While speaking to a public meeting of the Harris County Community Flood Resilience Task Force, Scott Elmer, the Flood Control District’s new Chief Partnership and Programs Officer, predicted that some projects in the 2018 flood bond likely will not get done because of a funding gap.

Elmer made this remark while discussing a list of projects proposed by Harris County Flood Control District (HCFCD) for funding from grants totaling $825 million from the U.S. Department of Housing and Urban Development (HUD) and the Texas General Land Office (GLO).

The $825 million is the last large pot of money still sitting on the sidelines from Harvey. But it likely won’t stretch far enough to complete all the projects in the bond.

Despite a partner funding gap of approximately $800 million (published in 2021), the $825 million would only reduce the gap by approximately an estimated $420 million. How could that possibly be? For one thing…

Origins of Funding Gap

To understand the funding gap, one needs to start with the structure of the 2018 flood bond. It contained a list of projects totaling almost $5 billion, but voters approved borrowing only half of that. The other half was supposed to come from partners, such as FEMA, HUD, local governments and the Texas Water Development Board.

Then COVID and inflation struck. Supply chain issues and labor shortages drove up the cost of projects approximately 20-30%, according to Elmer.

Meanwhile, not all of the hoped-for partner funding materialized. For instance, Harris County Flood Control District (HCFCD) was hoping for a billion dollars from HUD, added Elmer, but received only $825 million. (The County siphoned off almost a quarter billion dollars for Harris County Engineering and Community Services Departments.)

Some Projects Expand While Others May Be Excluded

Complicating the squeeze between the upward pressure of price inflation and less-than-hoped-for funding, HCFCD added (in some cases) to the scope of projects listed in the bond.

• For instance, HCFCD originally budgeted the Greens Bayou Mid-Reach Project for $20 million in the bond. But HCFCD lists it at $90 million in the proposed GLO list – a 4.5X increase. The first figure reportedly includes the original phases of the project. The second includes those PLUS others which had been deferred for a subsequent bond.
• Another example: The Arbor Oaks Stormwater Detention Basin in the White Oak Bayou watershed started out as a $13.3 million project in the bond, but now weighs in at $42.3 million. Its price more than tripled.

A person familiar with the Arbor Oaks project said it could easily be phased, but that it appears some phases (which had initially been deferred) were now recommended for immediate construction.

Those two projects alone account for an additional $100 million in scope.

“Use It or Lose It” Deadlines Place Emphasis on Shovel-Ready Projects

The projects recommended on the GLO list largely came from projects which had already been extensively studied and which are near shovel ready. That’s primarily because of two factors:

• The county took 2-years between GLO’s announcement of a $750 million allocation for Harris County and the County’s submission of a plan for spending the money.
• Meanwhile, the original HUD deadlines placed on using the money have not slipped. So, HCFCD now has its back up against a “use it or lose it deadline” wall.

If money isn’t spent before HUD deadlines, HUD will take the money back – not just unspent funds, but all funds allocated to incomplete projects. So, say for instance, HCFCD spent $50 million on a project, but had $10 million to go when the deadline arrived. HCFCD would have to give back the $50 million it already spent.

Obviously, the specter of having already-spent funds clawed back by the federal government made “construction readiness” a huge factor in project selection that wasn’t there almost six years ago when Harvey struck.

This means projects given priority by the Equity Prioritization Framework were closer to shovel ready. Presumably, they also helped meet Low-to-Moderate Income (LMI) requirements placed on the HUD funds.

No other large pots of aid dedicated to Harvey remain out there. So, annual programs, such as FEMA’s Flood Mitigation Assistance (FMA) and Building Resilient Infrastructure and Communities (BRIC) represent HCFCD’s best hope to make up the rest of the funding gap.

But the competition for those grants is nationwide. They include all states, territories, the District of Columbia and tribal lands. And Texas applications are handicapped because Texas has not updated its building codes in almost a decade to qualify for BRIC funding – despite an 11-to-1 payback.

Updating Project Cost Estimates to Recalculate Funding Gap

Elmer says he cannot calculate an exact funding gap at this time. “We’re still working on updating all project costs with the inflation estimates,” he said.

Elmer hopes to have a firmer estimate by August when the Flood Control District expects to issue its second flood-bond update this year.

I personally hope that the District’s recent reorganization can help it track such financing issues better in the future. It appears that after years of promising residents that all projects in the bond would be completed, now some may not be…while others that were not in the bond will be.

And I suspect I know whose won’t be.

Posted by Bob Rehak on 6/24/23

2125 Days since Hurricane Harvey

The thoughts expressed in this post represent opinions on matters of public concern and safety. They are protected by the First Amendment of the US Constitution and the Anti-SLAPP Statute of the Great State of Texas.