House Committee on Land & Resource Management – March 8, 2018

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The House Committee on Land & Resource Management met to hear invited and public testimony regarding the following interim charges:

Review the General Land Office’s (GLO) role and efforts during the recovery period following Hurricane Harvey. Examine the state’s readiness and protocols in response to storm-related natural disasters. Provide an assessment of public lands and make recommendations on future and ongoing mitigation strategies regarding state assets.

Study the State Power Program operated by the GLO, and inter-local agreements authorized under Government Code Chapter 791, to ensure accountability and transparency in program administration. Evaluate program offerings to public customers as compared to those available in the retail electric market, as well as the State Power Program’s contribution to other state programs. Make reform recommendations and analyze potential impacts to program beneficiaries.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. This report is not a verbatim transcript of the hearing; it is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Invited Testimony

Jack Cagle, Commissioner of Harris County Precinct 4

Thanked the Committee for legislation passed in the 85^th
They plan on coming to them before the next Session with issues on condemnation

Rodney Ellis, Commissioner of Harris County Precinct 1

Their best guess is that Harvey impacted 24,000 structures around their precincts
Requests the Committee to help with meaningful cooperation with the GLO and to give them some flexibility before federal funding gets here
Chairman Herrero – Will follow up with them on their requests to figure out how to work with them
Krause – Where is the lack of consultation happening with the GLO?
- The amount of money the federal government gave was awesome, they could’ve done a direct allocation of it but did it through the GLO instead and they have not had meaningful consultation with the GLO on what the plan will be

