Fema Situation Updates

21 May 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Nashville-Davidson County
Disaster Number: 
1909-DR-TN
DSR: 
4706 and 5511
Date Signed: 
Wednesday, May 20, 2015
PA ID: 
037-52004-00
Summary/Brief: 

Conclusion:  The Applicant’s insurance policy does not provide coverage for the damaged elements of two golf courses for which Project Worksheets were written; therefore, the reductions in the PWs for anticipated insurance proceeds should be reinstated.

Summary Paragraph

Between April 30, 2010 and May 18, 2010, severe storms, flooding, straight-line winds, and tornadoes caused damage throughout the state of Tennessee, resulting in major disaster declaration (FEMA-DR-1909-TN).  Floodwaters caused damage to two golf courses operated by the Metropolitan Government of Nashville-Davidson County (Applicant).  The flooding damaged electrical components of irrigation controller boxes, sand bunkers, golf cart pathways, and four putting greens.  FEMA prepared two Project Worksheets (PWs) to address the damage to the golf courses: PW 4706 to address the McCabe Golf Course and PW 5511 to address the Ted Rhodes Golf Course.  During project formulation, FEMA determined that the Applicant’s property insurance policy provided coverage for the damage to the golf courses and, accordingly, determined that the Applicant was not eligible for Public Assistance funding to restore the damage.  The Applicant appealed this decision, asserting that its insurance policy did not cover the damage to the golf courses because, whether the damage was considered “Infrastructure” or “Landscaping” under the policy, neither affords coverage when the damage is caused by flood.  The Region IV Regional Administrator denied the appeals, concluding that policy covered the damage because the damage was located at an “Insured Location” and/or “Miscellaneous Unnamed Location” under the policy.  The Regional Administrator also denied the Applicant’s request for an additional $13,090.75 for additional repair work it asserted was eligible under PW 4706 and not captured in the PW.  On second appeal, the Applicant asserts that all of the types of damage addressed in PWs 4706 and 5511 constitute “Landscaping” under the policy, coverage for which is not afforded when the damage is caused by flood.

Authorities

  • Stafford Act § 312(a), 42 U.S.C. § 5155(a)
  • Public Assistance Guide, FEMA 322 at 119 (June 2007)

Headnotes

  • Under the Stafford Disaster Act § 312(a), an applicant for federal disaster assistance cannot obtain assistance with respect to any part of a loss if the applicant has received financial assistance “under any other program or from insurance or any other source.”  Thus, under the Public Assistance Program, FEMA is required to reduce the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.

The Applicant’s insurance policy does not provide coverage for the damage under the two PWs written for the two golf courses and, therefore, the reductions in the PWs for anticipated insurance proceeds was not warranted.

Letter: 

James H. Bassham
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee  37204

Re:     Second Appeals—Nashville-Davidson County, Insurance Reductions, FEMA-1909-DR-TN, Project Worksheets 4706 and 5511

Dear Mr. Bassham:

This is in response to a letter from your office dated September 18, 2012, which transmitted the referenced second appeal on behalf of the Metropolitan Government of Nashville-Davidson County (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) reduction of anticipated insurance proceeds from the amounts awarded under two Project Worksheets addressing damage to golf courses caused by flooding in 2010.

As explained in the enclosed analysis, the Applicant’s insurance policy does not provide coverage for the damage under the two PWs and, therefore, the reductions in the PWs for anticipated insurance proceeds should be reinstated.  The Applicant’s request for $13,090.75 for additional repair work under PW 4706 is eligible work, not covered under its insurance policy. Consequently, the Regional Administrator is instructed to review the Applicant’s supporting documentation and award eligible costs based on such.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
      Regional Administrator
      FEMA Region IV

Analysis: 

Background

Between April 30, 2010 and May 18, 2010, severe storms, flooding, straight-line winds, and tornadoes caused damage throughout the state of Tennessee. A major disaster (FEMA-DR-1909-TN) was declared on May 4, 2010.  Floodwaters caused damage to two golf courses operated by the Metropolitan Government of Nashville-Davidson County (Applicant), the Ted Rhodes Golf Course and the McCabe Golf Course. 

Cumberland River floodwaters covered the Ted Rhodes Golf Course to an approximate average depth of eight feet.  The flooding damaged electrical components of controller boxes that served as the course’s main irrigation control centers, rendering all of the controllers inoperable.  In addition, the flooding caused extensive damage to 41 sand bunkers throughout the golf course, with floodwaters washing sand away and filling the bunkers and drainage system with silt and debris.

Richland Creek floodwaters caused damage to the McCabe Golf Course, including damage to two irrigation control boxes, damage to asphalt golf cart pathways, and damage to the subgrade, drainage system, gravel, root zone mixture, and top mix covering on four golf putting greens.

FEMA prepared two Project Worksheets (PWs) to address the damage to the golf courses: PW 4706 and PW 5511 to address the McCabe Golf Course and the Ted Rhodes Golf Course, respectively.  During project formulation, FEMA determined that the Applicant’s property insurance policy provided coverage for the damage to the golf courses and, accordingly, determined that the Applicant was not eligible for Public Assistance funding to restore the damage.  FEMA deducted $181,767.96 in anticipated insurance proceeds for PW 4706 for the McCabe Golf Course, leaving only direct administrative costs applicable to the PW, and deducted $333,499.38 in anticipated proceeds for PW 5511 for the Ted Rhodes Golf Course. 

First Appeal

On May 27, 2011, June 8, 2011 and November 30, 2011, the Applicant submitted first appeals to the Grantee challenging FEMA’s reductions for anticipated insurance proceeds to PW 4706 and PW 5511, and denial of additional items necessary to complete the repairs in PW 4706.  In the appeals, the Applicant asserted that its insurance policy did not cover the damage to the golf courses because, whether the damage was considered “Infrastructure” or “Landscaping” under the policy, neither affords coverage when the damage is caused by flood.

The Region IV Regional Administrator (RA) issued a response to the three appeals dated May 11, 2012, denying them.  The RA described the damaged property in the PWs as “improvements to land, landscaping, and pavement,” and determined that the policy applied because the damage was located at an “Insured Location” and/or “Miscellaneous Unnamed Location” under the policy.  The RA also denied the Applicant’s request of $13,090.75 for additional repair work based on the conclusion that the policy provided coverage for such costs.

Second Appeal

The Applicant submitted a second appeal dated July 23, 2012.  The Applicant asserts that the damage did not take place at an “Insured Location” or “Miscellaneous Unnamed Location” under the policy and that the types of damage addressed in PWs 4706 and 5511—irrigation control centers, sand bunkers, cart pathways, and putting greens—constitute “Landscaping”. Because the policy does not provide coverage for damage to “Landscaping” if the damage is caused by flood, the Applicant argues, the policy does not afford coverage for the types of damage addressed in PWs 4706 and 5511. 

The applicant also reasserts that it is eligible for an additional $13,090.75 of actual costs for irrigation repair parts and consulting fees to recommend the proper methodology for repair of the golf course, not originally captured in PW 4706.  Some of the invoices were included as backup documentation.  

The Tennessee Emergency Management Agency (Grantee) transmitted the second appeal to the FEMA Region IV Regional Administrator in a letter dated September 18, 2012.  The Grantee supports the appeal.

Discussion

Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, an applicant for federal disaster assistance cannot “receive such assistance with respect to any part of [a] loss as to which he has received financial assistance under any other program or from insurance or any other source.” [1]  FEMA implements this requirement by reducing “the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.”[2]

Insured Location

The golf courses do not appear to constitute “Insured Locations” under the policy.  The policy insures property, including real property in which the insured has an insurable interest, “located at an Insured Location or within 1,000 feet thereof, to the extent of the interest of the insured in such property.”  The policy also states that coverage under it applies to an “Insured Location” unless otherwise provided.  Relevant here, an “Insured Location” is a location (1) listed on “Schedule of Locations” on file with the insurer or (2) “covered as a Miscellaneous Unnamed Location.” 

The “Schedule of Locations” lists eighteen specific locations on two appendixes.  The Ted Rhodes Golf Course and McCabe Golf Course are not included on the lists and, therefore, are not “Insured Locations” stemming from inclusion on the “Schedule of Locations.”

Under the policy, a Miscellaneous Unnamed Location is a “Location” that is “owned, leased, or rented by the Insured, but not specified in the Schedule of Locations.”  The policy further defines a “Location” as either “as specified in the Schedule of Locations” or, if not so specified, “a building, yard, dock, wharf pier or bulkhead (or any group of the foregoing) bounded on all sides by public streets, clear land space or open waterways, each not less than fifty feet wide.”  As discussed, the Ted Rhodes Golf Course and McCabe Golf Course are not included on the “Schedule of Locations,” and they are not a building, yard, dock, wharf pier or bulkhead.  Therefore, the golf courses are not “Insured Locations” by virtue of being “Miscellaneous Unnamed Locations.”

Landscaping

The policy provides “Additional Coverages” for physical loss or damage insured by the policy under several different types of categories, including “Infrastructure” and “Landscaping.” 

“Infrastructure” under the policy includes “street lighting, traffic signals, and control systems,” “underground piping,” “streets, roads, highways, sidewalks, bridges, tunnels, trestles, piers and docks,” and “street signs, traffic signs, and signs not attached to buildings.”  The types of damage elements addressed in PWs 4706 and 5511—irrigation control centers, sand bunkers, cart pathways, and putting greens—do not fall under the “Infrastructure” definition set forth in the policy.

“Landscaping” under the policy means “[l] and improvements including lawns, greens, fairways, tees; shrubs; trees; landscape gardening; and lawn sprinkler systems and related piping.”  The types of damage addressed in PWs 4706 and 5511 appear to fall within the definition of “Landscaping.”  The sand bunkers are landscape improvements that are part of the golf courses’ “lawns, greens, [and] fairways,” as are the golf cart pathways.  The golf courses’ irrigation control centers and boxes fall under the “Landscaping” definition as being part of “lawn sprinkler systems and related piping.”  Although the damage appears to fall within the coverage for “Landscaping,” that coverage only applies to “physical loss or damage to Landscaping caused by or resulting from fire, lightening, explosion, riot or civil commotion, vandalism or malicious mischief, aircraft, or vehicles.”  It, therefore, does not include physical loss or damage caused by flood; flood is not a listed peril associated with coverage for “Landscaping.”

A review of the Applicant’s insurance policy and associated materials submitted with its appeal indicates that the policy does not cover the damage captured in PWs 4706 and 5511 and, therefore, reductions for anticipated insurance proceeds should not have been applied.

Additional Costs

The applicant asserts that extensive repairs were needed to return the facility to its pre-disaster condition, and some of the lesser items were overlooked in the creation of the PW. These items included irrigation and fan parts, safety fence and irrigation repair for $5,355.75, as well as $7,735.00 in consulting fees related to the methodology to repair the facility. The Applicant requested the inclusion of these costs in the scope of work, but the request was denied as the RA determined these costs were covered under the Applicant’s insurance policy. As the policy does not apply, these costs are also eligible.

Conclusion

The damaged elements of the Ted Rhodes Golf Course and McCabe Golf Course are not located within an “Insured Location” under the Applicant’s policy.  Although the damaged elements may constitute “Landscaping” under the policy, coverage for landscaping does not apply to flood-related damage.  The Applicant’s policy does not provide coverage for the damaged elements of the Ted Rhodes Golf Course and McCabe Golf Course and, therefore, the reductions in PWs 4706 and 5511 for anticipated insurance proceeds should be reinstated.  Similarly, $13,090.75 for repair work that the Applicant asserts was excluded from the original PW and deemed covered by insurance, is also considered eligible work. Final costs for such work will be determined at project closeout, when all invoices and proof of payment can be reviewed.



[1]  See The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 312(a), 42 U.S.C. § 5155(a).

[2]  Public Assistance Guide, FEMA 322 at 119 (June 2007).

12 May 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
City of Tallahassee
Disaster Number: 
1785-DR-FL
DSR: 
PW 2149 and 2150
Date Signed: 
Monday, May 11, 2015
PA ID: 
073-70600-00
Summary/Brief: 

Conclusion:  Documentation provided by the Applicant demonstrated it was not feasible to repair only the observed point breaks so that the pipeline could perform its pre-disaster function.  The force main is not considered “repairable” and replacement is eligible.  No additional funding is eligible for draining and inspecting the pipeline, because FEMA approved reasonable, eligible costs for the services procured non-competitively.

Summary Paragraph

Heavy rainfall from Tropical Storm Fay caused the Capital Circle roadway sewer force main to rupture.  The City of Tallahassee (Applicant) performed emergency point repairs, which resulted in additional ruptures to the force main.  The Applicant concluded that the integrity of the force main had been so compromised that point repairs would not be sufficient to restore the pipeline; therefore, it requested funding for replacement.  FEMA determined that the cost of repairs would be less than 50 percent of the cost of replacement and that replacement was not eligible for funding.  FEMA approved funding for the repairs in Project Worksheet (PW) 2149 and for draining and inspecting the pipeline under contract in PW 2150.  FEMA found $186,964.18 in requested funding for work performed under contract ineligible, because the Applicant did not competitively bid the contracts.  FEMA developed cost estimates for the work and approved funding based on them. With its second appeal, the Applicant provided supplemental information demonstrating that it was not feasible to repair the pipeline.  The Applicant also asserted that the cost estimates do not address the complexity and emergency nature of the work.

Authorities and Second Appeals

  • 44 C.F.R. § 206.226(f)(1).
  • 44 C.F.R. §§ 13.36, 13.43.
  • OMB Circular A-87
  •  PA Guide, at 53.

Headnotes

  • Under 44 C.F.R. § 206.226(f)(1), a facility is considered repairable when disaster damages do not exceed 50 percent of the cost of replacing a facility to its pre-disaster condition, and it is feasible to repair the facility.
  • It was not feasible to restore the pipeline through point repairs.
  • According to 44 C.F.R. § 13.36(c), all procurement transactions have to provide full and open competition.  If an Applicant uses noncompetitive proposals to procure services, 44 C.F.R. § 13.36(d)(4)(ii), requires a cost analysis.
  • The Applicant did not competitively bid the contract services and did not complete a cost analysis.
  • 44 C.F.R. § 13.43(a) permits FEMA to disallow all or part of the costs incurred through noncompliant procurement procedures.
  • OMB Circular A-87 considers a cost reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under circumstances prevailing at the time.
  • PA Guide, at 53 allows reimbursement of costs FEMA finds fair and reasonable.
  • FEMA followed policy in determining reasonable, eligible costs for work procured non-competitively.
Letter: 

Bryan W. Koon
Director
State of Florida Division of Emergency Management
2555 Shumard Oaks Boulevard
Tallahassee, Florida  32399-2100

Re: Second Appeal – City of Tallahassee, PA ID 073-70600-00, FEMA-1785-DR-FL, Project Worksheets (PW) 2149 and 2150 – 50 Percent Rule and Procurement

Dear Mr. Koon:

This is in response to a letter from your office dated July 24, 2013, which transmitted the referenced second appeal on behalf of the City of Tallahassee (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $5,700,000.00 for the replacement of a damaged sewer force main and $82,832.00 for contract work to remove and dispose of sewage and to perform pipe inspections.

As explained in the enclosed analysis, I have determined that the Applicant has provided sufficient information to demonstrate it was not feasible to repair the force main.  Accordingly, I am granting the appeal as it relates to the replacement of the force main in PW 2149.  The Applicant also provided documentation to justify some of the actual costs claimed for the work; however it was not sufficient to support the $5,702,350.00 claimed. The documentation supported the eligibility and reasonableness of $5,225,747.89 for the replacement of the force main. 

Regarding the contracts for sewage removal and disposal and inspections, I have determined that the Applicant did not competitively bid the services nor did it perform a cost analysis at the time it procured the contract services.  Therefore, I am denying the appeal as it relates to the services in PW 2150.  By copy of this letter, I am requesting the Regional Administrator to take appropriate action to implement this determination.  Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. §206.206, Appeals.
 

Sincerely,

/s/


William W. Roche
Director
Public Assistance Division                                                                       

Enclosure

cc: Garcia Szczech
      Regional Administrator
      FEMA Region IV

Analysis: 

Background

On August 24, 2008, Tropical Storm Fay deposited approximately 18 inches of rain in the Tallahassee area causing the Capital Circle roadway sewer force main to rupture. This facility was a 36-inch fiberglass pipe beneath a roadway that carried one-third of Tallahassee’s sewage volume. The City of Tallahassee (Applicant) conducted an emergency point repair, which was immediately followed by a rupture at a different location; following a repair of that rupture, a third rupture occurred in a different location. To evaluate the condition of the force main, the Applicant performed a low-pressure fill test, which resulted in more failures. The Applicant then conducted a video inspection, which showed nine additional visible point breaks in the force main. Approximately 14 percent of the force main could not be video inspected due to standing water and other factors; however, a tenth break was detected in the uninspected area.

The Applicant’s city engineer determined that the integrity of the force main had been compromised and that point repairs would not sufficiently restore the force main. Consequently, the Applicant proposed replacing 10,000 linear feet of damaged force main. The Applicant estimated that excavation and replacement in the roadway would cost $7.3 million, and that approach was expected to cause significant traffic disruptions. To reduce costs, the Applicant proposed a slip line replacement (estimated at $3.9 million) combined with installation of a supplemental pipeline outside the road right-of-way (estimated at $2.8 million) to compensate for the resulting reduced capacity. Ultimately, the Applicant settled on what it determined to be the most cost-effective and feasible method of replacement: replacement of 7,600 linear feet using “pipe bursting” along the current alignment and re-aligning a portion of force main to shorten the length of the pipe bursting by approximately 1,400 linear feet to reduce costs and to avoid working in a busy intersection. For the re-aligned portion, that Applicant installed 700 feet of ductile iron pipe using an open trench. The total replacement cost was $5.7 million.

