The federal government appears to be trying to get out of a large chunk of its promised reimbursements to California cities for shelter-in-place hotels that were rented out to house the unhoused in the first two years of the pandemic. And, frankly, we would have more expected this from the Trump Administration.
Apparently, the Federal Emergency Management Agency (FEMA) has been playing fast and loose with the rule-making around how it will reimburse cities for hotel rooms that they rented in the early pandemic — rooms that were rented, in part, because FEMA pledged to reimburse most or all of the costs.
San Francisco spent a lot of money on its pandemic response, which was not limited to this hotel program — which alone cost $423 million. So far the city has sought $879 million in reimbursements from the federal government, only about a third of which has been received to date. As the Chronicle reports, FEMA is now backtracking on some of its promises, and California is vehemently pushing back, but it remains to be seen whether this will amount to another huge expense in SF's already strained budget.
The new limitation FEMA put on reimbursements, announced in October, was that the agency would only reimburse the cost of most hotel stays up to 20 days. This is a major change from what the agency had said earlier, which was that it would reimburse the full cost of the hotels from the beginning of the pandemic through July 1, 2022, and then 90% of the cost through May 11, 2023.
At the peak of the program, the city was leasing out 2,288 rooms across 25 hotels, providing housing for around 5,000 individuals. Given how many homeless people were given extended stays in these rooms, the city could be on the hook for $114 million in unexpected, unreimbursable expenses for the program, according to City Controller Ben Rosenfield.
That figure could rise to $190 million, Rosenfield says, if FEMA also denies reimbursements for empty hotel rooms that the city stockpiled in preparation for possible COVID surges during that time — which amounted to another $76 million.
Across other California cities, they could be out $300 million in reimbursements.
"We intend to explore every option available to appeal any claims denied by FEMA Region 9 that we believe to be eligible for reimbursement, based on the guidance in effect at the time," Rosenfield tells the Chronicle.
California's Office of Emergency Services Director Nancy Ward penned a 95-page memo to FEMA last month aggressively pushing back on FEMA's rule-change, saying that the agency had "inconsistently" applied the rules across the country when it came to so-called non-congregate shelter programs. The memo included letters from city officials, including Rosenfield, who called FEMA's change an "impermissible retroactive law."
A spokesperson for Mayor London Breed told the Chronicle that the mayor was "profoundly disappointed" in FEMA's decision. And Supervisor Aaron Peskin said, "It’s not over until FEMA sings and we’re not done."
All of this would be terrible news for SF's budget, which is already facing an $800 million deficit over the next two years.
And it's not clear how much, if any, of the $423 million price tag for the hotel shelter program is going toward the repairs the hotel owners subsequently sued the city over. As we previously reported, multiple hotel owners sued for damages to their rooms during the shelter program, with the Hotel Union Square ending up with a settlement of $5.3 million, and the Tilden Hotel receiving $2.9 million.