Permanent Relocation

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-4021
ApplicantBorough of Milltown
Appeal TypeSecond
PA ID#023-46620-00
PW ID#2362
Date Signed2016-04-08T00:00:00

Second Appeal: FEMA-4021-DR-NJ, Borough of Milltown, Project Worksheet 2362 – Permanent Relocation

Conclusion:  A facility must be destroyed, meaning more than fifty percent damaged, to be eligible for permanent relocation funding. The Applicant’s electric substation was four percent damaged and does not qualify for relocation.  

Summary Paragraph

The Applicant is appealing FEMA’s determination in Project Worksheet (PW) 2362 that denied $11,752,880.00 to fund the permanent relocation of the Washington Avenue electrical substation (Facility) out of a floodplain.  Hurricane Irene flooding damaged the Facility circuit breaker components. PW 2362, awarded for $219,657.83, funded those repairs.  PW 3835, awarded for $120,296.00, funded repair for other elements at the Facility, making the total eligible funding $339,953.83.  The Applicant requested $11,752,880.00 from FEMA’s Flood Mitigation Assistance (FMA) program to relocate the Facility.  The State Closeout Manager from the State of New Jersey Department of Public Safety (Grantee) requested closeout on May 13, 2014.  FEMA agreed with the Grantee that the final project amount was $219,657.83, equal to the amount originally obligated.  In February 2015, the Grantee submitted a request to withdraw the project from closeout and the Applicant submitted a change request, seeking permanent relocation.  The Grantee noted that the project did not receive FMA funding because all available funds had been allocated.  On March 10, 2015, FEMA prepared a benefit cost analysis (BCA) for the requested relocation, resulting in a benefit cost ratio (BCR) of 1.82. The BCA was later recalculated, resulting in a BCR of 1.5.  On March 24, 2015, the Grantee requested conversion of the project to a permanent relocation.  FEMA denied the request, finding the relocation cost not reasonable when compared with the repair cost and stating that to be eligible for relocation a facility must be destroyed.  The Applicant appealed, arguing that according to FEMA’s own policy, the Facility can be “damaged or destroyed” and the 1.5 BCR establishes that the relocation is cost effective.  The FEMA Region II Regional Administrator (RA) denied the appeal, finding that a facility must be destroyed or damaged beyond repair to be eligible and that in the instant case the Facility was less than fifty percent damaged, not destroyed or damaged beyond repair.  The Applicant filed a second appeal, renewing the assertion that a facility may be “damaged or destroyed” according to FEMA Fact Sheet RP9580.102, the PA Policy Guide and PA Policy Digest.  FEMA finds the RA correctly denied the relocation request and appropriately determined that the Facility is repairable and therefore not eligible for relocation.    

Authorities and Second Appeals

  • Stafford Act § 406(a)(1)(A), 42 U.S.C. § 5172.

  • 44 C.F.R. §§ 206.226(f)-(g).

  • RP9580.102, Permanent Relocation at 1.

  • PA Guide at 7.

  • City of Tallahassee, FEMA-1785-DR-FL at 2.

  • Palo Cooperative Telephone Association, FEMA-1763-DR-IA, at 3.

  • City of Valdosta, FEMA-1833-DR-GA, at 4.

Headnotes

  • Pursuant to 44 C.F.R. § 206.226(f), a facility is considered repairable when disaster damages do not exceed fifty percent of the cost of replacing a facility to its predisaster condition. If a damaged facility is not repairable approved restorative work may include replacement.

  • 44 C.F.R. § 206.226(g) delegates authority to the Regional Administrator to approve funding and require restoration of a destroyed facility at a new location when certain requirements are met.

    • Here, the Facility qualifies for repair and so is not eligible for permanent relocation.

