This is the first story in a two-part series
U.S. Housing and Urban Development Secretary Shaun Donovan gave Gov. Chris Christie a firm handshake and smiled for the cameras. It was April 29, 2013, six months to the day since Sandy had devastated New Jersey’s coast, and Donovan had come up from Washington to make the official announcement that the feds had approved the state’s plan for spending its first batch of $1.83 billion in recovery funding, and to start the flow of money.
The two men stood in the center of the dining room at a seafood restaurant in Highlands, one of several bay shore communities that had been devastated by the flooding. There was no oversized, Publishers Clearinghouse-style check, though the governor quipped that Donovan would later hand off the money in suitcases in the back room.
Joking aside, the HUD secretary assumed a cautious tone.
“We’ve got to be responsible with this money. And we’ve got to make sure that it’s spent right,” he said.
From the get go, a smooth recovery was doomed. The state did not have the personnel or experience to handle a disaster of this magnitude, and the federal government gave it the freedom to deal with problems as it saw fit. So New Jersey ended up hiring the very same contractors that failed with Katrina, and then it failed to oversee them closely. It took seven months to identify these problems, and once they were, the chief contractor was fired. But by then, tens of millions of dollars had already been spent.
That would all come later, though. Back in the restaurant, Donovan was optimistic New Jersey would get things right. He spoke of the need to balance safeguards against waste, fraud and abuse with getting the money out the door expeditiously, drawing upon the federal government’s experience handling past disasters. And he added that he had worked with Christie’s team to develop a program that was sure to be successful. New Jersey’s Sandy recovery, he seemed to say, wouldn’t repeat the mistakes that had plagued the Gulf Coast.
“It’s never fast enough, but it will be a lot more effective and faster than what we had in Katrina, and we’ll get better results because we’ve set it up right in the first place,” he said.
Now, a year and a half later, much of the visible damage along the coast is gone, and state officials are proudly proclaiming that they’ve committed more than $1 billion in housing assistance for storm victims. The feds have delivered to New Jersey a second tranche of $1.46 billion in aid, and a third batch is expected to arrive next spring.
Yet despite the promises of Donovan and Christie, thousands of homeowners are still waiting for long-term rebuilding aid, and popular dissatisfaction with the recovery is rampant. Along with the successes it’s had, it’s been plagued with horror stories of delays, lost paperwork, and bureaucratic red tape. A Monmouth University poll released earlier this week found widespread dissatisfaction among storm victims, who cited poor communication and responsiveness when they tried to apply for aid. And one-quarter of applicants who were denied funding from the state’s largest grant program said they don’t even fully understand why.
The problems are frustrating, but they’re not unique to New Jersey or even superstorm Sandy. New York City had many of the same issues, as did Louisiana after Hurricane Katrina hit in 2005 and Texas after Hurricane Ike in 2008.
The failures stem from numerous reasons, beginning with paperwork requirements by the federal government and extending to the lack of accountability on the part of the state in overseeing the contractors.
In partnership with WNYC/NJ Public Radio and public radio station WWNO in New Orleans, NJ Spotlight has been investigating why disaster recovery always seems to be fraught with error and what best practices should be adopted for dealing with the aftermath of future storms. The answers to these questions, it turns out, are far from simple.
For many people, the starting point for discussions about what went wrong after Sandy revolves around the private contractors the State of New Jersey hired help manage the recovery.
It’s hard to get a complete sense of exactly how much the State has spent on outside firms. But according to the latest, publicly available Sandy Integrity Monitor report — which tracks all Sandy projects whose prices exceed $5 million — more than $90 million has been paid so far to seven firms managing large parts of the recovery (as of the quarter ending June 30).
Several of the companies the state hired have come under criticism at one point or another for their mishandling of the recovery. For example, housing advocates said CDM Smith ignored federal rules and used erroneous data in its initial action plan that later had to be revised by the state. And the Christie administration abruptly terminated URS Corp.’s contract last Februrary after it was discovered that a high percentage of grant applicants had been wrongly rejected (though officials denied the move was related to poor performance).
Perhaps the most notorious contractor-related issues to arise from New Jersey’s Sandy recovery, however, revolve around New Orleans-based Hammerman and Gainer International.
HGI wasn’t hired to conduct brick-and-mortar repairs. Instead, its tasks included processing paperwork to determine who is eligible for what sort of federal aid. The company was brought on board in May of 2013, shortly after its New Jersey law firm, Capehart Scatchard, made a $25,000 donation to the Republican Governors Association, which. Christie now heads. The RGA contributed $1.7 million to Christie’s 2013 reelection campaign.
