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Second Appeal Letter
PA ID# 000-92009; Northern Illinois University
DSR ID# 89690; University Broadcast Center
January 12, 1999
Mr. David L. Smith, Administrator
Disaster Assistance and Preparedness
Illinois Emergency Management Agency
110 East Adams Street
Springfield, Illinois 62701-1109
Dear Mr. Smith:
This letter is in response to your August 24, 1998, submittal of Northern Illinois University's (NIU's) second appeal of the Federal Emergency Management Agency's (FEMA's) denial of its request for funding of costs to cover record albums destroyed by flooding in the University's Broadcast Center that resulted from FEMA-1129-DR-IL. The appeal is based on NIU's contention that these records were contents owned by NIU at the time of the disaster and, therefore, eligible under 44 CFR 206.226(f) (equipment and furnishings) or 44 CFR 206.226(g) (library books and publications). The applicant is requesting a total of $35,750, based on a unit value of $2.75 for each of the 13,000 damaged records. To support the request, the applicant provided supplemental information documenting the average retail prices of used record albums at four merchants in the area. The amount is $1 per album more than the value NIU placed on the albums in its first appeal letter of February 9, 1997.
FEMA initially valued the record albums at $8,000 and included in Damage Survey Report (DSR) 41772 that was approved for $14,205 on February 2, 1997. DSR 89690 was subsequently written to de-obligate the full amount of DSR 41772 ($14,205) because of insurance proceeds received by NIU. In the comments section of DSR 89690, FEMA noted that "Donated record albums for resale at annual auction are not eligible. $8,000 estimate for loss of revenue from auction is not approved." The comments section of DSR 89690 also notes that FEMA approved DSR 89698 for $50,000 to cover the deductible that was applied to damages outlined on seven different DSRs. Insurance proceeds did not cover the damaged record albums because contents of the building were not covered under NIU's policy.
In the first appeal, the applicant argued that the records constituted an inventory loss and, thus, qualified for reimbursement. FEMA noted in its first appeal response, however, that "payment of increased current operating expenses or replacement of lost revenues" is not eligible for FEMA funding pursuant to 44 CFR 206.226(a)(3) (see attached letters).
Insurance coverage under NIU's multi-peril property policy includes flood protection. The Broadcast Center, which is not within the 100-year floodplain, has a deductible of $50,000, but contents of the building are not covered under NIU's policy (see enclosed Explanation of Property Insurance). The University maintains flood insurance of $15 million, with higher deductibles and other special provisions for its buildings that are located within the floodplain.
Section 406(d) of the Stafford Act (Flood Insurance, Reduction of Federal Assistance), which requires a reduction of federal assistance under certain conditions, also does not apply because the Broadcast Center is not located within a special flood hazard area.
After review, I have concluded that the damaged record albums should be considered as inventory and thus are eligible under 44 CFR 206.226(g) (library books and publications). These records constituted the public radio station's dormant record library and represent a legitimate part of the University's books and publications.
With regard to the value of the record albums, please note that approved DSR 41772, Item 4 shows a value of $8,000 for the "inventory" damaged by the flood. I cannot support NIU's contention, based on a survey of local used record stores, that the value of the records is at least $35,750, or even $22,750 the valuation of the damaged records initially determined by the University. I believe that the valuation method that FEMA used, valuing the records at $8,000, based on the average amount of the sales for the previous three auctions, is indeed a more appropriate method for valuing 13,000 records than a unit cost approach based on individual record prices. Please note also that the University chose not to contest the original valuation that was approved initially on DSR 41772. The appeal is partially approved in the amount of $8,000.
By copy of this letter, I am requesting the Regional Director to prepare a Supplemental DSR in the amount of $8,000 to cover the value of the records lost in the flooding of July 1996.
Please inform the applicant 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. It amends 44 CFR 206.206.
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate
cc: Dale Shipley
FEMA Region V