No FEMA Money for Storm Victims

HOUSTON (CN) - Owners of some hurricane-damaged homes in Galveston are not entitled to FEMA buyouts, as they have no constitutionally protected right to the money, a federal judge ruled.

After Hurricane Ike smashed Galveston on Sept. 13, 2008 President George W. Bush declared Galveston County a disaster area, automatically qualifying it for assistance under FEMA's Hazard Mitigation Grant Program, or HMGP.

The program allows grantees to acquire flood-damaged properties with the funds.

The Galveston City Council in January 2009 authorized the city manager to apply for federal funds to buy damaged beachfront homes.

Owners of six homes in the Sands of Kahala Beach, a subdivision on the west end of Galveston island, applied for assistance, and after inspections of their homes, were found to qualify for acquisition under the FEMA program.

The city then applied to the Texas Department of Public Safety, Texas Department of Emergency Management for the FEMA funds, as the Texas agencies served as administrators for the funding.

FEMA awarded Galveston a $15.3 million grant to acquire and demolish hurricane-damaged properties in late July 2009.

Under the grant, the city was to acquire 62 homes, and as of Aug. 31, 2011 had acquired all but the six homes of owners in the Kahala Beach subdivision.

The city executed contracts to buy out the Kahala Beach owners with the FEMA funds in January 2010 for prices ranging from $789,000 to $868,000.

But in August 2009, before the execution of these contracts, other owners in the subdivision, along with Texas Department of Public Safety officials, began campaigning to prevent the owners from participating, alleging that their homes did not qualify and threatening the city with litigation.

Despite its approval of the owners' applications, the city then demanded they obtain a release from their homeowners' association confirming that the city would not be liable for any HOA fees.

The homeowners claim the city's release demand was simply to prevent them from receiving the buyouts because the city would have immunity from the HOA fees anyway, and no other participant had been required to obtain such a release.

The owners' buyout hopes were dashed when Greg Pekar, an official with the Texas Department of Public Safety, notified Galveston that he had received a tip from a federal agent concerning allegations by other homeowners in Kahala Beach that the applying homeowners had used fraudulent estimates to qualify for the FEMA buyouts.

The city then refused to close on the deals to acquire the homes.

The Texas DPS later released a report on its investigation into the allegations that found no fraudulent activity by any of the accused homeowners, and stated that DPS would need to conduct new damage determination reviews before the owners were allowed to participate in the buyout program.

The owners, however, were not allowed to submit new damage estimates or prove their entitlement to the funds. Their rights to participate in the process were thwarted for three years by the city, other owners in the subdivision and Texas DPS officials, who have yet to determine whether they qualify for the buy outs.

The owners sued Galveston and several Texas Department of Safety officials in 2011, alleging due process violations, seeking injunctive relief to allow them to demonstrate their entitlement to the buyout money.

But U.S. District Judge Melinda Harmon on Tuesday granted the Texas DPS officials' motion to dismiss.

Harmon concluded that federal law and 5th Circuit precedent does not entitle the homeowners to the FEMA buyouts, or to participate in the DPS review process.

"Nothing in the regulations dictates that qualified property owners are entitled to participate in the program or limits the State's discretion in determining a property owner's qualifications for the program or reviewing those qualifications at any time in the process. In sum, Plaintiffs have no entitlement to HMGP funds or a property right to such funds," Harmon wrote.

The owners sued their HOA's former attorney in Harris County Court in January, claiming he sabotaged their efforts to get the buyouts.

Follow @cam_langford

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit