Majority on City Council proposes making its own rules on buyouts until HUD says otherwise

CEDAR RAPIDS - It sounded akin to an act of civil disobedience, and it came from an odd place – the Cedar Rapids City Council.

At Tuesday evening's marathon five-plus-hour council meeting, Mayor Ron Corbett said the time had come for the city to ignore existing directives from the state and federal government related to certain previous disaster-related payments which the city has been told it must deduct from the home buyout offers it makes to flood victims.

Corbett said he wants the city to change its posture toward buyouts - there may be as many as 1,300 buyouts when all is said and done - and he said he wants the city to assume certain earlier payments will not be deducted from buyout offers “until someone tells us we can't do it.”

More than 21 months after the June 2008 flood, as the pace of buyouts is now beginning to pick up, the city finds itself still wrestling with the federal government's rules related to “duplication of benefits.”

Corbett and a majority of the City Council said they had tired of wrestling.

Corbett has spelled out his position in a letter dated Monday to the Office of the Secretary at the U.S. Department of Housing and Urban Development in Washington, D.C. The letter is follow-up to a meeting with a senior adviser to the HUD secretary in Cedar Rapids last Friday.

Most everyone agrees that the very-early disaster payments to homeowners from the Federal Emergency Management Agency for use in housing should be deducted from the city's buyout offer. Flood insurance also is deducted from the offers.

The dispute centers on owners awaiting a buyout who benefitted from subsequent disaster programs like the state Jumpstart program and the state Single-Family Housing Construction Program. Those include some who got down payment assistance of up to $25,000 to use for a new home; some who received assistance of up to $10,000 to make a replacement home more energy efficient; the handful who received subsidies of up to $54,000 in the special single-family new construction program; those who received interim mortgage assistance on their buyout home; and those who have or might receive some local-option sales tax money.

Corbett said on Wednesday that he has given three options to HUD, which will provide most of the funding for the city's expected 1,300 property buyouts.

In the first, which is the council majority's preference, HUD would not consider any of the subsequent disaster payments as a duplication of benefits to be subtracted from a buyout offer. If HUD rejects that request, a second option would allow the city to use local-option sales tax revenue to cover what HUD counts as duplication of benefits. And if HUD rejects that idea, the city simply would use local-option sales tax revenue to make the buyout.

Council members Monica Vernon, Chuck Swore, Chuck Wieneke, Justin Shields and Don Karr all expressed strong support for Corbett's position.

“It's a fair request we are making of HUD,” Vernon said. “We assume it's not to be taken out (of the buyout offer) until told otherwise.”

Wieneke criticized the state of Iowa and its Department of Economic Development, which is overseeing the HUD disaster programs, with not getting a resolution to these lingering buyout issues.

“I don't think the state and IDED have been standing up for this city and giving our people a fair break,” Wieneke said.

Corbett cited one owner of a $50,000 flood-damaged home, who received a $45,000 subsidy for a brand-new home in the Single-Family New Construction Program. The owner will receive a buyout check of just $5,000 under the current HUD interpretation, which counts the $45,000 housing subsidy as a housing benefit that must be subtracted from the buyout sum.

Corbett said if that HUD interpretation doesn't change, he would propose using local-option sales tax revenue to pay the $50,000 buyout.

“We would say (to HUD), ‘Hold your money,' we'll use local-option sales tax money,” Corbett said.

Corbett said HUD made changes to rules after questions were raised about lax oversight of disaster funding in the aftermath of Hurricane Katrina.

“The definition of duplication of benefits is so broad you can drive a truck through it,” the mayor said. “Unfortunately, these sticking points are slowing up the buyout process.”

Corbett said he didn't know anyone who thought that benefits like down payment assistance on a new house or subsidies on new homes should come off the buyout offer.

Council member Tom Podzimek said he did. Podzimek said someone with an $80,000 flood-damaged home who got that much in a buyout as well as $40,000 payment on a new home would end up getting $120,000 in payments. Some people will have been made “more than whole” since the flood, he said.

Wieneke said he's had a few people point that out to him, too.

Corbett disagreed.

“You can count on one hand the number of flood victims who will say they are better off after the flood,” he said.