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Hazard Mitigation Proposal (HMP) – Rockridge Sewer System

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

Disaster1561-DR-FL
Applicant Indian River County
Appeal TypeSecond
PA ID#061-99061-00
PW ID#6495
Date Signed2014-06-09T00:00:00

Conclusion:   The Applicant’s Hazard Mitigation Proposal (HMP) is not eligible under the Public Assistance Program because it addressed non-disaster-related damage, and Section 705(c) of the Stafford Act does not bar deobligation of the funding provided for the HMP because the funding was provided contrary to the Act and implementing regulations and policy.

Summary Paragraph           

In 2004, power outages from Hurricane Jeanne caused the sewer system in the Rockridge subdivision in Indian River County (Applicant) to fail.  FEMA prepared Project Worksheet (PW) 6495 to address the costs of restoring damaged drainage facilities throughout the subdivision. PW 6495 included $2,827,524 for a Hazard Mitigation Proposal (HMP) to replace the existing sewer system with a vacuum-based sewage collection system.  After a subsequent review of the project, FEMA determined that the HMP was not cost-effective and deobligated the funding.  In its first appeal, the Applicant primarily asserted that FEMA’s benefit-cost analysis was flawed.  The Regional Administrator denied the Applicant’s first appeal, determining that the HMP to replace the sewer system was not an eligible mitigation measure because it applied largely to elements of the facility that were undamaged by the event.  In its second appeal, the Applicant does not dispute FEMA’s position that the HMP applies to undamaged elements of the facility, but instead argues that Section 705(c) of the Stafford Act prevents the deobligation of funding for the project.

Authorities    

  • Stafford Act § 705(c), 42 U.S.C. § 5205(c)
  • 44 C.F.R. § 206.434(c)(4)
  • Response and Recovery Policy 9526.1, Hazard Mitigation Under Section 406 (Stafford Act) (Aug. 13, 1998)

Headnotes

  • Under Recovery Policy 9526.1, Hazard Mitigation Under Section 406 (Stafford Act), mitigation measures must be related to eligible disaster-related damages and must directly reduce the potential of future, similar disaster damages to the eligible facility.  Because the Applicant’s HMP included the replacement of the entire sewer system and addressed non-damaged elements of the system as well as damaged elements, the HMP was not eligible under the Public Assistance Program.
  • Under Stafford Act § 705(c), an applicant is not required to reimburse FEMA for any payment made under the Stafford Act if “(1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.”    Because the Applicant’s HMP addressed non-damaged elements of the subdivision’s collection system, the inclusion of funding for the HMP was contrary to Stafford Act implementing policy, and de-obligation of that funding does not fall within the scope of Section 705(c) of the Act.

Appeal Letter

June 9, 2014

Bryan W. Koon
Director
State of Florida Division of Emergency Management
2555 Shumard Oaks Boulevard
Tallahassee, FL  32399-2100

Re: Second Appeal – Indian River County, PA ID 061-99061-00, Hazard Mitigation Proposal (HMP) – Rockridge Sewer System, FEMA-1561-DR-FL, Project Worksheet (PW) 6495

Dear Mr. Koon:

This is in response to a letter from your office dated March 8, 2013, which transmitted the referenced second appeal on behalf of Indian River County (Applicant).  The Applicant is appealing the U.S. Department of Homeland Security’s Federal Emergency Management Agency’s (FEMA) deobligation of $2,827,524 for a Hazard Mitigation Proposal (HMP) for the replacement of a damaged sewer system.

As explained in the enclosed analysis, I have determined that the HMP addressed non-damaged elements of the collection system and is not eligible under Section 406 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.  Therefore, I am denying the appeal.

Please inform the Applicant of my decision.  This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206, Appeals.

Sincerely,

/s/

William W. Roche
Director
Public Assistance Division

Enclosure

cc:  Major Phil May
      Regional Administrator
      FEMA Region IV

Appeal Analysis

Background

In 2004, power outages from Hurricane Jeanne caused the sewer system in the Rockridge subdivision in Indian River County (Applicant) to fail.  Without power, the system’s pumps were inoperable and sewage backed up into homes in the already inundated subdivision.  The flooding also damaged various drainage facilities located throughout the subdivision, including culverts, storm water pipes and inlets, drainage swales, and a drainage channel.  The Applicant replaced ninety destroyed grinder pumps to restore the damaged sewer system and supplied temporary generators and portable toilets while the repair was being completed. The Applicant also restored the damaged drainage facilities throughout the subdivision.  FEMA prepared PW 6494 for $161,202 for the replacement of the grinder pumps and the use of the temporary generators and portable toilets.  FEMA also approved PW 6495 for the restoration of the drainage facilities (with a project cost of $350,000) and a Hazard Mitigation Proposal (HMP) to replace the existing sewer system with a vacuum-based sewage collection system ($2,827,524).  After a subsequent review of the project, FEMA determined that the HMP was not cost-effective and, therefore, not eligible for funding.  FEMA prepared a version to PW 6495 deobligating $2,827,524.

