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Second Appeal Analysis
PA ID# 103-03027-00; University of Iowa
PW ID# 1103; Museum of Art
Flooding that occurred in Iowa from May 25, 2008, through August 13, 2008, damaged the University of Iowa’s (Applicant) Museum of Art (Museum) building. FEMA prepared Project Worksheet (PW) 1103 for the cost to repair the Museum on July 30, 2008. At the Applicant’s request, FEMA assessed a number of facilities for replacement funding, including the Museum, under Title 44 of the Code of Federal Regulations (44 CFR), §206.226(f). The estimated cost to repair the Museum was $5,191,450. The cost to replace the Museum was estimated to be $40 million. FEMA determined that the Museum was eligible for repair but not replacement assistance, because the cost to repair the damage was less than 50 percent of the costs to replace the Museum.
On September 10, 2010, the Applicant submitted its first appeal, which the Iowa Homeland Security and Emergency Management Division (State) forwarded to FEMA Region VII on September 16, 2010. The Applicant argued that the Museum, even when repaired, could not perform its pre-disaster function as a fine arts museum, because of the inability to insure fine art collections at the current location. To support its claim for replacement funding, the Applicant submitted documentation from the Mitsui Sumitomo Insurance Group regarding the feasibility of insuring the high valued fine art collection at the Museum. The Applicant also submitted documentation from the American Association of Museums (Accreditation Commission) regarding future accreditation reviews, to include risk management and the “...ability to provide the appropriate collections care and safety...ability to secure object loans that are needed to support the museum’s educational and interpretative goals.” On January 27, 2011, the Regional Administrator denied the Applicant’s first appeal because the Museum did not meet the requirements for replacement under 44 CFR §206.226(f). The Regional Administrator also suggested several options for consideration as part of the Applicant’s recovery, including seeking an alternate or improved project; Hazard Mitigation Grant Program funding to reduce risk; Section 406 Hazard Mitigation funding; and consideration of moving the fine art collection to another facility on campus.
The Applicant submitted a second appeal on April 4, 2011, which the State transmitted to FEMA on May 12, 2011. In the second appeal, the Applicant reiterates its request for replacement funding. The Applicant contends that the Museum cannot perform its function if it cannot insure fine art collections at the facility. The Applicant argues that the Museum should be replaced based on the language in 44 CFR §206.226(f), which states that, “A facility is considered repairable when disaster damages do not exceed 50 percent of the cost of replacing a facility to its predisaster condition… and it is feasible to repair the facility so that it can perform the function for which it was being used as well as it did immediately prior to the disaster.” (Emphasis added)
The Museum was constructed in 1969 and, before the disaster, contained over 12,400 pieces of art with an estimated value of $500 million. The Museum and the fine art collection supported the academic mission of research, teaching, and education. The Applicant contends that it cannot obtain insurance on the fine art collection if the collection is located in the Museum at its current location. As indicated in the Applicant’s submittal, its insurance broker stated that it was their opinion that, “it would be impossible for the University of Iowa to get flood insurance commensurate with the value of the collection if the fine art was returned to the former facility.”
The Applicant is eligible for repair assistance, and the facility can physically be repaired at its current location. The principal argument in the Applicant’s second appeal is whether the ability to insure the Applicant’s fine art collection at the Museum’s current site should be a factor in FEMA’s determination to provide funding to repair or replace the Museum under 44 CFR §206.226(f). It is the Applicant’s contention that if the fine art collection cannot be insured at the original Museum location, then the Museum cannot “...perform the function for which it was being used as well as it did immediately prior to the disaster.” The Applicant contends therefore that FEMA should fund the replacement of the Museum at a new location.
FEMA’s regulations at 44 CFR §206.226(f) set forth criteria for a facility repair project, as opposed to a replacement project. Specifically, repair is warranted when: 1) disaster damage is 50 percent or less than the replacement cost; and 2) it is feasible to repair the facility to the point where it can perform its pre-disaster function as well as it did immediately before the disaster. Conversely, a facility is eligible for replacement when: 1) disaster damage is over 50 percent of the replacement cost, or 2) it is not feasible to repair the facility to the point where it can perform its pre-disaster function as well as it did immediately before the disaster.
The Applicant agrees with FEMA’s calculation of the disaster damage to the Museum, namely that the Museum can be repaired to its pre-disaster condition for less than half the cost to replace it. Therefore, the facility does not meet the first criteria. With regard to the second criteria, the documentation submitted with the appeal shows that the Applicant’s insurer gauged the risk of insuring the Museum’s fine art collection and for business reasons determined that it would not insure the collection at its current location. The difficulties in obtaining insurance is not a direct result of the impact of the declared major disaster on the facility, but rather is a business decision by the Applicant’s insurer. The regulations do not provide for the replacement of a facility because of decisions made by private entities regarding the conduct of their business. Replacement of the Museum due to a decision made by the Applicant’s insurer to decline insuring the Applicant’s fine art collection at the same location does not meet the criteria in FEMA regulations for funding.
Since the disaster damage is 50 percent or less than the replacement cost and the inability to obtain insurance for the fine art collection at the current location is not a direct result of the disaster on the Applicant’s facility, the Museum is not eligible for replacement funding under FEMA’s Public Assistance Program.