Pete Phillips and Heather Lagrone, GLO

70% of Harris County was covered in 1.5 feet of water, the weight of this water temporarily dropped the elevation of Houston by 2 centimeters
7500 households have received the innovative repairs or are in temporary housing under the short-term housing program
The first unit was placed within 22 days of the GLO’s first official day of the event
To qualify for PREPS you have to have less than $17,000 in FEMA verified loss
FEMA provided them with information on over 70,000 potential participants for this program and they began contacting them on December 13
GLO has worked to find state funds for the 10% match that the program requires
They’ve obtained 18,582 right of entries and have done inspections on all of them, they’ve assigned work orders on 15,957 of those, and have completed the work on 7,382 homes – about 4,700 homes were withdrawn or were found to be ineligible
As written in the federal register, the state will have 2 years to expend the CDBG-DR funds of $58.7 million from HUD
Anyone assisted by CDBG-DR funds in the floodplain must maintain flood insurance to be eligible for any future federal assistance
They have dedicated $500 million to the multi-family housing program and at least 60% of those units that were damaged or destroyed were renters
Setting up a $100 million dollar reimbursement program for homeowners who paid out of pocket for repairs to their home where the GLO will be able to reimburse them up to $50,000
They’re continuing to work with over 50% of counties in the state on Harvey issues
Faircloth – Who provides help for small businesses that have been impacted?
- They can apply for a SBA loan
- Faircloth – But there’s no other reimbursement funding for them correct?
- Correct, it is a loan
- Faircloth – Do we know how many were impacted?
- We have that outlined in the action program that we can get you
- Small businesses suffered like homeowners did and the reimbursement program they’re setting up can be used how homeowners will use it
Herrero – Can you summarize the 3 packages you mentioned?
- The first round of federal money we’ve received is $57.8 million, which is prioritized at 80% to Harris county buyouts – this action plan has made it all the way through public comment and is slated to begin its 45 day approval plan either today or tomorrow
- The second round of money is a $5.024 million which is going to 16 counties in 11 different zip codes that has various forms or rehab/reconstruction/reimbursement programs – this plan has been drafted and is out for translation right now, once it’s translated it’ll go on website for public comment then to 45 day approval period
- The third round of money is the $89 billion allocation that was just approved through Congress, there is $28 billion available for CDBG-DR funding but they do not know the rules, etc. for that package yet
Herrero – Within the second allocation you mentioned there’s $100 million that would be used for a reimbursement program for people who have used their own funds – what are the qualifications for that?
- It’s a CDBG-DR funded program, they’re not required to have applied to FEMA but they do consider how they’ve utilized their funds
- Chairman Herrero – What does that mean?
- You can’t pay for the same need twice, we can’t duplicate a benefit
- Chairman Herrero – Is there an assessment done/who would they submit the receipts to?
- It’ll be a program administered by the GLO, they’ll need to submit receipts or invoices that show they’ve expended those funds, on a spot basis we’ll go out to make sure those repairs did happen and that homeowner will be reimbursed up to $50,000
- Chairman Herrero – Have the parameters of that program been determined already?
- Yes, they’re detailed in the action plan that’s out for translation right now
- Chairman Herrero – What’s the timeframe for that?
- We were told they needed two weeks to do all the translations, so probably about another week
- Chairman Herrero – And at that point, all the details on how to apply will be on the website?
- The eligibility details will be on the website, but the program has to be approved by HUD before the actual implementation of the program
- Chairman Herrero – Once approve by HUD then the distribution of those funds are within the discretion of the GLO?
- Yes
Bell – Are there dollars already identified or is there a plan to identify flood mitigation funding within the GLO’s action plan?
- From the $57 million, Harris County is getting about $43 million for buyouts, from the $5 billion allocation, there is $500 million set aside for local buyouts and acquisitions that could be utilized for that purpose
- Bell – I’m not talking about the buyout program, I’m talking about a plan that puts in place a potential series of levies and other types of flood detention
- Pete Phillips – We do have money for planning study dollars to respond to this event and money to look towards the future and also want to utilize university systems to study the totality of flooding and damage to look towards the future
- Bell – We have some plans already in place that are expected to mitigate flooding, I’m talking about the dollars to fund those programs, not the dollars to fund another study – so, is there any money or attempt to identify money for the purpose of construction efforts to fund the plans that are already in place for flood mitigation?
- Phillips – Believes there is $16 billion for CORE authorized projects set aside in that last allocation from Congress, under the CDBG-DR guideline we’re limited to $250,000 max for anything that’s CORE related so with that most recent Congressional allocation for CORE we have the $16 billion
- Lagrone – From the $5 billion allocation, the infrastructure program that’s being created is about a $900 million program which will be allocated to communities for them to select projects to be funded by the GLO
Herrero – You mentioned the efforts towards a decentralized approach was the first time that this had been used, can you describe what you mean by that?
- For the first time in history, an agency other than FEMA has been allowed to participate in short-term housing recovery
- And for the first time, the state has been offered a slew of programs that we can use to help with recovery
- Chairman Herrero – That being because FEMA came in and said they wanted to try something new or was it something they had in place and it just so happened that Harvey was the first time for it to be implemented?
- It’s her understanding that FEMA was considering that model and Harvey was the first opportunity for them to use it
- Chairman Herrero – Was there consultations as to say whether or not we were prepared to handle that task?
- Phillips – That’s out of our sphere of influence
Herrero – You mentioned that Aransas county and Refugio county had the highest unemployment increase following Harvey, do you have those specific numbers?
- Does not have them readily available but will get them to him
Herrero – Going back to the summary of those 3 packages, you mentioned that 70% of those funds has to be used on low to moderate-income populations, is that specific as to an entire distribution of the second package?
- Yes, so when looking at the full $57 million or $5 billion, we have to look at that entire allocation and that at least 70% is spent on either individuals who qualify as low to moderate-income or service areas that encompass the majority of low to moderate-income people
- Chairman Herrero – Do you know what those numbers are?
- It varies by county and it also varies by household size
- Chairman Herrero – Where would someone know to find that?
- It’s published on the HUD website on an annual basis for every community in the country and we have subsets on it particular to TX on the GLO website as well
- Chairman Herrero – How does the GLO foresee using those funds?
- 70% of the $5 billion has to be spent, so as an example their homeowner assistance program will likely be greater than 70% of low to moderate income individuals, their infrastructure will likely be less than 70% – as long as the accumulated total is at least 70% then they meet the requirement
- Chairman Herrero – The action plans that you’ve submitted for approval to FEMA, are these readily available for someone to find?
- The $57 million action plan is posted to the website right now, they can’t post the $5 billion program to the website until completed
Herrero – Mr. Phillips, we previously talked about how the GLO is learning what they could do differently, have you continued to work on that?
- Working with FEMA, we’ve decided that in the future if they were to use the same programs we request that they not use MHU’s or travel trailers that they use the direct lease program, the PREPS program, and the dollar program instead
- The issue with MHU’s and travel trailers is local ordinance permitting, the other issue when doing those programs is you pay $90,000 for the MHU’s and travel trailers paired with an additional $100 – $150,000 in casework and at the end you have to dispose of those units
- Chairman Herrero – GLO had turned to the COGs for distribution or use of those funds when the COG wasn’t prepared or equipped to do that, do we have an answer as to how that would be carried out going forward as opposed to turning to COGs?
- We’re doing a capacity review of all of the COGs to understand their differences and capacities, we’ve hired state GLO staff from the community to work in the community to help build the capacity of that community
- Additionally, we’re requiring everyone in GLO staff responsible for recovery to submit a federal background check so that in the next event we don’t have an issue with access to information
- We’re working to get the GLO or at least the program area staff responsible for recovery designated as a first-responder agency to simplify that
Bell – You mentioned $90,000 for MHU trailers, what’s in that amount?
- Phillips – It’s the procurement of the unit, haul/install of it, and then the final disposition of the unit
- Bell – What is the value of one of those trailer houses if you just buy it?
- Probably about $50,000 just for the unit not including haul/install
- Bell – So they’re already purchased units in that scenario from FEMA?
- Correct
Herrero – We’ve talked about restrictions that FEMA has imposed on these funds, are there additional restrictions that FEMA imposes on top of the moneies?
- Phillips – Both of these programs are reimbursement programs so we submit a check to FEMA and get reimbursed for it and it’s the same for the HUD programs
- The difference in the two is the FEMA requires us to submit the check we used to pay for it whereas with HUD we submit an invoice
Herrero – There was mention earlier about getting the flexibility of GLO from perspective counties on how they use those funds, but does the GLO give the money to an entity other than the county?
- Phillips – We don’t impart any additional regulations on the federal funds we administer, our goal is to prevent the state of TX from having to repay funds – Whatever the federal regulation is we pass that on to the counties
Herrero – Going back to the second batch of money, $15 million to prevent foreclosures, can you give a summary of that?
- Lagrone – It’s $50 million and it’s a homelessness prevention program encouraged by the federal register
- The idea will be to likely go through a nonprofit entity about programs they operate that are similar
- Applicants will apply to receive payment of those funds on their behalf to an entity to prevent that homelessness from occurring
- Chairman Herrero – But that’s not in place yet, right?
- Correct, we have to wait for that HUD approval
- Chairman Herrero – Is it limited to preventing homelessness of people who are living on subsidized/government housing?
- No there’s not a limit on where we would be submitting the rent to

