Fire Tests FEMA in a New Way : Disaster: In Laguna Beach, a leading question is how much of a casualty loss a victim can deduct from income taxes.

LAGUNA BEACH —  After Hurricanes Andrew and Iniki and in the wake of the floods that ravaged the Midwest, thousands of victims craved the basics: food, clothing, homes, jobs. Anything and everything.

But in Laguna Beach, home of the relatively affluent and comfortable, a top priority for many residents after the recent devastating fire is finding out how much in property losses they can deduct on their tax returns. Far less necessary for Laguna Beach residents seems to be the need for grants, emergency shelter and unemployment insurance, according to applications gathered by FEMA officials through Monday.

With adequate amounts of insurance and well-paying jobs, many Laguna Beach residents do not need the financial resources of the Federal Emergency Management Agency, which is accustomed to dealing with the truly destitute in some of the most disaster-torn areas of the nation.

“There’s a great difference in the way people get back on their feet,” said Michael Allan, a FEMA spokesman who has been dispatched to some of country’s worst crises. “The fires here appear in most cases, though not all, to have struck people who have means at their disposal. They have assets, insurance and resources to take out loans without the kind of assistance that is typical of other disasters.”

At the FEMA center in downtown Laguna Beach, 496 people had filled out applications for assistance as of Monday. Of those, 384--nearly eight in 10--have been referred to federal and state tax experts, either to claim a casualty deduction or to apply for amendments to their tax returns. The amendment is due by April 15.

The next highest concern was money for temporary housing. Officials said 371 people have applied for the benefit, which can be as much as $1,200 a month, the average market value of rentals countywide. In most cases, homeowners insurance covers temporary housing. But where it doesn’t, federal aid is available.

Another available benefit is home loans at 3.625% through the Small Business Administration for those who cannot qualify through private lenders. Loans also are available at 7.25% for those who would qualify for partial financing elsewhere. The maximum loan is $100,000 for a home and $20,000 for personal property.

Although 316 people have taken out forms for those loans, Allan said it has been his experience that far fewer actually will submit them.

And 169 people have applied for business loans through the Small Business Administration, which offers up to $1.5 million per loan, or have applied for up to $5,000 per homeowner for minor damage like broken windows.

Farther down the list of concerns have been inquiries about insurance (136), referrals to the American Red Cross (127), requests for unemployment assistance (129), and applications for individual and family grants, which can provide up to $12,200 to meet disaster related needs not covered by other federal aid programs (108).

Only 31 people were referred to Social Security officials, 29 to the Department of Veterans Affairs and 15 to Legal Aid.

Several Laguna Beach residents said they were pleased with the emergency center.

“I would say, in my experience so far, they have done an outstanding job,” said David Horne, president of the Mystic Hills Homeowners Assn., who lost his home in the blaze. “They have been more than courteous. They helped us through the system and followed up twice. They are definitely on top of things.”

His wife, Margarethe Wiersema, was interested mostly in the tax implications of their property loss. Although their insurance policy covered the loss of their home, the coverage probably won’t extend to the total loss on the property.

She and her husband would be able to deduct the loss from their joint tax returns after they subtract 10% of their adjusted gross income. The bottom line, however, was that the deduction wouldn’t come close to covering the overall loss.

Although far fewer have sought grants and other emergency funding than those who have asked for tax help, some say FEMA is still crucial to the rebuilding process in Laguna Beach, particularly to the elderly with limited income and to renters with no insurance.

“It’s a misconception to say that everyone is affluent,” said Dave Kennelly, a Laguna Beach lawyer who has helped coordinate a free legal clinic for fire victims through the Orange County Bar Assn. “I guarantee you there are an astonishing number of renters and people on fixed incomes.”

For many FEMA employees, the chance to perform well during the Southern California fires is the latest in a series of tests, many of which the agency has failed.

The last several years have not been good for the federal agency, created by President Carter in 1979 as the federal government’s response to community needs during emergency disasters. Before FEMA was formed, military units such as the National Guard and Army Corps of Engineers provided assistance during emergencies.

The agency came under attack in late 1989, when two major disasters occurred a month apart. Hurricane Hugo hit Charleston, S.C., in September and the Loma Prieta earthquake shook Northern California in October during the World Series. The agency was criticized for responding too slowly.

