Officials say state to get FEMA determination this week; Irene insurance claims won’t be final until early 2013

The Waterbury State Office Complex, two months after Tropical Storm Irene flooded the facility. Photo by Josh Larkin

The Waterbury State Office Complex, two months after Tropical Storm Irene flooded the facility. Photo by Josh Larkin

State officials have waited 15 months for word from the Federal Emergency Management Agency about just how much the federal government will reimburse the state for flood damage to the Waterbury State Office Complex.

At the end of this week, officials say FEMA will determine what kind of reimbursements the state qualifies for. Definitive numbers from the federal agency, however, will not be forthcoming.

Federal funding for the 50-plus government buildings ruined by Tropical Storm Irene hinges on the outcome of its insurance claims, which won’t be finalized for several more months.

The Waterbury complex, the so-called nerve center of state government, once housed about 1,500 state workers and the state’s only psychiatric hospital. Since the flood, the state has had to move employees for the Agency of Human Services and the Agency of Natural Resources to temporary leased office space. It also relocated state psychiatric patients to hospitals around the state. ANR workers are now co-located with Agency of Transportation employees at the National Life insurance company building in Montpelier. Human services employees continue to work from various office locations.

Last spring, lawmakers and the Shumlin administration decided to tear down a number of buildings, construct a new structure on the Waterbury site and build a new psychiatric hospital in a separate location.

It has been unclear whether FEMA would provide reimbursements to help cover the costs associated with state’s plans to rebuild. In the summer, correspondence between FEMA and state officials showed that the state had received warnings that its proposal might not meet FEMA requirements.

By August 2011, the state had received $31.5 million from its insurance company, Lexington Insurance Co., a subsidiary of American International Group. According to Bill Duchac, the state’s one and only risk manager, that’s more than half of the $50 million to $55 million he expects to receive from the company.

The total tally of insurance claims, Duchac said, won’t be complete until early 2013. The reason it’s taking so long, he said, is that the state must tango with both Lexington and the Federal Emergency Management Agency at the same time.

FEMA will not duplicate funds already covered under insurance, according to David Mace, an agency spokesman.

“This week, the state will be receiving notification of some determinations that will significantly focus the potential funding for some of the key buildings at the state office complex, namely the state hospital building, Brooks and the annex,” said Mace. “But FEMA does not have a set schedule for providing definitive numbers to the state this week.”

Mace said that FEMA was willing to provide aid to the state without having completed every insurance claim.

“The state does not have to wait for the full settlement to be complete. We’re working with the state and its insurers to determine the full extent of its coverage,” said Mace. “As we’re working with the state and its insurance company, we’re reducing the individual grants on a building by building basis by the anticipated insurance proceeds for those specific buildings. And that’s designed to get the money into the hands of the applicant as quickly as practicable.”

Duchac said the state had almost full insurance coverage for damaged facilities in Waterbury.The insurance company has not yet paid for extra expenses and pollution associated with the flood.

Extra expenses are the costs of rent, moving and set-up for temporary medical facilities, labs and offices that government workers readied and moved into after their headquarters were inundated.

Duchac estimates that these costs total $22 million, and Lexington caps its level of reimbursement for such expenses at $5 million. The state is looking to FEMA to pick up the difference.

There were pollution cleanup costs associated with elevators and equipment leaking oil, and asbestos piping that was removed from some damaged facilities.

Duchac said it’s taking a long time to tally up all of the insurance claims.

“Part of the problem we’re running into is I’m spending a lot of time focusing on the FEMA side,” he said. “You can only get so much done and we didn’t bring in any extra (risk management) people in to handle this unusual event.”

Duchac said he’s pleased with Lexington’s response and thinks the state will end up in good fiscal shape when all is said and done.

“This is the first time we’ve had a disaster of this level, so it’s taking longer than usual because the event was unusual,” he said. “Given the complexity of what’s going on with FEMA involved, I think we’re actually on track with where we want to end up.”

Andrew Stein

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