Demolition and Debris Removal

January 4, 2010

Lonnie G. Hoffer

Disaster Recovery Chief

North Dakota Department of Emergency Services

PO Box 5511

Bismarck, ND 58506-5511

Re:  Second Appeal–City of Northwood–PA ID 035-58300-00,

       Demolition and Debris Removal, FEMA-1726-DR-ND, Project Worksheet (PW) 95

Dear Mr. Hoffer:

This is in response to your letter dated April 3, 2009, which transmitted the referenced second appeal on behalf of the City of Northwood (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) deduction of $29,400 for insurance proceeds from Project Worksheet (PW) 95 for the demolition of 204, 206 and 208 South Main Street (“Johnson Building”). 

Background

On August 26, 2007, a tornado struck the City of Northwood causing extensive damage to the privately owned Johnson Building located at the 200 block of South Main Street.  Due to the severity of the damage, the Applicant determined that the Johnson Building presented a threat to public health and safety.  The City Council determined that the Johnson Building was a substandard building and ordered that the owner the Johnson Building demolish it pursuant to Ordinance 326.  In its Findings of Fact, Conclusions of Law and Order for Compliance issued  on February 4, 2008, the City Council ordered the owner to repair or demolish the substandard building within a reasonable period of time, not to exceed 30 days.  The owner did not repair or demolish the building, and the Applicant subsequently demolished the building.  The City Council’s Findings of Fact, Conclusions of Law and Order for Compliance stated in part that the “cost of such repair or demolition be charged against the land on which the said building existed by special assessment or by municipal lien or as a special tax against the land in a suit at law against the owner….”

FEMA prepared PW 95 for $105,000 for the demolition of the Johnson Building.  However, FEMA deducted $29,400 from the PW because the property owner of 208 South Main Street received an insurance settlement of $85,000 ($75,000 for damage, including demolition, and $10,000 for debris removal).  Since PW 95 covered the demolition of two uninsured structures (204 and 206 South Main Street) in addition to 208 South Main Street, FEMA prorated the $105,000 demolition cost to each address based on its percentage of the total area demolished.  The portion of the building at 208 South Main Street represented 28 percent of the total area demolished.  Therefore, FEMA reduced the amount of PW 95 by $29,400 ($105,000 x .28 = $29,400).  In its first appeal dated August 27, 2008, the Applicant asserted that FEMA should have only deducted $10,000 from insurance proceeds because the insurance policy only covered $10,000 for debris removal and demolition.  In a letter dated

November 24, 2008, the FEMA Region VIII Disaster Assistance Division Director denied the first appeal.  The Division Director determined that the insurance coverage on 208 South Main Street included $75,000 basic coverage, which included demolition if required, and an additional $10,000 for debris removal.  The policy also included $75,000 for Business Personal Property.  The Division Director concluded that the insurance settlement was sufficient to cover the cost of demolition and debris removal for 208 South Main Street.  Therefore, a FEMA reimbursement would be a prohibited duplication of benefits.

Second Appeal

In a letter dated February 9, 2009, the Applicant submitted its second appeal.  In its attached legal opinion, the Applicant asserts that only $10,000 additional coverage for debris removal should be considered as recoverable duplicate funding.  Therefore, FEMA should claim an offset only to the extent of the insurance policy coverage available specifically for debris removal.

Discussion

Section 312 of the Stafford Act prohibits FEMA from approving funds for work covered by any other source of funding, including insurance settlements.  The property owner’s insurance policy covered demolition of the property and removal of debris.  The property owner received an insurance settlement of $85,000 for building damage and debris removal.  Therefore, FEMA must reduce the amount of assistance it provides by the amount of insurance proceeds, up to the amount of eligible assistance.

The Order for Compliance that the City Council approved on February 4, 2008, stated that the City would charge the cost it incurred to demolish the Johnson Building against the land on which the building existed by special assessment or by municipal lien or as a special tax against the land in a suit at law against the owner.  The Order for Compliance is clear that the property owner is legally responsible to pay the cost the City incurred in demolishing the building and removing the debris from the property.   FEMA’s funding of the cost to demolish the Johnson Building (204, 206 and 208 South Main Street and remove the debris would constitute a duplication of benefits.  Therefore, PW 95 is not eligible for funding.

Conclusion

I have reviewed the information submitted with the appeal and determined that PW 95 is not eligible for funding because the owners of the building located at 204, 206, and 208 South Main Street are legally responsible for the cost to demolish the building.  Therefore, I deny the appeal.  In addition, I request that the Acting Regional Administrator take appropriate action to deobligate PW 95.

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/

Elizabeth A. Zimmerman

Assistant Administrator

Disaster Assistance Directorate

cc:  Douglas A. Gore

      Acting Regional Administrator

      FEMA Region VIII