Last year, FEMA’s reputation was further tarnished by its performance during the aftermath of South Florida’s Hurricane Andrew and the Los Angeles riots.

After last year’s riots, 50% to 60% of all applications for disaster aid were denied, forming the basis for a class-action lawsuit alleging the agency illegally denied relief to riot victims.

The lawsuit alleged that FEMA “arbitrarily and restrictively interpreted eligibility requirements and required excessive verification and documentation beyond that required” by federal laws.

Now, with accolades garnered from its work in the Midwest during the flood disaster, FEMA faces its latest test in trying to assist those left homeless in the Southern California fires.

At a news conference two days after the fires blew into Laguna Beach and Anaheim, new FEMA director James Lee Witt insisted that “we’re not the old FEMA anymore” and vowed to slice through red tape that long has hampered the federal disaster agency.

Witt was appointed to the position in April by President Clinton, who had known him well from the Arkansas Office of Emergency Services.

The agency mobilized quickly after the Southern California fires began, opening four disaster application centers on Oct. 30, the Saturday after the Tuesday night Anaheim fires and the Wednesday morning Laguna Beach blazes.

Even before the centers opened, victims were permitted to apply for assistance through an 800 number. Information gathered from applications for assistance is being fed into a computer and even coming from hand-held computers in the field.

Because of earlier response and cooperation with the state’s Emergency Operations Center, some checks already had been distributed early last week.

“I feel real happy with everything that has happened so far; I’ve been treated very nicely,” said David Sabiroff, a 46-year-old sculptor whose rented South Laguna Beach studio and home were destroyed in the first round of fires that struck the Southland.

Sabiroff’s studio--and 12 to 15 pieces of irreplaceable artwork--went up in flames on Oct. 27; two days later, he called FEMA’s toll-free number to register for disaster assistance. On Tuesday he received a $2,400 check to pay for temporary housing for his wife and himself.

“Everybody’s been real super,” Sabiroff said. “What’s going to be hard though, is when the immediate stuff ends, when the Red Cross closes up and moves out, when everybody is back to business as usual and there are still people ragged around the edges from the fire. What’s going to happen then?”

Indeed, it will take months before an accurate assessment can be made of the government’s response to the fire disaster. Veterans of the riots say fire victims may encounter roadblocks in trying to prove their losses.

“There are still critical changes that need to occur in the regulation of policy guidelines to insure that FEMA is always prepared to deal with a disaster,” said Cynthia Robbins, director of Urban Recovery Legal Assistance, a legal services program launched last year to help riot victims. “Until then, there will always be the risk of arbitrary decision-making, with different outcomes for similarly situated people.”

Many residents of fire-damaged communities in the Southland say they have seen little evidence of FEMA’s presence, despite promises by officials to mount a vigorous outreach effort. And some observers doubt that FEMA programs--most designed to aid victims who have little economic means to recover on their own--will effectively serve the fire victims, who are generally more affluent.

Jaime Suarez is a 48-year-old Pasadena real estate broker who lost his home in the fire. He said he is underinsured for the losses he will likely suffer.

Suarez said he was persuaded to apply for federal aid after a chance meeting at a Red Cross shelter with U.S. Sen. Dianne Feinstein (D-Calif.) Suarez said he was assured by officials that he could qualify for funds to make up the difference in his insurance coverage.

However, his visit to a disaster application center produced only disappointment and uncertainty.

“At the Red Cross, they were talking about grants being available, but after talking to officials here, they seem to be saying all I’ll qualify for are loans,” said Suarez, after leaving the Arcadia disaster center. “That does not leave me where I was before.”

With losses from fire damage estimated to reach $1 billion, federal officials still have not indicated how much money will be made available for recovery and cleanup efforts. President Clinton this week announced that $15 million would be advanced to the state to partially cover firefighting costs.

In response to the Malibu fires, FEMA opened disaster centers this weekend at the Calabasas High School Gymnasium and the Los Angeles County Sheriff’s Station in Malibu. Centers have already opened in Arcadia, Laguna Beach, Camarillo and Murietta in Riverside County.