water collected from residents' yards for testing, Nied said.

''Nine fuel oil tanks broke loose during the flood and we're going to sample them. We will also sample the interior of homes,'' he said.

The PCB testing was conducted after Highland officials reported seeing a sheen on the floodwaters and suspected oil and gasoline may be leaking from submerged automobiles and fuel tanks.

The federal government banned the manufacture and use of PCBs in the 1970s. The substance had been commonly used as an insulator in electrical transformers.