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FEMA funds come with unintended consequences for Douglas Electric Co-op

RURAL Act has been proposed to try and fix the 2017 tax code

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Douglas County Storm

A crew with Jensen's Tree Service walk power lines along Highway 38 south of Elkton clearing trees from the Feb. 24, 2019 storm that left 30,000 homes without power.

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SOUTH COAST — After a February storm plunged parts of the South Coast into the dark, Douglas Electric Cooperative worked night and day to restore power.

Now if DEC accepts Federal Emergency Management Agency relief funds, it may lose its not-for-profit status due to how the 2017 tax code was written.

Power poles and lines lay beneath fallen trees along Highway 38 south of Elkton. A Feb. 24 storm brought heavy, wet snow and wind that downed …

According to a report from DEC, the total cost of restoration is just under an estimated $10 million. DEC is to get up to 75 percent of the storm cost from FEMA.

“The worst storm before that, in our 80-year history, cost $350,000,” said Todd Munsey, member services director for DEC.

The winter storm ripped down powerlines across one of the most economically depressed parts of Douglas County. This left towns such as Reedsport, Elkton and Yoncolla in the dark for weeks on end. As The World covered DEC’s efforts to get the lights back on, the American Red Cross set up a shelter in Elkton to help feed the residents and travelers still stranded there. One Red Cross volunteer told The World that the damage reminded them of what they saw after Hurricane Michael.

In a report from DEC, there was a total of over 1,600 miles of line patrolled and repaired, more than 406 broken poles replaced, more than 449 crossarms replaced, 70 transformers replaced, more than 105 miles of wire on the ground, 300 poles standing with damage, more than 100 trucks utilized and at least 180 people who worked the storm. There were also five canyon crossings and six river crossings repaired.

“The average DEC employee worked 27 straight 17-hour days,” the report read.

“We’re borrowing money and have to pay crews and cover expenses and hopefully have low-interest loans to cover immediate costs,” Munsey said. “We jumped through the hoops with FEMA to give them all the documentation they needed. That process went very well.”

FEMA funds affect status

DEC is hesitating to take any FEMA funds because if it does that would mean giving up its not-for-profit status. Because of how the 2017 tax code is written, an electric cooperative can’t exceed 15 percent of any revenue source other than that of its members.

Friends and families keep entertained with books, games and cards as they wait for dinner at an American Red Cross shelter at Elkton High Scho…

According to the America’s Electric Cooperatives webpage, “The 2017 Tax Cuts and Jobs Act passed by Congress had the unintended consequence of threatening the tax-exempt status of co-ops by treating government grants that co-ops receive as taxable income. This could force a co-op struck by a natural disaster to choose between accepting a FEMA grant to help restore power to the community or rejecting the money in order to keep its tax-exempt status.”

If DEC doesn’t take the FEMA money and instead took the hit to its $15 million budget, it would have no choice but to “lean on the shoulders of some of the members, but to what extent we’re not sure.”

“(This) was not the intent of the law and was an oversight,” Munsey said. “But this affects every electric cooperative from coast to coast. Folks dealing with hurricanes, tornadoes and flooding are dealing with the same thing we are.”

To fix the problem with the 2017 tax code, senators from Ohio and Minnesota introduced the Revitalizing Underdeveloped Rural Areas and Lands Act. If approved by Congress, it would expand FEMA disaster relief as well as provide “broader access to high-speed internet or repairs to the electrical grid.”

According to Munsey, the Act has support from over two-thirds of the House of Representatives and half of the U.S. Senate.

“We’re trying to lean on Senator (Ron) Wyden who has yet to commit,” Munsey said. “We’re looking at an economically depressed county and real people he represents. For me personally, this is as clear as it gets as far as helping the people you serve.”

A worker trims grape vines at the Gillirose Vineyard in Elkton as power lines hang slack behind him. A Feb. 24 storm brought heavy, wet snow a…

The deadline to decide whether or not to take the FEMA money is Friday, Dec. 20.

“This has to be done by the end of the year, that’s why there’s a lot of things in motion to convince Wyden to get this voted on so the president can sign it,” Munsey said. “It’s not just us. It’s everyone from here to the East Coast. It’s a big deal and needs to be fixed.”

Repairs still needed

Though most of the powerlines have since been repaired from the February storm, not all have. Munsey said that the fix has been ongoing as DEC continues to find poles where the damage wasn’t clearly evident earlier.

“They might be cracked at the bottom of the pole and the wires are still holding it up, but it is something that needs to be repaired,” he said.

Over the summer, DEC had a number of scheduled outages to fix lines that weren’t crucial during the storm but still needed attention.

“We’re in good shape now and put in an additional right of way crew to address trees outside of our right of way, contact land owners or the federal government because it might be a situation where it’s just a matter of time before the tree comes down,” he said. “We try to address those. It’s been an ongoing battle.”

The recent storm that blew into the South Coast over the Thanksgiving holiday was expected to cause some havoc, Munsey said, but no issues arose.

Also since the February storm, DEC has looked at where to get fuel in case areas like Reedsport, Elkton or Yoncalla are ever isolated again.

Trees had broken and fallen roughly every 100 feet across Highway 38 after the storm last week.

“We’ve learned that the state has the ability to helicopter in fuel to remote areas, which you don’t find out until you need them,” Munsey said. “Down the road, we discovered options we didn’t know existed which is helpful. Otherwise, our crews will keep doing what they’re doing and get ready for whatever nature throws at us next.”

Reporter Jillian Ward can be reached at 541-269-1222, ext. 235, or by email at Follow her on Twitter: @JE_Wardwriter.


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