FEMA determined the Applicant’s proposed course of action was not eligible for funding and prepared three Project Worksheets (PWs) for the damaged pipeline, as follows:

  • PW 2071 for $673,489.25 for the repair of the three ruptures.
  • PW 2149 for $696,583.00 for the repair of the ten additional point breaks that were identified through video inspection. FEMA developed a cost estimate for the ten point break repairs and evaluated the eligibility of the replacement of the force main in accordance with Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.226(f)(1), Repair vs. replacement (the “50 Percent Rule”). FEMA determined that, because the cost of repair was less than 50 percent of the cost of the replacement, only the point break repairs were eligible.
  • PW 2150 for $316,140.91 for the removal and disposal of sewage in the force main and use of robotics for assessing the force main’s conditions.  FEMA found $186,964.18 in requested funding for work performed under contract ineligible, because the Applicant did not competitively bid the contracts.  FEMA developed cost estimates for the work and approved funding based on those cost estimates.

First Appeal

The Applicant appealed FEMA’s determination in a letter dated November 24, 2010. As to PW 2149, the Applicant argued that FEMA erroneously applied the 50 Percent Rule by failing to consider the infeasibility of repairing only the point breaks. As to PW 2150, the Applicant requested an additional $117,721.46 stating that FEMA underestimated the eligible costs because it did not consider the cost impacts of the complexity, time constraints, and work conditions associated with the work of draining, transporting, and disposing of the sewage from the pipeline and performing an internal assessment using robotics. The Applicant did not appeal PW 2071.

The Florida Division of Emergency Management (Grantee) transmitted the Applicant’s appeal to FEMA Region IV in a letter dated March 14, 2011. The Grantee asserted that, for PW 2149, FEMA’s cost estimate for the repair of each break was too low.  According to the Grantee, if a more reasonable estimate was used, the total repair cost would exceed 50 percent of the replacement cost. For PW 2150, the Grantee noted that actual costs were higher than FEMA’s estimate and should be used to prepare the PW.

The FEMA Region IV Regional Administrator denied the first appeal in a letter dated September 28, 2012. As to PW 2149, the Regional Administrator reaffirmed that the repair cost was less than 50 percent of the replacement cost and, therefore, determined that replacement was not eligible in accordance with 44 C.F.R. § 206.226(f)(1). The Regional Administrator stated that the Applicant did not submit any additional data to dispute the accuracy of FEMA’s scope of work, estimate, or conclusion that repair costs exceeded 50 percent of replacement costs.  Additionally, the Regional Administrator stated that the $5,700,000.00 in actual costs claimed by the Applicant included costs to relocate the force main and did not solely consist of the costs of repairing and restoring it to its pre-disaster condition.  The Regional Administrator noted that, in accordance with 44 C.F.R. §206.226(g)(1), relocation is not eligible because the facility was not destroyed.

Regarding PW 2150, the Regional Administrator stated that the Applicant would receive reimbursement for the actual costs it incurred only for the performance of items within the eligible scope of work, as part of the final inspection process.

Second Appeal

The Applicant submitted a second appeal in a letter dated January 18, 2013, and submitted supplemental material in a letter dated July 19, 2013.  For PW 2149, the Applicant asserted that FEMA did not apply the requirements of 44 C.F.R. § 206.226(f)(1) correctly. Specifically, the Applicant stated that FEMA focused only on the comparison of the respective costs of repair and replacement and, instead, should have based its decision on the regulatory requirement that “a facility is considered repairable when … it is feasible to repair the facility so that it can perform the function for which it was being used as well as it did immediately prior to the disaster.” The Applicant provided information it asserted would demonstrate that the repair was not feasible and that the force main had to be replaced. The supplemental information included a March 2013 report, prepared by the engineering firm MWH Global, Inc., that:

  • Provided detailed discussion of the cause of damage to the force main due to extreme surge and vacuum conditions.
  • Described physical evidence of damage and weakening that was observed following excavation of portions of the force main and results of testing performed on excavated portions by the pipe’s manufacturer.
  • Described the likelihood of additional, unobserved weaknesses and failures due to delamination of the pipe and occurrence of micro fractures, as well as unobserved failures in portions of the force main that could not be video inspected.
  • Described requirements for certification by the engineer of record and permitting by state agencies and the reasons why the certification and permitting could not have been obtained for point repairs.

The Applicant also asserted that the Florida Department of Transportation and Florida Department of Environmental Protection, which are responsible for permitting the work, would not have given consent for point repairs because such repairs would not have met reliability requirements. The second appeal supplemental information included letters from these agencies informing the Applicant that point break repairs would not be a satisfactorily reliable approach to repairing the damage.

For PW 2150, the Applicant disagreed with the decision to address reimbursement of reasonable costs at final inspection.  The Applicant asserted that doing so would deny it of its appeal rights and relied on the documentation submitted with its first appeal to support its position that the actual contract costs are eligible.

Subsequent to submitting its second appeal, FEMA requested additional documentation from the Applicant to further support its position with respect to the eligibility of the contract costs in PW 2150.   In response to that request, the Applicant submitted a description of the scope of work of each contract and of the procurement procedures followed.  The Applicant also provided some details regarding its objection to FEMA’s cost estimates and reduced its claim to an additional $82,832.00 (from $117,721.46) for the contract work.  The comprehensive submission was designed to support the Applicant’s position that FEMA did not consider the “complexity and emergency nature of this work, combined with unique working conditions” (e.g. “being located in a six-lane heavily trafficked highway and working 24 hours per day”) when developing its cost estimates. 

Discussion

PW 2149

Under the Public Assistance Program, a facility is considered repairable when disaster damages do not exceed 50 percent of the cost of replacing a facility to its pre-disaster condition, and it is feasible to repair the facility so that it can perform the function for which it was being used as well as it had immediately prior to the disaster.[1]

The data submitted with the second appeal, which included documentation from the state permitting agency that the proposed point repair work was unreliable and would not be approved, demonstrate that it would not have been feasible to repair only the observed point breaks so that the force main could have performed as it had prior to the disaster.  As noted, the storm caused numerous intermittent pump failures and power fluctuations within the Applicant’s wastewater system, which resulted in flow variations within the force main. These flow variations produced transient pressure conditions that were large enough to damage the force main. These transient pressure conditions would have traveled throughout the force main, potentially damaging locations in addition to those that were observed through rupture or through video inspection. Moreover, as described in the 2013 MWH Global, Inc. report, excavation of the pipe during repair revealed delamination and fracturing, which indicate reductions in the wall strength of the pipe. Video inspection could not have identified this damage, and point break repairs would not have addressed it.

The observed point breaks and the evidence of damage revealed during excavation indicate the potential for widespread damage to the force main. Considering this damage and the likelihood of additional interior and exterior damage in unobserved segments of the force main, it is reasonable to conclude that the force main could not be restored only through point break repairs. This conclusion is also consistent with the determination of state permitting agencies and FEMA Headquarters technical experts who reviewed the materials provided.

The FEMA Regional Administrator included the issue of relocation in its basis for denying the first appeal in accordance with 44 C.F.R. §206.226(g). The facility was not relocated in its entirety; rather, a portion of the force main was re-aligned for reasons of constructability and to reduce the cost of the replacement. Therefore, 44 C.F.R. §206.226(g) is not applicable to this situation and the force main replacement is eligible. 

Based on a review of documentation supporting the Applicant’s actual costs claimed, summarized in Table 1, the eligible cost for the replacement is $5,225,747.89.  As noted in Table 1, the Applicant did not competitively procure all portions of the project.  FEMA performed a review of the bids and actual costs for those portions of the work that the Applicant did not procure competitively and found the costs to be reasonable. 

TABLE 1

 

Description

Initial Request

Revised Request

Eligible for Reimbursement

Comments

Force Main Pilot

$487,100

$501,652

$387,100

Deducted $114,552 in change order costs related to a change in scope.  Applicant provided no explanation of scope change.

Work Package 1A - Non-competitive Procurement

$1,648,350

$1,667,271

$1,548,349

Bid cost found to be reasonable based on review by independent Technical Specialist.  Deducted $118,922 in change order costs related to a change in scope.  Applicant provided no explanation of scope change.

Work Package 1B - Non-competitive Procurement

$571,250

$516,222

$516,222

Bid cost is reasonable based on review by independent Technical Specialist. 

Work Package 2

$1,558,952

$1,481,233

$1,481,233

Actual cost decreased due to change order and less materials needed.  Applicant provided sufficient documentation to support change.

Materials

$1,010,375

$1,017,287

$1,010,375

Deducted $6,912 for additional material associated with change orders for Force Main Pilot and Work Package 1A.  Applicant provided no explanation for the change in scope.

MWH – Pre-existing contract

$270,499

$259,360

$259,360

Cost is reasonable.

PBSJ – Pre- existing contract

$101,375

$101,221

$0

Applicant provided no details regarding the scope of work performed.

PBSJ – Pre-existing contract

$2,510

$2,510

$2,510

Cost is reasonable.

CES/Southern Earth Sciences – Non-competitive Procurement

$36,354

$20,599

$20,599

Cost is reasonable.

Force Account Labor

$42,274

$80,241

$0

Supporting documentation contains many discrepancies.

Miscellaneous Overtime

$48,331

$54,504

$0

Applicant provided no explanation supporting costs claimed.

FDEP Permit

$250

$250

$0

No supporting documentation.

TOTAL

$5,777,620

$5,702,350

$5,225,748

 

 

PW 2150

Pursuant to 44 C.F.R. § 13.36(b), Procurement Standards, when procuring services under a federal grant, subgrantees use their own procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in section 13.36.  Consistent with 44 C.F.R. § 13.36(b), grantees and subgrantees must maintain records sufficient to detail the significant history of a procurement.[2]  These records must include the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.[3]  In addition, all procurement transactions have to be conducted in a way that provides “full and open competition.”[4]

The Applicant did not competitively procure the services funded in PW 2150.  According to 44 C.F.R. § 13.36(d)(4)(i), “[p]rocurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids or competitive proposals and one of the following circumstances applies: (A) The item is available only from a single source; (B) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (C) The awarding agency authorizes noncompetitive proposals; or (D) After solicitation of a number of sources, competition is determined inadequate.”[5]  Further, “[c]ost analysis, i.e., verifying the proposed cost data, the projections of the data, and the evaluation of the specific elements of costs and profits, is required.”[6]  Here, the Applicant has sufficiently supported that the emergency nature of the repair required expediency, but the Applicant did not perform cost analyses for any of the contracts awarded for the work.

Pursuant to 44 C.F.R. § 13.43(a), Remedies for Noncompliance, “if an Applicant materially fails to comply with any term of an award, whether stated in a Federal statute or regulation, an assurance, in a State plan or application, a notice of award, or elsewhere, FEMA may take a number of actions”.  FEMA’s options include: temporarily withholding cash payments pending correction of the deficiency, disallowing all or part of the cost of the activity or action not in compliance, wholly or partly suspending or terminating the current award for the grantee's or subgrantee's program, withholding further awards for the program, or taking other remedies that may be legally available.[7]

Rather than disallow all costs incurred through noncompliant procurement procedures, FEMA policy allows reimbursement of costs it finds fair and reasonable.[8]  A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.[9]  FEMA will generally analyze cost reasonableness by use of historical documentation for similar work, average costs for similar work in the area, published unit costs from national estimating databases, and FEMA cost codes.[10]  The Regional Administrator, in denying the first appeal on this issue, determined that FEMA approved reasonable, eligible costs for the services procured non-competitively in PW 2150 in accordance with this policy. The Applicant disagreed with the regional calculated costs, stated their reasons for not agreeing, but provided no documentation to support otherwise.  FEMA used average costs for similar work in the area, in accordance with the PA Guide.

Conclusion

The data submitted with the second appeal demonstrate that it would not have been feasible to repair only the observed point breaks and return the force main to its pre-disaster function.  Accordingly, replacement of the force main is eligible. The eligible replacement includes the portion of the damaged force main that was realigned, and the eligible cost for the project is $5,225,747.89.

The Applicant has not provided sufficient documentation supporting reasonable costs associated with non-compliant procurement procedures.  Accordingly, no additional funding will be provided for the work approved in PW 2150.



[1] 44 C.F.R. § 206.226(f)(1) (2008).

[2] 44 C.F.R. § 13.36(b)(9) (2008).

[3] Id.

[4] Id. at § 13.36(c)(1).

[5] Id. at § 13.36(d)(4)(i).

[6] Id. at § 13.36(d)(4)(ii).

[7] Id. at § 13.43(a)(1)-(5).

[8] Public Assistance Guide, FEMA 322, at 53, (June 2007) [hereinafter PA Guide].

[9] Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments (2004)

[10] PA Guide, at 40-41.

12 May 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Memorial Hospital at Gulfport
Disaster Number: 
4081-DR-MS
DSR: 
PW 631
Date Signed: 
Monday, May 11, 2015
PA ID: 
047-UHJ7Y-00
Summary/Brief: 

Conclusion:  Pursuant to 44 C.F.R. § 206.225, the work performed by the Applicant’s staff during and following Hurricane Isaac is not emergency work.  Therefore, the costs reflected in PW 631 for force account labor overtime and meal vouchers for staff are considered increased operating expenses and ineligible for PA funding.

Summary Paragraph

Following Hurricane Isaac, FEMA drafted Project Worksheet (PW) 631 to capture the costs associated with the actions taken by the Applicant during and after the disaster.  FEMA obligated PW 631 for $40,516.56 to reflect costs incurred to operate and maintain generators.  However, FEMA determined that $410,665.61 for force account labor overtime and $24,845.00 for meals to feed staff were ineligible for PA funding because FEMA considers these costs increased operating expenses.  In the first appeal, the Applicant asserted that the force account labor overtime was used to continue a critical public service, provide medical care and emergency medical care services to patients, and maintain functional generators to ensure electricity throughout the hospital.  In addition, the Applicant asserted that, due to a “lock down” situation, the Applicant had to feed its staff while they were confined to the hospital.  The FEMA Region IV Regional Administrator (RA) determined that the cost associated with PW 631 was an increased operating expense, and as such, was not an eligible emergency cost.  In the Applicant’s second appeal, it requests $435,510.61 for costs incurred during and after Hurricane Isaac, again asserting the force account labor overtime costs reflected eligible emergency work and FEMA should reimburse them. 


Authorities and Second Appeals

  • 44 C.F.R. § 206.225.
  • DAP 9525.4, Emergency Medical Care and Medical Evacuations, at 1-3.
  • Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2 (Oct. 3, 2008).
  • PA Guide, at 54.

Headnotes

  • Pursuant to 44 C.F.R. § 206.225, emergency protective measures to save lives, to protect public health and safety, and to protect improved property are eligible for PA funding. 
  • According to DAP 9525.4, costs associated with providing temporary facilities for emergency medical care of disaster survivors when existing facilities are destroyed or severely impacted are eligible for PA funding.  However, increased administrative and operating costs to a hospital due to increased or anticipated increased patient load, labor costs for medical staff, and increased costs for feeding residents and staff of critical facilities are ineligible for PA funding.
  •  The Applicant required staff to stay onsite and provided meal vouchers during a “lock down” period during and following Hurricane Isaac.  The Applicant claimed costs for this work as emergency protective measures.

FEMA policy explicitly states costs associated with this type of work are ineligible for PA funding because they are increased operating expenses

Letter: 

May 11, 2015

Mr. Robert Latham, Jr.
Executive Director
Mississippi Emergency Management Agency
220 Popps Ferry Road
Biloxi, Mississippi  39531

Re: Second Appeal – Memorial Hospital at Gulfport, PA ID 047-UHJ7Y-00, FEMA-4081-DR-MS, Project Worksheet (PW) 631 – Increased Operating Expenses

Dear Mr. Latham:

This is in response to a letter from your office dated September 17, 2014, which transmitted the referenced second appeal on behalf of Memorial Hospital at Gulfport (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $435,510.61 in Public Assistance (PA) funding for force account labor overtime and meals provided to staff.

As explained in the enclosed analysis, I have determined that the activities conducted by the Applicant following Hurricane Isaac and addressed in PW 631 are ineligible for PA funding because they are increased operating expenses.  Therefore, I am denying the appeal. 

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
     Regional Administrator
     FEMA Region IV

Analysis: 

Background

In August 2012, Hurricane Isaac caused street flooding, downed trees and power lines, and power outages throughout Gulfport City, Mississippi.  Gulfport City and Harrison County imposed a curfew causing a “lock down” scenario at Memorial Hospital at Gulfport (Applicant).  As a result, the Applicant initiated a Hurricane Alert Status (HAS) plan that included keeping medical staff at the hospital for approximately 72 hours in anticipation that the next regularly scheduled shift would be unable to report due to the storm, authorizing meal vouchers to employees, and operating and maintaining four generators.  FEMA drafted Project Worksheet (PW) 631 to capture the costs associated with the actions taken by the Applicant during and after the disaster.  FEMA obligated PW 631 for $40,516.56 to reflect costs incurred to operate and maintain the generators.  However, FEMA determined that $410,665.61 for force account labor overtime and $24,845.00 for meals to feed staff were ineligible for PA funding because FEMA considers those costs increased operating expenses.