Appeal Letter

Lieutant Colonel Parick Callahan
Governor's Authorized Representative
State of New Jersey
Department of Law and Public Safety
Division of State Police
Box 7068, River Road
West Trenton, NJ 08628-0068

Re: Second Appeal – Borough of Milltown, PA ID 023-46620-00, FEMA-4021-DR-NJ, Project Worksheet (PW) 2362 – Permanent Relocation

 

Dear Lieutenant Colonel Callahan:

This is in response to a letter from your office dated December 30, 2015, which transmitted the referenced second appeal on behalf of the Borough of Milltown (Applicant).  The Applicant is appealing the Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $11,752,880.00 to fund the permanent relocation of the Washington Avenue electrical substation.

As explained in the enclosed analysis, I have determined that the Applicant’s electrical substation is repairable.  Consequently, the facility is not eligible for permanent relocation.

Therefore, I am denying the appeal.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.
 

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division                                                                  

Enclosure

cc: Jerome Hatfield
      Regional Administrator
      FEMA Region II

Appeal Analysis

Background

Between August 27, 2011 and September 5, 2011, flooding from Hurricane Irene damaged major circuit breaker system components at the Borough of Milltown’s (Applicant) Washington Avenue electrical substation (Facility).  The Facility, which is located in a Special Flood Hazard Area, was built in 1958 and has incurred storm related damage on previous occasions.  Specifically, the Applicant indicated that flood damage occurred previously, and provided documented costs for 2007, 2010 and 2011, which total $605,224.00.[1]

On March 8, 2012, FEMA obligated Project Worksheet (PW) 2362, for $219,657.83, to repair and replace the damaged circuit breaker system components.  The eligible work was 100 percent complete when the PW was obligated.[2]  Separately, FEMA awarded PW 3835, for $120,296.00, to repair and replace other damaged elements at the Facility.[3]  The total eligible funding to repair all the damage was $339,953.83.

On September 23, 2013, the Applicant applied for flood mitigation assistance, requesting $11,752,878.44, from FEMA’s Flood Mitigation Assistance (FMA) program.  The application details a plan to use the funding to acquire property, and design and construct a new substation located outside of the 2 percent annual flood plain.[4]

The State Closeout Manager from the State of New Jersey, Office of the Attorney General, Department of Public Safety, Division of the State Police (Grantee) sent a letter and a Final Inspection package to FEMA on May 13, 2014, requesting a final review and closeout for PW 2362.[5]  The accompanying Request for Large Project Final Inspection found the total claimed cost for all eligible project work to be $219,657.83.[6]  On January 16, 2015, FEMA agreed with the Grantee on that total eligible work amount which was equal to the amount originally obligated.[7]

On February 9, 2015, the Applicant signed a change request seeking to have PW 2362 amended to fund relocation of the Facility.[8]  Two days later, the Grantee sent FEMA a letter requesting withdrawal of the project from final accounting based on the Applicant’s permanent relocation amendment request.  The Grantee stated in the letter that FMA program staff advised the Applicant that all its available FMA project funds had been exhausted upon allocation to other facilities. [9]  FEMA granted the request to withdraw the PW from final accounting by letter on March 9, 2015, advising the Applicant and the Grantee that FEMA had not received a request for the direct relocation.[10]

On March 10, 2015, FEMA hazard mitigation specialists prepared a benefit cost analysis (BCA) for the requested permanent relocation.  The analysis found that permanently relocating the Facility would result in $21,389,777.00 in benefits and $11,752,880.00 in costs, a benefit cost ratio (BCR) of 1.82.[11]  The BCA was recalculated on April 21, 2015, resulting in a BCR of 1.5, based on $18,940,561.00 in benefits and $12,628,840.00 in costs.[12] 

In its March 24, 2015 letter to FEMA, the Grantee described the Applicant’s claim that the project be converted to a permanent relocation out of the floodplain to avoid further repetitive damage to the Facility, as evidenced by the 2007, 2010 and 2011 losses.  The letter provided a general description of the proposed relocation project including the scope of work for the new and the existing location.  The letter stated that the Facility is the sole source of electricity for the Borough of Milltown and the BCR shows the relocation project is cost effective.[13]

