FEMA slowly reviewing Thetford's 2017 disaster declaration

The Town didn't notify FEMA of scope changes, and had multiple procurement violations.

FEMA slowly reviewing Thetford's 2017 disaster declaration

The July storm of 2017 washed out roads and culverts in Thetford, costing millions in damage to local infrastructure. Money that was budgeted for the top coat on a just-rebuilt – and now cracking – portion of Latham Road was diverted, as was revenue from logging operations on the Town Forest that would've been destined for the Town Lands Maintenance Fund. Two lines of credit were taken out to cover major repairs to Route 132 and around town, the former backed by the Federal Highway Administration (FHA) and the latter by FEMA.

By 2020, the FHA had reimbursed the Town for several million dollars’ worth of repair work on Route 132. Together with other monies from the Town, a deficit of less than $50,000 remained on that line of credit. It was finally paid off at the close of 2020 with budget surplus from the Department of Public Works.

By no means was that the end of the work Route 132 needed; culvert repairs continued as late as 2020, including a culvert identified as Site 16 with a repair cost of almost $150,000, and Site 17, with a similar cost, all pulled out of the Town's Paving Fund. In addition, the EPA contributed millions of dollars from the Elizabeth Mine cleanup project to rebuild miles of Route 132, and Thetford voters recently approved an "up to" $4 million bond for the remaining reconstruction. In total, it's estimated that over $12 million of work will have been put into Route 132.

The Town had been waiting on reimbursements from FEMA for repair work completed on roads other than Route 132 – 12 projects in total. However, six of those projects were put under legal review by FEMA, and the review process ground to a halt. By 2020, the Town was still waiting on FEMA's response.

For context, the Town spent $85,506 on loan interest from lines of credit in 2019 needed for the July ‘17 storm. With FHA paid off fully in 2020, that number dropped to $53,465, with about $2.7 million outstanding on the lines of credit at the start of that year (the six projects under review accounting for almost $2.1 million of that total). The longer it takes FEMA to make a determination and reimburse the Town for disaster-related expenses, the more interest the Town pays. The interest loan payments in 2020 alone were roughly equivelant to the salary and benefits of one full-time road crew member.

FEMA's legal review was triggered by unapproved changes in the projects' scope, as FEMA explained in an August 2021 communication to the Town:

Federal regulation requires a recipient or applicant obtain prior approval from the awarding agency whenever any revision of the scope or objectives of the project is anticipated. When a change in scope is discovered, the applicant should notify the recipient as soon as possible.

This did not happen in Thetford. Rather, project scopes changed and/or increased, work was completed, and FEMA wasn't notified until the Town submitted project closeout requests in 2019. To which FEMA replied in late 2019:

Following our review of the closeout documentation, FEMA has identified concerns with the eligibility of the scope of work completed by the Applicant and the associated costs and the Applicant’s compliance with the terms and conditions of the award. Because these concerns could lead to full or partial denial of financial assistance, FEMA is providing the Applicant an opportunity to provide additional information.

Further, FEMA found the Town to have "procurement violations by using services procured through a noncompetitive proposal beyond the exigency period." In short, the Town did not properly bid out the repair work. In 2019 and earlier, the position of Town officials was that there was no time to bid out the work due to the need for emergency repairs, but the projects in question were executed months and sometimes years after the July 2017 storm. FEMA explained to the Town that, "Once the exigent or emergency circumstances cease to exist, the Applicant is expected to transition to a more appropriate method of contracting using full and open competition."

In 2020, following significant turnover in Town government, officials were left holding this multi-million dollar bag. "We don't know what our exposure will be," then-Town Manager Guy Scaife informed the Selectboard. If FEMA declined to reimburse the Town for the repair work, taxpayers could be on the hook.

At that time, Town officials contacted Senator Leahy's office for assistance, and by late 2020, FEMA's legal review was back in gear. Requests for Information were received by the Town, who worked with Stantec, the engineering firmed hired by the Town, to provide answers. The Town's response to FEMA regarding the six outstanding projects was submitted in April, 2021.

Now, FEMA's determinations are starting to come in. FEMA notified the Town on April 17, 2021 that a closeout request for one of the six outstanding projects had been approved, meaning a federal reimbursement to the Town of $467,682.71. It came with a warning, however:

This notification is to advise you that FEMA reviewed the Applicant’s procurement method and found the Applicant has violated the regulations set forth in Title 2 of the Code of Federal Regulations, part 200 (“Procurement Standards”). When an Applicant fails to comply with these Procurement Standards, FEMA has broad discretion in imposing an enforcement remedy...

... However, FEMA has elected not to take any remedial actions at this time.... However, it is important to highlight that while FEMA is not making reductions, the Applicant’s method of procuring engineering and project management services does not meet the Procurement Standards. If the Applicant does not comply with the Procurement Standards when procuring work for future Public Assistance projects, FEMA may take enforcement actions at that time, which could include total disallowance of funding for those projects.

On August 5th, 2021, FEMA had approved a smaller project with a federal reimbursement of $182,747.60. That project carried the same violations and warning from FEMA.

The Town is still awaiting a determination on the remaining four projects. With federal reimbursements starting to come in, however, the Town also becomes eligiblle for similar state reimbursements. Although, even if every change of scope is approved and the Town receives the full reimbursement from both the federal and state governments, it will still have to cover a portion of the repairs costs, as it did with the FHA line of credit. The reimbursements are not intended to cover 100% of repair costs.

It is too soon to know what that exposure will be or how it will be paid for (another budget surplus or, perhaps, the raising of new taxes), but it is good news that the process is moving along and projects are slowly being closed out.

Photo credit: Guy Scaife, undersized culvert on Turnpike Road South replaced after the July 2017 storm. This culvert has since been upgraded to a steel bridge.

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