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The Committee hear invited and public testimony on interim charges relating to Hurricane Harvey and Special Purpose Districts bond reform.

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.

GLO Hurricane Harvey Update

 George P. Bush, Texas General Land Office (GLO)- Commissioner

  • Administered short-term and long-term housing assistance
  • Discussed number of qualified applicants
  • 11,000 Preps repairs to date
  • Compared to previous weather events, MHUs were placed much faster (3 months to less than 1)
  • GLO is creating a model for disaster housing programs to be used in future disasters
  • Pushed for regulatory and contractual reforms
    • Reforms to speed up the process of getting people into housing faster
    • Still working to remove DAHLR cap of $60,000
    • Handling of personal data and communications with FEMA
    • Utilizing technology to work with those in the field
    • Working to create report due in early fall regarding improvements to be made to housing programs and response for future disasters
  • Recommend change to the Stafford Act: use of block grants, state sponsor should have pre-positioned assets or agreements, need pre-prepared waivers to allow for expedited response,
  • Outlined federal block grant funds, 80% of funds are required to support the most devastated areas, need for prioritized housing needs
  • Bettencourt- interested in block grants for flexibility, where should we go from here regarding housing?
    • Want to allow communities flexibility to use what best works for them
    • Do not want to mandate any option but allow options
  • Bettencourt- what about the pre-positioning of waivers?
    • With intergovernmental service agreements, they are 100% federally reimbursed, meaning that federal procurement guidelines must be followed
    • Pre-positioning or pre-qualifying vendors and manufacturers to be able to count on for the next event
  • Lucio- how can the legislature better assist GLO in meeting needs?
    • Will provide a comprehensive list
    • Pool of liquidity accessible for GLO to call down to administer a program
    • Need more options to qualify people for housing programs
  • Lucio- Mr. Wilson has been named, how do you see the process moving forward?
    • Expecting to work well together and continue moving forward
    • Governor is continuing support
    • Nearing the end with about 70% of applicants housed
  • Lucio- concerning Rapido, is there an update?
    • Have requested changes, which have been declined by FEMA due to Stafford Act
  • Garcia- Houston area still has too many people displaced and impacted, in speaking about waivers for procurement, can you expand on that?
    • In the event of a federally funded program, federal procurement regulations have to be followed
    • Pete Phillips, GLO- no local preference and posting requirements, etc.
  • Garcia- what specifically?
    • Required posting for any procurement posted for 30 days
    • Will provide a comprehensive list to the committee
  • Garcia- how did Louisiana get the STEP program in place? And how can we compete with other events in the occurrence of multiple events at once?
    • Debris removal is outside the prevue of GLO
    • Many contracts did not have the strength to allow for recourse for contractors who do not provide services
    • With more synchronization at the county level, a better response and price point could be established
  • Garcia- how many people still need housing
    • PREPS program still has 8,000
    • Temporary housing programs outside of Harris County is about 19,000
    • Individual assistance and hotel vouchers are still being administered
  • Garcia- why do we have non-Harris county number?
    • Houston and Harris County have chosen to administer program with FEMA
    • FEMA is providing direct oversight
  • Garcia- need to look at temporary with a real roadmap to permanent housing
  • Taylor- in speaking to the Stafford act, can you provide additional details, especially regarding approved vendors?
    • Will provide that information
    • Discussed environmental permitting and its effect on a timeline in addition to procurement issues for efficacy
  • Menendez- proactive in licensing ahead of hurricane season makes sense, would like a list of things that can or should be addressed at the state and federal level to help work through this process. Should work with TDLR for licensing and pre-checks.
  • Huffines- pre-positions assets, what kind of assets?
    • Combination of MHUs and personnel
    • Having those response teams and equipment ready to go will expedite the process
  • Huffines- in terms of the MHUs, a little skeptical that having those available may not be the best method for preparedness due to potential upkeep etc.
  • Huffines- balance of need for speed and fiscal responsibility
  • Lucio- there has been mixed response about the PREPs program, can you clarify?
    • Pete Phillips- in the beginning, the PREPs program did not have a good reputation and did not feel that that program was the best option
    • For those with less than $15,000 in damages that was the only option
    • Requested changes to the program including raising the cap to $20,000 which were accepted by FEMA
    • Issues with general population understanding PREPS repairs
  • Bettencourt- would like specific action items for Stafford Act. And information on how Louisiana got the Direct Repair approved.
    • Will provide that information
  • Lucio- discuss the GLO LAR to meet needs
    • Issues with getting enough people background checked to handle personally identifiable information
    • Expecting to retain as many people who worked on Harvey as possible to eliminate that wait time in the future

 

Examine and report on ways to improve the coordination of rebuilding housing and infrastructure following a natural disaster, including evaluating additional cost effective options for FEMA to utilize in providing direct housing assistance immediately following a disaster, creation of comprehensive lists of housing opportunities or web portals to disseminate information to survivors, ways to automatically waive local government regulations to facilitate rebuilding, and additional local resources available for rebuilding efforts.

