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Inactive or Alternative Use Facility

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster4339
ApplicantPR Industrial Development Company
Appeal TypeSecond
PA ID#000-UEQ77-00
PW ID#GMP 95356
Date Signed2021-03-23T16:00:00

Summary Paragraph

During the incident period of September 17 through November 15, 2017, Hurricane Maria caused catastrophic damage throughout Puerto Rico.  The Puerto Rico Industrial Development Company (Applicant), a public corporation and government instrumentality, sought Public Assistance (PA) funding for permanent repairs to 557 facilities (Facilities), including some identified by the Applicant as “vacant.”  FEMA reviewed photographs and drone footage, inspected the Facilities, and grouped 149 Facilities that were abandoned or showed signs of predisaster deterioration into Grants Manager Project (GMP) 95356.  FEMA denied funding for the 149 Facilities, stating they were not eligible because the Applicant had not established active use and the Facilities did not meet any of the exceptions for inactive facilities set forth in Title 44 Code of Federal Regulations (CFR) § 206.226(k)(2).  The Applicant appealed.  FEMA partially approved the appeal for 42 Facilities, determining they satisfied 44 CFR § 206.226(k)(2)’s active use requirement or one of its exceptions for inactive facilities.  The Applicant’s second appeal reiterates its first appeal arguments. 

 

Authorities and Second Appeals

  • Stafford Act § 406.
  • 44 C.F.R. § 206.226(k)(2).
  • PAPPG, at 18, 133.

Headnotes

  • Under 44 C.F.R. § 206.226(k)(2) and FEMA’s implementing policy, facilities that were not in active use at the start of the incident period are ineligible except in those instances where: 1) the facilities were only temporarily inoperative for repairs or remodeling; 2) the applicant firmly established future active use in an approved budget; or 3) the applicant can clearly demonstrate its intent to begin use within a reasonable time.  It is the applicant’s responsibility to substantiate the eligibility of each item claimed.  To that end, the applicant must provide documentation that is sufficiently detailed to support each claim.

Conclusion

FEMA finds that, of the 149 Facilities, two were leased and in active use, and the Applicant demonstrated intent to use 40 Facilities within a reasonable time.  However, the Applicant has not shown, with supporting documentation, that the remaining Facilities were active at the time of the disaster, or that it met one of the exceptions set forth in 44 C.F.R. § 206.226(k)(2).  Therefore, FEMA denies the appeal.  

 

Appeal Letter

Manuel Laboy

Governor’s Authorized Representative

Government of Puerto Rico

P.O. Box 42001

San Juan, Puerto Rico 00940-2001

 

Re:       Second Appeal – PR Industrial Development Company, PA ID: 000-UEQ77-00, FEMA-4339-DR-PR, Grants Manager Project 95356 – Inactive or Alternative Use Facility

 

Dear Mr. Laboy:

This is in response to a letter from your office dated December 23, 2020, which transmitted the referenced second appeal on behalf of the Puerto Rico Industrial Development Company (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of Public Assistance funding for facilities found to be inactive.

As explained in the enclosed analysis, of the 149 Facilities, two were leased and in active use, and the Applicant demonstrated intent to use 40 Facilities within a reasonable time.  However, the Applicant has not shown, with supporting documentation, that the remaining Facilities were active at the time of the disaster, or that it met one of the exceptions set forth in 44 C.F.R. § 206.226(k)(2).  Therefore, FEMA denies the appeal.

Please inform the Applicant of my decision.  This determination is the final decision on this matter pursuant to 44 C.F.R. § 206.206, Appeals.

 

                                                                     Sincerely,

                                                                         /S/

                                                                      Ana Montero

                                                                      Division Director

                                                                      Public Assistance Division

                                                                       

cc:  Thomas Fargione  

Acting Regional Administrator

FEMA Region II

Appeal Analysis

Background

During the incident period of September 17 through November 15, 2017, Hurricane Maria caused catastrophic damage throughout Puerto Rico.  The Puerto Rico Industrial Development Company (Applicant), a public corporation and government instrumentality, sought Public Assistance (PA) funding for permanent repairs to 557 facilities (Facilities), including some identified by the Applicant as “vacant.”  In a memorandum issued in March 2019 (March Memorandum), the Applicant clarified its use of the term “vacant,” stated that it was responsible for maintaining the Facilities, and claimed that it marketed the Facilities every day.  The Applicant subsequently provided operational budgets for fiscal years 2016-2019.  FEMA reviewed photographs and drone footage, inspected the Facilities, and grouped 149 Facilities that were vacant and abandoned (i.e., showing signs of predisaster deterioration) into Grants Manager Project (GMP) 95356.  On January 16, 2020, FEMA denied funding for the 149 Facilities, stating they were not eligible because the Applicant had not established active use and the Facilities did not meet any of the exceptions for inactive facilities set forth in Title 44 Code of Federal Regulations (44 C.F.R.) § 206.226(k)(2) regarding future or intended use. 

