[Senate Hearing 113-351]
[From the U.S. Government Publishing Office]
S. Hrg. 113-351
SUPERSTORM SANDY RECOVERY: ENSURING STRONG COORDINATION AMONG FEDERAL,
STATE, AND LOCAL STAKEHOLDERS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT
of the
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
ON
ASSESSING THE STATUS OF RECOVERY AND REBUILDING WORK FROM THE
DEVASTATION OF SUPERSTORM SANDY AND THE STATE OF THE COMMUNITIES
AFFECTED
__________
MARCH 12, 2014
__________
Printed for the use of the Committee on Banking, Housing, and Urban
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
TIM JOHNSON, South Dakota, Chairman
JACK REED, Rhode Island MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey BOB CORKER, Tennessee
SHERROD BROWN, Ohio DAVID VITTER, Louisiana
JON TESTER, Montana MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon MARK KIRK, Illinois
KAY HAGAN, North Carolina JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota
Charles Yi, Staff Director
Gregg Richard, Republican Staff Director
Dawn Ratliff, Chief Clerk
Taylor Reed, Hearing Clerk
Shelvin Simmons, IT Director
Jim Crowell, Editor
______
Subcommittee on Housing, Transportation, and Community Development
ROBERT MENENDEZ, New Jersey, Chairman
JERRY MORAN, Kansas, Ranking Republican Member
JACK REED, Rhode Island BOB CORKER, Tennessee
CHARLES E. SCHUMER, New York PATRICK J. TOOMEY, Pennsylvania
SHERROD BROWN, Ohio MARK KIRK, Illinois
JEFF MERKLEY, Oregon TOM COBURN, Oklahoma
JOE MANCHIN III, West Virginia DEAN HELLER, Nevada
ELIZABETH WARREN, Massachusetts RICHARD C. SHELBY, Alabama
HEIDI HEITKAMP, North Dakota
Brian Chernoff, Subcommittee Staff Director
William Ruder, Republican Subcommittee Staff Director
(ii)
C O N T E N T S
----------
WEDNESDAY, MARCH 12, 2014
Page
Opening statement of Chairman Menendez........................... 1
WITNESSES
Shaun Donovan, Secretary, Department of Housing and Urban
Development.................................................... 2
Prepared statement........................................... 36
Matthew J. Doherty, Mayor, Belmar, New Jersey.................... 18
Prepared statement........................................... 41
Adam Gordon, Staff Attorney, Fair Share Housing Center........... 20
Prepared statement........................................... 44
Janice Fine, Ph.D., Associate Professor, Rutgers School of
Management and Labor Relations................................. 22
Prepared statement........................................... 47
Additional Material Supplied for the Record
Screenshots of the New Jersey Department of Community Affairs
RREM Website in English and Spanish submitted by Senator
Menendez....................................................... 55
(iii)
SUPERSTORM SANDY RECOVERY: ENSURING STRONG COORDINATION AMONG FEDERAL,
STATE, AND LOCAL STAKEHOLDERS
----------
WEDNESDAY, MARCH 12, 2014
U.S. Senate, Subcommittee on Housing,
Transportation, and Community Development,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Subcommittee met at 10:00 a.m., in room SD-538, Dirksen
Senate Office Building, Hon. Robert Menendez, Chairman of the
Subcommittee, presiding.
OPENING STATEMENT OF SENATOR ROBERT MENENDEZ
Senator Menendez. This hearing of the Senate Banking,
Housing, and Urban Affairs, Subcommittee on Housing,
Transportation, and Community Development will come to order. I
am pleased to welcome two panels this morning and to have the
chance to hear from the Secretary of Housing and Urban
Development, Shaun Donovan. Mr. Secretary, welcome and thank
you for joining us.
Today's hearing will focus on the ongoing and often unmet
needs of the people devastated by Superstorm Sandy. It has now
been almost a year and a half since the storm made landfall on
the Jersey coast and wreaked havoc throughout the region. Since
the storm, the people of New Jersey and other affected States
have worked hard to rebuild. But for too many, that recovery is
not as far along as it should be, and too many families are
frustrated with the administration of some of the disaster
funds meant to help them rebuild from this tragic storm.
With grantees now preparing action plans for the second
round of community development block grant disaster funding, we
are at a critical moment. Clearly we need to consider lessons
learned from the first round so States do not make the same
mistakes in the second round. And it is my hope that we will
avoid repeating the same problems that, frankly, never should
have happened in the first place.
When the storm struck and we began to secure the necessary
funding and assistance, I confess that I thought it was a good
idea to give States the flexibility and discretion that seemed
reasonable, assuming we would all rise to the occasion. And
now, frankly, I question the wisdom of that assumption.
I say this because, for the last year and a half, I have
heard story after story from family after family, business
owners, homeowners, renters, local officials, I have heard from
constituents at roundtables to emails and heart-wrenching
telephone calls to my office about their shared experiences
that have led us here today. I have heard of paperwork being
lost time and time and time again; a lack of clear criteria for
awarding assistance; people who have been left waiting and
waiting and waiting for permission to start rebuilding.
There has been confusion about how to apply for State-run
programs. There has been a clear lack of transparency about the
status of applications, incorrect denials of funding, and lack
of transparency about the reasons for denial and how applicants
can appeal those denials. There have been reported problems
with the Spanish language Web site and allegations that
minorities are being rejected at disproportionately higher
rates.
People simply feel the major State programs are not being
run fairly or competently, and from what I have heard, I am
inclined to say they have cause for concern.
Bottom line, some have chosen to point the blame at the
Federal Government. But I believe it is time to stop
fingerpointing and get the job done. We need solutions, not
more of the same blame game that has led to delay after delay
in helping the people of my State and other States recover. We
need greater transparency, clear standards, and responsibility
and accountability. I do not think that is too much to ask.
So let me be clear. This is now the third hearing this
Subcommittee has held on Sandy recovery, and I will hold a
hundred more if that is what it is going to take to get the
answers we need and get it right for the people whose lives
have been devastated by the storm.
So, Mr. Secretary, we look forward to some of the insights
that you can share with us so that the people of my State and
every State that has suffered extraordinary damage can finally
get their life underway.
We want to be clear about what is working well and how we
build on those successes as well as what is going wrong and
where the delays are in order to fix the problems quickly and
effectively. And in the interest of time, I will ask unanimous
consent that the rest of my statement be included in the
record.
Senator Menendez. With that, we welcome the Secretary of
HUD, Shaun Donovan. Mr. Secretary, your full statement will be
included in the record. We would ask you to synthesize it in 5
minutes or so, but if it is important, if you need a little
more time, go ahead. And the floor is yours.
STATEMENT OF SHAUN DONOVAN, SECRETARY, DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT
Mr. Donovan. Thank you, Mr. Chairman, and thank you for
inviting me to testify here today and for your focus on this
critical issue.
As you know, in addition to my concern as a citizen and a
member of the Administration, Hurricane Sandy was personal to
me. As you often remind me, I married up, a Jersey girl, and
because of my deep roots in the region as a New Yorker as well,
I remain concerned with the devastation that Sandy has caused,
and I am especially honored to have the opportunity to help
with recovery efforts across the region.
We both remember the devastation this storm caused: $65
billion in damage and economic loss, 9 million lost power,
650,000 homes that were damaged or completely destroyed. And it
was clear to all of us that the road to recovery would be long
and difficult.
So we began immediately helping communities put their lives
back together, and President Obama quickly pledge his support
of these local efforts in order to ensure a full recovery. He
created the Hurricane Sandy Rebuilding Task Force to maximize
Cabinet-level coordination in support of the work to rebuild
this region. I have been proud to chair this effort as we work
to achieve two basic goals: one, to get assistance to
communities as quickly as possible to meet the immediate needs
of the region; and, two to ensure that the region builds
stronger and smarter than before so that it is better equipped
to deal with future storms.
Let me start with the work of getting assistance to
communities quickly and efficiently. As you well know, in
January 2013, President Obama, working with you and other
Members of Congress, fought tirelessly to get $50 billion in
Sandy supplemental funding in order to aid victims of the
storm. And ever since, it has been a priority to get these
dollars into communities. That is why we thought it was
critical to include several measures in the supplemental that
facilitated more efficient spending of the dollars, for
example, giving HUD the authority to reduce duplicative
environmental reviews.
As a result of these and other measures, we have made great
progress. More than 265,000 people and small businesses have
received direct assistance; more than 99 percent of Sandy-
related flood insurance claims have been paid; 97 percent of
public beaches were open by Memorial Day of last year; and as
of the end of January, HUD has announced more than $11 billion
and paid out nearly $1 billion through our CDBG-DR program.
I would note that this pace of spending is 48 percent
faster than after Hurricane Katrina and more than 2 \1/2\ times
faster than after Hurricane Ike. When you include flood
insurance payments, we have allocated nearly $41 billion in
total, with roughly $15.5 billion of this already paid out.
So relief is getting to communities, but as you well said,
Senator, we know it can never be fast enough, and that is why
we have been looking at creative ways to expedite the
rebuilding process--faster approvals from SBA during this
process; the alignment of FHA and FHFA foreclosure prevention
policies to keep homeowners in their homes; streamlined
permitting that has cut times for approval of large
infrastructure projects; and at your urging, work to make sure
that we would not hurt homeowners who may have applied or been
awarded SBA funds; and for the very first time, allowing
homeowners to receive reimbursements through CDBG funds.
We will continue to look for ways--and I am sure we will
discuss that here at the hearing--to remove unnecessary
barriers and headaches, ensuring that the billions that flow
into the region are put to use as quickly and efficiently as
possible.
This, of course, complements our other goal of rebuilding
stronger and smarter so that the region is better prepared to
withstand future storms. On August 19, the task force released
our rebuilding strategy for the region which included 69
recommendations to help do just that.
For example, one of the most critical concerns we heard
from our local partners was that they needed clear, accessible
information about current and future flood risk. We have
provided exactly that with our new sea level tool. And we have
established for the first time a uniform minimum Flood Risk
Reduction Standard across the Federal Government to have a
single, simplified standard.
We have also worked to connect communities with the most
innovative engineering, planning, and design ideas from around
the world through an international competition called ``Rebuild
By Design.''
Investing in projects that will make our communities more
resilient is vital to their safety, but it is also good for our
economy because we know that for every dollar we spend in
mitigation, we save $4 in avoided costs in the future.
Finally, Mr. Chairman, I want to be clear that I and my
Department will be accountable to the region and to you to see
this process through. Every recommendation in the task force
rebuilding strategy has a detailed implementation plan, and we
are on track.
While we continue working with Federal partners, we are
also committed to overseeing CDBG-DR funds that are being
distributed by grantees, and I take our role as a steward of
Federal dollars very seriously. HUD is working closely with
these grantees through weekly conference calls to answer any
questions or concerns they may have. We also have twice-a-year
onsite monitoring and twice-a-year onsite technical assistance
for New York State, New York City, and New Jersey. We completed
our first round of onsite monitoring last August. We completed
our first round of onsite technical assistance in December. And
right now we are going through our second cycle of onsite
monitoring. We have completed our second onsite review of New
York State. We are literally this week completing our second
review of New Jersey. And we will be conducting our second
review of New York City by the end of March. And we will stay
on it for as long as it takes, knowing that eventually we will
emerge stronger and more vibrant than before.
The reality of these storms is that the recovery can never
happen fast enough for the Americans that have been affected,
but we are making significant progress. Communities are turning
the page and looking toward the future with new hope. But we
all know, as you have eloquently said, that more work needs to
be done. All of us in the Obama administration are committed to
working with local partners, Members of Congress, and other
stakeholders to get assistance to those in the process of
rebuilding, ensure the region is better prepared to withstand
future extreme weather events, and work to improve our recovery
efforts across the Nation.
I look forward to working with the Committee on those
goals. Thank you.
Senator Menendez. Well, thank you, Mr. Secretary.
Let me get into some specifics here. As you know, CDBG
funds are meant to help States and communities fill needs that
are unmet by other sources of funding. In my State of New
Jersey, the State allocated about half of its funding under the
first CDBG tranche to homeowner assurance, with the largest
share going to what is called the ``Reconstruction,
Rehabilitation, Elevation, and Mitigation program,'' or RREM.
Now, some of the State's programs using CDBG funding may be
working well, but as I hope you will become aware, the RREM
program has not been one of them. Some initial disorganization
may be expected in standing up a completely new program of the
scale on a short time line in the aftermath of a major natural
disaster. But the problems here have been much larger, lasted
much longer than the people of New Jersey should have to
accept.
Major issues have been reported with the outreach,
application, intake process, as well as customer service,
application review, and appeals. In this century where we are
at the cutting edge of innovation, I heard story after story of
people having their applications handwritten and then lost
multiple times. You would think there would be a central data
base that is computerized so that any entity across the
spectrum who is engaged in providing relief would be able to do
so.
And one of the biggest obstacles still facing many people
whose homes were damaged in the storm is the inability to start
construction almost 15 months later--15 months later. Because
they have not been able to start repairs, many of these
families are still displaced.
As I understand it, about 12,000 applicants received
preliminary clearance into the RREM program. Of these, about
7,000 are now on a waiting list while about 5,000 have been
told they are in line to receive funding pending further
reviews.
Of the 5,000, only about 2,700 have been told they can
start construction. The rest, almost 10,000 people, have been
told they cannot start construction without losing their
eligibility for reimbursement.
Now, the storm hit in October of 2012. The RREM program
started accepting applications in May of 2013, closed in
August, and now it is March of 2014. And almost 10,000 people
have been told not to start rebuilding their homes or else they
will lose eligibility for reimbursement. And to me that is
simply unacceptable.
Now, there has been a lot of misinformation,
misunderstanding, and fingerpointing over the causes of this
delay, so I hope you will be able to help us set the record
straight here.
State officials have recently been saying that the main
cause of the delay is what they call burdensome red tape of
federally required environmental and historical preservation
reviews. It is my understanding, though, that HUD and the
State's Department of Environmental Protection have worked hard
to streamline and expedite these reviews to the point where
they take on average about 2 to 4 weeks. The longest I have
been told is that they take at most 6 to 8 weeks.
So question number one, is that your understanding as well
as to how long these reviews are taking to complete on average?
Mr. Donovan. You are exactly right, Senator. In fact, our
most recent information is that the typical review is now down
to about 2 weeks and that the most complex ones are now down to
about 6 weeks.
Senator Menendez. OK. So 2 weeks on the typical and 6 weeks
on the max. Now, this accounts for only a few weeks out of the
many months that people have been waiting since the RREM
program was supposed to start processing applications. Is it
correct that once a homeowner gets these environmental and
historical preservation reviews completed, they can start or
continue to rebuild their home without jeopardizing their
eligibility for Federal reimbursement?
Mr. Donovan. You are correct, Senator, and I would add that
you raised this concern with us early on. We have never before
allowed that sort of reimbursement to happen. But because of
your advocacy, we did make that available in this case after
Sandy.
Senator Menendez. So if the State is requiring homeowners
to submit other documentation such as ``substantial damage
letter'' that may be taking a long time to obtain or is taking
a long time to process their applications to decide how much
funding they will receive, the homeowner can start rebuilding
while all of this is going on as long as they have completed
the environmental and historical preservation reviews, which
take, as you say, normally 2 weeks, a maximum of 6 weeks. Is
that a fair statement?
Mr. Donovan. That is correct.
Senator Menendez. So right now I understand the State is
not even starting environmental reviews for people until it
has--my time is not up yet.
[Laughter.]
Senator Menendez. That is one of the benefits of being the
Chairman. I understand the State is not even starting
environmental reviews for people until it has completed and
signed off on all other documentation, a process that for many
people has been taking months. I am told that some parts of
this process, such as determining the scope of work, may be
necessary for some environmental reviews. But these steps do
not seem to be the biggest sources of delay.
Wouldn't it be a better idea to have the environmental and
historic preservation reviews happening as early as possible in
the process so that people can start rebuilding rather than
making them complete the most time-consuming steps first when
these steps are not even necessary for environmental reviews?
Mr. Donovan. That is certainly an option that is available.
There is no restriction at the Federal level from them doing
that. The only risk from that perspective is that you might end
up paying for an environmental for a family that is later
determined to be eligible--to be ineligible, excuse me.
Senator Menendez. All right. So let us go to that. So, in
other words, it is not the environmental or historical
preservation requirements that are slowing things down, because
if it was just those, people's wait time would be 2 to 6 weeks,
not 7 to 10 months and counting. The bigger problem seems to be
making people complete other time-consuming steps first.
So in this regard, my office has been in contact with State
officials about this issue, and the State has told us that they
are afraid to go ahead with environmental and historical
preservation reviews until they have completed all other steps,
including making a final determination that a homeowner is both
eligible for funding and that the State has funding available
for the homeowner. They said they are afraid that if they pay
for environmental and historical preservation reviews for
homeowners that ultimately do not receive funding for other
reasons, they are afraid that HUD might penalize them or make
them repay the money.
Are the State's concerns legitimate? Would you penalize the
State for front-loading the environmental and historical
reviews for preliminarily approved applicants so they could
start rebuilding again?
Mr. Donovan. There is no restriction on making that choice
by the State. That is a program design issue. The risk for them
is that they may end up performing environmental reviews for
families that are determined later to be ineligible. We would
allow them to cover those costs, but instead of being taken out
of the project delivery costs, they would be required to pay
them out of the program administration costs, which are capped
at 5 percent of the total award. So that is the risk to----
Senator Menendez. And even those 5 percent are Federal
dollars, are they not?
Mr. Donovan. That is correct.
Senator Menendez. So the bottom line is I am being told--
and I listen to family after family--that, you know, the State
will not do the environmental and historical review, which your
testimony says is 2 weeks, average, 6 weeks, you know, in the
more extensive context, and that they will not do it because
they are afraid of being penalized--although I think the
universe of how many people they would find in that is
relatively small. And your testimony is they would not be
penalized, they would just have to take it from an
administrative pot versus a program pot. Is that a fair
statement?
Mr. Donovan. If there were funding available there. There
is a cap of 5 percent on that pot.
Senator Menendez. OK. So the bottom line is, well, you
know, I guess--well, I guess maybe we should not do any more
advertising and look toward the next round of tranche and say
that we need to ultimately buildup the overall amount so that
the 5 percent is bigger.
You know, the bottom line is there are people who have been
out of their house for a year and a half--a year and a half--
and many who have applied for this program 10 months ago and
had to start rebuilding when they submitted their application
and who have since been penalized only because they applied as
early as possible. So I hope that we can--and I know that your
rebuilding strategy task force report, which you testified
about in this Subcommittee last September, included as one of
its most important recommendations finding ways to improve
Federal, State, and interagency cooperation, and to streamline
and harmonize review processes like this to cut red tape and
unnecessary delays. I think this is a prime example of an
opportunity to cut red tape that can have a tangible impact of
making people's lives better, because there is no reason to
take the one item that is essential to be eligible, which is
the environmental and historical review, and back-end it
instead of front-end it and be able ultimately to have the
wherewithal to know that you can move forward. So I hope that
this record makes it very clear to the State that it is their
choice in their program design.