First Appeal

In the first appeal dated January 31, 2013, the Applicant asserted that the force account labor overtime was used to continue a critical public service, provide medical care and emergency medical care services to patients, clean up and remove water infiltration, relocate patients, ensure security, and maintain functional generators.  In addition, the Applicant asserted that the City and Harrison County imposed curfew during the disaster, prevented staff from leaving the hospital, and necessitated the Applicant feeding them for the duration of the curfew.

In a letter dated May 23, 2014, the FEMA Region IV Regional Administrator (RA) determined that the cost associated with PW 631 was an increased operating expense, and as such, was not an eligible emergency cost.  The RA cited to the second appeal determination for Ochsner Clinic Foundation[1] in which FEMA concluded that overtime labor costs of medical staff are not eligible for PA funding.

Second Appeal

In its second appeal dated July 23, 2014, the Applicant requests $435,510.61 for costs incurred during and after Hurricane Isaac.  The Applicant states Hurricane Isaac created a “lockdown” situation that was extraordinary in nature.  The Applicant asserts the force account labor overtime costs reflected eligible emergency work and FEMA should reimburse them.  In a letter dated September 17, 2014, the Grantee elaborates by explaining the Applicant’s staff ensured that normal medical services would continue, assisted with securing the facility, helped stabilize and relocate patients, helped to ensure that generators were running, and ensured that critical equipment maintained power and continued to function.   

Discussion

Pursuant to 44 C.F.R. § 206.225, emergency protective measures to save lives, to protect public health and safety, and to protect improved property are eligible for PA funding.[2]  This includes measures, such as emergency medical care, that eliminate or lessen immediate threats to life, public health or safety, or additional damage to improved public or private property through cost effective means.[3]  FEMA DAP 9525.4, Emergency Medical Care and Medical Evacuations, provides that PA funding may be available to eligible applicants for the extraordinary costs associated with providing temporary facilities for emergency medical care of disaster survivors when existing facilities are overwhelmed if the costs are reasonable and customary for the emergency medical services provided.[4]  However, increased administrative and operating costs to a hospital due to increased or anticipated increased patient load, labor costs for medical staff, and increased costs for feeding residents and staff of critical facilities are ineligible for PA funding.[5]

In supporting its appeal, the Applicant cites to FEMA DAP 9525.4 as allowing for reimbursement of force account labor overtime when personnel are performing eligible work.  However, this policy specifically states that eligible work includes assistance for emergency medical care and medical evacuations of disaster survivors from a public or private nonprofit medical facility that has been destroyed or severely compromised by the disaster.[6]  In addition, this policy applies to temporary medical facilities, not facilities that normally operate as hospitals.[7]  Here, the Applicant’s facility still operated as a regular hospital at the time of the disaster.   Therefore, DAP 9525.4 does not apply.

The Applicant also argues that, due to Hurricane Isaac and the city-issued curfew that followed, it initiated a HAS plan that required physicians, nurses, and other medical staff to stay onsite beyond their normal work schedules.  The Applicant contends the disaster and subsequent curfew mandated a “lockdown” of the facility which was “extraordinary in nature.”  However, the Ochsner Clinic Foundation second appeal also involved a facility that was “locked down” during a declared disaster.  In that case, FEMA determined that the overtime paid to medical personnel was an increased operating expense regardless of cause.[8]  Pursuant to FEMA policy, requiring medical personnel to stay onsite to perform their normal work duties during an emergency is not an emergency protective measure.[9]  While the Grantee argues that the staff performed some duties that may be eligible work, the Applicant did not sufficiently substantiate this assertion.[10]  Finally, FEMA guidance explicitly states increased costs for feeding hospital staff is ineligible for PA funding.[11]  Therefore, FEMA policy prohibits granting relief with respect to the meal vouchers provided to the Applicant’s staff during and after Hurricane Isaac. 

Conclusion

The costs reflected in PW 631 for force account labor overtime and meal vouchers for staff are considered increased operating expenses. As such, the work performed by the Applicant’s staff during and following Hurricane Isaac is not emergency work, and consequently ineligible for PA funding. 



[1] FEMA Second Appeal Analysis, Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2 (Oct. 3, 2008).

[2] 44 C.F.R. § 206.225(a)(1).

[3] See 44 C.F.R. § 206.225(c); see also Disaster Assistance Policy 9525.4, Emergency Medical Care and Medical Evacuations, at 1 (Jul. 16, 2008).

[4] DAP 9525.4, Emergency Medical Care and Medical Evacuations, at 2.

[5] Id. at 3; see also Public Assistance Guide, FEMA 322, at 54 (June 2007) [hereinafter PA Guide].

[6] See DAP 9525.4, Emergency Medical Care and Medical Evacuations, at 1.

[7] Id. at 2-3; see also Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2 (stating “[w]e believe that the section 7.A of the policy is clear: eligible costs must be associated with an eligible applicant providing temporary facilities for treating disaster victims when their existing facilities are overloaded and cannot accommodate the patient load.  The policy does not authorize reimbursement for increased costs incurred in its regular facility.”).

[8] Ochsner Clinic Foundation, FEMA-1603-DR-LA, at 2.

[9] See PA Guide, at 54 (stating the costs for providing a service, including increased hospital patient care costs, are ineligible for PA funding).

[10] On December 17, 2014, FEMA sent a Request for Information (RFI) to the Applicant and Grantee requesting sufficient documentation, including but not limited to, an applicable salary/pay policy, fringe benefits plan, timesheets, and a detailed record of work performed, including the name and title/position of each employee, hours worked, demonstrating the type and extent of work completed by its employees during the disaster.  As of the date of issuance of this appeal, FEMA had not received a response to its RFI. 

[11] PA Guide, at 54.

29 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Adams County Board of Supervisors
Disaster Number: 
1983-DR-MS
DSR: 
PW 209
Date Signed: 
Monday, April 27, 2015
PA ID: 
001-99001-00
Summary/Brief: 

Conclusion: On second appeal, the Adams County Board of Supervisors (BOS) (Applicant) failed to demonstrate that the damage to its culvert was the result of the disaster.  Accordingly, FEMA cannot approve a revised scope of work for Project Worksheet 209 nor § 406 Hazard Mitigation for this project.

Summary Paragraph

During the incident period in 2011, the Mississippi River experienced severe flooding which resulted in loss of clay gravel surface material, dirt fill material, deep rutting, and numerous “soft spots” on the Applicant’s road known as Jackson Point Road (Facility).  FEMA drafted Project Worksheet (PW) 209 to document damage and eligible costs associated with washouts on a 4.5 mile length of the Facility to include the roadway surface atop a three-section box culvert.  On August 7, 2012, eleven months after the initial repairs were completed, the Applicant requested that FEMA revise the scope of work in PW 209 to replace the box culvert.  FEMA denied the request because the Applicant had not demonstrated that the culvert’s damage was attributable to Disaster 1983. In its first appeal, the Applicant asserted that it provided documentation that proved the destruction of the culvert was the result of the disaster event and that FEMA erroneously used pictorial evidence to deny the change in scope.  The Region IV Regional Administrator (RA) denied the first appeal based on his determination that the water levels were sufficiently low when PW 209 was drafted; therefore, FEMA staff would have been able to identify a collapsed portion of the box culvert and any embankment subsidence.  In the second appeal, the Applicant asserts that the damage to the culvert was latent, could not be discovered at the time of the site visit, and was disaster-related.

Authorities and Second Appeals

  • Stafford Act § 406, 42 U.S.C. § 5172.
  • 44 C.F.R. § 206.223(a)(1).
  • RP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act) at 4.
  • PA Guide, at 101.

Headnotes

  • 44 C.F.R. § 206.223(a)(1) states that an item of work must be required as the result of the disaster event in order to be eligible for Public Assistance funding.  
  • The Applicant failed to demonstrate that the damage to its culvert was disaster-related.
  • According to the PA Guide, the scope of work describes the work that is necessary to repair the damage or replace the facility and provides the cost estimate.  If additional damage is discovered once the PW is completed, the Applicant must document the damage, show how the damage is disaster-related, and request a re-inspection by FEMA.
  • Applicant could not demonstrate the culvert was damaged by Disaster 1983.  Therefore, FEMA will not authorize a revised scope of work for PW 209.
  • Recovery Policy RP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act) states mitigation measures will be performed as part of the overall project.
  • Since the work outlined in PW 209 was completed in September 2011, mitigation measures cannot be approved for this project. 
Letter: 

April 27, 2015


Mr. Robert Latham, Jr.
Executive Director
Mississippi Emergency Management Agency
220 Popps Ferry Road
Biloxi, Mississippi  39531

Re: Second Appeal – Adams County Board of Supervisors, FEMA-1983-DR-MS, PA ID 001-99001-00, Project Worksheet (PW) 209 – Scope of Work

Dear Mr. Latham:

This is in response to your letter dated June 13, 2014, which transmitted the referenced second appeal on behalf of Adams County Board of Supervisors (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $1,106,214.49 in Public Assistance funding for a revised scope of work to address repairs to its culvert.  In the alternative, the Applicant requests $719,192.77 for 406 Hazard Mitigation.    

As explained in the enclosed analysis, I have determined that the Applicant failed to demonstrate that the damage to its culvert was the result of the disaster.  Accordingly, FEMA cannot approve a revised scope of work for PW 209 nor approve Stafford Act § 406 Hazard Mitigation for this project.  Therefore, I am denying the appeal.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

CC: Garcia Szczech
       Regional Administrator
       FEMA Region IV

Analysis: 

Background

From May 3 through June 17, 2011, the Mississippi River experienced severe flooding which resulted in loss of clay gravel surface material, dirt fill material, deep rutting, and numerous “soft spots” on an Adams County Board of Supervisors’ (Applicant) road known as Jackson Point Road (facility).  Based on the Applicant’s force account labor and equipment 100 percent completion date of September 15, 2011, FEMA drafted Project Worksheet (PW) 209 to document damage and eligible costs associated with washouts on a 4.5 mile length of the facility to include the roadway surface atop a three-section box culvert area known as Narrows.  The site inspection occurred in October 2011 but damage to the box culvert was not identified to FEMA’s Project Specialist at that time nor prior to PW completion.

On August 7, 2012, the Applicant requested that the scope of work in PW 209 be revised to replace the box culvert.  The request was made eleven months after the initial repair was completed.  FEMA denied the request because the Applicant did not demonstrate the culvert’s damage was attributable to the declared disaster.

First Appeal

In its first appeal, dated April 9, 2013, the Applicant asserted that it provided documentation that proved the destruction of the culvert was the result of the disaster event.  The Applicant argued that the facility was completely inundated by flood waters at the time of FEMA’s site inspection.  Therefore, it was impossible to discover the destruction of the area around the box culverts.  The Applicant asserted that the additional damage was latent and not discoverable until after the PW was drafted.  The Applicant stated that its engineer’s narrative confirms that the damage was latent.  Finally, the Applicant asserted that FEMA erroneously found that the pictorial history showing multi-year inundation and a total inundation in 2009 contributed to the culvert’s damage.  The Applicant stated that its audit records and engineer reports show that the culvert had no instances of damage due to the inundation of flood waters until the declared disaster (FEMA-1983-DR-MS). 

On February 14, 2014, the Region IV Regional Administrator (RA) denied the first appeal based on his determination that the water levels were sufficiently low when FEMA drafted PW 209; therefore, FEMA staff would have been able to identify a collapsed portion of the box culvert and any embankment subsidence.  The RA also noted that PW 209 included a photo of the project that indicated the floodwaters had receded and that the claimed damage was not visible.  Finally, the RA stated that the Applicant provided no documentation in addition to its appeal letter to support its position.   

Second Appeal

In its second appeal, dated May 27, 2014, the Applicant requests additional scope of work in the amount of $1,106,214.49 be added to PW 209 or, in the alternative, FEMA obligate $719,192.77 for a substitute bridge to serve as Stafford Act § 406 Hazard Mitigation.  The Applicant assert that, after Disaster 1983, it repaired the facility as it had after previous floods.  However, the downstream portion of the facility continued to sink and slough.  The Applicant provides signed documents from the County Engineer and County Road Manager.  The County Engineer’s letter states that Disaster 1983 caused damage to the culvert.[1]  The letter states, “[a]pparently the apron and downstream section of the triple barrel box bridge was undermined when the water went out of the Narrows as evident by the loss of section of the roadway at the discharged end of the box.  This allowed the barrel joint to shift and allow further undermining.”[2]  The County Road Manager’s memorandum states, “[b]ased upon my experience, the damage to the culvert was caused by an extremely high water level and it could take up to twelve months for the damage to be noticeable.”[3]

On October 14, 2014, FEMA hosted a conference call with the Applicant and Grantee.  Following the conference call, the Applicant submitted additional documentation, including maintenance records, inspection reports, and additional pictures of the culvert.

Discussion

Scope of Work

Pursuant to the Stafford Act § 406, FEMA Public Assistance funding may be available to a state or local government for the repair, restoration, reconstruction or replacement of damaged or destroyed facilities under a major disaster.[4]  In addition, Title 44 Code of Federal Regulations §  206.223(a)(1) states that an item of work must be required as the result of the disaster event in order to be eligible for Public Assistance funding.[5]  FEMA policy provides that the scope of work describes the work that is necessary to repair the damage or replace the facility and provides the cost estimate.[6]   If additional damage is discovered once the PW is completed, the Applicant must document the damage, show how the damage is disaster-related, and request a re-inspection by FEMA.[7]

In October 2011, FEMA conducted a site visit of the facility.  During the site visit, FEMA did not document damage to the culvert.  The Applicant asserts that additional damage caused by FEMA-DR-1983-MS was latent and not discovered until after the completion of PW 209.  The Applicant requested a change in scope of work to address additional damage to its culvert in August 2012.  While the Applicant did document the additional damage, it failed to demonstrate that the additional damage is disaster-related.  Neither the County Engineer’s letter nor the County Road Manager’s memorandum provide analysis or explanation as to the conclusions that:

1) FEMA-DR-1983-MS caused damage to the culvert and 2) it could take up to twelve months to detect the additional damage.  In addition, the County Engineer’s letter acknowledges the facility experienced an inundation of water after floods during the previous five years.[8]  If the Applicant’s assertion regarding latent damage is correct, it is feasible that any or all of these flooding incidents contributed to the culvert’s damage.  Moreover, the additional documentation that the Applicant provided does not conclusively demonstrate that the damage was disaster-related.  The last inspection report on record was issued in 2006, five years before the flood and six years before the damage occurred.  Several intervening flood events could have resulted in damage to the culvert.  Without more definite evidence, such as an engineering report, that connects the damage to the culvert to this particular disaster, FEMA cannot provide funding for the repair work requested by the Applicant.       

In June 2012, the Applicant took pictures of the culvert and road atop the culvert.  The Applicant submitted these pictures to refute the RA’s determination that photos taken during the site visit demonstrate that waters had receded and that the claimed damage was not visible.  The Applicant’s June 2012 pictures show cracks and severe deterioration of the road above the culvert.  However, this damage is not present in FEMA’s October 2011 pictures.  FEMA’s pictures do not demonstrate that the road was inundated with water, and, in fact, support the RA’s assertion that “water levels were sufficiently low… to identify a collapsed portion of the box culvert and any embankment subsidence.”  Considering that the pictures taken by FEMA in October 2011 were taken closer to the disaster event than the pictures taken by the Applicant in June 2012, FEMA’s reliance on the October 2011 pictures was appropriate.  Based on the pictorial evidence and the lack of documentation demonstrating that the culvert was damaged by the declared disaster, FEMA is unable to approve a revised scope of work for PW 209.    

406 Hazard Mitigation

FEMA policy states that funding for Stafford Act § 406 Hazard Mitigation measures may be approved if the original facility and its function will be restored and the mitigation work is “still needed, is technically feasible, and will be performed as part of the overall project.”[9]  The Applicant completed the work outlined in PW 209 in September 2011.  Since the project has been completed and FEMA is not approving the revised scope of work, the hazard mitigation work would not be performed as part of the overall project and is therefore ineligible.

Conclusion

Pursuant to 44 C.F.R. § 206.223, the Applicant failed to demonstrate that the damage to its culvert is the result of FEMA-DR-1983-MS.  Accordingly, FEMA is unable to approve a revised scope of work for PW 209.  In addition, because the project has been completed, FEMA cannot fund mitigation measures to replace the culvert with a bridge.     


[1] Letter from County Engineer, Jordan, Kaiser & Sessions, LLC to County Administrator, Adams County (May 16, 2014) [hereinafter Letter from County Engineer].

[2] Id.

[3] Memorandum from Road Manager, Adams County, MS Road Department to County Administrator, Adams County (May 14, 2014).

[4] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 102, 42 U.S.C. § 5172 (2007).

[5] 44 C.F.R. § 206.223(a)(1) (2011).

[6] See Public Assistance Guide, FEMA 322 at 101 (June 2007).

[7] Id.

[8] See Letter from County Engineer.

[9] Recovery Policy RP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act) at 4 (Mar. 30, 2010) (emphasis added).

22 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
University of Iowa
Disaster Number: 
1763-DR-IA
DSR: 
10546
Date Signed: 
Monday, April 6, 2015
PA ID: 
103-03027-00
Summary/Brief: 

Conclusion:  FEMA grants a time extension to restore the convenience store.  The RA has granted a time extension to complete repairs to the Mayflower Dormitory, and the Applicant has shown that the store has not yet been restored to the pre-disaster design, function, and capacity.

