Indiana gives millions in disaster recovery to companies, not victims

Storms in 2008 dumped almost a foot of rain on some Hoosier communities
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As families across Indiana continue to clean up from last week's devastating storms and flooding, 13 Investigates has been following Indiana's trail of disaster relief money from previous storms.  It shows millions of dollars in federal disaster relief funds were distributed to private companies – not flood victims – for projects that have nothing to do with disaster recovery.

2008 was a brutal year for storms in Indiana.

Those storms dumped almost a foot of rain on some Hoosier communities, stranding thousands of people and flooding entire cities like Franklin and Columbus.

The damage was both widespread and devastating.

82 Indiana counties were declared disaster areas.

"I remember walking up to the house and I just broke down and cried," remembers Jay Saunders. "I just saw everything my wife and I had worked for was gone. Everything was destroyed."

Saunders' Columbus home was wiped out by more than three feet of flood water. Cleaning up the mess pushed Jay, his wife and three young daughters more than $40,000 in debt. Five years later, they're still struggling.

"We maxed out our credit cards, depleted our savings account, took money out against my 401(k). It was a huge hit," he said, adding that federal assistance did not come close to covering his costs for clean-up and rebuilding.

For the Saunders family – and the thousands of other Indiana families who suffered huge losses during the 2008 disasters – it might come as a surprise to find where the state of Indiana spent millions of dollars it received in disaster recovery. Much of the money never made it to the people who needed it most. In fact, it wasn't spent on disaster recovery at all.

Millions and millions spent

Congress responded to the disasters by allocating $440 million in federal disaster recovery funds to Indiana.

Much of the money went to repair roads, levees, bridges, sewers and other infrastructure damaged by flood waters.

Some of it was used to buy homes in flood-prone areas and to relocate families out of those flood zones.

And another portion was spent on debris removal and to reimburse communities for emergency services during the disaster.

"These federal dollars are very important. We would not have gotten those funds were it not for the disaster," explained David Terrell, director of the Office of Community and Rural Affairs (OCRA), the state agency that receives and distributes Indiana's allotment of federal disaster recovery money.

But Indiana did not spend all of its disaster recovery funds on disaster recovery.

13 Investigates discovered $20 million has been spent on projects that have little to do with disaster recovery.  The state decided to give away disaster funds to help stuff bratwurst, to make car batteries and to electrocute turkeys.  The disaster recovery dollars went to private companies – companies that were not affected by the 2008 disasters at all.

Building better bratwurst

One of those companies is Bloomfield Processing in Greene County.

This small, family-owned business got a $50,000 disaster recovery grant from OCRA to purchase a high-tech machine to make sausage. The computerized stuffer/linker can shoot out sausages, hotdogs and brats faster than an oncoming storm.

"If I turn it all the way up, it can do 200 per minute," said company owner Brian Kollmeyer. "To be honest with you, it's faster than I can think."

Kollmeyer's sausages are winning state awards, his sales are up and his costs are down -- all thanks to the new machine purchased with disaster recovery money from the state.

"I was very elated we got the grant. We wouldn't have been able to move forward like we have without it," he said, showing off a fresh batch of his best-selling jalapeno and cheese brats.

But while Kollmeyer's grant came from disaster recovery funds, the meat processor is quick to admit his business was not impacted by the storms that ravaged many portions of Indiana in 2008. 

"No, we weren't hit. I don't believe we were really affected at all," he said.

That doesn't matter. 

Because Greene County was included in the state's disaster declaration, Kollmeyer's business -- and every other business in the county -- qualified for OCRA's disaster recovery grant program.  Bloomfield Processing found a sponsor (the Greene County Board of Commissioners) and promised to hire five new workers. OCRA then handed over the money.

A year later, business is still good but all the new workers are gone. Kollmeyer says they simply aren't needed right now.

"Before it would take five hours to make 800 brats, and we did it by hand. Now I can do all that in about six minutes," Kollmeyer said, pointing to his new equipment. "It's been great for us. It's intensely saved me a lot of labor."

"Everything that could have gone wrong…"

Other businesses share a similar story.

Companies like Enerdel, NuSun and Geesaman Industries received millions of dollars in disaster recovery grants, even though they were not impacted by the 2008 disasters. They were supposed to bring hundreds of jobs to Indianapolis, Columbus (Ind.) and Portland (Ind.), but most of those jobs haven't come.

Enerdel got a $3 million disaster recovery grant for equipment needed to produce lithium ion car batteries on the northeast side of Indianapolis.

OCRA agreed to give NuSun $600,000 for an assembly line that would make solar panels in Columbus.

Geesaman Industries received $900,000 for a stainless steel polishing machine for a proposed business in Portland.

