Tuesday, May 21, 2019

[Editorial] Pagando Los Platos Rotos

By on March 29, 2019

Puerto Rico has not been the only disaster funds grantee to suffer from HUD shortcomings

Editor’s note: The following originally appeared in the March 28 – April 3, 2019, issue of Caribbean Business.

The Spanish saying “pagando los platos rotos,” translated literally into English as “paying for the dishes that were broken,” is a fitting slogan for congressional oversight of Community Development Block Grant-Disaster Relief (CDBG-DR) funds assigned to jurisdictions devastated by nature in 2017. The “Time to Pay the Piper” theme—el dicho en inglés—underpinned recent hearings on the Hill hosted by the House Committee on Financial Services (Subcommittee on Oversight & Investigations) as representatives sought to discern what is broken with “The Administration of Disaster Recovery Funds in the Wake of Hurricanes Harvey, Irma and Maria.” It did not take long for the answer to surface—“Plenty is wrong, and there is enough blame to go around.”

Just minutes into the hearing, Rep. Andy Barr (R-Ky.) offered a brief history of the CDBG program, outlining shortcomings in a process handled by the U.S. Department of Housing & Urban Development (HUD) in what he called “an ad hoc fashion.” It is his hope that the program’s assignments might be codified with the help of HUD’s Office of the Inspector General (OIG), whose findings might lead to a bill that could expedite recovery with the proper controls in place. During his turn, Barr went over a laundry list of grantees in disaster recoveries past using money for work outside of the scope of that approved by HUD.

For example, “Louisiana is unable to account for some $700 million to have been used to elevate homes in a flood zone; in another Louisiana case, $10 million to have been used for housing purposes was utilized to build a wing for a museum; Mississippi used recovery funds to build roads and infrastructure in an area where no one lives.”

In the more than 50 years since its creation, the CDBG program, under Title I of the Housing & Development Act, has “generally afforded the HUD secretary broad discretion to allocate funds to states or local governments using information from the Federal Emergency Management Agency (FEMA) to calculate allocations. For each supplemental appropriation, HUD publishes a corresponding Federal Register notice establishing the allocation of funds to eligible grantees and describing rules, statutes, waivers and alternative requirements that apply to allocations under the notice,” reads the hearing memo issued by the House Committee on Financial Services, which goes on to add that there are now 57 grantees with 106 active CDBG-DR grants totaling $54.6 billion.

The memo goes on to explain that HUD’s OIG found grantees often had to navigate confusing and sometimes duplicative requirements in multiple notices. Puerto Rico has not been the exception. Puerto Rico Housing Secretary Fernando Gil Enseñat, who testified during the hearings, was quick to point out that although Puerto Rico has some $20 billion allocated, HUD’s multiple federal register notices and action plan workflows have hindered the stream of money.

As it stands, Vivienda’s chief has charted a course with very strict requests for proposal in what now seems an ironclad action plan that reportedly meets HUD requirements that address unmet needs in housing, planning, economic recovery and infrastructure. At this writing, there are several projects underway with the Homeowner Repair, Reconstruction or Relocation Program (R3 Program) in a first tranche of $1.5 billion.

Truth be told, Puerto Rico has a handful of companies that were selected after meeting very rigorous standards including, among other things, a bonding capacity of at least $25 million. What next? Asking for their firstborn?

A second tranche of some $8.2 billion was recently approved, although the island’s housing department is currently waiting for a grant agreement from HUD to access this next allocation. “Each of our tranches of recovery funding will come with a unique grant agreement,” Gil Enseñat said. “We are hopeful that since our initial action plan and first amendment are substantially similar, it won’t take HUD long to send us the agreement and that this version will be similar to our current executed agreement.”

During his initial turn, Barr went straight to the point: “Oversight is an important function of Congress and there is a very legitimate legislative purpose to ensuring that taxpayers are protected and that victims of disasters receive the assistance they need in an expeditious manner.” Most people would agree that waiting more than a year to receive appropriations approved for assignment does not qualify as an expeditious process. This newspaper wishes U.S. Congress Godspeed in fixing a broken system, so the victims in Puerto Rico, Florida, Texas and California get the R3 help they deserve.

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