Cedar Rapids hydroelectric plant still fighting for FEMA dollars

CEDAR RAPIDS - Tussling over $13.8 million in federal disaster payments for the city's flood-damaged hydroelectric plant at the 5-in-1 bridge might be the kind of “close-call” fight taxpayers want to see.

This is a plant, which began operation in 1986, that long had underperformed, prompted calls by a City Hall Efficiency and Reform Committee in 1994 to sell it, had city employees at the time term it a “white elephant,” and had been disabled and out of commission for 17 months before the June 2008 flood.

In addition, the City Council, upon initial support from FEMA to provide disaster funds for the plant - an award that has gone back and forth and is now under review - decided quickly to use the money for other city projects and to mothball the hydroelectric plant.

Even so, Joe O'Hern, the city's executive administrator for development services, says that FEMA's decision to award the city disaster funds for damage to the hydroelectric plant wasn't a close call at all.

In the city's view, O'Hern says disaster payments for the plant center on the fact that the city had hired consultants and was reviewing its options to bring the plant back into service when the 2008 flood inundated the plant's machinery, further damaging it.

“… (T)he city was taking prudent action in studying and evaluating its options on the future of the facility, and that's more than enough to make it eligible,” O'Hern says.

Keeping score

Nonetheless, the score card on disaster funding for the plant reads like a close call: Yes. No. No. Yes. No. Yet to be determined.

The last verdict of no, which came out against disaster payments for the plant, arrived in May from FEMA's Office of Inspector General. The OIG is FEMA's own internal watchdog and it weighs in with recommendations on only a small number of matters that it determines were in error and needs fixed.

An OIG report has a way of giving something like the city's hydroelectric plant a celebrity status of sorts.

The OIG report is as unequivocal in making its case for denying funds as O'Hern is in making the case for arguing that the city deserves disaster funds for the plant.

FEMA headquarters in Washington, D.C., now must decide if it will agree with the OIG's criticism of the headquarters' decision to provide disaster funds for the city's plant or reject it.

It's a decision of “significant” importance to the city, O'Hern says, because the city is using those expected disaster dollars as permitted on an alternate project, the new parking ramp now under construction on the south edge of downtown near the new federal courthouse.

“We have funding at stake ... and to lose that funding would cause significant problems for us,” O'Hern states.

In its conclusion, the OIG report states that the city's hydroelectric plant does not qualify for disaster funding because it wasn't operational at the time of the flood and because the city had “no substantive plans” to repair it and had not budgeted to repair or operate it.

In response, O'Hern says the city had hired two consultants in the 17 months after ice damaged the plant in January 2007, prompting the city to take the plant offline. One option being studied was shutting down the plant.

The OIG report states that the ice damage was relatively minor and could have been fixed at a cost of $270,000. However, the city “demonstrated little interest in returning the facility to operation” in the 17 months before the flood of 2008, but instead “chose” not to operate it while it assessed the continued use of the facility that “required major deferred maintenance and had marginal economic viability,” the report states.

O'Hern counters that a quarter-million-dollars of damage from the ice was not “minor” and the damage led to a facility review which identified about $1 million in total repair needs. In any event, the city clearly was spending money on consultants to study its options at the time of the flood, he says.

Long saga

The back and forth is the latest round in a three-year-long saga.

Back in the late spring of 2010, the City Council was surprised and pleased to learn from FEMA disaster staff working in Iowa that the city could use most of the $13.8 million in disaster funding for the damage to the hydroelectric plant for an “alternate” project.

By August of 2010, though, FEMA changed its mind. The hydroelectric plant did not qualify for disaster funding. The city appealed to FEMA's regional office in Kansas City, Mo., which concluded in December 2010 that the city's plant was not in use at the time of the flood, that the city had not proved that it intended to repair the plant. Instead, the city's actions demonstrated that it intended to abandon, sell or otherwise dispose of the plant. In April 2012, FEMA's headquarters sided with the city on its second appeal, saying the city should not be penalized because it was exploring options about the future of the plant at the time of the flood. Then in May 2013, FEMA's OIG said headquarters was wrong.

Greg Eyerly, who served as the city's flood recovery director from July 2009 until February 2011 and is now wastewater treatment manager for the city of Salem, Ore., was in the middle of the funding debate for the hydroelectric plant and he says that the city does qualify for FEMA funding because it was exploring options for the plant at the time of the flood.

In his view, the OIG's auditors recommended against funding because they believed the city could have made repairs to the hydroelectric plant before the flood and didn't and because it became clear that the city intended to use FEMA dollars for an alternate project, not to repair the plant. Eyerly says the city was caught in a Catch-22: FEMA insisted that the city identify flood-damaged properties from which it might use money for alternate projects even as FEMA was making a decision on whether the hydroelectric qualified for disaster funding.

“It's my perception that federal auditors didn't like the decision the City Council made (to use disaster money for an alternate project) and didn't like how long it took to make repairs to the plant (after the 2007 ice damage),” Eyerly says. “But just because you don't like it, doesn't make it wrong.”

History of plant

Tariq Baloch, the city of Cedar Rapids' water plant manager, has worked with the city since 1989, a history that stretches back almost to the opening in 1986 of the $4.5-million hydroelectric plant between First Street NE and the Cedar River. The plant sits at the dam just upstream from the Tree of Five Seasons, with Interstate 380 overhead at the 5-in-1 bridge. The dam has 10 gates, with the east-most gate used for the hydroelectric plant.

In a tour of the plant this week, Baloch said the city's investment to generate electricity back in the early 1980s made good sense “in philosophical terms.” In “practical terms,” the success of the plant really depends on river flow, much like a wind turbine depends on dependable wind, he says.

Some of the time, Baloch and Steve Hershner, the city's utilities director, say the river isn't flowing strongly enough to generate electricity. In fact, the OIG report quotes a city consultant and says that the plant produces 20 percent less electricity than expected because its design allows it to capture available water flow only about 35 percent of the time.

At the time it opened, the city expected the plant to provide $500,000 in net revenue a year. By June 1992, it had completed its best fiscal year yet, providing $247,000 in net revenue.

In the 10-year period from July 1, 1998, through June 30, 2007, the city took in $220,664 a year on average after paying a private firm - hired in 1995 - to operate the plant and to pay for maintenance.

Baloch calls the three-turbine plant “maintenance-intensive,” which he says was the reason the hired a private firm to run and maintain.

“It wasn't easy work,” he says. “When it worked, it worked well. But when it didn't, it was a labor-intensive challenge.”

Looking ahead

For now, the city has no plans for the place, which it has cleaned up from the control room above ground to the three-story climb down to the bottom of the turbines. Hershner says “mothballed” is a good word for its status.

Hershner says it is “impossible to say” what the city would have done with the plant if the flood hadn't damaged it further.

“The study wasn't done, the flood happened,” he says.

At the same time, O'Hern says FEMA money coming to the city for the out-of-commission hydroelectric plant - none has come yet and none will come if FEMA agrees with the OIG report - isn't surprisingly good fortune in the broader picture.

“You have to look at this in the context of the fact that the city suffered a disaster, and the city and the community in it aren't going to receive enough dollars to be made whole through all the damages from that disaster,” O'Hern says.

Both he and Mark Schouten, the state's emergency management administrator, note that FEMA's OIG also attempted in 2012 to withhold $84 million in disaster funding to relocate three flood-damaged University of Iowa buildings, including Hancher Auditorium, and that FEMA headquarters rejected the OIG recommendation.

“In both instances, this unwarranted interference by the OIG has delayed projects ... ,” Schouten states in a letter to FEMA headquarters.