Summary Paragraph

Severe storms and flooding from DR-1763 damaged building contents at the University of Iowa Mayflower dormitory on May 25 to August 13, 2008.  FEMA prepared PW 10546 to replace the contents of the building.  The Applicant submitted a time extension request to complete the replacement of building contents.   FEMA denied the time extension citing that the hazard mitigation proposal should not impact the replacement of the contents.  In a first appeal letter, the Applicant appealed FEMA’s denial and requested a time extension through February 28, 2015.  The Applicant cited PW 1102 for the Mayflower dormitory building repairs, which received a time extension through January 31, 2015 and stated that it wanted to wait until the repairs were complete to replace the contents.  The Regional Administrator (RA) denied the first appeal based upon the fact that PW 1102 states that the building repairs were completed prior to January 2009.  The RA states that a time extension for PW 1102 was approved because a Hazard Mitigation Proposal was recently approved, not because the repair work was ongoing.  The RA maintained that the convenience store (C-Store) was permanently restored to the pre-disaster function, noting that the Applicant made repairs to the C-Store and “has continued to operate the facility for more than five years.”  The Applicant submitted a second appeal stating that a temporary C-Store was built for the immediate school year and that permanent repairs are still needed to restore it to the pre-disaster condition.

Authorities and Second Appeals

  • 44 C.F.R. § 206.204(d).
  • 44 C.F.R. § 206.226.
  • PA Guide, at 29, 139.

Headnotes

  • 44 C.F.R. § 206.204(d) and the Public Assistance Guide provide the RA the authority to grant time extensions appropriate to the situation.
  • 44 C.F.R. § 206.226 and the Public Assistance Guide state that work to restore eligible facilities to the pre-disaster design, function, and capacity as they existed immediately prior to the disaster is eligible.
    • The Applicant demonstrated through a design report that the C-Store has not yet been restored to the pre-disaster design, function, and capacity.
Letter: 

April 06, 2015

Mark Schouten
Administrator
Iowa Homeland Security and Emergency Management Division
7105 NW 70th Avenue
Camp Dodge, Bldg. W-4
Johnston, Iowa 50131-1824

Re:  Second Appeal – University of Iowa, PA ID 103-03027-00, FEMA-1763-DR-IA, Project Worksheet 10546 – Time Extension - Work

Dear Mr. Schouten:

This is in response to your letter dated April 10, 2014, which transmitted the referenced second appeal on behalf of the University of Iowa (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of a time extension to replace the contents of the Mayflower dormitory.

As explained in the enclosed analysis, I have determined that the Applicant has provided sufficient justification to warrant a time extension.  Accordingly, I am granting the appeal.  By copy of this letter, I am requesting the Regional Administrator to take appropriate action to implement this determination.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division                                                                      

Enclosure

cc: Beth Freeman
      Regional Administrator
      FEMA Region VII

Analysis: 

Background

Severe storms and flooding from FEMA-1763-DR-IA damaged building contents at the University of Iowa (Applicant) Mayflower dormitory on May 25 to August 13, 2008.  Floodwaters inundated the building, flooding the first floor with three feet of water and completely submerging the basement and sub-basement.  On June 16, 2010, FEMA prepared PW 10546 to replace the contents of the Mayflower dormitory, including commercial kitchen shelving, kitchen equipment, an ice cube maker, and an expresso machine.  The cost was $96,942.00 in contents and $850.00 in Direct Administrative Costs (DAC).  Anticipated National Flood Insurance Program proceeds were deducted in the amount of $96,942.00.  As a result, FEMA obligated $850.00.  Work was to be completed by May 27, 2012.

In a May 31, 2011 letter, the Applicant requested a time extension until September 30, 2013 to complete the work.  The same day, the Grantee granted a time extension until May 27, 2012 and requested that FEMA extend the deadline until September 30, 2013 due to the size and complexity of the scope of work of the project.  On August 31, 2011, FEMA denied the time extension request citing that the repairs to the dormitory were completed in January 2010 and a recently submitted Hazard Mitigation Proposal (HMP) for the Mayflower Dormitory building PW should not impact the replacement of the building contents.[1]  On September 1, 2011, the Grantee notified the Applicant of the time extension denial.  The Applicant submitted a second time extension request on July 10, 2012.  On April 11, 2013, FEMA denied this second time extension request.

First Appeal

In a first appeal letter submitted June 5, 2013, the Applicant appealed FEMA’s denial of the time extension and requested a time extension through February 28, 2015.  The Applicant states that temporary repairs were made to the dormitory “to quickly accommodate immediate needs and to be operational in time for fall classes in 2008.”  The Applicant was “waiting for the final permanent recovery and mitigation to be approved before purchasing the contents.”  FEMA PW 1102, version four, captures the permanent work to repair the convenience store (C-Store)[2] on the first floor of the Mayflower dormitory.  The Applicant seeks to purchase the building contents in connection with the permanent repairs as it is more costly to purchase and store the contents before the building is ready for them.  Reporting of the completion of the permanent recovery and mitigation projects for the Mayflower dormitory is scheduled to occur in April, 2015 and the Applicant plans to install the contents after the work is complete.

The Applicant states that it did not appeal the first time extension denial because it seemed insignificant “in light of the magnitude of the ongoing issues with the flood recovery and mitigation construction project” and the Applicant “believed that the denial was based upon a misunderstanding of the project.”[3]  The Applicant “was under the impression that the denial would be resolved logically in connection with the final resolution of repair and mitigation issues and a new extension on those projects.”[4]

On July 16, 2013, the Grantee forwarded the first appeal to FEMA, supporting the appeal.  The Grantee points out that while FEMA states that the permanent repairs to the building were completed in January 2010, an April 15, 2013 letter from the Applicant requested a time extension until May 31, 2014 for the permanent repairs to the Mayflower dormitory on PW 1102.

On August 5, 2013, FEMA submitted an RFI requesting the permanent work completed to date, the date the approved mitigation was started, and the work remaining to complete the mitigation.  FEMA also asked for the contents purchased as of May 27, 2012, which was the current work deadline.  The Applicant responded on September 5, 2013 with a timeline, a list of contents purchased, and a list of contents to be purchased.  The list of contents purchased includes “items that were not identified/obligated on PW 10546 [version 0], as noted in writing by the University when the Project Worksheet was signed on June 24, 2010.”[5]  The timeline provided by the Applicant is reflected below.

  • “August 2008 – Completed immediate recovery sufficient to reoccupy student dorm rooms.  Included building mechanical and control systems, fire protection system, IT service, building electrical supply, security system, electrical distribution to the southern [third] of the lobby, four elevators, two staff apartments, replaced  first floor doors and hardware, repaired broken exterior windows and repaired student mailbox/post office.”[6]
  • “January 2009 – Completed recovery of the north half of the lobby including front desk, staff offices and remaining 14 student/staff apartments located on the first floor and created temporary C-[S]tore.  No other construction work has been done since January 2009.”[7]
  • “July 2013 – All remaining permanent recovery and flood mitigation work approved and obligated by FEMA.  This includes the construction of a permanent and portable flood wall system, de-watering wells, storm sewer and storm water pumping station, back-up electrical generators for the mitigation systems, permanent recovery of the C-Store, removal of the temporary C-Store and restoration of the remaining lobby where the C-Store is currently located.  This project was publicly bid on July 30, 2013 and … construction activities will begin the first two weeks of September.”[8]
  • “[Work] is scheduled to be completed on or before January 31, 2015.”[9]

On December 16, 2013, Region VII issued a first appeal response denying the appeal based upon the fact that PW 1102, written for the Mayflower dormitory, states that the building repairs were completed prior to January 2009.  The Regional Administrator (RA) reasoned that since the repairs to the building were complete, there is no reason to delay purchasing the contents.  The RA stated that time extensions for the Mayflower dormitory in PW 1102 were approved because the Hazard Mitigation Proposal was recently approved, not because the repair work was ongoing.  The RA maintained that the initial repairs to the C-Store restored it to the pre-disaster function and were therefore permanent repairs.  This is supported by the assertion that the Applicant made repairs to the C-Store and “has continued to operate the facility for more than five years.”[10]

Second Appeal

On February 13, 2014, the Applicant submitted a second appeal for a time extension for PW 10546.  To prove that the repairs to the Mayflower dormitory were not completed prior to January 2009, the Applicant cites a February 8, 2010 consultant report that states “[t]he remaining component to recover is the Convenience Store.”[11]  The Applicant goes on to explain that a September 9, 2011 letter to the Grantee addresses the discrepancies found in version four of PW 1102.  “In the letter, the [Applicant] notes that the initial work performed to re-open the Mayflower dormitory … was not the permanent repairs to recover the building to its condition prior to the flood and that this work was also not captured in the project worksheet.”  The Grantee responded to the Applicant, “suggesting that when the project worksheet was obligated, [it] could be appealed.”  During this period, there were many discussions between FEMA, the Grantee, and the Applicant.  The Applicant was told that discrepancies could be resolved at closeout, and, therefore, it did not appeal version four of the PW.  While most of the contents listed in PW 10546 have already been ordered, the remaining contents to be ordered are associated with the C-Store.  “The final work to reconfigure the C-[S]tore back to the format that existed prior to the flood, and install the contents … [is] to be completed with the construction project for the building.”

On April 10, 2014, the Grantee forwarded the second appeal to FEMA and supported the Applicant’s position.  The Grantee states that FEMA “denied the [Applicant’s] … [first] appeal due to the apparent misunderstanding that permanent repairs to the facility were completed.”  “As explained by the [Applicant] in an email dated April 4, 2014 … a temporary Convenience Store was erected within the lobby as the permanent repairs could not be completed until the design of the permanent repairs to the facility as well as the HMP were finalized. … The permanent repairs to the Convenience Store and lobby are ongoing to date.”  Although PW 1102 does not mention the construction of a temporary Convenience Store, the Applicant pointed this out to the Grantee and was under the impression this discrepancy could be resolved at closeout.  The Grantee noted that page three of the Schematic Design Report, Mayflower Hall – Permanent Flood Recovery and Mitigation report dated July 3, 2012, also indicates that permanent repairs to the Convenience Store are still needed:

“Recovery of the majority of the damaged interior to the Mayflower was completed immediately after the flood to allow the building to reopen for the 2008 Fall School Semester.  The only spaces remaining to be recovered are the Convenience Store, Vending and Lounge areas.  Recovery for this project will include restoring these spaces to pre-flood conditions.”

On April 17, 2014, Region VII forwarded the second appeal to FEMA HQ.

Discussion

44 C.F.R. § 206.204(d) states that “[r]equests for time extensions beyond the Grantee’s authority shall be submitted by the Grantee to the Regional Administrator” with a “detailed justification for the delay and a projected completion date.”[12]  The Applicant requested a time extension through February 28, 2015 and explained that the delay was so that building contents can be purchased in conjunction with permanent repairs to the C-Store since the RA granted a time extension until January 31, 2015 for PW 1102 to complete the permanent repairs.  The RA has authority to grant extensions appropriate to the situation.[13]  The RA claims that the Applicant has completed all permanent repairs to the facility and the time extension to complete the permanent repairs was granted solely due to the Applicant’s Hazard Mitigation Proposal. 

44 C.F.R. § 206.226 states that “[w]ork to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster … is eligible.”[14]  Permanent work includes restoring the facility back to its pre-disaster design, function, and capacity.[15]  In the second appeal, the Applicant provides a Schematic Design Report that shows the current location of the interim C-Store and the pre-disaster location of the store.[16]  The interim C-Store is smaller, located in a different section of the lobby of the Mayflower Dormitory, and is displacing a space that served as a lounge prior to the disaster.[17]  Therefore, permanent repairs are still needed to restore the Mayflower Dormitory lobby and the C-Store to the pre-disaster design, function, and capacity.  It is not reasonable to require the Applicant to purchase building contents before the building is restored.  Even though the first appeal decision states that the time extension for permanent repairs for PW 1102 was solely due to an HMP and permanent repairs to the C-Store were completed, this limitation was the result of a factual misunderstanding.  The Schematic Design Report delineates the temporary nature of the C-Store and consequently justifies granting an extension for all building repairs.  Since the RA granted a time extension for the building repairs, a time extension should have also been granted for the building contents.

Conclusion

The RA has granted a time extension for the Applicant to complete repairs to the Mayflower Dormitory.  The Applicant has shown that the convenience store has not yet been restored to the pre-disaster design, function, and capacity.  Therefore, it is appropriate to the situation for FEMA to have granted a time extension until February 28, 2015 to restore the convenience store contents.  Due to the timeframe in which FEMA responded to this appeal, if a further time extension is required, the Applicant should submit one and the RA should consider it.  Such an extension is warranted.         



[1] PW 1102, for permanent repairs to the Mayflower Dormitory, states that work was completed by Jan. 1, 2009.  Upon further review, the work had not been completed at any of the identified completion dates.

[2] In this document, C-Store and Convenience Store are used interchangeably.

[3] First Appeal Letter from Chief Risk Officer, University of Iowa, to Alternate Governor’s Authorized Representative, Iowa Homeland Security and Emergency Management Division Recovery Bureau, at 1 (June 5, 2013).

[4] Id.

[5] RFI Response from University of Iowa to FEMA, at 2 (Sept. 5, 2013).

[6] Id. at 1.

[7] Id.

[8] Id.

[9] Id.

[10] FEMA First Appeal Analysis, University of Iowa, FEMA-1763-DR-IA, at 2 (Dec. 16, 2013).

[11] While the Applicant did not provide a copy of the February 8, 2010 report, a revised report was provided.  See Schematic Design Report, Mayflower Hall – Permanent Flood Recovery and Mitigation, at 3 (July 3, 2012).

 

[12] 44 C.F.R. § 206.204(d)(2) (2007).

[13] Public Assistance Guide, FEMA 322, at 139 (June 2007) [hereinafter PA Guide].

[14] 44 C.F.R. § 206.226 (2007).

[15] PA Guide, supra note 13, at 29.

[16] See Schematic Design Report, Mayflower Hall – Permanent Flood Recovery and Mitigation, at 5 (July 3, 2012).

[17] Id.

 

17 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Clarksville Gas and Water
Disaster Number: 
1909-DR-TN
DSR: 
2418
Date Signed: 
Tuesday, March 31, 2015
PA ID: 
125-U00B3-00
Summary/Brief: 

Conclusion:  Pursuant to 44 C.F.R. § 206.223(a), the Applicant sufficiently demonstrated that it was legally responsible for two exterior high-voltage transformers and related switches located within its wastewater treatment plant at the time of the disaster.  Accordingly, the cost associated with replacing the transformers and related switches is eligible for PA funding. 

Summary Paragraph

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  FEMA prepared PW 2418 to document damage to the Administration, Laboratory, and Mechanical Building (Facility) within the Applicant’s wastewater treatment plant.  FEMA denied funding for the Facility because, using GPS coordinates, it determined that the Facility was found to be within the boundaries of a United States Army Corps of Engineers (USACE) easement.  In the first appeal, the Applicant asserted that the easement did not contain an indemnification provision in favor of the United States.  In addition, the Applicant asserted that two transformers and related switches were excluded from the scope of work in PW 2418, but were eligible for PA funding.  As such, the Applicant requested an additional $82,000.00 in funding for the cost of the transformers and related switches.  The Regional Administrator (RA) partially approved PW 2418 for $3,005,187.90 for replacement of the Facility.  However, the RA determined that the Applicant was not legally responsible for the transformers and related switches and denied funding associated with their replacement.  In the Applicant’s second appeal, it asserts that it owned the transformers; thus, it is legally responsible for them.


Authorities and Second Appeals

  • Stafford Act § 406, 42 U.S.C. § 5172.
  • 44 C.F.R. § 206.223(a).
  • OMB Circular A-87, 2 C.F.R. § 225.
  • PA Guide, at 23, 30-31.

Headnotes

  • Pursuant to 44 C.F.R. § 206.223(a), an eligible item of work must be the legal responsibility of the Applicant. 
  • In addition, the PA Guide provides that legal responsibility can be conveyed through a lease or other legal instrument.
    • Based on a signed and notarized affidavit and other supporting documents, the Applicant demonstrated that it was legally responsible for the replacement of the transformers and related switches.     
  • Pursuant to OMB Circular A-87, allowable costs must be, among other things, reasonable.
    • Using RS Means, FEMA established that the Applicant’s request for $82,000.00 to replace two high-voltage transformers and related switches is reasonable. 
Letter: 

March 31, 2015

David Purkey
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee 37204-1502

Re: Second Appeal – Clarksville Gas and Water, PA ID 125-U00B3-00, FEMA-1909-DR-TN, Project Worksheet (PW) 2418 – Legal Responsibility

Dear Mr. Purkey:

This is in response to a letter from your office dated July 10, 2014, which transmitted the referenced second appeal on behalf of Clarksville Gas and Water (Applicant).  The Applicant appealed a total of seven PWs; the remaining PWs will be addressed in separate determination letters.  Regarding PW 2418, the Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $82,000.00 in Public Assistance (PA) funding for two exterior high-voltage transformers and related switches located within its wastewater treatment plant.

As explained in the enclosed analysis, I have determined that, pursuant to 44 C.F.R. § 206.223, the Applicant is legally responsible for the transformers and related switches.  In addition, the Applicant’s request for $82,000.00 in PA funding to replace the transformers and related switches is reasonable.  Therefore, I am granting the appeal.  By copy of this letter, I am requesting the Regional Administrator take appropriate action to implement this determination. 

