Scope of Authority to Hear Evidence: de novo
- In the matter of Bay Saint Louis-Waveland School District, CBCA 1739-FEMA, 12/8/09.
Jurisdictional Rulings: When is Arbitration Available?
- In the matter of Forrest County Board of Supervisors, CBCA 1772-FEMA, 3/3/10.
- In the matter of Sewerage & Water Board of New Orleans, CBCA 1760-FEMA, 1/13/10.
- In the matter of Sabine Passport Authority, CBCA 1787-FEMA, 2/4/10.
- In the matter of Moss Point School District (MPSD), CBCA 1800-FEMA, 2/10/10.
Substantive Rulings
Repair vs. Replacement
- In the matter of State of Louisiana, Facility Planning and Control (FP&C), CBCA 1741-FEMA, 1/27/10.
- In the matter of Bay St. Louis-Waveland School District (BSWSD), CBCA 1739-FEMA, 2/1/10.
- In the matter of the City of Westwego, CBCA 1783-FEMA, 4/23/10.
Pre-Disaster Conditions / Post-Disaster Maintenance Issues
- In the matter of Forrest County Board of Supervisors (BOS), CBCA 1772-FEMA, 3/3/10.
- In the matter of Sewerage and Water Board of New Orleans [Clarifiers] CBCA 1761-FEMA, 4/2/10.
- In the matter of St. Tammany Parish (Parish) CBCA 1778-FEMA, 5/12/10.
Compliance with NFIP Standards
- In the matter of Moss Point School District, CBCA 1800-FEMA, 2/10/10.
- In the matter of Moss Point School District (MPSD) CBCA 1800-FEMA, 6/22/10.
- In the matter of the University of Southern Mississippi, CBCA 1781-FEMA, 1/26/10.
Codes & Standards / Hazard Mitigation
- In the matter of Sewerage & Water Board of New Orleans [Generator], CBCA 1759-FEMA, 4/13/10.
- In the matter of Mississippi State Port Authority (MSPA), CBCA 1757-FEMA, 4/22/10.
Scope of Panel's Authority to Hear Evidence: de novo
The panel has determined that Section 601 of the American Recovery and Reinvestment Act of 2009 (ARRA) provides the arbitrators "sufficient authority" to resolve disputed public assistance awards, without reservation or special deference to the FEMA decision on that award. The Panel stated: "The arbitration panel does not sit as a court reviewing the validity of agency regulations... nor does it engage in judicial review of a final agency action...we sit as an arbitration panel." The implementing regulatory scheme does not contemplate the arbitration panel's deferential review of FEMA's actions. To the contrary, FEMA's regulation contemplates that the panel will make independent determinations of the extent of the damage, taking into account the submissions of all parties to the arbitration. However, the burden of proving the claims by a preponderance of the evidence remains with the Applicant and the Grantee. In the matter of Bay Saint Louis-Waveland School District, CBCA 1739-FEMA, 12/8/09.
Jurisdictional Rulings: When is Arbitration Available?
The statute that created the FEMA arbitration panels was quite specific that arbitration was to be available, under the Federal Emergency Management Agency Public Assistance Program, to resolve "disputed public assistance applications for covered hurricane damage under section 403, 406, or 407 of the [Stafford Act] for a project the total amount of which is more than $500,000. The panel has confirmed that the $500,000 jurisdictional minimum is not the amount of assistance which is in dispute, but rather the full amount of the initial "project" in which the dispute over assistance arose. Indeed, there is jurisdiction to arbitrate even if the project ultimately cost less than $500,000 - as long as initial cost estimates exceeded this amount. In In the matter of Forrest County Board of Supervisors, CBCA 1772-FEMA, 3/3/10, the project worksheet for the courthouse repair had been written for an estimated cost of over $500,000 - satisfying the jurisdictional amount - even though the work ultimately cost only $202,443. In this particular case, the panel concluded that only 40% of project cost was eligible for assistance.