On May 20, 2015, FEMA denied the funding request, finding the cost to relocate the Facility is not reasonable when compared with the repair cost of the current Facility.  FEMA stated that Hurricane Irene inflicted $436,039.00[14] in total damage to the Facility, a small amount when compared with $11,752,880.00 for permanent relocation.  FEMA noted that a facility must be destroyed before permanent relocation can be found eligible and defined “destroyed” as when damage exceeds fifty percent of the cost of repairing the facility.  FEMA acknowledged that although the BCR is cost effective for mitigation, mitigation costs are not eligible in an improved project.[15] 

First Appeal

The Applicant appealed on June 9, 2015, seeking $11,752,880.00 for the permanent relocation of the Facility.  The Applicant argued that according to FEMA’s own policy, the Facility is eligible for relocation funding because it was damaged; it does not have to be destroyed.  The Applicant asserted that the 1.78 BCR[16] established that the proposed relocation is cost effective and that the supplied documentation established past repetitive damage to the Facility.  Those factors, according to the Applicant, qualified the Facility for permanent relocation in accordance with 44 C.F.R. § 206.226(g).[17]

The Applicant argued that FEMA did not correctly apply the FEMA Disaster Assistance Policy DAP9524.4 Repair vs. Replacement of a Facility under 44 C.F.R. § 206.226(f) (The 50 Percent Rule), which provides: “[f]or facilities that are systems composed of multiple components that can be easily segregated, it is practical to apply the 50 percent rule to individual components of the system rather than the system as a whole.”  The Applicant claimed that multiple, easily segregated, individual components (e.g. switching, protection and control equipment and transformers) were more than fifty percent damaged and therefore qualified the Facility for replacement and relocation.  The Applicant also noted the Facility needs to be removed from the floodplain and that all other mitigation measures, such as raising it or using floodwalls, are too impractical, dangerous to construct, prohibitively expensive or otherwise not feasible.[18]

The Grantee transmitted the first appeal to FEMA on August 5, 2015, supporting it and arguing that the Facility met the definition of “destroyed” because it was rendered useless due to its inability to function at any capacity due to the disaster related damage.  The Grantee also argued that the BCR demonstrated the relocation was cost effective and noted the Facility had been damaged even more times in the past than has been documented but the supporting government records were destroyed.[19]

On September 25, 2015, FEMA sent a final request for information (RFI) to the Grantee and the Applicant, providing notice that if FEMA adjudicated the appeal based on the existing administrative record it would be denied.  FEMA offered the Applicant a final opportunity to submit any additional information for inclusion in the administrative record.[20]

The Applicant responded to the RFI in an undated letter, reasserting its argument that FEMA policy allows funding for permanent relocation projects where the underlying facility is either damaged or destroyed.  The Applicant again emphasized that it has proven the three criteria necessary to establish eligibility for permanent relocation as required by FEMA Fact Sheet 9580.102.  No additional documentation was included in the letter.[21]  On November 4, 2015, the Grantee sent a letter to FEMA that referenced electronic versions of several documents, including various plans for the proposed new facility, a letter of support from a congressman, a State House Commission transcript and mitigation documents.[22]

The FEMA Region II Regional Administrator (RA) denied the appeal by letter dated December 10, 2015, concluding that the Applicant had not demonstrated that the Facility is eligible for permanent relocation assistance.  The RA stated that in order to be eligible, the Applicant is required to demonstrate at a minimum that the cost to repair the damaged facility to its predisaster condition exceeds fifty percent of the cost to replace the Facility.  The RA found that the $436,039.00 total disaster related repair costs was less than fifty percent of the total replacement costs of $12 million, so the Facility did not qualify for permanent relocation funding.[23]

The RA considered the Applicant’s argument that FEMA Recovery Fact Sheet RP9580.102, Permanent Relocation, provides for assistance where a facility has been “damaged or destroyed” and not just where it has been destroyed.  The RA disagreed with the Applicant and stated that to be eligible for relocation, the entire facility must be destroyed or damaged beyond repair.  The RA interpreted “damaged” in this context as meeting the 44 C.F.R. § 206.266(f) qualifications for facility replacement and found that a damaged facility that does not qualify for replacement under subpart 206.226(f) is ineligible for relocation assistance under 206.226(g).[24]  

