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Issues

Sandy Aid Bill

After a protracted battle over federal emergency assistance, legislation supporting victims of Superstorm Sandy was signed by the President on January 29th. The bill, H.R. 152, provides for $50.5 billion in Sandy-related aid. The money will be used for both immediate needs and long-term projects to mitigate impacts from future storms. In total, Congress has passed $60 billion in federal assistance for the region.

Spending Highlights:
  • $16 billion for the Department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG) fund
  • $11.5 billion for the Federal Emergency Management Agency’s Disaster Relief Fund
  • $10.9 billion for public-transit systems
  • $5.35 billion for the Army Corps of Engineers
  • $2 billion for highways

The legislation does not contain the Senate’s controversial proposal for $150 million in support of fisheries as far away as Alaska. Instead, it includes $5 million for fishery disasters related to Sandy. It also provides $608 million for the Environmental Protection Agency (EPA), about $200 million less than the Senate’s original bill.
Additionally, many provisions, including the CDBG funding, can be spent on projects related to disasters occurring in 2011, 2012 and 2013.

CDBG Funding:
The CDBG program is of particular importance to Con Edison as it provides the governors with the greatest flexibility. In fact, HUD’s regulations state that CDBG funds can be used for privately owned utilities to, “acquire, construct, reconstruct, rehabilitate, or install the distribution lines and facilities of privately owned utilities, including the placing underground of new or existing distribution facilities and lines.”

CDBG funds will be awarded directly to the states at the discretion of the HUD Secretary, Shaun Donovan. At least 33-percent of the funds must be released within 60 days of enactment. Prior to the release of funding, the state must submit a plan to the Secretary for approval, detailing the proposed use of all funds.

There are a number of past examples where utilities received CDBG funding, including the following:

  • Post 9/11, President Bush requested support for utilities and there was a separate earmark for Con Edison in the supplemental funding bill (earmarks are no longer permitted).
  • After Katrina, Entergy and Southern Company worked with the governors to receive CDBG funding from the supplemental emergency funding bill.

Policy Provisions:
H.R. 152 also streamlines the government’s procedures for responding to natural disasters such as Sandy. The House unanimously passed those provisions separately on Jan. 14 and that language was included in the supplemental bill upon its passage.

Procedural changes include modifying the methods for reimbursing localities for disaster expenses by offering them fixed grants based on professionally prepared cost estimates.

Local governments will be offered more flexibility in how they spend that money, though they would also be responsible for cost overruns. They could potentially keep at least some of any savings if projects come in under budget. The goal is to give states more incentives to rein in costs. Participation would be voluntary so states could also choose to continue operating under current procedures, which would result in sending the federal government invoices for the expenses they incur.

The bill creates a pilot program to help resolve differences between federal and local officials over which damages are eligible for reimbursements using arbitration by an independent review panel.

The bill also provides the President more flexibility in providing housing to storm victims. It would allow FEMA to lease and make repairs to private rental properties to house victims if that proves more cost-effective than the trailers FEMA typically offers. Other provisions would require the president to streamline environmental and historic requirements for rebuilding infrastructure.

Looking Ahead:
Relative to emergency assistance passed for storms such as Katrina and Irene, the Sandy aid package includes an increased amount of oversight. Congress will likely be taking an active role in implementation and ensuring funding is spent responsibly.

Members of Congress from the Northeast are also likely to pursue tax relief for individuals and businesses impacted by Sandy. If tax provisions include the ability to deduct the cost to repair or replace damaged equipment, Con Edison stands to benefit.

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