Filing Deadlines
The panel has denied several requests for arbitration because the applicant had not appealed a FEMA decision within the statutory 60 day period (or had not timely requested any assistance at all). FEMA's Arbitration rules make it quite clear that "arbitration is not available for determinations for which the applicant failed to file a timely appeal under the provisions of §206.206 prior to August 31, 2009." In In the matter of Sewerage & Water Board of New Orleans, CBCA 1760-FEMA, 1/13/10, the Sewerage Board had received a First Appeal Decision in September 2007 - but never filed a second appeal. Applicant contended that its FEMA representative had advised against filing a second appeal so that the representative could continue to work out a resolution. But when these efforts failed and applicant appealed, FEMA rejected the appeal as untimely. The arbitration panel agreed that it did not have jurisdiction to hear the appeal, since the second appeal had been untimely filed. (The panel noted that the evidence in the record did not provide compelling evidence of the applicant's allegation that FEMA had misled the applicant or instructed the applicant to abandon or delay the appeal process.)
The applicant in In the matter of Sabine Passport Authority, CBCA 1787-FEMA, 2/4/10, did not apply for any public assistance funding for more than two years after hurricane Katrina; when it finally did so in 2007, FEMA denied the application as untimely. A second appeal was pending when the FEMA arbitration statute was enacted, so the panel had jurisdiction when the applicant sought arbitration of the denial (in June, 2009) of applicant's Second Appeal. The panel agreed with FEMA and denied to consider the merits of the dispute: applicant's initial request for public assistance was "well beyond the date for a timely application" and "extenuating circumstances beyond the control of the applicant" did not exist.
In the matter of Moss Point School District (MPSD), CBCA 1800-FEMA, 2/10/10, provides important insight into the way the panel interprets the "decision" that can be appealed. FEMA had made a determination - back in 2007 - that damage to the MPSD's Magnolia Junior High School had not been sufficient to justify replacement; FEMA approved funds only for repair of the school. MPSD unsuccessfully twice appealed this decision; FEMA denied the second appeal in July, 2008 - before any arbitration option existed. But when MPSD sought the building permit necessary for it to make the repairs FEMA had authorized, the permit was denied because as repaired, the building would be below FEMA's newly increased base flood elevation and so would not be in compliance with NFIP standards, with FEMA flood plain guidelines, and a new city flood plain damage prevention ordinance that took effect on February 17, 2009. (The city's ordinance requires critical facilities such as the junior high to be either floodproofed or heightened to four feet above BFE for new construction or substantially improved facilities.)
Both FEMA and MEMA technical team assessors agreed that "(1) elevating the existing facilities to the required elevation would not be feasible; and (2) dry floodproofing exterior walls with impermeable polymer coatings or by the construction of a free standing flood wall or levee similarly would be impracticable." Because repair was no longer "feasible" in light of its inability to secure a building permit, MPSD argued that they could no longer proceed with the authorized repair project for the school. In October 2009, MPSD sent FEMA a letter requesting FEMA reconsider MPSD's request to fund total replacement of the Magnolia Junior High School Facilities. In a letter dated October 23, 2009, FEMA refused (referring to earlier denials as being "final") and MPSD sought arbitration.
FEMA then argued in this case that since a second appeal decision had been made before February 17, 2009, the effective date of the ARRA, MPSD could not pursue arbitration before the panel as it had exhausted all administrative remedies. MPSD asserted that the matter before the panel was not the same as that decided by the FEMA Administrator, more particularly, when it sought a building permit in order to commence with the repair project, the permit was refused because the city's ordinance requires critical facilities such as the junior high to be either floodproofed or heightened to four feet above BFE for new construction or substantially improved facilities. The panel considered FEMA's October 23, 2009 response to be a FEMA determination that was subject to appeal, and therefore, under the jurisdiction of the arbitration panel.