Together, they were supposed to create almost 300 new jobs for Indiana …. but state officials admit the projects only produced a fraction of that number.

Enerdel and NuSun won't return WTHR's phone calls to discuss their job numbers and their disaster recovery grants.

Much of NuSun's grant money was revoked after it became clear the company would not create the 80 jobs it promised.

The city of Portland wishes it had done the same for Geesaman Industries.

"Everything that could have gone wrong with that project did," explained the mayor of Portland, who sued the company after it abandoned its project -- and then refused to pay back any of the money.

"We didn't get any jobs – zero," said mayor Randy Geesaman.

The mayor and the company owner happen to be cousins. Randy had not yet been elected mayor when the city of Portland and OCRA awarded the disaster recovery grant to his cousin, Steve.

"Right now, we have no idea where [Steve] is," the mayor said, adding that he doubts his cousin will ever return the disaster recovery money.

"I'd say chances are slim and none. I don't see that ever happening… there is just a big chunk of it that's unaccounted for."

Federal rules require OCRA to account for all the grant money.

Since the funding just disappeared without any jobs to show for it, the small city of Portland is being held responsible.

"The money came to the city of Portland so we're the ones who are on the hook. We still owe $738,000," said the mayor.

Rather than forcing the city to pay back all that money, OCRA is allowing Portland to complete a sewer project instead. Even though the city will have to use its own money to pay for the sewers (a project the city was already planning to do), the mayor says Portland will be able to turn in its receipts for the project to settle its debt to OCRA.  It does not change an ugly reality: the city and state are out nearly a million dollars in disaster recovery grant money.

"At the end of the day, it is the community that has lost out on those dollars. It is the community that's paying that cost," said Terrell.

Tough questions

Funding disasters like that have not discouraged the state.

OCRA is still giving out disaster recovery money to businesses and hoping for a return on its investment. 

$3 million is going to a new Farbest turkey processing plant in Vincennes to buy equipment to stun and kill turkeys.

Kemper Foods in New Albany has received another $3 million for manufacturing equipment and freezers.

Atlas Foundry in Marion got a $300,000 grant to buy a diamond-coated robotic grinder that smooths components for stadium seats.

"I'm a big fan of the grant program," said Atlas president Bill Gartland. "We can have people work on the machine 24 hours a day, and since we got it, we've probably been able to bring close to $2 million in business back from overseas."

Atlas Foundry has grown from 103 workers to 120 workers following the grant, and both Kemper Foods and Farbest are expected to meet or exceed expectations, creating lots of new jobs.

But several lingering question remain: how does new equipment for their companies have anything to do with disaster recovery, and how did companies not impacted by a disaster get disaster recovery money in the first place?

"Wow," Gartland said, laughing. "That would be a tough question. I'm not real sure."

"I don't know how it all works. I just know the funds were there," Kollmeyer explained. "I was very surprised when I found out I got the grant. Very surprised."

"What's the state actually doing?"

"Businesses are not doing anything that's wrong or questionable. They are taking advantage of a situation the state has created," said economist and business analyst Morton Marcus, who spent 30 years as director of the Indiana Business Research Center at Indiana University. 

He says many Hoosiers may lose confidence in state government for giving disaster recovery grants to companies that weren't affected by a disaster.

"It's a very poor example of disaster recovery. We have to question: what's the state actually doing?" Marcus said. "It's legal. What you're looking at is a question of does it make sense."

It does not make sense to Jay Saunders, who still hasn't completed all of his home repairs five years after the flood.

"If that money is allotted for disasters, that's what it needs to be used for. There are people who really needed it. They still do … and that's a lot of money."

Terrell insists OCRA and the state are not doing anything wrong, and he says the state is justified in devoting some of its federal disaster recovery money on economic development projects and job creation.

"We felt that was Congress' intent, so that's what we did," he said. My interpretation was this was kind of like a pre-stimulus type of activity from Congress. It's not recovery from the disaster. Its' economic revitalization."

Open to interpretation

It's not hard to see why the state might make that interpretation.

When Congress allocated near $4 billion in disaster recovery funds to 14 states (including Indiana) and Puerto Rico to recover from hurricanes and floods of 2008, it gave states wide discretion to use the money for all kinds of disaster relief.

Specifically, federal lawmakers earmarked the funds for "necessary expenses related to disaster relief, long-term recovery, and restoration of infrastructure, housing, and economic revitalization in areas affected by hurricanes, floods, and other natural disasters occurring in 2008."

"Congress said this is how the money needs to be spent," Terrell said.

When reminded that Congress did not actually require states to spend disaster recovery money on economic development efforts, Terrell paused and then offered a more personal perspective.