 

Monitor the distribution of federal disaster relief funds related to housing and infrastructure, including community development block grant (CDBG) funds, to ensure the timely dissemination of monies by state entities to local governments for reconstruction efforts. Develop recommendations for any statutory changes necessary to improve the efficiency of disaster recovery efforts, maximize housing and infrastructure funds, and ensure cooperation between private and government partners.

 

Review and recommend options to expedite debris removal, including cutting unnecessary regulation and streamlining the process.

 

Identify and report on existing disaster training opportunities available for local officials and make recommendations for training programs that equip them to efficiently interact with state and federal agencies during times of disaster.

 

C.J. Wax, City of Rockport-Mayor

  • Provided written testimony
  • Has one emergency management contract and one emergency management coordinator for Aransas County
  • GLO has been very present in Aransas county
  • Biggest weakness in temporary housing is multifamily housing: every family in multifamily housing was displaced
    • Roughly 25% of students in Aransas county
    • Renters were further impacted with assistance
    • A facility could be built similar to Eagle Ford Shale camp
  • Has 133 MHUs which do not cover multifamily housing
  • CDBG- we know where the money needs to go and should be able to spend it more easily
    • Many people found local solutions as opposed to waiting for program assistance
  • Noted governor’s aid in debris removal
    • 6 million cubic feet of debris removed
  • Should consider funding but at least ensuring that each emergency coordinator has a minimum amount of training
  • Lucio- will be working on issues relating to appraisals

 

Daphne Lemelle, Harris County

  • Discussed unincorporated Harris County
    • Unmet need is estimated at $6 billion
  • Still need to improve the timeliness of distribution of CDBG funds
  • State or GLO could give Harris County a lump sum to administer
  • Pleased with working relationship and progress being made with GLO
  • Concern over spending timelines
  • Garcia- of 30,000 units flooded that was just in unincorporated Harris county?
    • Correct
  • Garcia- how many of those people are still displaced?
    • Still 4,000 people in hotels but no specific number at present
  • Garcia- what could the legislature do to assist those people?
    • Continuing to connect and working with non-profit organizations
  • Garcia- do you think we will get all the resources needed?
    • Unknown, but the faster we can get funding the better we can help get people back in homes
  • Bettencourt- tracking 1907 people in temporary housing from GLO, what is Harris county tracking?
    • City of Houston has their own direct program
    • Harris County should be included in the state numbers

 

James Allison, County Judges and Commissioners Association of Texas

  • Have made progress with training and preparations for hurricanes
  • Improvements can be made in post-event system
  • Debris removal was a huge issue and fell on counties
    • Noted San Patricio County costs as extremely high
    • Expenditures associated are significant to counties especially small counties
    • FEMA provides partial reimbursement but takes time to get
  • State should set up a fund for debris removal
  • Need to preset debris removal contracts
  • Housing distribution needs to be prioritized and expedited
  • Need response teams to go into affected areas and coordinate with locals and feds
  • Private participation should be encouraged
  • Taylor- FEMA reimburses up to 90% on debris removal?
    • Yes, but it takes a long time even if the paperwork has been completed correctly
    • At this point, San Patricio County is just waiting on funds to knowledge
    • Will provide more details
  • Bettencourt- discussed emergency funding and contemplated COGs ability to provide emergency management resources
  • Bettencourt- important to know where issues are to be able to fix them. Need specific points of where roadblocks to recovery are.
    • Will provide that
    • Debris removal would be a very important aspect to consider specific funding for state assistance

 

Heather Lagrone, GLO

  • Bettencourt- please discuss initial process of getting a person into a MHU?
    • After application, a site inspection occurs, followed by environmental clearance along with utility connection
  • Bettencourt- why would it work faster for one person than another?
    • Factors include utility providers speed of operation, local ordinances and policies
  • Bettencourt- would like specific answers provided by GLO
    • Will provide answers to the listed questions provided by the previous witness
  • Memendez- requested an assessment of affordable housing need
    • Will provide that information

 

Tracy Figueroa, TX Rio Grande Legal Aide

  • Had 1800 cases legal services requested
    • ¼ of those are landlord/tenant issues
  • Counties served include 16 of the disaster-declared counties
  • FEMA loss verification assessors have relatively little training