Substantive Rulings
Repair vs. Replacement:
Perhaps one of the most visible of these arbitration decisions is In the matter of State of Louisiana, Facility Planning and Control (FP&C), CBCA 1741-FEMA, 1/27/10, which overturned FEMA's refusal to find that damage caused by Hurricane Katrina to Charity Hospital in New Orleans was so great that the facility should be replaced. FEMA had concluded that eligible repair costs were $126 million, and that replacement costs were over $400 million. Applicant contended that eligible repair costs were well over $250 million and triggered replacement under FEMA's 50% Repair/Replacement Rule. FEMA's low cost estimate was caused largely by its finding that much of the repair work needed in the hospital was not caused by Hurricane Katrina but by either deferred maintenance or by failure to protect the facility from further damage after Hurricane Katrina. The panel disagreed with FEMA and awarded replacement cost of Charity Hospital to the applicant. While this decision was viewed as a major loss for FEMA, the arbitration panel was scrupulous in following not just the broad language of the Stafford Act and FEMA's regulations governing repair vs. replacement, but also FEMA's published policy guidance. FEMA's public assistance policies were thus not challenged by the panel - only the factual determinations made by FEMA in applying these policies.
The panel rested its decision on the credibility of the factual presentations and witnesses. The hospital had submitted three separate studies performed by highly experienced, licensed professionals who had examined the entire hospital; each of these studies found that the cost to repair Charity Hospital would exceed fifty percent of the cost of replacing it. By contrast - the arbitrators concluded that FEMA's cost estimates had been prepared largely by unlicensed professionals who had spent far less time in the building - and whom the arbitrators simply did not find as credible.
The panel was also called to apply FEMA's repair vs. replacement policy in In the matter of Bay St. Louis-Waveland School District (BSWSD), CBCA 1739-FEMA, 2/1/10. The BSWSD sought replacement of roofs, siding, and windows of a high school, middle school and elementary school damaged by Hurricane Katrina. FEMA argued that there was no visible damage to roofs and contended that damaged siding could be repaired, not replaced. But the panel was unpersuaded by FEMA's reports and witnesses - who were contradicted not just by applicant's expert witnesses, but by photographic evidence and other reports in the record. The panel appeared particularly concerned that FEMA's witnesses testifying on the absence of roof damage had never, in fact, been on the roofs at issue. The panel determined that BSWSD was entitled to receive $6,988,360.59 for complete replacement of: 1) metal roofs at the BSWSD high school and middle school; 2) damaged windows at the middle and elementary school; and 3) damaged siding at the high school.
In In the matter of the City of Westwego, CBCA 1783-FEMA, 4/23/10, Hurricane Katrina damaged the city hall and police station building in Westwego, Louisiana. The Applicant, Westwego, requested the Arbitration Panel to direct FEMA to award a Public Assistance Grant to replace the building. After Katrina, FEMA prepared Project Worksheets (PWs) that authorized the 'replacement of the building based on meeting the 50% replacement rule threshold.' The PWs estimated 'repairs at $775,240.41 or 74.67% of the estimated replacement cost of $1,038,247.94.' In June 2008, FEMA created a new PW that eliminated damages listed on previous PWs, thus reducing the base repair costs to below 50% of the replacement costs ($337.094) and eliminating eligibility for replacement. At the hearing, the panel was faced with conflicting testimony (Westwego's witnesses testified to the extensive damages; FEMA witnesses testified that the early PWs before June 2008 were incorrect and that all damages from Katrina were repaired). The Panel disregarded the (contradictory) oral testimony and based its decision on the written record. It found that all PWs written by FEMA for a period of over 2 yrs had documented extensive damages. And it found no evidence that any permanent repairs had been completed. Based on this review, the Panel determined that the earlier PWs were more credible than the latest PWs which 'understate the extent of the damages that require repair.' The Panel held that the Westwego city hall and police station building qualify for replacement and FEMA is to fund the replacement costs for the building.