Chuck Phinney, State Coordinator for Preparedness, TDEM

Back to the question Rep. Bell had on mitigation funding, the money is there through the Hazard Mitigation Grant Program and is administered through TDEM and is on its website
Half the funds have been released and the other half will be released on the anniversary of Harvey
Bell – What is the dollar value?
- The total is $1 billion
With respect to preparedness, we did a full-scale evacuation in the Houston, Beaumont, Galveston, Port Arthur area in June of 2017, which helped with part of the preparation for Harvey
We had planned an evacuation exercise in the Coastal Bend area for June 2018 but the local enforcement is unprepared for that still so it’s been pushed back to June 2019
We had 48 hours to put together a response and resources in place – put assets together in the Coastal Bend region in preparation for a wind event
Once Harvey was declared a rain event they switched assets to prepping for a flood event
Their plan for disasters are the same for the entire state and their response is dependent on what the particular hazard is
One thing they didn’t anticipate was the fuel shortage that was fueled by media/social media
Another thing they didn’t anticipate was the Beaumont/Port Arthur area becoming an island
As far as plans for the next storm, they’re still undergoing their after-action reviews, are working with the stakeholders of the problem areas, and work to make those corrections as they move forward
Because of the success with the volunteers we had like the Cajun Navy, believes we should write them into future plans
Faircloth – Is your budget connected to the Governor’s budget in terms of disaster response?
- Part of our budget comes from the Legislature and a large part comes from EMPG, a FEMA grant
On average, TX gets a Presidential Disaster Declaration every 8 months and the threshold now for a declaration is around $35 million in insured/uninsured losses