 

Sandra Brown, Lone Star Legal Aid

  • Services Harris County
  • FEMA appeals transitioned into landlord/tenant issues
  • Many clients live in low rent properties making it difficult to find alternative housing
  • Issues establishing ownership of homes in many circumstances
  • FEMA adding Airship document to determine ownership
  • Provision for licensing contractors was sunset in 2009
  • Need affordable housing
  • Menendez- need to weigh in with housing affairs to ask for a set aside for disaster areas above and beyond what is already there
  • Menendez- requested additional information regarding Airship issues and clouded title issues
    • Large issue and has come up in the past
    • Will provide that information
  • Taylor- you are 501C-3 organizations?
    • That is correct
  • Taylor- you are helping with administrative hearings regarding FEMA?
    • Correct, working on the FEMA appeal process

 

David Mainse, Texas Apartment Association

  • Need for statewide housing portal
    • Current housing portal does not allow those within affordable housing programs to get information
    • 8 housing portals right now, needs to be streamlined
  • Need a comprehensive website for housing information
    • Extensive amount of information and needs to be user-friendly
  • Should be a standing committee to discuss housing needs going forward
  • Issue in state code that adds cost to recovery
    • TDLR must have the latest version of the electric code, additional information provided in written testimony

 

Madison Sloan, Texas Appleseed

  • Discussed need for affordable rental housing to be prioritized
  • FEMA data understates needs of renters (in cost of damages)
    • Needs to be changed to how FEMA collects and displays and reports data
    • Potential multiplier for correcting understated needs by FEMA
  • Building affordable housing should be proportional
    • Affordability needs to be long-term
  • Additional comments available in written testimony
  • Bettencourt noted the difficulty in making changes to FEMA assessments

 

Ben Hirsch, West Street Recovery

  • PREPs program returns people to their neighborhoods quickly
    • Beneficial for many reasons
  • Discussed specific examples of poor work done during PREPs Program work
  • Recommends: clear communication of scope of work, protocol for reporting poor work needs to be explained, all houses must be fully mucked before work begins, all houses should go through mold remediation, all homes must be fully dried before construction begins, PREPs work should not obscure other construction needs

 

Nim Kidd, Texas Division of Emergency Management (TDEM)

  • Discussed need for increased speed of funding for reimbursements and recovery
  • In previous 6 declared disasters
    • 160 counties impacted
    • only 2 counties qualified for FEMA direct housing mission
    • Only 81 applicants were qualified for direct housing mission
  • Harvey was so significantly increased compared to previous disasters
  • TDEM is responsible for recovery on public assistance
    • Long-term recovery through GLO is where we need to continue to focus
  • Resources available $150 million in funding with only $5.2 million in state funds
  • Taylor- in debris removal funding, what’s happened?
    • Out of $671 million advanced $200 million was for requested advance funds
    • Governor worked with TCEQ added $90 million to cover local share of split
    • For this event, there should be no local costs, but there could be if proper procurement procedures were not followed
  • Lucio- noted TDEM’s good work during this event, what should the legislature do to better assist in long-term recovery?
    • List of reforms and initiatives will be provided
    • Recommends emergency management training for coordinators and setting minimum criteria to be a coordinator, in addition, should come with some level of funding

 

Special Purpose Districts Bond Reform: Study the state agency review of tax exempt bonds issued by special purpose districts and public improvement districts used to finance water and sewer infrastructure in new residential and commercial developments. Examine the disparities that exist between the feasibility review of water and sewer bonds backed by property- based assessments and those backed by ad valorem taxes and make recommendations that ensure the continued stability of the Texas tax- exempt bond market by requiring all districts to undergo appropriate reviews prior to issuance.

 

Julie Peak, Hilltop Securities

  • Discussed history of utility district bonds
  • Rules were adopted by private and public entities to reduce egregious financial technics and protect the customers
  • Current rules involve a reimbursement of the developer causing the developer to have “skin in the game”

 

Jan Bartholomew, RW Baird

  • Initially, bonds were sold as junk bonds
  • By late 80s had 18 defaults causing rules to be rewritten
  • In late 2000s many of the districts were rated and sold at a lower interest rate and secured by ad valorem taxes
  • Have not had a default since rules were rewritten
  • Since 2009 1300 districts have been rated (70% of districts)
  • System help up very well after Harvey
  • Huffines- do you know how many districts have been absorbed by a city?
    • Since kingwood annexation, some cities have chosen to go into limited annexation
    • Very rarely seen districts being absorbed
  • Huffines- what percentage of muds are in Houston area?
    • The majority, over 900
    • Not sure what the percentage is
  • Taylor- how will the tax reform act affect the bods being sold?
    • Not being able to do an advanced refund has been a significant hit to the smaller issuers
  • Taylor- have we seen any credit downgrade as a result of Harvey?
    • No, all districts have been reviewed and only had one downgrade but not below

