UPDATED: FEMA balks at price tag for Irene damage to state property

FEMA representative Richard Serino speaks to Royalton residents. VTD/Stacy Tatman

The Federal Emergency Management Agency has dropped a $120 million fiscal bombshell on Vermont and it landed with dramatic thud at the Statehouse Friday.

State officials announced that after nearly a year of discussions, FEMA has reversed course and is indicating the state can’t count on major financial help to rebuild the flooded Waterbury state office complex and a new state hospital, both damaged by tropical storm Irene.

Parts of a revamped mental health system approved by the Legislature last session may also prove ineligible for FEMA funds or receive a greatly reduced amount, officials said.
The $120 million figure is the gap between the $182.8 million the state estimates it will cost to renovate and replace state assets and the $62 million that the state or its insurance has pitched in to cover damage costs.

Since Irene’s devastation last August, state officials have consistently said they been assured FEMA will kick in a good chunk of money to restore or replace state assets at the historic Waterbury complex, which has 70 buildings that housed some 1,200 state workers and the state hospital.

The pricetag for restoring the office complex and bulding a new state hospital in Berlin is currently estimated at around $152 million, according to Deputy Secretary of Administration Michael Clasen.

Clasen drew the unfortunate job of delivering what may just be the worst fiscal news the state has ever received to a packed Statehouse hearing room Friday.

He said it appeared FEMA could no longer be counted on to substantially fund the state’s rebuilding effort and bridge that $120 million gap.

Using a baseball analogy, he said if the state had earlier been under the impression it had hit a funding home run, “today FEMA is giving a signal we may not even make it to first base.”

But a FEMA official said Friday that analogy is premature.
Deputy Federal Coordinating Officer Steven Ward, who is working in Vermont with a team evaluating the state’s documentation, would not agree with the state’s assessment.

“The process is not complete. We have a long way to go,” he said, declining to hazard a guess on where funding will end up, but saying FEMA was working to “maximize” funding for the state.

Sitting before several high-powered legislative panels that had gathered for an update on the Waterbury complex and mental health overhaul, Clasen told lawmakers that state expectations on FEMA money started blowing up a few weeks ago.

Clasen said the state has had lengthy and elaborate conversations with FEMA and consistent indications since Irene struck last August that FEMA would pitch to help restore and rebuild the complex or fund alternate replacement structures.

“A FEMA representative was actively working with state employees providing information and guidance, to where we were going to have a significant stream of funding,” Clasen said. 

But when new FEMA officials began working with state officials last month, FEMA’s previous reassurances were “for all intents and purposes disavowed,” he said.

“We are now being told by FEMA that the state hospital is not eligible for FEMA funds,” he said.

Further, assurances that rebuilding the office complex would be eligible for reimbursement are also uncertain, including such key parts as moving the heating plant out of the floodplain before the complex is reconstructed.

William Duhac, a fiscal expert for the state buildings division, said FEMA may also not be funding facilities for six new acute care mental health beds at Rutland Regional Medical Center and 14 at the Brattleboro Retreat, which are expected to cost a total of $10.6 million. The state has the backup option of paying for the new units with higher rates, which would get a 60/40 federal-state match.

“They have walked away from that commitment,” he said.

“These are shifting waters we are working with and that is very difficult,” he said.

FEMA is now reviewing the state’s extensive documents and expects to give the state guidance in about a month for a “range of values” on what it might pay, Clasen said. 

Calling the development “stunning,” he said if FEMA substantially scales back its contributions, the state may have to revisit its extensive post-Irene plans for everything, including a new 24-bed state hospital planned next to the Central Vermont Medical Center and the new state office building proposed in Waterbury.

“If significant funding is not forthcoming from FEMA, we believe collectively we may have to re-evaluate current plans,” he said. 

“All options are on the table,” he said.

Speaking for FEMA, Ward said he was hesitant to characterize the new staffing as a “changing of the guard.” He said FEMA had brought in more expertise to look at the state’s situation and funding requests, and that had prompted a deeper look at the “worksheets” FEMA develops to decide what is eligible for reimbursement.

“I’ve got to be honest with you, it was one of the most complex projects I’ve ever been involved in,” he said. “We’re well aware of the governor’s and Legislature’s goals and objectives for the Waterbury complex and potential move of the Vermont State Hospital.”

“Both the state and FEMA recognize that currently there is a (funding) gap,” he said, insisting that FEMA would work the issues through with the state to develop “a range of values.”

At the same time he seemed to indicate that FEMA might opt to have the state repair some buildings and bring them up to code rather than going the route of new construction. He did say that FEMA does not want to fund repair of buildings that might face flooding again.