Jennifer Armstrong, TX Windstorm Insurance Association

They’re a residual insurer and does not compete with the private market
As of last Friday they’ve received 74,914 claims and issued $1,12,472,333 in claim payments to policyholders
They had over 1,200 field adjusters, over 360 inside claims personnel, and 220 call center staff to take claims and process damage
They’ve worked to provide face-to-face aid through community outreach events, town halls, etc.
They’ve received 127 claims complaints from TDI and they have an ongoing process to handle these claims
They didn’t really see any unforeseen issues because of their priorities of building relationships within their communities and their robust catastrophe plan
Herrero – The information you gave us, is that to all affected counties or just Harris county – how many claims did you have total?
- Total was 74,914 as of 3/2/18
- Chairman Herrero – How about complaints?
- 127 claims related from TDI total
- Chairman Herrero – If someone wants to file a complaint where would they do it?
- Encourage policyholders to reach out to them and there’s also a formal complaint process through TDI and believes their info is up on their website
Faircloth – We had about 91,000 claims for Ike so is surprised at this number – Is wind driven rain a covered loss?
- It’s covered by endorsement for residential policies, not commercial
- Faircloth – Knows there’s an expert panel in place to determine if this was wind or water so where are we on that?
- On track to have that implemented on June 1 as required by regulations
- Faircloth – Where can I find information on that?
- Does have information that she can follow up with the committee about

Julie Masters, Mayor of Dickinson

GLO has been very responsive to them via phone calls, personal visits, and emails
Wants to get quicker aid to help people get the wet out of their homes with the PREPS program – needs to be immediate aid
There needs to be funding put forth for a study of the Dickinson Bayou Watershed
Faircloth – How many homes have been disproportionally affected?
- 80% of the city was inundated with floodwater and impacted
- Hoping the CDBG-DR and Hazard Mitigation Grant will help people elevate their homes
- Faircloth – The 8 Days of Hope faith-based program will be moving in on this area for the next 2 weeks coming up to help rehab about 2,400 homes with the $4 million they’ve raised

Sarah Cerrone, Director of Economic Development, Chambers County

All of the counties would love to see the federal allocation go through the GLO than through the COGs and then to them
Need help with the Corps of Engineers, for them to take up to 18 months – 5 years to address draining permitting, etc. is ridiculous

Roy Turner, Emergency Management Coordinator, Chambers County

The hurricane flooding put them into an unfamiliar area
They received very little outside help
Stucky- noted the need to keep small and rural towns in mind

Stevee Franks, Homeland Security

Discussed amount of rain received during Harvey
More than 1000 people involved in the Harris County EOC
3 Disaster Recovery Centers initially leading to 20 DRCs by the end of the event
Ran DSNAP program for 15 days

Daphne Lamelle, Harris County Community Services Department

75% of those which flooded did not have flood insurance
- CGBD funds will be critical for those families to recover
Need to increase efficacy of funding distribution from GLO
Need to be sure that local programs are being continued as well as possible
GLO needs to provide flexibility in funds to help local communities best serve their needs
Herrero- mentioned the county has assistance with utilities?
- Within the department in Harris County, but is a county operation
Herrero- how many people are served through this?
- Thousands, the entire county is the service area
- Received utility assistance funds through utility companies

Matt Zeve, Harris County Flood Control District

Recovery and preparation is ongoing
Need repairs to drainage infrastructure
Home Buyouts are a high need area
Receiving money through GLO is taking too long
- Needs similar and consistent requirements to other federally administered programs
Need for a disaster fund similar to the ESF
Krause- GLO stated they do not put any additional regulations to federal funds?
- Often times the accounting and reporting requirements are different and we’d like them to be more consistent for efficacy purposes

Josh Stucky, Harris County Public Infrastructure

Noted the number of agencies and entities required to go through to access emergency funds
Keeping it as simple as possible in working with GLO would be extremely helpful
Discussed continuity of government during Harvey response
Discussed issues relating to unincorporated Harris County not having building codes

