Announces HUD to visit NJ to review state's handling of Sandy funds
WASHINGTON, DC - Today, U.S. Rep. Bill Pascrell, Jr. (D-NJ-09) released his recommendations to Governor Christie on a proposed amendment to New Jersey Disaster Recovery Action Plan. The amendment, released in February, details how the state will spend $1.46 billion in federal Sandy recovery funds. Rep. Pascrell also announced that the U.S. Department of Housing and Urban Development (HUD) will be coming to New Jersey in the coming weeks to monitor the state's handling of federal Sandy recovery funds, marking the first time HUD has visited New Jersey in this capacity since July 2013.
"I'm pleased that HUD will be coming to New Jersey to take a closer look at the state's handling of federal Sandy recovery funds," said Rep Pascrell. "While this is a welcome sign, there is still more that needs to be done to ensure that this next round of federal funding is spent fairly, efficiently, and gets to the families that need it most. I believe my recommendations will bring much-needed transparency to the distribution of these federal funds and finally get New Jerseyans the answers they deserve."
In a letter to Governor Christie, Rep. Pascrell made thirteen recommendations on Amendment 7, the substantial amendment to the State of New Jersey’s Community Development Block Grant – Disaster Recovery (CDBG-DR) Action Plan dealing with the second allocation of CDBG-DR funding, including in part:
• the State of New Jersey must publically acknowledge its rationale for the early termination of its contracts with HGI and URS;
• the State of New Jersey should systematically review all denied RREM applications to ensure that those homeowners who failed to appeal their decisions were not wrongly denied aid;
• the State of New Jersey must make every effort to prioritize development projects in Sandy-impacted areas;
• the State of New Jersey should make public all reports from its internal auditor.
The full text of the letter letter follows:
February 28, 2014
The Honorable Chris Christie
Governor of the State of New Jersey
PO Box 001
Trenton, NJ 08625
Dear Governor Christie:
I write today to comment on Amendment 7, the substantial amendment to the State of New Jersey’s Community Development Block Grant – Disaster Recovery (CDBG-DR) Action Plan dealing with the second allocation of CDBG-DR funding. Evidence has emerged of serious problems with the State’s federally-funded Sandy recovery programs, from lost paperwork and a lack of responsiveness to contracting issues and wrongly denied aid applications. Instead of doubling down on the policies which led to these issues, this amendment presents an opportunity for a course correction in how federal Sandy aid is administered in New Jersey. I believe that the following recommendations will help the State of New Jersey to ensure that Sandy aid is distributed efficiently and effectively.
I remain deeply concerned about the circumstances surrounding the termination of contracts between the State of New Jersey and Hammerman and Gainer, Inc. (HGI), as well as URS Corporation. In light of complaints regarding HGI’s performance, it is for the best that they will no longer be administering New Jersey’s housing recovery programs. However, the lack of transparency in the contracting process raises serious red flags. There is no excuse for the fact that the agreement to end the relationship between the State of New Jersey and HGI was not disclosed for weeks. Additionally, in early February, homeowners received notices that URS Corporation would no longer be supervising their rebuilding projects, indicating continued issues between the State and its contractors.
These episodes demonstrate that the State needs to be more transparent with its use of contractors for essential Sandy recovery functions. The people of New Jersey deserve an explanation for these firings as well as the steps that will be taken to administer Sandy housing programs going forward. Furthermore, the State should carefully consider how any severance payments to contractors using federal funds will reduce the amount of funds available for crucial recovery needs.
In light of these issues:
1. the State of New Jersey must publically acknowledge its rationale for the early termination of its contracts with HGI and URS;
2. the State must release a plan for how Sandy programs will be administered moving forward and what role contractors will play; and
3. the State must proactively inform the public, Congress and State lawmakers of future contract terminations, their rationale, and the state’s plan to replace and improve the services terminated contractors were providing.
Homeowner Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) Program
The RREM program is a centerpiece of the State of New Jersey’s efforts to get Sandy aid out the door to New Jersey homeowners who have unmet recovery needs due to Sandy. This program was greeted with great enthusiasm by homeowners who experienced unprecedented damage to their homes from Sandy.
Unfortunately, the application and appeal process for RREM assistance has been tedious, with reports of lost paperwork, unresponsive caseworkers and uncertainty for homeowners. I was shocked to learn from a study by the Fair Share Housing Center that nearly 80% of homeowners who appealed their denials were found to have been wrongly denied awards. While I appreciate that the State has reopened the appeals process, the burden should not rest on the homeowner to assemble an appeal at this late stage. Due to the unacceptably high error rate in the processing of applications, the State should take it upon itself to conduct a systematic review of all denied RREM applications to ensure that no homeowners are wrongfully left out in the cold.
The lack of transparency in the criteria for awarding RREM funds has led to confusion among program applicants. Currently, many homeowners who were promised awards are having those promises revoked because of a retroactive requirement that homeowners meet the ‘substantial damage’ threshold of 50% of their home’s value. This benchmark is far beyond the $8,000 level initially used to qualify homeowners for RREM awards. Furthermore, some homeowners have had difficulty obtaining a substantial damage certification from their local floodplain managers. Although I understand that the imposition of this requirement is an effort to prioritize funding for those with the greatest need, it is patently unfair to move the goalposts and revoke awards - especially when the State knew full well how much funding it had available when making initial awards. Instead, additional funding should be allocated to the RREM program to allow the State to honor its commitments to homeowners who have been promised much-needed help.
