Frustration, disbelief, a call for resignation: Lawmakers grill hurricane recovery official

By: - December 16, 2022 6:00 am

(Screenshot from committee livestream)

Laura Hogshead did not lose her job as the head of ReBuild NC on Wednesday, as many hurricane survivors had hoped.

Instead, several state lawmakers on a government oversight committee used the hearing as another opportunity to publicly berate Hogshead for the many deficiencies of the hurricane recovery program. 

An abysmal number of home completions and a lack of accountability. A pattern of deception and a culture of secrecy. Over the past seven months, a Policy Watch investigation has found these factors continue to hamper ReBuild NC, formally known as the NC Office of Recovery and Resiliency, at the expense of some of North Carolina’s most vulnerable people.

HUD allocated $800 million to ReBuild NC for disaster recovery related to Hurricane Matthew, which devastated eastern North Carolina in October 2016, and Florence, which wrecked many of the same areas in September 2018. 

Nonetheless, for the past three years under Hogshead’s leadership, ReBuild NC has failed to return hundreds of families, equivalent to thousands of people, to their homes.

“I’m here this morning to show you the progress, understanding that it’s not enough,” Hogshead told lawmakers this week, under oath. “It’s not enough for anybody who’s sitting behind me” – the dozen or so hurricane survivors in attendance. “It’s not enough for anyone in eastern North Carolina.”

At least 115 families have been displaced for one to three years after seeking help from the state to rebuild after Hurricanes Matthew and Florence, according to figures cited by lawmakers. Still more people have been out of their homes for shorter periods of time. ReBuild NC has spent more than $15 million to house the survivors, primarily in one- and two-star motels, and to pay for storage of their belongings.

Despite the chronic construction delays, ReBuild NC has never financially penalized a contractor for poor performance, even though its own policies empower it to do so. Quite the opposite: The program allowed one contractor, Rescue Construction Solutions, to bid on several projects – worth a total of $80 million – despite being more than a year behind on some homes, Policy Watch previously reported. Although Rescue was the lowest bidder on the projects, ReBuild NC had the authority to award them to other companies, but did not.

“Something doesn’t add up,” Sen. Jim Perry (R-Lenoir, Wayne) said at the hearing. “Something smells.”

During the first oversight hearing in September, Hogshead and Ivan Duncan, then the chief program delivery officer, assured lawmakers they would get at least 54 families back home by the end of the year. Those hurricane survivors were scheduled to move into mobile homes, which have among the quickest turnaround times.

(Duncan abruptly resigned last month; his last day was Nov. 30.)

Hogshead told lawmakers she didn’t know how many of those 54 families had moved back home, but that a “number of them have.”

It’s certainly not all 54. Only 18 families who qualify for all housing types, including traditional “stick-built” homes and rehabs, have moved back home since September. Eleven are scheduled to return through the end of the month, Hogshead said.

“That’s terrible,” Perry said. “It’s hard to believe.” 

Hogshead attributed the delays to county permitting and other factors beyond ReBuild NC’s control.

While the updates were grim, more telling was how Hogshead elided the data, what Perry called “shining the numbers,” to make ReBuild NC appear more productive than it has been. In a slide presentation to lawmakers, Hogshead noted that since September, 100 homes had entered in Step 8, which indicates they are complete.

That’s not entirely true. Of the 100, only 76 have actually been built, Hogshead acknowledged, when questioned by lawmakers. The remaining 24 are homeowners who accepted ReBuild NC’s offer to reimburse them up to $5,000 for future repairs. The homeowners would ostensibly hire their own contractors with the money.

Some hurricane survivors who have returned home have reported shoddy workmanship on their houses, even for repairs covered by warranties.

Sen. Kirk DeViere (D-Cumberland), said he visited homes in his district “that would not pass an inspection if somebody was going to get a loan.” That includes improperly installed windows and wall sockets, as well as uneven floors.

“My concern is that some people feel like they don’t have any other options,” he went on. “They don’t have a voice. They’re stuck in a hotel … They’ve got to take the home, and it’s in whatever form is given to them.”

Even the total number of families listed in the final step of the program – 889 – is misleading. ReBuild NC is taking credit for 201 homes completed by Robeson County’s local program, which was funded by federal dollars, Policy Watch previously reported.

Subtract Robeson County, and only 688 families have proceeded to Step 8. Factor in the reimbursements, and only 664 families have returned home.

