Building Permit and Safety Inspection Cost

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1008-DR
ApplicantLos Angeles Dept. of Building and Safety
Appeal TypeSecond
PA ID#037-91075
PW ID#51690
Date Signed1999-06-17T04:00:00
Citation: FEMA-1008-DR-CA; City of Los Angeles Department of Building and Safety, DSR 51690

Cross Reference: Northridge Earthquake, City of Los Angeles, Building Permit Program, Emergency Work versus Permanent Work, Time Extension

Summary: The Northridge Earthquake damaged or destroyed an estimated 93,000 structures in the City of Los Angeles. FEMA Director Witt authorized the payment of straight or regular time salaries of the City of Los Angeles Department of Building and Safety's (subgrantee's) permanently employed personnel engaged in permit processing, and inspection tasks for buildings damaged or destroyed in the City of Los Angeles during the Northridge Earthquake. DSR 51690 was approved in the amount of $36,628,641 as Category G and included estimated labor costs associated with these tasks between January 17, 1994, and December 31, 1995. The subgrantee requested a time extension for the building permit program until January 17, 1997, and supplemental funding in the amount of $22.5 million. On August 3, 1995, OES approved the requested time extension. On November 2, 1995, FEMA determined that DSR 51690 should have been prepared as Category B because the work was required as an emergency measure; and the time extension and request for supplement were not eligible. The subgrantee submitted a first appeal and questioned FEMA's determination regarding the time extension and the change in Category from G to B. FEMA analyzed the subgrantee's appeal and found no evidence to justify the extension of DSR 51690 to January 17, 1997. Because DSR 51690 was mistakenly prepared as Category G, DSR 13500 was prepared to deobligate funding originally obligated under DSR 51690. DSR 15711 was prepared as Category B in the amount of $25.9 million, which represents the state's reported payment to the subgrantee. The subgrantee submitted a second appeal regarding the same issues as in the first appeal.

Issues:
  1. Are permitting and inspection costs eligible as Category G?
  2. Is the requested time extension eligible?
Findings:
  1. No. Eligible permitting and inspection costs are associated only with emergency work activities and are to be classified as Category B.
  2. No. OES does not have the authority to grant a time extension in this instance because time equals money, and OES does not have the authority to commit federal funding.
Rationale: Disaster-related building permit costs are funded as Category B for DR-1008. The Stafford Act authorizes FEMA alone to grant federal funds for disaster assistance.

Appeal Letter

June 17, 1999

Gilbert Najera
Governor's Office of Emergency Services
74 North Pasadena Avenue, West Annex, Second Floor
Pasadena, California 91103-3678

RE: Second Appeal - City of Los Angeles Department of Building and Safety, Building Permit Program, FEMA-1008-DR-CA, DSR 51690

Dear Mr. Najera:

This letter is in response to the referenced second appeal, transmitted by your June 9, 1997, letter. The subgrantee is requesting that FEMA reconsider a time extension for DSR 51690 until January 17, 1997, and its determination that this DSR should be classified as Category B.

As explained in the enclosed analysis, I have determined that the scope of work under DSR 51690 is eligible for funding as Category B. I have also determined that the requested time extension is not eligible. Only building permitting and inspection costs that the subgrantee incurred between January 17, 1994, and December 31, 1995, are eligible. Accordingly, the subgrantee's appeal is denied.

Please inform the subgrantee of my determination. In accordance with the appeal procedure governing appeal decisions made on or after May 8, 1998, my decision constitutes the final decision on this matter. The current appeal procedure was published as a final rule in the Federal Register on April 8, 1998, which amends 44 CFR 206.206.

Sincerely,

/S/

Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate

Enclosure

cc: Martha Z. Whetstone
Regional Director
FEMA Region IX

Appeal Analysis

BACKGROUND

The Northridge Earthquake (FEMA-1008-DR-CA) occurred on January 17, 1994, and damaged or destroyed an estimated 93,000 residential and commercial structures in the City of Los Angeles. In a February 15, 1994, letter to Federal Emergency Management Agency (FEMA) Director, James Lee Witt, Mayor Riordan of Los Angeles requested that FEMA fund the full federal share of costs for City employees to process permits, demolish buildings and structures, and remove debris from earthquake-damaged properties in the City of Los Angeles. Mayor Riordan explained that the cost would be lower if these tasks were conducted by City employees because the City Engineer was organizing a program to absorb the costs of building permit processing, demolition, and debris removal for all earthquake-damaged and destroyed properties. Director Witt responded in a letter dated February 17, 1994. In this letter the Director authorized payment of straight or regular time salaries of the City's permanently employed personnel engaged in permit processing, demolition, and debris removal activities under the proposed program (Northridge Earthquake Building Permit Program) for buildings damaged or destroyed in the City of Los Angeles during the Northridge Earthquake. This waiver was approved by the Office of Management and Budget and was not intended to establish a change in policy or a sub rosa change in FEMA's regulation.