The RA reasoned that 44 C.F.R § 206.226(g) concerns the relocation of damaged “facilities,” not the relocation of damaged individual component parts.  As such, the RA determined that the Applicant’s argument that the entire Facility was eligible for permanent relocation because individual component systems were more than fifty percent damaged was incorrect.[25]  Furthermore, the RA determined that the Applicant’s documentation did not sufficiently demonstrate that the individual damaged Facility components were “easily segregated” components as intended by DAP9524.4.

The RA also disagreed with the Grantee’s assertion that the Facility was destroyed because it was rendered useless by virtue of it not functioning at any capacity for several days as a result of the declared event.  The RA pointed out that repair of the Facility was deemed to be feasible in accordance with 44 C.F.R. § 206.226(f) and work had been completed.  The RA stated that FEMA would continue to construe “destroyed” to mean that the facility is damaged to such an extent that it qualifies for replacement assistance under 44 C.F.R. § 206.226(f).  The RA found that since the disaster damage to the entire Facility was less than fifty percent of the replacement cost, the Facility was not eligible for permanent relocation funding.[26]

Second Appeal

The Applicant submitted a second appeal in a letter dated December 18, 2015,[27] reiterating the argument that the Facility is eligible for permanent relocation funding based on the language in FEMA Fact Sheet 9580.102, Permanent Relocation, that explicitly states that the facility has to be “damaged or destroyed” to qualify.  The Applicant also argues that the language in the FEMA Public Assistance Guide supports the “damaged or destroyed” argument where it states: “[g]enerally, the project will be cost effective only if the damage is severe enough that the facility qualifies for replacement.”  The Applicant points out that the word “generally” is a qualifier that means not every facility has to be destroyed as a requirement for permanent relocation funding eligibility.[28]

The Applicant requests a straight forward, clear explanation why FEMA determined that a facility must be destroyed to qualify for funding when different language is used in 44 C.F.R. § 206.226(g), FEMA Fact Sheet 9580.102, Permanent Relocation and the FEMA Policy Guide.  The Applicant also states that it never suggested that the Facility was destroyed.[29]  The Applicant asks for relocation of the Facility from the 500 year floodplain, as provided in RP9580.102. 

The Grantee transmitted the second appeal by letter dated December 30, 2015.  The Grantee deemed that the appeal has merit and requests FEMA to obligate the requested project funding.[30]

Discussion

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act) Section 406 authorizes FEMA to “make contributions to a State or local government for the repair, restoration, reconstruction or replacement of a public facility damaged or destroyed by a major disaster and for associated expenses incurred by the government.”[31]  Pursuant to 44 C.F.R. § 206.226(f), 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.  If a damaged facility is not repairable, approved restoration may include replacement of the facility.[32]  Under 44 C.F.R. § 206.226(g), an RA may approve funding for and require restoration of a destroyed facility at a new location when: the facility is and will be subject to repetitive heavy damage; the approval is not barred by other provisions of title 44 C.F.R.; and the overall project, including all costs, is cost effective.[33] 

The Applicant argues that damage to a facility is sufficient to qualify for permanent relocation, the facility does not have to be destroyed.[34]  The interpretation is contrary to 44 C.F.R § 206.226(g) which reads: “[t]he Regional Administrator may approve funding for and require restoration of a destroyed facility at a new location.”[35]  In the first appeal, the RA correctly determined that the Facility was repairable because, in accordance with 44 C.F.R. § 206.226(f), the disaster damages did not exceed 50 percent of the cost of replacing the Facility to its pre-disaster condition.  FEMA has consistently found that for a project to be permanently relocated, in accordance with 44 C.F.R. § 206.226(g), the damage must be severe enough that the facility qualifies for replacement in accordance with 44 C.F.R. § 206.226(f).[36]  Moreover, the consecutive regulatory provisions should not be considered in isolation, because collectively they describe FEMA’s progressive decision making framework.  Recognizing such, FEMA must first determine whether it should repair or replace a facility before engaging in the decision making process associated with relocation.  Consequently, if a facility does not qualify for replacement according to (f), it does not meet the eligibility requirement according to (g).  In this case, the cost to repair the Facility did not exceed 50 percent of the cost of replacement.

