City begins fight with FEMA over $36 million

It had been a bit of a surprise from the start for some City Council members here when federal officials suggested earlier this year that the city could parlay three, broken-down, flood-damaged, city-owned facilities into $36.4 million in federal disaster funds for use on other city projects.

Welcome surprise turned to belief by June, and city officials began looking for the big check from the Federal Emergency Management Agency to compensate the city for flood damage to the former Sinclair meatpacking plant and the former Quality Chef Foods plant up the street - both only partly in use and on their final legs at the time of the June 2008 flood - and for flood damage to a previously disabled hydroelectric plant at the 5-in-1 dam

Something happened on the way to the bank, though, and on July 2, FEMA officials shifted gears. They told city leaders that the $21 million expected for the Sinclair plant, the $13 million for the hydroelectric plant and $3 million or so for the Quality Chef plant for use on other city projects wasn't coming after all.

The appeal battle now has begun, an appeal that prompts a taxpayer question: Who should you be rooting for, the city of Cedar Rapids or the federal government?

City Council member Pat Shey says he's as fiscally conservative as the next person, adding, “I guess I haven't met anybody that doesn't profess to be a fiscal conservative.”

But Shey says, too, that policymakers at the federal and state levels, not local City Council members, have made funds available, whether they come from FEMA or the state I-JOBS program or an assortment of other programs, to accomplish certain ends. And he says it makes sense for local officials to fight to get the funds they feel their communities deserve.

“I kind of view it as health insurance or work comp insurance: We've been paying into this system,” Shey says. “I don't think we're asking them to give us special treatment or to bend the rules in our direction.”

Mayor Ron Corbett says the city is appealing the FEMA ruling because the city believes that federal law sets out rules that let cities receive compensation for facilities that had been in use or were slated to be put back in use and no longer can be used because of a flood or other natural disaster.

“It's not a matter of protecting federal tax dollars, it's a matter of Cedar Rapids being entitled to damages in the flood,” the mayor says. “We feel strongly that the city is entitled to damages whether it's the library, the Central Fire Station, the hydroelectric dam … “

Corbett says holding the line on the city's annual operating budget as mayor is not inconsistent with fighting for federal disaster funds that the city believes it qualifies for.

Corbett, Shey and Greg Eyerly, the city's flood-recovery director, all point out that the City Council's confidence that it would qualify for $36.4 million in FEMA funds for alternate projects was helped along in a series of meetings in which FEMA representatives in Iowa participated.

However, Eyerly says sometime in June he began to get “all these bad vibes” from those same FEMA folks, which prompted a meeting between city officials and FEMA officials at FEMA's local office on July 2. There was no give-and-take then, just an announcement: FEMA effectively pulled the plug on the $36.4 million for Sinclair, the hydroelectric plant and Quality Chef.

Some council members were not happy to say the least, Eyerly says, while he says Corbett pinned down particulars of the appeal process, which has now begun.

In its appeal on the hydroelectric plant, the city acknowledges that the plant was damaged by ice in 2007 and was offline and not in use at the time of the flood. However, the city argues that it had hired a consultant to study the facility before the flood and that it had plans in its budget to make repairs.

By his way of thinking, Eyerly says he believes there is a right answer for the hydroelectric plant, adding that the city's position is the right one. Taxpayers, he says, should be rooting for the city in this matter. The plant sustained $13 million of damage in the flood and the city can prove it had plans to fix the pre-flood damage and get the facility running again, he says.

As for the FEMA funds that may or may not come for the Sinclair and Quality Chef plants, Eyerly suggests taxpayers root for neither the city nor FEMA, but for “the right answer.”

The $21 million or so that the city had come to think it would get from the Sinclair plant for an alternate project vanished when FEMA first noted that only 225,000 of the 625,000 square feet of the plant was being leased for a variety of uses at the time of the flood. Then FEMA deducted $500,000 for each of 22 buildings that make up the plant as part of flood-insurance rules for public structures in the 100-year flood plain.

How, asks Corbett, can FEMA cut disaster funds based on partial use of the plant's buildings and at the same time deduct for flood insurance for every building at the plant? All the buildings are connected, he says. Shouldn't there be just one $500,000 deduction for flood insurance? the mayor wonders.

Bob Josephson, spokesman at FEMA's regional office in Kansas City, Mo., says FEMA's role is neither to resist with all its might payments to cities nor to open up the funding spigot to let the money simply flow. Instead, he says FEMA's task is to follow very specific rules and guidelines set out in federal law. The job is to be responsible with federal tax dollars and yet give communities all they are eligible for, he says.

Josephson says any change of direction at FEMA regarding alternate-project funds tied to Sinclair, the hydroelectric plant and Quality Chef came during FEMA's process of review. In that discovery process, FEMA learned that the hydroelectric plant was not in use at the time of the flood, less than half of the Sinclair plant was in use and the city tax rolls assessed taxes on multiple buildings on the Sinclair site.

Eyerly says the city isn't trying to pull some kind of “slicky” move to get funds it is not entitled to.

“We want to do what's right,” he says. “We want to make sure whatever happens at the end of the day stands the test of time.” He says he doesn't want FEMA auditors to show up two or three years from now and demand that the city return money. “I want to be able to go to sleep at might,” he says.

Mayor Corbett says the appeals on Sinclair, Quality Chef and the hydroelectric plant will come down to the interpretation of rules in a FEMA policy manual that different people can interpret differently.

In that regard, the FEMA manual is no different from the Bible, he says.