On June 30, 1994, a team of inspectors, consisting of a representative from FEMA, the California State Governor's Office of Emergency Services (OES) and the City of Los Angeles Department of Building and Safety (subgrantee) reviewed the estimated cost to the subgrantee for the review of plans, issuance of permits, and inspection of structures being demolished or reconstructed. Damage Survey Report (DSR) 51690 was prepared as Category G and included straight and overtime labor costs associated with these tasks as well as costs associated with mileage, office rent, and furniture and equipment purchases. This DSR also included the cost of purchasing and installing a Geobase/Land Management and Permit Information Tracking System that would expedite the issuance of building permits. DSR 51690 was approved on December 15, 1994, in the amount of $36,628,641. It is noted that the narrative for DSR 51690 states, "Costs incurred after December 31, 1995, are not reimbursable."

In a letter dated July 10, 1995, the subgrantee requested a time extension until January 17, 1997, and supplemental funding in the amount of $22.5 million to continue the Northridge Earthquake Building Permit Program. The subgrantee claimed that 52,000 sites still needed to be permitted; 218 red tagged structures, 1,337 yellow tagged structures, and 50,500 green tagged but damaged structures. The subgrantee asserted that some projects were delayed because of the lack of availability of masons and construction contractors; slow resolution of insurance claims; and delayed funding of repair/building loans and grants. They claimed that the additional 18 months would provide sufficient time to complete the repair work. In a letter dated August 3, 1995, OES approved the time extension to January 17, 1997. In a letter dated November 2, 1995, the Federal Coordinating Officer (FCO) stated,

FEMA originally determined the permitting work to be eligible for reimbursement because it was a necessary step prior to commencing the emergency demolition work. Additionally, the inspections to be performed, pursuant to the issuance of the permits for reconstruction work, were considered to be eligible on the basis that they were required to assure the overall safety of the buildings, for the general public.

Accordingly, it was determined that DSR 51690 should have been prepared as Category B because the work was required as an emergency measure, not as permanent work. The FCO also concluded that since 97% of the buildings yet to be permitted (50,500 of 52,055) were safe for occupancy, an emergency situation did not exist. Therefore, the time extension and request for supplement were not eligible. A February 7, 1996, letter from OES transmitted this information to the subgrantee.

First Appeal
The subgrantee submitted a first appeal to OES on March 29, 1996, questioning FEMA's determination regarding the time extension for DSR 51690 and the change in DSR Category from G to B. The subgrantee claimed that they continued the permitting program after receiving the August 3, 1995, letter from OES, with the understanding that the time extension was approved. The subgrantee stated that the decision from FEMA to deny the time extension was not received until February 7, 1996. The subgrantee claimed that they continued the permitting program based on information received in the February 17, 1994, letter from Director Witt, the August 3, 1995, letter from OES, and DSR 51690. It is noted that the subgrantee accepted FEMA's decision to deny additional funding in the amount of $22.5 million.

FEMA received many inquiries from many applicants regarding the eligibility of building permit program costs. Therefore, in a letter to OES dated July 15, 1996, the FCO addressed FEMA's position regarding the eligibility of building permit program costs. The FCO states, ".based on a review of the building permit DSRs it has been determined that FEMA will fund local government earthquake-related building permit costs through December 31, 1995." This letter reiterated the one time waiver issued by Director Witt on February 17, 1994, that approved regular time costs of permanently employed personnel as well as the overtime costs and contract costs associated with disaster-related building permits for the City of Los Angeles.

In a letter to OES dated July 25, 1996, James Duffer, the FEMA Public Assistance Officer, stated that Price Waterhouse LLC, a technical assistance contractor to FEMA, would review all expenditures and revenues from January 17, 1994, to December 31, 1995, for all applicants requesting building permit costs.