HGI was also hired to operate nine intake centers where storm victims could apply for long term rebuilding aid. If you were one of the thousands of homeowners who needed help, you might have gone to one of these centers.
“The housing recovery centers were set up to help process applicants that didn’t feel comfortable applying either online or over the phone … primarily elderly applicants that were not particularly computer-literate,” explained “David,” a former employee who worked in a management position in one of the centers. He’s afraid that going public could hurt his chances for future employment, so we’ve agreed not to disclose his real name or other identifying details.
Like most of the other employees, David was hired through a temp agency — actually a subcontractor of a subcontractor of HGI.
“The senior people, in my opinion, were adequately qualified,” he said. “Most of the lower-level people were a mix of typical temporary workers and college students.” Few if any had any sort of experience doing this kind of work.
David said that higher-level managers received a week of training, while the rest of the employees including customer service reps were basically trained on the job. The workers shared a genuine commitment and desire to help everyone who came through their doors, he said, but they faced a series of obstacles.
“We were coached to give rote answers to questions,” he recalled. “Many of the applicants wanted more information, and we were urged not to provide further information.”
Although HGI’s initial contract was worth $68 million, he said the subcontractor that ran the centers on behalf of HGI appeared to be cutting corners to save money. The computers ran cloud-based software that had all sorts of glitches. There weren’t enough chairs for applicants to sit while they waited in long lines. And several of the centers were located in buildings that seemed to have cheaper rent but were miles from where most storm victims lived, in inconvenient areas inaccessible to public transportation.
On top of all that, there were communication difficulties, so homeowners would sometimes make appointments through the call center, but when they showed up, the staff did not know to expect them.
“The sense I got was that the management of the program was more interested in perpetuating their contract than they were in helping the victims of the storm,” David said. “I’m from New Jersey, and I live in the coastal area, and I had any number of friends that were in severe distress,” he added, “and to see a program extending their distress rather than trying to help them in the most efficient manner possible angered me.”
The problems David saw on the inside provide a window into what was going on behind the scenes of a severely broken recovery process. Meanwhile, back on the outside, the state’s recovery was met by repeated criticism from homeowners and advocacy groups over lost paperwork, repeated delays, and claims it had wrongly blocked many storm victims from getting aid.
The state had hired HGI based on its experience managing past disasters, including Hurricane Katrina. The point of hiring outside firms like this is supposed to be to provide extra manpower and make the recovery more efficient. But in this case, it wasn’t working.
Richard Constable, the New Jersey Commissioner of Community Affairs, acknowledged as much at a hearing before state lawmakers last January.
“We know there were some issues and concerns,” he said. “Once we were made aware, we wanted to make sure from a training standpoint that the housing advisors that would be hired by our consultants were well informed and could do the best job possible.”
David said he tried making suggestions for improvement at the recovery center, but his bosses were not receptive. Eventually, he was fired.
State officials declined to respond to David’s specific complaints, but said they’ve taken several steps to refine the program.
“We work every day to improve customer service and employee training, and these efforts are paying off,” Lisa Ryan, a spokeswoman for the state’s Department of Consumer Affairs, said in an email. “The State’s recovery programs, including RREM, are running more efficiently and achieving their goals.”
For its part, HGI complained in legal filings that the state kept piling on extra work with unrealistic deadlines that went beyond what the company had originally agreed to perform.
Eventually, the Christie administration cut its ties with the firm due to “performance-related concerns,” though administration officials have never provided a public accounting of just what those concerns were. The Department of Community Affairs declined multiple requests for interviews, including even a general discussion about the use of outside contractors. According to the latest figures, HGI has received $36 million for its New Jersey work.
State officials have been less than forthcoming, so most of what’s known about the termination of HGI’s contract comes from public records uncovered by the group Fair Share Housing. The Christie administration has refused to release internal records on the firing on the grounds that they are “deliberative” and “advisory” draft documents. The company has billed the state an additional $22 million, but it’s unclear if the dispute is currently in litigation or mediation.
After HGI was fired, its duties were handed off to another contractor called ICF. At the same time, state officials assumed more of a hands-on management role than they did in the past. Housing advocates say things do appear to have improved somewhat in recent months, though it’s unclear how much of that is due to the change in contractors and how much is the result of greater oversight or the fact that the state is simply farther along in its recovery process.
ICF is a familiar name in Louisiana, where New Jersey’s post-Sandy stumbles sound all too familiar.
After Hurricanes Katrina and Rita destroyed 200,000 homes in 2005, that state established the Road Home program to funnel billions of federal dollars to homeowners in the form of rebuilding grants. And it hired Virginia-based ICF for $900 million to administer the program. The company went public shortly after it won the Road Home contract.
But the program found critics early on.
