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City of Portland v. Maine Department of Health And Human Services

Superior Court of Maine, Cumberland

August 3, 2016



          Thomas D. Warren Justice.

         Before the court is the City of Portland's 80C appeal from a decision by defendant Maine Department of Health and Human Services (DHHS) to withhold a total of $1, 297, 120.50 in General Assistance reimbursement from the City for the period covering mid-June 2014 through February 2015. Counsel appeared at a hearing on August 1, 2016 because the court had some questions with respect to the record and the relief that the City was requesting.

         Prior Proceedings

         On June 11, 2015 the City filed a Rule 80C petition for review of the DHHS action, combined with a claim for declaratory and injunctive relief and an independent claim seeking relief on a theory of promissory estoppel. DHHS moved to dismiss the claim for declaratory and injunctive claim and the promissory estoppel claim, alleging that those claims were duplicative of relief available under Rule 80C.

         Initially the Rule 80C appeal was complicated by a dispute between the parties as to whether DHHS was required to provide the City with an administrative hearing before a fair hearing officer under 22 M.R.S. § 4323(4). The City initially had sought a stay of the DHHS action pending such a hearing.

         At a scheduling conference on July 21, 2015 the parties agreed that the court could proceed to hear the Rule 80C appeal. While continuing to pursue its argument that it is entitled to an administrative hearing, the City withdrew its request for a stay. DHHS agreed to waive any argument that the City had not exhausted its administrative remedies. The parties also agreed to file the record and their Rule 80C briefs while the motion to dismiss remained pending. See order dated July 22, 2015.

         After the briefs were filed, the parties informed the court that there were other pending administrative proceedings that might affect the case. By agreement of the parties, the court stayed any decision until March 31, 2016. After that time it was understood that the court would proceed to decide the appeal. See order dated February 12, 2016.

         General Assistance Program

         General Assistance is governed by Chapter 1161 of Title 22. It is designed to offer immediate aid to persons who are unable to provide basic necessities such as food, clothing, shelter, and medical care essential to maintain themselves and their families. See 22 M.R.S. §§ 4301(1), (3), (5), (10). Each municipality is required to operate a general assistance program which shall be administered in accordance with a municipal ordinance. 22 M.R.S. § 4305(1). The governing statute requires that eligibility must be based on need. E.g., 22 M.R.S. § 4308(1). With i minor exceptions, [1] the responsibility for setting all other eligibility standards is placed on municipalities. 22 M.R.S. § 4305(3):

Municipalities may establish standards of eligibility, in addition to need, as provided in this chapter. Each ordinance shall establish standards which shall:
(A) Govern the determination of eligibility of persons applying for relief....

         Each municipal ordinance must also provide that relief shall be furnished or denied to all eligible applicants within 24 hours of their application. 22 M.R.S. § 4305(3)(C).

         Although General Assistance payments are made by municipalities, the statute provides that municipalities shall receive reimbursement by DHHS for a substantial portion of those payments. For the time periods at issue on this appeal, the statute provided that DHHS shall reimburse a municipality for 50% of its direct General Assistance costs up to .0003 of the municipality's most recent state valuation and for 90% of direct General Assistance costs in excess of .0003 of the most recent state valuation when the Department finds that the municipality has been "in compliance with all requirements of this chapter." 22 M.R.S. §§ 4311(1), (1-B).[2]

         22 M.R.S. § 4323(1) provides that DHHS shall review the administration of general assistance in each municipality. If DHHS finds "any violation of this chapter after review, " it shall notify the municipality that it has 30 days to file a plan to correct the violation. 22 M.R.S. § 4323(2). Any municipality which fails to file an acceptable plan or which remains "in violation of this chapter" 60 days after filing its plan is subject to civil penalties and DHHS shall in addition "withhold reimbursement to any municipality which is in violation of this chapter" until it achieves compliance. Id.

         Regulations governing DHHS review, the imposition of penalties, and DHHS reimbursement are contained in the DHHS General Assistance Policy Manual at 10-144 C.M.R. ch. 323, sections X, XII, and XIII respectively.

         Record Evidence

         The dispute in this case involves the City's right to reimbursement under the General Assistance Program for individuals at the City's Homeless Shelter.