 

First Appeal

On March 16, 2020, the Applicant appealed, asserting that it established the active use of the properties and that it proved its intent to use the 149 Facilities, e.g., it provided a list of 27 vacant properties that it intended to use as shelters for hurricane evacuees.  The Applicant argued that regulation and policy do not require facilities to be in perfect shape and do not define “active” or “inactive.”  The Applicant also noted FEMA’s interpretation of the budget information was restrictive as it made ineligible any project that lacks a specific budget for maintenance.  The Applicant requested FEMA reverse its determination and approve $30,945,304.53 in funding.  Alternatively, the Applicant proposed that FEMA reverse its determination in part and provided evidence for 86[1] of the Facilities that it claimed complied with the inactive facility exception set forth in 44 C.F.R. §206.226(k)(2) and warranted approval of $19,273,436.85 in PA funding.  The Applicant attempted to prove its intent to use the facilities in the near future by submitting evidence of specific marketing efforts and negotiation status for each facility.  The Central Recovery and Reconstruction Office of Puerto Rico (Grantee) supported the appeal by letter dated May 29, 2020.

The FEMA Region II Regional Administrator (RA) partially approved the appeal on August 26, 2020.  FEMA could not conclude from the budgets and other documentation that any of the 149 Facilities were only temporarily inoperative.  In addition, the Applicant did not show that it marketed all of its vacant Facilities on or before the incident start date.  However, regarding the alternate proposal, FEMA determined 42 of the 86 Facilities met 44 C.F.R. § 206.226(k)(2)’s active use requirement or one of its exceptions for inactive facilities.  The Applicant failed to show that the 44 remaining inactive facilities met one of the 44 C.F.R. § 206.226(k)(2) exceptions.  FEMA remanded the appeal to the FEMA-4339-DR-PR Joint Recovery Office to determine whether the work claimed at the 42 potentially eligible facilities was required as a result of the disaster. 

 

Second Appeal

In its October 24, 2020, second appeal, the Applicant requests that FEMA reverse the initial determination and the first appeal analysis for all 149 Facilities and reiterates its first appeal arguments, including its alternative proposal.  The Applicant provided no additional documentation.  The Grantee supports the second appeal by letter dated December 23, 2020.

 

Discussion

FEMA may provide PA funding to eligible applicants for the repair, restoration, reconstruction, or replacement of a public facility damaged or destroyed by a major disaster.[2]  Under

44 C.F.R. § 206.226(k)(2) and FEMA’s implementing policy, facilities that were not in active use at the start of the incident period are ineligible except in those instances where: 1) the facilities were only temporarily inoperative for repairs or remodeling; 2) the Applicant firmly established future active use in an approved budget, or 3) the Applicant can clearly demonstrate its intent to begin use within a reasonable time.[3]  It is the applicant’s responsibility to substantiate the eligibility of each item claimed.[4]  To that end, the applicant must provide documentation that is sufficiently detailed to support each claim.[5]

Regarding the Applicant’s proposal for demonstrating eligibility of all 149 Facilities, FEMA reviewed the operating budgets and the March Memorandum to determine whether the Facilities were in active use, and if not, whether they were only temporarily inoperative for repairs or remodeling or were set for future active use in an approved budget.  However, the record does not show that all vacant facilities were in active use or that the Applicant satisfied the first two exceptions for inactive facilities.  The operating budgets do not show how money was used or allocated among the Facilities, and the maintenance policy described in the March Memorandum does not show that the Applicant performed or planned repairs or remodeling at each Facility.  FEMA also reviewed whether the Applicant clearly demonstrated its intent to begin use of all Facilities within a reasonable time through marketing efforts, including through electronic platforms.  While the record shows that the Applicant currently markets all vacant properties, it does not establish that all Facilities were marketed at or before the incident start date. 

Regarding the alternative proposal for 86 Facilities, FEMA found that two Facilities were leased to a third party and in active use at the time of the disaster.  For 40 Facilities, the Applicant provided documentation (e.g., pre-incident email correspondence showing client interest in purchasing or renting, plans for site visits, documents showing keys provided to tenants, travel expenses for site visits, etc.) demonstrating its intent at the time of the disaster to begin use within a reasonable time.  However, for the remaining 44 Facilities, the Applicant did not establish that it had the intent to use the Facilities at the start of the incident period or within a reasonable time, nor did it establish that it had the intent at the start of the incident period to make Facilities available for use as a shelter.  Instead, the Applicant provided documentation or descriptions of activities (e.g., site visits, marketing events, responses to inquiries from potential renters, showing the Facility to a potential renter or purchaser, soliciting requests for proposals for the purchase of specific Facilities, etc.) from after the disaster or lacking specific detail.  

 

Conclusion

FEMA, consistent with the RA’s first appeal determination, finds that of the 149 Facilities, two were leased and in active use, and the Applicant demonstrated intent to use 40 Facilities within a reasonable time.  However, the Applicant has not shown, with supporting documentation, that the remaining Facilities were active at the time of the disaster, or that it met one of the exceptions set forth in 44 C.F.R. § 206.226(k)(2).  Therefore, FEMA denies the appeal. 

 

 

 

[1] In its first appeal letter, the Applicant lists one facility twice, T043805800 in Arecibo, as #8 and #52.  The Applicant continues to ask for 87 in its alternate request.

[2] Robert T. Stafford Disaster Relief and Emergency Assistance Act § 406(a)(1), 42 U.S.C. § 5172(a)(1) (2012). 

[3] Title 44 Code of Federal Regulations § 206.226(k)(2) (2016); Public Assistance Program and Policy Guide, FP-104-009-02, at 18 (Apr. 2018) [hereinafter PAPPG].

[4] PAPPG, at 133.

[5] Id.

Last updated March 26, 2021