One other issue before--I see Senator Schumer has arrived,
so I have a whole bunch of issues, but let me just go to this
one. How are we going to review as we look at this next
tranche--you know, as one of the Members here who fought in the
midst of a fiscal cliff, the end of a congressional session, in
the midst of the worst natural disaster at least my State ever
had, to get the money, I look at this issue of how the State
spends it as an important one, and I look at what the State did
with a vendor called HGI. When people whose homes were
destroyed do not understand how to apply or what documentation
to provide and had a very hard time getting helpful answers
when they had questions, they went to intake centers that the
State created. They faced a disorganized process where even
after they submitted the correct documents and had verification
that they submitted the documents, the contractors hired to
process them often entered their information incorrectly or
misplaced their documents multiple times--multiple times.
When homeowners reached the application review stage, they
were unable to get information as to the status of their
application. For example, waiting weeks or months in limbo,
only to find the review of their applications had not even
started because it was missing documents the homeowner did not
know they needed to provide.
An independent assessment of the State's data revealed in
January that far too many homeowners were being incorrectly
rejected. Of the thousands or so who were denied and appealed,
80 percent had their denials overturned--80 percent. More than
2,000 people did not appeal and may have been incorrectly left
out.
It is my understanding that the State contracted out almost
the entirety of the problematic RREM program to a company
called Hammerman & Gainer, Incorporated, or HGI. And after
months of what I will term as ``gross mismanagement,'' during
which time the State denied the existence of many of these
problems, the State finally terminated HGI's contract without
public notice in December of last year. For less than 8 months
of work, HGI has reportedly billed the State for $51 million of
$68 million it was supposed to be paid over 3 years. Twelve
percent of the way through the contract, the contractor had
burned 75 percent of its funding, with an abysmal performance.
Now, my question is: Are you aware of the State's contract
with HGI and the scope of the contract? Combined, the two
programs run by HGI were responsible for distributing almost
half of the State's first tranche of CDBG funding?
Mr. Donovan. Yes, I am.
Senator Menendez. And did the State make clear to HUD the
full scope of how much responsibility they had intended to
outsource to HGI?
Mr. Donovan. We were not notified in the action plan or in
other discussions of the precise scope of the contract. We were
aware that they planned to contract out portions of the work,
but we did not have advance knowledge of the specific work that
HGI would be performing.
Senator Menendez. Do you think the State acted quickly
enough to identify the problems in HGI's work and appropriately
remedy them?
Mr. Donovan. Given that we are literally as we speak
performing a review that includes looking at that issue, I am
not prepared to say, to give a definitive answer on that. I
will say, Senator, that the State did set up integrity
monitoring. They did find a number of problems relatively early
on that I believe led to the concerns and changes that were
made in the program. But I do not at this point have a clear
answer that I can give you on whether that was sufficient----
Senator Menendez. Well, as HUD is reviewing now--and then I
will turn to Senator Schumer--its second tranche, you know, the
law that appropriated the Sandy CDBG funding requires HUD to
``require grantees in contracting or procuring these funds to
incorporate performance requirements and penalties into any
such contracts or agreements.'' So my question, which we asked
you to review, is: Did the State officially comply with this
requirement? Do you think the State has sufficiently monitored
and enforced the applicable performance requirements and
penalties with respect to HGI? And, finally, the Sandy recovery
appropriation legislation requires the Secretary of Housing and
Urban Development to certify in advance that a Sandy CDBG
grantee, such as the State of New Jersey, has in place
proficient financial controls and procurement processes. A
report co-authored last week by Dr. Janice Fine of Rutgers
University, who is testifying on our second panel today,
identifies serious flaws in the State's processes for
contractor hiring and oversight that may have contributed to
the problems with HGI.
So I look at this, and, yes, it is a mess that affected
people in a way that they should not have been affected. But
before we let that second tranche go out--and I certainly want
it to go, but I want it to go not to end up with the same
results--I hope that HUD is going to review whether the State
if going to again hire a contractor. What is the nature of that
contractor? What is the quality of that contractor? I am told
that this HGI contractor had a checkered past in other disaster
recovery situations. And if the State is not going to hire a
contractor, are they going to hire up to do what is necessary
for this? Because, otherwise, this tranche of money that we
fought so hard for is not getting to the people who need
relief.
So can I elicit from you a commitment to review both what
happened here, because it involves Federal money, and also
moving forward, before this tranche moves forward, at least in
a New Jersey context, that we are going to have a process that
ultimately is going to give greater streamlining and
responsiveness to people who are suffering?
Mr. Donovan. Senator, you have my assurance that, as we
complete this review, we will come back to you with our full
determinations about that process. But I would go one step
further. Even though those reviews are not complete, we
identified enough concerns with the work of the contractor and
the oversight of the State that we have worked with them and
they have given us assurance that, as part of the second
tranche, they will take additional steps to reach families that
may have been left out of eligibility of being able to get
funding using that second tranche. We will be following up with
you in the next few weeks to give you details of exactly what
steps those will be, depending on the specifics of the report,
but I have that assurance from the State, and you can rely on
my oversight to make sure that we follow through on that.
Senator Menendez. Well, I would like to follow up on that,
but let me turn to Senator Schumer.
Senator Schumer. Well, thank you, Senator Menendez. Thank
you for calling this hearing, which is so important that we
continue to do oversight of Sandy. It was a huge amount of
money. It was well thought out. But obviously when that
happens, there are things that you have to do oversight with
because there are glitches all over the place.
Let me start with Bay Park. As you know, FEMA and Nassau
County agreed to an $810 million package for the reconstruction
of the largest sewage treatment plant project on Long Island.
It is also the largest reimbursement for a sewer project in
FEMA's entire history. But there are two missing pieces that
are really vital that have not been part of the agreement as of
yet. This includes the funding for necessary nitrogen removal
and, of great importance, an ocean outfall pipe. Because if the
raw sewage, when things overflow through storms, goes into the
ocean, it is a lot better than going into the Great South Bay.
It hurts recreation, it hurts pollution, it hurts fishing, and
everything else. And my constituents strongly believe that
reconstruction of this plant must include these two areas, and
obviously there are CDBG and EPA loans that could help Nassau
pay for these costs. But at the moment we have not gotten a
commitment from the State or localities about how the costs are
being paid for, even though it is Federal money, obviously. My
view is this has to be funded federally. The locality cannot
afford it, and it is a large amount. I do not think the State
can afford it either.
So could you please tell me what you are doing to
coordinate the Federal, State, and local agencies to use all
Federal Sandy relief resources so that we can get full Federal
funding from the Sandy money of both nitrogen removal and
particularly the ocean outfall pipe?
Mr. Donovan. So, Senator, first of all, thank you for your
advocacy----
Senator Schumer. And I neglected to thank you. I think you
are doing a great job. I am glad you are there. You are on top
of it. You care, you know the areas. We could not have a better
person doing it, so thank you. I neglected to say that in my
excitement about the outfall pipe.
[Laughter.]
Mr. Donovan. I appreciate that, Senator. What I will tell
you is with your urging, we have been working very closely with
FEMA and EPA. We have brought them all together to work closely
with the State to try to investigate what exactly can and
should be done. We have made very clear that our CDBG notice
and requirements, based on the work of the Sandy Task Force,
will ensure that work gets done with greater resilience and a
focus on environmental quality.
And as I think you also know, we expect to get within the
next couple weeks the final request for our plan for the second
tranche, and we are certainly hopeful that we will see
reflected in that potential funding for those issues.
Senator Schumer. I hope you will let the State and
localities know how important it is. I can tell you, as the
author of the bill here in the Senate, along with Senators
Menendez, Gillibrand, and--is there another Senator?
Senator Menendez. Lautenberg.
Senator Schumer. Lautenberg--Frank at the time. We miss
him--that this is just the type of project we envisioned, a
large essential public works project, susceptible to major
flooding where the localities could never afford to step in on
their own because it is so vital. So I hope you will push all
of them to make this request, and I hope you would grant that
request. I hope they fully fund it. Do you agree with that?
Mr. Donovan. We certainly are working with them closely and
are hopeful that these will be--these issues will be included.
Senator Schumer. OK, great.
Second question: Rebuild By Design, one of the things--I
think we have done really good at creating a plan for Suffolk
County, God forbid the next Sandy occurs, the $700 million of
FIMP money, long awaited. I met with the Army Corps of
Engineers yesterday, in fact, on this, Colonel Owens; talked,
in fact, to Congressman Bishop yesterday; and we are making
good progress on getting that money available.
But, of course, Nassau County is also susceptible. We have
good plans for Long Beach, which is one of the barrier islands,
you know, going from Point Lookout to East Atlantic Beach. But
we do not yet have a plan in place for the rest of Nassau
County. The Rebuild By Design, which I think was excellent and,
as you know, I urged that one of the plans at least be chosen
that included a plan for Nassau County, Great South Bay, all
the problems that occurred throughout the area, you know, all
you have to do is go to places like Freeport or Massapequa and
see the damage that occurred.
Can you tell me the status of the selection project for the
10 projects? Are you weighing in to make sure a protect Nassau
County piece is done? If each little locality does their own
piece, we will still have Nassau County susceptible to another,
God forbid, big storm like Sandy. So we need a Nassau County
plan. You were good enough to help us at least see that one of
the Rebuild By Design plans included that. What is the status?
How are we going to make sure that some of this Rebuild By
Design money goes to protecting the Nassau County southern
front the way we have done it in Suffolk County?
Mr. Donovan. So briefly, Senator, on the overall Rebuild By
Design process, final proposals will be completed by the end of
this month. We are going to convene a jury that I will lead in
the first week of April, and we are hopeful to make not just
decisions about the competition but funding allocations for
those by the end of April.
Specifically on Nassau, again, at your urging we have
brought together not just the State but also Long Beach and
other localities to make sure that this is a comprehensive plan
and that we are getting very specific input from the local----
Senator Schumer. Good. Are you optimistic we will get
some--I mean, we do have a plan, as I said, for Long Beach. We
have a plan for Jones Beach, in that area. But we do not for
the Great South Bay, and that is where all the people are. So
are you optimistic that we can get something to protect that
area, a comprehensive plan to cover that?
Mr. Donovan. I am optimistic that the team is working
closely to get a good plan. I honestly cannot tell you without
seeing the final plan what their chances are in the
competition.
Senator Schumer. All I can tell you is I will be deeply
disappointed if we do not have a Nassau County plan. That is,
again, what the Sandy money was entitled for. We do want to
help each little area do their own thing, but without a major
plan protecting Nassau County, it will be vulnerable and all
the little stuff could get washed away. OK?
Mr. Donovan. Understood.
Senator Schumer. So do whatever you can to make sure--I
mean, maybe even look at that Nassau County plan now, have your
people look, and see, if it is not quite up to snuff, what can
be done to bring it up to snuff so we do not hear on April
30th, well, not a good enough plan. OK?
Mr. Donovan. Absolutely.
Senator Schumer. Very important. OK, next, another question
for you. Small business. Now, this is really disappointing, one
of the areas where Sandy money has not worked very well, and
that is in the loans to our businesses. In HUD's latest
quarterly grant report, the reimbursements for small business
repair program were $1.5 million out of a projected $37.5
million. Despite these funds being categorized as urgent need,
the progress narrative states that the majority of funds were
used for marketing and program delivery costs.
It has been over 18 months since Sandy. I have heard from
small business owners who want these loans and are not getting
them, and you are not the SBA, but you are the czar, so you
have got the clout. In places like Freeport, Mastic Beach,
Lindenhurst, Long Beach, Baldwin, Bay Park, Brooklyn, Queens,
they are not getting much help here and they need it. What can
be done to prevent more delays and to see that the money goes
maybe in tranche two or elsewhere so that these small
businesses have access to programs to build back their small
businesses? I visited Island Park awhile back. Sixty percent of
the businesses were wiped out on Main Street because of the
flooding, and they need help for all the reasons--my dad was a
small business man. He was an exterminator. I know how they
struggle. And they do not have resources. They cannot build it
back on their own most of the time, unless they have got a rich
uncle or something.
So could you comment on that, please?
Mr. Donovan. Absolutely. First of all, with your advocacy
and also Senator Menendez's, we did obviously allow businesses
to be eligible even if they had not applied for SBA loans or if
they had gotten an award from SBA and their circumstances had
changed. And I will be honest, I have been surprised at the
limited number of businesses that have come in and applied for
the programs, not only in New York but also in New Jersey.
We are looking at that. Specifically Mayor de Blasio is
reviewing the programs now to look at whether there are
additional things that can be done on economic development, and
I think this is also a question of making sure, as we do the
monitoring reviews that I spoke about earlier, that we are
making sure that there is adequate outreach done on that front.
So those are the areas that we are looking at.
Senator Schumer. OK. One final--is that all right, Mr.
Chairman?
Senator Menendez. Yes.
Senator Schumer. Thank you. This is speeding up the flow of
money to homeowners. OK? I am concerned about the speed of
money flowing to New York City. New York State has done a
better job here, and about $330 million for housing rehab and
construction has been disbursed. That is not close to all the
money, but homeowners on Long Island, Nassau, Suffolk, are
beginning to tell us that they are getting the money both for
reimbursement and others, and I want to make sure they all get
it, you know, even if their incomes are, you know, middle
class. Nice middle-class incomes, we promised them that they
would get money, and that was the intention of the bill.
Unfortunately, while $330 million from New York State has
been disbursed, the non-New York City parts, zero dollars has
been disbursed in New York City. And to be honest, I am a great
fan of Mayor Bloomberg, and he is a good friend, but in this
area, in my view, their attitude about the housing money was
not robust enough.
I have talked to Mayor de Blasio, and he does not have his
people in place yet. We intend to meet to discuss this to
improve the money that flows to homeowners.
But, in your view, why is there such a great disparity in
getting the money out the door to the city homeowners? What
kind of technical support and specific recommendations can HUD
exercise to streamline the city process? And is there any
specific instruction HUD can offer to grantees to adjust their
program to minimize further delays?
Mr. Donovan. So, Senator, I share your concern in this
area----
Senator Schumer. Zero dollars for New York City makes you
scratch your head and wonder if something is wrong with the way
they set it up.
Mr. Donovan. And as you stated, correctly, this is a
concern that I have shared for some time now. In fact, I have
spoken directly to the mayor a couple times about this,
including this week. He has assured me that his team is looking
comprehensively at this process, that they will have
recommendations for changes to speed up the process within the
next few weeks.
Obviously, a transition to a new mayor has meant that, as
you said, he needs to get his team in place, but I have
expressed my concern that we need to move this as quickly as
possible because the money is not getting out fast enough.
Senator Schumer. Good. And will you work with him? I think
we are going to----
Mr. Donovan. Absolutely.
Senator Schumer.----need some modifications in the actual
New York City program. You obviously want to see the money only
go to people who need it and deserve it. You do not want to see
duplication of dollars. If people had $80,000 of damage and got
$70,000 from their insurance company, the only amount we want
them to get is $10,000.
So these are all concerns, but if you make the program so
onerous and you have got to dot the ``I'' and cross the ``t''
48 times before you get a nickel, something is wrong. And I
suspect something is wrong not just in the execution but in the
way the city set up the program. Would you be willing to work
with us to try to modify it so we get a careful balance here,
not wasting any money but getting the money out to the
homeowners?
Mr. Donovan. We are doing weekly calls with the grantees to
provide technical assistance. I will say on this, we do not
have any pending requests for waivers or other changes.
Senator Schumer. I know.
Mr. Donovan. I believe this really is about program design
and getting--just getting it done on execution. I do not think
the problems here are red tape or regulations standing in the
way. It is about execution.
Senator Schumer. OK. Well, that is a little encouraging to
hear. I talked to Mayor de Blasio within the last hour about
this. He called me, which shows his concern, which I
appreciate. And we are going to get together to figure this
out. And as always, I know we will have your cooperation.
Mr. Donovan. He has assured me his focus is on this as
well, as I am sure he----
Senator Schumer. One more quick question, with my
Chairman's indulgence, and please give a short answer, because
he has more to say. No, very serious. When is tranche three
coming? What can we expect for New York State and New York
City? And are you contemplating any local sub-allocations? You
can answer that quickly.
Mr. Donovan. Long story short, we are finalizing data from
other places around the country. We want to see remaining unmet
needs that we will get in the next few weeks from the grantees
in their second action plans. And my hope is that we can make
final allocations by the end of April.
Senator Schumer. Thank you.
Thank you, Mr. Chairman, for your indulgence.
Senator Menendez. Thank you.
Mr. Secretary, there are votes going on, but I would like
to get in a couple of questions before so that we can hopefully
excuse you and then move to the next panel after the votes.
Going back, just to finish on HGI, you know, I hope that
HUD is going to require or encourage the State to seek recovery
for HGI from the problems and delays that it caused. Canceling
the contract is not enough here. The programs HGI was hired to
manage are at the heart of the State's efforts to help
homeowners in New Jersey. And administering close to $1 billion
worth of recovery money is too significant to be treated like
some small boilerplate contract.
So it would be mind-boggling that the company could walk
away, get $51 million, you know, 75 percent of its contract,
which is supposed to last over 3 years, mess it up so badly
that it hurt people, and then at the end of the day, you know,
we just cancel the contract and that goes good-bye. That cannot
be the case. I assure you that will not be the case. So I hope
that HUD in its review here is going to urge the State, because
I just do not know how we can do that. So when you have your
review, I will look forward to seeing whether or not there is
going to be any urging of the State to go after the contract
here based upon a horrendous condition.
Three final questions. I heard from everybody, you know,
that I have listened to, homeowners who are still trying to get
in, they do not know where they are on the list. If I am number
5,000 on the list, no matter how much money there is, I might
say, ``You know what? I am never going to get it, so I am going
to have to make a determination of what I do with my life.''
But why the secrecy of not knowing where you are on the
list unless you want to play with the list? So can we get the
State to just tell somebody they are number 2,000 on the list?
There should be transparency.
Mr. Donovan. The State has assured us that they are now
providing information to homeowners about their place on the
list, so what I would suggest, if you have specific----
Senator Menendez. Not the case. Not the case. I do not care
what the State is telling you, because when I listen to
something so many times, I know it just cannot be one person
just happens to be misinformed. They tell them in tranches,
``You are between 2,000 and 3,000.'' I want to know if I am
2,500. I want to know if I am 2,000. I would love to know who
the first hundred are on the list. I would like to see where
the list was supposedly randomized. What is random? Is it
mostly from certain parts of the State? Is it truly randomized
in a place in which the universe is spread all over those who
were affected by Sandy? I do not know what is the big deal. Let
us publish the list. No personal information other than a name
and address. This way we can determine the geographics of this,
and everybody knows what their standing is.
Mr. Donovan. Senator, I share your interest in making sure
homeowners have the information that they need to move on with
their lives, and----
Senator Menendez. Isn't that something you can require?
Mr. Donovan. We do not require exactly how they design
their programs in that way, but we can work with you to
encourage them to make this information in a way that is useful
to homeowners.
Senator Menendez. The list needs transparency. It is basic
fundamental fairness to give people, first of all--and a sense
of how the list came about, right? If it is randomized, how did
you randomize it? Because if everything is, for example, one
county or two counties, to the exclusion of all the counties
that were affected, something is wrong with that.
Speaking about challenges, I mean, you know, as you know,
HUD is required by Executive order to work to ensure that
recipients of Federal financial assistance provide meaningful
access to applicants and beneficiaries with limited English
proficiency.
Now, New Jersey's CDBG action plan says the State will make
key documents available in both English and Spanish, but we
have seen specific evidence to the contrary. Of particular
concern is the State's Spanish language Web site which failed
to provide the same information--the same information--about
accessing assistance to Spanish speakers as to English
speakers.