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/


William W. Roche
Director
Public Assistance Division

Enclosure

cc:  Garcia Szczech
       Regional Administrator
       FEMA Region IV

Analysis: 

Background

Beginning on April 30, 2010, severe storms, tornadoes, heavy rains, high winds, flooding, and flash flooding affected the City of Clarksville.  FEMA prepared PW 2418 to document disaster-related damage to the Administration, Laboratory, and Mechanical Building (Facility) within the Clarksville Gas and Water’s (Applicant) wastewater treatment plant.  Pursuant to FEMA policy regarding repair versus replacement, FEMA determined that the Facility was eligible for replacement.  During the preparation of PW 2418, FEMA, using GPS coordinates and United States Army Corps of Engineers (USACE) overlay flooding boundary maps, determined that the Facility was located within a USACE easement.  Subsequently, FEMA denied all costs to replace the Facility. 

First Appeal

In the first appeal letter, dated June 24, 2011, the Applicant asserted that, while the Facility was located within the USACE easement boundary line, the easement did not include a “hold harmless” provision in favor of the United States Government.  In addition, the Applicant asserted that the easement did not preclude FEMA from providing PA funding for disaster-related claims.  Since FEMA previously determined that the work was a result of the disaster and otherwise eligible for PA funding, the Applicant argued that $3,005,187.90 should be reinstated to PW 2418.  The Applicant also requested additional funding for two exterior high-voltage transformers and related switches excluded from the original scope of work in PW 2418. 

In a letter dated May 13, 2014, the Region IV Regional Administrator (RA) partially granted the appeal, approving $3,005,187.90 for costs associated with the replacement of the Applicant’s Facility, because he concurred with the Applicant’s position that the provisions of the USACE easement did not apply to the issue of eligibility regarding PW 2418.  However, the RA denied $82,000.00 in costs associated with the two transformers and switches maintained by the Applicant because it could not demonstrate ownership.  The RA stated, “[t]he appeal… did not provide the level of information necessary to make eligibility determinations on the transformers and switches, therefore these costs have been determined ineligible unless the Subgrantee is prepared to provide ownership documents at project close-out.”

Second Appeal

In the second appeal, dated June 30, 2014, the Applicant again requests reimbursement for the two transformers and related switches in the amount of $82,000.00.  With the second appeal, the Applicant provides a notarized affidavit from the Clarksville Department of Electricity’s (CDE) General Manager and other documentation to demonstrate legal responsibility.[1]  In the affidavit the General Manager explains that CDE conveyed the transformers to the Applicant in June 2000.  

Discussion

Legal Responsibility

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), Section 406, authorizes FEMA to make contributions to an eligible Applicant to restore eligible facilities on the basis of the design of such facilities as they existed immediately prior to the disaster.[2]  In addition, if equipment and furnishings located within a facility are damaged beyond repair, comparable items are eligible as replacement items.[3]  Pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223(a), an eligible item of work must be required as the result of the disaster event, be located within a designated disaster area, and be the legal responsibility of the applicant.[4] The Applicant has fulfilled the first two requirements of § 206.223(a); the issue on appeal is whether the Applicant is legally responsible for the replacement of the transformers.  The legal responsibility to repair a facility usually resides with the owner of the facility, unless the owner has transferred the responsibility to another party by lease or other legal instrument.[5]

The Applicant asserts that it purchased the transformers from CDE in 2000 as part of a renovation project.[6]  As Work Order Number 1215, dated February 22, 2001, demonstrates, the two transformers at issue were located within the Applicant’s wastewater treatment plant.[7]  The Applicant also submitted a notarized affidavit from CDE’s General Manager, in which the General Manager affirms that CDE sold the two transformers to the Applicant prior to the disaster.  In addition, the General Manager states that a standard CDE practice is that all equipment behind the primary electric meter belongs to the customer (i.e., in this instance, the Applicant).  The Applicant admits that copies of the invoices related to the purchase cannot be located; however, the Applicant submitted records that summarize the invoices related to the sale, including History Inquiry statements.[8]  Finally, the Applicant provides a 2001 memorandum of costs associated with the wastewater treatment plant expansion project.  It states, “[t]his cost includes poles, wire, underground cables, and metering equipment to complete the project.” 

FEMA notes that the Applicant has not provided precise documentation demonstrating its legal responsibility for the two transformers for which it seeks reimbursement.  However, FEMA also recognizes that precise documentation is not always available.  Based on the totality of the information provided (i.e., the location of the transformers behind the Applicant’s Facility, the signed and notarized affidavit, Work Order Number 1215, and the History Inquiry statements), FEMA concludes that the Applicant’s documentation is sufficient to demonstrate that it was legally responsible for the transformers at the time of the disaster.  As such, replacement of the transformers is eligible for PA funding.

Allowable Costs

Pursuant to the Stafford Act § 406, FEMA is authorized to provide reimbursement for the associated expenses incurred by a local government during the repair, restoration reconstruction, or replacement of a facility damaged as the result of a declared disaster.[9]  Generally, costs that can be directly tied to the performance of eligible work are eligible for FEMA reimbursement.[10]  However, these costs must, among other things, be reasonable and necessary to accomplish the work, comply with applicable federal, state, and local laws, regulations and procurement requirements, and be adequately documented.[11]  Although the Applicant did not submit invoices, receipts, or other documentation that state the cost of the two transformers, FEMA researched the average cost of transformers[12] and determined that the cost requested by the Applicant is reasonable.[13]  Accordingly, the cost to replace the transformers in the Applicant’s Facility is eligible for PA funding.

Conclusion

The Applicant provided sufficient documentation to demonstrate the replacement of two transformers and related switches is eligible for PA funding.  In addition, the requested cost associated with these items is deemed reasonable.   



[1] General Manager Affidavit, notarized June 23, 2014 [hereinafter Affidavit].

[2] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406, 42 U.S.C. § 5172 (2007).

[3] See 44 C.F.R. § 206.226(h) (2009).

[4] 44 C.F.R. § 206.223(a).

[5] See generally Public Assistance Guide, FEMA 322, at 23, 30-31 (June 2007) [hereinafter PA Guide].

[6] See Affidavit (stating that, in conjunction with 2000 and 2001 upgrades, the Applicant asked CDE to move the primary electric meter at the wastewater treatment plant, placing it before two transformers and switch gear equipment servicing the plant.)

[7] Second Appeal, Clarksville Gas and Water, FEMA-1909-DR-TN, at Exhibit 2 (June 30, 2014).

[8] Id.

[9] Stafford Act § 406(a)(1)(A), 42 U.S.C. § 5172.

[10] PA Guide, at 40.

[11] See Office of Mgmt. & Budget, Exec. Office of the President, OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, at Attachment A  (2004) (codified at 2 C.F.R. § 225).

[12] Using RS Means, FEMA researched the average cost for high-voltage transformers.  The range in cost for these transformers is from $20,000 to $147,000 per transformer.  The Applicant requested $41,000 per transformer which falls on the low end of that range. 

[13] See PA Guide, at 41  (explaining that FEMA will generally analyze cost reasonableness by use of historical documentation for similar work, average costs for similar work in the area, published unit costs from national estimating databases, and FEMA cost codes).

 

7 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Nashville-Davidson County
Disaster Number: 
1909-DR-TN
DSR: 
PWs 2244, 2636, and 4669
Date Signed: 
Friday, March 27, 2015
PA ID: 
037-52004-00
Summary/Brief: 

Conclusion:  The Applicant’s insurance policy does not provide coverage for the damaged elements of water system tunnels and a recreation trail for which three Project Worksheets were written; therefore, the reductions in the PWs for anticipated insurance proceeds should be reinstated. DAC remains ineligible.

Summary Paragraph

Between April 30, 2010 and May 18, 2010, severe storms, flooding, straight-line winds, and tornadoes caused damage throughout the state of Tennessee, resulting in a major disaster declaration (FEMA-DR-1909-TN).  Floodwaters caused damage to electrical components of water system tunnels and a recreation trail operated by the Metropolitan Government of Nashville-Davidson County (Applicant).  FEMA prepared two Project Worksheets (PWs) to address the damage to the tunnels, and one PW to address the damage to the recreation trail and Direct Administrative Costs (DAC).  During project formulation, FEMA determined that the Applicant’s property insurance policy provided coverage for the damage to the tunnels and trail and, accordingly, determined that the Applicant was not eligible for Public Assistance funding to restore the damage. FEMA also adjusted DAC costs for PW 4669.  The Applicant appealed these decisions, asserting that, under its insurance policy, the tunnels and trails should be considered “Infrastructure” and that the policy does not afford “Infrastructure” coverage when the damage is caused by flood.  The Region IV Regional Administrator denied the appeals, concluding that policy covered the damage because the damage was located at an “Insured Location” and/or “Miscellaneous Unnamed Location” under the policy and that “Infrastructure” coverage includes damage caused by flood.  The RA also denied DAC as unreasonable and not supported. On second appeal, the Applicant reasserts that its policy does not provide coverage for “Infrastructure” when the damage is caused by flood.

Authorities

  • Stafford Act § 312(a), 42 U.S.C. § 5155(a)
  • Public Assistance Guide, FEMA 322 at 119 (June 2007)
  • DAP9525.9, Section 324 Management Costs and Direct Administrative Costs, at 6.

Headnotes

  • Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, an applicant for federal disaster assistance cannot obtain assistance with respect to any part of a loss if the applicant has received financial assistance “under any other program or from insurance or any other source.”  Thus, under the Public Assistance Program, FEMA is required to reduce the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.
    • The Applicant’s insurance policy does not provide coverage for the damage under the two PWs written for the tunnels and the PW written for the recreation trail.  Therefore, the reductions in the PWs for anticipated insurance proceeds was not warranted.
  • DAP9525.9 states that administrative   costs must be directly attributable to the project and must be reasonable.
Letter: 

March 27, 2015


James H. Bassham
Director
Tennessee Emergency Management Agency
3041 Sidco Drive, P.O. Box 41502
Nashville, Tennessee  37204

Re: Second Appeals—Nashville-Davidson County, Insurance Reductions, FEMA-1909-DR-TN, Project Worksheets 2244, 2636, and 4669

Dear Mr. Bassham:

This is in response to a letter from your office dated September 18, 2012, which transmitted the referenced second appeal on behalf of the Metropolitan Government of Nashville-Davidson County (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency (FEMA) reduction of anticipated insurance proceeds from the amounts awarded under three Project Worksheets addressing damage to water system tunnels and a recreation trail caused by flooding in 2010.

As explained in the enclosed analysis, the Applicant’s insurance policy does not provide coverage for the damage under the three PWs.  Consequently, that portion of the Applicant’s appeal is granted and $213,401.63 reductions to the subject named Project Worksheets should be restored. However, the applicant did not provide justification for its Direct Administrative Costs, and therefore that portion of the appeal is denied.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: Garcia Szczech
      Regional Administrator
      FEMA Region IV


 

Analysis: 

Background

Between April 30, 2010 and May 18, 2010, severe storms, flooding, straight-line winds, and tornadoes caused damage throughout the state of Tennessee. A major disaster (FEMA-DR-1909-TN) was declared on May 4, 2010.  Floodwaters from the Cumberland River caused damage to a water system tunnel and recreation trail operated by the Metropolitan Government of Nashville-Davidson County (Applicant). 

The floodwaters entered the Applicant’s steam and chilled water system tunnels located approximately 30 feet under the streets of Nashville, Tennessee. The tunnels supply steam and chilled water energy to businesses in downtown Nashville. The tunnels also contain  a “leaky feeder” communication system required by federal standards for the safety of personnel that enter the tunnels.  The floodwaters damaged splitters, repeaters, a transmitter, a PCB assembly, a handset, a rack assembly, a radio, and cable associated with the communication system.  The Cumberland River flooding also damaged the tunnels’ main power system, ventilation systems, lighting systems, sump pumps, and a meter that monitors energy use.

FEMA prepared two Project Worksheets (PWs) addressing the damage to the tunnels: PW 2244 for the leaky feeder communications system and PW 2636 for the tunnels’ power, lighting, and ventilation systems.  During project formulation, FEMA determined that the Applicant’s property insurance policy provided coverage for the damage on the PWs and, accordingly, determined that the Applicant was not eligible for Public Assistance funding to restore the damage.  FEMA deducted $41,272.44 in anticipated insurance proceeds from PW 2244, leaving only direct administrative costs applicable to the PW, and deducted $170,256.00 in anticipated proceeds from PW 2636.

Separately, floodwaters from Mill Creek overtopped the Mill Creek Greenway Trail, a 10-foot-wide trail with two inches of asphalt surface and six inches of aggregate base. The floodwaters washed out the trail embankment and the aggregate base at four locations, leaving the asphalt surface unsupported, causing it to collapse.  FEMA prepared PW 4669 to address the damage to the trail, and, again, during project formulation, determined that the Applicant’s property insurance policy provided coverage for the damage.  FEMA deducted $1,873.19 in anticipated insurance proceeds from PW 4669, as well as $1,385.06 in direct administrative costs (DAC), leaving $576.59 in eligible DAC. 

First Appeal

On May 27, 2011, the Applicant submitted separate first appeals to the Grantee challenging FEMA’s reductions to PWs 2244 and PW 2636 for anticipated insurance proceeds. On May 27 and June 8, 2011 the Applicant submitted two additional appeals challenging FEMA’s $1,385.06 DAC reduction and $1,873.19 anticipated insurance proceeds reduction for PW 4669.  In the appeals for PWs 2244 and 2636, the Applicant asserted that its insurance policy did not cover the damage to the water system tunnels because the tunnels should be considered “Infrastructure” under the policy and that the policy does not afford “Infrastructure” coverage when the damage is caused by flood.  In the appeal for PW 4669, the Applicant asserted the same argument—that the damage to the recreation trail should be considered “Infrastructure” under the policy and, therefore, not covered.

The Region IV Regional Administrator (RA) denied the appeals for PWs 2244 and 2363 in a single response dated November 10, 2011.  The RA determined that the policy covered the damage because it was located at an “Insured Location” and/or “Miscellaneous Unnamed Location” under the policy.  The RA also cited an analysis prepared by the Applicant’s insurance adjuster indicating that the policy does allow coverage for “Infrastructure” damage caused by flood—when the damage is at a “Location” under the policy’s “Schedule of Locations.”  The RA also issued two responses to the PW 4669 appeals. The first response was dated November 10, 2011, similarly noting that the policy allows for coverage for “Infrastructure” damage caused by flood and that the policy provides this coverage for “Infrastructure” when the damage is located within 1,000 feet of a location listed on the “Schedule of Locations.”  The RA concluded that the damage to the Mill Creek Greenway Trail was located within 1,000 feet of such a location and, therefore, covered by the policy. The second response, addressing DAC, was dated April 23, 2012. The RA concluded that the total claimed amount of $1,961.64 for DAC was unreasonable for asphalt surface failures on a project estimated at $2,677.88. The RA also stated that based on its appeal letter, the Applicant requested DAC to track procurement and payment activities, payments to vendors and similar procurement actions that were not directly attributable to preparing and documenting the PW and, therefore, not eligible for DAC reimbursement.

Second Appeal

The Applicant submitted a second appeal for PWs 2244 and 2636 and a second appeal for PW 4669 in letters dated July 23, 2012.  The Applicant asserts that the damaged tunnels are “Infrastructure” not located at a “Location” listed in the policy’s “Schedule of Locations” and that the Regional Administrator’s conclusion that being within 1,000 feet of a listed location is sufficient for coverage does not apply to “Infrastructure.”  The Applicant states that there is only coverage for damage to “Infrastructure” caused by flood when the “Infrastructure” is located at a “Location” listed on the policy’s “Schedule of Locations.”  Because the tunnels are not so listed, the Applicant argues, the policy does not cover the damage addressed in PWs 2244 and 2636.  The Applicant’s second appeal for PW 4669 asserts the same argument—that because the recreation trail is not a “Location” listed on the policy’s “Schedule of Locations,” there is no coverage for the flooding damage to the trail.

The Tennessee Emergency Management Agency (Grantee) transmitted the second appeal for PWs 2244 and 2636 and the second appeal for PW 4669 to the FEMA Region IV Regional Administrator in letters dated September 18, 2012.  The Grantee supports the appeal.

Discussion

Under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, an applicant for federal disaster assistance cannot “receive such assistance with respect to any part of [a] loss as to which he has received financial assistance under any other program or from insurance or any other source.”[1]  Therefore, under the Public Assistance Program, “FEMA is required to reduce the amount of assistance for eligible work by the amount of any actual or anticipated insurance proceeds available for that work.”[2]

A review of the Applicant’s insurance policy and associated materials submitted with its appeal indicates that the policy does not cover the damage captured in PWs 2244, 2636, and 4669 and, therefore, reductions for anticipated insurance proceeds should not have been applied.

Insured Location

The policy insures property, including real property in which the insured has an insurable interest, “located at an Insured Location or within 1,000 feet thereof, to the extent of the interest of the insured in such property.”  The policy also states that coverage under it applies to an “Insured Location” unless otherwise provided.  Relevant here, an “Insured Location” is a location (1) listed on “Schedule of Locations” on file with the insurer or (2) “covered as a Miscellaneous Unnamed Location.” 

The “Schedule of Locations” lists sixteen specific locations on two appendixes.  The tunnels for the leaky feeder communications system and power, lighting, and ventilation systems are not included on the lists, nor is the Mill Creek Greenway Trail.  Therefore, they are not “Insured Locations” stemming from inclusion on the “Schedule of Locations.”

Under the policy, a Miscellaneous Unnamed Location is a “Location” that is “owned, leased, or rented by the Insured, but not specified in the Schedule of Locations.”  The policy further defines a “Location” as either “as specified in the Schedule of Locations” or, if not so specified, “a building, yard, dock, wharf pier or bulkhead (or any group of the foregoing) bounded on all sides by public streets, clear land space or open waterways, each not less than fifty feet wide.”  As discussed, the tunnels and recreation trail are not included on the “Schedule of Locations,” and they are not a building, yard, dock, wharf pier or bulkhead.  Therefore, they are not “Insured Locations” nor are they an insured location through the “Miscellaneous Unnamed Locations.”