Work goes on at the Waterbury State Office Complex. VTD/Josh Larkin
Work goes on at the Waterbury State Office Complex. VTD/Josh Larkin

He also stressed that the agency, whose failures after Hurricane Katrina made it a whipping boy for derision, had contributed substantially already with $126 million in public and private assistance.

As for the old state hospital, he said a determination as to whether to repair it or replace “truthfully, has not been made by FEMA.”

Clasen said FEMA seems to be shifting its terminology on the state hospital. Whereas they considered it eligible for reimbursement because it was badly damaged by flooding, now FEMA seems to be saying it would only be eligible if it was “destroyed.”

“Their current reading is that the building is still standing, that the building was not destroyed,” he said.

Gov. Shumlin and the Legislature, counting on FEMA funds to replace the 54 beds lost at the hospital, cast their votes for closing the facility and spreading acute care beds around the state in Brattleboro, Rutland and Berlin. FEMA’s decision on funding may throw a giant monkey wrench into those plans despite Shumlin’s vows that no one would ever be housed in the antiquated facility again.

For lawmakers who watch state dollars, workers who are displaced, the town of Waterbury itself and state government, the implications of greatly diminished FEMA reimbursement are hard to overstate. The news rippled across the Statehouse into numerous hearing rooms where lawmakers took in the news and wondered what it meant if the flood of expected FEMA dollars turned into a trickle and didn’t help float the state’s rebuilding effort.

Sen. Ann Cummings, D-Washington, called Clasen’s report “overwhelming.”

Sen. Jane Kitchel, D-Caledonia, was distressed at the potential delays in the rebuilding effort that could face the state if FEMA funding fall substantially short.

“It seems like a year later, and we’re just starting this process,” she said.

“This is, to put it very mildly, very bad news for us,” she said.
I’m stunned.”

Clasen told Kitchel the state was going to continue to fast-track plans for the state hospital and state complex restoration while the FEMA situation seeks resolution.

According to state Buildings and General Services Commissioner Michael Obuchowski, whose office has worked heroically to plan the massive rebuilding of the state complex and other damaged state structures, said as late as June 21, the administration had tallied $88.8 million in work sheets that it expected to get reimbursed by FEMA. That left the state with a manageable shortfall of $32 million.

“We really have no idea of what this process is going to yield,” he told lawmakers, except that if FEMA doesn’t provide a major chunk of money the state will have to re-evaluate its rebuilding plans.

Gov. Peter Shumlin and Michael Obuchowski, commissioner of the Department of Buildings and General Services in Waterbury. Photo by Taylor Dobbs
Gov. Peter Shumlin and Michael Obuchowski, commissioner of the Department of Buildings and General Services in Waterbury. Photo by Taylor Dobbs

“FEMA is going to have to come through or we’re going to have to recommend changes,” he said.

The FEMA news obliterated or overshadowed some positive post-Irene developments, including a progress report from Obuchowski and architect Jesse Beck of Freeman French Freeman, the firm hired by the state to design the new office complex in Waterbury. Beck said extensive surveying and discussions indicate about 950 Human Services Agency employees would move back and be housed in Waterbury in a new and revamped office complex and a proposed building design was expected to be ready by the end of the summer.

Duchac reported that about $50 million in insurance settlement monies are expected by the state. Of that amount $15 million is “new money” that is not allocated and the state can use for a range of projects on the table. A final settlement is due toward the end of August, he said.

But the FEMA news was the cold shower on a warm sunny day. Rep. Alice Emmons, D-Springfield, whose House committee oversees state buildings, said it appeared FEMA was not familiar with the Vermont way of doing things “with a handshake.”
“We expect the other side to come through with their commitment that they gave to us,” she said.

Her Senate counterpart Robert Hartwell, D-Bennington,
said the state poured money into its infrastructure, fixing its roads and bridges and communities after the storm in “an absolutely fabulous example for all of America to see, and FEMA needs to take a hard look at what we’ve done.”

He said the state office complex and state hospital are the equivalent of state government’s “infrastructure.”

“This is where the hub of state government gets carried out,” he said.


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  • Pete Everett

    Of course everyone knew this would happen. Thanks Govenor and to your administration for lying to the legislature and the people of Vermont. VSH could have had 2 units opened months ago, but you and Comiisioner Clueless just got caught telling another lie. There could of been a safe place for Vermont’s most vulnerable to get help, but insyead you people decided to take it away with lies and numerous casualties have happened since. Along with people not being able to get the treatment that they need and deserve. Also now you are going to break the bank on the taxpayers of Vermont with your lied about plan and the most vulnerable will continue to suffer as this is going to be more than a 3 year project now.