Hogshead noted that since September the average number of completed homes per month has increased by 242%, compared with the first eight months of the year. But the bar was low: From January through August, ReBuild NC had averaged just five completed homes per month. That number is now 17, still far off pace to finish the estimated 3,600 homes in the queue by the HUD deadlines of 2025 and 2026.

Hogshead said that with more contractors – 12, up from five – she expects the rate to significantly increase.

But more contractors doesn’t necessarily translate to more work. Sen. Brent Jackson (R-Duplin, Johnston, Sampson), said that oversight committee staff performed random site visits to more than 60 homes in roughly a dozen counties.

“Do you know how many times they encountered contractors actively working on the home?” Jackson asked Hogshead.

“I don’t know off the top of my head,” Hogshead replied.

“Once,” Jackson said.

“By any stretch of the imagination, this is unacceptable,” he went on. “And I’m infuriated if you can’t tell. … There has got to be some improvement made in this program immediately. Or I’ll use what power I have to redirect the program to someone that can get the job done.”

Rescue Construction Solutions: despite poor performance, a ReBuild NC favorite

State lawmakers didn’t publicly name Rescue Construction Solutions as the problematic contractor, but there were clues: The only contractor who won the bid to build modular homes, despite a spotty performance history. The contractor with houses sitting untouched or unfinished for months or years. 

And after the hearing, lawmakers confirmed that they are scrutinizing the company.

As Policy Watch has reported, in 2018 on its prequalification form to the program — then operated by the Department of Commerce and NC Emergency Management — Rescue President Sheila Brewington omitted that the company had been a defendant in civil litigation. She answered the question “no,” despite the company having been recently sued in Wake County court.

Despite that inauspicious beginning, from 2019 through 2021, Rescue won multiple contracts, adding up to at least 725 homes – rehabs, reconstructions, and modular homes – worth $80 million, according to state records from July.

Policy Watch requested updated numbers on Tuesday, but had not received them by deadline Thursday evening.

In August 2021, Rescue won the modular contract as the lowest bidder; seven months later it requested and received an 18% increase to do the work, worth an additional $7 million, according to lawmakers. Had that increase been part of Rescue’s bid, it’s possible they might not have won the modular project.

“The contractor was able to show to us that she was not able to get the units at the dollar per square foot that we had signed for,” Hogshead told lawmakers. “So we went through procurement and legal and gave an increase to get the homes ordered.”

This was not an isolated incident. State records show that Duncan, with Hogshead’s approval, retroactively increased the company’s bid prices on 85 other projects. Meanwhile, other contractors said, Duncan denied their requests for increases to cover costs of materials. Three contractors, Hogshead told Policy Watch earlier this year, did eventually get increases.

As of August 2022, when ReBuild extended Rescue’s contract for another year, the company had built just six of the more than 520 modulars. Now that number is 11.

Hogshead attributed the delay to manufacturing and permitting. 

But that doesn’t fully explain the interminable delays on the renovation and reconstruction projects. State records show multiple homes in Rescue’s portfolio have languished for years. State and county demolition permits have been granted on a half dozen homes, records show, some dating back to March. But Rescue has not torn down those houses. Work is at a standstill.

Lawmakers asked Hogshead why she had not terminated Rescue’s contract. She replied that the contractor “had completed 179 homes.” But that’s less than a quarter of their awarded projects.

A former Rescue employee who asked not to be named because they still work in the construction industry told Policy Watch that the company was “absolutely not qualified to do modular.”

“We had bid packages we couldn’t keep up with,” the former employee said. “But to stay in the program we had to bid.”

Like most contractors, Rescue relies on subcontractors to do some of the work. (Rescue is also a small company. It employed 22 people in 2020, according to federal PPP loan documents. Its $284,000 PPP loan was forgiven in September 2021.)

Yet ReBuild NC has also failed to require Rescue to provide certain documentation between the company and some of its subcontractors that build the modulars.

Hogshead testified that even though she personally asked Rescue for the paperwork, per the committee’s request, the company has refused to provide it. She told lawmakers that she does not have the right to demand it. 

However, state law does require contractors to provide that information to state auditors, HUD, and investigators, such as the oversight committee.

“So basically, everything you know about the numbers is based simply on your trust that you’re putting in the vendor and their estimate on when these things are going to be done,” Britt said. “And no actual documentation provided by the vendor to show when it will be done.”

