HACKENSACK, N.J. — As New Jersey prepares to spend $600 million on homes clobbered by Hurricane Sandy, the state is taking steps to avoid the pitfalls of the country's largest-ever rebuilding effort in Louisiana after Hurricane Katrina.
There, hundreds of millions of federal dollars were given to residents to elevate homes in New Orleans. But in many cases, the work was never done, federal auditors have found. Eight years after the 2005 hurricane, Louisiana can't account for how most homeowners spent grants intended to raise homes above the threat of floodwaters.
Unlike Louisiana and Mississippi, New Jersey plans to release home repair and elevation grants in installments — not in upfront lump sums. And the Christie administration also plans to hire private contractors to manage the program and oversee an estimated 30,000 property inspections over the next two years, according to officials and state documents.
But in proposing safeguards to eliminate waste, the Christie administration risks slowing work on homes along the Jersey Shore and in devastated communities like Moonachie and Little Ferry, experts say.
"It takes longer and requires more technical support," said Edward Thomas, president of the Natural Hazard Mitigation Association, a nonprofit group that promotes disaster preparation. "But the alternative is not a theory, it's what happened after Katrina."
At stake is how resilient the Shore will be to the next major storm as well as Gov. Chris Christie's record as a steward of $1.8 billion the federal government is sending to New Jersey for the recovery.
Christie's plan for spending $1.8 billion in federal recovery money would give residents grants of up to $150,000 to repair, strengthen or elevate their primary homes. An estimated 26,000 homeowners will benefit from the programs, which the federal government must approve first.
The inspector general for the U.S. Department of Housing and Urban Development, who released a report on Louisiana's home elevation program a few weeks ago, has said the lesson for the federally funded Sandy recovery is that homeowners should be reimbursed - not given money upfront - for rebuilding expenses. But that would leave out people who don't have access to enough money to start the projects, experts warned.
"When you're talking about low- and moderate-income people, they can't front the money," said Jan Opper, a former associate deputy secretary for disaster policy and management at HUD.
New Jersey has proposed a more staggered approach, state officials told the Record, offering new details on the process that could be spelled out in the coming weeks, if federal officials approve the state's disaster spending plan.
Lisa Ryan, a spokeswoman for the state Department of Community Affairs, said the release of individual grants "will be tied to actual construction and will be disbursed in installments."
She added that the agency will hire a private "construction management team" to oversee the housing programs and "routine inspections" will take place during the construction.
The state will withhold final payment to a contractor, equal to 10 percent of the grant, until after a final inspection to ensure the work meets code and quality standards, she said.
Eric Howard, vice president at H2O Partners, a Texas-based consulting firm focused on disaster recovery, said such a program "will create a little more bureaucracy and a significant amount of added expense." But he added, "I think it's workable."
Louisiana initially proposed releasing elevation money in installments, but frustration over delays due to required federal environmental reviews led the state to switch to a streamlined "disaster compensation" program. That gave residents the money upfront, but eliminated the state's control of it. Residents had to agree that they would elevate their homes within three years or the state could take the money back, but Louisiana is still having trouble tracking down thousands of grant recipients.
The federal report by the HUD inspector general found that most grant recipients had not elevated their homes, years after receiving up to $30,000 to do so. More than 29,000 homeowners had been given grants totaling $845 million by the end of 2009. Federal auditors interviewed some of the homeowners who said they didn't fully understand that they were required to elevate within three years, according to the report. They also cited financial constraints and issues with contractors.
Louisiana tried to monitor the grant spending by mailing questionnaires to grant recipients and hiring companies to inspect recipients' homes. But the money was already released, and recovering grant money from non-compliant homeowners has been a challenge.
Pat Forbes, executive director of Louisiana's Office of Community Development, stressed that the state's home rebuilding program was the single largest in the country's history and said the agency was working to get elevation grant recipients in compliance. He also sought to portray the program's issues as a lack of proper documentation.
Of the 15,027 elevation participants cited in the federal report as non-compliant, 8,343 had not responded to a survey the state conducted, Forbes said, meaning it was unclear whether they had elevated or not. He also said almost 1,100 mentioned in the report have since finished their elevation with money from other programs.
"We have been in discussions with HUD on designing programs that will assist some of these homeowners who have not yet completed construction, and we are working aggressively with HUD to ensure that homeowners get in compliance."
In New Jersey, officials are already expressing concerns about whether the federal cash infusion will invite fraud and whether the state has the resources to monitor it.
Christie wants to spend $84 million of the federal money — or 5 cents for every federal dollar — on planning, oversight and monitoring.
Matthew Boxer, the state's comptroller, has also been tasked by Christie with reviewing Sandy recovery work.
But Boxer, during a recent state Senate Budget and Appropriations Committee meeting, acknowledged that his agency doesn't have the full resources to keep close tabs on every ongoing recovery project out in the communities. Instead, Boxer's staff will have to rely on newly created integrity monitors to help with the oversight.
"What we're trying to do here is kind of a belt and suspenders approach," Boxer said.
His answers came in response to questions from Republican Sen. Jennifer Beck, whose Monmouth County legislative district includes some of the Shore communities hit hardest by the storm.