  • Nick Davlantes

    No “state of the art” mental hospital with views. No private sector profit from disaster. All to be constructed on seven acres when there could of been twenty seven. Oh what a plan by sociopathic leaders.

  • Craig Powers

    Wait until the feds renege on all of the healthcare and medical reimbursements Governor Shumlin is counting on for his ambitious health care plan.


    Well here is the perfect opportunity for Gov. Shumlin and the rest of the GOP to break the NO NEW taxes pledge!!!! Raise revenue and Go lobby Congress for a bailout!!!!

  • David Dempsey

    The Governor pressured the legislature to approve his plan to build a new state hospital and rebuilding the Waterbury complex. Thanks to this railroad job the Shumlin administration pulled off, the state has spent $88 million on the projects that may not be reimbursed in full or at all by FEMA. Shumlin should have spent the last year focusing on getting the state hospital and the state offices functional now instead of 3 years from now. A sensible person would find out how much money they have for the projects before spending money to get them started. Now we have paid $88 million to design buildings that we probably won’t be able to afford to build, we have a broken mental heath system and many state workers traveling all over the state to go to work. My daughter was a nurse at the State Hospital, until she got layed off. She told me that 4 of her ex patients have met untimely deaths since the flood. In the 5 years she worked at the hospital before the flood, none of her patients died unexpectedly. Thanks to the cloak of silence that the mental health department operates under, she is not privy to this information. She learned of the deaths by seeing their obituary in the paper,hearing it on the news or through the grapevine. There could be more as far as she knows. Shumlin needs to get his act together before more untreated mental health patients die and he bankrupts the state.

    • Curtis Sinclair

      This “cloak of silence” is a federal medical information privacy law: The Health Insurance Portability and Accountability Act of 1996 (HIPAA). That law was enatced to protect the privacy of personal health information, and sets limits and conditions on the uses and disclosures of that information without patient authorization.

  • “But when new FEMA officials began working with state officials last month, …” (above story)

    Did anyone inquire as to why the FEMA team was changed? Did it have anything to do with the promised funding levels?

  • Curtis Sinclair

    Another state hospital would not be needed if the mental health system would give up on the folly of involuntary treatment.

    The Ethan Allen Institute put out a report in 2007 that would be agood model to follow. This report concluded:

    The operative policy for Vermont’s seriously mentally ill population ought not be removal from society, but recovery in community. Vermont’s mental health system should be centered on community-based services, not built around a centralized psychiatric facility.
    • The Department of Mental Health should abandon its relentless quest for the construction of new high-cost state-owned mini-VSH facilities, whether in Waterbury, the FAHC Burlington campus, or elsewhere.
    • The DMH and designated agencies should welcome new private providers of services, such as residential recovery housing (Fairweather Lodges), and faith-based and peer-run drop-in centers. Every temptation to secure a monopoly, so damaging to the interests of consumers, must be stoutly resisted.
    • Community hospitals must evolve to holistically address the physical and mental health of the people in their communities, and address the issue of forced medication as a serious question of medical ethics.
    • Designated agencies should employ peers and give them authority to serve creatively, not simply direct new workers to provide old models of care. Providers should seek compassionate staff members who like people and are not looking for opportunities or evidence to punish clients.
    • Building an enormously expensive new replacement facility for VSH, at the urging of a state bureaucracy and its employee union allies, over the objections of the Public Oversight Commission and most advocates for the mentally ill, will create a large and unnecessary burden for a generation of Vermont taxpayers, while offering inadequate recovery services for Vermonters with mental illness. It is not sound public policy.

  • Not sure where Mr. Sinclair comes up with his $88 million spent figure, but the information I have indicates those figures are way out of line.

    Here is the information released at the day-long FEMA fest.
    – Legislature authorized $5 million for planning and design etc. of new Berlin state hospital facility. This process is under way.
    – Rutland’s 6 beds and Brattleboro’s 14 beds are roughly $5.3 million each. Both facilities progressing at this time.
    – Construction of the new Berlin 24-bed facility is expected to be $28.5 million. None of this is allocated or spent yet. This may be revisited in case FEMA fails to come through.
    This is significantly less money. IN any case, the Legislature’s arm was hardly twisted on this. They took excrutiatingly extensive testimony, from ALL sides, and backed the community mental health treatment concept, adopting peer involvement and much better emergency interventions and treatment facilities to prevent folks ending up in acute care. That said, there was overwhelming testimony that there remains a strong need for acute mental health care in modern treatment facilities.
    The state would need this no matter what as a result of Irene. Whether FEMA comes through or not is a separate issue.

