116 3rd St SE
Cedar Rapids, Iowa 52401
As if the Aug. 10 derecho had not caused enough devastation, the storm's aftermath is putting Linn County's local governments to the test as they front tens of millions of dollars in cleanup costs while waiting for the federal government to reimburse much — but not all — of it months from now.
Budget cushions built up to deal with emergencies and other unexpended funds are being tapped to meet the costs, but for Marion that may not prove enough: The city is looking for a bank to extend it a line of credit for up to four years.
So far, Marion has been able to float the cost of storm recovery projects, said Lon Pluckhahn, its city manager. But as expenses continue to amass, they could put pressure on other important city projects like building a new library as reimbursement from the Federal Emergency Management Agency remains in the offing.
'We've paid out $16 million so far and we could probably do it up to around 20,' Pluckhahn said. 'The problem becomes the money we are using, working capital, adds up. We need that money to do projects like the library. The hedge is how long will it take to get money from FEMA.'
So Marion is seeking the bank loan to meet 'short-term financial needs,' according to the city's request for proposals. According to the document, Marion would use the credit line to finance the millions of dollars of work necessitated by the storm that is expected to be reimbursed.
Proposals from lenders were due Friday and Marion will evaluate offers in the coming days.
'It will take banks of a certain size to do it, at least on their own,' Pluckhahn said. 'I would expect larger financial institutions to send us proposals.'
At the end of December, Marion filed for its first round of FEMA reimbursement. Pluckhahn said the total cost of derecho clean up in Marion could be between $33 million and $43 million.
'This is why we hold money in reserves because you don't see events of this scale typically,' he said. 'The biggest thing is we are going to have to be very deliberate in how we plan. ...
'It means the community is more vulnerable if something like this were to happen again next year. When you're using your rainy day fund, you have to build it back up for when another rainy day comes,' he said.
Typically, the total reimbursement between FEMA and the state comes to about 85 percent of the total cost, which means local governments have to make up that remaining 15 percent through their own funding or grants.
But the process to get the reimbursements can take quite some time.
Pluckhahn said for the first proposal, the cost of street cleanup in Marion was about $13 million. The expected reimbursement from FEMA is about $9 million plus 10 percent from the state.
'I think our goal would be to have wrapped up by midsummer, June to July time frame,' Pluckhahn said. 'Honestly, that's probably going to be tough with everything we're encountering in the waterways.'
Marion hired Southern Disaster Recovery to clean up derecho debris from its waterways. The company currently is working on the $20 million project, which the city can't file for reimbursement until the project is closed.
Pluckhahn said there's a potential the special financing could ding the city's bond rating — and thereby up its cost of financing future capital projects — but he isn't overly concerned about the possibility.
'When we were talking with our bond agent, they were not anticipating it would because this is a short-term issuance. If it was long term, that could be a problem, but this isn't that,' he said.
In Cedar Rapids, City Manager Jeff Pomeranz said expenses may total $100 million or more to clean up and recover from the derecho.
Much of those costs are associated with paying debris removal contractors, mainly Wisconsin-based Jamey Flannery Trucking, which specializes in high-volume debris removal.
He said the city has opportunities to borrow internally from unexpended funds, and FEMA reimbursements eventually will pay back various funds of the city — so Cedar Rapids officials are not turning to financial institution for loans.
'We were able to finance and to sustain these large amounts because we have tremendous capacity with all of the funds of the city that we can borrow in essence from ourselves,' Pomeranz said. 'And then once we get reimbursed, we pay ourselves back.'
Finance Director Casey Drew said in a statement, 'The city is working with FEMA to write project work sheets related to the disaster. The process takes time to complete and the city is working with FEMA on a regular basis to move the process along.'
Pomeranz said he is confident the city will be properly reimbursed in the coming months.
'We were very attuned to the documentation that was and is necessary,' Pomeranz said. 'We just think we have worked closely with FEMA and the state. They understand the nature of the costs that we have incurred and we have, I think, a collaborative relationship.'
Cedar Rapids City Council member Scott Overland, who chairs the finance committee, said he expects the ongoing calculation of derecho recovery costs to factor somewhat into the budget for fiscal 2022, which begins July 1 and ends June 30, 2022. The city currently is working on that budget proposal.
'Our plan is to not raise taxes and simply absorb that into our normal budgetary process,' Overland said, adding he also is confident the city will be reimbursed once the documentation is submitted.
In Linn County, Risk Manager Steve Estenson said the county still is in the process of filing for FEMA reimbursement.
'We hope to have that done this month,' he said.
The cost for recover work done in the county is $11 million, Estenson said, and the cost of work still to be done is about $5 million. The county can't file for FEMA reimbursement until the work is done.
'The contractor was done collecting debris on Dec. 20 and last Friday, the finished cleaning up the debris management site,' he said.
For work still to be completed, Estenson said the county will use its secondary road department to pick up smaller debris piles.
'We're still assessing how much of that is left,' he said. 'But with FEMA, if (the secondary road department) picks that up, the only way that's reimbursable is if they do it on overtime.'
Estenson said that while the largest financial impact for the county was debris clean up, the county still has an insurance claim on building damages to work through.
Damage was done to buildings in Morgan Creek and at Wanatee Park as well as the courthouse, juvenile courthouse, detention center and the community services building.
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