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HUD says North Carolina’s long-criticized disaster spending is finally ’on pace’

In a recent regular report, the federal Department of Housing and Urban Development for the first time classified North Carolina’s spending of disaster relief money from Hurricane Matthew as “on pace.”

State oversight of the Community Development Block Grant disaster recovery (CDBG-DR) program has been a matter of interest among both the state’s politicians and the survivors of 2016’s Hurricane Matthew and 2018’s Hurricane Florence. Both groups have used HUD’s consistent classification of the state as a “slow spender” of $236.5 million in funds from Hurricane Matthew to express frustration with Gov. Roy Cooper and his administration.

On its most recent report, though, HUD shifted North Carolina’s category to “on pace,” noting the state has spent more than $4 million in each of the past three months. Asked what has allowed the state to hasten its spending, Laura Hogshead, the chief operating officer of the N.C. Office of Recovery and Resiliency (NCORR), points to the founding of that office as part of December 2018 legislation.

“Basically, that is what we think has made the difference here, is setting up a dedicated staff and an infrastructure for spending this money,” said Hogshead, a former HUD chief operating officer.

According to NCORR records, the agency has spent — or drawn down — $26.12 million in Matthew recovery funds, while award letters for another $135.92 million have been sent and are awaiting signature.

The slow spender status, according to HUD, indicates a grantee spending at least 10% less than the amount needed to spend the entire grant by its projected close-out date — Dec. 30, 2023, for the Matthew funds. An “on pace” spender is is likely to use all of the funds.

Lawmakers from areas hit hard by 2016’s Hurricane Matthew and 2018’s Hurricane Florence have frequently criticized Cooper’s administration for its oversight of the CDBG-DR funds.

Rep. John Bell, a Goldsboro Republican, is the vice chairman of the House Select Committee on Disaster Relief, founded by Speaker Tim Moore last July after Republican legislators grew frustrated funds weren’t being spent.

Recently, Bell told the News & Observer on Tuesday, he has spoken with residents in his district who are receiving CDBG-DR funds for buyouts of their homes. Funds have also been used to build affordable housing developments in hurricane-impacted counties.

“It’s about time,” said Bell, the House majority leader. “We’re over three years and moving forward. I have talked with some people that have started to see results and move through the process. Of course, it’s can’t happen fast enough for anybody.”

Sen. Thom Tillis announced earlier this summer his intention to propose federal legislation allowing local governments to take over CDBG-DR funds if the initial grantee is not “on pace” after 18 months. HUD doesn’t classify CDBG-DR spending for the first year after a grant is announced in order to allow states and other grantees time to build a program.

While NCORR is managing the $236.5 million in Matthew funds, the agency is also working on an action plan that would allow it to access an additional $168 million in Matthew mitigation funds and awaiting a federal register notice for a $336.5 million Hurricane Florence recovery grant. Hogshead also expects an additional Florence appropriation to push the total amount of funds NCORR oversees above $1 billion.

In May, a report from the legislature’s Program Evaluation Division cited a lack of expertise as a key reason for the slow spending. NCORR was founded about six months before the report was published, and the agency was in the process of hiring staff at the time.

When the report was published, CDBG-DR funds were being granted to the N.C. Department of Commerce before being shifted to the state Department of Public Safety. That process has since changed so that NCORR is the direct recipient of all funds.

The Program Evaluation Division noted that CDBG experts began leaving the Department of Commerce after the General Assembly began in 2009 to shift the focus of the grants from housing to economic development before eliminating the last housing program in 2013. During the same period, the report stated, the staff with CDBG experience fell from 36 to 10. When the General Assembly again allowed Commerce to administer CDBG programs in 2017, the department staffed many positions with temporary workers.

Furthermore, the report noted, the Department of Public Safety was learning the parameters of CDBG-DR funds while implementing them, as it had no expertise with the grants.

Earl Randall, III, a former HUD offiical, is now the director of CDBG-DR compliance and monitoring for private firm IEM. The firm has contracted with NCORR to assist with its CDBG-DR program.

When he was working as a HUD official, Randall monitored CDBG-DR grants for disasters such as Hurricane Katrina and Superstorm Sandy.

“States aren’t adequately prepared to handle that influx of funding,” Randall said, “so there’s a huge capacity issue up front where states are trying to reach out to communities that were impacted previously to get some advice and guidance, but they’re also looking for capacity to administer these programs.”

Hogshead is optimistic that NCORR has given North Carolina the capacity to administer the CDBG-DR funds. Specifics of the grants can change, Hogshead said, but the agency has created the infrastructure and processes that will allow the state to spend funds efficiently.

“We’re thrilled to be on pace, and we plan to stay there. We don’t anticipate any future problems,” Hogshead said.

NCORR, Hogshead added, is monitoring its 45-person staff to make sure it maintains the capacity to keep funds flowing as the agency receives additional allocations.

After observing Matthew and Florence’s impact in his district, Bell was among the legislators pushing most adamantly to form NCORR in order to streamline the spending of disaster money.

“I wish we could have had this in place before Hurricane Matthew,” Bell said, “and we wouldn’t have had the delays we have now, that’s my opinion.”

This story was produced with financial support from Report for America/GroundTruth Project, the North Carolina Community Foundation and the North Carolina Local News Lab Fund. The News & Observer maintains full editorial control of the work.

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Adam Wagner is a Report for America Corps member covering North Carolina’s recovery from Hurricanes Matthew and Florence, as well as efforts to prepare the state for future storms. He previously worked at the Wilmington StarNews, where he covered multiple beats, including the environment.