Pre-disaster Conditions/ Post-Disaster Maintenance issues:
In several of its decisions, the panel has grappled with a standard conundrum of FEMA's public assistance program: deciding what to do when a facility is in much worse shape after the disaster than can fairly be attributed to the disaster event. Was the condition of the facility after the disaster caused by the disaster - or primarily the result of deferred maintenance? Did the owner of the building take adequate steps after the disaster to protect it from further damage? In Charity Hospital, FEMA staff had concluded that hospital management did not restore air conditioning quickly enough - and as a result mold from the flooded basement and first floor spread throughout the 20 story building. In In the matter of Forrest County Board of Supervisors (BOS), CBCA 1772-FEMA, 3/3/10, FEMA had claimed that the supervisors had not restored air conditioning fast enough in the Forrest County courthouse (a historic structure built in 1910) causing damage from mold growth fed by high interior temperatures and humidity during the nine-day loss of electrical power following Hurricane Katrina. FEMA also noted that there was evidence of mold in the courthouse prior to the Hurricane. Rather than finding no mold remediation costs eligible, however, the panel determined (based on the County's expert report) that forty percent of the mold damage was attributable to Hurricane Katrina. The panel also found that mold damage was not a result of negligence and that BOS took reasonable property saving measures using the personnel and equipment that were available in the midst of a major disaster. The amount awarded was forty percent of $242,841, which equals $97,136 minus $25,000 from insurance proceeds, for a total awarded amount of $72,136.
In the matter of Sewerage and Water Board of New Orleans [Clarifiers] CBCA 1761-FEMA, 4/2/10, the panel weighed the applicant's evidence that corrosion to the steel in its clarifiers was caused by their immersion in salty floodwaters for some 45-75 days after Hurricane Katrina. But FEMA produced EPA reports prior to Katrina that noted corrosion of these clarifiers, records showing a lack of any corrosion control efforts during the 35 year life of the clarifiers, and an expert licensed professional engineer who testified that corrosion for only 45-75 days would stimulate a minimal amount of corrosion. Faced with FEMA's evidence, the panel concluded that the applicant's position (that there had been insignificant corrosion prior to Katrina) was simply not credible even though it was presented by the plant engineer who had actually seen the clarifiers prior to the storm. The panel rejected applicant's request for $2.5 million to replace the steel in its clarifiers.
Finally, In In the matter of St. Tammany Parish (Parish) CBCA 1778-FEMA, 5/12/10, St. Tammany Parish requested public assistance to remove debris from canals located within the Parish. A subdivision had been developed in 5 phases from 1965 through 1998. As part of the development, existing natural waterways within or bordering a particular development were dug, dredged or expanded to create canals. As each development was completed, it was turned over to the Parish, who maintained that it had legal and financial responsibility for maintenance of roads, culverts, ditches and canals in the subdivision. FEMA authorized funding, an estimated $1,879,483, for debris removal within the canals and for clearing drainage ditches through several project worksheets. Later, FEMA determined that the applicant had not provided proof of pre-storm conditions, a record of prior routine maintenance, or 'quantifiable storm related damage', or shown that there was a serious threat to public health and safety. Additionally, FEMA argued that the Parish had not established the canals as an eligible facility as stipulated in the FEMA PA guide stating that an improvement of a natural feature must be "based on documented design" (i.e. public golf courses may be considered facilities), there must be a measurable difference in performance between the unimproved and improved natural feature, and regular maintenance must be performed. "It is the improvement itself that must be maintained for the natural feature to be considered a facility."
The Applicant argued that FEMA had considered the canals to be an eligible facility shown in various project worksheets and that FEMA should be bound by its earlier actions. The panel reaffirmed that all evidence will be reviewed de novo and stated, "We are not bound by earlier FEMA actions taken on other project worksheets."
The panel found that the Applicant provided no documents detailing the original or actual design of the canals, or how the canals were constructed. There was no evidence of the canals' pre-Hurricane Katrina condition. Also, the applicant had not provided any records to show it performed routine maintenance and no specifics were provided as to when prior debris removal maintenance actually occurred, which led the panel to believe that maintenance of the canals pre-Katrina was performed only on an as-need basis to remove obstructions. The panel was also not convinced that the "removal of silt, sediment, and marsh grass from the canals would eliminate a significant threat to public health and safety" and denied the applicant's request for public assistance.