         The record reflects that there were discussions between DHHS and the City since at least 1996 in which the City took the position based on 22 M.R.S § 4304(3) that homeless persons staying at the City's homeless shelter were presumed to be eligible for General Assistance. The City sought reimbursement accordingly. Although DHHS expressed disagreement with that position on at least one occasion, R. Tab 1, DHHS acknowledges that it did not take any action to withhold reimbursement or to demand that the City change its approach from at least 1996 until early 2014. Brief of Respondents at 2. See R Tab 2-7 (letters from DHHS stating that Portland is in compliance with the General Assistance Statute and DHHS policy from March 2008 through May 2013). From 1996 onward DHHS expressly agreed that the costs of running the shelter, including rent, electricity, heat, and personnel costs, would be treated as General Assistance operating costs rather than as administrative costs. R. Tab l.[3] Finally, from 1996 onward DHHS allowed Portland to use an abbreviated eligibility form for shelter residents. Id.

         The record indicates that the first time these understandings changed was when DHHS issued preliminary audit findings relating to the month of June 2013. The preliminary audit findings are contained in the record as part of R. Tab 8, along with a response from the City.

         In the audit the examiner reviewed 90 specific cases and found that each met the standards in the DHHS policy manual, 10-144 C.M.R. ch. 323, section X. However, the preliminary audit findings identified what the DHHS Field Examiner termed four "improper eligibility and reimbursement practices" with respect to the Oxford Street Shelter. First, the examiner stated Portland was not obtaining interim reimbursement assistance forms from persons staying at the shelter.[4] The City's response disputed that such forms were not being collected. R. Tab 8 at 2.

         Secondly, the examiner stated that eligibility was not being determined on at least a monthly basis as required by 22 M.R.S. § 4309 and that the City was not using the appropriate shelter eligibility form. The City responded that the procedures it had been using were procedures that had previously been approved by DHHS. R. Tab 8 at 3.

         Third, the examiner stated stated that presumptive eligibility under 22 M.R.S. § 4304(3) should only apply for one night and that after one night eligibility should be individually determined.

         Finally, the examiner stated that the City was improperly seeking reimbursement based on the operating costs of running the shelters.

         On both of the latter issues, the City responded that it disagreed that the statute allowed presumptive eligibility for only one night and stated that DHHS had audited its program in prior years and had previously found the City's presumptive eligibility practices to be in compliance with chapter 1161. R. Tab 8 at 3-5. The City also pointed out that DHHS had expressly approved reimbursement for the operating cost of running the shelters. R. Tab 8 at 4, citing R. Tab 1.

         DHHS drafted a letter to the City that is contained in the record as R. Tab 9. The draft, dated April 24, 2014, stated that DHHS had found the City out of compliance with respect to the second, third, and fourth issues raised by the field examiner and set forth steps that were necessary to bring the City back into compliance. The letter noted that 22 M.R.S. § 4323 required the City to submit a plan of correction and that if it failed to do so, § 4323 would allow the Department "to withhold reimbursement until the plan is received." The draft letter also advised the City that if it disagreed, it could seek a fair hearing under § 4323.

         DHHS acknowledges, however, that the draft letter was never sent and that DHHS did not resort to its remedies under § 4323 or otherwise seek to withhold reimbursement at that time. Respondent's Brief at 2-3.

         In January 2015 DHHS conducted another audit of Portland's General Assistance program. Although the record reflects that the preliminary audit findings were transmitted to the City on or about February 20, 2015, see R. Tab 11 at 1, the preliminary audit findings are not contained in the record. However, counsel for the parties confirmed at the August 1, 2016 hearing that the preliminary audit findings tracked the final audit findings, which are dated March 24, 2015 and are found in the record at R. Tab 12.

         In the final audit findings DHHS stated that it found that the City was in violation of General Assistance statutory and regulatory requirements in five respects in connection with the City's Oxford Street Shelter and Family Shelter: (1) eligibility was not being determined on at least a monthly basis; (2) presumptive eligibility was being applied for more than an initial night at the shelter; (3) the City was not entitled to reimbursement for the operating costs of the shelter; (4) the City was not requiring shelter residents to utilize their existing income or resources as required by 22 M.R.S. § 4317; and (5) the City was improperly submitting reimbursement for non-citizens in violation of federal law. R. Tab 12 at 6-11.

         Items (1) through (3) essentially reiterated the points made - but not followed up - during the prior year's audit. Item (4) was new and was based on the Department's finding that some of the individuals staying at the shelter were ineligible because they had assets in savings or checking accounts. The audit stated that of the 30 residents who had stayed the most nights, at least 13 had more than $20, 000 in savings or checking accounts. According to the audit, one of those was reported to have had $92, 424 in his accounts and another had been reported as having as much as $ 161, 351 in liquid assets. The audit also noted that some City employees serve as representative payees for individuals receiving SSI[5] and that at least 60 of those individuals stayed at least one night at the Oxford Street Shelter in 2014. According to the audit, many of those had bank account balances amounting to as much as $50, 000 as of January 2015. R. Tab 12 at 10-11.