For example, you will see from the screen shots that we
have here--which I am submitting for the record, without
objection.
The New Jersey Department of Community Affairs' Spanish Web
site was never updated to advise people about the extended
August 1st deadline by which applications could be filed for
the RREM program. And the Spanish Web site is entirely missing
information about how to appeal a rejection.
Unfortunately, it is not just the Web site that has
prevented people with limited English proficiency from
accessing recovery programs. Earlier this week I met with Angel
Mejia who lives in Ironbound in Newark with his wife and
children. He went to the Recovery Assistance Center in Newark.
There was not one Spanish-speaker who could help him. The only
available person who could communicate was a secretary who was
not trained in the details of the program. A year and a half
later, he is still awaiting an award for his property. And that
is just one of many stories.
So it is my understanding that a complaint has been filed
with HUD's Office of Fair Housing and Equal Opportunity
alleging unequal access for victims with limited English
proficiency. Is HUD investigating this complaint?
Mr. Donovan. We are. We do have a formal complaint, and we
are investigating, and I expect that investigation to be
completed in the next few weeks.
Senator Menendez. And can I have your commitment to keep
the Committee informed as to the results of that?
Mr. Donovan. Absolutely, and, Senator, I would go farther
than that. As I said earlier, between our monitoring review and
the review we have been doing on the fair housing complaint, we
do have concerns, and the State has assured us through the
second action plan that they will take steps to reach
homeowners and businesses that may have been left out because
of language access issues or steps of the contractor.
Senator Menendez. All right. Then, finally, I hope in HUD's
review there are--the second panel will have studies that
suggest that people from minority communities, citizens from
minority communities--African Americans, Latinos, and others--
have a disproportionate rejection rate and a whole host of
challenges, even though they already started a challenge with
what Sandy did to them. I hope that there will be a review of
that as well. We need to make this program efficient,
transparent, fair, and equitable for everyone. And I know that
is your intention. It certainly is the Chair's intention, and
we are not going to be happy until we get there. So I hope you
will instruct your Department to have a review of that as well.
Mr. Donovan. I can assure we are looking at that in great
detail, and I want to thank you for your leadership on this
issue, not just around Sandy but more broadly.
Senator Menendez. Mr. Secretary, thank you for your
testimony here today. We look forward to following up with you
on a host of these issues. And with that, I appreciate your
time. The Secretary is excused.
Mr. Donovan. Thank you.
Senator Menendez. The next panel is going to be held right
after these votes, which, unfortunately, unless they are
mitigated, there are about 45 minutes' worth of votes. So the
Committee will stand in recess subject to the call of the
Chair, at which time we will convene the second panel, which is
testimony that we desperately want to hear.
The Committee stands in recess.
[Recess.]
Senator Menendez. This hearing will come back to order.
First of all, let me give my apologies to this panel. I do
not control when votes take place here in the Senate--at least
not yet.
[Laughter.]
Senator Menendez. And we had a series of votes on nominees
that went on until right now, so I appreciate your willingness
to hang in there with us because I think your testimony, based
upon reading your written testimony, is very important, and I
would like to get some of that on the record orally as well as
have some conversation with you.
Second, I failed at the opening remarks to say that I did
invite the State of New Jersey and the Department of Community
Affairs commissioner to join us at this hearing, and that offer
was rejected by the State. So I do not want anybody to think
that I did not give the State an opportunity to make its own
presentation here, which I did.
We now have three very important witnesses: Mayor Matt
Doherty, the Mayor of Belmar, New Jersey, who had significant
damage done to his community, and who has worked to rebuild it
with a fair degree of success, but still faces challenges on
behalf of some of his citizens. And so we look forward to
hearing from him as the perspective of one of our mayors.
Adam Gordon, who is the Staff Attorney at the Fair Share
Housing Center, which has done some very significant work in an
analysis of some of these programs and what it meant to
citizens or where they have fallen short and raised some
serious questions about its effect. And so we appreciate your
willingness to be here.
And Dr. Janice Fine, who is an Associate Professor of labor
studies and employment relations at the Rutgers School of
Management and Labor Relations, who I referred to earlier when
the Secretary was here about a study that she did about some of
the contracting and procurement processes here and the
importance of having a greater transparency as well as
standards.
So as I said to the Secretary, all of your testimony will
be fully included in the record, without objection. I would ask
you to summarize in about 5 minutes or so, so that we can enter
into some dialog on these issues.
We will start in the order that I introduced you. Mayor
Doherty, you will be first. And if you would put your
microphone on, press the red button.
Mr. Doherty. My first time doing this.
Senator Menendez. That is OK.
STATEMENT OF MATTHEW J. DOHERTY, MAYOR, BELMAR, NEW JERSEY
Mr. Doherty. I want to thank you for the opportunity to
share with you some of the experiences we have had in Belmar,
New Jersey. Based on conversations with other Jersey Shore
mayors, it seems that our experiences are similar to what other
communities are going through as well.
I want to first thank you and the Members of the Committee
and the rest of the Senate and the House of Representatives for
appropriating financial resources to both Belmar and the rest
of the Jersey Shore since Sandy ravaged our communities on
October 29, 2012. I know that while there were some Members who
opposed helping us, as a collective body you supported us and
for that we are grateful. I would also like to take an
opportunity to thank New Jersey's congressional delegation for
all of their hard work in securing much needed aid,
particularly Senator Bob Menendez, Congressman Frank Pallone,
Congressman Bill Pascrell, and Congressman Chris Smith. Having
gone through this experience, I can tell you that without
Federal assistance both my community, and the rest of the
Jersey Shore, would be at risk of becoming a relic of the past.
No State, county, or municipality could come back from a
terrible hit like the one our communities absorbed without
Federal assistance.
I also think it is worth noting that there is no private
sector solution to recovery and rebuilding from a storm like
Sandy. It is Government, and Government alone, that makes
recovery from a storm like Sandy possible.
Sandy destroyed town infrastructure, businesses, and
residential properties. I would like to take this opportunity
to share with you our experience of working with families that
have been hardest impacted. In addition, I would like to humbly
offer suggestions for the future allocation for Federal
resources for Sandy recovery based on my experiences as the
mayor of a town that was hit particularly hard.
We found through this process that businesses seemed to
recover rather quickly, far more quickly than residential
properties. We are finding that residents affected by Sandy are
the ones having the most difficult time recovering. While FEMA
and SBA were both on the ground after the storm for 4 months,
it is the long-term process of recovery for many families that
has proved to be problematic. In many communities along the
Jersey Shore, there are still families that have been
displaced. As of today, they have been displaced for 500 days--
500 days of stress on families; 500 days of living in multiple
places; 500 days of living on someone's couch; 500 days of
driving children to school 17 miles a day just so they have
some semblance of normalcy in their young lives; 500 days of
struggling through bureaucratic rules and regulations; 500 days
of not knowing when, or even if, they will ever get back home
again.
In our small town alone, we have 90 families that have
applied for the Reconstruction, Rehabilitation, Elevation, and
Mitigation, also known as the RREM grant. Only one in five were
approved and funded. The rest are either wait-listed or
ineligible. I cannot stress how difficult this is on these
families when all they want to do is get back home.
I would like to share a couple examples. The first one is
Frank Murphy and his wife who had twin babies a couple of
months before Sandy destroyed their home. They applied for the
RREM program and were told that once they applied, they must
stop all construction or they will receive nothing. They were
denied the grant and began rebuilding their house as they
appealed their denial. Over time, their denial was reversed,
and they were told that their grant for $30,000 would be
funded. But now, since they started to rebuild to get back
home, even though their grant was funded and they are eligible,
they will receive nothing. No one from the State ever told them
that during the appeal process they could not work on their
house. How long should they be forced to wait to work on their
home, particularly after being denied and subsequently given no
timeframe for when they would hear on their appeal? The fact of
the matter is that the Murphys are not looking to blame someone
for the wrongful denial of their grant application; they just
need the resources so they can get back home.
Another example is Krista Sperra. She is a graphic designer
who both lives in Belmar and has her business in Belmar. She is
married with two children in grammar school. She and her
husband paid premiums on their flood insurance every year, for
over 10 years, before Sandy hit. Sandy brought water that
engulfed Krista's home and surrounded her neighborhood and
those of her neighbors for several days. After the water
resided, she had a structural engineer look at her foundation.
Like many in Belmar, Krista owns an old house with a foundation
made of brick and mortar. The engineer told her that she needed
a new foundation and that she could not do any work above the
foundation until it was completed. She brought this information
to her insurance company. They sent someone out to look at it,
and they told her that all she needed to do was replace some of
the mortar in between the bricks and she would be fine. They
gave her $600 and told her that would be sufficient for the
mortar. She consulted another engineer, and he told her the
same as the first engineer: The entire foundation needed to be
replaced.
Krista is now suing her insurance company, displaced from
her home and living in the third house since Sandy hit and now
needs to find another place to live as her family will be
moving out by the end of May. Five hundred days she and her
family have been displaced, and she is now suing her insurance
company as she looks for a new place to stay. All she wants to
do is get herself and her family back home.
These are just two of the countless stories at the Jersey
Shore today. But I think they are both indicative of the fact
that people are generally not interested in moving anywhere
else. They do not want to give up on their communities; rather,
they want to stay and rebuild. Again, they simply want to get
back home.
From these experiences and many others, I would like to
offer a few suggestions on how additional Federal resources
could be allocated for the maximum benefit to communities and
families still recovering from Sandy.
First, while communities are waiting for Federal funding,
allow them to begin projects they need to recover from the
storm and reimburse them later. This follows the current FEMA
model.
Second, relax rules that would make it difficult for
families that did work on their homes right away to receive
funding simply because they wanted to get their families back
home. This will eliminate the disincentive for being aggressive
about getting back home. People should still receive their
funding, even if they did the work after the application date.
Third, compel the National Flood Insurance Program to
settle with clients through arbitration as opposed to forcing
these residents to sue their insurance company. Many of these
people have been paying premiums on their insurance for years
in order to have help during such an emergency, and they should
not have to sue for that coverage.
Fourth, increase the appropriation for housing and
infrastructure for Sandy-impacted communities. As we come to
the end of the community development block grant allocation, I
believe there will be a need for additional financial resources
to assist families to fully recover.
Fifth, and last, let us not get caught up in the blame
game. Let all of the elected officials from the Federal, State,
county, and municipal level work together to help middle-class
families during this time of ongoing trouble. We have all done
a lot these past 500 days, and now is the time to rededicate
ourselves to ensuring that everyone gets back home.
Thank you again for this opportunity to come speak before
this Committee and share my experiences and suggestions.
Senator Menendez. Thank you, Mayor.
Mr. Gordon.
STATEMENT OF ADAM GORDON, STAFF ATTORNEY, FAIR SHARE HOUSING
CENTER
Mr. Gordon. Thank you, Chairman Menendez. My name is Adam
Gordon. I am a Staff Attorney with Fair Share Housing Center,
and since Sandy hit, we have worked with impacted
organizations, communities, and individuals to make sure that
Federal funds for rebuilding are distributed fairly and
effectively.
It has been nearly a year and half--as the mayor said, 500
days--since Sandy. But for too many people, it is as if Sandy
just happened yesterday. According to a recent poll by Monmouth
University, three-quarters of people impacted by Sandy in New
Jersey say that the State's recovery process does not care
about people like them.
At a recent meeting on the next set of Federal funds, a
veteran whose home was devastated by Sandy said that dealing
with the State has been harder for him than fighting was in
Afghanistan.
It is an absolutely critical time for this hearing. As we
heard earlier this morning, New Jersey is about to receive
another $1.4 billion in Federal funds, and that allocation
provides a singular opportunity--and for many people impacted
perhaps the last opportunity--to get this recovery on track and
help people rebuild.
We appreciate the Secretary this morning announcing that
there are going to be some important changes, which I will talk
about in more detail later, to make sure that people who did
not have an opportunity will be able to apply, and we really
want to make sure that--with your help, Senator Menendez, you
know, make sure that the details on that get nailed down and
that this becomes effective and HUD completes its investigation
and changes as soon as possible, because people cannot wait any
longer and we do not want all the money to be allocated or
spent without a fair process being put in place.
I am going to touch on three main areas:
First, we have talked a lot about the RREM and resettlement
programs, and I am going to talk about both the problems with
those programs and the disparities in those programs that we
have already heard a little bit about this morning;
I am going to talk about renters impacted by Sandy and how
they have been largely left out of rebuilding;
And, finally, making sure that the money really does focus
on the hardest-hit communities, places like Belmar.
First, on RREM and resettlement, as we have already heard a
lot about, these programs are just not working the way they
should be. We had to sue the State of New Jersey for access to
basic documents under our freedom of information law, and only
after that lawsuit did we find out that the State and HGI
unfairly rejected thousands of applicants for both of these
programs. In fact, as we already discussed and, Senator
Menendez, as you brought up this morning, 80 percent of people
who appealed their denials won.
These problems hit people of every racial and ethnic group
and all incomes. But they hit African Americans and Latinos
especially hard. African Americans were rejected from these
programs at two and a half times as often as white applicants,
and Latinos at one and a half times the rate of white, non-
Latino applicants, even when you look within the same
community.
As we have already talked about, the whole program was
shoddily run. Walk-in centers were located far from damaged
communities to save on rent. In Monmouth County, the center was
in Freehold which is nowhere near the areas of the shore that
were impacted. Call centers were told to get people off the
phone as quickly as possible instead of helping them solve
their problems.
Here is what needs to change. First----
Senator Menendez. Sorry, what did you say? Call centers
were told----
Mr. Gordon. Call centers were told, actually given
instructions to get people off the phone as quickly as possible
and say that they were helping their neighbors, even though in
many cases there was not actually anyone on hold. That is in a
document that we received through our litigation.
So here is what needs to change to fix this mess.
First, we know that 80 percent of the people who appealed
actually were eligible, but we also know that most people, and
especially most African Americans and Latinos, did not appeal.
What the State needs to do is go back and review every single
person who was rejected and find out if they were eligible.
People should not have to go through further paperwork and
further bureaucracy. When you are wrong four out of the five
times, it should be on the State and not on people who have
already suffered so much to go through that process.
Second--and we already heard positive news on this from HUD
this morning--the people who were given the wrong information,
told that they did not qualify, people given the wrong
information on the Web site who spoke Spanish and were told
about the wrong deadlines or that they could not appeal, we
need a resolution to this. And we are glad to hear that HUD is
saying this process is going to be reopened. We need those
details to happen, and we need that to happen soon, because a
lot of people are giving up hope because they were given the
wrong information, were basically told the wrong information,
especially if they spoke Spanish.
And, finally, on this, the State promised a grant, 60
percent of Resettlement funds and 70 percent of RREM funds, to
low- and moderate-income homeowners. Those targets have not
been met, and they need to be because they are the people with
the greatest need.
While programs for homeowners are not working well or
fairly, in many cases renters have not gotten any money at all.
Forty percent of all families impacted by Sandy in New Jersey
are renters. Roughly two-thirds of African Americans, Latinos,
and low-income people impacted are renters. But so far only a
quarter of the money from the housing programs have gone to
renters. We hear from people living in isolated areas in
campers, doubled up with relatives, sleeping on couches, and
they have no idea where they are going to be a few months from
now. And we need to make sure everyone is treated fairly,
renters and homeowners, based just on damage.
And, finally, related to that, we are very concerned
particularly for the rental programs that the two hardest-hit
counties, Ocean and Monmouth, had between them most of the
damage from the storm, but in the main rental rebuilding
program, those two counties have only received about a fifth of
the money to date. Much of that scarce money has gone to
communities with little or no damage from the storm, places
like Belleville instead of Belmar, which makes people actually
impacted by the storm very angry.
We know when we talk to landlords and developers they are
quite willing to invest in those areas, but they need to be
told by the State if those areas will be prioritized, and that
is just not happening, and we need to make sure for the next
$1.4 billion we are focusing on the areas that were hit the
hardest first.
The time to act is now. As I noted before, the next $1.4
billion for many people may be the last chance. And absent that
critical action to make sure the State actually changes things
now, too many New Jerseyans will just never have a chance to
rebuild and move back to their communities.
Thank you very much for your time and inviting me today.
Senator Menendez. Thank you.
Dr. Fine.
STATEMENT OF JANICE FINE, Ph.D., ASSOCIATE PROFESSOR, RUTGERS
SCHOOL OF MANAGEMENT AND LABOR RELATIONS
Ms. Fine. Hello, Senator Menendez. Thank you for inviting
us.
I would like to first introduce Patrice Mareschal, who is
my co-investigator from Camden, Rutgers. Thanks for all your
help at Rutgers.
So one thing we know, after studying the State's oversight
policies and practices for close to 3 years, is that this is
not an isolated problem due to emergency circumstances but,
rather, a consequence of a deep, systemic problem many years in
the making. If the system is already broken, it is only going
to be worse in a State of emergency than it already is. So with
my brief time, what I want to do is summarize some of the best
practices in contracting, what we found to be some of the major
issues, then describe the problems with how the State of New
Jersey conducted contracting in the aftermath of Sandy.
I will not use this time to make recommendations, but I
want to say I have some to offer and would like to have that
opportunity.
So in a nutshell, the key to contract oversight is, first,
well-written contracts that adequately define the
responsibilities of the contractors and the protections of the
State; and, second, strong, experienced, well-trained managers
with a deep knowledge of the activities they are monitoring and
time to do the job well; and, third, data systems that make the
process more efficient and more transparent.
Unfortunately, between 2004 and 2011, the size of the State
workforce in New Jersey shrank by about 36,319, while the total
value of contracts held steady, and in some years, especially
in 2013, increased quite significantly.
In all circumstances, good oversight requires strong,
overarching institutions. The laws, regulations, and policies
governing the process provide the foundation for oversight. The
need for strong institutions is especially acute in emergencies
because they exacerbate the already significant challenges of
contract administration. So creating strong institutions
involves: laws ensuring that contracts are managed by qualified
individuals with sufficient capacity to engage intimately and
over and in real time with the time with the contractor; meta
oversight of the contracting process by the State, not just at
the agency level but at the top of the State; appropriations
for integrated and standardized data systems; and transparency,
including the publication of all key documents and details.
Prior to Sandy, we had concluded that lack of oversight had
already had significant consequences for vulnerable people and
for New Jersey taxpayers and was placing precious Garden State
assets at risk. So it is not surprising to us that the State
struggled to handle the massive relief program.
On the surface, the State's Action Plan and Executive Order
125 signed by Governor Christie appeared to enhance oversight
under special circumstances. However, our findings and the
stories that are now coming to light suggest that these paper
requirements were insufficient, not followed well, or both.
Executive Order 125 offered three potential enhancements to
the existing requirements:
First, it mandated that the comptroller preclear all RFPs
prior to bidding. We do not know if any additional capacity,
however, was created in the comptroller's office.
The second enhancement was the appointment of
accountability officers in each unit responsible for Sandy
relief contracts. The qualifications and specific duties of
these officers, however, are not specified. Likewise, there is
no indication that these would be new staff positions rather
than just titles added to already swamped staff members, which
was what we found very often in our study.
Finally, Executive Order 125 had a transparency provision
that required the creation of a Web site to post contract
information on all Sandy contracts. This Web site does, in
fact, exist and it provides both contract documents and some
nominal aggregate data, although I must say I learned a great
deal more from Fair Share Center's Web site.