Compliance with NFIP Standards:
While deciding a the procedural question (discussed earlier In the matter of Moss Point School District, CBCA 1800-FEMA, 2/10/10) of its jurisdiction to arbitrate, the panel reached an important decision on whether FEMA public assistance program grants should fund upgrades to comply with federal flood plain management requirements. FEMA's regulations provide for funding upgrades to comply with a "legal Federal requirement" - but FEMA contended during arbitration that, because the city could have opted to withdraw from the National Flood Insurance Program (NFIP), the decision to enact the ordinance was strictly that of the local government and not a "federal requirement" under the public assistance program. FEMA cited United States v. Parish of St. Bernard, 756 F. 2d 1116 (5th Cir. 1985), in which the Fifth Circuit Court of Appeals refused to enjoin St. Bernard Parish to remedy violations of the floodplain management ordinances the Parish had adopted when joining the NFIP:
"Under the NFIP a community may withdraw, or it may be suspended by the agency, if it is not in compliance with the regulations governing flood plain construction and management... Deciding to join or remain under the program is a decision left solely by the statute to the local community...As a result, it is not a proper use of judicial power to force the parishes to do what they may decide to avoid doing simply by withdrawing from the program.
In other words, FEMA argued in the Moss Point arbitration proceeding that floodplain management requirements were not "legal federal requirements": the community was after all free to leave the NFIP. This argument was rejected by the arbitration panel, "a municipality already participating in the NFIP and wishing to continue to participate" is "subject to federal NFIP standards and related FEMA flood plain guidelines." The approach suggested in FEMA's brief was surprising given FEMA's mission to encourage compliance with the NFIP. Indeed - although not mentioned by either FEMA or the panel, FEMA's own regulations implementing Executive Order 11988 require that FEMA protect its federal investment, when funding reconstruction of facilities in floodplains, by compliance with federal flood risk mitigation requirements: the regulations applicable to construction of structures funded by FEMA grant funds state that either the lowest floor of the structure must be "at or above the level of the base flood" [or 500 year flood in the case of "critical facilities"], or the facility must be designed so that below the base or 500 year flood level (as applicable) "the structure is watertight with walls substantially impermeable to the passage of water and with structural components having the capability of resisting hydrostatic and hydrodynamic loads and effects of buoyancy." [44 CFR 9.11(d).] These regulations apply to "substantial improvements" - defined as any repair, reconstruction, or other improvement that costs more than 50% of replacement cost or of market value of the structure prior to the damage." [44 CFR 9.4, Definitions, "Substantial Improvement."]
During the hearing and posthearing reports, FEMA offered an alternative to replacement of the Magnolia Junior High School – the construction of a flood wall ten feet from the edge of the school. In order for the wall to manage adequate means of ingress and egress during a flood, however, the flood wall would have to include thirty-three (33) removable floodgate sections/panels which would have to be manually installed prior to and /or in the event of a major storm. Each section panel has an average weight of 80.67 pounds and the panel found that: “the task of lifting and maneuvering sections/panels and assembling and anchoring floodgates [would] be daunting, particularly under the pressure of an oncoming hurricane, [in addition] MSPD submits that the school does not employ full-time maintenance workers to undertake such a task.” In the Matter of Moss Point School District, CBCA 1800-FEMA, 6/22/10,The panel ruled that FEMA’s proposal of a floodwall around the Magnolia Junior High “would not be feasible” and ultimately ordered that FEMA fund the replacement of the school.
Miscellaneous Observations
The panel simply approved a settlement agreement in In the Matter of the University of Southern Mississippi, CBCA 1781-FEMA, 1/26/10, but there are two aspects of this dispute that deserve mention. First - applicant had demonstrated in its arbitration papers that the FEMA staff computations of repair and replacement cost had not complied with FEMA's policy: staff had used two different methodologies, one methodology for computing repair (via the 2006 RS Means Manual) while using a different methodology for computing replacement (via the applicant's Capital Cost Study). The two computations were not compatible. Rather than asking the arbitrators to rule on this, FEMA arbitration staff simply agreed with applicant's position and settled the matter.