The Applicant points to the PA Guide for support, specifically the statement that “[g]enerally, the project will only be cost effective if the damage is severe enough that the facility qualifies for replacement.”[37]  The Applicant argues that the word “generally” qualifies the statement such that a facility does not need to be “destroyed” to meet the requirements for permanent relocation.  As discussed in the prior paragraph, the Applicant’s interpretation is contrary to 44 C.F.R § 206.226(g) which specifically states that a facility must be “destroyed” to qualify for permanent relocation.  Moreover, the word “generally,” as used in the PA Guide, pertains to the third requirement of 44 C.F.R § 206.226(g) that a relocated project must be “cost effective.”[38]  The statement clarifies an acceptable means of determining whether a project is cost effective, however, it does not eliminate the requirement that a facility must have been destroyed.

Conclusion

FEMA Region II correctly denied the permanent relocation request for the Facility.  FEMA appropriately determined that the Facility must qualify for replacement according to the fifty percent rule to qualify for permanent relocation.  As such, the Applicant’s second appeal for permanent relocation funding is denied.

 

[1] Letter from Deputy Coordinator, Emergency Mgmt., Borough of Milltown, to 406 Mitigation Specialist, FEMA 406 Mitigation Group, FEMA SRO (Jan. 23, 2015).

[2] Project Worksheet 2362, Borough of Milltown, FEMA-4021-DR-NJ, at 1 (Mar. 8, 2012).

[3] Project Worksheet 3835, Borough of Milltown, FEMA-4021-DR-NJ, at 1 (July 1, 2012).

[4] Subgrant Project Application, Borough of Milltown Facility Relocation Project – FMA Application, at 8 and 39 (Sep. 23, 2013).

[5] Letter from State Closeout Manager, State of N.J., Office of the Attorney Gen., Dep’t. of Law and Pub. Safety, Div. of State Police, to Reg’l Adm’r, FEMA Region II (May 13, 2014).

[6] Request For Large Project Final Inspection, Borough of Milltown, FEMA-4021-DR-NJ (Apr. 5, 2014).

[7] Letter from Acting Pub. Assistance Branch Chief, Recovery Div., FEMA, to Governor’s Authorized Representative, State of N.J., Dep’t. of Law and Pub. Safety, Div. of State Police (Jan. 16, 2015).

[8] Change Request/Amendment 2362, Borough of Milltown, FEMA-4021-DR-NJ (Feb. 9, 2015).

[9] Letter from Pub. Assistance Unit Head, DR-4086-NJ, State of N.J., Office of the Attorney Gen., Dep’t of Law and Pub. Safety, Div. of State Police, to Reg’l Adm’r, FEMA Region II, Response and Recovery Div. (Feb. 11, 2015).

[10] Letter from Acting Pub. Assistance Branch Chief, Recovery Div., FEMA to Governor’s Authorized Representative, State of N.J., Department of Law and Pub. Safety, Div. of State Police (Mar. 9, 2015).

[11] Benefit Cost Analysis, Milltown Facility, FEMA-4021-DR-NJ at 1 (Mar. 10, 2015).

[12] Benefit Cost Analysis, Milltown Facility, FEMA-4021-DR-NJ at 1 (Apr. 21, 2015).

[13] Letter from Alternate Governor’s Authorized Representative, Recovery Bureau, Office of the Attorney Gen., Dep’t of Law and Pub. Safety, Div. of State Police, to Regional Administrator, FEMA Region II. (Mar. 24, 2015)

[14] The $436,039.00 total does not include funds that were removed from PW 3835 for insurance proceeds and a mandatory NFIP insurance deduction.  The actual obligated total for PW 2362 and PW 3835 is $339,953.83.