The HGI contract is available on the Sandy Web site;
however, when searching the site for the contract manager,
clicking on the HGI contract link leads to an error page.
New Jersey's Action Plan promised further enhancements. Two
keys were the creation of a special division to manage the
grant and the use of a special audit plan by the DCA's internal
auditor. The special division was created, and some documents
suggest it may have as many as 95 employees. What is not clear,
however, is what roles they are tasked with. Moreover, even if
they were all newly hired contract managers, given the sheet
complexity and the size of many of the contracts, HGI's
contract being a prime example, it would seem that no one
contract manager could have adequately handled the process
alone.
There is little readily available information on the
internal auditor. We do not know how many audits were
conducted. We do not know how diligently they were done. We do
not know what was found. We do not know the consequences. These
are key questions.
The State's response to Hurricane Sandy required the
coordinated actions of various organizations who needed to be
properly vetted to ensure they had the expertise, capacity, and
legitimacy to support the State and recovery efforts. Certainly
best practices suggest that contracting units must perform
their due diligence and gather information on a contractor's
previous record to serve as a basis for contracting decisions
and to ensure that they do not have a prior history of poor
performance.
Again, on the face of it, New Jersey appeared to have made
this part of the RFQ process, but media reports show that the
State of New Jersey did not thoroughly vet HGI's performance
during Hurricane Katrina. Nine years later, after Hurricane
Katrina devastated New Orleans, claims and issues from HGI's
services remain unresolved.
Successful contract monitoring, the bottom line is the
oversight requires significant managerial aptitude, including
the ability to assess costs, identify needs, and critically
analyze vendor strengths. No organizational chart is available
on the Sandy Recovery Division's Web site. Therefore, we cannot
determine whether the 95 staff were actually hired, whether
they are contract managers, and what their qualifications and
experiences are.
We can surmise that the division is still without the
required oversight capacity given the numerous employment
vacancies at the department. From what we see, all of the
current vacancies in the Sandy Recovery Division are for
compliance and monitoring positions--for example, chief
financial officer and assistant director of compliance and
monitoring.
Our review of the RFQ for the management and other related
services program indicates that the State is developing an MIS
system. It remains unclear if the MIS system has been
adequately developed and if personnel have been trained on the
system. This is particularly important to aid in monitoring and
compliance since contractors were required to have data
collection and storage systems that were compatible with the
States.
To bolster State capacity to oversee contracts, the State
enacted the Oversight Monitor Act in order to prevent, detect,
and remediate waste, fraud, and abuse. However, the State says
that it spent 10 months training the monitors, and to date, no
reports on the work of these integrity monitors are publicly
available.
Additionally, although the State required Sandy contractors
in its RFQ to submit weekly reports on their progress, and HGI
promised it would generate and submit a weekly report and also
provide a monthly program status report, it did not do so for 8
months. When copies of the reports promised in the bid were
requested, Fair Share attorneys were advised by the State that
they did not exist. These were essential tools necessary for
the State to engage in oversight, and they were ignored. We
still do not know how or why this happened.
Despite the deeply flawed service being provided in less
than 8 months, we now know that HGI billed the State over $51
million, although it had proposed a 3-year contract for a total
of $67 million. There is an ongoing dispute over at least $18
million that HGI claims it owed but the State has not paid.
This number may, in fact, grow significantly. HGI claims that
the State demanded far more work than the contract originally
anticipated, but the lack of reporting makes all of this
extremely difficult to assess.
Overall, our analysis suggests that New Jersey lacked the
capacity to oversee the contracts involved in such a large and
complex natural disaster recovery program. This lack of
capacity was compounded by a lack of transparency.
Thank you. I will be glad to answer questions.
Senator Menendez. Thank you. Thank you all for your
testimony. It raises many questions.
I would throw this out to any one of the panel who feels
that they can answer it. I see that as we were conducting this
hearing, the State of New Jersey announced some change, which
from my perspective is welcome but nowhere near resolution of
the core issue I was raising with the Secretary about
environmental and historical reviews as a precedent to get
people cleared and moving on to reconstruction.
So as I understand this change--I do not know if any of you
have had the opportunity to see the announcement--RREM grant
awardees--these are already people, obviously, who have been
decided that they have qualified and they are awarded--who are
using their own contractor can request an advance payment for
50 percent of their RREM grant. And it goes on to talk about
what else they can do. But that is already for someone who, as
I understand it, has worked through the process, gotten their
clearances, and have been an awardee. That does not deal with
the 10,000 people I was referring to who have not been clear.
Is that a fair statement? Has anybody been able to look at
it?
Mr. Doherty. I looked at the same statement, yes, Senator,
and it is a step in the right direction. However, it still does
not address those families that started work prior to that, you
know, to the award. So they applied for the award. Some of them
may have been rejected. While they appealed, they started
working on their house because they did not know when the
appeal period would be over. They were granted their appeal and
said, you know, their rejection at first was wrong. But since
they started their work after that application date, they are
no longer eligible.
So they are funded, but as the example I use, they will
never receive their money because they violated that principle
of doing work after the application date.
Senator Menendez. That is one universe which is clearly a
problem.
Mr. Gordon, do you have any sense of t his?
Mr. Gordon. Yes, Senator, I would agree that while it is
certainly a positive step, it does not address thousands of
people who are not in that narrow situation. I mean, you have
to be already approved and you have to be using your own
contractor, which is just a fraction of the people that you and
the Secretary were discussing this morning. And we would agree
that we really should--it is a much better use of a lot of
these administrative funds to do those environmental
assessments and get the ball rolling. And I think it is part of
a troubling pattern overall. There is kind of a hiding of
information by the State. Then when it comes to light, there is
sort of a begrudging acknowledgment and addressing a very small
piece of the problem, but not really addressing the full scope
of the problem and coming up with a comprehensive solution that
actually addresses the needs of everybody as opposed to a tiny
fraction. I think that is true of the 80 percent rejections as
well, that they have announced kind of after that came to
light, 6 months after they knew about it, and instead of them
saying, ``We knew that we were rejecting people wrongly,'' they
hid it until we had to sue to get the information. And then
afterwards, what they said is, ``Well, people can, you know,
submit another appeal if they want.'' Well, again, if you are
wrong 80 percent of the time, or in this case--I agree with the
mayor--if you are wrongly advised--did not advise people of the
program requirements, it should be on the State to fix that and
to figure out a way to comprehensively fix it for everyone
instead of just, you know, carving up tiny slices of the people
who are eligible.
Senator Menendez. It would seem to me that those who were
foreclosed as a result of lack of knowledge from an appeal
should be allowed to appeal at this point or have their files
reviewed prospectively.
Mr. Gordon. Senator----
Senator Menendez. Or not prospectively. Should have the
file reviewed by the State retrospectively as it relates to
what they had filed in making a determination under the
guidelines that obviously produced an 80-percent default rate.
Mr. Gordon. Senator, I would agree with that. I think that
the State should start by reviewing every one of those files
and basically rerunning those applications. If at that point
people then get a denial and want to appeal it, then they
should have that right as well. But it should not be in the
first instance on people to file an appeal, which, you know,
for many people, especially lower-income people, especially
people with limited English proficiency, can be a daunting
process. It should really be on the State to re-review those
applications.
Senator Menendez. Now, Mayor, you mentioned in your
testimony that business recovered more quickly than residential
properties. Give us an insight as to why you feel that
happened.
Mr. Doherty. You know, in our case, after the storm, we
worked very closely with FEMA. We had a real partnership with
FEMA. And one of the things we were able to do was rebuild----
Senator Menendez. I do not know. Are you going to give me a
good-news story about FEMA?
[Laughter.]
Senator Menendez. It is not the new ``F'' word?
Mr. Doherty. Well, I would tell you this: If it was not for
FEMA, towns like ours and the rest of the Jersey Shore would
have a virtually impossible time cleaning up and rebuilding
what was there before. So in our case, the important thing for
our town was to rebuild our boardwalk and, you know, you were
able to be there for our grand opening just before Memorial
Day. By being able to rebuild our infrastructure, we knew that
tourists were going to come for the summer season. So it
incentivized business owners who worked with the SBA and also
had insurance money through business interruption insurance to
get back on their feet.
So we had the same amount of businesses in our community
for Memorial Day as we did the day before Sandy struck. So all
the ones that were devastated were able to get back. They were
incentivized through the work we were able to do because of
FEMA and also because, you know, as you know, Senator, at the
Jersey Shore virtually all the businesses are small business
owners. This is how they make their livelihood. There are no
large corporations outside of Atlantic City. So if they were
not up and running for a summer season, it would have been
devastating to their financial situation, which ultimately
would have led to, you know, a deterioration in the community
as businesses would fail and you would have more vacant stores
down the road.
Senator Menendez. One other question for you. Do you
believe that the way the CDBG funding has been prioritized
meets the needs of your constituents? Or are there some needs
that you are afraid may not be met or you have a different idea
beyond obviously you have made a very clear point about those
who started and got denied and should be eligible? Is there any
other universe of CDBG as we look at the second tranche of
money that should be considered.
Mr. Doherty. There are two. And to separate them, one is
for infrastructure, municipal infrastructure, government
buildings, and the other one is for housing, for individual
residential properties.
For the first one, our concern is because of the LMI
requirement that some of that money will not actually go to
towns like Belmar or Sea Bright or Seaside that are not LMI
areas, up on the beachfront. So where the waves actually came
ashore, where they destroyed pavilions and other
infrastructure, that those dollars will actually go westward,
off the short, to LMI census tract communities. So that is on
the community side.
On the residential side, our fear is that the money is
going to run out before the residents who were directly
impacted are able to get back home. You know, that is not as
much of an LMI concern. It is just the fact that the
appropriation that came out, as large as it was, was spread
over multiple storms. It was not just spread over the impact of
Sandy, particularly in New Jersey. So one of our suggestions,
which I know it is very difficult to do in today's political
environment, would be an additional appropriation through CDBG
for residential properties, particularly those folks that are
on the wait list, that may be on a wait list a year from now.
And, again, remember, the way the guidelines work is if you are
on the wait list and you start work on your home, you are no
longer eligible for that. And, again, we are on Day 500 of this
storm, and some people have not started working on their home
at all.
Senator Menendez. Well, that will be a challenge, although
maybe one we will consider undertaking, but we are going to
have to get it right for the money that exists before we can
make the case for the next tranche of money beyond the $1.4
billion.
Mr. Gordon, as you stated in your testimony, your
organization had to sue the State for access to data on
recovery programs, and you made that determination that almost
80 percent of the people who appealed had their rejections
overturned. The State contends that for the 80 percent that won
their appeals, this problem has been corrected and people were
not substantially harmed. What are your thoughts on that
assessment?
Mr. Gordon. Two responses, Senator. I think the first is
that, you know, as you actually mentioned before in the
colloquy with the Secretary, we are concerned about people are
prioritized in RREM. We are concerned about why people are 1st
or 1,000th or 7,000th on the wait list. And one of the things
that we are looking into now is whether people who appealed
were put back in the same place that they would have been if
not for the State's error or whether they are going to the
bottom of the pile.
It is very hard to determine that when people do not even
know where they are on the list, so it is kind of a chicken-
and-the-egg-type analysis. But it is a concern that they may
have been disadvantaged in some way because the State unfairly
rejected them.
But the broader point is that only about a third of the
people who were rejected appealed. Two-thirds of the people did
not appeal, and that number is even higher for African
Americans and Latinos who appealed, and lower-income people,
all of whom appealed at lower rates. Not surprising for Latinos
given that there is no information on the Spanish language Web
site about appealing at all.
And so we really are particularly concerned, and, again, I
think the solution is for the State to affirmatively re-examine
every rejected application, that that did not actually help
most of the people who were denied.
Senator Menendez. Do you believe that the appeal process
was clear and easy for people to understand?
Mr. Gordon. No. There were a number of problems with the
appeal process. Again, if you were looking at a Spanish
language Web site, you did not even know that there was an
appeal process. But people were bewildered by the appeal
process because, again, with the lack of transparency, people
did not even know why they were denied. And so they were asked
to submit information about why the decision was wrong when
they did not even know what the decision was. And so people
were very much perplexed by this process.
Another real problem that we saw was that there actually
are a number of things that you can appeal. It is not just
whether you are accepted or denied. It is also the amount of
the award. We hear a lot of complaints from people who say the
RREM award--``We really need $100,000 to rebuild,'' and they
are saying, ``We can only give you $20,000.'' The State, until
last month, after we publicized it, never put on their Web site
that there is an appeals process for other issues like that.
And so they only put an appeals process there for whether you
were rejected. And so there is a lot of information--a lot of
other things about appeals that the State did not even tell
people were possible.
Senator Menendez. And one more line on this line of
questioning. Can you talk a little bit about your efforts to
gather information on this effort about how we minimize the gap
in appeal rates between homeowners? Particularly you mentioned
the disproportionate reality among Latinos and African
Americans. Can you talk a little bit about your efforts to
gather information on the program and whether or not this was
an open and transparent process? And what--well, let us start
there.
Mr. Gordon. Well, Senator, as you have already referred to,
we did have to sue in order to get this information, and that
is particularly disturbing in light of how quickly this process
is moving and how urgent people's needs are.
You know, we initially asked for this basic information on
July 31st. The State asked for a 30-day extension. We had not
gotten it at the end of that process, and they asked for even
more time. And so at that point we sued, and we filed our
lawsuit in early September, and we did not get the information
until late in November. So that was 4 months from asking for
the information to getting it.
And then based on what we saw there, there was subsequent
information that we then had to additionally request and
required additional extensions and threats of lawsuit.
So it has been a very untransparent process, and, you know,
if you think about how hard it is for a legal organization to
get this information with being able to sue and so on, how much
harder it is for individual people who have been displaced, who
cannot find out even basic information like where they are on
the wait list, why it is that they are that sort of number, why
haven't they gotten any money. So I think it is----
Senator Menendez. Am I missing something? Maybe to you and
Dr. Fine, am I missing something here? Why is it such a big
deal to have the transparency of having the list published or
available or online and you go and you find out, I am Joe Schmo
and here is my number on the list? Is there some harm that is
created by that process?
Mr. Gordon. Absolutely not. And I think more generally it
is incredible how there is nothing online or easily available
through a phone.
Another thing, with those call center records, people were
actively told who worked at the call centers not to tell people
their application status when they called in.
Senator Menendez. How do you know that?
Mr. Gordon. We got it through the litigation, the
instructions that were given to people working in the call
centers.
Senator Menendez. This is HGI?
Mr. Gordon. From HGI, yes. And one of the things they said
is that, ``You have something in front of you on the screen
that says the application status. Do not give that to the
person who is calling in.''
And so not only you could not call, you could not go online
and find out where your application stood, it still is the case
that you cannot really get that information. And I see--what
you suggested before, I mean, even if there were privacy issues
with listing people's names, there is a unique application
identification number that is private for everybody. You could
just post a list from 1 to 7,000 or whatever of those people,
of people's application numbers. I do not know why that is so
hard.
Senator Menendez. It is pretty amazing to me.
I want to turn to Dr. Fine, but I have one final question
for you. I understand your organization's analysis of the State
data found that, as we have talked about, African Americans and
Latinos being rejected from the largest program at
disproportionate rates. I also understand while you controlled
the data for geography, your analysis does not necessarily
control for every factor that would explain some other
disparity, such as an individual's level of damage suffered by
each applicant. And these initial findings certainly, at least
to me, suggest a need for further investigation. Even if there
was no intent to discriminate, a disparate impact could still
be cause for concern.
Has the State provided to you additional data needed to
complete a deeper analysis?
Mr. Gordon. We have recently, Senator, gotten some
additional data from the State, and we have used, as you
mentioned, that data to look at geographic concerns. And even
when you are in the same municipality--we looked at Atlantic
City, for example, a very hard hit, very diverse municipality.
And even within Atlantic City, there is a very large disparity.
You see these disparities persist in the same place.
I also think that there is a problem--if you match up the
State saying things like, well, you cannot control for the
damage data, and this came from disparities in damage data; but
then they have also admitted that the data they were relying
upon was incorrect. And so I think there is a link between
those two things, between the 80-percent appeal success rate
and the differences in rejections. I think for some reason that
damage data was particularly faulty in Latino and African
American communities. Why that is I think we still have not
quite gotten to the bottom of, and we are still going to be
requesting even more information from the State and hopefully
HUD through its review that it discussed this morning.
Senator Menendez. Have you shared your initial findings
with HUD for their review?
Mr. Gordon. We have shared our initial findings in the data
that we reviewed with HUD, and we hope that they will review
those and require significant changes to address those
problems.
Senator Menendez. OK. And one last--I keep saying ``one
last question,'' but I just want to make this record as replete
as possible so I can have action items to follow up on.
Is the State aware of your overarching list of
recommendations? And have they indicated any willingness to
address those concerns?
Mr. Gordon. The State should be aware because we released
them publicly in a report on January 15th. We also submitted
extensive comments with over 70 other groups, such as the
Latino Action Network, NAACP, Housing and Community Development
Network, a number of faith-based organizations and communities
that are impacted, a wide range of groups. We submitted those
comments to the State earlier this month, and so we have been
very public about what our recommendations are. Unfortunately,
we have not gotten a response to that from the State, and
generally we have found it to be very difficult to get any kind
of response for the State.
Senator Menendez. Have you had any sit-downs with any of
the State officials?
Mr. Gordon. We have, but it has been quite a while since
that has happened.
Senator Menendez. OK. Dr. Fine, let us start with a series
of things I want to ask you about. Number one, based upon the
standards you described should exist in your testimony,
evidently those standards were not--HGI was not held to those
standards. Is that a fair assessment?
Ms. Fine. Yes, I think so.
Senator Menendez. And do you believe that it was a lack of
enforcement of standards or a lack of personnel, which you also
described as a challenge to pursue the enforcement of those
standards? What would you say--I know you are not privy to all
the information on HGI, but from what we know publicly, what
would you ascribe to some of the challenges of having a
contractor that was administering nearly $1 billion of program
money, the overwhelming majority, gets $50-some-odd million up
front for 7 months worth of work when the whole contract was
going to be a little over $60 million for 3 years, and then
gets fired? Evidently something in the process here went wrong.
Ms. Fine. That is true. So I guess what we would say is,
the first problem we would say is the State did not perform
adequate due diligence. The RFQ called for contractors to have
a history of successful professional engagements in disaster
recovery. This was not the case with HGI whose handling of
Katrina in New Orleans drew significant negative press and
public discontent.
Problem two, the State did not have a process to ensure
weekly and monthly reports were submitted. We do not know why
that is, but HGI should not have been allowed to operate for 8
months without submitting weekly or monthly reports. The State
continued to allow HGI to operate unmonitored during what has
been described as a critical period. This is particularly
problematic because the State essentially could not correct
early implementation and execution flaws, which eventually led
to widespread systemic failure in the recovery programs.
Problem three, either the RFQ did not adequately specify
the scope of work to be performed, or HGI did not fully
comprehend the contracting unit's requirement. Either way,
there seems to have been a total and complete breakdown in
communication between the contracting unit and HGI. This could
have been prevented with a more relational contracting
approach, which basically means that you have got to be in
real-time, regular relationship and communication with your
contractor. Someone has got to be--you know, just when the
State contracts--when the State lets a contract, it does not
absolve itself of responsibility to manage the contract.
