Thursday, December 31, 2009

Process Matters: The Revolver Fund and the Chevron Deal

I think WDSU was the first to report on it but the Times-Picayune has a story as well.

I also learned earlier today that the city was again pursuing the acquisition of the Chevron Building and the abandonment of City Hall. The section 106 (historic review process) notice is here and supporting material is here.

Both of those articles remind us why this is news. Over the summer, the administration negotiated with Chevron Corporation to potentially purchase the Chevron Building from the oil giant for the price of $8 million, pending the process stipulated by City Charter.

There was a process. The City Planning Commission held a hearing and a vote. The City Council held a hearing and a vote.

City Council voted against the project.

So some members were apparently surprised today to learn that the administration was going to go ahead with the purchase and relocation anyway. Travers Mackel reeled in Shelley Midura:

"This is news to me," she said. "(The information) is not factual. The city determined in July that it would not buy the Chevron Building and would not move any city offices into that building."

Frank Donze also caught up with the Councilmember from District A:

She said she has "serious concerns about what is going on here" and described any effort to acquire the Chevron complex with state and federal money as "an undisguised attempt to avoid the council's involvement, and, unfortunately, part of a disturbing pattern of this administration."

Later, I emailed Councilman Arnie Fielkow for his thoughts:

We only learned of this today and are trying to get many of the same questions answered. I, and many other cms, do not support this! The entire project needs to be better thought out, master planned and left to the next administration and council!

And Councilwoman Stacy Head for hers:

I have no idea how he plans to do this without council approval. I am calling around to find out.

I also emailed Ceeon Quiett at the Mayor's Office of Communications. Here is what she wrote back:

The matter before the City Council was the appropriation of funding from one capitol account to another ..not an approval of the acquisition. Funding appropriation –Legislative Branch authority per the charter, Purchases –Executive Branch authority per the charter. The Mayor and the City Council both believe in the relocation of City Hall and the viability of the Chevron building. To this day, as the media has reported, leaking roofs, lack of hot water, broken elevators remain. As you remember FEMA has recognized the depth of damages to 1300 Perdido St. City Hall. Over $5million has been approved by FEMA for City Hall.

I think the administration is arguing that City Council and the City Planning Commission had oversight power over the original proposal to acquire the Chevron Building and mothball 1300 Perdido St. from this past spring and summer because at that time, they were being asked to fund the purchase using the city's capital budget.

Indeed, the city's original deal was to purchase the Chevron building for $8 million by using the $5 million FEMA has pledged for damage to our current City Hall and cobbling together the other $3 million through bond sales and the capital improvement budget.

This time is different, from the Mayor's perspective, because the executive is simply moving forward with the execution of a purchase and is not pursuing funds from the budget, which would reengage the a cycle of public hearings and votes by Council and the City Planning Commission.

The administration's position is that it did not need approval for the project itself, just the funds to move forward with the purchase. Ms. Quiett reminds us that FEMA has already allocated $5 million. That still leaves the same $3 million shortage for the price of purchase alone, ignoring the cost of renovation as a factor. I suppose that means that this time, administration is going to fill in the rest using funds that they have the authority to move around in a discretionary fashion without triggering a cycle of hearings.


I closely followed Dambala's recent piece about the potential pitfalls involved with discretionary use of Disaster Community Development Block Grant (DCDBG) funds, which come from the federal Department of Housing and Urban Development (HUD) and are administered by the Louisiana Recovery Authority (LRA).*

Today, he has a post about today's new controversy about the Cheveron Building in which he indicates the administration is planning to use what is called "the revolver fund" to avoid initiating the CPC and Council oversight process.

The revolver fund was set up by the LRA to help hurricane-damaged parishes scrounge up the cash to initiate recovery projects. For instance, when FEMA agrees to reimburse the City of New Orleans a certain amount of money for damage to a public building, they don't just cut the check so the city can go and hire a construction firm. Instead, FEMA reimburses the city once the work has begun. This protects taxpayers by ensuring that these recovery dollars are applied to restore the infrastructure that was damaged and not to other purposes but it also hurts the liquidity of parish level and municipal governments by requiring them to front the cash for all of these projects. To fix the problem, the LRA created revolver funds to help parish and municipal governments get cash up front. New Orleans can now tap revolver money to pay for projects and then repay the revolver fund when FEMA reimbursement checks cleared.

Dambala says today that:

The problem with that equation is that any money spent under the Revolver system must meet FEMA requirements for spending. If you recall in my previous post, the FEMA requirements state the the money can't be used for new development....they can only be used for repairs of exising infrastructure.

But FEMA requirements aren't that inflexible. FEMA money can be applied to a new development, if it is classified as an "improved project." That is what the city requested in its letter (see the WDSU story or the attachments linked at the top of this post) to FEMA.

