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Why Billions in Disaster Recovery Remain Unspent for 2017 Hurricanes

A new GAO report signals bad news for places that will try to rebuild after the Midwest flooding.

Flooded RV's in flood waters
Flooded RV's are seen in Plattsmouth, Neb., this month.
(AP/Nati Harnik)
Historic flooding in the Midwest has left millions of acres under water in 10 states after a "bomb cyclone" storm brought heavy snow and drenching rains. And it’s far from over. Weather forecasters say more precipitation is on the way.

The task list for the cleanup and recovery is already mounting. So far, the floods are affecting the safety of more than a million private water wells; farms won’t be able to plant crops this year; and Superfund waste sites are inaccessible.

And when it comes to getting the money to rebuild, states and localities in the Midwest likely have a long wait ahead of them.

According to a new report from the U.S. Government Accountability Office (GAO), states and localities have still barely tapped the billions in federal funding for 2017’s major hurricanes. 

As of January:

  • Texas had used about $18 million of $5 billion for administration and planning;
  • Florida had used about $1 million of $616 million for administration, planning and housing; 
  • And Puerto Rico and the U.S. Virgin Islands hadn't used any of the $1.5 billion and $243 million, respectively, that they were allocated.
The main reason for the sluggishness, the GAO found, is red tape. The Department of Housing and Urban Development (HUD) has to customize its disaster funding grant requirements each time there’s a new disaster. That’s “a time-consuming process that has delayed the disbursement of funds,” the report says.

And, the report adds, “the expected increase in the frequency and intensity of extreme weather events” will only make matters worse in the future.

Hurricanes Harvey, Irma and Maria caused an estimated $265 billion in damage in 2017, primarily in Texas, Florida, Puerto Rico and the U.S. Virgin Islands. Congress has provided more than $35 billion to HUD in the form of Community Development Block Grant Disaster Recovery funds, which can be used for housing, infrastructure and economic revitalization. The money tends to be targeted toward lower-income areas with more limited resources.

But HUD’s reinventing-the-wheel approach to the funding creates all sorts of delays. States and localities first must wait for the department to write the rules that will outline what they need to do to be eligible for grants. It's no small task. The rules must address, for instance, how the money will be managed and what level of community involvement is required.

It wasn’t until a year after the 2017 hurricanes that states and territories signed grant agreements with HUD.  

Climate change, the report says, “underscores the need for a permanent program to address unmet disaster needs.”

“I think there’s a growing recognition that everybody would benefit if there were clear, predictable rules,” says Sarah Labowitz, the communications and policy director for Houston's housing department.

She says the city is working toward having a permanent staff for managing disaster recovery and the ensuing grant process, but there's only so much they can do without the federal government changing its process.

The issues with HUD pile on to an already convoluted disaster recovery process. Disaster funding distributed by FEMA has its own problems. Because FEMA tends to undercount the poor, many cities don’t receive grants that reflect their actual costs. According to a study released this month, the federal government underestimated by nearly $2 billion the serious unmet needs after Hurricane Harvey.

 

In Other Public Finance News This Week:

 

In Nashville, Amazon Jobs Won’t Pay as Much as Expected

When the online retailer Amazon announced it would build an operations plant in Nashville as a runner-up prize in the company’s HQ2 search, the expected 5,000 jobs, at an average $150,000 salary, were celebrated by many. Turns out, most jobs are likely to fall far under that mark, The Tennessean reports.

In reality, three out of five jobs will pay well below that amount (although still above the median income for similar jobs in Davidson County). The $150,000 average that the company quoted was actually the average -- which any mathematician can tell you is different from the median.

Nevertheless, Nashville approved giving Amazon up to $17.5 million in job creation incentives. Tennessee is adding another $21.7 million in job tax credits over seven years.

As the city and state eventually assess whether Amazon lives up to its job promises, officials have to be wary about the degree to which very high salaries at the top end -- and the relocation of executives to the area -- skew Amazon’s numbers.

 

Marijuana Banking Act Moves Forward

A federal fix to a problem that prevents banks from working with marijuana businesses is moving forward.

This week, the Secure and Fair Enforcement (SAFE) Banking Act passed committee and now goes to the full U.S. House for consideration.

There are reasons for people in the ever-growing cannabis industry to be hopeful. For starters, there are now a whopping 152 bipartisan cosponsors on the House bill. It started with 108. This bill also has more traction than its previous version two year ago, which lingered in committee.

Because marijuana is still illegal under federal law, the act would provide a safe harbor to financial institutions doing business with cannabis companies.

Medical marijuana is legal in 33 states and among those, one-third have approved full legalization.

 
This appears in "The Week in Public Finance" newsletter. Subscribe for free.

Liz Farmer is a former GOVERNING fiscal policy writer.
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