Abuse in flood mitigation program likely cost state millions

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wwltv.com

Posted on September 10, 2013 at 10:57 PM

Updated Wednesday, Sep 11 at 9:50 AM

David Hammer / Eyewitness News
Email: dhammer@wwltv.com | Twitter: @davidhammerWWL

NEW ORLEANS -- The largest hazard mitigation effort in U.S. history is wrapping up this month, setting off a last-minute push to lift, reconstruct or harden the last of 10,500 storm-damaged homes.

But the effort could have been even bigger. Years of graft and abuse in Louisiana’s home elevation grant program swelled costs and dissuaded further federal largess, likely keeping another 10,000 eligible homeowners from getting help, Gov. Bobby Jindal’s mitigation chief says.

“At the end of the day, if we vetted all of them, there would probably be 10,000 people say(ing), ‘I’m ready to go,’ but we can’t serve (them) because we don’t have the funding to do so,” said Craig Taffaro, head of state hazard mitigation programs.

The state’s Hazard Mitigation Grant Program got $750 million from the Federal Emergency Management Agency to help Louisiana homeowners build safer and stronger houses after hurricanes Katrina and Rita. All of the money was for the recipients of Road Home rebuilding grants who didn’t get enough to make their homes more resilient.

Most was spent on lifting rebuilt homes. Some went to building raised houses where structures had been totally destroyed, and some was for storm-proofing measures like shutters and hurricane windows.

In 2011, former Commissioner of Administration Paul Rainwater asked FEMA for another $390 million to serve thousands more homeowners who were waiting to get into the program. But FEMA refused, saying the state program was rife with waste and hampered by poor management controls.

Instead, the money was given to parish governments, many of which decided to use the money on programs that had nothing to do with flood-proofing.

Observers say the internal controls improved tremendously after Taffaro took over the program in December 2011. Even those who acknowledge taking advantage of the old regime admit that Taffaro changed the game.

“Right after Taffaro got into here, you saw the drastic changes,” said Dean Groover, a salesman who was kicked out of the program by Taffaro because he was moving jobs from one contractor to another. Taffaro said Groover was “acting as a brokerage.”

But before the crackdown, which also involved tough bonding requirements imposed by the Jindal administration, Groover and others pulled in huge profits by “making the numbers work.”

“For a typical house, the sweet, honey-hole house is 1,500-1,600 square feet,” Groover explained. “You want it to get the contract to $130,000” of approved costs.

Groover said a job covered by $130,000 in taxpayer funds would often only cost a contractor $60,000 to perform. And he had deals with contractors to collect any profits over $30,000 as his commission, he said.

The state had a process to control contractor costs, but it didn’t work as it was intended.

The program initially set hard costs based on how large the house was and how high it was being lifted. But for the first several years, it paid various “soft” costs as well, for such overhead expenses as paying engineers and architects.

Randy Gaspard, a builder who got in trouble with the program and was charged with contractor fraud in Jefferson Parish, said he was one of many who took advantage of the program’s loose structure.

He said he often could do a “turn-key” elevation job, covering all of the project’s costs and paying all of the subcontractors for such things as plumbing and electrical wiring, for $36 per square foot. Meanwhile, the state was approving payments to contractors of up to $75 per square foot.

That meant more than 100 percent profit in Gaspard’s example.

The permissive rules got even more vulnerable to abuse in 2011 when, in an effort to speed up work after two languid years, the program began paying 80 percent of the grant up-front.

“Eighty percent of the work I did came in under the 80 percent (advanced grant payment),” Gaspard said. “That allowed me to just put the money in my bank account.”

Taffaro stepped in and threw 12 contractors out of the program in 2012 for failing to complete projects. A dry-erase board in the Hazard Mitigation offices at the New Orleans Lakefront shows a list of companies with numbers of jobs next to them. Some have been removed from the program and others have to pick up the slack.

A workflow chart shows how to move jobs from one contractor to another, and instructs program staff to “celebrate” when the transfer is completed successfully.

Last year, when the state made it harder for contractors to claim soft costs and started issuing payments in stages as work was completed, only the most financially stable elevation companies were able to handle the work. A program that had been a gold rush, attracting contractors in droves, soon had a rotating qualified contractor list of only about a dozen companies.

With 9,800 elevation, reconstruction and storm-proofing jobs completed, there are still about 800 others remaining with just weeks to go before the Sept. 30 construction deadline. Taffaro said he’s had to send 20 notices a day to contractors telling them they are about to reach deadlines to finish work on projects, and if they aren’t done, the state will start docking their pay.

Taffaro said the original cost estimates were designed well and validated by top industry experts, but “the implementation may have had holes.”

“We don’t shy away from the fact that some contractors tried to, and sometimes were successful at, maybe taking advantage of the program,” Taffaro said. “Nor do we shy away from the fact that we stand very firmly if we catch someone doing something they will have to be accountable for it.”

Taffaro said the program won’t close down after the Sept. 30 construction deadline. Some projects will get extensions due to special hardships. For instance, Taffaro promised that homeowner Tom Legendre, whose job stalled as he dealt with conflicts with the contractor and his own serious health issues, would not lose his funding if his job isn’t complete by Sept. 30.

And even when all the construction work is done, the program must go after deadbeats who abandoned their raised homes.

“Now you’re going to be getting letters to pay that money back to the program because you’re out of compliance,” Taffaro said.

More finesse will be necessary to deal with people who didn’t get flood insurance, another requirement of the program -- especially with rates going up in some areas.

“So those people who are just documentation-short, we’re going to work very closely with those people,” Taffaro said.

 

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