Sandy Families Celebrate Action on Clawbacks

New Jersey families battling Sandy grant clawbacks for years welcomed Congressman Kim and Pallone’s introduction of the “Security After Sandy Act” in the House of Representatives today and applaud Senator Menendez’s upcoming introduction in the Senate.  With the fiscal trouble facing families, municipalities, New Jersey and our nation due to the economic impact of COVID-19, Sandy survivors cannot afford one disaster on top of another.  The “Security After Sandy Act” would keep hundreds of millions of dollars here in New Jersey at a time when we can least afford to lose them.  While it has been over seven years since Sandy, many families have had clawbacks looming over their heads – a debt owed due to a supposed “duplication of benefits.”

“I followed all the guidelines presented to me by the RREM program, I followed the rules in my recovery and fought hard to finally make it home. I was told I could use my ICC (Increased Cost of Compliance through the National Flood Insurance Program) funding only to find out later that I was being penalized for doing so. My nightmare continues because now I’m being told I owe money back for a grant that was supposed to help me get home,” said Estelle Stolz a New Jersey Organizing Project member from Little Egg Harbor who is facing a clawback.

opens in a new windowAccording to The Long Road Home: Sandy 5 Years Later report (2017) by New Jersey Resource Project, twenty percent of respondents in New Jersey’s major Sandy recovery programs for homeowners – RREM or LMI – had been told that they owe money back to the grant programs; of the homeowners who reported a clawback amount, the average amount they told to repay was $30,643, and nearly 90 percent reported that they could not afford to the pay the money back.  And that’s because fifty-six percent had trouble paying bills and/or affording food and gas since the storm. Seventy-seven percent of respondents reported that they either did not have enough money to finish rebuilding their homes, or else needed to rely on or borrow from funding sources such as retirement or other savings, SBA loans, and credit card debt.  And now, with clawbacks hanging over their heads, these same families are facing hardship related to COVID-19. 

“Now more than ever, we need closure on our Sandy Clawbacks. We tried to do everything right in our disaster recovery by listening to the so-called experts. We still ended up with a Clawback that has continued to haunt us. As we all can see, life goes on and brings new challenges like we are all facing now from the COVID 19 Pandemic, which is another disaster for our family and so many others. I have been a small business owner for the past 28 years. I had to put 18 of our staff members on unemployment on 3/19/20 when Governor Murphy ordered hair salons to close.  Sandy survivors like us could really use a break.” Barbara Zukowski, a New Jersey Organizing Project member from Toms River. 

The “Security After Sandy Act” would stop the federal government from trying to collect debt owed due to Superstorm Sandy and other federally declared disasters since 2006 – including the Community Disaster Loan clawbacks facing New Jersey communities like Little Egg Harbor and Toms River. 

“Over seven years has passed and we are still suffering the effects of Superstorm Storm Sandy.  Our families, our communities must be able to heal and move forward to recover. The clawbacks are putting financial burdens once again on those who have already lost so much from the storm. I would like to thank Congressman Kim, Congressman Pallone and Senator Menendez for standing up for our families and communities to help us become whole,” said Jody Stewart, an Organizer at the New Jersey Organizing Project. 

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Background on Clawbacks & FEMA Community Disaster Loans:

The Long Road Home report defines clawbacks as follows.  “Clawbacks are a term for families in the RREM program who face a demand to repay funds they received, known as a recoupment or “clawback.”  This process may occur if the program determines that a homeowner 1) was ineligible, 2) failed to comply with the scope of work or could not validate the proper use of grant funds, or 3) received a duplication of benefits from another source.  The state is required to attempt to recoup any overpayments, regardless of who was at fault or whether the homeowner relied on inaccurate information provided by the program.  The most common reason given for clawbacks in the grant program is duplication of benefits.  Under the Stafford Act, which outlines federal natural disaster assistance for state and local governments, agencies are required to establish policies and procedures to prevent duplication of benefits (meaning provision of funds from more than one source for the same purpose). 

One of the problems, however, relates to the sequence of delivery of disaster assistance.  Under normal circumstances, flood insurance funds, FEMA assistance, and SBA loans are distributed first, and CDBG-DR programs, such as RREM, are meant to be a last resort and to “fill the gaps” after a homeowner has already received most of the assistance they need.  After Sandy, though, numerous homeowners received money from insurance carriers (in particular, through Increased Cost of Compliance, or ICC, coverage, which is designed primarily to fund elevation) or SBA loans after they had signed an RREM grant.  Frequently, homeowners were affirmatively told by Housing Advisors in the grant program that ICC funds and SBA loans would not be considered a duplication of benefit, only to find out later on that this information was inaccurate.  Adding to the confusion is the fact that homeowners were previously permitted to use CDBG money to pay off SBA loans, but guidance issued by HUD in November 2011 clarified that the entire SBA loan amount for which someone is deemed eligible is a benefit that cannot be duplicated.  Because most homeowners were still short of funds necessary to rebuild even after receiving various forms of assistance available to them, they were baffled and frustrated by the notion that they were somehow “double dipping.””

Recognizing that these clawbacks were an issue, in October 2018, Governor Murphy placed a freeze on repayment of clawbacks, which was a critical step forward particularly for those Sandy families who had been told to pay large sums back in three years by the Christie Administration.  Those sums would have been due in the early Spring of 2019 for the first families to get notice about the clawbacks.  The freeze has given families room to breathe, and allowed the state to work for solutions. 

FEMA Community Disaster Loans:

opens in a new windowThe Community Disaster Loan (CDL) Program provides operational funding for local governments to continue to operate after a substantial revenue loss caused by a disaster.  Local governments can apply if they are located in a Presidentially Declared Disaster Area, have substantial revenue loss, and that it affects current or subsequent fiscal years.  There are three phases of the program, application, maintenance, and cancellation.  If a borrower can demonstrate that they have a cumulative 3-year operating deficit following the disaster and associate that deficit with a disaster-related loss in revenue, including unreimbursed disaster-related expenditures (UDRE), they can have all or part of the loan cancelled, along with the related interest.  Similar to clawbacks, what FEMA will accept does not include all expenses incurred by municipalities and so places like Little Egg Harbor and Toms River are currently being told to repay forgivable loans for Sandy expenses. 

About the New Jersey Organizing Project:

The New Jersey Organizing Project is an organization for Central and South Jersey and our Shore region who have been fighting to eliminate clawbacks.   They were founded by 9 Superstorm Sandy survivors in 2014 and now have over 5,000 members. NJOP has fought for and won rental assistance for Sandy families, transparency in Sandy spending, and foreclosure protections.  They are led by communities on the frontlines of climate change and disaster who build power to address the threats, health challenges, and economic inequality faced in New Jersey.   They also work for affordable healthcare – in particular expanding access to treatment for people struggling with opioid addiction – and to make sure disaster recovery systems are reformed to work better for families, and that  communities are better prepared for flooding and future storms.