Infrastructure

The policy provides “Additional Coverages” for physical loss or damage insured by the policy under several different types of categories, including “Infrastructure.”  “Infrastructure” under the policy includes “street lighting, traffic signals, and control systems,” “underground piping,” “streets, roads, highways, sidewalks, bridges, tunnels, trestles, piers and docks,” and “street signs, traffic signs, and signs not attached to buildings.”  The types of damage elements addressed in PWs 2244, 2636  and 4669—a communication system and power, lighting, and ventilation systems within tunnels, as well a recreation trail (i.e., a “sidewalk”)—fall under the “Infrastructure” definition set forth in the policy.

Coverage for “Infrastructure” only applies to “physical loss or damage to Infrastructure caused by or resulting from fire, lightening, explosion, riot or civil commotion, vandalism or malicious mischief, aircraft, or vehicles.”  Thus, the “Infrastructure” coverage does not include coverage for physical loss or damage caused by flood because flood is not a listed peril associated with coverage for “Infrastructure.”  In addition, the “Infrastructure” coverage applies only when such “Infrastructure” is “not at a Location per the Schedule of Locations on file with the Company.”

According to a 2010 coverage analysis provided to the Applicant by an adjuster for the insurer, the “net effect” of (1) the policy’s omission of the flood peril in the general grant of coverage for “Infrastructure” and (2) the requirement that the “Infrastructure” not be at a “Location” on the “Schedule of Locations” is that “there is coverage for infrastructure due to Flood that is otherwise insured, while at a Location per the Schedule of Locations on file with the Company.” (Emphasis in original.)  Applying this reasoning, there is no coverage for the flood-damaged tunnel systems and recreation trail, as neither the tunnels nor the trail are listed on the policy’s “Schedule of Locations.”  Whether any elements of the tunnels or trail are located within 1,000 feet of a “Location” listed on the “Schedule of Locations” is irrelevant; because neither item of infrastructure is listed on the schedule.

DAC

The Applicant requests DAC for PW 4669, but provides no new justification or documentation to support their request. Applicable FEMA policy states that “[d]irect administrative costs include costs that can be tracked, charged, and accounted for directly to a specific project, such as staff time to complete field inspections and preparation of a PW. Direct costs are limited to actual reasonable costs incurred for a specific project.”[3] As such, the RA’s conclusion that DAC totaling $1,961.64 for asphalt surface failures on a project estimated at $2,677.88 are unreasonable is correct.

Conclusion

The damaged elements of the water system tunnels’ leaky feeder communications system and power, lighting, and ventilation systems, as well as the Mill Creek Greenway Trail, constitute “Infrastructure” under the Applicant’s insurance policy.  However, coverage for infrastructure only applies to flood-related damage when the infrastructure is at a “Location” listed in the policy’s “Schedule of Locations;” and the tunnels and trail are not so listed.  The Applicant’s policy does not provide coverage for the damaged tunnels and recreation trail and, therefore, the reductions in PWs 2244, 2636, and 4669 for anticipated insurance proceeds should be reinstated. In addition, the Applicant’s request for reinstatement of $1,385.05 in DAC in PW 4669 is not substantiated and, therefore, is denied.



[1]  See The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 312(a), 42 U.S.C. § 5155(a).

[2]  Public Assistance Guide, FEMA 322 at 119 (June 2007).

[3] Disaster Assistance Policy DAP9525.9, Section 324 Management Costs and Direct Administrative Costs, at 6 (March 12, 2008).

7 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Philadelphia Ministries
Disaster Number: 
1603-DR-LA
DSR: 
PWs 20245, 20246, 20247, and 20248
Date Signed: 
Tuesday, April 7, 2015
PA ID: 
071-ULNET-00
Summary/Brief: 

Conclusion: The two facilities do not meet PNP facility eligibility requirements as set forth in regulations and policies.  The contents of ineligible facilities are also ineligible for PA funding.

Summary Paragraph

On August 29, 2005, heavy rains, winds, and flooding from Hurricane Katrina damaged the Applicant’s two facilities located at 5301 and 5330 St. Claude Avenue, across the street from each other in New Orleans.  FEMA provisionally approved the Applicant’s Request for Public Assistance in April 2011, but the Applicant did not submit adequate documentation to substantiate Public Assistance (PA) eligibility of the two facilities.  FEMA prepared PWs 20245, 20246, 20247, and 20248 for the two facilities and their contents, and obligated all four PWs for zero-dollars in February 2013.  In its first appeal, the Applicant provided additional documentation to support the eligibility of its two buildings.  The Regional Administrator denied the first appeal based on a determination that neither facility had any eligible PA activities as outlined in 44 C.F.R. §206.221(e).  In its second appeal, the Applicant requests reconsideration and provides additional documentation to support its claim that the two facilities were used as an eligible community center and homeless shelter.  FEMA finds that neither facility meets private nonprofit (PNP) facility eligibility requirements as set forth in applicable regulations and policies.

Authorities and Second Appeals

  • 44 C.F.R. § 206.221(e).
  • 44 C.F.R. § 206.222(b)
  • 44 C.F.R. § 206.223(a)(3)
  • Recovery Division Policy (RDP) 9521.3, Private Nonprofit Facility (PNP) Eligibility
  • Response and Recovery Directorate Policy (RRDP) 9521.1, Community Center Eligibility

Headnotes

  • Eligible PNP facilities are defined in 44 C.F.R. § 206.221(e) and include facilities providing essential government type services such as community centers and homeless shelters.
  • RDP 9521.3 provides that a PNP facility must be primarily used for one of the eligible PNP services to be eligible for PA funding. Primary use is determined by first considering the space that a facility is used for eligible services. Over 50 percent must be used for eligible activities.
  • The facility at 5301 St. Claude Avenue is a mixed-used facility that includes a homeless shelter.  Approximately 31 percent of the space at this facility is dedicated for homeless shelter services, but this does not meet the primary use requirement. 
  • RRDP 9521.1 defines an eligible community center as a facility open to the general public, established and primarily used as a gathering place for a variety of social, educational enrichment, and community service activities.  The policy also specifies that facilities “established or primarily used for religious…activities are not eligible PNP community centers.”
  • The other 69 percent of the facility at 5301 St. Claude Avenue is purportedly used as a community center.  However, with only one activity qualifying as an eligible community center activity, this facility does not qualify as an eligible community center.
  • The main feature of the facility at 5330 St. Claude Avenue is a large church sanctuary, and the facility was established as a church.  As such, the facility is not an eligible community center.
Letter: 

April 06, 2015

Kevin Davis
Director
Governor’s Office of Homeland Security and Emergency Preparedness
7667 Independence Boulevard
Baton Rouge, Louisiana 70806

Re:      Second Appeal – Philadelphia Ministries, PA ID 071-ULNET-00, FEMA-1603-DR-LA, Project Worksheets (PWs) 20245, 20246, 20247, and 20248

Dear Mr. Davis:

This is in response to your letter dated April 11, 2014, which transmitted the referenced second appeal on behalf of Philadelphia Ministries (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding for the repairs and contents of two mixed-use facilities.

As explained in the enclosed analysis, I have determined that neither facility meets private nonprofit (PNP) facility eligibility requirements pursuant to 44 C.F.R. §206.221(e) and Recovery Division Policy (RDP) 9521.3 Private Nonprofit Facility (PNP) Eligibility.  As such, the contents of ineligible facilities are also ineligible.  Therefore, I am denying this appeal. 

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc: George A. Robinson
      Regional Administrator
      FEMA Region VI

 

Analysis: 

Background

On August 29, 2005, heavy rains, winds, and flooding from Hurricane Katrina damaged Philadelphia Ministries’ (Applicant) two facilities located across the street from each another in New Orleans, Louisiana.  One facility, located at 5330 St. Claude Avenue, consisted of an 11,268 square foot (SF) one-story building with a slab-on-grade foundation, which the Applicant reported was used as a church and a community center.  The other facility, located at 5301 St. Claude Avenue, consisted of a 4,344[1] SF two-story building with a slab-on-grade foundation, which the Applicant reported was used as a community center and a homeless shelter.  Both facilities sustained over twelve feet of floodwaters for several weeks. 

From November 16, 2010, to October 7, 2011, FEMA accepted new Requests for Public Assistance (RPA) from faith-based private nonprofit (PNP) organizations that had not previously applied for Public Assistance (PA) due to extenuating circumstances in the aftermath of Hurricane Katrina.  The Applicant applied for Public Assistance during this timeframe, as a non-critical, faith-based PNP organization.  In addition to religious activities and programs, the Applicant claimed to have provided various community service activities including after school tutoring, community meeting space, annual health fairs, food/clothing drives, drug counseling, and homeless shelter programs.

On April 15, 2011, FEMA provisionally approved the Applicant’s RPA.  At the time of the FEMA inspection, all interior surfaces for both facilities were demolished, with the destroyed building contents removed.  During the Project Worksheet (PW) development process, the Applicant did not submit adequate documentation to support PA eligibility of its two facilities.  On July 27, 2012, FEMA made a final request to the Applicant for supporting documentation.  After receiving no response from the Applicant, FEMA prepared the following four PWs and obligated them for zero dollars on February 12, 2013:

  • PW 20245 for Community Center/Homeless Shelter building;
  • PW 20247 for Community Center/Homeless Shelter building contents;
  • PW 20248 for Church/Community Center building; and
  • PW 20246 for Church/Community Center building contents.

First Appeal

In its first appeal, dated May 30, 2013, the Applicant claimed that both facilities were eligible community centers, and submitted supporting documentation.  The Applicant asserted that it provided all documents previously requested by FEMA, but did not hear from FEMA again until the zero-dollar obligation of the four PWs.  The submitted supporting documentation consisted of flyers for various services and letters from members of the church and community attesting that the Applicant provided community services, including career orientation for young women, after school tutoring program, and a General Educational Development (GED)  program.

The FEMA Region VI Regional Administrator (RA) denied the first appeal on
December 2, 2013, based on a determination that neither facility had any eligible PA activities as outlined in Title 44 of Code of Federal Regulations (C.F.R.) § 206.221.  The RA stated that due to a lack of documentation to support when and where the claimed activities occurred, FEMA was unable to complete the required time and space use analysis.  The RA also noted that the Applicant did not supply documentation for any repairs already completed at the facilities.

Second Appeal

On April 11, 2014, the Grantee transmitted the Applicant’s second appeal letter dated February 10, 2014, indicating its support of the appeal.  In the second appeal, the Applicant reiterates its request for reconsideration of the denied funding for the damaged facilities and their contents.  The Applicant provides additional supporting documentation, including spreadsheets showing some time and space use information for the two facilities.  The Applicant also clarifies that no repairs to either facility have ever been started or completed, which is why it has not supplied documentation for any repairs.

During the second appeal evaluation, FEMA discovered that many of the supporting documentation for the RPA were not in the Applicant’s legal name (Philadelphia Ministries).  FEMA issued a Request for Information (RFI) seeking clarification, and the Applicant provided sufficient documentation to explain legal organizational name changes over the years.  Accordingly, the Applicant eligibility has been verified.  The remainder of this appeal discusses the eligibility of the Applicant’s two facilities.

Discussion

Facility Eligibility

Pursuant to 44 C.F.R. § 206.222(b) and § 206.223(a)(3), to be eligible for PA funding, a PNP applicant must own or operate an eligible PNP facility, and it must have legal responsibility for disaster-related damages.[2]  Eligible PNP facilities are defined in 44 C.F.R. § 206.221(e) and include facilities providing essential governmental type services such as community centers and homeless shelters.[3]  PNP facility eligibility requirements are clarified in Recovery Division Policy (RDP) 9521.3, Private Nonprofit Facility (PNP) Eligibility, which provides that a PNP facility must be primarily used for one of the eligible PNP services or facilities listed in 44 C.F.R. § 206.221(e) to be eligible for PA funding.[4]  Primary use is determined by first considering the space that a facility is used for eligible services, whereby over 50 percent of a facility’s space must be dedicated to an eligible purpose.[5]  For mixed-use facilities, primary use is determined by the amount of time that the facility is used for eligible services.[6]

FEMA reviewed all supporting documentation for the first and second appeals in detail.  Each building was independently considered for PNP facility eligibility, as follows:

  1. Church/Community Center at 5330 St. Claude Avenue

Response and Recovery Directorate Policy (RRDP) 9521.1, Community Center Eligibility specifies that “[f]acilities established or primarily used for religious, political, athletic, recreational, vocational or academic training, the arts, conference, or similar activities are not eligible PNP community centers.”  The same policy further defines the term established as the following:

“Established…” refers to the purpose for which a facility was instituted.  This should be determined by reviewing the organization’s (pre-disaster) charter, bylaws, and amendments or other well-documented evidence of longstanding, routine (day-to-day) use of such facilities as a community center. A facility offering a wide range of activities for only a brief period or at irregular intervals would not be eligible.  As a general rule, a facility that was not founded as a community center would not be an eligible community center.[7]

The policy also states:

Materials such as the organizational charter, articles of incorporation, minutes of board meetings, activity logs, and other documents that existed prior to the disaster and evidence the facility activities and uses prior to the disaster should be obtained and reviewed to ensure that a facility is not being identified as a community center for the first time only after the disaster. …Another approach is to ask the question: “If all community activities were eliminated, would the facility still function?”  If, stripped of all community activities, a facility would be a performing arts center, church, or gymnasium; it is more likely to have been established for that purpose, not as a community center.  Conversely, if ending all community activities would result in an empty, unused building, the facility is more likely to have been established as a community center.[8]

Based on a thorough review of all available information, the Church/Community Center facility does not meet PNP community center eligibility requirements as set forth in the policy. To reach this determination, FEMA first reviewed the Applicant’s Articles of Incorporation, dated May 1, 1987, which explains that Philadelphia Ministries was incorporated as a religious organization primarily for the purpose of worship.  Specifically, the Articles of Incorporation states:

The general purpose of this corporation shall be the Worship of the True God; teaching, preaching and spreading the Gospel in accordance with the instructions, laws and commandments laid down in the Holy Bible as interpreted by the PENTECOSTAL ASSEMBLIES OF WORLD, INC. … To organize, encourage and promote group fellowship among Christians in the furtherance of the gospel of Jesus Christ…to sponsor the organization and establishment of churches; and assist benevolent, charitable, educational or missionary undertakings, and church related activities…[9]

The Articles of Incorporation includes no mention of the community center or any secular community center activities independent of church activities.  It supports FEMA’s determination that this facility was founded as a church, rather than a community center.  FEMA also notes that the Applicant’s own insurance policy lists the facility as “Church” under the Occupancy field of the insurance coverage declarations page.[10]  Based on the Applicant’s description of the facility’s rooms and all religious and secular activities that took place within the facility, if all community activities were eliminated, the facility would still function as a church for its members.  As such, the facility does not meet PNP facility eligibility requirements and is ineligible for any PA funding. 

  1. Community Center/Homeless Shelter at 5301 St. Claude Avenue

The Applicant refers to the property at 5301 St. Claude Avenue as Community Center/Homeless Shelter.  The total area of the facility is 4,344 SF, which consists of 3,358 SF of non-common space (consisting of two separate open spaces on the first floor and bedrooms on the second floor) and 986 SF of common space (consisting of hall areas, bathrooms, and kitchen).  Of the 3,358 SF of non-common space, the Applicant claimed that 2,306 SF (69 percent) were used as a community center and 1,052 SF (31 percent) were used as a homeless shelter.  Although the space occupied by the homeless shelter was dedicated to an eligible service, at only 31 percent, it does not meet the policy requirement that a PNP facility must be primarily used for one of the eligible PNP services.[11]

For the remaining 69 percent of the space purportedly used for the community center, FEMA considered each service offered to determine whether services provided at the community center met eligibility requirements pursuant to RRDP 9521.1 Community Center Eligibility.[12]  The community center in question offered three services: a study program to prepare for the GED tests; a drug program; and a clothing giveaway program.  Of these, the study program for the GED is not an eligible community center activity, due to the academic nature of the activity.  The policy specifically excludes academic training as part of eligible community center activities.[13]

Next, FEMA considered whether the drug program offered at the facility qualified as an eligible community center activity, and determined that it did qualify.  The Applicant characterized the drug program as a counseling program provided by church staff for individuals “within the ministry,” in contrast with the homeless shelter program, which it referred to as a program for individuals “in and out of the ministry.”[14]  Based on the Applicant’s description, FEMA interprets the term “ministry” to mean “within the church” or “among the church congregation.”  Further, the supporting documentation submitted with the second appeal includes letters from a local television station and a Christian radio station, attesting that the Applicant provided various services including the GED program and the homeless shelter; distinctly absent from these letters is any mention of the drug program. The Applicant also submitted the Rules and Guidelines of the homeless shelter, as well as a separate homeless shelter information sheet.  However, the Applicant did not provide any similar documentation related to the drug program.  While the drug program was likely offered at the facility, there is insufficient documentation to demonstrate that it was open to the general public.  Pursuant to policy, a community center and its services must be open to the general public in order to be eligible for PA assistance.[15]  As a service for individuals within the ministry, the drug program is not an eligible community center service.