Tom McCasland, City of Houston

Volunteers and non-profits were extremely helpful in Harvey Response
Intermediate housing required coordination with FEMA only through the GLO
- Good working relationships helped with this process
Noted ramp-up of direct housing assistance programs have been delayed in Houston
Direct Lease program has proven to be a program that cannot be implemented
- Program has not kicked off in Harris County
- Some details of the program preclude many areas and homes in Houston
Discussed need for continued cooperation with local communities in terms of disaster recovery and planning
Discussed federal funding language require consultative process with local and affected communities
GLO action plan does not have a method of funding distribution noted
Does not believe that $5 billion from HUD will cover the unmet housing need
- Single family is the only area that HUD funds will go directly to Houston
Herrero- the GLO did not consult with the City of Houston when drafting the action plan?
- City met with GLO but was not consulted on the cities needs, only told what the action plan will include
Herrero- discussed the definition of planning period as it relates to the city of Houston’s understanding that they were not consulted as required for the action plan
Bell- is there a calculation method defined for establishing the calculation of damage sustained/need?
- Unmet needs calculation is what is used
- That is the calculation that arrives at $5 billion for unmet needs
- Believes that each jurisdiction should be involved in the determination of the need and to have the ability to administer those funds

Pete Phillips and Heather Lagrone, GLO

Herrero- requested information regarding GLO’s inclusion of local communities and jurisdictions regarding recovery plans and funding allocations
Discussed post 2015-2016 floods and noted need for improved communications to leverage resources and get the required funding
Due to experience with 2015-2016 floods, determined that the action plan needed to be drafted quickly and requesting a large amount of money
Immediately after the event cities and communities were visited and consulted
There was a need to expedite the process
Received first block grant faster than any previous storm
Some cities, Houston included requested carveouts which were included in the action plan
Everything done at the state level has been done with local input
Many programs are the first time they are being implemented in Texas
Herrero- how does the GLO differ between having a presence in a community versus collecting local input in drafting the document that will be approved by FEMA?
- Were originally going to go through the COGs but after discussions action plan included Houston’s request for a set-aside, Rockport requested and was given a set aside for multifamily housing as a working community
- Utilized strike team to gain understanding and aid in determining community needs
- Have met with housing advocacy groups to facilitate buy-in from them to avoid the potential for going to court
Herrero- explain the process to developing the action plan and getting the money
- Lagrone- after the disaster declaration the state is able to get FEMA funding
- Need to get congressional approval for the appropriation
- The money flows through Housing and Urban Development which requires them to create a register which comes with a set of developed rules
- The action plan identifies the use of the funds in accordance with the rules, after it is developed it goes out for public comment for 14 days
- HUD has shown intention for robust consulting process
- Detailed list of consultation meetings included in the action plan
- HUD has 45 days to approve the action plan and then changes and amendments can be added
Herrero- does the GLO feel confident in its due diligence to consult with local governments?
- The GLO does but will continue to meet and consult
- Will not slow down the action plan process but will be able to continue to make small modifications
Herrero- does the GLO include in the notification process the local governments?
- Yes, have encouraged cogs and communities to link the action plan to their websites
Bell- requested information regarding regional calculation of unmet need, where does the static information HUD uses come from?
- HUD took data sample which takes housing data into account in November
- Glo agrees $5 billion is not enough
- HUD compares Texas to other states and to Puerto Rico to determine funding
- Standardized federal data has to be used in order to compare fairly to other affected areas

Gary Clyne and Walter Lewis, White Star Commercial

General contractor to GLO
Serviced disabled veteran company
They have offices in Texas and New Orleans
When FEMA entered in with GLO to help manage the direct housing mission the state of Texas suspended some rules and requirements to accelerate this
We only had maybe a day or two to work on the bid for this, but we were still selected
While thousands of work orders have been issued, have not received a single one
- After extensive regulatory effort, licensing and permitting a cost has been incurred
- Have not had a chance to work
Herrero- who are you dealing with now to be qualified?
- With GLO
- Developed methodology involving weighted access
- Does not seem to be a transparent process
Why not utilize all 34 contractors instead of just 10 contractors if we are trying to really get people back in their houses

