Atascadero appeals FEMA's plans to revoke funding 

• PHOTO BY STEVE E. MILLER
• FUNDING KERFUFFLE: Nobody seems to know why the rug was pulled out from under Atascadero city officials’ feet and FEMA yanked back some $2.7 million it had previously approved them, but those city officials aren’t giving up the green without a fight.

As Atascadero takes steps to move on from a 10-year saga that started with an earthquake and still isn’t quite settled, the city has filed an appeal disputing a federal agency’s decision to reclaim some money.

In late July, just as city leaders prepared to return to the historic City Hall—an iconic four-story red brick building that was damaged in 2003 by the 6.5-magnitude San Simeon Earthquake—the Federal Emergency Management Agency (FEMA) notified Atascadero that the agency was de-obligating nearly $2.7 million of the total $26.3 million aid package the city received. The $2.7 million was originally approved by FEMA and was used by the city to pay rent for its temporary facility.

Atascadero filed an appeal with FEMA on Sept. 17, arguing that the funding is reasonable and necessary, though the city didn’t announce the appeal until Oct. 31.

Following the earthquake, the city and FEMA worked through various stages to allocate the funding, said Jeri Rangel, director of administrative services for the city.

“We discussed this at length initially with FEMA, we ran through all the proper channels, we got the proper authority, we moved forward with our plan, which they supported all along, even as recent as last December,” Rangel told New Times.

The reversal came after the Department of Homeland Security’s Office of the Inspector General audited the funding. That office conducts routine audits to ensure federal funds are used appropriately. It found issue with the relationship between the city and the city’s Community Relocation Agency, a separate entity that nonetheless has the same five members as the city council and many of the same staff, operating out of the same building. The relocation agency bought a former bowling alley across the creek from City Hall, paying $1.3 million for the building and another $1.76 million for repairs to get it up to standards, largely necessary because of problems stemming from the building sitting atop a creek bank.

Once the relocation agency—a form of a redevelopment agency—purchased the building, the city leased it and paid $31,133 a month for rent to the agency, which then became a “successor agency.”

The Office of the Inspector General took issue when it found that this was a “less-than-arms-length-transaction” because the two entities have the same board and administration, which violates requirements for such arrangements.

Since Atascadero and FEMA did work closely together throughout the process, and FEMA stood by its decision to award the money as recently as December 2012, it’s not clear why the funding was approved in the first place. Both the city and FEMA say it’s too soon to tell.

In the meantime, Mayor Tom O’Malley is confident that the city’s in the right.

“I think that will be something that will be resolved when FEMA takes a look at their history of advising us in the past,” O’Malley told New Times. “I’m still confident that [FEMA] will come to the conclusion that they did the first time, and the second and third time.”

For now, the ball is the federal government’s court. In an e-mail to New Times, a representative of FEMA wrote that agency “officials met numerous times with the OIG to explain how the Agency reached its decisions during the recovery effort and continues to work to address lingering differences in opinion in the audit findings.”

That leaves Atascadero officials wondering for now.

“One never knows in dealing with the federal government,” O’Malley said. “That’s why I call it the far-away government, as opposed to local government.”

-- Melody DeMeritt - former city council member, Morro Bay