Improved Project, Hazard Mitigation

Appeal Brief

Summary Paragraph

Hurricane Ike struck Galveston Island on September 13, 2008.  The resulting storm surge caused damage the Applicant’s campus.  Flooding damaged two underground distribution systems, one for steam and the other for chilled water.  FEMA subsequently prepared two Project Worksheets (PWs) documenting necessary work to repair and restore those two systems—PW 15521 awarded $79,036,604.00 in costs for the chilled water system, and PW 15503 provided $93,688,262.56 for costs related to the steam system.  The FEMA Region VI Regional Administrator (RA) initially required hazard mitigation as a condition of funding.  The Applicant presented a Hazard Mitigation Proposal (HMP) involving the replacement of the steam system with a high pressure hot water system.  Through an October 11, 2012 letter, FEMA denied the HMP because it was not supported by policy in effect at the time of the disaster.  On November 5, 2012, the Applicant requested to complete the replacement as an improved project.  The RA approved the request, capping funding for both PWs at their original amounts on December 19, 2012.  In an April 20, 2013 letter, the Applicant submitted its first appeal of FEMA’s determination that the HMP was not eligible, and requested an additional $33,602,988.00 in funding, arguing the costs were eligible as hazard mitigation.  The RA, in an August 10, 2015 letter, denied the Applicant’s first appeal, asserting that the improved project was a complete replacement and undamaged portions of the facilities were not eligible for hazard mitigation funding.  In an October 26, 2015 letter, the Applicant submitted its second appeal, limiting its appeal to PW 15503 for an amount of $35,848,252.00 in PA funding.

Authorities and Second Appeals

• Stafford Act §§ 101(b)(5), 406, 423.
• 44 C.F.R. § 206.206.
• DAP9526.1, at 4.
• PA Guide, at 110-111.
• FEMA Second Appeal Analysis, Florida Department of Transportation, FEMA-4068-DR-FL, at 3 (Aug. 5, 2016).
• FEMA Second Appeal Analysis, Florida Department of Transportation, FEMA-1785-DR-FL, at 3 (July 9, 2016).

Headnotes

• Pursuant to DAP9526.1 and the PA Guide, when an applicant requests an improved project that will replace the facility, the cost of mitigation measures are not eligible.  
  • FEMA approved an improved project as requested by the Applicant.  The requested project completely replaced the steam system.  Accordingly, mitigation measures are not eligible for funding.
• Pursuant to 44 C.F.R. § 206.206, an Applicant has 60 days to file its appeal after receipt of the notice of the action that is being appealed.
  • The Applicant received notice of an eligibility determination through an October 11, 2012 letter.  However, it filed its appeal on April 20, 2013, well past the 60 day deadline. 
  • Neither the Stafford Act nor 44 C.F.R. authorize FEMA to grant time extensions for filing appeals.

Appeal Letter

Appeal Analysis

Background

Hurricane Ike struck Galveston Island on September 13, 2008.  The resulting storm surge caused damages to the campus of the University of Texas Medical Branch (Applicant).  Flooding damaged two underground distribution systems, one for steam and the other for chilled water.  FEMA subsequently prepared two Project Worksheets (PWs) documenting necessary work to repair and restore those two systems—PW 15521 awarded $79,036,604.00 in costs for the chilled water system, and PW 15503 provided $93,688,262.56 for costs related to the steam system.  PW 15503 noted that the Applicant’s engineer determined that the entire steam system was damaged beyond repair and needed replacement.[1] 

As a condition of funding, the FEMA Region VI Regional Administrator (RA) initially required hazard mitigation.  Through a November 16, 2011 letter to the RA, the Applicant submitted a Hazard Mitigation Proposal (HMP), which pertained to both PWs and requested to replace the steam system with a hot water system.  In response, via an October 11, 2012 letter to the Texas Division of Emergency Management (Grantee), FEMA Region VI denied the HMP, determining that the proposed mitigation was not supported by policy in effect at the time of the disaster, namely that mitigation efforts applied to undamaged elements.  Through that letter, FEMA encouraged the Applicant to submit an improved project request because the Applicant still intended to complete the scope of work and also outlined the Applicant’s right to appeal the determination.  The Grantee forwarded the October 11, 2012 letter to the Applicant, and also noted the Applicant’s appeal rights. 