With the GED program and the drug program determined ineligible, the only remaining activity is the clothing giveaway program.  This type of activity is generally considered an eligible community service activity provided at an eligible community center.  However, this single eligible activity is insufficient to consider a facility an eligible community center.  Pursuant to RRDP 9521.1, an eligible community center is defined as a facility open to the general public, established and primarily used as a gathering place for a variety of social, educational enrichment, and community service activities.[16]  A community center must involve many different activities, serving many diverse groups to be considered eligible.[17]  A facility used for only one or two activities or limited to a narrow range of activities, however worthwhile or socially redeeming, would not ordinarily serve a sufficiently broad and varied segment of the community to constitute an eligible community center.[18]  In this regard, a single clothing giveaway program does not constitute a variety of activities of an eligible community center. Thus, the facility does not meet policy requirements to be an eligible community center.

As the facility is neither an eligible homeless shelter nor an eligible community center, it does not qualify as an eligible PNP facility primarily used for one of the eligible PNP services.  FEMA also notes that the Applicant’s own insurance policy lists the facility as “Fellowship Hall” under the Occupancy field of the insurance coverage declarations page, which does not support the Applicant’s assertion that this facility was established and used as a community center and a homeless shelter.[19]  As such, the facility is ineligible for PA funding.

Building Contents

Policy states that “[c]ontents that are the responsibility of an ineligible occupant are not eligible for reimbursement if damaged.”[20]  Regulations state that a PNP applicant that owns or operates an eligible PNP facility is eligible for PA assistance.[21]  Accordingly, without an eligible facility, the Applicant is effectively considered an ineligible occupant of the damaged facility for the purposes of PA assistance.  Therefore, the Applicant is not eligible to receive PA funding for any contents within the two ineligible facilities damaged during the disaster.

Conclusion

Philadelphia Ministries was incorporated as a religious institution for the specific purpose of worship.  Although the Church/Community Center facility may have been used for some community center activities, this facility was established primarily as a church with its main interior feature being the church sanctuary.  As such, this facility is not an eligible community center.  The Applicant’s other facility—the Community Center/Homeless Shelter—does not meet the policy requirement for a PNP facility to be primarily used for one of the eligible PNP services or facilities.  Therefore, the two facilities are ineligible for PA funding.  Furthermore, without an eligible facility, any contents therein are also ineligible for PA funding. 



[1] Project Worksheet 20245 states the building’s area as 3,542 SF. However, the Applicant-provided building details show that the actual area of the building is 4,344 SF.

[2] 44 C.F.R. §§ 206.222(b), 206.223(a)(3) (2005).

[3] 44 C.F.R. § 206.221(e).

[4] Recovery Division Policy RDP9521.3, Private Nonprofit Facility (PNP) Eligibility, at 2 (May 23, 2003).

[5] Id., at 3.

[6] Id., at 4.

[7] Response and Recovery Directorate Policy RRDP9521.1 Community Center Eligibility, at 2 (Aug. 11, 1998).

[8] Id., at 3.

[9] Articles of Incorporation of Philadelphia Assembly of Christ (May 1, 1987).  Note: the Applicant has legally changed its name several times since the initial incorporation.  It is now known as Philadelphia Ministries.

[10] Church Mutual Insurance Company, Policy Number 0167833-02-442446 for Philadelphia Ministries (Jan. 5, 2005).

[11] RDP 9521.3, Private Nonprofit Facility (PNP) Eligibility, at 2.

[12] RRDP 9521.1 Community Center Eligibility, at 1-6.

[13] Id., at 4 (stating: “Educational enrichment activities include a wide variety of activities, but not vocational, academic, or professional training.”).

[14] The Applicant described its programs and used the quoted phrases during a conference call held on November 20, 2014.

[15] Id., at 1 (stating: “An eligible community center is defined as a facility open to the general public…”).

[16] Id.

[17] Id., at 4.

[18] Id.

[19] Church Mutual Insurance Company, Policy Number 0167833-02-442446 for Philadelphia Ministries (Jan. 5, 2005).

[20] RDP 9521.3, Private Nonprofit Facility (PNP) Eligibility, at 4.

[21] 44 C.F.R. §§ 206.222(b).

3 Apr 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Roman Catholic Diocese of Brooklyn
Disaster Number: 
4020-DR-NY
DSR: 
Multiple PWs
Date Signed: 
Tuesday, March 31, 2015
PA ID: 
047-UGYND-00
Summary/Brief: 

Conclusion:  Pursuant to the Stafford Act § 312, FEMA funding to repair the Roman Catholic Diocese of Brooklyn’s facilities is prohibited as it constitutes a duplication of benefits due to the Applicant’s secondary insurance policy.    

Summary Paragraph

Hurricane Irene caused flooding throughout Queens and Kings Counties, New York.  Several of the Applicant’s facilities were impacted by the disaster.  FEMA prepared PWs 5098, 5357, 5411, 5419, 5439, 5657, 5662, 5944, 6212, 6218, 6477, 6483, 7117, 7816 and 7889 to address repairs necessary to restore the facilities to pre-disaster condition.  A FEMA Insurance Specialist reviewed the PWs and made cost reductions based on anticipated and actual insurance proceeds.  The Applicant had two insurance policies in place at the time of the disaster.  The primary insurance policy was in the amount of $70 million with a deductible of $250,000.  The secondary policy was with Peter Turner Insurance Company (PTIC).  The PTIC policy provided $250,000 of coverage with a $750 deductible.  All, but one, of the PWs were obligated for a zero-dollar amount based on the duplication of benefits—PTIC policy payout and Public Assistance funding—that would result if the PWs were obligated. The PTIC deductible—$750.00 per occurrence—was funded in PW 5419.  In the first appeal, the Applicant asserted that the PTIC policy provided self-insurance retention coverage, and thus, not a duplication of benefits.  The Region II Acting Regional Administrator (RA) denied the first appeal because she determined that PTIC was licensed and regulated by the New York State Insurance Department.  As such, PTIC issued a policy covering the facilities listed for damage caused by Hurricane Irene.  The total amount of damage was under the $250,000 coverage amount; therefore, under the Stafford Act § 312, Duplication of Benefits, was not eligible for PA funding.  In the second appeal, the Applicant argues that its contract with PTIC does not constitute insurance because there is no risk shifting or risk distribution involved.  Accordingly, the Applicant contends that there is no duplication of benefits.

Authorities and Second Appeals

  • City of Chicago v. FEMA, 2013 U.S. Dist. LEXIS 41633 (2013).
  • Stafford Act § 312, 42 U.S.C. § 5155.
  • 44 C.F.R. § 206.250(c).
  • Catholic Bishop of Chicago, FEMA-1800-DR-IL, 18 PWs
  • PA Guide, at 41.

Headnotes

  • Stafford Act § 312 prohibits FEMA from providing assistance to any entity for any loss for which financial assistance has already been received from any other program, from insurance, or from any other source.
    • The Stafford Act does not define “insurance.”  However, based on the ordinary meaning of “insurance,” the Applicant’s subsidiary policy with PTIC constitutes insurance.
  • According to the PA Guide and City of Chicago v. FEMA, the Stafford Act § 312 applies to a duplicative benefit for the same item of work from “any other source,” including a private contract where consideration was given for a benefit incurred.

Here, even if FEMA determined that the PTIC policy was not insurance, it would still constitutes a duplication of benefits because PTIC is obligated to compensate the Applicant for losses incurred with respect to the facilities in the PWs listed.  

Letter: 

March 31, 2015


Mr. Andrew X. Feeney
Alternate Governor’s Authorized Representative
New York State Office of Emergency Management
1220 Washington Avenue, Building 7A, Suite 710
Albany, New York 12242  

Re: Second Appeal – Roman Catholic Diocese of Brooklyn, PA ID 047-UGYND-00, FEMA-4020-DR-NY, Project Worksheets (PWs) 5098, 5357, 5411, 5419, 5439, 5657, 5662, 5944, 6212, 6218, 6477, 6483, 7117, 7816 and 7889  – Duplication of Benefits

Dear Mr. Feeney:

This is in response to a letter from your office dated March 21, 2014, which transmitted the referenced second appeal on behalf of the Roman Catholic Diocese of Brooklyn (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $228,630.16 in Public Assistance (PA) funding.

As explained in the enclosed analysis, I have determined that, pursuant to the Stafford Act § 312, PA funding to repair the Applicant’s facilities is prohibited as it constitutes a duplication of benefits due to the Applicant’s insurance policy with Peter Turner Insurance Company.  Therefore, I am denying the appeal. 

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

Sincerely,

/s/

Alex Amparo
Assistant Administrator
Recovery Directorate

Enclosure

cc: Jerome Hatfield

      Regional Administrator

      FEMA Region II

Analysis: 

Background

From August 26, 2011 thru September 5, 2011, Hurricane Irene caused flooding throughout Queens and Kings Counties, New York.  Several of the Roman Catholic Diocese of Brooklyn’s (Applicant) facilities were impacted by the disaster.  At the time of the disaster, the Applicant either owned or leased each of the facilities.  The leased facilities were subject to a lease agreement that stipulated that the Applicant was responsible for all repairs excluding the structure exteriors.

FEMA prepared PWs 5098, 5357, 5411, 5419, 5439, 5657, 5662, 5944, 6212, 6218, 6477, 6483, 7117, 7816 and 7889 for an aggregate amount of $228,630.16 to address repairs necessary to restore the facilities to pre-disaster condition.  A FEMA Insurance Specialist reviewed the PWs and made cost reductions based on anticipated and actual insurance proceeds.  The Applicant had two insurance policies in place at the time of the disaster.  The primary insurance policy was with Lexington Insurance Company in the amount of $70 million with a deductible of $250,000.  The secondary policy was with Peter Turner Insurance Company (PTIC).  This policy was designed as a deductible buy-down policy, which is a supplemental policy established by the insured to cover part or all of the primary insurance policy’s deductible per occurrence.  The PTIC policy provided $250,000 of coverage with a $750 deductible.  FEMA obligated the PWs for a zero-dollar amount based on the duplication of benefits—PTIC policy payout and Public Assistance funding—that would result if the PWs were obligated.  However, the PTIC deductible—$750.00 per occurrence—was funded in PW 5419.

First Appeal

In its first appeal, dated January 28, 2013, the Applicant asserted that it had a property policy with Lexington Insurance Company.  However, the PTIC policy provided self-insurance retention coverage.  The Applicant stated, “it [the PTIC policy] is a funding mechanism for the deductible of $250,000.”  The Applicant also stated that PTIC was a captive insurer formed and wholly owned by the Applicant to provide insurance programs for its parishes, schools, and affiliated agencies.  Finally, the Applicant asserted that because it was self-insured for the first $250,000, the projects in the PWs should be obligated for the full amounts. 

In a letter, dated October 21, 2013, the Region II Acting Regional Administrator (RA) denied the first appeal because she determined that PTIC was licensed and regulated by the New York State Insurance Department.  As such, PTIC issued a policy covering the facilities listed for damage caused by Hurricane Irene.  The total amount of damage in the PWs was $228,630.16—under the $250,000 coverage amount; therefore, under the Stafford Act § 312, Duplication of Benefits, funding to repair the Applicant’s facilities was not eligible for FEMA assistance.  

Second Appeal

In the second appeal, dated January 27, 2014, the Applicant argues that its contract with PTIC does not constitute insurance; accordingly, the Applicant concludes that there is no duplication of benefits.  The Applicant asserts the contract is an alternative risk management tool meant to “manage claims and specifically fund the Lexington deductible.”  The Applicant contends that, because the Stafford Act does not define “insurance” and FEMA policy guidance does not provide guidance regarding the use of alternative risk management tools, FEMA must follow the Supreme Court ruling in Helvering v. LeGierse.[1]  The Applicant argues that, under LeGierse, both risk shifting and risk distribution must be present for an arrangement to constitute insurance for federal income tax purposes.  

Discussion

Duplication of Benefits

Pursuant to the Stafford Act § 312, “… no such person, business concern, or other entity will receive such assistance with respect to any part of such loss as to which he has received financial assistance under any other program or from insurance or any other source.”[2] (emphasis added).  FEMA analyzes each clause of Section 312 of the Stafford Act separately when determining whether a duplication of benefits exists.     

  1. Insurance

The Stafford Act § 312 prohibits FEMA funding for items of work covered by insurance.  In addition, Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.250 states “actual and anticipated insurance recoveries shall be deducted from otherwise eligible costs.”[3]  The Applicant argues that, because “insurance” is not defined by the Stafford Act or any FEMA regulations or policy, FEMA should use the definition provided in LeGierse.  However, the definition of insurance used in LeGierse is specific to federal income tax collected by the Internal Revenue Service (IRS).  It is important to note that the LeGierse decision is limited to interpreting the Revenue Act of 1926 and not explicitly applicable to other statutory authority.

The Applicant is correct in asserting that the Stafford Act does not define “insurance.”  However, when a term goes undefined in a statute, courts give the term its ordinary meaning.[4]  Black’s Law Dictionary defines “insurance” as “a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils.”[5]  The Merriam-Webster dictionary defines “insurance” as “coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril.”[6]

At the time of the disaster, the Applicant’s policy with PTIC, entitled Contractual Indemnification Policy Declarations, stated that PTIC would indemnify the Applicant for all losses attributable to its obligations under deductibles and self-insured retentions with respect to primary commercial property.[7]  Based on the ordinary meaning of “insurance,” the policy between the Applicant and PTIC does constitute insurance because it is a contract whereby PTIC agreed to indemnify and compensate the Applicant for losses incurred if certain conditions were met. 

In addition, the Applicant’s assertion that the PTIC policy is equivalent to self-insurance or a “rainy day fund” because PTIC is wholly owned by the Applicant is not supported by the facts.[8]  PTIC was incorporated on August 31, 2004 under the laws of the State of New York as a stock company.[9]  As such, PTIC issues 100,000 shares of $1 par value per share common stock.[10]  PTIC was formed to insure the Applicant (the parent) and its affiliates for various risks as a means to fund such potential losses.[11]  PTIC was formed under Articles of Incorporation and must comply with set by-laws.[12]  PTIC’s net income is drawn from, both, net premiums earned and investment income.[13]  Finally, although the Applicant argues PTIC is not an insurance company, it is subject to the insurance laws of New York State.  For example, in 2012, PTIC was examined by a New York State Senior Insurance Examiner who issued a Report of Examination.[14]  It must be noted that throughout the Report, the examiner refers to PTIC’s operations as “insurance.”[15]  Accordingly, the Acting RA correctly concluded that PTIC is an insurance company that provided an insurance policy to the Applicant. 

  1. Any Other Source

Even if, arguendo, FEMA did not determine that the policy between the Applicant and PTIC is “insurance,” Section 312 of the Stafford Act still applies because it clearly states financial assistance from “any other source” is a duplication of benefits if it is used for the same project funded by FEMA funds.[16]  “Any other source” includes any source from which a financial benefit covering the same purpose would derive, including a private contract, such as the one at issue in this appeal.[17]  Here, the Applicant paid premiums to PTIC for coverage that indemnified against property losses if certain conditions were met.  Hurricane Irene triggered such conditions.  Accordingly, the Applicant—through its policy with PTIC—incurred a benefit that addressed the same work outlined in the PWs at issue in this appeal.  Thus, a duplication of benefits would occur if FEMA funding was obligated.    

Conclusion

The subsidiary policy between the Applicant and PTIC meets the ordinary meaning of “insurance.”  Accordingly, FEMA funding towards payment of the deductible of the primary insurance policy constitutes a duplication of benefits pursuant to the Stafford Act § 312.  Therefore, the appeal is denied.   


[1] Helvering v. LeGierse, 312 U.S. 531 (1941). 

[2] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 312, 42 U.S.C. § 5155 (2007).  

[3] 44 C.F.R. § 206.250(c) (2010).

[4] See Taniguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct. 1997, 2002 (2012) (citing Asgrow Seed Co. v. Winterboer, 513 U.S. 179, 187 (1995)).

[5] Black’s Law Dictionary 802 (6th ed. 1990).

[6] Merriam-Webster (May 27, 2014, 9:50 AM), http://www.merriam-webster.com/dictionary/insurance.

[7] See Peter Turner Insurance Company Contractual Indemnification Policy Declarations at 3, signed June 20, 2011.

[8] This appeal can be distinguished from a previous FEMA appeal determination where a self-insurance retention fund was not deemed a duplication of benefits; see FEMA Second Appeal Analysis, Catholic Bishop of Chicago, FEMA-1800-DR-IL, at 2 (Dec. 20, 2010) (finding that the Applicant’s self-insured retention fund was not a duplication of benefits because the Applicant utilized its own money, and a third-party merely acted as an administrator, debiting the Applicant’s bank account as necessary to pay claims).

[9] See Second Appeal Letter, Roman Catholic Diocese of Brooklyn, FEMA-4020-DR-NY, at 2 (Jan. 27, 2014).

[10] See Report from Wei Cao, Senior Insurance Examiner, Report of Examination of the Peter Turner Insurance Company as of December 31, 2010 (Aug. 14, 2012).

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] See Public Assistance Guide, FEMA 322 at 41 (June 2007) (stating “An applicant may not receive funding from two sources for the same item of work”; see also, City of Chicago v. FEMA, No. 08 CV 4234, 2013 U.S. Dist. LEXIS 41633, at *17-19 (N.D. Ill. Mar. 21, 2013)(holding that FEMA’s determination that a contract for snow removal services constituted duplicate benefits was a reasonable interpretation of the Stafford Act).

[17] City of Chicago, 2013 U.S. Dist. LEXIS at *21.  

 

31 Mar 2015
Appeal Type: 
2nd
Report Type: 
PW
Appeal Categories: 
Applicant Name: 
Town of Springtown
Disaster Number: 
1751-DR-AR
DSR: 
3058
Date Signed: 
Friday, March 27, 2015
PA ID: 
007-66200-00
Summary/Brief: 

Conclusion: The Applicant is not entitled to retain the obligated funds as small project funding because it did not complete the bridge replacement in accordance with the approved scope of work nor did it establish extenuating circumstances to justify an otherwise untimely alternate project request.