Robert Hatter and Brian Carter, GLO

Gave brief overview and history of the State’s Power Program (SPP) with Public Retail Customers (PRC)
Last competitive bid through RFP in 2016
- Cavallo Energy Texas, LLC won the bid for the wholesale provider
Presented budgetary and statistical numbers associated with the SPP
- Currently have 608 contracts
- Accounts for 1.9% of the entire market
- Provides to Houston ISD and Corpus Christi ISD
Herrero- what is the role of Cavallo?
- They are the wholesale provider
- GLO acts as the retail provider
Herrero- GLO goes out for bids for the wholesale provider to work with?
- Correct in 2016
Herrero- is there a bidding process for the gas program?
- The whole gas program in run internally and does not require a wholesale provider
Herrero- why is there a need to work with a wholesale provider?
- Because the GLO is not a wholesale provider, only sells to customers
- Can only sell electricity to a public retail customer (ISD, etc.) due to statute limitations
- Will provide the amount of revenue deposited into permanent school fund since inception
Herrero- according to the written testimony, there are 6.9 billion average kilowatts, what is that referencing?
- Average per year provided to customers
Bailes- can you explain the rational with the government entity trying to compete with private industry?
- That is what the legislature charges the GLO to do, and in at least 608 cases the GLO had the best bid and was selected
Herrero- the program exists because the legislature requested it?
- Correct
Clardy- the 600 clients are gas and electric?
- Only electric
Clardy- do you know if that 6.9 billion is the average for the last few years as well?
- Last year there were fewer contracts, unsure about the volume of kilowatt hours
- Roughly 550 contracts last year
- Will provide additional information
Clardy- would like reports and historical data regarding rates and how much has been paid by the public entities to the point that some of the savings for those entities may not be available anymore.
- That report will be delivered in June to the committee
Herrero- mentioned brackets in written testimony?
- If it is unincorporated or the population is 1000 or less the rate is 0.581%
- If 2500 but less than 10,000 it is 1.07%
- 10,000 or more it is 1.997%
Herrero- what is the average length of contract?
- 18months is the average, but they are very negotiable
Herrero- discussion of contracts both with clients and with the wholesale provider
- Have only had two wholesale providers
- Reliant and Cavallo have been the other providers
- Will provide additional information to the committee
Herrero- the money that goes into the PFS comes from where in the SPP
- The profits the GLOO receives from operating the SPP determines the funds that are put into the SPP
- Will provide historical information regarding that
- In the grand scheme, the electric portion contributed to the PSF is relatively low
Bailes- does statute limit the number of wholesale providers that the GLO can contract with?
- No, for the sake of consistency the GLO uses one provider
- Have considered regional providers
Clardy- a PRC contract will be entered into with the GLO?
- That is correct
Herrero- not every public entity is getting electricity from the GLO?
- Absolutely not, many customers find rates that suit their needs better

Julia Rathgeber, Association of Electric Companies of Texas

Texas Competitive Retail Market has been in place for over 16 years
Look forward to working with a committee to better understand how the GLO program works and to ensure that other providers are able to compete in the marketplace on a level playing field
Want to ensure that public retail customers have access to the full market
Krause- are there other agreements like this out there? Interlocal agreements around the state like this?
- This is unique, not aware of the state competing in any other markets
Krause- only thinking that if it is good public policy that maybe it should be expanded into other markets as well
Discussion on other governmental entities operating in competition with private enterprise

Bradley Reynolds, Curtis and Clark Energy Services

Described personal experience competing with GLO
Has lost profits and business due to GLO operating in this space
Concerned that government is making a profit
Discussed issues relating to becoming a GLO provider that would disallow providing to others
Is opposed to this program
Krause- did you submit a proposal to the RFP for to provide this service?
- No, I have not
- I would have had to make two companies in order to do that
Herrero- how long have you been in this business?
- Began in 2009
Herrero- you said you believe you have lost contracts to the GLO, do you know how many times?
- Can recall 2 contracts specifically lost to GLO
Herrero- what is your region?
- East Texas
- A 4 or 5 county region
Herrero- have you lost contracts to other entities?
- Yes
Herrero- how much do you pay in gross receipts tax?
- Not being a retail provider, I do not collect gross receipts tax
Bailes- you serve in the same capacity as the GLO?
- We work more similarly to an insurance broker
Clardy- commenting toward government should make a profit, you have worked in government correct?
- That is correct, have served on city council
- The government has certain parameters that it needs to stay in to not infringe on private enterprise