Business Disaster

Why is the state Department of Homeland Security refusing to pay a contractor for cleanup work?

At home in his own equipment yard, Martin Urban steps down from a Peterbilt truck he and his employees use for hauling. He lives in Sile, New Mexico, a town so small it makes Peña Blanca, just across the Rio Grande, look like a metropolis. This is where he started his business more than 20 years ago, just doing backhoe work. Over the years, he took advantage of government programs meant to help minority-owned businesses and rural companies and built his business on government contracts. Today, he has about 30 employees, many of them from the nearby Pueblos of Cochiti and Santo Domingo.

Now, he stands to lose all that. The New Mexico Department of Homeland Security and Emergency Management is holding back tens of millions of dollars in federal money meant for disaster relief from Urban's company and others. After a wildfire, flood, or some other natural disaster, FEMA, or the Federal Emergency Management Agency, works with states to send money to where it's needed. The idea is that the state uses the cash to help communities recover from disasters.

But things aren't working the way they should.

After the Pacheco Fire raged in the Sangre de Cristos, the Pojoaque Valley Irrigation District needed to hire someone to deal with the mudslides and floods that were filling Nambé Reservoir with ash, mud, dead trees and boulders.

For about three months in early 2015, Urban's employees worked out at the reservoir. With loaders, excavators, backhoes and trucks, they built stone and wire walls to hold back mud and ash, dug trenches and hauled away debris. Dam tender Alfredo Pacheco points out that they even worked through bitter cold and terrible weather, wrapping the work up before irrigation season so it wouldn't disrupt water deliveries to farmers in Nambé, Pojoaque and El Rancho.

But that job may be the ruin of Urban.

"We've been told by our bonding company that because the state owes us over $2 million dollars—I believe it's 2.3," he pauses and looks over at his wife, Sandra, who nods; "—we now are a liability to them and they will not be able to bond us anymore if we do not get paid in 30 days."

Bonding is like insurance, and over the past 24 years, Urban had built his up to bid on bigger and bigger jobs. "When you do work, especially for the government, they require a bond, which is insurance to make sure you finish the project," he says. "Without a bond you cannot solicit these projects through the government agencies, both state and federal."

Technically, it's not a check from the state that he's waiting on. Rather, it's federal money that the state holds onto, and should have passed along to the Pojoaque Valley Irrigation District, which then should have paid Urban within 120 days of finishing the job.

And it turns out that Urban isn't the only one waiting: The state owes money to subgrantees all over New Mexico. In early 2015, the same time crews were working out at Nambé, the New Mexico Office of the State Auditor sent a letter to M Jay Mitchell, secretary of the state's Department of Homeland Security and Emergency Management.

At that time, the department had $40 million in open budgets related to disaster declarations in New Mexico. According to that letter, the audit couldn't identify "any valid reason" for maintaining those high balances.

"We've been investigating a litany of concerns at the department that go back several years," says New Mexico State Auditor Tim Keller.

The department hasn't completed its state-required audit for Fiscal Year 2015, which was due in December. It's also on the auditor's "at risk" list —the only cabinet-level agency on the list. And though Keller's office gave them some time to try and fix things, he says that time is running out.

"We will probably be taking some significant action with respect to the agency in the fall if the problems aren't remedied in the next month or so," he says. "There have been several federal audits already and so we're trying to make sure those changes have been fixed. But there's also been lots and lots of turnover in the department, and that's why we're concerned about the short term viability of the department to even function as it should."

SFR reached out to FEMA's public information officer for the region about the issues, too. We asked, for instance, if other states have trouble passing the federal money through to its subgrantees. Or if this could affect New Mexico's ability to receive future disaster relief funding from FEMA. But the agency remained tight-lipped, saying FEMA doesn't compare states and all questions should be directed to New Mexico officials.

That didn't work either.

The state agency dodged repeated requests for interviews with Mitchell or other staff, and ignored requests for information. Its custodian of records tells SFR she doesn't have time to prepare records for inspection in compliance with New Mexico law because she's busy with other responsibilities, including the State Fair. And to try to shake the information loose, we've filed a complaint with the New Mexico Office of the Attorney General.

Everyone's heard the news of New Mexico's budget shortfall. But the failure of the state's department to pay out disaster money shouldn't be related to that.

When a governor declares an emergency, FEMA evaluates the situation, trying to figure out if it's really a disaster. If it is, it allocates funding to clean up the mess. Usually, there is cost-sharing involved. The state pays some of the money, and so might the local government.

The federal money is supposed to be held in a special state account. Then, once the work's been done, inspected, and approved the state pays out that federal money to subgrantees that include irrigation districts, municipal governments and tribes.

Exactly what is happening is difficult to say. Subgrantees and their contractors aren't receiving their funding. And the auditor's office can't get a clear picture of the department's finances.

This isn't the first time the department has held onto money meant for its subgrantees. Four years ago, the Pueblo of Santa Clara complained about the slow payouts after the village and its watershed kept getting whacked by post-Las Conchas Fire floods. Even though tribes are sovereign nations, the FEMA process treats them like local governments, requiring them to work through the state.

Then, in 2013, Santa Clara's leaders signed an agreement with FEMA—the first of its kind in the region—allowing the tribe to bypass the state and work directly with the federal government.

Everyone else, however, appears to be stuck wondering what's going on with their payments.

Edward Lucero, chair of the Pojoaque Valley Irrigation District, doesn't understand why the state still hasn't passed the disaster relief money to the irrigation district so that it can pay Urban for the work. "It doesn't affect our finances, but it does affect if we need people to come in later on, knowing the district has not made good on work already done," Lucero says. And he's worried about Urban: "It's really affected the people who did the work, completed the work over a year ago, just waiting to pay the bills."

Meanwhile, Urban's wrapping up a few other projects. Given the department's silence, it seems unlikely that he'll be paid for the Nambé job before he loses his bond rating.

He's getting ready to cut his employees and sell off most of his equipment. And he's still paying interest on the credit he took out for the reservoir job. He's at a loss to see his business go under when the money's sitting in account somewhere.

"What the state's doing is wrong," he says. "It affects small business. If they're here to help a small business, why aren't they by paying after a job is completed, especially a year and a half later?"

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