FEMA responded specifically to the subgrantee's first appeal in correspondence dated January 7, 1997. FEMA analyzed the subgrantee's appeal and found no evidence to justify the extension of DSR 51690 to January 17, 1997. FEMA cited Title 44 of the Code of Federal Regulations (44 CFR) Section 206.225(a)(3)(i), which defines emergency work. FEMA claimed that the wording of the City's ordinances (169349 and 169818) adopted to waive demolition and building permit fees, indicates that the subgrantee recognized that work for the building permit program constituted work designated as emergency protective measures under 44 CFR 206.225(a)(3)(i). Therefore, FEMA determined that the time extension was not eligible and DSR 51690 should have been prepared as Category B.

Second Appeal
The subgrantee submitted a second appeal to OES on April 25, 1997. This appeal questioned FEMA's determination to change DSR 51690 from Category G to Category B and deny the time extension for this project to January 17, 1997. The subgrantee argues that FEMA's interpretation of the City's ordinances is inaccurate. As well, the subgrantee lists thirteen other DSRs approved for permit processing as Category G DSRs for the subgrantee and other applicants.

On December 16, 1998, the Northridge Long-Term Recovery Office forwarded this appeal to FEMA Headquarters. This correspondence explains the delay in forwarding the appeal stating the following:

On July, 2, 1997, FEMA requested the Subgrantee to submit documentation supporting the actual disaster-related building permit and safety inspection project costs incurred as of December 31, 1995. Additionally, FEMA requested that the Subgrantee separately identify and submit costs for the period from January 1, 1996 th n building permit and safety inspection costs as requested by FEMA on July 2, 1997.

It is noted that on April 24, 1998, DSR 13500 was approved to deobligate $36,628,641 originally obligated under DSR 51690. DSR 15711 was prepared as Category B in the amount of $25,927,148. This cost was approved on April 24, 1998, and represents eligible building permit and safety inspection costs through December 31, 1995, based on the state's reported payment to the subgrantee. Specific documentation to support these costs has not yet been received.

DISCUSSION

All relevant information has been reviewed regarding DSRs 51690 and 15711 and the subgrantee's second appeal. The approved scope of work under DSR 51690 was required for unsafe buildings to be demolished and for the safety inspection of damaged buildings. According to 44 CFR 206.225(a)(3)(i), emergency protective measures are eligible if threats to life, public health, or safety are eliminated or lessened. Therefore, the scope of work associated with DSR 51690 (review of plans, issuance of permits and inspection of structures being demolished or reconstructed) should be classified as emergency work, Category B. Typically, the regular or straight time labor costs associated with eligible emergency work are not eligible for FEMA funding. However, Director Witt, has given the subgrantee a one-time waiver that grants eligibility of regular or straight time labor costs for this project.

The subgrantee lists other DSRs (DSRs 50367, 05629, 06356, 01214) that were obligated for various applicants as Category G during the 1008 event. DSRs 05629 and 50367 were also mentioned in the July 25, 1996, letter from James Duffer. Per this letter, these DSRs were to be adjusted and reobligated as Category B DSRs. The subgrantee also lists nine DSRs that were approved as Category G in three other disasters. The Category G and Category B replacement has caused confusion and inconsistencies for the permit and inspection cost DSRs. These inconsistencies do not represent a change in policy or interpretation. FEMA has determined that building permit and inspection activities are eligible only as Category B, emergency work.

OES has the authority to grant time extensions in accordance with 44 CFR 206.224(c)(2)(ii); however, OES does not have the authority to approve federal funds. The Stafford Act authorizes FEMA alone to grant federal funds for disaster assistance. DSRs 51690 and 15711 include costs for the time for employees to review plans, issue permits, and inspect damaged structures. Therefore, in this instance, time is money; and OES does not have the authority to grant a time extension that is essentially a commitment of federal funds.

Typically, the deadline for the completion of work is six months after the declaration of a disaster for emergency work, and 18 months for permanent work. However, due to the extreme nature of the Northridge earthquake, the original deadline for DSR 51690 was extended to December 31, 1995, almost 24 months from the date of the declaration. It is reasonable to expect that this time period was sufficient for the completion of emergency work under DSR 51690. This is supported by the subgrantee's July 10, 1995, letter, stating that at that time earthquake reconstruction permits were not yet issued for 52,055 sites, of which 50,500 were structures that were damaged but are safe for occupancy. The emergency situation to issue permits and complete building inspections was significantly diminished as of July 10, 1995, five months prior to the established deadline. Therefore, the time extension is not eligible.

CONCLUSION

As discussed in the above analysis, the scope of work under DSRs 51690 and 15711 is considered eligible as emergency work and the time extension as requested is denied. Only building permitting and inspection costs that the subgrantee incurred between January 17, 1994, and December 31, 1995, are eligible.
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