"We felt a small component of that was justified in helping companies basically create jobs," he explained.

By if the disaster recovery money is going to be used for job creation, why not create jobs at companies actually affected by the disaster?

Across Indiana, millions in disaster recovery money went to small businesses and big corporations that had no flood damage at all --- while those hardest hit, didn't get a dime.

"Can't believe it"

Just ask Dan Paris.

He owns two businesses in downtown Franklin – a tire shop and a towing service – and both were wiped out in 2008 when flood water submerged the entire town. He says at that time, every business in Franklin needed economic revitalization.

"We had water four-and-a-half, five feet deep in the whole building," Paris told WTHR, pointing to a line on his chest where the water crested five years earlier.  "Hard to believe it just came up so quickly. It was devastating, that's for sure ... somewhere between a quarter and a half million dollars [in damage]."

Yet Paris didn't get a disaster recovery grant for economic recovery.

"We didn't get anything like that. We jumped through a lot of hoops and didn't get anything. As far as the government giving help, there was no assistance at all," he said.

Companies like Paris' can't apply for a disaster recovery grant on their own. They need a city or county to apply on their behalf. Many of the city and county officials contacted by WTHR said they did not know they could have helped flood-damaged businesses secure a disaster recovery grant from OCRA following the 2008 storms.

"I can't believe it because there was some of our businesses in downtown Franklin that lost their business and walked away from them because they couldn't make it," said Johnson County Emergency Management Director Stephanie Sichting.

Sichting didn't know OCRA had millions of dollars in disaster recovery funds available to help companies retain and add employees. She believes businesses in her county (one of the state's hardest hit by 2008 flooding) could have put that money to good use, and she says those companies should have received preference from the state.

"Just giving [the money] to companies that weren't affected by the storms, I think it's wrong," Sichting said. "If that's how initially they got that money from HUD was for disaster recovery, that's what it needs to get spent on. There's too many companies in this state that could have used that money."

OCRA says it is not the agency's role to find flood-damaged companies for grant money, and Terrell says OCRA did not reach out to those types of businesses. He said OCRA relied on communities and economic development groups to contact the state, seeking money for economic revitalization projects.

"It's the communities that need to approach us, not the other way around," he said.  "It was economic-recovery-from-disaster money. Going back to the spirit of the legislation, we're talking about long-term economic recovery. That's what we did."

Free money for jobs?

Putting people to work in disaster-hit areas certainly sounds good, and most of the 29 companies that got OCRA disaster recovery grants did add jobs.

"I think there have been over 900 jobs created. I think that's a great success story," Terrell pointed out.

But a closer look raises questions.

  • Some of those 900 jobs were planned and announced by grant recipients long before they ever received disaster recovery money from the state.
  • OCRA has closed files on many of the grant recipients, so it is no longer tracking the companies to see if the workers hired are still employed.  (Bloomfield Processing has laid off all of the new workers it was required to hire since OCRA closed its file.)
  • Most of the OCRA grant recipients had already been awarded hundreds of thousands (or even millions) of dollars in state and federal assistance from other programs designed specifically for economic development.
  • Some of the grants were formally announced by companies and the Indiana Economic Development Corporation before mandated public hearings were held to offer communities and taxpayers a chance to review the applications and raise concerns.

"It looks like the state had a bundle of federal money and had to figure out how to get rid of it quickly," Marcus said. "They were looking for projects where they could use that money and most of those were projects already underway.  There is good reason for the money to go to individual private businesses, but it would be nice for those businesses to at least somehow show they were affected by the disaster."

When public hearings did take place, often no one attended. And when they did, there was little or no talk of the projects being funded with dollars that came as a result of disaster recovery.

At a public hearing for the Geesaman Industries grant, city leaders were told OCRA's grant program was equivalent to "free money" with "very little strings attached."

OCRA's director said he was unaware that the project had been portrayed in that manner, even though the meeting minutes are included in the company's grant file stored at OCRA.

"Absolutely not, this is not free money," Terrell said, when 13 Investigates read him notes from the city council's public hearing. "I think it's very unfortunate that it was presented that way. It is the community that's now paying that cost."

But the state says, overall, the disaster recovery grant program has still paid off, and that some grant recipients created more jobs than originally expected.

Dan Paris is not impressed.

His county – one of the hardest-hit in the state during the 2008 flooding – did not any disaster recovery grants and it did not get a single job.

While Paris is still trying to fully recover from the storms, other business owners are enjoying new equipment and facilities – paid for by the state using grant money from a disaster that didn't affect them.

"Yeah, I'm angry," Paris said. "That's just not right because there's a lot of Johnson County companies that were hurt. If the money was for flooding, it should have been used for flood victims. I'm not the only one. This whole town was flooded."