Village of Ocean Beach taxpayers could owe $750,000 in superstorm Sandy disaster recovery funds that authorities want back because the Federal Emergency Management Agency says a sewer plant and two buildings in the barrier island community were underinsured.
The village on Fire Island is in a special flood hazard area requiring flood insurance, which Ocean Beach had but not to maximum levels available from agencies underwritten by FEMA.
If more insurance is available but not taken, it is considered a duplication, which is prohibited under federal rules.
The underinsurance error was caught during a state insurance review and Ocean Beach was notified in April.
FEMA officials said insurance is routinely discussed in initial meetings after disasters, rules are cited in handouts and work sheets about each project include clauses warning of a mandatory reduction if flood insurance coverage is inadequate.
"All public assistance applicants are informed at the beginning of this process that there are floodplain insurance requirements," FEMA spokesman Donald Caetano said. "In the case of Ocean Beach, several deductions [in what the agency will award] were taken to comply with this requirement."
But Village Clerk Administrator Steven Brautigam said he was never notified.
"If they told me two-and-a-half years ago, I would have dealt with it," he said. "Now, it's an emergency. There are several other options but all of them including raising taxes -- how far and how much is not clear."
For this tiny village of nearly 600 parcels, each $37,000 added to the budget amounts to an increase of 1 percent, he said.
"This is a major problem for us," Brautigam said.
On commercial properties in special flood hazard areas, the maximum amount of flood insurance allowed per building is $500,000 for damage. For residential units, the amount is $250,000 per building, said Bill McDonnell, deputy director for mitigation for FEMA's Region II, which includes New York.
On the sewer system and a village building that housed a community group, the flood insurance was $200,000 apiece. On a rental property used by the village it was $100,000, Brautigam said. In total, the amount of federal flood insurance available on those three units is $1.25 million. The village had $500,000 total insurance on all three buildings.
Dave Andrews, deputy director for emergency management services for the disaster recovery consulting organization Adjusters International, said special flood hazard areas are required to carry insurance and reductions can take place if FEMA does not believe the amount is adequate.
"It is more complicated and there are additional regulations that have to be met to receive funding through FEMA," he said.
The village's insurance policies predate Brautigam, who has been with Ocean Beach for five years. He could not say how long ago they were written.
"They were established years before . . . and never changed," he said.
The Village of Island Park got a similar deduction after Sandy because the municipality did not have flood insurance on its village hall, which was demolished after the storm because of damage.
It's unclear how many deductions FEMA makes because of uninsured or underinsured properties.
The agency does not track that specifically, said Craig Ketzak, a senior emergency management program specialist in FEMA's recovery division.
But insurance is generally a common topic of discussion. "They're hearing it multiple times," Ketzak said of disaster money applicants. "We start looking at the time of preliminary damage estimates."
Brautigam hopes to negotiate with FEMA and has asked for help from Rep. Lee Zeldin (R-Shirley) and Sen. Chuck Schumer (D-N.Y.). Both have asked for meetings with FEMA.
"The village was guaranteed money that they planned their recovery around," Zeldin spokeswoman Jennifer DiSiena said in a statement. "Now, they are being told they owe back money that has already been budgeted for. . . . At first glance, it does not appear that FEMA treated the Village of Ocean Beach fairly."
Schumer is also pushing for a resolution. "We have asked FEMA to meet with Ocean Beach officials personally, while advocating for the Village to receive every penny in FEMA aid they are entitled to collect," he said in a statement.