Senator Menendez. That is a point I wanted to get to. So
while we can have a debate about privatizing any service, even
if you choose to privatize that service----
Ms. Fine. That is right.
Senator Menendez.----as you did with HGI, it does not
absolve the State of oversight responsibility since the entity
receiving the money from the Federal Government is the State of
New Jersey, not HGI.
Ms. Fine. Exactly. Exactly right.
Senator Menendez. So you said you had a list of
recommendations to make that you did not get to in your oral
testimony.
Ms. Fine. Yes.
Senator Menendez. I would be happy to entertain some of
those now.
Ms. Fine. OK. So the overarching lessons is that these
grants represent enormous increases in the expenditures of
relevant State agencies, because so much of the services are
carried out by contractors, they will dramatically increase the
burden on States' existing oversight capacity. So I just want
to make this clear, that when we let a contract, we build in
the cost of the contract itself, but we do not think about the
cost to the existing State agency that is going to have to
oversee the contract. This is an endemic problem. This is what
we found across the board in New Jersey, and it was absolutely
critical here, right, that if you are going to all of a sudden
get this huge raft of money at a really incredible difficult
moment, you have got to make sure that you shore up the
agencies that are going to be responsible. In this case, that
was DCA.
So because so much of the services are carried out by
contractors, you have got to make sure that the State's
existing oversight capacity is increased. So if you want to
make sure Federal resources are not wasted and citizens are not
harmed, you have got to make sure the State ramps up oversight.
So here is just five quick things that we would suggest to
HUD in terms of requiring of New Jersey's kind of next phase.
One is they have to have a showing of sufficient resources,
which would mean three things: the existence of enough contract
managers to properly manage all the contracts. There is a
really good OMB standard for how many contractors--how many
personnel you need to manage contract personnel. So we know
some of that, and it is actually in my testimony. I would be
happy to talk to you more about it. So the existence of enough
contract managers to properly manage them; detailed
qualifications about those managers, demonstrating their
substantive expertise; and, the existence of systems that will
be used to allocate managers and facilitate contract
management.
All contract managers should be civil servants and cannot
be subordinate to the contractors. New Jersey's Action Plan is
not clear on all these points. The mention of 50 employees in
DCA's new division would not be sufficient as it does not
demonstrate what they will be doing or what their
qualifications are. So that is the first thing.
And we would add, we should have whistleblower protections
for--we are recommending at the State level that anybody who is
managing these contracts, anybody who works for the contractor,
more importantly, anybody who works for a State agency who is
managing a contract should be covered by whistleblower
requirements, also for quality of service. Right now in the
State of New Jersey, only nurses, if they complain about the
quality of service, are protected by our SEPA. It should be all
employees. And, again, we say this in our study, and I would be
happy to talk to you more about it.
So the second is transparency, that States should be
required to show in detail how they make critical information
beyond just the contract documents and broad, aggregate metrics
publicly available. Let me just say again, some of the Web
sites, both on Sandy and in general in the State of New Jersey,
they look good, but when you dig deeper, they are all aggregate
statistics. You cannot really use them unless you can do what
Fair Share did, right? Unless you can just keep coming back
over and over again, suing over and over again. A lot of the
data is not there. So it needs to show how grant funds will be
allocated for data colleague management and publication. The
transparency needs to be improved.
The third is voice. Information will be more meaningful if
it is actionable. It will also be more available if parties
with knowledge feel comfortable disclosing what they know. So
the first piece is whistleblower protection, as I mentioned.
And the other thing I wanted to say is I do not believe
hotlines are sufficient because that is for individuals. I also
think that we need to have strong voice provision through the
establishment of community-based oversight committees, right?
So that you bring stakeholders together and give them a voice
and make them feel like they could ask questions. I mean, we
know that people are more likely to step forward with problems
if they feel they have an option to do that in a group, not as
an individual. So some kind of community oversight committee.
Next is meta oversight. The State should be required to
identify clearly how it will handle the complexity of the
process. It cannot be enough to say that there will be a new
office within the executive branch or that watchdogs will look
at all contracts. The plan must be clear, specific, and
comprehensive, and take into account the increased burden
imposed by emergency grant distribution.
And, finally, you spoke earlier in this process about how
do we recover what we have already lost. Right? So what do we
do about the $51 million? How do we recover? So one of the
things that we looked at was that in the contract with HGI,
``The agency shall retain 10 percent of each invoice
submitted'' is weak language. We need strong language about how
the State can claw back funds from contractors when those funds
are not--you know, when they are mismanaged. So in our overall
review, in our review of Sandy, the State's inability,
incapacity, or unwillingness to recover lost or wasted funds
was a key problem. States should be required to demonstrate:
One, that they have given themselves maximal legal
authority to recover funds from underperforming or fraudulent
contractors;
Two, that they have people and systems in place to do it.
An example would be the specific language that will be included
in an RFP or an RFQ: to allow the State to withhold payment or
require a performance bond rather than having to litigate to
recover money after the fact. Provisions are not sufficient,
however, which is why the people and systems have to be in
place.
Senator Menendez. Well, I appreciate those recommendations.
We will be looking at them and seeing how we can implement some
of this as we look at the next tranche of money.
One final question for you. There is an indication now--I
do not know if this is fact yet, but there is an indication
that the State may now move not to a contractor but to do it
themselves. If that is the case, then I assume that your
statements about personnel will be even more significant if
they are looking to do it themselves.
Ms. Fine. You know, I will just say that in the 3 years
that we did this study, one of the things that was so striking
and so inspiring is that when you--at one point I did a whole
bunch of interviews with New Jersey Turnpike workers, and this
was at a time when, you know, the toll collectors were being
beaten up and, you know, the turnpike, there was all this
discussion about privatization. And one of the things that was
so striking was these people woke up every morning worrying
about the turnpike. On a snowstorm day, they knew every exit,
they knew every toll, they knew every booth. You know, that is
what we want, right? We have had enormous attrition of people
who are deeply committed to the Garden State and to excellence
and who know their area really well--ecologists who got turned
on in the 1970s and then went into DEP and care about, you
know, preserving native species, right?
What we had was a State full of people like that, and what
we have got now is a State that has been--you know, where the
attrition has just decimated these civil servants, and we need
to rebuild a core of State contract managers. We need to lift
them up. We need to be proud of them. We need to ensure they
get the training they need. And this is an opportunity to start
to rebuild that core. This is an opportunity to take some of
the best and brightest that are coming out of Rutgers and other
schools, to hire some of the people, to move some of the people
up who are already there, who know their area. Right? It is not
enough to say, ``Oh, well, let us get people who know contract
management.'' We need people who know contract management and
know these substantive areas. We once had them. We need to have
them again.
So the idea of doing this directly through the State--you
know, it never made sense to me. We could not understand when
we were studying this, we could not understand why the State
had not considered managing some of these programs themselves,
right? Or contracting out less and doing more inside. And, you
know, we believe there are perfectly appropriate moments for
contracting, right? And certainly all of this work could not
have been done internally. But there was never a serious
consideration and a serious cost accounting done of what it
would cost to expand the State's in-house capacity to do it
versus to do it outside, right?
And what studies show frequently is that the reason why so
much insourcing is happening at the municipal level is because
the quality of service went down, right? That one of the major
reasons mayors bring work back in-house that they had
contracted out was because of quality of service, among other
reasons.
So we know this from the municipal experience, and yet it
seems that at the State level we have to learn it all over
again, which should not be the case.
Senator Menendez. Well, I guess it does not take a rocket
scientist to figure out that if you are going to now perform
the same functions that you gave a contracting company $50-
some-odd million to do and you are going to do it in-house,
that you are going to have to have the human capital in order
to do that that can execute well.
I appreciate all of your testimony and answers to
questions. It has been incredibly helpful as we devise what I
expect will be both follow-up and an action plan.
This record will remain open until the close of business
tomorrow, and with the gratitude of the Committee, this hearing
is adjourned.
[Whereupon, at 1:10 p.m., the hearing was adjourned.]
[Prepared statements and additional material supplied for
the record follow:]
PREPARED STATEMENT OF SHAUN DONOVAN
Secretary, Department of Housing and Urban Development
March 12, 2014
Chairman Menendez, Ranking Member Moran, and Members of the
Subcommittee, thank you for the opportunity to testify today regarding
the ongoing effort to recover and rebuild in the region impacted by
Hurricane Sandy in October 2012, including efforts to ensure strong
coordination among Federal, State, and Local stakeholders.
Because Sandy was one of the most devastating and costly natural
disasters in our history, the President recognized that the response
required an additional focus on rebuilding efforts coordinated across
Federal agencies and State, local, and Tribal governments to
effectively address the enormous range of regional issues.
On November 15, 2012, President Obama announced that I would lead
the coordination of Federal support to the long-term rebuilding effort.
The President issued Executive Order 13632 on December 7, 2012,
establishing the Hurricane Sandy Rebuilding Task Force, and appointed
me to serve as its chair. Executive Order 13632 charged the Task Force
to ``work to ensure that the Federal Government continues to provide
appropriate resources to support affected State, local, and Tribal
communities to improve the region's resilience, health, and prosperity
by building for the future.''
My responsibilities in this role occurred in concert with the
National Disaster Recovery Framework (NDRF) and involved coordinating
closely with the Federal Emergency Management Agency (FEMA) and the
other agencies involved in recovery efforts.
Sandy and the Nor'easter that followed had immense impacts across
much of the eastern United States, with damage most severe in New York,
New Jersey, Connecticut, Rhode Island, and Maryland. Within the United
States, the storm caused over 150 fatalities, major flooding,
structural damage, and power loss to over 8.5 million homes and
businesses, directly affecting more than 17 million people as far south
as Puerto Rico, and as far north as Maine.
Sandy caused tens of billions of dollars in damage and is estimated
to be the second most costly storm in American history. Thousands of
businesses and more than 650,000 homes were damaged or destroyed.
State, local, and Tribal governments are addressing damage to roads,
bridges, mass transit, and other essential infrastructure, including
electrical and water treatment facilities, public hospitals, and
shorelines.
As I have previously explained to this Committee, in addition to my
concern as a citizen and as a member of this Administration, this is
personal to me. I grew up in the region. I was born and raised in New
York and worked on housing issues there, including serving as Mayor
Bloomberg's Commissioner of the New York City Department of Housing
Preservation and Development. I also worked on housing issues for
Prudential Mortgage Capital in New Jersey, and my wife is originally
from New Jersey. Many of my friends have been directly affected by the
storm's devastation. In light of my deep roots in the region, I am
particularly concerned with the devastation that Sandy has caused, and
I am especially honored to have the opportunity to help with recovery
and rebuilding efforts.
I have seen much of the damage first-hand, talked with State and
local officials and citizens living with the aftermath of the storm,
had discussions with Senators and Representatives from the area, and
have met with other Federal officials working on the recovery effort.
Everyone involved in the recovery and rebuilding has demonstrated
extraordinary dedication and courage.
Just as remarkable are the actions by average people I have spoken
with--individuals who have demonstrated a different brand of heroism by
simply reaching out to help their neighbors, even as they were facing
their own losses. I have seen bravery and determination that inspires
me and my colleagues to work even harder, respond quicker, and develop
more creative solutions.
With that mission in mind my testimony today will cover: 1) Ongoing
response and recovery efforts; 2) A brief background on the formation
and role of the Hurricane Sandy Rebuilding Task Force; 3) The role of
the supplemental Community Development Block Grant Disaster Recovery
(CDBG-DR) funding provided by Congress; and 4) HUD's continuing role
with respect to that funding and an assessment of the ongoing recovery
efforts.
Ongoing Response and Recovery Efforts
It is important to note the unprecedented cooperation that has been
taking place since Sandy struck among Federal, State, local, and Tribal
authorities. HUD, FEMA and other parts of the Department of Homeland
Security (DHS), as well as the Departments of Transportation, Health
and Human Services, Interior, Commerce, and Agriculture, plus the Small
Business Administration (SBA) and the U.S. Army Corps of Engineers
(USACE) and other agencies are all working together. For example, as a
result of coordination under the National Response Framework (NRF),
within a week after Sandy hit there were almost 11,000 National Guard
and 17,000 Federal responders on the ground from FEMA, the Department
of Defense, USACE, HUD, Department of Transportation, Department of
Energy, and HHS, as well as tens of thousands of utility workers from
across the Nation. The Federal Housing Administration and Federal
Housing Finance Agency worked to protect thousands of families who,
through no fault of their own, were at risk of home foreclosure as a
result of Sandy--first by putting in place a foreclosure moratorium,
and then by cutting red tape to offer families streamlined home loan
modification.
Another example is HUD and FEMA coordination to address past
environmental permitting and review inefficiencies in disaster
recovery. In developing our response to Sandy, HUD and FEMA recognized
that a single Federal review, sufficient for both agencies, could
expedite the review of housing recovery projects. To that end, HUD,
FEMA, and their local counterparts in New Jersey and New York State
worked together to find efficiencies in environmental review
requirements associated with housing recovery projects that leveraged
both HUD and FEMA funds. These efforts resulted in a process available
to expedite recovery reviews across the Sandy-affected region that
could otherwise be delayed by sequential and redundant review of
housing projects.
As of January 2014, FEMA and the SBA have served over 250,000
households and individuals and more than 13,000 businesses.
Additionally, 99.5 percent of Sandy-related National Flood Insurance
Policy claims totaling over $7.9 billion have been paid out to the more
than 143,000 policyholders who filed claims. Based on grantee reports
as of January 31, we know that more than 19,000 households have already
been assisted through CDBG housing programs across the region, with an
estimated pay out of more than $478 million to beneficiaries.
While substantial recovery efforts have been implemented across the
spectrum of needs, recovery can never be fast enough for affected
families, homeowners, and other victims of this terrible storm. And
because so much of the recovery from Sandy involves long-term
construction and infrastructure projects, work will continue for years
to come. More needs to be done at every level. But important progress
has clearly been made.
The Role of the Hurricane Sandy Rebuilding Task Force
The Administration recognized that the Federal Government's
performance during Hurricane Katrina and other disasters highlighted
the need for additional guidance, structure, and support to improve how
we as a Nation address disaster-related recovery and rebuilding
challenges. In September 2009, the Homeland Security Secretary and I
were charged with establishing a Long Term Disaster Recovery Working
Group, composed of more than 20 Federal agencies.
HUD, DHS, and the Working Group consulted closely with State, local
and Tribal governments as well as experts and stakeholders, and they
worked to improve the Nation's approach to disaster recovery and to
develop operational guidance for recovery efforts.
As a result, in September 2011, FEMA published the NDRF. The NDRF
addresses the short, intermediate, and long-term challenges of managing
disaster-related recovery and rebuilding. It sets forth flexible
guidelines that enable Federal disaster recovery managers to operate in
a unified and collaborative manner with State, local, Tribal, and
territorial governments. The Sandy Task Force has operated within that
framework.
On August 19, 2013, the Task Force released its Hurricane Sandy
Rebuilding Strategy. The strategy was designed to help communities
rebuild for the future and to ensure that we evaluate future
vulnerabilities and risk. This means building to address expected sea
levels, storm surges and extreme heat and precipitation, which pose
risks to the Nation. Many elements of that strategy are being
incorporated in HUD's ongoing work with CDBG-DR grantees to expedite
and ensure a more resilient recovery.
The work of the Task Force ended on September 30, 2013, on time and
significantly under budget. Going forward, HUD, FEMA and other agencies
that perform Recovery Support Functions will continue the Federal
rebuilding coordination efforts. There are three primary lessons that
are guiding our efforts to support local community rebuilding efforts.
First, it is important that both near and long-term recovery and
rebuilding efforts start immediately following a disaster and that the
Federal Government takes a coordinated regional approach to the
delivery of assistance to its State and local partners. To ensure that
this happens, HUD and FEMA are leading regional coordination efforts in
coordination with the Federal Disaster Recovery Coordinators under the
NDRF.
Second, this must be an ``All-of-Nation'' approach to rebuilding.
While the Federal Government has a key role to play in recovery, State,
local, and Tribal governments must be the leaders in this effort. To
ensure the Task Force's efforts maintained a local focus, we quickly
established an Advisory Group composed of 37 elected officials from the
Sandy affected region. We were also in constant contact with other
State and local officials--which gave us real-time information about
the rebuilding challenges communities faced. Now that the Task Force
has ended, FEMA and HUD are co-leading the Sandy Regional
Infrastructure Resilience Coordination group (SRIRC), supported by
dedicated staff at the Sandy Recovery Office (SRO) in Queens,
representing a range of Federal agencies. Since January, the SRIRC has
commenced monthly meetings with the States of New York, New Jersey and
Connecticut and the city of New York to coordinate on issues, and has
established 10 interagency Technical Coordination Teams that will focus
on implementing projects within 10 areas the group has identified as
the most critical infrastructure priorities, from waste water treatment
facilities to transportation to coastal protection. In addition, the
Sandy teams at the SRO and at HUD are in daily contact with the State
and City grantees.
Third, the recovery effort must include rebuilding in a more
resilient fashion rather than simply recreating what was already there
so that we are prepared for future disasters. One of the most critical
concerns we heard from our local partners was that communities needed
clear, accessible information about current and future flood risk. In
order to gather the best information on the risks the region faces,
FEMA, the National Oceanic and Atmospheric Administration and the Army
Corps of Engineers developed a tool which allows local planners and
decisionmakers to click on a map and see projections of the impacts of
rising sea levels as much as a century into the future. To ensure this
science would be put into practice, the Administration established a
single Flood Risk Reduction Standard that applied to all rebuilding
projects funded by Sandy-Supplemental dollars.
But we have not just armed communities with the best available
data--we have also worked to connect communities with the most
innovative engineering, planning and design ideas from around the
world. That's why HUD launched Rebuild By Design, a multi-stage
regional design competition, specifically to develop innovative
projects to protect and enhance Sandy-affected communities. I expect
the RBD process to come to fruition this spring and the resulting
projects will encourage new ideas for resilient recovery.
We have solid evidence that the risk of large scale disasters and
catastrophic losses is increasing due to increasing development along
our coasts and changes in demographics and climate. Investing in
mitigation is critical not only for the future of our communities--it
is also cost effective. The National Institute for Building Safety's
Multi-hazard Mitigation Council has estimated that for every dollar
invested in hazard mitigation, a savings of four dollars is achieved.
Homeowners, businesses and other entities recovering from a disaster
currently have access to FEMA's Hazard Mitigation Grant Funds in
coordination with their State and local hazard mitigation plans, to
assist in taking protective mitigation actions against future events.
Such investments are critical in a time of constrained resources. In
addition, it is critical to maximize the impact of every dollar of
supplemental funding.
To that end, the Sandy Rebuilding Strategy has outlined a process
for coordinating infrastructure projects across the entire region by
bringing all of the relevant Federal, State and local players to the
table to discuss those projects and map connections and
interdependencies between them. This process will help us save money,
improve the effectiveness of these projects and accelerate the pace at
which they're built. As noted previously, all major CDBG-DR funded
infrastructure projects will be included in this process. The Strategy
also highlights how the alignment of Federal funding and increased
leverage of non-Federal funds for infrastructure projects are important
to the success of disaster recovery in the Sandy-affected region.
The Role of CDBG-DR Funding
On January 29, 2013, President Obama signed the Disaster Relief
Appropriations Act (DRAA) of 2013. The supplemental funding bill
included funds for FEMA and USACE projects and activities, needs of the
Department of Transportation including the Federal Transit
Administration, support for the Small Business Administration and its
disaster loan program, Community Development Block Grant-Disaster
Recovery (CDBG-DR), and funding for a range of other critical
priorities.
