South Florida

This village took on a $1.25 million debt it can’t afford. The mayor blames FEMA

Fallen trees and electric utility poles are seen around Coconut Grove as Hurricane Irma’s heavy winds pounded South Florida on Sept. 10, 2017.
Fallen trees and electric utility poles are seen around Coconut Grove as Hurricane Irma’s heavy winds pounded South Florida on Sept. 10, 2017.

As of Thursday, El Portal has 363 days to pay off a debt worth one third of its annual budget. The small village’s financial future rides on the gamble that FEMA’s reimbursement for Hurricane Irma-related expenses will come in time.

Known for its tree-lined streets and its tight budget, the Northeast Miami-Dade County village struggled to pay large bills for tree removal after the storm. After a months-long solicitation and approval process, the village government on Tuesday voted to take out a $1.25 million line of credit with Florida Community Bank to cover still-outstanding invoices for emergency debris removal.

“The only reason we are here is because FEMA hasn’t paid us,” Mayor Claudia Cubillos said Tuesday before the council voted to approve the loan. She said the credit was a bridge loan to cover city expenses until FEMA pays up. “The reimbursement timeline is on them, not on a municipality,” she wrote in a statement before Tuesday’s meeting.

Except in this case, that’s not quite true.

FEMA doesn’t reimburse unpaid bills. And at Tuesday’s meeting the mayor said El Portal had two outstanding invoices with a debris removal service for a total of $1.4 million, necessitating the loan.

“If that invoice did not exist, we would not be here today. The intent is only to pay [the bill], the intent is not to use it [the credit] to build a new village hall,” Cubillos said.

The line of credit became available to the village Wednesday morning at 10 a.m. By nightfall, the village manager had already arranged to run the account dry to pay down two outstanding bills. Secured by the promise of federal reimbursement, the Florida Community Bank loan must be repaid in full within 364 days of signing.

As long as FEMA pays out in time, the village’s 2,300-some residents and their property taxes should be off the hook for the bill (other than interest for the variable-rate loan, which must be paid each month starting September 2018).

That time shouldn’t be a problem, according to a consultant the village hired to help with the FEMA reimbursement process, Gabrielle Benigni. She told concerned commissioners at a special meeting on July 17 that she expects the village to see the FEMA reimbursements within a few months. “I’m hoping 90 days max,” said Benigni.

However, if history provides any context, it would seem the timeline for FEMA payouts is almost impossible to predict.

“It’s not unusual from my previous storms to say it might take four years to close out the financial reimbursement,” said Dan Summers, emergency management director for Collier County. But big-ticket items like debris removal are often first priorities.

Cities all over the state are saying this round of reimbursements — those related to Irma — are coming in even more slowly than usual. Summers said Collier County started receiving reimbursements about six months after Hurricane Charley in 2004, but Irma payments have taken much longer.

“At least as of last week, we haven’t received anything on debris, let alone a partial. Certainly, it’s double or triple the time we would have received anything [in the past],” Summers told the Miami Herald a few weeks ago. To date, no city in Miami-Dade County has seen a single dollar of federal reimbursement, despite the 11 months that have passed since the hurricane knocked down trees and caused significant property damage across South Florida.

North Bay Village, an only slightly larger municipality than El Portal, submitted its request for reimbursement in December and received confirmation only this week that it was approved. But it still hasn’t received the money.

As of the loan signing Tuesday night, many commissioners couldn’t answer the Herald’s questions about whether the city had actually filed for reimbursement. Still, the ordinance necessary to take out a loan of that size passed, with only councilman Werner Dreher voting no.

In fact, El Portal submitted its initial reimbursement request to FEMA on July 26, 2018, just five days before taking out the loan. City officials said the delay was to make sure the bills were all paid prior to submission in order to best streamline the process.

El Portal commission July 2018.jpg
The El Portal village council considers taking out a $1.25 million line of credit at a special meeting Tuesday, July 31, 2018. Sarah Blaskey

The outstanding invoices to be paid with the line of credit were from Looks Great Services Inc., a national debris removal service with a Miami branch. The company, which provided services in New Orleans after Hurricane Katrina, hit headlines following Hurricane Sandy when it paid over $256,000 after pleading guilty to charges of withholding wages from contracted employees.

According to the FEMA reimbursement submission, El Portal contracted with Looks Great Services through a mutual aid agreement with Florida City, which in the case of an emergency, allows a city without its own debris removal contract to use the other city’s legally contracted service.

Benigni said Looks Great Services removed more than 5,000 damaged trees from El Portal after Irma. The original bill was for almost $1.5 million, but the mayor said the village paid it down a little. The remainder as of Tuesday night was around $1.4 million, according to the mayor.

The village manager, Cristia Alou, said she provided written instructions for $1.235 million to be wired directly to Looks Great Services on Wednesday. The other $15,000 went to attorneys’ fees. But that still leaves El Portal $165,000 away from paying off the debt and being eligible for FEMA reimbursement.

“We asked for more, but it’s not what we were approved for,” said Cubillos at the July 17 meeting.

The village will pay the rest out of its general funds in the next few days, Alou said in a statement. Even a $165,000 bill is a lot for a small town with little padding in its budget.

By all accounts, that’s when the FEMA reimbursement clock really starts counting down, after the debt is paid off and the documentation provided to FEMA is updated. Although El Portal provided the Herald with documentation saying the reimbursement submission is complete, the Miami-Dade Office of Emergency Management’s records say the village’s six-project submission is lacking nine supporting documents.

But even 90 days from now is wishful thinking if other municipalities’ experiences are any indication.

The process is time consuming and complicated, and it’s gotten more so after reimbursement distribution changed. Now, after initial review and approval of a reimbursement submission, FEMA obligates those funds to the Florida Department of Emergency Management for further review and distribution to local governments. The process is dragging, and small municipalities that don’t have the budgets to swallow huge debris removal costs are suffering.

The state agency has said it is attempting to speed up the process. But the new submission process and new federal guidelines have tripped up several local and regional governments trying to submit their documentation and delayed the release of funds, some county emergency managers have told the Miami Herald.

Federal money used to be available through the FEMA advanced reimbursement program to help small municipalities cover big bills until reimbursements could be turned around. However, Politico reported that the program was discontinued. Many municipalities ended up having to pay back some of the initial payment after further review of the documents they submitted.

Now, some cities are turning to loans to cover the gaps. In El Portal, that means that if FEMA doesn’t pay out by July 30, 2019, and the city can’t negotiate an extension, the taxpayers are going to be on the hook for $1.25 million plus interest.