In a letter dated November 5, 2012, the Applicant requested an improved project for PWs 15503 and 15521.  The improved project matched the work outlined in the November 16, 2011 HMP, which involved the replacement of the steam system with a hot water system.  The Applicant’s improved project submission acknowledged: 1) its proposed HMP had been denied, and 2) completing the improved project would cost an additional $ 23,763,492.00 for PW 15521, and $63,088,167.00 for PW 15503, which FEMA would not fund.[2]  Both the Applicant and Grantee’s representatives signed it.  FEMA subsequently amended both PWs to incorporate the improved project request and capped PA funding at $79,036,604.00 for PW 15521 and $93,688,262.56 for PW 15503.     

First Appeal

On April 20, 2013, the Applicant submitted its first appeal to the Grantee.  The Applicant requested an additional $33,602,988.00 in funding—$19,030,639.00 for PW 15521 and $14,572,349.00 for PW 15503—for costs it contends were required to complete the HMP.  The Applicant appealed FEMA’s determination that the HMP was not eligible for funding, arguing that costs over the improved project cap were eligible as hazard mitigation. 

The RA denied the appeal on August 10, 2015, finding that the HMP would replace undamaged portions of both systems.  The RA also noted that improvements to the steam system involved its replacement, making mitigation costs ineligible.

Second Appeal

The Applicant submitted its second appeal on October 16, 2015, limiting its appeal to the steam system (PW 15503) for a total of $35,848,252.00[3] in PA funding.  The Applicant maintains the replacement of the steam system with a hot water system corresponds to its initial HMP, and accordingly does not constitute an improvement, but is rather eligible as mitigation.

The Applicant asserts the following to support its position: 1) FEMA conditioned the grant on hazard mitigation but did not propose a mitigation methodology, other than noting that that parts of the HMP applied to undamaged portions of the steam system; 2) the HMP is the least cost alternative of any potential mitigation measures;[4] 3) undamaged elements, such as demolition of elevated stanchion distribution lines, distribution lines on roof tops, and two steam boilers; filling the existing abandoned pipe system with slurry were mitigated because there was no way to mitigate only damaged elements; 4) only a small portion of the HMP actually involved improvements, namely hot water boilers; and 5) hazard mitigation can be eligible for improved projects.    

Discussion

Improved Projects and Hazard Mitigation

FEMA provides Public Assistance (PA) funds to eligible applicants for the repair, restoration, reconstruction or replacement of facilities damaged or destroyed by major disasters.[5]  Stafford Act Section 406(e)(1)(A)(ii) provides that eligible costs may also include hazard mitigation.[6]  FEMA Disaster Assistance Policy DAP9526.1, Hazard Mitigation Funding Under Section 406 (Stafford Act), provides further guidance related to hazard mitigation and improved projects.  The DAP9526.1 policy explains that funding for mitigation measures for an improved project may be approved if the original facility and its function will be restored and the mitigation work is still needed, is technically feasible, and will be performed as part of the overall project.[7]  However, mitigation measures are not eligible if the improved project involves the “replacement of the facility, on the same site or an alternate site.”[8]  

At the time of the second appeal, the Applicant was in the process of replacing the steam system with a hot water system as part of an improved project approved by FEMA.[9]  Upon completion, this replacement would create a new facility on the same site, and per FEMA policy, precludes the award of hazard mitigation funding.  Aware of the Applicant’s appeal rights related to the hazard mitigation proposal, both the Applicant and Grantee signed and submitted an improved project request acknowledging the HMP had been denied, the improved project capped FEMA funding, and the responsibility for project costs over the cap would rest with the Applicant.[10]

Appeal Procedures – Timeliness

Any decision regarding eligibility for, from, or amount of PA funding may be appealed within 60 days after the date the applicant is notified of the award or denial of the award of such assistance.[11]  FEMA’s implementing regulations require an applicant to submit its appeal within 60 days of receiving notice of the appealable action.[12]  Neither the Stafford Act nor 44 C.F.R. authorize FEMA to grant time extensions for filing appeals.[13]  The Applicant, through its second appeal submission, asserts that it had no choice but to proceed with the improved project.[14]  However, the Applicant did not appeal FEMA’s October 11, 2012 determination as to the eligibility of its HMP.  Instead, the Applicant elected to proceed with the improved project.  The Applicant chose this course of action even after both the RA and Grantee apprised it of the right to appeal the HMP determination.  The Applicant did not file its first appeal until April 20, 2013, well past the 60 day appeal deadline triggered by the October 11, 2012 determination.  As such, the Applicant’s appeal was untimely.    

Conclusion

The Applicant’s HMP is not eligible for funding because the Applicant elected to replace the steam system as part of an improved project and FEMA policy precludes funding hazard mitigation for improved projects that involve replacement.  Moreover, the Applicant failed to timely appeal FEMA’s denial of the HMP, opting instead to proceed with the improved project.  For these reasons, the Applicant’s second appeal is denied.