“The company, in hindsight, we can all say should have done a better job,” said Davida Finger, a professor at the Loyola Law Clinic in New Orleans. “That program was plagued from the beginning: very serious issues with how the program was assessing damage, with how the program was estimating costs, with serious race discrimination issues that eventually went to federal court.”
Louisiana’s legislature tried to fire ICF and have the feds investigate its business practices. Finally in 2009, the state let the company’s contract expire. The company declined to comment on its Road Home work for this story. One of its partners in the program took over: HGI – the same firm that would be hired by New Jersey four years later, after Sandy, only to be let go within a year.
So in an ironic case of musical chairs, Louisiana and New Jersey made the exact opposite hiring decision, but both faced similar problems.
In Louisiana, the change in contractors did lead to some improvements, but the state still ended up fining HGI more than half a million dollars between 2009 and 2013, primarily for delays in handling applications.
New Jersey officials, meanwhile, said they’d heard about HGI’s troubles in Louisiana, but hiring the firm was the best choice at the time. HGI’s proposal was $127 million less than the only other bid the state received. In addition, California-based Tetra Tech. — the other bidder — did have experience working on the Katrina and Rita recoveries along the Gulf Coast and had been contracted to rebuild levees and floodwalls, but it was very different sort of work than they were applying for here, to help manage the RREM program for Sandy-affected homeowners.
HGI, however, seemed to have exactly the sort of experience managing Louisiana’s Road Home program that Trenton was looking for.
In Louisiana, nearly a decade after Katrina, homeowners continue to battle both ICF and HGI over recovery money. Last year, the Road Home program sent letters to 50,000 residents saying they had to pay back some or all of their grants. Homeowners complain that they’ve tried to figure out which rules they’ve violated or what documentation they’ve failed to provide, and they’ve been met with unreturned phone calls or told their files are lost.
“I never could have imagined that ten years later, we’d still be hearing about Road Home and FEMA and other post-disaster programs, although people who were familiar with post-disaster work told us it would take at least ten years,” Finger said.
After Sandy, many Louisiana companies and officials helped write legislation to try to help New Jersey and New York avoid Katrina-style missteps, but it wasn’t enough.
Despite technocratic leadership under then-Mayor Michael Bloomberg and an expensive, top-down analysis of how to run a rebuilding program, New York City’s efforts ran up against many of the same obstacles.
The city started out vowing to avoid repeating the mistakes of the past by undertaking a comprehensive review of not just Katrina but also Hurricane Ike and the 2008 floods in Iowa.
“One of the very first things we did was we engaged the Boston Consulting Group to help us look at all the past disasters, all the problems that they had, all the lessons learned from those, and try to put together a program that would avoid those problems,” recalled Brad Gair, the city’s former Sandy Czar.
“It was easy to categorize them and classify them and identify solutions, but those solutions can’t be implemented independently at the local level, like the environmental issues that often delay these programs for months and months. We couldn’t change that unilaterally. The federal government can’t change that quickly.”
In addition, the contractors running the city’s recovery program ended up losing applicants’ paperwork as they tried to navigate the complexities of the federal Sandy legislation.
“Things go wrong in the best of circumstances, so when something’s put together quickly, implemented on the fly, more things go wrong, people start scrambling for solutions and trying to do quick fixes that may Band-aid one problem but then it just pushes the problem down the line,” Gair said. So what started out as small problems have only gotten worse over time.
“Meanwhile, the homeowners are sitting there,” he added.. “All they know is they’ve applied, they’ve done everything they’ve asked, and it’s really not very transparent to them what’s going on to cause the delays.”
Repairs on the first home in New York City using federal housing aid did not begin until March of this year, about 14 months after Congress approved the $50 billion Sandy aid package. And even though the pace has picked up considerably, a report earlier this month by the city’s Department of Investigations found that 90 percent of applicants have yet to receive any assistance from Build it Back, the city’s program.
New York City’s new mayor, Bill de Blasio, has instituted numerous changes and committed to begin repairs on 1000 homes by the end of the year. But observers predict that if another disaster were to hit in the near future, many of the same problems and delays could happen all over again.
After hearing about all the problems New Jersey, New York City, and Louisiana faced, it’s easy to blame the contractors and assume that things might have turned out better if we simply hadn’t hired the same firms that had spotty track records to begin with.
But the field of disaster recovery is a relatively small world. There simply aren’t that many companies out there that do this kind of work. And many of the ones that do have encountered their share of difficulties. Furthermore, NJ Spotlight’s investigation identified a number of structural problems with how disaster recovery is handled that mean it’s likely many of these same problems would occur regardless of which firm is in charge. There will be more discussion of how to address those underlying problems in the second part of this report.