One of the more alarming facts that came out of Thursday’s City Council meeting is that Houston’s Housing and Community Development is spending far more on disaster relief than it gets back in reimbursements. In the case of one program, Economic Development, the ratio between costs and reimbursements to date was actually 1100 to 1, even higher than the headline indicates ($3,596,821 spent vs. $3,260 reimbursed).

The program’s purpose: to help small businesses damaged by Harvey. But the City launched the program just this year. And four years after the storm, those who needed assistance the most have already gone out of business. Most small businesses can’t survive that long after losing essential equipment. Is this program chasing business applicants that no longer exist? It’s hard to tell without more information. (The City’s most recent pipeline report, published just yesterday, doesn’t even mention the Economic Development Program.)

Regardless, the Economic Development Program isn’t the only area where expenses seem out of whack. This raises the questions, “Should the City even be in the disaster-relief business?” And “Can others do it better?”

Disaster Relief Costs Exceed Reimbursements and Budgets in Multiple Areas

Temika Jones, the Department’s new Chief Financial Officer and Assistant Director showed the chart below as part of her presentation. She has one year on the job. Before that, she served as an auditor for a major accounting firm. Her presentation spotlighted two giant problems: Costs exceed reimbursements. And costs exceed budgets – so some may never be reimbursed.

In the chart above, focus on the last two columns in the Total row. They show that the City is incurring disaster relief costs that average 2.3X higher than reimbursements – across the board.

Also focus on the big red numbers at the bottom of the slide. They show budgets that have already been exceeded.

Now compare Columns 3 and 6 in Line 1. The City has already overspent its four-year budget for administration in the first year of its contract with the GLO by $1+ million. Oops. The budget was $15 million. But the City already spent $16 million and has only had draws approved for $1.2 million.

Finally, compare Columns 3 and 5 on Line 4: The Homeowner Assistance Program. The department budgeted only $8.2 million for project delivery, but has already spent $30.6 million – almost quadruple. That means they have no budget remaining to finish the program. Worse, reimbursement for $22.3 million could be in jeopardy.

City Operating Outside of Its Core Competencies

There are several reasons for the problems discussed above:

• HUD and the GLO operate on a reimbursement basis. The City can give money to flood victims and expect reimbursement, but then have the victim’s application refused for some reason – often missing forms or incomplete data.
• The City’s track record with successfully completing applications has not been good. Many have been kicked back because they are incomplete.
• That’s apparently because of staffing, training, and management issues.
• The City’s accounting systems don’t handle disaster relief programs well, so the problems lack visibility.

Disaster relief just doesn’t seem to be one of the City’s core competencies.

The City is operating waaaaay outside of its areas of expertise. Police. Fire. Water. Streets. Trash. Those are the things people expect from the City and what the City should focus on. In business, any time you tread outside of your core competencies, your costs and risks escalate exponentially. That takes money away from flood victims.

It appears that the City was so eager to get its hands on hundreds of millions of dollars in disaster relief money that no one asked whether the City even should be in that business. Or whether the City should just have let the GLO handle disaster relief – as it did so well in 48 other counties.

As of the end of last year, the GLO had reimbursed 2961 homeowners; Houston reimbursed 119.

And while the GLO reconstructed 2500 homes, the City reconstructed only 117.

Increasing the Pace, But Falling Father Behind

The City has accelerated its pace this year, but Jones’ presentation also shows that the City is still sitting on top of applications worth $114 million that have yet to be filed. That’s almost triple the previous year’s number. Meanwhile, expenses have more than tripled.

That brings us full circle. The City’s Economic Development Program has spent more than $3 million to get $3 thousand approved. It makes one wonder whether the purpose of pursuing HUD money was to create employment in Housing and Community Development or to help flood victims.

Turfing this to the GLO could have helped many more flood victims much faster at a lower cost.

The City put a third bureaucracy between money in Washington and the flood victims who need it. Two could have done the job faster, easier, and better.

Posted by Bob Rehak on 10/9/2021

1502 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.