Feds stick S.F. with homeless hotel bills
San Francisco may be on the hook for a surprise bill that could reach $190 million in COVID expenses that it had expected the federal government to pay. The potentially massive liability lands as the city’s deficit is projected to reach more than $1 billion in a few years.
In the midst of the pandemic, San Francisco and other cities across California housed thousands of homeless people in empty hotels to enable social distancing and cut down on transmission in crowded shelters and tents. During natural disasters and other emergencies, municipalities pay for unexpected expenses and then turn to FEMA, the Federal Emergency Management Agency, to reimburse the money.
FEMA first said it would reimburse 75% of the costs, then told counties it would actually cover the entire cost of the noncongregate shelter program through July 1, 2022, and 90% afterward, through May 11, 2023. In October, however, FEMA officials sent a letter to the California Office of Emergency Services saying that it would not reimburse many hotel stays of longer than 20 days between June 11, 2021, and May 11, 2023. That’s big money for California and San Francisco — as much as $114 million for San Francisco and more than $300 million for the state as a whole.
During the pandemic, the city spent north of $423 million sheltering more than 5,000 residents in hotels and other “non-congregate” facilities.
On Monday, city officials said FEMA’s new guidelines about what is reimbursable “pose a significant potential risk” to San Francisco’s budget forecast.
“We are profoundly disappointed that FEMA is changing their plans for reimbursement,” Jeff Cretan, a spokesperson for Mayor London Breed, said.
FEMA officials did not respond to a request for comment on Monday.
Supervisor Aaron Peskin, a proponent of the hotel program, said the city was pushing back.
“Hopefully we will work it out,” he said. “It’s not over until FEMA sings and we’re not done.”
The city controller’s office and officials from the state’s Office of Emergency Services have both pushed back on the federal government, saying FEMA is essentially changing rules midstream, years after the fact — and that if cities and counties had known this was the position FEMA was going to take, they might have acted differently as they responded to the pandemic.
San Francisco City Controller Ben Rosenfield said Monday that the city responded to the COVID pandemic consistent with the public health information and FEMA’s guidance that was available at the time.
“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,” he said.
On Jan. 31, California OES Director Nancy Ward sent a 95-page memo to FEMA, urging the agency to rescind its decision.
She noted that the agency had “inconsistently” applied its non-congregate shelter policies across the country and pointed to numerous statements from FEMA and President Joe Biden committing to “fully cover” eligible costs. The memo included letters from cities and counties from across California responding to the change in FEMA policy.
Rosenfield noted that FEMA’s conclusion would amount to a $114 million impact on the city’s coffers, but could balloon to $190 million if FEMA also does not pay $76 million in reimbursement claims the city filed related to stockpiling vacant hotel rooms. Those rooms ensured the city was ready when there was a surge of COVID infections.
In the letter, he also noted that FEMA never communicated its new, 20-day limit, at any time during the declared pandemic — and that its actions amount to an “impermissible retroactive law.”
In total, San Francisco has sought more than $879 million in reimbursements from the federal government for its COVID response, including hotel rooms and other expenses. So far, the federal government has reimbursed the city about $301 million, (including $148 for non-congregate sheltering costs), according to the controller’s office.
Across the bay, Oakland Controller Stephen Walsh said the city had “taken great care” to make sure its COVID actions complied with FEMA directions during the pandemic. The about-face from the feds would leave the city on the hook for at least $1.2 million, he said. In Santa Clara County, the tally was almost $16 million. And in Sonoma County, almost 40% of the reimbursement sought would be affected, at least $32 million.
In San Francisco, Rosenfield said the city has not yet been able to determine how the decision will ultimately affect the city’s financial health in the coming budget cycles.
“We will update revenue projections when there is more information available about the actual or likely outcome of the discussion,” he said.