[15] Letter from Acting Pub. Assistance Branch Chief, Recovery Div., FEMA, to Governor’s Authorized Representative, State of N.J., Dep’t. of Law and Public Safety, Div. of State Police  (May 20, 2015).

[16] The Applicant does not cite the source for the 1.78 BCR.  The two BCA’s in the administrative record have BCR’s of 1.82 and 1.50.

[17] Borough of Milltown First Appeal Request, Project #2362: Appeal #1, https://njemgrants.org/app (submission June 9, 2015).  (The Applicant submitted the first appeal directly into the New Jersey Emergency Management Grants database).

[18] Id.

[19] Letter from Pub. Assistance, Acting Unit Head, State of N.J., Office of Attorney General Dep’t. of Pub. Safety, Div. of State Police, to Regional Administrator, FEMA Region II, Response and Recovery Div. (Aug. 5, 2015).

[20] Letter from Deputy Director, Recovery Div., FEMA, to Governor’s Authorized Representative, State of N.J., Dep’t. of Law and Pub. Safety, Div. of State Police (Sept. 25, 2015).

[21] Letter from Deputy Coordinator, Office of Emergency Management, Borough of Milltown, to FEMA (undated).

[22] Letter from Alternate Governor’s Authorized Representative, State of N.J., Office of the Attorney General, Dep’t. of Law and Public Safety, Div. of State Police, to Regional Administrator, FEMA Region II, Response and Recovery Div. (Nov. 4, 2015).

[23] FEMA First Appeal Analysis, Borough of Milltown, FEMA-4021-DR-NJ, at 5 (Dec. 10, 2015).

[24] Id.

[25] Id. at 6.

[26] Id. at 6-7.

[27] Letter from Coordinator, Office of Emergency Management, Borough of Milltown, to FEMA (Dec. 18, 2015). [hereinafter Applicant Second Appeal Letter].

[28] Id. at 1.

[29] Id. at 2-3.

[30] Letter from Sergeant First Class, Public Assistance Acting Unit Head, State of N.J., Office of the Attorney General, Department of Law and Pub. Safety, Div. of State Police, to Assistant Administrator – Recovery, FEMA (Dec. 30, 2015).

[31] The Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, Pub. L. No. 93-288, § 406(a)(1)(A), 42 U.S.C. § 5172 (2007).

[32] 44 C.F.R. § 206.226(f) (2011).

[33] Id. at § 206.226(g) (2011).

[34] For support, the Applicant points to Recovery Policy RP9580.102, Permanent Relocation, at 1 (Apr. 14, 2010), which misquotes 44 C.F.R. § 206.226(g) as authorizing the regional administrator to approve the relocation of a “damaged or destroyed facility.”  The quoted regulatory provision, however, does not include the word “damaged.”  The regulations are controlling and cannot be expanded by policy.  The error was corrected in the Public Assistance Program and Policy Guide, FP 104-009-2, at 99 (Jan. 1, 2016), which replaced RP9580.102.

[35] Id. (emphasis added).

[36] FEMA Second Appeal Analysis, City of Tallahassee, FEMA-1785-DR-FL, at 2 (May 11, 2015) (stating “[t]he Regional Administrator noted that, in accordance with 44 C.F.R. § 206.226(g)(1), relocation is not eligible because the facility was not destroyed.”); FEMA Second Appeal Analysis, Palo Cooperative Telephone Association, FEMA-1763-DR-IA, at 3 (Sep. 11, 2012) (stating that the facility was not destroyed and does not meet the threshold for replacement); FEMA Second Appeal Analysis, City of Valdosta, FEMA-1833-DR-GA, at 4 (July 27, 2012) (finding that the facility was not eligible for permanent relocation because it was not destroyed).

[37] Public Assistance Guide, FEMA 322, at 39 (June 2007).

[38] 44 C.F.R § 206.226(g)(iii).

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