    • Andrew:

      The $88 Million figure you referred to was within David Dempsey’s comment, not Curtis Sinclair’s comment.

  • Curtis Sinclair

    The $88 million figure was not mine. But building no new VSH or a smaller 16 bed VSH would certainly cost less than the proposed 25 bed hospital. Those options should still be on the table.

    The overwhelming testimony about the need for a new version of the same old Vermont State Hospital came from people with vested interests in the status quo, NOT those who have been incarcerated in VSH. Has anyone noticed how hard the state employees union pushed for a bigger hospital? Does anyone seriously think that VSEA has patient’s mental health in mind? All they care about is holding on to more union jobs.

    VSH has been and will continue to be used for involuntary “treatment”. It does not help anyone’s mental health to be forcibly locked up and forcibly drugged. Every time someone is locked up in an institution against their will it is due to a failure of the mental health system. Ideally psychiatric hospitalization will become a thing of the past. The use of mental hospitals to incarcerate people defined as insane also violates the general assumptions of patient- and doctor-relationships. That turns the doctor into a warden and a keeper of a prison. No one should be deprived of liberty unless he is found guilty of a criminal offense. People sometimes are afraid to get help because they are afraid of being put into such involuntary “treatment”.

    • Jack Glass

      Mr Sinclair,

      As somebody who worked in the old facility, I know first hand that there are very few people being drugged and ‘incarcerated’ involuntarily. The overwhelming majority of the people in that situation were there because of violent crime. Not exactly the people you want in the streets or in the prison system. Many others are there completely voluntarily. Please, don’t go off on a rant about the state of Vermont’s mental health hospitals when you are clueless as to how they are being run. Believe it or not, it’s not a prison; it’s a hospital for people to go so they don’t fall through the cracks of society.

      How is the new plan anything like the status quo? The new facilities are smaller than the Waterbury complex. They are spread out in the state to allow for friends and family to visit more often. It’s more personalized and less institutional. Those are all good things for society and the patients.

  • Curtis Sinclair

    Once again we have someone who WORKED at VSH defending it. I have yet to see a patient defend the kind of work VSH did. I am very familiar with what went on at VSH, having been incarcerated there for over two years and having worked in food service there for over a decade. I am far from clueless about VSH and the damaging effects of involuntary hospitalization.

    Almost all the patients (inmates is a better word) at VSH were there involuntarily. No one would volunteer for the kind of treatment they received there. Very few patients were accused of serious crimes. Most were disorderly conducts or other misdemeanors like me. One man was there for 8 months for hitchhiking on the interstate. Another was there for locking himself naked outside his motel room. One was there for throwing a brick through a window. Another for stealing a carton of cigarettes. One woman was there not on any charge, but simply because she was arguing with her doctors at Fletcher Allen. They found a psychiatrist who said she had oppositional defiance disorder and had her locked up at VSH for over 6 months. Most druggings were coerced if not forced. When faced with the threat of a court hearing that the psychiatrists would probably win followed by what the staff called the “silver bullet” – a forced injection – most patients “voluntarily” took the drugs that have terrible, often debilitating side effects.

    The new plan is too much like the status quo in that there are still the same number of “acute care” beds that will be used for involuntary “treatment”. VSEA pushed for an even bigger VSH than the one that was shut down.

  • Barbara Lowe

    I do know of a few patients that went to the state house
    and testified for VSH and they spoke very highly of the HOSPITAL and the STAFF

  • Curtis Sinclair

    There were very few patients who spoke in favor of VSH -of all the hundreds who have had their civil rights violated in that institution. The US Department of Justice found that VSH had been violating patients rights for decades when it finally cracked down on VSH. Sentiment from former patients was seen in press reports such as this one:

    Xenia Williams, a former Waterbury patient who went on to help to care for patients for Washington County Mental Health services, said she recently attended a meeting with five displaced patients.

    “All five of them were extremely outspoken about how glad they were to be out of VSH and what a horrible place it was,” she said. “The few I’ve talked to who are sorry it’s no longer available are people who appear to have real problems with self-esteem. They’ve bought the idea that they’re some sort of inferior person who doesn’t deserve to be treated well.”

    A Scandinavian study showed the unfavorable psychological treatment outcomes of involuntary treatment (Kaltiala-Reino, Laippala, & Salokangas, 1997). The authors conclude that “coercive treatment arouses negative feelings in the patient, creates negative expectations about the outcome of treatment, and fails to result in a trusting relationship between the patient and the professionals.”