I am trying to understand, from a procedural standpoint, how the administration can use revolver money for discretionary purposes. The idea is that the fund fronts the city cash for a specific, reimbursement approved project and then the city reimburses the revolver once the FEMA money comes through. Seems like a simple, clean transaction. But it's more complicated than that.

For instance, under the School Facilities Master Plan, the Recovery School District is not rebuilding every single school for which it is receiving FEMA reimbursement money. Or, under the plan guiding construction for the New Orleans Public Library, the city is not rebuilding every single branch for which it is receiving money from FEMA for flood damage.

One would assume that the city would apply every dollar from FEMA toward reimbursement for damaged libraries (just as an example) to building new libraries, even if the plan is to build fewer libraries in a more consolidated system. But maybe that's not the case. Conceivably, if the city spends less out of the revolver fund than they take in reimbursement money from FEMA, there would be a stash of surplus cash sitting in the revolver fund.

FEMA is not, I don't think, supposed to reimburse for construction that is not performed. If the city uses $10 million in revolver money, they're only supposed to get a $10 million check from FEMA to repay the revolver even if FEMA had budgeted $20 million for their assessment of damage. But I don't really know how it works in practice. It might be that the City allocates money from the revolver and gets an expedited reimbursement based on the allocation instead of the actual expenditure.

Some reader insight on this would be great.

Dambala says it is understood that the money leftover in the revolver when it is no longer needed to front anticipated reimbursements would go into the city's pot of remaining DCDBG funds and could be reapplied to other purposes. Is that what is understood and is that what is happening now?

I also want to know more about how oversight and administration of the revolver fund works. My sense is that it is something the LRA created for the Mayor's office to help with cashflow, is not something that is considered a part of the city's revenue or spending streams, and is therefore hidden from the regular budget process. Does that mean that a hypothetical surplus in the revolver fund is purely a discretionary tool for the executive branch? If Council doesn't have oversight over that money, does the LRA?

If there's anybody out there who can add some detail, answer some questions, or correct my mistakes, please leave a comment or email me.

*I have additional analysis and questions on this matter as well that I'll have to tease out in another post. I have been very curious about unaccounted discretionary spending, the 2010 budget, and the use of DCDBG funds as it relates to the demolition of Lower Mid-City and the proposed LSU/VA. If you've been itching for more information about what Dambala might be talking about, check out this story and video. It'll get your brain churning a little bit but it might give you more new questions than new answers.


mominem said...

I got a rather depressing response form my council person.

I suggest someone filing a law suit to run the clock out on the bugger.

Get all of the serious candidates for mayor to disapprove of this action.

Anonymous said...

Even if the mayor could use the 8 million to buy Chevron, what does that leave to mothball City Hall? What does that leave to make the move? What does that leave to upgrade facilities? No, this is not thoughtout at all and I'm suspicious that C. Ray is happy to let the FEMA end fail and leave the city to pick up the tab, which is what could happen. He can watch it all tangle up from Houston.

jeffrey said...

under the plan guiding construction for the New Orleans Public Library, the city is not rebuilding every single branch for which it is receiving money from FEMA for flood damage.

Um, how so? Once this construction program is completed, every branch that was destroyed by the flood will have been rebuilt. After reading Dambala's explanation of how HUD rules govern D-CDBG funds, I'm pretty certain that each of those projects will in fact happen. (Two are under construction now) Now how the City and the library plan to operate these facilities is another matter altogether, but we're just talking about construction projects at this point.

mcbrid35 said...

The city must have a defined plan for mothballing the current City Hall for the Section 106 process to move forward in any meaningful fashion. They are currently missing that - quel surprise.

Dambala said...


I think the lawsuit is the best possible option, it may be our only option. If someone wants to file suit I have a law firm who will back you. I would, but I live in River Ridge (JP).

jeffrey said...


There are "serious candidates for mayor"?

Anonymous said...

FEMA issued the press release, but who are the contractors and subcontractors who will be doing the actual assessments of City Hall and conducting any public meetings which may be held in conjunction with the 106 review?

CONSULT, v. t. To seek another's approval to a course already decided on. --Ambrose Bierce

Mohammad said...

What youre saying is completely true. I know that everybody must say the same thing, but I just think that you put it in a way that everyone can understand. I also love the images you put in here. They fit so well with what youre trying to say. Im sure youll reach so many people with what youve got to say. Replica Watches

yurake said...

whole lot of process descriptions in the women's health

yurake said...

the meaning of led flashlight

Nikola said...

More than $1 billion is spent each year on neck ties in the United States. cheapest car insurance

Nikola said...

It would take 1.2 million mosquitoes biting you simultaneously to drain all your blood.laptop reviews