The need for RREM assistance extends far beyond those who were able to apply before the original application deadline of August 1st, 2013. In fact, I wrote to you in October to make you aware that many of my constituents in Bergen County received notices of substantial damage after the RREM application closed. They were dismayed to learn that as a result of this substantial damage finding, they would need to elevate their homes or face skyrocketing flood insurance rates. Unfortunately, they never had the opportunity to apply for elevation assistance through the RREM program or the HMGP elevation program before the application deadlines. While I appreciated the response to my letter from the Director of your the Office of Recovery and Rebuilding, Mr. Marc Ferzan, my constituents are still waiting for the opportunity to apply for aid.
The State’s previous Action Plan Amendment allocating additional funding to RREM was a good first step, but the continued oversubscription of the program points to the vast outstanding need for homeowner assistance. Many of our constituents are still holding the bag for tens of thousands of dollars in costly repairs and expenses. Because of the problems with RREM, it is imperative that the application process be reopened in order to give homeowners who have been shut out of the process access to crucial assistance. Additional funding should be allocated to the RREM program in order to clear the waitlist and enable the reopening of the application process.
In light of the issues with the RREM program’s administration as well as the ongoing need for assistance:
4. the State of New Jersey should systematically review all denied RREM applications to ensure that those homeowners who failed to appeal their decisions were not wrongly denied aid;
5. the State should reallocate additional funding to the RREM program in order to clear the waitlist; and,
6. the State should reopen the RREM application process to give all impacted homeowners a fair shot at accessing the federal aid intended to meet their needs.
Fund for the Restoration of Multi-Family Housing (FRM)
The FRM program was designed to jumpstart the construction of new rental units to provide housing for renters whose units were damaged or destroyed by Sandy. This program serves a critical function for Sandy victims, insulating them from skyrocketing rents as rental demand meets an unexpected reduction in supply due to the storm.
However, reports of large subsidies for projects in towns which were only minimally impacted by Sandy have generated doubts as to whether this program is truly being targeted at the needs of Sandy victims. The State should do all that it can to ensure that as much of this funding as possible is spent in areas affected by a federally designated disaster. For projects outside of disaster impacted areas, there should be a higher bar for the State to demonstrate how this funding would directly benefit victims and further our recovery efforts. Furthermore, as this is the state’s second largest CDBG funded recovery program, it is vital that these funds are awarded in a transparent and fair manner in order to avoid the appearance of political favoritism, particularly for awards outside of immediately impacted areas.
In order to ensure that the FRM program remains focused on Sandy recovery:
7. the State of New Jersey must make every effort to prioritize development projects in Sandy-impacted areas;
8. the State must show how approved projects not in directly impacted areas are going to help Sandy victims;
9. developers constructing new rental units with financial assistance through the FRM program should be required to market new rental units to Sandy victims and give Sandy victims priority in the rental application process; and
10. the State should make available on its website a database of all individual awards made through this program including: the name of the developer, the amount of FRM funding awarded, and all other sources and amounts of additional financing. Following the completion of construction and the rental of individual units, the state should disclose, for each individual project, how many units were ultimately rented to victims of Sandy.
Transparency and Accountability
Due to the issues outlined above with contracting and the administration of recovery programs, I have called for independent monitoring of the State of New Jersey’s recovery efforts. While I appreciate that HUD requires the State of New Jersey, as a CDBG grantee, to maintain an internal auditor, I believe more must be done to bring accountability to the administration of the State’s federally-funded recovery programs. It is essential that recovery programs are made more transparent in order to restore public confidence in the recovery process.
New Jersey’s legislature has also recognized the need for additional monitoring and accountability, passing the “Integrity Monitor Act” in March 2013. This law requires the State to assign an independent monitor to supervise all recovery projects of $5 million or more. I was disappointed to learn that the process of assigning integrity monitors to recovery projects has only begun this past January, a full ten months after the passage of the legislation.
11. the State of New Jersey should make public all reports from its internal auditor;
12. the State must fully implement integrity monitor legislation and make public all reports; and
13. the State should hire an external monitor for Sandy recovery, accountable to an outside party.
Thank you for your work to restore normalcy for New Jersey families and businesses impacted by Hurricane Sandy. As you know, we still have a long way to go. In light of the issues highlighted above, I do not believe that continuing down the current path is the best way forward. My colleagues and I in New Jersey’s Congressional Delegation worked too hard to bring these needed funds home to our state to see them mismanaged. We must make sure these funds are spent quickly and effectively to disprove the skeptics in Congress who argued that this aid would be wasted.
I urge you to take the recommendations in this letter into serious consideration, and I look forward to a response which specifically addresses each of the suggestions I have outlined. Let’s continue our work together to ensure that New Jersey’s communities experience a complete recovery from the storm. The people of New Jersey deserve no less.
Bill Pascrell, Jr.
Member of Congress
cc: Shaun Donovan
Secretary, United States Department of Housing and Urban Development
Director, New Jersey Governor’s Office of Recovery and Rebuilding
Commissioner, New Jersey Department of Community Affairs
Executive Director, New Jersey Housing and Mortgage Finance Agency