 

Howard Cohen, Schwartz, Paige Harding LLP

  • We believe the model for ad valorem tax bonds works well for Texas
  • Bettencourt: Why do you think we haven’t had a default in 30 years?
    • Texas is the only state reviewing financial feasibility and has worked really well
    • The rules have allowed that

 

Trey Lary, Allen Boone Humphries Robinson LLP

  • In the Houston area, MUD growth is following population growth
  • Housing and infrastructure allows for growth
  • Concentration of MUDs in Houston area, Harvey was a significant test of the system and public policy
  • Meyers Research and the University of Houston completing a study of how MUDs affected Harvey
    • Not yet complete but will be soon and provided to the committee
    • Preliminary results shown that MUDs are extremely resilient
  • Regarding ratings, 3 districts have been put on negative watch by Moodys

 

Val Perkins, Gardere

  • Stressed resoluteness of the MUDs

 

Tripp Davenport, FMS Bonds

  • Gave a brief history of Special Assessment Bonds
    • Revision of statutes in 81st and 82nbd sessions
    • Zero defaults on Special Assessment Bonds
  • Purpose is to transfer risk from homeowner to investor
  • Relating to regulation, local governments are heavily involved in the issuance of bonds
  • Justification of assessments lead to improved services
  • And infrastructure
  • Usually only one bond issuance, not a recurring issuance
  • Bettencourt- do not see any reason to make any changes?
    • Last session there was a bill for hyper-technical changes, though did not pass through the Senate
    • Will provide additional details to the committee

 

Jim Shepherd, Texas Municipal League

  • Find variance factors between municipalities regarding PID bond issuance
  • The avoidance of default at the municipal level, there is a standard of no defaults by the city at all
  • Too early to describe PID issues or successes yet
  • Assessments are conducted in advance of infrastructure being completed, should be reviewed
  • TML does have research on PIDs in various locales
  • Huffines- PID creation can be created in the city or the ETJ, is the city council the board?
    • Davenport- Yes, although very rare to have an ETJ PID, only worked on one
    • All ETJ PIDs have to meet city regulations
    • Far more scrutiny placed on PID bond than GR, etc.
  • Huffines- the homeowner can pay off the PID at any time, correct?
    • Davenport- that is correct, and it can be prepaid at anytime
  • Huffines- what is the difference between a rated mud and PID bond?
    • Davenport- A first issue non-rated bond is in the high 3s or low 4s, and roughly 80-point base difference

 

Public Testimony

 

Mark Rogers, Green Energy Fund

  • Provide mitigation
  • Vet contractors before project work can be financed
  • Bettencourt- mentioned none of the homes were a total loss, what is that attributed to?
    • Because we made the financing available to make more substantial upgrades to the home
  • Bettencourt- do you have recommendations regarding contractors?
    • Need to continue the discussion on creating the programs

 

Douglas Gilliland, Taurus of Texas

  • Very satisfied with PID bonds
  • Used to bring $40 million to a planned community outside of Austin
  • Financing method used to pay for the infrastructure necessary before the development of lots
  • Costs were distributed and will be paid for over 30 years allowing for needed affordable housing
  • Fixed, predictable payments are very beneficial for property owners
  • If there is a default, the neighbors are not impacted
  • Lucio- where is your community located, ETJ?
    • Considered Limited Purpose ETJ
  • Lucio- how are services provided?
    • Through the county for police and fire, etc.

 

Rick Rosenberg, Development Planning & Financing Group, Inc.

  • Consultant for half of PID bond issuance in Texas since the most recent update
    • No defaults
  • 2008 recession caused the use and issuance of PIDs
  • The fixed nature of the PID is very attractive because of cost certainty
  • No assessments are able without the approval of municipality or county
  • Bettencourt- are there any PID defaults you are aware of, and why not in Texas?
    • No, because of the standards of the appraisal
    • It is not anticipatory
  • Bettencourt- discussed previously issued PID bonds

 

Corey Admire, Shupe Ventura PLLC

  • Preserving the maximum amount of flexibility, having MUDs or PIDs for each project is important
  • No additional regulations or constraints are necessary at present

 

Robert Rivera, Self

  • Concerned with community policing in Houston as result of FEMA funding going through emergency management and local policing

 

Closing Remarks

  • Next hearing will be in late April