The DRAA provided $16 billion in CDBG-DR funding, reduced to $15.2
billion due to FY 2013 sequestration, to address Sandy and other
qualifying disaster events in 2011, 2012, and 2013. The Department has
aggressively implemented the law and is ensuring that its requirements
are met. Of the amount appropriated, more than $10.5 billion has been
allocated to Sandy grantees through December 2013, and more than $2.8
billion has been obligated, and more than $1 billion has been disbursed
to those grantees as of March 6, 2014. HUD also has allocated an
additional $642 million to other State and local governments to assist
in their recovery from other major disasters in 2011, 2012, and 2013.
Specifically, on February 6, 2013--eight days following the
President's signature--I announced the first allocation of $5.4 billion
of CDBG-DR funds under the Act, to five States and the city of New York
to support their efforts to recover from the damage caused by Sandy.
This represented the fastest ever allocation of CDBG-DR funds following
the signing of a disaster appropriations bill.
With this first allocation, the Department and our grantees took
important first steps toward ensuring a more resilient and sustainable
recovery. Grantees, for example, are now incorporating green building
features in the replacement and construction of new housing. In the
construction or substantial improvement of structures, grantees must
also meet the elevation requirements of the Flood Risk Reduction
Standard to reduce risk in the face of future sea level rise and other
factors. This requirement addresses projected sea level rise, which is
not considered in current FEMA maps and National Flood Insurance
Program premiums, while acknowledging that those premiums may increase
once FEMA issues Flood Insurance Rate maps that account for Hurricane
Sandy.
On October 28, 2013, I announced an additional $5.1 billion in
CDBG-DR grants for the Sandy-affected region, bringing the total CDBG-
DR funding available there to $10.5 billion. Again, the Department
published a Federal Register Notice that builds upon the Notice for the
initial allocation but which also addresses grantee infrastructure
investments critical to recovery. Consistent with the recommendations
of the Hurricane Sandy Rebuilding Strategy, the Department's guidance
gives emphasis to making resilient investments, by requiring grantees
to identify and implement resilience standards in their infrastructure
projects, including factors such as rising sea levels and future
extreme events. We are also working closely with Sandy grantees to
ensure that resulting projects are the product of coordinated regional
planning efforts, meet needs identified by the grantees through
comprehensive risk assessments, and recognize the importance of both
natural and built infrastructure.
The Department is well aware of the frustration voiced by many
communities and residents over the pace at which CDBG-DR funds have
been distributed by our grantees. However, we are seeing the pace of
expenditures increase and it is important to understand both the
timeline as well as what it takes to implement programs of this scale.
With respect to the timeline, 3 months elapsed between the
onslaught of Sandy and enactment of the supplemental appropriation on
January 29, 2013. HUD allocated funds to Sandy grantees within days
following enactment of the appropriation and issued guidelines
governing the use of those funds on March 5, 2013. Grantees, however,
had to develop plans for using the funds and submit them to HUD for
approval. The three major grantees submitted their plans to HUD by May
2 and HUD approved them not later than June 6. Grant agreements were
immediately offered by HUD upon approval of the plans to enable
grantees to access their funds. To date, some grantees have been more
aggressive in accessing their CDBG funds than others.
With respect to implementation it is important to note that while
preparing recovery plans, grantees had to simultaneously build the
``back of the house'' infrastructure to implement programs on a scale
and at a pace they had not previously experienced. For example, in
developing a single family housing rehabilitation program, the grantee
must develop policies and procedures to implement the program, advise
the public of how to apply for the assistance, open the application
window for an adequate period of time, and then move to evaluating
those applications and making funding decisions. Only after these
processes occur can the grantee proceed to closing and begin to
distribute funds to homeowners. Similar issues arise in implementing
housing buyout programs, business assistance programs, public service
programs and other innovative initiatives undertaken by grantees.
HUD's Continuing Role and Ongoing Efforts
HUD continues to play a significant role in the recovery effort
across the Administration. Since the sunset of the Task Force on
September 30, my staff has worked closely with the Task Force agencies
to ensure implementation of the 69 recommendations in the Rebuilding
Strategy. We are coordinating on a daily basis with our partner
agencies in Washington as well as with their teams on the ground in the
region, and we have reporting and accountability mechanisms in place to
track both implementation of the recommendations and the pace of
spending. Further, on a quarterly basis, we convene the Sandy
Principals to review and assess progress, ensuring that the highest
level of leadership remains focused on the region's recovery and on
better preparing us for the next storm.
Collectively, and as a result of these efforts, we've accomplished
a great deal, and implementation of the Rebuilding Strategy is on
track, with nearly a third of the work we set out to achieve already
complete, and much more in progress. To be clear, much of the work of
implementing the Sandy Rebuilding Strategy is long term in nature, but
we're making significant strides: laying the groundwork for more
resilient infrastructure and establishing new mechanisms for
coordination both across Federal agencies and with State and local
governments.
To improve transparency about the pace of spending, we recently
announced that, in partnership with the Recovery Accountability and
Transparency Board, HUD is now publishing State-level data on the
status of Sandy funds across the Federal Government. This data will be
updated monthly and is available in the form of a map and downloadable
data files on the Sandy section of Recovery.gov.\1\ The map is shaded
to reflect the aggregate value of awards to primary recipients in each
State, and users will be able to click on each State to see the total
awards and payments from each agency to recipients within that State.
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\1\ Link here: http://www.recovery.gov/Sandy/whereisthemoneygoing/
maps/Pages/HudPmo
.aspx.
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CDBG-DR funds are currently being invested in communities working
toward long-term recovery. As noted above, more than 19,000 households
have already been assisted through CDBG housing programs across the
region, with an estimated pay out of more than $478 million to
beneficiaries. In January, for example, the State of New York provided
more than 2,400 homeowners on Long Island with nearly $83 million in
assistance for house rehabilitation and repair, while New Jersey
reported an expenditure of more than $166 million for residents
assisted through the State's Homeowner Resettlement program. With
grantee long-term recovery programs now in place, the pace of recovery
dollar expenditures can be expected to increase dramatically in the
coming months.
Grantees are obligating funds once they've made the determination
that they will be able to expend those funds within 2 years for
specific activities and programs. While the Act provides a means for
obtaining a waiver of the 2-year expenditure deadline, to date the
Department has received no such requests from grantees, but stands
ready to work with grantees to overcome any obstacles they may
encounter to achieving their recovery goals. As I stated, recovery will
never be fast enough for affected families, homeowners, and other
victims of this terrible storm. And because so much of the recovery
from Sandy involves long-term construction and infrastructure projects,
funds will continue to be spent for years to come. But receiving the
supplemental appropriation from the Congress has been critical for
planning and commitment of funds for significant recovery projects to
move forward.
The Department takes very seriously its role as a steward of
Federal dollars provided for long-term recovery efforts. HUD has
scheduled routine onsite monitoring and onsite technical assistance at
least twice every calendar year for New York, New York City and New
Jersey, the three largest recipients of CDBG-DR recovery funds for
Hurricane Sandy. The Department always has the right to supplement this
schedule to address emerging issues as appropriate. In addition to
these visits, HUD works closely with grantees on the implementation and
expenditures of funds and convenes weekly teleconferences with grantees
to discuss any issues or concerns that may arise. HUD is using well
established practices in monitoring these funds, including using a risk
analysis process to identify areas of concern that may warrant more
attention.
The DRAA also provided critical administrative funds to the
Department to implement the law, positioning the Department to
strengthen its monitoring of grantees' use of CDBG-DR funds and to
provide enhanced levels of technical assistance to each Sandy grantee.
To date, the Department has hired an additional nine term employees to
support the administration of Sandy CDGB-DR funds. This funding has
also allowed the Department to commit to an aggressive schedule of
monitoring and technical assistance for each of our largest grantees on
a quarterly basis.
It is common that concerns are expressed as initiatives of the
scale and scope of New Jersey's Reconstruction, Rehabilitation,
Elevation and Mitigation (RREM) program, the State's largest CDBG-DR
funded housing program, are developed and implemented. The Department
uses its established monitoring and review processes to examine the
facts and sort out the reality of claims. The Department initially
monitored New Jersey's CDBG-DR program in July 2013 and issued one
actionable finding related to the use of CDBG-DR funds as matching
funds to certain FEMA programs. This finding has been resolved. HUD is
undertaking a regularly scheduled monitoring review this week. This
review will focus on the State's RREM program, economic development
programs, use of CDBG-DR for tourism support and financial management.
As a preface to the regularly scheduled review, HUD recently conducted
a supplemental review of the RREM and Homeowner Resettlement programs.
The Department is in the process of finalizing conclusions from that
supplemental review and expects to provide feedback to the State
shortly.
The above mentioned reviews are carried out by HUD's Office of
Community Planning and Development which has management
responsibilities for the CDBG program and, hence, CDBG-DR funding.
There are also other parts of the Department that have distinct roles
as well. The Office of Fair Housing and Equal Opportunity (FHEO) has
separate review and enforcement responsibilities related to fair
housing, civil rights and related statutes and FHEO staff have been
actively reviewing and analyzing the performance of Sandy grantees,
including New Jersey. The Department's Office of Inspector General
(OIG) was provided $10 million in additional funding under the Disaster
Relief Appropriations Act, 2013 (Public Law 113-2) to review Sandy
grantees and they have a multi-faceted review plan that includes both
audits and investigations, and the Department has sought input from OIG
in our efforts to develop policies on the front end to avoid fraud,
waste, and abuse.
With regard to technical assistance, CPD has provided grantees with
a wide range of resources to assist in the design and implementation of
their recovery programs. For example, in March 2013, HUD convened a 3-
day training session for grantees receiving funds under the Act.
Through HUD's OneCPD Technical Assistance Initiative, HUD has deployed
technical assistance providers, who are subject matter experts, to work
with grantees on such tasks as developing appropriate safeguards to
help ensure that HUD funds are being used to address unmet needs that
have not been addressed by other sources of funding. HUD also convenes
hour-long weekly calls with each of our largest grantees to address
ongoing challenges and questions that arise in program implementation.
With regard to New Jersey's proposed action plan for the second
tranche of $1.463 billion in CDBG-DR funds, the State issued the draft
action plan for public comments on February 3, 2014, and is expected to
formally submit that plan to HUD for consideration within the next 2
weeks. Given that the Department must approve the plan, we will
carefully review the State's submission against the requirements of the
applicable Federal Register Notices and in light of information
gathered during monitoring reviews and technical assistance visits. A
key aspect of this review will be an interagency review process focused
on major infrastructure projects. To ensure a thorough and complete
analysis, HUD is permitted to take up to 60 days to review the plans.
To the extent that HUD identifies deficiencies in any action plan for
these CDBG-DR funds, we have a range of options for addressing those
concerns--ranging from informal consultations with grantees to clarify
and resolve issues to not approving the plan and requiring revisions
consistent with statutory and regulatory guidelines.
Thank you again for the opportunity to testify today. I am happy to
answer any questions you may have.
______
PREPARED STATEMENT OF MATTHEW J. DOHERTY
Mayor, Belmar, New Jersey
March 12, 2014
Thank you for this opportunity to share with you some of the things
we experienced in Belmar, NJ as a result of Sandy. Based on
conversations with other Jersey Shore Mayors, it seems that our
experiences are similar to what other communities are going through as
well.
I want to first thank you, all of the Members of this Committee,
and the rest of the Senate and House of Representatives for
appropriating financial resources to both Belmar and the rest of the
Jersey Shore since Sandy ravaged our communities on October 29, 2012. I
know that, while there were some Members who opposed helping us, as a
collective body you supported us and for that we are grateful. I would
also like to take an opportunity to thank New Jersey's Congressional
delegation for all of their hard work in helping to secure much-needed
aid, particularly Senator Bob Menendez, Congressman Frank Pallone,
Congressman Bill Pascrell and Congressman Chris Smith. Having gone
through this experience I can tell you that without Federal assistance
both my community, and the rest of the Jersey Shore, would be at risk
of becoming a relic of the past. No State, county, or municipality
could come back from a terrible hit like the one our communities
absorbed without Federal assistance.
I also think that it is worth noting that there is no private
sector solution to recovery and rebuilding from a storm like Sandy. It
is government, and government alone, that makes recovery from a storm
like Sandy possible.
Sandy destroyed town infrastructure, businesses and residential
properties. I would like to take this opportunity to share with you our
experience of working with the Federal Government and the State
government in these three areas. In addition, I would like to humbly
offer suggestions for the future allocation for Federal resources for
Sandy recovery based on my experiences as the mayor of a town that was
hit particularly hard.
The day after Sandy stuck our community, we immediately began
cleaning up. We started pumping water out of our town at a top rate of
60,000 gallons of water a minute and it took 6 days to complete. In
addition, we brought in outside contractors to begin to remove the
debris from town, including 1.2 miles of boardwalk and 5 pavilions on
the beach front. There was also a tremendous amount of debris that came
out of people's homes and businesses. We made a concerted effort to
remove the household debris as soon as possible for both health reasons
and psychological reasons. We found that beginning the process of
recovery as quickly as possible had the positive impact of bringing our
residents closer together and the thousands of people who came to help
volunteer only served to further expand the larger sense of community.
Through all of this, we worked with the Federal Emergency
Management Agency (FEMA) on a daily basis. They developed project work
sheets so that we would be eligible for reimbursement of 90 percent of
all the debris removal expenses and they helped guide us through what
could have been a very difficult and convoluted process.
Even while we were in the process of cleaning up the devastating
effects of the storm we began to aggressively plan to rebuild our
boardwalk with a goal of being completed in time for the summer in
order to try and salvage our tourist season and pump needed tourism
dollars into our community. We began to rebuild the boardwalk on
January 9, 2013 and completed the project by the end of April, with a
Grand Opening just days before Memorial Day Weekend.
Both Senator Bob Menendez and Governor Chris Christie joined us for
our Grand Opening. Not completing this project in a timely fashion
would have risked the future of our 140 small businesses in town. Like
most towns along the Jersey Shore, all of Belmar's businesses are small
businesses owned by middle class families. By completing the boardwalk
on time we were able to set the tone that our town would be open for
business for the summer which, in turn, helped encourage local business
owners to be open as well. Because of their hard work and
determination, we had the same number of businesses open for Memorial
Day as we did the day before Sandy. Similar to the efforts on debris
removal, we worked with FEMA on a weekly basis and looked at them as a
partner. They produced the project work sheets that made the rebuilding
of the boardwalk eligible for 90 percent reimbursement and, again,
offered us necessary guidance.
Again, without FEMA, our town, and the rest of the Jersey Shore
would have a very difficult time advancing toward recovery. In fact,
without their help it is possible that vast middle class areas may have
remained permanently stagnant, so I want to reiterate how important
FEMA has been to our recovery.
We found through this process that businesses seem to recover
rather quickly, far more quickly than residential properties. This
seems to owe to a few different factors. As I mentioned before, most of
the businesses at the Jersey Shore are small businesses owned by middle
class families. In most instances, these businesses are the sole means
of income for these families. If they were unable to be open for the
summer months, it would be devastating to their financial situation and
would begin to negatively impact the rest of the community. Failed
businesses and vacant store fronts lead to the deterioration of a
community. Another factor in the timely recovery for small businesses
in our community was the Small Business Administration (SBA). The SBA
was quick to establish itself in the shore area (just like FEMA) and
assisted small business owners and several business owners were
eligible for grants to help them restock their inventory for the
summer. An additional factor was the insurance that many businesses
had, particularly business interruption insurance. Last, in order to
save their businesses, many small businesses owners emptied out their
savings, borrowed money from friends and family, and did whatever it
took to get open for the summer.
Unfortunately, we are finding that residents affected by Sandy are
the ones having the most difficult time with recovery. While FEMA and
SBA were both on the ground after the storm for 4 months, it is the
long-term process of recovery for many families that has proved to be
problematic. In many communities along the Jersey Shore there are still
families that have been displaced, as of today, for 500 days. 500 days
of stress on families. 500 days of living in multiple places. 500 days
of living on someone's couch. 500 days of driving children to school 17
miles a day just so they have some semblance of normalcy in their young
lives. 500 days of struggling through bureaucratic rules and
regulations. 500 days of not knowing when, or even if, they will ever
get back home again.
In our small town alone we have 90 families that have applied for
the Reconstruction, Rehabilitation, Elevation, and Mitigation (RREM)
grant and only 1 in 5 were approved and funded. The rest are either
waitlisted or ineligible. I cannot stress how difficult this is on
these families when all they want to do is go back home.
I would like to share a couple examples, Frank Murphy and his wife
had twin babies a couple of months before Sandy destroyed their home.
They applied for the RREM program and where told that once they apply,
they must stop all construction, or they will receive nothing. They
were denied the grant and began building their house as they appealed
their denial. Over time, their denial was reversed and they were told
that their grant for $30,000 would be funded. But now, since they
started to rebuild to get back home, even though their grant was
funded, and they are eligible, they will receive nothing. No one from
the State told them that during the appeal process they could not work
on their house. How long should they be forced to wait to work on their
home, particularly after being denied and subsequently given no
timeframe for when they would hear on their appeal? The fact of the
matter is that the Murphy's aren't looking to blame someone for the
wrongful denial of their grant application, they just need the
resources so they can get back home.
Another example is Krista Sperra. She is a graphic designer who
both lives in Belmar and has her business in Belmar. She is married
with two children in grammar school. She and her husband paid premiums
on their flood insurance every year, for over 10 years, before Sandy
hit. Sandy brought water that engulfed Krista's home and surrounded her
home, and those of her neighbors, for several days. After the water
resided, she had a structural engineer look at her foundation. Like
many in Belmar, Krista owns an old house with a foundation made of
brick and mortar. The engineer told her that she needed a new
foundation and that she could not do any work above the foundation
until it was completed. She brought this information to her insurance
company, they sent someone out to look at it, and they told her that
all she needed to do was replace some of the mortar in between the
bricks and she would be fine. They gave her $600 and told her that
would be sufficient for the mortar. She consulted another engineer and
he told her the same as the first engineer, the entire foundation
needed to be replaced.
Krista is now suing her insurance company, displaced from her home
and living in the third house since Sandy hit and needs to find another
place for her family by the end of May (her fourth place since Sandy).
500 days she and her family have been displaced and she is now suing
her insurance company as she looks for a new place to stay. All she
wants to do is get herself and her family back home.
These are just two of countless stories at the Jersey Shore today.
But I think they are both indicative of the fact that people are
generally not interested in moving somewhere else, they do not want to
give up on their community. Rather, they want to stay and rebuild. They
want to get back home.
From these experiences, and many others, I would like to offer a
few suggestions on how additional Federal resources could be allocated
for the maximum benefit to communities still recovering from Sandy.
First, while communities wait for Federal funding, allow them to
begin projects they need to recover from the storm, and reimburse them
later. This follows the current FEMA model.
Second, relax rules that make it difficult for families that did
work on their homes right away to receive funding simply because they
wanted to get their families back home. This will eliminate the
disincentive for being aggressive about getting back home. People
should still receive their funding, even if they did work after the
application date.