Summary Paragraph

In 2008, severe storms, tornadoes, and flooding in Arkansas caused damage to the Flint Creek Bridge.  FEMA prepared Project Worksheet (PW) 3058 to replace, rather than repair the bridge.  FEMA obligated the federal cost share of $30,013.58.  In February 2011, the Applicant submitted an improved project request to build a replacement bridge 25 feet from the original.  As a condition for approval, FEMA required the Applicant to submit an environmental assessment (EA).  The Applicant submitted a U.S Department of Housing and Urban Development (HUD) EA, which FEMA found insufficient.  The Applicant withdrew its request, opting to utilize HUD supplemental funding toward the new bridge.  Meanwhile, the Applicant temporarily restored the Flint Creek Bridge, which it demolished once the new bridge was complete.  The Applicant, however, sought to retain FEMA’s funding claiming that, by temporarily restoring the bridge, it completed the work according to the PW’s scope of work.  Per the Grantee’s representative, the Applicant had not completed the work pursuant to the PW.  Accordingly, the Region VI Director, Recovery Division, found the Applicant ineligible for small project funding and required that all funds be deobligated.  In its first appeal, the Applicant alleged that: (1) it should retain funding because it complied with the PW’s scope of work by temporarily restoring the bridge to its predisaster function, (2) if FEMA considered the project incomplete, FEMA should allow the Applicant to request an alternate project, arguing that the deadline for requests was removed in FEMA DAP 9525.13 issued in 2008, or (3) if FEMA deemed the project incomplete and denied the alternate project request, FEMA should modify the PW’s scope of work to meet the Applicant’s disaster needs.  The Regional Administrator denied the appeal, finding that the Applicant did not complete the project per the PW’s scope of work, and denying the alternate project request as unsubstantiated and untimely.  FEMA then revised PW 3058 deobligating all funds.  In its second appeal, the Applicant reiterates its claim that the project was functionally completed and states that FEMA has consistently deviated from the 12-month deadline for alternate project requests in extenuating circumstances. 

Authorities Discussed

  • 44 C.F.R. § 206.202(f)(2) (2007).
  • 44 C.F.R. § 206.203(c)(2) (2007).
  • 44 C.F.R. § 206.203(d)(1)-(2) (2007).
  • 44 C.F.R. § 206.205(a) (2007).
  • Public Assistance Guide, FEMA 322, at 109 (June 2007).
  • DAP 9525.13, Alternate Projects (July 31, 2001).

Headnotes

  • 44 C.F.R. § 206.205(a) requires the Grantee to certify that a project was completed in line with FEMA approvals for small project funding.  Pursuant to Public Assistance Guide, FEMA 322, at 109 (June 2007), failure to start or complete a small project requires FEMA to deobligate funding.
    • The Applicant did not replace the Flint Creek Bridge per the PW scope of work.
  • Pursuant to 44 C.F.R. § 206.203(d)(2), the Applicant may request an alternate project when the public welfare would not be best served by restoring a damaged public facility or the function of that facility. DAP 9525.13 mandates that the request be made within 12 months after the kickoff meeting.  Per 44 C.F.R. § 206.202(f)(2), the deadline can be waived in extenuating circumstances.
    • The Applicant requested an alternate project nearly five years post disaster without demonstrating extenuating circumstances beyond its control.
Letter: 

March 27, 2015

David Maxwell
Director
Arkansas Department of Emergency Management
Camp Joseph T. Robinson, Building 9501
North Little Rock, Arkansas 72199-9600

Re: Second Appeal – Town of Springtown, PA ID 007-66200-00, FEMA-1751-DR-AR, Project Worksheet (PW) 3058, Scope of Work

Dear Mr. Maxwell:

This is in response to your letter dated September 18, 2014, which transmitted the referenced second appeal on behalf of the Town of Springtown (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) deobligation of small project funding for bridge repairs performed at Flint Creek, or alternatively, denial of the Applicant’s request for an alternate project. 

As explained in the enclosed analysis, I have determined that the Applicant did not complete the bridge replacement on Flint Creek in accordance with the PW’s approved scope of work.  As such, pursuant to 44 C.F.R. § 206.205(a), the Applicant cannot retain FEMA funds as small project funding.  Further, the Applicant’s request for an alternate project was untimely.  Given that the Applicant did not establish the existence of extenuating circumstances to warrant a waiver of the 12-month filing deadline, I find no basis on which to grant the Applicant’s request for an alternate project.  Therefore, I am denying this appeal.

Please inform the Applicant of my decision. This determination constitutes the final decision on this matter pursuant to 44 C.F.R. § 206.206 Appeals.

   Sincerely,     

   /s/           

   William W. Roche
   Director
   Public Assistance Division

Enclosure

cc: George A. Robinson
      Regional Administrator
      FEMA Region VI

 

Analysis: 

Background

On March 18 to April 28, 2008, severe storms, tornadoes, and flooding caused damage to the low water crossing bridge on Flint Creek in the Town of Springtown (Applicant).  FEMA determined that the bridge was eligible for replacement because the cost to repair the damage exceeded 50 percent of the costs to replace the bridge.  As a result, on July 31, 2008, FEMA prepared Project Worksheet (PW) 3058 to replace, rather than repair the bridge, pursuant to 44 C.F.R. § 206.226(f).  The PW’s scope of work included replacing concrete slabs and aprons and installing new corrugated metal pipes to restore the Flint Creek Bridge to its predisaster function.  FEMA obligated the federal cost share of $30,013.58.  The PW also indicated that the Applicant intended to pursue an improved project.

Improved Project Request

On December 13, 2010, the Applicant submitted an improved project request to use the grant funds toward a replacement bridge relocated 25 feet away from the original location.  The bridge was located on a low-level flood plain and near a creek, and consequently, the culverts often got congested during storms resulting in frequent flooding of the bridge.  As such, the Applicant sought to relocate the bridge upstream to the narrowest point on the floodplain and the highest adjacent grade.

As a condition for improved project approval, FEMA required the Applicant to submit an Environmental Assessment (EA).  FEMA provided the Applicant with guidance on what constituted a valid EA.  The Applicant submitted several documents consisting of letters and a checklist, which FEMA identified as Housing and Urban Development (HUD) EA documents.  FEMA found the HUD EA insufficient per 44 C.F.R. Part 10.  The Applicant also made a determination of a Finding of No Significant Impact—which the Applicant had no authority to perform—and published it in a Public Notice in a local paper on April 28, 2011.  On June 28, 2011, FEMA informed the Applicant that the HUD EA was insufficient and prohibited the Applicant from constructing the new bridge until the Applicant provided the requested EA and FEMA approved it.

On August 2, 2011, the Applicant requested through the Arkansas Department of Emergency Management (Grantee) that FEMA consider the improved project as a Categorical Exclusion (CATEX) pursuant to 44 C.F.R. 10.8(d), on the basis that another federal agency had already performed an EA and found that the new bridge would pose no significant environmental impact.[1]  FEMA responded through the Grantee to the Applicant on August 3, 2011.  FEMA determined that the HUD EA was insufficient because (1) it did not address the construction of the new bridge, a road that the Applicant intended to build to provide access to an undeveloped park, and construction of the park; and (2) the HUD EA did not comply with the laws FEMA follows and did not provide documentation substantiating HUD’s conclusions.  As such, FEMA concluded that another EA would not duplicate the HUD EA.[2]

The Applicant subsequently withdrew its improved project request on September 14, 2011.  Instead the Applicant opted to utilize HUD supplemental funding toward the new bridge and informed the Grantee that it would retain the obligated amount as small project funding.

Small Project Funding

While the Applicant built the new bridge, it temporarily restored the Flint Creek Bridge.  As a result, the Applicant stated that it was entitled to retain the FEMA obligated funds as small project funding because it completed the PW’s scope of work on the original bridge.  By letter dated January 10, 2012, the Grantee stated that its representative inspected the Flint Creek Bridge location and found that the Applicant had not completed the work in accordance with the PW’s scope of work.  The Grantee gave the Applicant until May 1, 2012, to complete the work or return the $30,013.58 in FEMA obligated funds. 

On June 27, 2012, the Applicant responded to the Grantee’s January 10, 2012 letter, declining to return the funds to FEMA absent an express FEMA determination and deobligation, and, even so, not until all appeal avenues were exhausted.  The Applicant also stated that the “intent and purpose of PW 3058 scope of work was to restore road access over Flint Creek, and the [Applicant had] accomplished [that] objective.”[3]  The Applicant specified that it repaired the Flint Creek Bridge “sufficiently to keep it open for public use until the new bridge was completed three years later.”[4]  The Applicant subsequently demolished the Flint Creek Bridge once the new bridge was complete. 

On March 13, 2013, the Region VI Recovery Division Director determined that the Applicant had not completed the project in accordance with the PW’s scope of work.  Consequently, the Director ordered that $30,013.58 be deobligated. 

First Appeal

On May 8, 2013, the Applicant submitted a first appeal to the Grantee.  The Applicant alleged that: (1) it complied with the PW’s scope of work and should retain the funds as small project funding because it temporarily restored the bridge to its predisaster function, (2) if FEMA considered the project incomplete, FEMA should allow the Applicant to request an alternate project, arguing that the deadline for alternate project requests was removed in FEMA DAP 9525.13 issued August 2, 2008, or (3) if FEMA rejected the project as complete for small project funding or as an alternate project, FEMA should modify the PW to meet the Applicant’s needs.    

In support of the first appeal, the Applicant stated that it could not build the new bridge at the old location because of creek formation.  Hence, the Applicant requested that the project be considered complete for purposes of small project funding, reasoning that “the intent and purpose of PW 3058 (i.e., restoring road access over Flint Creek) was fully satisfied”[5] when its function was restored before demolition.  The Applicant also claimed that, due to the high cost of preparing an EA and the resulting time delay, the Applicant reached an agreement with the Grantee to withdraw its improved project request in exchange for retaining the obligated funds as small project funding. 

The Grantee transmitted the first appeal on June 3, 2013.  The Grantee stated that it advised the Applicant to withdraw its improved project request and submit documents supporting the Flint Creek Bridge replacement in order to retain the obligated funding, provided the documents showed that the Applicant complied with the approved scope of work.  According to the Grantee, the Applicant did not provide the necessary supporting documentation.  An inspection of the original bridge by the Grantee’s representative showed that the scope of work defined in the PW for Flint Creek Bridge was not completed.

On October 23, 2013, FEMA sent a Request for Information (RFI) to the Applicant requesting documentation on the following: (1) work performed on Flint Creek Bridge before demolition as well as a description of all demolition related activities; (2) the Applicant’s decision to construct a new bridge, including details of code and standard requirements, and engineering reports; (3) details of the replacement bridge; (4) the HUD EA including all findings and compliance measures; and (5) clarification of the alternate project. 

The Applicant responded to the RFI on November 25, 2013, as follows:

  1. Demolition- the Applicant explained that it repaired the bridge numerous times after the disaster due to further damage caused by truck traffic and five additional flooding events.  The Applicant submitted a photograph of the bridge immediately before demolition, an invoice of the labor performed, and a summary of expenditures for supplies and labor for repairs.  As far as demolition-related activities, the Applicant removed concrete and used it to stabilize banks elsewhere.  The Applicant submitted photographs of the removal of the damaged structure’s concrete.
  2. Decision to construct a new bridge – The Applicant explained that it decided to construct the new bridge because the Flint Creek Bridge was located within a flood plain and became congested with debris creating a dam, which forced the creek to flow over the bridge.  The new bridge would withstand a 100-year flood event and removal of the Flint Creek Bridge would allow for better flow of water.

The Applicant also submitted several documents in response to the remainder of the RFI.  The Regional Administrator denied the appeal on June 17, 2014, finding that the Applicant did not complete the project in accordance with the PW for purposes of small project funding and that the alternate project request was unsubstantiated and untimely.  FEMA also stated that Disaster Assistance Policy DAP9525.13, Alternate Projects (July 31, 2001) was applicable because it was in effect at the time of the disaster.  The policy imposes a 12-month deadline to file an alternate project.  As such, the Applicant’s request for an alternate project was untimely.  FEMA subsequently revised PW 3058 deobligating $30,013.58. 

Second Appeal

In its second appeal, dated August 11, 2014, the Applicant reiterates its first appeal claim that the project was functionally completed for purposes of small project funding and states that FEMA has consistently deviated from the 12-month deadline for alternate project requests where extenuating circumstances exist.  The Applicant requests that FEMA consider an alternate project which would allow the Applicant to “improve drainage on Springtown Main Street by paving the street and adding culverts and storm water sewers to prevent erosion and prevent contamination of Flint Creek.”[6]

Discussion

Small Project Funding

The central issue here is when a project is deemed complete.  The Applicant claims that it is entitled to keep the remaining obligated funds as small project funding because the Flint Creek Bridge was restored to predisaster function, albeit temporarily.  For small project funding, the Grantee must certify that the Applicant completed the project “in accordance with FEMA approvals,”[7] which is recognized as the PW’s approved scope of work.  Failure to start or complete a small project requires FEMA to deobligate funding.[8]

The PW approved replacement of the bridge to its predisaster condition, with specifications.  The Applicant maintains that it complied with the PW’s scope of work when it restored to functional condition, then demolished, the Flint Creek Bridge.  The Applicant provisionally restored the bridge to functional condition while it constructed the new facility but did not follow the prescribed PW’s scope of work.  The Applicant has not demonstrated that its provisional restoration of the Flint Creek Bridge complied with the PW specifications.  Thus, FEMA has no basis on which to find that the Applicant complied with the PW’s scope of work.

Even if FEMA accepts the Applicant’s contention that the bridge was functionally completed, the Grantee is required to certify that the project was completed in accordance with the PW’s approved scope of work, as required by 44 C.F.R. 206.205(a).  If the Grantee finds the project incomplete, FEMA will deobligate funding.  The Grantee inspected the bridge and found it incomplete.  The Applicant subsequently demolished the Flint Creek Bridge.  Essentially, the Applicant is requesting that FEMA provide small project funding for a nonexistent bridge.  Thus, FEMA appropriately deobligated the funds. 

Alternate Project

Where an Applicant determines that the public welfare would not be best served by restoring a damaged facility or the function of that facility, the Applicant may request an alternate project.[9]  The Applicant’s request for an alternate project must be timely.[10]  Pursuant to Disaster Assistance Policy DAP9525.13, Alternate Projects (July 31, 2001), which was in effect at the time of the disaster, a proposal for an alternate project must be submitted within 12 months of the applicant's Kickoff Meeting.[11]  In specific circumstances, FEMA may extend the time to identify eligible work where an applicant shows extenuating circumstances beyond its control.[12]

The Applicant argues that FEMA has consistently deviated from the 12-month deadline in situations where extenuating circumstances exist, citing the Florida Field Office for the 2004 and 2005 disaster declarations, where, due to circumstances beyond the applicants’ control, FEMA allowed alternate project requests after the deadline.  To substantiate extenuating circumstances, the Applicant cited the chain of events since the inception of the project.  The Applicant explained that it indicated its intent to pursue an improved project at the outset and submitted an improved project request, which it withdrew once FEMA rejected the HUD EA and imposed the burden on the Applicant to acquire the correct EA.  Given that the FEMA-requested EA would have cost approximately half of the obligated funding, the Applicant found it cost prohibitive to pursue the EA. 

FEMA finds no basis to find the existence of extenuating circumstances because all matters were within the Applicant’s control.  The Applicant could have completed the project in accordance with the PW’s scope of work, timely requested an alternate project, or provided an EA for the improved project.  The fact that the Applicant chose to abandon the improved project in favor of using HUD funding toward a replacement bridge does not rise to the level of extenuating circumstances; the Applicant simply exercised another option.  Absent an adequate justification for seeking an alternate project years after the deadline, FEMA must deny the Applicant’s alternate request.

Conclusion

The Applicant failed to complete the project in accordance with the PW’s scope of work and is thus not entitled to retain the small project funding.  Alternatively, the Applicant cannot seek alternate project funding years after missing the required deadline, as another avenue to retain FEMA funds.  As such, FEMA denies the second appeal.



[1] Email from Recovery Branch, Arkansas Department of Emergency Management, to Public Assistance Infrastructure Branch Chief, FEMA (Aug. 2, 2011, 16:23 CST).

[2] Email from Public Assistance Infrastructure Branch Chief, FEMA, to Arkansas Department of Emergency Management Email List (Aug. 3, 2011, 09:15 CST).

[3] Letter from City Attorney, Town of Springtown, to Director, Disaster Management Division, Arkansas Department of Emergency Management,  1 (June 27, 2012).

[4] Id. at 2.

[5] Letter from Mayor, Town of Springtown, to Disaster Management Division, Arkansas Department of Emergency Management, 2 (May 8, 2013).

[6] Letter from Mayor, Town of Springtown, to Director, Disaster Management Division, Arkansas Department of Emergency Management, 3 (August 11, 2014).

[7] 44 C.F.R. § 206.205(a) (2007).

[8] Public Assistance Guide, FEMA 322, at 109 (June 2007) (“If a small project, including any mitigation work, was not started or was not completed, funds will be de-obligated.”).

[9] 44 C.F.R. § 206.203(d)(2) (2007).

[10] DAP 9525.13, Alternate Projects (July 31, 2001).

[11] Id.

[12] 44 C.F.R. § 206.202(f)(2) (2007).