|PW ID#||963, 964, 966, 967 and 968|
Conclusion: On second appeal, Erie County (Applicant) demonstrated that it was legally responsible for repairs to the Buffalo Southern Railway Line 1246 (facility) at the time of the disaster.
From August 8 to August 10, 2009, severe storms and flooding damaged sections of the Buffalo Southern Railway Line 1246 (facility) owned by the Applicant. However, the facility is leased to the Erie County Industrial Development Agency (ECIDA), and sub-leased to the Buffalo Southern Railroad, Inc. (BSR)—a private company. Culverts were plugged, and ballast
alongside and underneath the railway ties were damaged in different sections along the track from track mile markers 10.8 to 32.6. A total of five PWs—963, 964, 966, 967 and 968—were drafted to address the damage along this stretch of the facility. Upon review of the two controlling leases, FEMA field personnel determined the repair work for the facility was ineligible because the Applicant was not legally responsible for the facility at the time of the disaster event. In the first appeal, the Applicant asserted that it and ECIDA both understood that major capital repair was the responsibility of the Applicant. The Region II Acting Regional Administrator (RA) denied the first appeal because she determined that the Applicant—although owner of the facility—was not legally responsible for repairs to the facility because the leases in effect at the time of the disaster explicitly state BSR was responsible for all repair work.
August 12, 2014
William R. Davis Jr.
New York State Office of Emergency Management
1220 Washington Avenue
Building 22, Suite 101
Albany, New York 12226-2251
Re: Second Appeal – Erie County, FEMA-1857-DR-NY, PA ID 029-99029-00, Project Worksheets (PWs) 963, 964, 966, 967 and 968 – Legal Responsibility
Dear Mr. Davis:
This is in response to your letter dated February 24, 2014, which transmitted the referenced second appeal on behalf of Erie County (Applicant). The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) denial of $293,805.03 in Public Assistance funding resulting from a determination that the Applicant was not legally responsible for the facility at the time of the disaster.
As explained in the enclosed analysis, I have determined that the leases at issue demonstrate that the Applicant had legal responsibility of the facility at the time of the disaster. Therefore, I am approving the appeal. By copy of this letter, I am requesting the Regional Administrator take appropriate action to implement this determination.
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.
William W. Roche
Public Assistance Division
cc: Jerome Hatfield
FEMA Region II
From August 8 to August 10, 2009, severe storms and flooding damaged sections of the Buffalo Southern Railway Line 1246 (facility). The facility is owned by the County of Erie (Applicant), leased to the Erie County Industrial Development Agency (ECIDA), and sub-leased to the Buffalo Southern Railroad, Inc. (BSR)—a private company. FEMA prepared PWs 963, 964, 966, 967 and 968 to address repairs necessary to restore the facility to pre-disaster condition. Upon review of the two controlling leases, FEMA field personnel determined the repair work for the facility was ineligible because the Applicant did not have legal responsibility for the facility at the time of the disaster event.
In its first appeal, dated May 4, 2011, the Applicant asserted that it and ECIDA both understood that major capital repair was the responsibility of the Applicant. Further, the type of repairs necessary to restore the facility to pre-disaster condition is major, not routine maintenance. The Applicant asserted that evidence was submitted showing the Applicant—through ECIDA—hired a contractor to perform major repair projects since 1998.
The Region II Acting Regional Administrator (RA) denied the first appeal because she determined that the Applicant—although owner of the facility—was not legally responsible for repairs to the facility. She determined that the lease between Erie County and ECIDA and the lease between ECIDA and BSR were in effect at the time of the disaster. Moreover, the leases spell out who was legally responsible for repairs to the facility—BSR. Finally, the Acting RA stated that the Applicant had provided no examples where it previously stepped in and made repairs in a similar non-federally declared event, and did not charge those repairs back to BSR. Accordingly, there was no evidence that the Applicant was legally responsible for repairs and maintenance of the facility.
The Applicant’s second appeal, dated November 6, 2013, was transmitted to FEMA by the Grantee on February 24, 2014. In the second appeal, the Applicant asserts that as the leases have been administered by ECIDA, the Applicant has held BSR responsible for normal maintenance; however, the Applicant has assumed responsibility for major repairs to the facility. The Applicant states that the new documentation it provides on second appeal should be sufficient proof of ECIDA’s undertaking and managing of major repairs to the facility.