Third, compel the National Flood Insurance Program (NFIP) to settle
with clients through arbitration, as opposed to forcing these residents
to sue their insurance company. Many of these people have been paying
premiums on their insurance for years in order to have help during just
such an emergency and they should not have to sue for that coverage.
Fourth, increase the appropriation for housing and infrastructure
for Sandy impacted communities. As we come to the end of the Community
Development Block Grant (CDBG) allocation, I believe there will be a
need for additional financial resources to assist families and
communities to fully recover.
Fifth, and last, let us not get caught up in the blame game. Let
all of the elected officials from the Federal, State, county and
municipal level work together to help middle class families during this
time of ongoing trouble. We have all done a lot these past 500 days,
and now is the time to rededicate ourselves to ensuring that everyone
gets back home.
Thank you again for the opportunity to come speak before this
Committee and share my experiences and suggestions.
______
PREPARED STATEMENT OF ADAM GORDON
Staff Attorney, Fair Share Housing Center
March 12, 2014
Good morning, Chairman Menendez, Ranking Member Moran, and Members
of the Committee. Thank you for convening this morning's hearing. My
name is Adam Gordon and I am a Staff Attorney with Fair Share Housing
Center, which works throughout New Jersey to ensure that people of
every race, ethnicity, and income level, including families, seniors,
and people with special needs, can live near their schools, jobs, and
families. Since Sandy hit, we've worked with a broad range of community
groups and individuals impacted by the storm to ensure that the
rebuilding process, including Federal money available for rebuilding,
is distributed fairly to everyone impacted by Sandy. We run a hotline
for people impacted by Sandy and provide rebuilding information on our
Web site and through partnerships with local community groups.
It has now been nearly a year and half since Superstorm Sandy
devastated communities throughout New Jersey, from Moonachie in Bergen
County to Ocean City in Cape May County. For too many people in New
Jersey, it is still as if Sandy happened yesterday. There are places in
our State where street after street sits with half-destroyed homes or
homes filled with mold, with the people who live there unsure what
comes next for them and their families. With tens of thousands of
renters and homeowners still displaced and wondering if they will ever
be able to move home, many people are asking: ``Couldn't the recovery
be going better?'' In fact, according to a recent Monmouth University
poll, three-quarters of people impacted by Sandy believe that the
recovery is not helping people like them. Some of the stronger
complaints that we've heard include the veteran who said dealing with
the State has been harder than fighting in Afghanistan and the local
community leader who compared the programs to a shady used car salesman
trying to figure out how to get away with providing as little aid as
possible.
We agree with something Senator Menendez said earlier this week:
the most important thing at this point is not to assign blame, but
rather to chart a path forward that fixes the problems. This hearing
comes at a critical time: when New Jersey is about to receive $1.4
billion in additional Federal funds. The allocation of these funds
provides a singular opportunity--for many people impacted by Sandy
perhaps the last opportunity--to get this recovery on track and help
people rebuild.
Today, we'll describe program and policy changes we and others have
proposed to make the recovery stronger, fairer, and more transparent.
These proposals come from us and a broad range of other groups,
including people impacted by Sandy, civil rights groups such as the
NAACP and Latino Action Network, business groups such as housing
developers, the nonprofit Housing and Community Development Network,
and to faith-based organizations and congregations throughout New
Jersey. We described many of these recommendations in a report in
January available on our Web site, and have submitted them as comments
to both State and Federal officials.
We're going to focus on three main areas: first, fixing the two
main New Jersey homeownership programs, RREM and Resettlement, which
have been plagued by widespread problems in implementation that have
hit lower-income people, African Americans, and Latinos the hardest,
but have more generally not worked well enough for everyone impacted by
Sandy. Second, making sure that renters impacted by Sandy are not left
out. And finally, targeting scarce Federal funds to the hardest hit
areas.
First, the State's main programs for rebuilding for homeowners, the
Reconstruction, Rehabilitation, Elevation, and Mitigation, or RREM,
program, which helps with structural rebuilding, and the Resettlement
program, which helps with short-term grants, simply are not working the
way they should be. That's true for everyone, but especially true for
lower-income people, African Americans, and Latinos hit hard by the
storm.
It recently came to light, only after we had to sue the State for
access to documents under our freedom of information law, that the
State and its contractors unfairly rejected thousands of applicants for
both of these programs. We'd hear the stories day after day--people who
had four feet of flooding would call us and say they got a letter that
they did not have enough damage to qualify. And it turns out that the
data that the State relied upon was systemically flawed. In fact, when
people appealed their denials, nearly 80 percent of people appealing
won. That means that when the State reviewed denials for funding, four
out of five times they got it wrong. But most people didn't appeal--
they trusted in the process, even though it turns out the process was
fundamentally flawed.
These problems hit people of every racial and ethnic group, and all
incomes. But they hit African Americans and Latinos particularly hard.
African Americans were rejected from these programs at 2.5 times the
rate of white applicants, and Latinos at 1.5 times the rate of white,
non-Latino applicants. Yet for people who appealed denials, approval
rates in the RREM program were similar--over 75 percent for people of
all races and ethnicities--in fact Latinos had the highest approval
rate of any group. And even when you isolate applications by zip code--
thus looking at people with similar levels of damage--the disparities
persist.
We still don't know the full story of how this happened, but we
have some clues. The State frequently provided incorrect information in
Spanish. There was no information for months on the appeals process or
the date applications were due on the Spanish language Web site, when
that information was readily available in English. When Spanish-
speaking applicants went to in-person application centers, they often
found nobody who could help them, even in heavily Spanish-speaking
areas. And many people in African American and Latino communities did
not know about the programs at all due to poor publicity and outreach.
One particularly troubling example is in the heavily Latino community
of Moonachie, where some applicants were told, incorrectly, that the
mobile homes they lived in did not qualify for the program and it was
for the ``big houses in the center of town''; out of hundreds of mobile
homes damaged there have been only 10 grants that we know of to mobile
homeowners.
The whole program was shoddily run. Walk-in centers were located
far from damaged communities to save on rent. Call centers were told to
get people off the phone as quickly as possible instead of helping them
solve their problems. To its credit, the State has now fired the
contractor running the program, HGI, though it hid that decision for 6
weeks until a reporter uncovered it and it is unclear who is now
running the show.
The main problems now are that while everyone agrees the program
wasn't working, there is an attitude of defensiveness about the debacle
that transpired. Instead of working together to fix the problems, the
State has consistently hid information, failing to respond to public
records requests, and only reacting after litigation and severe
pressure from the media and angry homeowners.
The fixes in many cases are obvious. Here's a few:
As I noted, denials were wrong 80 percent of the time. Yet
most people didn't appeal the denials because they didn't know
about the process, were concerned about the potential costs or
bureaucracy involved, or didn't think it mattered--in fact
fewer than 1 in 3 people rejected appealed, and African
Americans and Latinos appealed at particularly low rates. The
State should affirmatively review every denial and see if in
fact the applicant was eligible. Instead, the State is
requiring people to go through a complex appeals process. When
you're wrong 4 out of 5 times, it's on you to fix the problem,
not people impacted by the storm.
Too many people were wrongly told they didn't qualify, or
provided the wrong information, whether mobile home owners or
people using the Spanish language Web site. The Latino Action
Network filed a Federal complaint in response to the Spanish
language Web site problems, which included incorrect
information about the appeals date and location of the centers,
and asking for the lists to be reopened. That complaint, 5
months later, remains unanswered by either the State or HUD.
The State needs to reopen the application process given these
widespread failures, which it has to date refused to do.
The State promised to grant 60 percent of Resettlement
funds and 70 percent of RREM funds to low and moderate income
homeowners. They have not met those targets because they claim
there were not enough qualified applicants. We now know that
many of the people the State found unqualified in fact were
qualified--so it's time to make sure that these promises are
kept.
We need to make sure this money gets out efficiently and
effectively, and people know where they stand. We hear from
people all of the time that they are told different things
about whether they will get money or not, and confusing
information about their place in the wait list. We need a plan
to fairly treat everyone who qualifies based on need and damage
alone.
Second, while programs for homeowners are not working well or
fairly, in many cases renters have it even worse and aren't eligible
for funding at all. An analysis that I worked on with the Furman Center
for Real Estate and Urban Policy at New York University, where I am a
nonresident fellow, showed that 40 percent of all families impacted by
Sandy in New Jersey are renters. About two-thirds of the lowest-income
people hit by Sandy in New Jersey, those families earning less than
$30,000 per year, are renters. In addition, over two-thirds of African
Americans and Latinos impacted by Sandy in New Jersey are renters.
So far, only 25 percent of housing funds made available from the
Federal Community Development Block Grant have gone to renter programs,
despite renters constituting 40 percent of the damage. In particular,
New Jersey has made very little money available directly to help
renters impacted by the storm. While homeowners have been eligible for
over $200 million of Resettlement grants of $10,000 in immediate funds
to help people get back on their feet, the State has only just now
proposed a $15 million program for renters. Meanwhile, as rents
skyrocket due to the damage to housing stock and new competition in the
rental market from displaced owners, families have to split up or are
being displaced from their home communities. In many areas, rents have
gone up by 20 percent or more due to a lack of housing supply; vacancy
rates in some counties fell after the storm to under 1 percent. We hear
from people living in isolated areas in campers, doubled up with
relatives, or having to leave because their rents are going up--with no
idea of where they will be even a few months from now.
Long-term rebuilding efforts are also severely underfunded and, as
I'll discuss next, are being funded in areas with little or no damage
from Sandy far from where most people displaced by the storm live. Our
second recommendation is to increase funding available to renters to
both meet immediate needs and long-term rebuilding, so it is
proportional to the damage from the storm.
Finally, we are very concerned that the money there is for renters
isn't actually going to where the damage from the storm was. The two
hardest hit counties, Ocean and Monmouth, had 52.5 percent of major and
severe rental damage. However, these two counties have received only
21.7 percent of the funds in the main rental rebuilding program to
date, the Fund for Restoration of Multi-Family Housing. In contrast,
the eligible county with the least damage, Essex, which is about 60
miles from Monmouth and Ocean Counties, had just 1 percent of major and
severe rental damage--or less than one fiftieth of the damage in
Monmouth and Ocean Counties. However, that single county has received
16.1 percent of funding for the main rental rebuilding program to
date--nearly as much as Monmouth and Ocean County combined--including
in municipalities such as Belleville that had little or no damage from
the storm. I can't overemphasize how much we hear from people who are
angry about this. They ask why Belleville could get money, but there is
no money for people to relocate to replacement homes in their
communities.
The potential is there. We hear from landlords and developers that
they are quite willing to invest in rebuilding in the hardest hit areas
and would like to do so. However, the State's programs are not
structured in a way that sets clear rules to target the funding to the
places with the most impact. As such, developers have no incentive to
deal with the regulatory tangle that inevitably comes with developing
in a disaster area, if they can more easily get Federal funds in areas
that were barely hit. It isn't right, but it is how the State's
incentives are structured, and it is not realistic to expect private
market actors to invest a lot of time and money in the areas truly hit
by Sandy if they won't get funding at the end of the day.
What impact does that have on families? Let me put it in the
context of a few of the Members of the Committee's States that I have
the pleasure to have visited. Senator Toomey, it's like telling someone
displaced from a disaster in Reading that they have to move to
Harrisburg if they want recovery money; Senator Warren, it's like
telling someone hit with a disaster in Boston that they have to move
somewhere out past Worcester if they want relief. It's wrong to use
Federal disaster money in a way that severs people from their
communities, and forces them to choose between moving far away and
getting to rebuild. Especially when we have heard from the development
community that they are willing to rebuild in storm-impacted areas if
the State prioritizes those areas. Our final recommendation is that for
the next $1.4 billion the State needs to put the hardest hit areas
first.
I'll conclude by noting that both the State and HUD have known
about the problems I have identified for many months, yet we have not
seen any significant action to address them. While HUD was helpful in
requiring changes of the State nearly a year ago in the first Action
Plan to shift more money to renters impacted by Sandy, since that time
we have seen too little action to ensure that these Federal funds are
spent fairly. Given the magnitude of the problems on the ground in New
Jersey and the urgent needs of people impacted by Sandy that are going
unmet, HUD needs to take a leadership role in making sure that these
problems are corrected.
The time to act is now. As I noted before, the next $1.4 billion
from HUD is critical. If we don't make sure these funds are spent
fairly--fixing the broken RREM and Resettlement process, addressing the
needs of both renters and owners, and targeting the people and areas
hardest hit--it will be lights out for too many New Jerseyans trying to
rebuild. Unfortunately, absent a strong course correction through a
partnership between the Federal and State governments and impacted
communities, too many people will not be able to rebuild. We want a
better result for our State that uses these scarce Federal funds fairly
and effectively. Thank you for your time.
______
PREPARED STATEMENT OF JANICE FINE, Ph.D.
Associate Professor, Rutgers School of Management and Labor Relations
March 12, 2014
State Oversight of Hurricane Sandy: Some Problems and Questions
Introduction
In December 2013, the Christie Administration terminated the
largest contractor hired to provide Hurricane Sandy relief services,
HGI (Hammerman & Gainer) which had a 3 year, $67.5 million contract to
manage the Renovation, Reconstruction, Elevation and Mitigation (RREM)
program,\1\ and more recently, the URS Corporation, which had a $20
million contract to supervise the rebuilding of homes destroyed in the
hurricane.\2\ What went wrong?
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\1\ Colleen O'Dea, ``Botched Process Denied NJ Residents Millions
in Sandy Relief,'' NJ Spotlight, Feb. 7, 2014.
\2\ Matt Katz, ``NJ Quietly Fires Second Contractor Hired to Help
Sandy Victims,'' NJ Spotlight, Feb. 14, 2014.
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These companies, that were awarded multi-million dollar contracts
and charged with administering millions in Sandy Recovery funds, were
supposed to be overseen by the Department of Community Affairs (DCA).
Their failures have had far-reaching consequences for Sandy victims.
Recovery centers frequently lost applications or provided misleading
advice on what documentation was needed. Ultimately thousands of
homeowners were wrongly found to be ineligible and the process they
could utilize to appeal these decisions was also poorly publicized.\3\
Documents released by the Fair Share Housing Center paint a disturbing
portrait of what happens when oversight is neglected. From what we have
come to understand after studying the State's oversight policies and
practices for close to 3 years, this was not an isolated problem due to
emergency circumstances but rather a consequence of a deep, systemic
problem many years in the making.
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\3\ Fair Share Housing Center, et al., ``The State of Sandy
Recovery: Fixing What Went Wrong with New Jersey's Sandy Programs to
Build a Fair and Transparent Recovery for Everyone,'' Housing and
Community Development Network of New Jersey, January 2014, http://
www.hcdnnj.org/assets/documents/report%20state%20of%20sandy.pdf.
(accessed Feb. 2014).
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While many State governments are actively engaging in government
contracting, research strongly suggests that government capacity to
provide adequate and effective oversight has dwindled--and New Jersey
is no exception.\4\ The two keys to contract oversight are (1) well-
written contracts adequately defining the responsibilities of the
contractor and the protections of the State and (2) strong,
experienced, well trained managers with a deep knowledge of the
activities they are monitoring and time to do the job well.
Unfortunately, between 2004 and 2011, the size of the State workforce
in New Jersey shrank by 36,319 while the total value of contracts held
steady and in some years especially 2013, increased quite
significantly.\5\
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\4\ Van Slyke, David M. ``The mythology of privatization in
contracting for social services,'' Public Administration Review 63, no.
3 (2003): 296-315.
\5\ Despite our best efforts to arrive at comprehensive numbers, we
have only been able to obtain figures regarding Department of
Purchasing and Property contracts. The State Office of Management and
Budget generally estimates that these contracts account for
approximately 50 percent of all State contracts. We have no data about
the other 50 percent, which includes all human service contracts.
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Contract management involves both people who maintain relationships
with contractors and clients, and systems that facilitate the work of
those people. Our research project looked at the capacity of the
current State workforce to conduct contract oversight and analyzed the
overarching institutions--laws, regulations and policies--governing the
entire contracting process. Below we summarize best practices in
contracting as documented in scholarly literature on public
administration and supply chain management. Next we describe how the
State of New Jersey conducted contracting in the aftermath of Hurricane
Sandy. We conclude with a discussion of the consequences of New
Jersey's approach to contracting and oversight and provide a list of
questions that merit further investigation.
Best Practices
When employment is shifted to another party that is paid to provide
services, the lead employer is simply ``less able to monitor
performance, since those doing the work are now potentially hidden
within another organization.''\6\ Best practices in the business
literature \7\ suggest that lead firms maintain quality in services
delivered by their subcontractors, by providing for 3 things:
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\6\ Weil, The Fissured Workplace, 59.
\7\ Ibid., 63-73.
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Clear and explicit guidance on what is expected
A system of monitoring and auditing to ensure that those
standards are followed
Significant penalties in the face of failure to meet goals
In terms of conducting oversight, best practices therefore include
thorough contract costing and design, transparent and competitive
bidding, and strong performance management. The latter involves ongoing
communication and cooperation between contract managers and contractors
and strategic contract monitoring with clear performance requirements
and standards. These in turn require adequate staffing and training of
contract managers who are responsible for the process. The challenges
ordinarily posed by contracting to provide services are exacerbated in
emergencies, which can dramatically increase the demand for oversight
in a very short period of time. Details regarding the three best
practices are summarized below, including qualifications relating to
emergency relief.
1--Thorough Contract Costing and Design -> Transparent and Competitive
Bidding
Typically, the contracting process proceeds in three stages: RFP
generation, bidding, and contract management. The RFP generation stage
is critical because it is here that the terms of the contract are
created. Prospective contractors bid on the RFP and the terms of that
RFP largely become the terms of the contract between the State and the
winning bidder. Given that the RFP essentially becomes the contract, it
also effectively defines what the State can demand of the contractor
and what remedies are available if the contractor fails to live up to
its duties. Best practices suggest that contract design and contract
oversight are closely linked and contracting units should develop and
communicate, during the RFP process, clear and detailed performance
measures, specifications and contract monitoring requirements.
The bidding process offers another opportunity to exercise control
over contractors. This is where the State gets to choose its partners.
However, for the State to have a choice, and for bidders to have an
incentive to maximize quality and minimize cost, there must be multiple
bidders who compete on a level playing field. Information is key to
this competition. The more information the State has on what is being
offered, the better a consumer the State can be. Likewise, transparency
helps level the playing field by offering competitors and other
interested parties the information needed to hold the State accountable
for its decisions.
As these practices suggest, the process is very intensive and can
be extremely time consuming. It is difficult under the best of
circumstances. In emergencies--including one of the most destructive
natural events to hit New Jersey--temporarily relaxing some best
practices relating to contract creation and bidding is understandable.
It provides the State flexibility to immediately respond to human
needs. The increased flexibility is exemplified by DCA using the less
detailed RFQ process as opposed to the more extensive RFP process. This
does not, however, absolve the State of all due diligence in designing
contracts or choosing contractors. The State can, for example, identify
obvious flaws in past performance and conduct desk reviews of capacity
and competence. Moreover, strongly institutionalized oversight--
discussed further below--can make it far easier to conduct these
analyses on short notice.