         Item (4) of the audit findings is based on documents bearing the indication that they were faxed on January 22, 2015 from the ASPIRE program. The faxed documents are included in the record at R. Tab 30. Certain of those documents contain typewritten lists of certain residents at the Oxford Street Shelter with handwritten notations of account balances belonging (or allegedly belonging) to those residents. The March 24, 2015 final audit references some of those balances at R. Tab 12 at 10-11. As discussed below, however, the record does not establish the source of the handwritten account balances even if it is assumed that the typewritten lists originated with the City.

         The reference in item (4) to the 30 residents who had stayed the most nights is based on a list dated November 19, 2013 found at the fifth page of R. Tab 30.[6] Dollar amounts have been penciled in next to 13 of the individuals. Of the 13 individuals for whom dollar amounts are listed, three show amounts in excess of $50, 000;[7] the remaining 10 individuals show amounts from $ 19, 368 to $ 48, 696. There is nothing on the November 19, 2013 document indicating whether any of the individuals listed stayed at the shelter during the period from mid-June 2014 through February 2015 - the period for which reimbursement has been denied.

         The reference in item (4) of the audit findings to representative payees who stayed at least one night at the shelter during 2014 is based on a list which consists of the last two pages in R. Tab 30. That list shows 59 representative payees who stayed at the shelter in 2014. It does not show how many specifically stayed there between June 13, 2014 and December 31, 2014. Next to those individuals is a handwritten list of the amounts in their checking and savings account balances as of January 16, 2015. One of those individuals shows a balance of $ 50, 491.76 and one shows a balance of $ 43, 801.49. The individual with the next highest balance is $ 12, 303.82. Ten individuals have balances of zero or less than $100, and 45 of the individuals have balances of less than $ 2, 000. Adding the January 16, 2015 account balances for all 59 listed individuals comes to $197, 629.16.

         The fourth page of R. Tab 30, not referenced in the Department's March 24, 2015 audit letter, consists of a list entitled "Former Rep Payee Clients who have spent bed nights at Oxford Street Shelter from March 2013 to the present" with handwritten annotations that appear to list the number of nights for each person each and showing a total - at $24 per night - of $435, 072. There is no indication when the memorandum was prepared or whether the individuals listed had stayed at the Shelter during the mid-June 2014 to February 2015 time period for which reimbursement was denied.

         Finally, R. Tab 30 contains two memoranda sent by City employees in October 2013. R. Tab 30, pp. 2-3.[8] Those memoranda are not mentioned in the March 24, 2015 audit findings but are relied upon by DHHS in support of its position on this appeal. Those memoranda indicate that the City was aware that persons for whom City employees were the representative payees were staying at the Oxford Street shelter and that those people received "substantial monthly social security income." R. Tab 30 p. 2. The memoranda propose charging a $5 per night user fee to be paid from the representative payee accounts, with the proceeds to be used to pay for some of the expenses of the Shelter.

         The March 24, 2015 final audit sent to the City listed specific remedial action that DHHS required and notified the City that it had to file a plan of correction within 30 days. R. Tab 12 at 11-13.

         However, even before the final audit findings dated March 24, 2015 were sent, the City had informed DHHS that on all the issues except item (5) - reimbursement for non-citizens - it was prepared to adhere to what it described as DHHS's new interpretation of the statute and regulations.[9] Responding on March 16, 2015 to the preliminary audit findings, the City had reiterated that it had been using the same presumptive eligibility practices in past years and that those had been approved in past audits. It also reiterated that DHHS had previously approved reimbursement for shelter operating costs. However, the City stated that it was prepared to change its practices to address DHHS's objections. R.Tab 11.

         However, after the preliminary audit findings had been sent but before the City had responded to those preliminary audit findings, DHHS had already issued a letter dated March 13, 2015 denying reimbursement for all of the Temporary Housing costs for which the City had sought reimbursement for the period from June 14, 2014 through October 31, 2014 - a total of $562, 612.21. R. Tab 10.[10] That letter stated that the City had requested reimbursement for individuals and costs "that the City has not been able to demonstrate are eligible for General Assistance reimbursement." It added that the information provided by the City "does not support a finding that the City has made required eligibility determinations ...

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