Pursuant to Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.223 (a)(3), in order to be eligible for PA funding, an item of work must be the legal responsibility of an eligible applicant. FEMA interprets this provision to mean “at the time of the disaster.” Ownership of a facility is generally sufficient to establish legal responsibility even if the owner leases out an eligible facility. This is true except when the controlling lease states that the lessee is responsible for repairs to the facility or maintains insurance for repairs. The lease usually contains general repair and maintenance language; however, responsibility for damage resulting from a disaster may not be established. In the absence of any mention in the lease, the owner of the facility will be assumed responsible for the repair.
As stated in the first appeal determination, there are two leases that control in this appeal. However, there is no clear delegation of legal responsibility for major or disaster-related repairs in either lease. In fact, the lease between ECIDA and BSR creates a limitation for responsibility of maintenance of not less than $20,000, meaning BSR is not legally required to spend more than that amount for maintenance. In addition, the lease between ECIDA and BSR defines “maintenance” and “rehabilitation”, and neither definition includes major repair work or repairs resulting from disaster damage. Lastly, the lease authorizes BSR to terminate the agreement if performance was rendered impossible due to Force Majeure. 
Regarding maintenance, the lease between the Applicant and ECIDA only stipulates that ECIDA must return the facility to the Applicant in as good condition as received, reasonable wear and tear excepted, when the lease expires. The lease does not speak to legal responsibility regarding repairs resulting from disaster damage or catastrophic events. However, the lease does explicitly provide that ECIDA may terminate the lease without repairing the facility if an event or occurrence renders the facility inoperable as a railroad without major reconstruction. In addition, ECIDA was permitted to terminate the lease in the event that it was unable to continue railroad operations because rail service was suspended due to substantial faults with the railbed, tracks, ties, bridges, crossings, or right-of-way “for which funding to cure such faults” was not available. When these clauses are read together, the Applicant’s argument that the parties understood that the Applicant was legally responsible for all major repairs is logical.
Notwithstanding the Applicant’s assertion that it is responsible for all major repairs, FEMA policy stipulates that the owner of a facility is legally responsible for disaster-related repairs absent a clear delegation to a lessee. Here, the Applicant owned the facility at the time of the disaster. Accordingly, since neither lease delegates responsibility for major repairs resulting from disaster damage, legal responsibility lies with the Applicant.
At the time of the disaster, the Applicant owned the facility. While the facility was leased to a quasi-governmental entity and sub-leased to a private company, neither lease delegated legal responsibility for major repairs resulting from disaster damage to the Lessee or sub-Lessee. Pursuant to FEMA policy, in the absence of such delegation, the owner is legally responsible for such repair work. Accordingly, the Applicant is responsible for the repair work addressed in PWs 963, 964, 966, 967 and 968.
 See Public Assistance Guide, FEMA 322 at 30 (June 2007) [hereinafter PA Guide].
 Id. at 23.
 Id. at 31.
 See Lease Agreement between Erie County Industrial Development Agency and Buffalo Southern Railroad, Inc. at Section 6.01, Maintenance in Lieu of Rent, (Nov. 22, 1991) (on file with FEMA).
 Id. at Section 1.01, Definition of Terms, (defining “maintenance” as “normal and regular work required to keep the Railroad Properties in minimum safe condition…” and “rehabilitation” as “the work required, in addition to maintenance, including capital improvements, to improve or upgrade the condition of the Railroad Properties…”).
 See Lease Agreement between Erie County Industrial Development Agency and Buffalo Southern Railroad, Article Seven§7.01(c). Termination of Agreement (November 22, 1991) (on file with FEMA). See also, definitions in § 1.01 which defines Force Majeure as an act of God, including, among other things lightening; earthquakes; fire; and flood so long as such causes or events are not reasonably in control of the Lessee.
 See Lease Agreement between Erie County and Erie County Industrial Development Agency at Section 10(a) and (b), Maintenance, (June 1, 1985)(on file with FEMA).
 Id. at Section 11, Inoperability.
 Id. at Section 13(a)(4), Termination.
 PA Guide, at 31.