2--Contract Management
Expediency cannot justify a complete relaxation of contract
management best practices. On the contrary, less stringent contract
creation and bidding procedures impose a heightened burden on the
contract management process to compensate for any increased scope for
abuse. Best practices suggest that States should have:
a corps of highly qualified contract managers with the
expertise and resources to engage intimately with the
contractor
systems, and especially data systems, that make the process
more efficient and more transparent
3--Strong Institutions
In all circumstances, good oversight requires strong overarching
institutions. The laws, regulations and policies governing the process
provide the foundation for oversight. The need for strong institutions
is especially acute in emergencies because they exacerbate the already
significant challenges of contract administration. Strong institutions
ensure that the State has the capacity and competence to handle
ordinary oversight and absorb sudden spikes in demand that come with
emergencies. Creating strong institutions involves the following:
Laws ensuring that contracts are managed by qualified
individuals with sufficient capacity to engage intimately with
the contractor
Laws providing mandates and resources for meta-oversight of
the contracting process
Laws requiring and providing appropriations for integrated
and standardized data systems and regulations detailing
technical requirements to ensure compatibility across units
Laws making transparency, including the publication of all
key documents and details, non-negotiable and providing
mechanisms for interested citizens to act on that information
How New Jersey Responded to Hurricane Sandy:
In our in-depth review of New Jersey's capacity to oversee its
contractors, we found significant issues that may provide insight into
why the State has struggled to handle the contracts associated with
Sandy Relief. In general, where legal and administrative structures for
contract oversight exist, they are not being effectively implemented.
Where they do not exist, people and systems are not sufficient to
compensate. Our brief review of Sandy relief suggests that both issues
may be at play. In particular, there are executive orders and
documented plans that on their face should have enhanced oversight. How
they were executed in practice may be one key to the failure of
oversight. Similarly, despite the additional orders and plans, they
were not likely sufficient to fill the existing holes in New Jersey's
oversight capacity.
New Jersey has significant structural and practical flaws that make
it extremely difficult for it to conduct ordinary oversight, let alone
handle the sharp increase in demand created by the administration of a
massive disaster-relief grant. In particular we found large
institutional deficiencies and significant neglect of on-the-ground
oversight. These led predictably to significant consequences for
taxpayers and clients.
Many of the most significant oversight decisions and processes are
subject to few if any formal rules. Only the bidding process is well-
regulated and only for about half of all State contracts. There are few
central institutions governing contracts for services provided directly
to residents.
There are no institutionalized mechanisms within State government
to ensure that sufficient resources exist so that individuals
responsible for the majority of oversight are able to do the job well.
Simply put, the budgetary process does not build in the cost of
oversight of contractors at individual State agencies.
There does not appear to be any agency within the State with the
capacity or competence to monitor the overall efficiency or
effectiveness of resources allocated to contractors. OSC and the Office
of Management and Budget (OMB) are prime candidates, with relevant
competencies, but neither currently has a mandate or the resources to
do so.
Attrition is a predominant problem, depriving every contracting
unit we studied of practical expertise while simultaneously increasing
the burdens on those workers that remain. This is not surprising, given
the structural lack of priority given to oversight. It occurred in all
four of the departments for which we were able to obtain such
information.
No contract costing and minimal specification of contract terms
prior to the issuance of RFP's. Every official we asked confirmed that,
to their knowledge, costing was not done in any systematic way.
Contract Managers are not always qualified or properly trained to
fulfill their roles effectively. According to officials from every
department studied, there are not enough human resources being assigned
to oversight and effective oversight is not being fulfilled by many of
the individuals who are being designated as contract managers.
Contracts had weak performance requirements and standards. Only a
minority of contracts had outcome-based performance measures and there
was little evidence of performance targets being integrated into a
comprehensive oversight system. Only the Department of Mental Health
Services (DMHS) had clear, outcome-based performance measures in
contracts combined with a comprehensive system of oversight.
Very few contracts required specific data collection and reporting,
outcomes-based benchmarks with clear performance measures and
milestones tied to payment despite these being widely accepted best
practices. Similarly, very few contracts had automatic sunset
provisions and requirements that contractors would have to reapply in a
competitive bidding process.
There are substantial impediments to transparency. The biggest of
these is that data for many contracts is simply not kept in any
systematic way. As a result, it is nearly impossible to gather and
analyze information.
Prior to Sandy, lack of oversight had already had significant
consequences for vulnerable people and for New Jersey taxpayers and was
continuing to place assets at risk
A lack of contract monitoring at DCF's Division of Child
Protection and Permanency (DCPP) leaves children vulnerable to
being served by inadequate providers
Lack of oversight at DHS's Department of Developmental
Disabilities led to substantial waste of taxpayer money with
little assurance that services for which the State has
contracted are being provided
Lack of oversight at DOC's Residential Community Release
Program (RCRP) led to assaults and deaths in the facilities as
well as in communities
businesses
Given our findings regarding the State's lack of capacity to
oversee ordinary contracts, it is not surprising that it has struggled
to handle the massive relief program. The State's response required the
coordinated action of various organizations, each providing services to
New Jersey citizens and each with long lists of detailed
responsibilities. On the surface, the State's Action Plan and Executive
Order 125--signed by Governor Christie appear to enhance oversight
under special circumstances. However, our prior findings and the
stories that are now coming to light suggest that these paper
requirements were insufficient, not followed well, or both.
The core of New Jersey's effort to enhance oversight capacity to
handle the demands of Sandy relief are Executive Order 125, the
creation of a special management Division within DCA and the use of an
Internal Auditor within DCA. The latter two come directly from New
Jersey's Action Plan.
Executive Order 125 offered three potential enhancements to the
existing systems and requirements. First, it mandated that the
Comptroller pre-clear all RFP's prior to bidding. This effectively
subjects all 100+ contracts to the process that was already in place
within the Department of Public Purchasing (DPP) for contracts in
excess of $10,000,000. However, it requires only that the Comptroller
ensure that all laws are followed and therefore would not necessarily
enhance programmatic review. Moreover, insofar as it would impose a
much greater burden on Comptroller staff, to be effective it should
come with an increase in staff or some reallocation. We do not know if
any additional capacity within the Comptroller's office was created.
The second enhancement of E.O. 125 was the appointment of
Accountability Officers in each unit responsible for Sandy relief
contracts. The qualifications and specific duties of these officers,
beyond liaising with the Governor's office to ensure success, are not
specified. Likewise, there is no indication that these would be new
staff positions, rather than just titles added to already swamped staff
members. If our research is any indication, the latter is far more
likely to have occurred.
Finally, E.O.125 had a transparency provision that required the
creation of a Web site to post contract information on all Sandy
contracts. This Web site does in fact exist and provides both contract
documents and some nominal aggregate data. The HGI contract is
available on the Sandy Web site, however, when searching the site for
the contract manager, clicking on the HGI contract link leads to an
error page.
New Jersey's Action Plan promised further enhancements. Two keys
were the creation of a 50+ person special division to manage the grant
and the use of a special audit plan by the DCA's Internal Auditor. The
special division was created and some documents suggest it may have as
many as 95 employees. It is not clear, however, what roles they are
tasked with. Moreover, even if they were all newly hired contract
managers,\8\ each one would be responsible for more than one contract.
Given the sheer complexity and size of many of the contracts, the HGI
contract being a prime example, it would seem that no one contract
manager could have adequately handled the process alone.
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\8\ State law requires the assignment of a contract manager to
every contract let through DPP. However, we found that in general,
State contract managers were employees with other primary duties
assigned as State contract managers merely to meet this requirement.
The specialized training required to manage contracts came down to a 3-
hour Web tutorial.
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There is little readily available information on the Internal
Auditor. We do not know how many audits were conducted, by whom, how
diligently they were done, what they found, or whether there were
consequences. These are key questions.
The State's response to Hurricane Sandy required the coordinated
action of various organizations, and these organizations needed to be
properly vetted to ensure they had the expertise, capacity and
legitimacy to support the State in recovery efforts. Certainly best
practices suggest that contracting units must perform their due
diligence and gather information on contractor past activities to serve
as a basis for contracting decisions and to ensure that potential
contractors do not have a prior history of poor performance. Again, on
the face of it, New Jersey appeared to have made this part of the RFQ
process. For example the State's solicitation to Hammerman and Gainer
(HGI), specifically states the ``bidder should have significant proven
experience and a history of successful professional engagements in
disaster recovery'' (RFQ774882S, p. 33). Media reports suggest
however,\9\ that the State of New Jersey did not thoroughly vet HGI's
performance during Hurricane Katrina. Nine years after Katrina
devastated New Orleans claims and issues from HGI's services remain
unresolved.
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\9\ Haddon, Heather, Sandy Contractor Draws Fine in Home-
Reconstruction Effort, Wall Street Journal, NY Region, September 22,
2013, http://online.wsj.com/news/articles/SB100014241
27887323808204579087420937630290. (accessed Mar. 2014)
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Moreover, best practices literature \10\ stresses that contracting
units compare potential contractor costs with the cost of providing the
service in-house. In the context of Sandy Recovery efforts, it is
unclear if the State engaged in this comparative process. We cannot
determine from available records if State contracting units found that
it was not in their best interest to ramp up internal H.R. capacity to
hire additional staff and therefore chose to rely on private
contractors instead. For example, the State should have compared the
internal costs for managing the Superstorm Sandy Housing Incentive
Program, with the proposal submitted by Hammerman & Gainer, Inc.
Similarly, it is not clear how the State determined that 95 staff could
adequately handle the work for the Sandy Recovery Division.\11\
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\10\ See Sclar, Elliott D. You don't always get what you pay for:
The economics of privatization. Cornell University Press, 2001.
\11\ State of New Jersey Department of Community Affairs, Sandy
Recovery Division, CDBG Disaster Recovery Action Plan and Reports,
``Superstorm Sandy Performance Reports 4Q 2013,'' p. 6, http://
www.state.nj.us/dca/divisions/sandyrecovery/pdf/
4th%20Qtr%202013%20Submit
ted%20QPR%20Submitted%20for%20Approval.pdf. (accessed Mar, 2014).
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Successful contract monitoring and oversight requires significant
managerial competence and aptitude,\12\ including ability to assess
costs and benefits, identify needs, and critically analyze vendor
strengths. No organizational chart is available on the Sandy Recovery
Division's Web site, therefore we cannot determine whether the 95 staff
were actually hired, whether they are contract managers and what their
qualifications and experience are. We can surmise that the Division is
still without the required oversight capacity given the numerous
employment vacancies at the department. From what we can see, all of
the current vacancies in the Sandy Recovery Division are for compliance
and monitoring positions. These include: Chief Financial Officer,
Assistant Director of Compliance and Monitoring, Administrative
Analyst-Procurement, Program Specialist, and Network Administrator.
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\12\ See Brown, Trevor, and Matt Potoski. ``Contracting for
management: Assessing management capacity under alternative service
delivery arrangements.'' Journal of Policy Analysis and Management 25,
no. 2 (2006): 323-346; Romzek, Barbara S., and Jocelyn M. Johnston.
``Effective contract implementation and management: A preliminary
model.'' Journal of Public Administration Research and Theory 12, no. 3
(2002): 423-453; Chen, Yu-Che, and James Perry. ``Outsourcing for e-
government: Managing for success.'' Public Performance & Management
Review (2003): 404-421.
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Our review of RFQ 774882S for the Management & Other Related
Services of the ``SSHIP'' program indicates that the State is
``developing an MIS system and related interface for DCA for
aggregating data for financial management, production reporting,
compliance reporting and auditing.'' It remains unclear if the MIS
system has been adequately developed and if personnel have been trained
on the system. This is particularly important to aid in monitoring and
compliance, since contractors were required, per the RFP, to have data
collection and storage systems that were compatible with the State's
MIS and SSHIP HP-CMIS systems.\13\
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\13\ Ibid., p. 27
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To bolster State capacity to oversee contracts, on March 27, 2013,
The Integrity Oversight Monitor Act (P.L.2013, Chapter 37) was enacted.
This legislation authorized the deployment of oversight monitors in the
implementation of recovery and rebuilding contracts, resulting from
Superstorm Sandy and other major storms in NJ, in order to prevent,
detect, and remediate waste, fraud, and abuse. However, the State spent
10 months training the monitors and to date no reports on the work of
integrity monitors are publicly available. A companion bill (A61) that
would have strengthened oversight by requiring the State to ``maintain
a public Web site dedicated to the dissemination and transparent
administration of Hurricane Sandy recovery funding'' was approved by
both the Assembly and the Senate but was vetoed by the Governor who
contended it would, ``produce unnecessary redundancies and waste
government resources'' (http://www.njleg.state.nj.us/2012/Bills/A0500/
61_V2.PDF).
Additionally, although the State required Sandy contractors in its
RFP to submit weekly reports on their progress toward recovery response
and HGI promised it would ``generate and submit a weekly report'' and
also provide a monthly ``Program Status Report'' which would provide
``an accounting of progress toward major Program milestones,'' it did
not do so for 8 months. When Fair Shar Housing requested copies of the
reports promised in the bid they were advised by the State that they do
not exist. These were essential tools necessary for the State to engage
in oversight and they were ignored. As Fair Share has pointed out,
along with the failure to provide the integrity monitors required by
State law, allowing HGI not to submit reports amounted to another major
missed opportunity to correct mistakes before they led to widespread
systemic failure of the State's recovery programs.
A key component of the RREM program, is the establishment of two
categories of contractors--those who administer the program and those
who monitor the program.\14\ Even though the RFQ for the management of
the RREM Program states that the State Contract Manager is responsible
for the overall management and administration of the contract,\15\ RREM
contractors are required to ``perform management, file review,
reporting and document management for compliance with all program
policies and procedures. File documentation, document management,
quality control, reporting, program and Federal compliance, and issue
tracking are also embedded requirements for this functional area'' (RFQ
for the Management of the RREM Program, 2013, p. 25). This ultimately
means that RREM contractors remained at the forefront of contract
monitoring and compliance. The DCA did identify an internal monitoring
agent.\16\ However it is unclear if the internal monitoring agent was
provided with the requisite training, financial resources, and
additional staff required to engage in effective contract oversight.
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\14\ State of New Jersey, Department of Community Affairs,
Reconstruction, Rehabilitation, Elevation and Mitigation Program and
Procedures (RREM), 2013, Number 2.10.36, p. 6.
\15\ State of New Jersey, Division of Purchase and Property,
Request for Quote for Management of the Reconstruction, Rehabilitation,
Elevation and Mitigation Program (``RREM'') for the State of New Jersey
Department of Community Affairs, 2013, RFQ775040S, p. 53.
\16\ New Jersey Department of Community Affairs, ``RREM Program and
Procedures,'' 2013, p. 6.
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Finally, the partitioning of the RREM program into two categories
of contractors--those who administer the program and those who monitor
the program further distanced the DCA from the service being provided.
The DCA's ability to monitor and oversee the performance of a
contractor is directly related to their ability to identify the actor
who is responsible. Similar to a situation where a contractor
subcontracts a service, DCA's already limited capacity to monitor
contractors was further strained. In this context, DCA essentially
outsourced a core governmental function--contract monitoring and
oversight.
Consequences and Questions for Further Investigation:
Contracting out under emergency circumstances is challenging and
complex, but there must be protocols in place to ensure that those at
risk are treated carefully and equitably. A 2014 analysis by the Fair
Share Housing Center found that 79 percent of residents who appealed
denials of funds for housing recovery were successful which raises
questions about how well the firm hired to determine eligibility did
its job. The report also found troubling racial and ethnic disparities.
African Americans were rejected for RREM and resettlement grants at two
and a half times the rate of whites. Latinos were also
disproportionately rejected.\17\ Moreover, numerous media reports
suggest that those applying for, or those in the process of receiving,
RREM funding lacked access to the feedback mechanisms required to voice
their concerns and issues.\18\ \19\ All of these problems are in direct
contradiction to the process stated in the DCA's Community Development
Block Grant Action Plan.\20\ Finally, documents analyzed by the Fair
Share Housing Center suggest that even after contracts were let,
program details and policies continued to be amended without going out
for public comment.\21\ Worse, in many cases, there were no policies in
place until after the program started.
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\17\ Fair Share Housing Center, et al., ``The State of Sandy
Recovery,'' 2014, p. 8.
\18\ Ibid.
\19\ Katz Matt, New Jersey Quietly Fires Second Contractor Hired to
Help Sandy Victims, NJ Spotlight, February 14, 2014, http://
www.njspotlight.com/stories/14/02/13/amid-criticism-nj-quietlyfires-
2nd-sandy-contractor. (accessed Feb. 2014).
\20\ State of New Jersey, Department of Community Affairs, CBDG
Disaster Recovery Action Plan, 2014, p. 6-12.
\21\ ``Documents Obtained from Christie Administration Through
Litigation Raise Questions of Mismanaged Sandy Relief Funds'', Fair
Share Housing, press release, November, 2013, on the Fair Share Housing
Web site, http://fairsharehousing.org/media/ (accessed Feb. 2014).
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Despite the deeply flawed service being provided, in less than 8
months, we now know that HGI billed the State over $51 million--
although it had proposed a 3-year contract for a total of $67 million.
There is an ongoing dispute over at least $18 million that HGI claims
it is owed, but the State has not paid; this number may grow
significantly depending on the payments HGI claims are due between the
December 6 termination and the January 20 date when all of HGI's
activities ceased. While HGI claims that the State demanded far more
work than the contract originally anticipated and that it received
``express representations from State contracting officials that HGI
would be paid for the work,'' the lack of reporting makes all of this
extremely difficult to assess. There were also apparently no written
amendments to the contract to account for the additional costs, which
again raises troubling questions about how the State managed this
contract and led to the current dispute.
Overall, our analysis suggests that New Jersey lacked the capacity
to oversee the contracts involved in such a large and complex natural
disaster recovery program. This lack of capacity was compounded by a
lack of transparency. In other words, we don't have adequate staffing
to ``police'' the contracts and citizen watch dogs cannot obtain the
information necessary to sound the ``fire alarm.'' We conclude here
with a list of questions that merit further investigation.
Questions
1. Who are the State contract managers assigned to each contract?
How many contracts are they responsible for? Are they specially
qualified or just allocated from other staff as we found in
general? A look at any one contract, for example the HGI
contract, highlights the enormity of the task facing even a
highly qualified individual.
2. Who are the accountability monitors (required under E.O. 125)?
Are they qualified? Do they have real knowledge of contractor
performance? How are they integrated with other staff
responsible for oversight?
3. The State action plan involved the creation of a new division
within DCA with 50 staff to administer the program. The State
Web site mentions 95 employees. What are their job
descriptions? To what extent has that division fully staffed
up? Are they State contract managers? What do the staff do?
There are current postings for CFO and Assistant Director
positions. Were these ever filled? Are they open because of the
fallout from press.
4. E.O. 125 adds a requirement that all RFQs be pre-cleared by OSC.
That effectively has every Sandy Contract treated like a
$10,000+ contract. There are over 100 contracts over a short
period of time. Did OSC increase staff to handle the dramatic
increase in workload? What was the review process to determine
compliance ``with all applicable public laws, etc.'' To the
extent that the laws were relaxed, how meaningful was it
really?
5. Who is responsible for ensuring contractors provide reports and
for reviewing the quality of those reports? Contracts such as
the HGI contract grant the contractor millions ($3,006,864) for
internal oversight. Who ensures that the State gets anything
out of this? [Note that this is mainly for fraud by program
participants, not the program administrator. ]
6. The Action Plan (s6.6.5) refers to DCA's Internal Audit office
and several procedures that it will conduct to ensure
compliance. To what extent were these procedures actually
followed. Was the Internal Audit office staffed up to handle
this?
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