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Second Appeal Letter
PA ID# 113-12000-00; City of Cedar Rapids
PW ID# 1415; Hydro Electric Plant
April 3, 2012
Iowa Homeland Security and Emergency Management Division
7105 NW 70
Camp Dodge, Bldg W-4
Johnson, Iowa 50131-1824
RE: Second Appeal–City of Cedar Rapids, PA ID 113-12000-00, Hydroelectric Plant, FEMA-1763-DR-IA, Project Worksheet (PW) 1415
Dear Mr. Schouten:
This is in response to a letter from your office dated March 31, 2011, which transmitted the referenced second appeal on behalf of the City of Cedar Rapids (Applicant). The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) decision to deny $13,786,951 in funding to repair damages to the Applicant’s hydroelectric power plant.
In January 2007, ice jams damaged the Applicant’s hydroelectric power plant. The President did not declare a major disaster for this event. At that time, the Applicant took the facility out of service and the hydroelectric power plant remains out of service and unrepaired. The Applicant contracted with Power Engineering and Manufacturing (PEM), Ltd. to develop a cost estimate to repair the ice jam damages. PEM estimated the cost to be approximately $1 million and the repairs would take 24-30 months to complete. In early 2008, the Applicant contracted with another engineering firm, Mead and Hunt to analyze the feasibility of repairing the plant and analyze other options for the future disposition of the plant.
Flooding of the Cedar River and its tributaries between May 25 and August 13, 2008 caused additional damage to the hydroelectric power plant. The President declared a major disaster for this event (FEMA-DR-1763-IA). Working with the Applicant, FEMA developed a cost estimate of $13,786,951 for the work to repair the flood damage, as well as administrative costs, and a hazard mitigation proposal. In August 2010, following review of the project, FEMA obligated zero dollars for PW 1415 because it determined that the hydroelectric power plant was not in active use at the time of the disaster and was therefore not eligible for Public Assistance funding.
By a letter dated August 9, 2010, the Applicant submitted its first appeal. The Applicant asserted that it intended to repair the hydroelectric power plant to full power generating capability. In a letter dated December 2, 2010, the Regional Administrator denied the Applicant’s first appeal because it determined that the hydroelectric power plant was not in active use at the time of the disaster. The Regional Administrator stated that the Applicant had not provided evidence that it intended to repair the plant and that its actions demonstrated that it intended to either abandon, sell, or otherwise dispose of the facility and use FEMA funding for another project.
On April 6, 2010, the Applicant submitted an improved project request. By a letter dated February 9, 2011, the Interim Director of the Iowa Closeout Center denied the Applicant’s request for an improved project because the facility was not eligible for Public Assistance funding.
The Applicant submitted a second appeal in a letter dated February 7, 2011, which was forwarded by the State to FEMA on March 31, 2011. In its second appeal, the Applicant asserts that the hydroelectric power plant meets the eligibility requirements for facilities that are not in active use at the time of the disaster. The Applicant states that the power plant was only temporarily inoperative while the Applicant considered its options to repair and/or dispose of the facility. Furthermore, the Applicant asserts that the City’s Capital Improvement Program for fiscal years 2009-2018 and its contracts with PEM and Mead and Hunt demonstrate the City’s intent to maintain and operate the facility. The Applicant also resubmitted its request for an improved project for PW 1415.
In accordance with 44 CFR §206.226(k)(2), Restoration of damaged facilities, Inactive Facilities, facilities that were not in active use at the time of the disaster are not eligible except in those instances where the facilities were only temporarily inoperative for repairs or remodeling, or where active use by the applicant was firmly established in an approved budget or the owner can demonstrate to FEMA’s satisfaction an intent to begin use within a reasonable time.
In order to establish eligibility in this case, FEMA must determine the status of the hydroelectric plant at the time of the disaster. While the Applicant’s internal planning and decision making regarding the future disposition of the plant that took place after the disaster is relevant, it is not a determining factor in terms of eligibility in this case.
At the time of the disaster, the hydroelectric plant was inactive due to significant damage sustained from the ice jams in 2007. The plant was operational prior to this event and the Applicant had performed a damage assessment to ascertain the scope of repairs and a cost estimate, which amounted to approximately $1 million. The Applicant’s consultant PEM determined the repairs would take 24-30 months to complete. Given the time and cost associated with the repairs, the Applicant made a reasonable decision to examine options for the disposition of the facility and evaluate the costs and benefits of each option.
The Applicant’s scope of services with Mead & Hunt identified five options prior to initiation of the contract: 1) Repair the facility and self-operate; 2) Repair the facility and enter into a contract with another operation/maintenance firm; 3) Repair the facility and lease its operations; 4) Repair the facility and sell it outright; or 5) Surrender the license and decommission the facility.
When the disaster occurred, Mead and Hunt had not completed its study and the Applicant had not yet determined which course of action to pursue. In March of 2008, just prior to the disaster, the Applicant’s City Council adopted a Capital Improvements Program budget for Fiscal Years 2009 through 2018, which included $320,000 for operation and maintenance of the hydroelectric plant. Although this budget did not approve the estimated $1,000,000 to repair the facility, it does support the conclusion that the Applicant had not yet made a final decision on whether to restore or dispose of the facility.
Although the Applicant had not begun repairs at the time of the disaster, the fact that it was examining options for facility does not disqualify it from the exception to 44 CFR 206.226 (k)(2) for a facility temporarily inoperative awaiting repairs. The Applicant should not be penalized for pursuing a reasonable course of action to examine options and determine the cost and benefits of each following the ice jam damages in January 2007. Therefore, the facility is eligible for repair assistance.
I have reviewed the information submitted with the appeal and have determined that the Applicant’s appeal should be granted for $13,786,951. Following this decision, if the Applicant still wishes to request an improved or alternate project, it should submit its request to your office and FEMA will work with your staff and the Applicant accordingly. Please note that the estimated cost of the hazard mitigation proposal ($217,587) cannot be included in the funding for an improved project or the calculation of the amount of alternate project funding.
By this letter, I am requesting that the Regional Administrator take appropriate action to implement my decision. Please inform the Applicant of my decision. This determination is the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
cc: Beth Freeman
FEMA Region VII