Steam Heat Service

February 17, 2012

Mark Schouten

Administrator

Iowa Homeland Security and Emergency Management Division

7150 NW 70th Avenue

Camp Dodge, Bldg W-4

Johnston, Iowa 50131-1824

RE:  Second Appeal–Mercy Medical Center, PA ID 113-05359-00, Steam Heat Service, FEMA-1763-DR-IA, Project Worksheet (PW) 9449

Dear Mr. Schouten:

This is in response to a letter from your office dated July 1, 2011, which transmitted the referenced second appeal on behalf of the Mercy Medical Center (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of funding in the amount of $3,343,929 for steam service for the hospital.

Background

In 2008, flooding damaged a steam generation plant owned by a commercial vendor, Alliant Energy Corporation (Alliant), that supplied steam to the Applicant.  The Applicant procured steam from the vendor to sterilize medical equipment and heat their facility.  Damage to Alliant’s steam generation plant caused a temporary lapse in its ability to provide the Applicant’s facility with steam.  As a result, the Applicant took emergency protective measures and leased a boiler to provide steam to its facility.  Alliant resumed steam service to the Applicant beginning on July 15, 2008.  The post-disaster steam service that Alliant provided was more expensive and less reliable than the pre-disaster steam service.  On February 4, 2009, the Applicant executed a plan to build a permanent steam facility on-site at its facility.  The Applicant leased three temporary boilers, using Alliant’s service as back-up until the permanent steam facility could be built.  The three phases of the project include:

·         Phase 1: Emergency protective measures in the amount of $238,263 to provide steam to the Applicant’s facility when Alliant was unable to provide steam. 

·         Phase 2: The Applicant reconnected to Alliant to provide steam to the Applicant’s facility.  The cost of steam increased from $8.50/Mlb to $54.00/Mlb for a total increased cost of $925,539.

·         Phase 3: Temporary boilers that cost $2,405,300 to provide steam until the Applicant built a permanent facility that produced steam.

FEMA obligated $225,173 for Phase 1 costs, denying $13,090 as incidental operating costs.  FEMA denied funding for Phase 2 costs for the increased price of steam service from Alliant, and for Phase 3 costs for the temporary boilers, as commercial steam service had been restored.

First Appeal

The Applicant submitted its first appeal in a letter dated October 29, 2010, requesting reimbursement of the full cost of temporary steam service needed to operate the Applicant’s facility.  The Applicant asserted that Alliant’s inability to provide steam service on a reliable basis was a direct result of the disaster.  Further, the Applicant also stated that the costs incurred were reasonable and necessary for the Applicant to operate as a critical care facility to protect the public health and welfare of Cedar Rapids and surrounding communities.  On March 2, 2011, the Regional Administrator determined that FEMA correctly reimbursed the Applicant for emergency temporary costs for steam until the steam service provided by Alliant was restored, and denied the appeal for additional funding.  FEMA determined that the cost difference of the steam provided by Alliant was an increased operational cost and not eligible for reimbursement.  Once the Applicant reconnected to Alliant steam service, funding for emergency protective measures were no longer eligible as there was no longer an immediate threat to public health and safety.

Second Appeal

The Applicant submitted a second appeal in a letter dated May 3, 2011, requesting reimbursement of Phase 2 and 3 costs.  The Applicant asserts that these costs were necessary to deliver an essential service central to the operation of a critical care facility and that the costs incurred for the three temporary boilers were a direct result of the disaster.

Discussion

FEMA provides assistance for costs that are a direct result of a Presidentially-declared disaster.  Per 44 Code of Federal Regulations (44 CFR) §206.223(a) General work eligibility, to be eligible for financial assistance, work must be required as the result of the major disaster.  The Applicant seeks reimbursement for the increased cost of steam following the disaster.  Before the disaster, Alliant provided the Applicant with steam at a cost of $8.50/Mlb.  After the disaster, Alliant provided steam at a cost of $54.00/Mlb.  While the cost of operating a facility or providing a service may increase following a disaster, these costs are increased operating expenses and are not eligible for Public Assistance funding.  The Applicant also seeks reimbursement for the cost of temporary boilers to produce heat while a permanent steam production facility was constructed.  After commercial steam service was restored to the Applicant, the Applicant made a decision to discontinue service from Alliant because of the increased expense and unreliable service.  When the Applicant reconnected to Alliant, eligibility for the cost of emergency protective measures under Category B of the Public Assistance Program ended, as there was no longer an immediate threat to public health or safety resulting from the major disaster.  The Applicant did not provide documentation of any direct disaster damage to the Applicant’s facility that would require the leasing of three temporary boilers.

Conclusion

I have reviewed the information submitted with the appeal and have determined that the Regional Administrator’s decision is consistent with Public Assistance Program regulations and policy.  Therefore, I am denying the Applicant’s second appeal.

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

Sincerely,

/s/

Deborah Ingram

Assistant Administrator

Recovery Directorate

cc:  Beth Freeman

Regional Administrator

FEMA Region VII