The story of this city’s struggle with the Federal Emergency Management Agency would almost be funny if it didn’t combine such a large sum of money with the majestically slow pace of bureaucracy.
In 2004 and 2005, when hurricanes Frances, Jeanne and Wilma struck South Florida, Lake Worth received $26.5 million in aid from FEMA for substantial damage to city property, including its beach. The money was to help pay for picking up debris and making repairs to public property. FEMA contractors were on hand after the hurricane to help city workers properly record tons of debris and hundreds of hours of overtime.
At no time has either FEMA or any other governmental agency suggested malfeasance on Lake Worth’s part, only improper paperwork.
Fast forward to 2010, six years after the first two hurricanes. FEMA, now under pressure to show it is managing its budget properly, began aggressively rechecking the payments it had made. It informed Lake Worth that audits show $4 million of the $26.5 million was not properly documented — and would Lake Worth please send back that money.
There may never be a good time to cough up $4 million, but Lake Worth — which has more households below the poverty line than any city in Palm Beach County except Belle Glade — was just starting to totter out of a real-estate bust that depressed property values and shrank the city’s already small tax base.
This is not just about Lake Worth. FEMA’s database shows hundreds of demands to cities to return FEMA funds, some as small at $21,000, some far larger than Lake Worth’s, from Kansas to Montana to Alaska, for fires, mudslides and other disasters.
FEMA took a big bite out of Florida, and particularly Palm Beach County.
In the past three years, FEMA has asked for $65 million in givebacks from Florida cities, counties and towns. As in Lake Worth, FEMA had given the money seven to eight years earlier and in many cases had signed off on the expenses, leaving the cities with the impression that their documentation was acceptable.
FEMA also ordered the South Florida Water Management District to repay $21.9 million last year, arguing that the U.S. Army Corps of Engineers, not FEMA, should have paid that tab. The district sued FEMA in May, contending that the work had already been approved.
Steve Carr, the city’s finance director, says the words “bureaucratic nightmare” are inadequate to describe what he and his staff have been doing since they got the first FEMA letter in 2011. His staff has collected and scanned so many documents that they ruefully refer to their records as “the big book of FEMA.”
“I came here in April 2010. We’ve been dealing with this since 2011, and now in July 2013, we are still digging out information, making copies, scanning documents,” said Carr, who is also in the midst of carving more money out the city’s budget for 2014.
Carr said the work has taken hundreds of hours of staff time in the last two years.
Lake Worth had the option to appeal, and did. But with the exception of the return receipt that Carr’s staff got from the postal service when they mailed the appeal to FEMA in February 2012, they have never had any formal recognition from FEMA that the appeal even exists.
FEMA has, however, sent Lake Worth the equivalent of second and third notices of payment due on the $4 million. Each time, Carr sent polite letters saying that until the appeal is processed, Lake Worth is not paying up.
Since the FEMA demands came in two batches, Carr sent an appeal on the second batch this week, also with a return receipt requested.
Lake Worth has had hundreds of hours of visits from auditors from the state emergency management department, FEMA and the Department of Homeland Security, FEMA’s bureaucratic parent. The state audit took over a year, and FEMA auditors were at City Hall “a full solid month,” Carr said.
Carr, who was the finance director in Alachua County before arriving in Lake Worth, said he has never encountered this kind of federal micromanaging of disaster money.
“It was more of a spot-check kind of thing, more than each and every time,” he said.
One problem caused by the extraordinary lapse of time between the hurricanes and the audits occurred when FEMA auditors requested to see the repairs done at Lake Worth beach and casino.
When they arrived, Lake Worth was in the midst of a $6.5 million revamp of the casino and beach area that began in 2010, so there were no casino repairs to show because the original casino was gone.
“That can happen anywhere at any time,” said Carr. “Buildings can be repaired (after a storm) and 10 years later torn down and replaced.”
If Lake Worth has to write a check to FEMA for $4 million, the results would be disastrous. Four million dollars is 13.3 percent of Lake Worth’s annual budget of $30 million. The city’s hurricane fund contains $5 million, and it would take at least three to five years to replenish that fund, which is the city’s hedge against the unthinkable.
And if the unthinkable happened, and a hurricane hit Lake Worth before the money was replenished?
“Where we would get the money, I don’t have the answer to that,” said Carr. “It would be difficult if not impossible.”
There are a few bright spots in this story, though it may be far from over.
The state Division of Emergency Management has advocated for Lake Worth and in at least one case may have saved them $7 million that FEMA was asking to get back.
In that case, FEMA had accepted the city’s documentation methods for Hurricanes Frances and Jeanne, but disallowed the exact same documentation for Wilma.
“It just didn’t make any sense,” said Carr.
“Ultimately, they have not billed us for that $7 million,” said Carr.
FEMA spokesman Lars Anderson said that his agency is obligated to be “a good steward of taxpayer dollars” and said he was not familiar with the specifics of the Lake Worth case.
The key to FEMA’s sudden interest in reviewing old files can be traced to its concerted effort that started in 2010 to bring back money to its coffers. That year was when Congress got serious about sequestration, or keeping the cost of government under control through mandatory spending cuts. When the belt-tightening began, government agencies had to locate every spare penny.
In October 2011, FEMA deputy director Richard Serino reported to the U.S. Senate committee on Homeland Security that FEMA was aggressively checking its disaster grants for inaccuracies. FEMA had been on the hot seat several times for sloppy oversight of its grants since 2004, when it gave $26 million to private residents of Miami-Dade County, even though Hurricane Frances barely touched that area.
Serino told the Senate committee that since 2010 FEMA had recaptured more than $4.7 billion between late 2010 and September 2011 to its disaster relief fund. He also told the committee that Homeland Security gave FEMA an award for “superior achievement” in financial management.