$166 Million in Federal Quake Aid Questioned

State officials are demanding that seven Southern California municipalities and institutions prove they properly spent nearly $166 million in federal funds earmarked for emergency earthquake repairs--or pay the money back.

The state Office of Emergency Services has also frozen tens of millions of dollars in federal grants to those recipients--which include the city of Los Angeles and the Los Angeles Unified School District--pending repayment of the money the state says is owed.

At issue is $305 million in emergency advances from the Federal Emergency Management Agency, which was distributed by the Office of Emergency Services after the 1994 Northridge earthquake.

That money, state officials say, must be repaid unless the institutions prove that it was spent in accordance with federal regulations covering everything from the type of labor used to seismic safety standards.

“We put out . . . advance funds to jump-start the disaster recovery and help the applicants with any cash flow problems,” said FEMA coordinating officer Leland Wilson. “Then late last summer all the applicants were invited to a meeting to explain that the normal process was in place now and they needed to start thinking about repaying those advances.”

If the money is not repaid, Wilson said, FEMA will hold the state of California responsible, and demand payment from the general fund. If the state doesn’t pay up, he said, FEMA could withhold the amount owed from relief payments for a future disaster.

So far, however, only about 45% of the earthquake advance funds--which were distributed to 25 local agencies throughout the region--have been found to conform to the federal rules.

The city of Los Angeles is still trying to prove that it properly spent nearly $30 million, according to a state report. The city school district has spent $60 million on projects that so far have not received federal approval, and Cal State Northridge has $24 million in question.

“In a perfect world according to FEMA, we would write a check for $60 million, but we’re not in a perfect world,” said Margaret Scholl, director of the school district’s earthquake recovery program.

FEMA and the Office of Emergency Services are concerned that the school district won’t be able to justify all of the $60 million it received as an advance, Scholl said.

Even if the district and federal officials reach an agreement on the $60 million, she said, it is likely to take years before the frozen quake repair funds for L.A. Unified will be released. That, she said, means the cash-strapped district could be out about $50 million for several years.

One area of contention, she said, was over expenses for cleaning up campuses in the immediate aftermath of the quake. Because the district used its own employees on regular time instead of paying them overtime or hiring contract labor, Scholl said, FEMA ruled the expenses ineligible.

Indeed, several agencies, including the Metropolitan Transportation Agency, have discovered too late that they spent the money on projects that FEMA will not sanction.

“When that devastating earthquake hit, we didn’t stop to say, ‘Who’s going to pick up the bill?’ ” said MTA spokesman Rick Jager. “We marched forward and we provided some very vital, needed services in this region.”

Dennis Newjahr, director of regional planning for the transportation agency, said the MTA needs to justify not only the $16 million it received as an advance, but an additional $9 million spent on transportation services after the quake.

But, he said, the MTA is negotiating with regulators over the amounts and strongly believes that, in the end, FEMA will accept all of the agency’s expenses.

The city of Santa Clarita had hoped to justify all of the $5 million that the state says is due, but FEMA has denied a $3-million claim used to hire extra people to help issue building permits.

“We followed the procedure that they outlined,” said Adele Macpherson, Santa Clarita’s emergency preparedness coordinator. “Now they are turning around and saying that it is not acceptable.”

If the city’s appeal is denied, Macpherson said, “then we are really in trouble.”

The city of Fillmore in Ventura County is in a similar fix. D.A. Christian, field operations manager of the Office of Emergency Services, said the city owes about $1 million that it probably will not be able to justify under the federal rules.

If it cannot, Fillmore, along with the MTA and Santa Clarita, might have to pay that money back, Christian said.

“Each of these agencies would say they spent more than the amount that’s being requested by the state,” Christian said. “But some of it is eligible and some of it is not. They are looking at it very broadly, and we are looking at it narrowly.”

Part of the problem, said Pat Bonino, chief analyst for emergency preparedness for the city of Los Angeles, is that agencies unused to working with federal disaster regulations didn’t realize the minefield that lay ahead when they set about spending money for earthquake repairs.

“If you haven’t had a lot of disasters and you’re not used to working with FEMA’s regulations, it can be a little confusing,” Bonino said. “In the heat of battle, just after the earthquake, people probably used money for things they didn’t realize were ineligible.”

By contrast, Bonino said, the city of Los Angeles had been the site of eight federally declared disasters in the three years before the Northridge quake.

Bonino said she expects the $30 million owed by Los Angeles to be easily offset by acceptable projects, in part because the city spent hundreds of millions of dollars on earthquake relief, and in part because city officials knew which projects would be reimbursable by FEMA.

Nonetheless, she said, FEMA officials have disputed the legitimacy of millions of dollars in claims, including work on City Hall, a Wilshire Boulevard library and a recreation center in Granada Hills.

She said the city spent about $30 million of its own money--an amount equivalent to what the state says is owed on the advance--on emergency services that are not eligible for reimbursement, such as increased fire and police services.

The state froze federal grants to Cal State Northridge, which suffered tremendous damage in the quake, in January, said Art Elbert, vice president for administration.

Since then, the campus has reached a rapprochement with the Office of Emergency Services, and the agency is releasing funds on a piecemeal basis as projects gain approval.

“I went to them in February and said, ‘I want my money,’ ” Elbert said. “They said, ‘You’re not getting any until you pay back the advance.’ ”

The state is still holding $24 million, he said, but campus officials expect much of it to be released within the next few weeks.

The city of Santa Monica has an outstanding balance of $29 million, but Christian said his agency is not concerned about repayment because a preliminary review of planned earthquake projects indicate that they seem to be in compliance. Unlike other cities, he added, Santa Monica set aside its funds and has been using the money in increments.

By an odd accounting fluke, the Archdiocese of Los Angeles was left owing $1 of its advance, but Christian said the state is not going to press too hard for collection.

“I may just take a buck out of my pocket and pay it myself,” he said.