Second - the procedural history of the University of Southern Mississippi dispute demonstrates the flexibility FEMA has in interpreting its 60 day appeal deadlines. FEMA staff had denied replacement of the facility at issue in version 0 of Project Worksheet 9230 in 2006. Applicant did not appeal. FEMA issued a version 1 of the project worksheet in 2007 (essentially changing the federal cost share to 100%). Applicant did not appeal. FEMA issued version 2 of PW 9230 to reflect various insurance adjustments in March 2008, again reiterating the previous finding that replacement was not warranted. Applicant did not appeal. In September, 2008, USM requested (through MEMA) a written response from FEMA for a 50% building replacement calculation on three facilities on USM's Long Beach Campus, including the Administration Building. MEMA made this request to FEMA on or about October 1, 2008. FEMA, in a letter dated November 6, 2008 stated that they had reviewed the PW's for each building and that 50% replacement calculations were not warranted. It was this letter from FEMA that the Applicant appealed. Since this appeal - from a letter that stated that replacement cost calculations were not warranted - was timely filed, the dispute was still pending when the Arbitration statute was enacted and the panel had jurisdiction.
Codes & Standards; Hazard Mitigation
In yet another decision where the Panel has consistently applied FEMA's regulations, the Applicant, East Bank Waste Water Treatment Plant (Plant) requested funds for the design, procurement, and installation of a generator as a permanent back-up source of power. Previously, the Plant had feeder lines from two substations, as its alternate power source. During Hurricane Katrina both lines were compromised causing the Plant to lose electrical power which, in turn, caused untreated sewerage to be discharged into the Mississippi River. FEMA authorized emergency funding for seven temporary generators until both feeder lines were restored and it resumed operations. In 2006, the EPA issued an order for the Plant to "provide adequate and stationary auxiliary power for the effluent pump, other critical units, and the treatment facilities so that said units and facilities will remain functional in weather events." After additional outages which occurred in 2008, the Plant requested funds for a four-megawatt generator as a new back-up source. FEMA denied assistance on the basis that the Plant did not have a generator at the site prior to Katrina - a condition of eligibility that the applicant must meet in order to restore "such facility as it existed prior to the disaster," and the applicant requested arbitration. In In the Matter of Sewerage & Water Board of New Orleans [Generator], CBCA 1759-FEMA, 4/13/10, the applicant put forward two theories for eligibility of funding for a new generator: 1) Codes and Standards, and 2) Hazard Mitigation, we shall review the panel's analyses on both. First, the EPA's order was not considered, by the panel, an upgrade required by a code or standard. While this order might have been considered a "Legal Federal Requirement" applicable to the type of restoration, the panel found "no compelling evidence that only a permanent back-up generator at the site would satisfy the requirements of this order." Second, the panel rejected the applicant's effort for funding of the generators as 406 Mitigation in that: "To be eligible for funding under the 'hazard mitigation' provisions, the [applicant] must show that the generator would eliminate or reduce the threat of future damage to the facility damaged."
In In the Matter of Mississippi State Port Authority (MSPA), CBCA 1757-FEMA, 4/22/10, MSPA requested FEMA Public Assistance to fund the replacement of two large refrigerated warehouse storage facilities. An engineering firm inspected the buildings after Katrina, and concluded one would need to be demolished and the other repaired. Ultimately, however, MSPA demolished both buildings due to safety concerns. MSPA presented the engineering reports to FEMA and sought funding to restore both buildings to pre-disaster state. FEMA approved the estimated cost to replace the first and repair the second for a total of $57,033,510. Both parties considered this a reasonable approximation.
FEMA later issued another PW stating eligible costs were $52,338,225. FEMA stated that because the refrigeration components are equipment, they are eligible for only limited application of CEF factors. MSPA submits that the refrigeration systems are integral to the structures and should be considered as such when estimating the replacement costs for both buildings, further, that FEMA misapplied the CEF factors. MSPA contends that it is entitled to recover additional non-construction management and engineering costs, as well as overhead, for a total of $63,137,902 for replacement of both buildings.
The panel decided the "weight of the evidence" worked in favor toward MSPA and that the refrigeration systems must be considered as integral to the structures for estimating the replacement costs. They rejected FEMA's argument that the work could be performed by separate contractors, one for the construction of the buildings, and the second for the installation of the refrigeration systems as "unsupported by the evidence." The panel, however, determined that evidence did not support MSPA's claim for additional non-construction costs. The panel granted $57,033,510 for the costs of replacing both buildings.