Brewington, the Rescue president, responded to Policy Watch questions about the documents through the company’s crisis communications firm:

“Rescue Construction Solutions has complied with all legally required disclosures. In addition, we have attempted to cooperate with the State to share information that will assist in the improvement and success of the program. For example, Sheila Brewington met for over an hour with Derrick Welch, the Senate Majority Staff Director for Governmental Operations, and Blake Belch, the Gov Ops Evaluation for the Joint Legislative Commission on Governmental Operations, just a few weeks ago to answer their questions regarding ReBuild NC and Rescue’s role in the program.”

During the same period in which Rescue was winning millions of dollars in contracts – and leaving many vulnerable hurricane survivors displaced because it had failed to complete work on their houses – Brewington and the company’s Senior Vice President Christopher Edwards made a significant investment.

In March 2021, they purchased a $718,000 home on the shores of Hyco Lake, according to Person County property records. The 1,754-square-foot log cabin sits on nearly two-and-a-half acres, accessible only by water or a long gravel driveway. It includes a boathouse. At 1,326 square feet, it is bigger than many motel rooms.

Through the crisis communications firm, Brewington said the joint purchase with Edwards was “unrelated to to Rescue Construction Solutions’ efforts to assist the State and homeowners in the NC Rebuild program. To indicate otherwise is irresponsible and, potentially, slanderous.”

No financial penalties, no accountability

Despite the extensive construction delays, ReBuild NC has never assessed Rescue, or any contractor, a financial penalty for failing to meet a deadline. Yet the program’s contractor manual clearly states that companies can be fined $250 per day in “liquidated damages” for failure to adhere to construction deadlines.

Those damages would be garnished from the final payment for the project.

In September Hogshead acknowledged the program was reluctant to fine contractors for fear of “scaring them off.” She reiterated that point this week, saying ReBuild NC had to confer with its legal staff, disaster recovery programs in other states, and HUD “so we won’t spend all of our time in litigation, so that we can do this cleanly.”

It’s unclear why the penalty provision was included in the contractor manual if the legal aspects have not been fully vetted.

Hogshead said she recently put contractors on notice that if they didn’t comply with deadlines they would be subject to financial penalties starting Feb. 1.

“When were they put on notice?” Sen. Steve Jarvis (R-Davidson, Montgomery) asked.

“This week, just before this meeting,” Hogshead replied.

Emails shared with Policy Watch show that Hogshead had notified Trace Allard, interim chief program delivery officer, and two other top-level ReBuild NC staff Tuesday at 9:44 p.m. of the intent to assess penalties. In turn, Allred emailed all contractors at 10:50 p.m. less than 12 hours before the oversight hearing started. 

(Policy Watch redacted the contractors’ emails addresses)

In lieu of financial penalties, ReBuild NC docks points from contractors’ respective scorecards. Falling below a certain point threshold would disqualify, at least temporarily, a contractor from bidding. “It’s one of the other ways that we hold them accountable,” Hogshead said.

However, those point thresholds and criteria varied, based on the whims of Ivan Duncan, Policy Watch reported earlier this year.

And ReBuild NC hasn’t even used scorecards since May, two contractors who would have been subject to scoring told Policy Watch. That means there has been virtually no accountability for most of the year.

During a WRAL documentary that aired this week, Sen. Danny Britt, said he would call for Hogshead to quit. At the hearing, he did just that.

“You should resign,” Britt, a Robeson County Republican, told Hogshead. “If you were in the private sector, you would be fired.”

The legislature can’t fire Hogshead. That authority lies solely with Gov. Roy Cooper and Eddie Buffaloe, secretary of the Department of Public Safety.

After the hearing, several homeowners said they were disappointed that lawmakers didn’t act more substantively.

“They’re stringing us along,” said Willie Williams, who with his wife, Geraldine, have been displaced from their home in Ayden since 2020. They’ve been living in a one-room motel ever since.

Their contractor is Rescue Construction Solutions. After two years, the Williams’ home is scheduled to be demolished today.

The oversight committee will meet no later than March 15, when lawmakers are expected to address ReBuild NC’s legislative requests.

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Lisa Sorg
Lisa Sorg

Assistant Editor and Environmental Reporter Lisa Sorg helps manage newsroom operations while covering the environment, climate change, agriculture and energy.