- Associated Press - Tuesday, March 25, 2014

DES MOINES, Iowa (AP) - The Des Moines Water Works board on Tuesday approved a settlement offer of more than $2 million from the federal government to resolve a lawsuit over flood repair funding approved by the Federal Emergency Management Agency and later withdrawn.

Des Moines Water Works, which is run independently but owned by ratepayers and answerable to a mayor-appointed board, provides drinking water to about 500,000 people. It is one of many local organizations and government agencies across the United States that have dealt with FEMA’s practice of approving emergency funding only to later - sometimes years later - ask for the money back in what the agency terms de-obligation of funds.

FEMA in 2010 authorized giving Water Works nearly $7.6 million to repair erosion along the Des Moines and Raccoon rivers. The repairs were designed to rebuild and strengthen the riverbanks to protect six wells used to collect drinking water from underground aquifers. The city had spent nearly $2 million by the time FEMA rescinded its funding in 2011. The agency concluded after a review of the project that improvements on natural riverbanks do not meet funding requirements.

The Water Works board’s appeals to FEMA in 2011 and 2012 were denied.

The board filed a lawsuit in U.S. District Court in Des Moines in December 2012, asking the court to reverse FEMA’s action. The utility contends in its lawsuit that the decision to de-obligate funds previously approved “is not consistent with FEMA’s governing statutes, regulations and policies.” It also says FEMA has no authority to retroactively rescind funding once work authorized by the agency has been completed.

The settlement will resolve the case by returning to the agency the money it had spent on the project, said Des Moines Water Works CEO Bill Stowe.

“We’re pleased by the federal government’s offer of a compromise,” Stowe said. “It is in the best interest of our ratepayers and our utility to move us forward, but most of all its important in our view that the federal government recognizes its role in providing federal emergency disaster relief money to protect water utilities in disasters like the 2008 flood.”

Flooding in 2008 resulted in damage estimated at nearly $10 billion in Iowa, making it the state’s worst disaster on record. Federal disaster declarations were issued by FEMA for 80 of Iowa’s 99 counties.

A spokesman for the U.S. attorney’s office, which represents FEMA in the case, said he couldn’t comment until something is filed with the court. A FEMA spokeswoman in Kansas City also said she couldn’t comment because the case remains in litigation until the court approves the settlement.