Somerset County officials are calling on Gov. Martin O'Malley's administration to revise an application for $8.6 million in federal aid, saying it will render many families hurt by the remnants of Hurricane Sandy ineligible for money to rebuild.

The county, hit hard by flooding from the superstorm in October, would be forced to spend the federal disaster relief only on lower-income families — defined at less than $48,000 for a household of two. That would exclude nearly half the county's homeowners, local officials said.


At issue is whether the Maryland Department of Housing and Community Development should have sought permission to spend part of the aid on families regardless of income, as New York and New Jersey have done. Congress loosened the standards for making that request in the $60 billion measure it enacted in January to fund restoration efforts.

"The people who get hurt are schoolteachers, firefighters, working-class families," said John K. Phoebus, chairman of the Somerset County Long Term Recovery Committee, a nonprofit that is coordinating storm recovery efforts. "We need to rewrite this plan and make it more inclusive."

Phoebus said eligibility for federal aid should be expanded to include families above the $48,000 threshold.

Sandy damaged about 300 homes in Crisfield, a largely poor fishing community on the Lower Eastern Shore that once was the second-largest city in Maryland. The Federal Emergency Management Agency operated an office in the Somerset County community for months after the storm and processed hundreds of claims for assistance.

State officials defend the plan submitted to the U.S. Department of Housing and Urban Development in early June. Carol Gilbert, an assistant secretary at the state housing department, said officials always had intended to focus the aid on lower-income families. Their need, she said, exceeds the money the federal government will provide.

Gilbert said the state does not intend to amend its proposal, which the federal agency has 45 days to review.

"The limited federal funds should remain focused on those with the least financial ability to address their housing needs," Gilbert said in a statement. "This decision is based solely on our desire to meet the unmet needs of the lowest-income residents."

Nearly 42 percent of the county's owner-occupied homes belong to families whose household income is between $50,000 and $100,000, census data shows.

Where the cutoff is set is important partly because the rules that govern spending of the federal money, allocated through the Community Development Block Grant program, are more flexible than for other federal programs. Families deemed ineligible for FEMA aid because they let required flood insurance lapse, for instance, could still benefit from the other program.

The federal aid is "important to a lot of the population that's going to be needed to help keep Somerset County vital and vibrant," Phoebus said. The recovery board might file an administrative complaint with the U.S. government if the state does not act, he said.

County officials said they were surprised by the state's action. State and local officials disagreed on whether Maryland could seek greater flexibility in determining eligibility, and Phoebus said both sides agreed during a June 6 meeting to seek clarity from HUD.

On June 17, Phoebus received an email from a HUD official suggesting that Maryland could request the more lenient spending standards. But he learned that the state had submitted its plan to the federal government without making the request.

"If they could have included others that are the working poor, so to speak, that is what I was hoping to see," said Del. Charles J. Otto, a Republican who represents Somerset and Wicomico counties. "I had encouraged them to increase" the threshold.

Otto noted that the state had submitted a plan for only half the money it is entitled to receive, providing an opportunity to address the issue — if it sees the need — when it seeks the balance of the aid.


But that timeline has raised another point of contention between local and state officials. Phoebus has pointed out that the state is seeking a waiver from the requirement that the money be spent over a two-year period, which he said would slow the aid and increase administrative costs.

Gilbert said the housing department is confident it can spend the money within the two-year time frame but sought the extra time out of an "abundance of caution."

The state dropped from the plan a proposal to buy out Smith Island homeowners to help them avert damage from storms. State officials had proposed using $2 million of the federal recovery funds to offer to buy out islanders who wanted to relocate, but the idea faced stiff resistance from residents who did not want to move.