DALLAS — The central Texas town of West and the school district that serves it do not qualify for a 75% federal reimbursement for infrastructure damaged or destroyed by the April 17 fertilizer plant explosion that killed 15.
A letter from the Federal Emergency Management Agency made public Wednesday by Gov. Rick Perry said the damage at West was "not of the severity and magnitude that warrants a major disaster declaration."
Insured property losses total more than $100 million from the blast, but federal regulations require at least $34 million in uninsured losses before a major disaster can be declared. If the designation had been applied to West, the city and school district would have been reimbursed by FEMA for 75% of the replacement costs.
The state can appeal the decision by FEMA Director Craig Fugate within 30 days.
In the letter to Perry, Fugate said the reconstruction is within the capabilities of state and local governments.
Perry said he was disappointed in FEMA's decision, and called on President Obama to come to the city's aid.
"The day of the West memorial service, President Obama stood in front of a grieving community and told them they would not be forgotten," Perry said. "We anticipate the president will hold true to his word and help us work with FEMA to ensure much-needed assistance reaches the community of West."
Moody's Investors Service last week put the city of West and West Independent School District under review for potential credit downgrades due to the destruction.
West has $385,000 of general obligation debt rated Baa1 by Moody's and $2.5 million of unrated outstanding GO debt.
West Independent School District's GO debt has underlying ratings of A1 from Moody's and A from Standard & Poor's, but the credit is enhanced to triple-A with coverage from the state's Permanent School Fund. The district has $12 million of outstanding GO debt.
The denial of a major disaster proclamation means the cost of rebuilding the damaged infrastructure will be borne by the local governments, said Adebola Kushimo, an analyst in Moody's public finance office at Dallas.
"Right now, this essentially shifts the cost of rebuilding to the school district and the city," Kushimo said. "It is definitely credit negative."
Kushimo said last week that the decision to review West "reflects potential sizeable losses in property taxes and sales taxes, which provide over 70% of operating revenue and which could significantly strain financial operations."
More than a third of the city's budget comes from sales tax revenues that are expected to decline over the near term, Kushimo said. Property damages could result in a lower property tax base as well.
The blast leveled one middle school and the school district's administrative offices, and damaged two other facilities. Only one of the four campuses operated by the district was untouched.
The explosion at West Fertilizer Co. also destroyed city roads and utility lines within a five-block radius of the plant.
West and the school district were seeking up to $57 million in FEMA reimbursements.
Rebuilding and repairing damaged schools will cost up to $96 million, officials at West Independent School District said. The district was insured for $59 million.
District officials said funds for the August debt service payment are in the bank, and they expect to make the debt service payment in full and on time.
Repairing damaged streets and utility lines in the blast area will cost $17 million, West Mayor Tommy Muska said.
FEMA is reimbursing the state and local governments for their initial responses to the disaster and 75% of the costs of debris removal. More than $7 million in aid and low-interest loans for residents have been approved by FEMA and the Small Business Administration.
