The Shumlin administration painted an optimistic portrait of the state’s financial future the day after the Federal Emergency Management Agency dealt the state a fiscal blow.
FEMA determined on Tuesday that the Vermont State Hospital and other government facilities were not destroyed by Tropical Storm Irene and are therefore not eligible for the 90 percent public assistance match the state had hoped for. Secretary of Administration Jeb Spaulding said afterwards that the state would not receive as much overall funding for the state hospital.
On Wednesday, Spaulding told a room of legislators that regardless of FEMA funding levels, the administration would still reconstruct the flood-damaged Waterbury State Office Complex and build a new state hospital in Berlin.
“I can assure you that our plan for rehabilitating the Waterbury state office complex and our replacement plan for the state hospital are on track and are going to happen no matter what the final amount of money is that we get from the federal government,” he said at the legislative briefing.
The “heavy lifting,” said Spaulding, would fall on the shoulders of the Legislature’s institution committees, which are tasked with drawing up a new capital bill.
A spreadsheet passed out to legislators during the briefing showed a $120 million gap between state revenues, or the money it knows it has, and estimated construction costs.
The gap reflected a reduction of more than $700,000 from a July estimate, due primarily to a decrease in costs for a seven-bed residential facility in Middlesex. Spaulding said the state would proceed with construction of that psychiatric facility despite a citizen appeal of the zoning permit.
As of Oct. 16, the sheet showed that estimated construction costs would amount to roughly $182 million for a revamped state office complex, a new state hospital, new labs, renovations at the National Life building and other psychiatric facilities. The combined construction costs of all five psychiatric facilities across the state is estimated at about $43 million, and the new Berlin hospital is projected to cost $28.5 million to build.
The level of FEMA and insurance funds that the state receives for Irene damage will determine the end costs of these facilities, as bonding requires payments on interest and to banks.
The state knows that it can raise $63 million from various allocations, but the sheet provided to legislators did not include FEMA funds or bond premiums, which the sheet said are “to be determined.”
The sheet did not list insurance reimbursements on behalf of Lexington Insurance Company, from which the state expects to receive a total of $50 million to $55 million.
The administration refuses to talk about specific FEMA numbers for fear that statements could hurt negotiations or potentially affect public perception of the administration.
“I hope you’ll understand that I and the governor do not want to mention specific numbers because if we were to mention some number higher and we got less, people will say, ‘You didn’t get what you thought you were going to get,’” Spaulding told legislators. “If we mention (a number) too low that could set a lower bar, which means we might not be able to get more.
“All I can tell you is we are making significant progress and we will have the financial capacity to work with the institution committees to stay on track.”
Spaulding told reporters after the meeting that raising the bond level to address these issues “would be an absolute last resort.”
“We are AA+ by S&P with a positive outlook and AAA by Fitch and Moody’s, and we’re not anxious to do anything that deviates from our trajectory to be AAA across the board,” he said.
The state maintains strong credit ratings, in part, by keeping its borrowing within set parameters. In the event the state would need to borrow more to achieve its infrastructure goals, Spaulding said he did not “think that action in and of itself would necessarily lead to a downgrade, but it wouldn’t be helpful.”
On the upside, Spaulding said in a separate interview, Vermont has thus far received a total of $154.8 million in FEMA funds: $131.6 million for state and local infrastructure and $23.2 million for assistance to individual families.
Spaulding said the state is strongly pursuing FEMA’s flood mitigation funds. Those monies would be allocated based on repair costs for damaged facilities. But if they were used for new facilities, like the Berlin hospital, the state would lose 10 percent.
Several weeks ago, Spaulding said FEMA deemed the state hospital buildings “critical action facilities,” which means the two main buildings that were damaged are eligible for a higher level of assistance, which is allocated based on the “500-year flood level and not the 100-year flood level.”
While the administration is not sure whether it will appeal FEMA’s most recent determination, Irene Recovery Officer Sue Minter told legislators that the state was making a second appeal for town box culverts. FEMA’s Boston branch denied the state’s first appeal, and now the state is taking its case to the nation’s capital.
“We are not giving up,” said Minter. “We believe the law is on our side and we are eligible for more.”
Down in Washington D.C., Vermont’s congressional delegation — Sen. Patrick Leahy, Sen. Bernie Sanders and Rep. Peter Welch — issued a joint statement to VTDigger about the FEMA situation.
The congressmen are still reviewing and analyzing the technicalities of FEMA’s recent decision regarding the state hospital, and they are keeping a close eye on other funding routes, including the option to appeal the agency’s determination.
“The Shumlin administration clearly believed there was a good case for the permanent relocation of the state hospital,” they wrote. “We are coordinating closely with the Shumlin administration and will actively support whatever avenue they decide to pursue.
“We are pleased with the significant federal resources brought to Vermont to date, and we will continue to work hard to ensure that Vermont receives every tool needed to complete the long recovery from Tropical Storm Irene.”