First Appeal

The Applicant submitted a first appeal of FEMA’s determination on October 21, 2010, primarily asserting that FEMA’s benefit-cost analysis (BCA) was flawed.  The Applicant stated that while FEMA used damage costs totaling $350,000 in its BCA, the total amount of public damage associated with the sewer system failure was $2,067,831.  The Applicant also stated that it is responsible for $10,437,840 in damage to private homes and asserted that the private home damage should be included in the BCA.  The Applicant concluded that a BCA including the public damage costs ($2,067,831) and using a recurrence interval of 7.7 years, instead of the 10 years used by FEMA, yields a benefit-cost ratio greater than 1.  Lastly, the Applicant stated that while initially applying for funding for the HMP via the Hazard Mitigation Grant Program (HMGP) under Section 404 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), it only proceeded with applying for funding through the Public Assistance (PA) Program under 406 of the Stafford Act on the advice of FEMA personnel.

The Florida Division of Emergency Management (Grantee) forwarded the Applicant’s appeal to FEMA on December 30, 2010.  While the Grantee did not support the Applicant’s position that the more than $10 million in private property damage should be included in the BCA, the Grantee asserted that public damage totaling $575,952 should be included.  Further, the Grantee stated that a recurrence interval of 2.5 years is the appropriate interval to use in the analysis, given that the storms took place between 2001 and 2010.  According to the Grantee, based on its analysis, the benefit-cost ratio is 1.09.

On October 15, 2012, the FEMA Region IV Regional Administrator denied the Applicant’s first appeal, determining that the HMP to replace the sewer system was not eligible because it applied largely to elements of the facility that were undamaged by the event.  The Regional Administrator did not address the cost-effectiveness of the HMP in the appeal response.

Second Appeal

The Applicant submitted a second appeal on January 3, 2013 and a supplement to the appeal on February 12, 2013.  In its appeal, the Applicant reiterates its first appeal position regarding the BCA.  Further, in response to Regional Administrator’s determination that the HMP is not eligible because it applies largely to elements of the facility that were undamaged by the event, the Applicant states that it initially submitted the project for HMGP funding under Section 404, worked with FEMA for more than 3 years on the HMGP application, and only submitted an HMP under Section 406 based on direction provided by FEMA.  The Applicant asserts it should not be penalized for taking action based on a recommendation made by FEMA personnel and requests that, if the HMP cannot be funded under the PA Program, FEMA should consider the project for funding under Section 404’s HMGP.  Lastly, the applicant also states that Section 705(c) of the Stafford Act prevents the deobligation of funding for this project, arguing that the section “mandatorily prohibits deobligation of the County’s grant.”

Discussion

FEMA policy establishes specific eligibility criteria for HMPs.[1]  Pursuant to the policy in effect at the time of the disaster, mitigation measures must be related to eligible disaster-related damage and must directly reduce the potential of future, similar disaster damage to the eligible facility.[2]  In this case, the damage was limited to 90 out of more than 400 grinder pumps; the vast majority of the system was undamaged by the event.  The HMP included the replacement of the entire system and, thus, addressed non-damaged elements of the collection system.  Therefore, the HMP is not eligible under Section 406 of the Stafford Act.  Because the HMP addressed non-damaged elements, the cost-effectiveness of the HMP is not relevant, as cost-effectiveness applies only to eligible mitigation efforts.[3]   

The Applicant asserts in its appeal that, according to Section 705(c) of the Stafford Act, FEMA cannot de-obligate the funding provided in PW 6495. Section 705(c) prohibits FEMA from de-obligating grant funds provided to a state or local government under the Stafford Act when three statutory preconditions are met.  Specifically, the law provides:

A State or local government shall not be liable for reimbursement or any other penalty for any payment made under this Act if – (1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.[4]

The Applicant asserts that the HMP funding included in PW 6495 meets these preconditions.  This conclusion is incorrect.  As the provision is written, it only applies to payments made “under this Act,” meaning payments authorized under the Stafford Act and its implementing regulations and policies.  In order for the first precondition to be met, the payment must be “authorized by an approved agreement.”  Accordingly, for the agreement to be the authorized act of an agency official, the approval must have been for an authorized use of the federally appropriated funds, consistent with applicable legal authorities and implementing policy guidance.  Consequently, if the approval is not consistent with applicable legal authorities, it follows that the approval was outside the scope of the authority of the official and does not constitute a binding agreement.

In this instance, any funding provided for the Applicant’s HMP was not authorized under the Stafford Act and its implementing regulations and policies.  FEMA policy requires that mitigation measures must be related to eligible disaster-related damage and must directly reduce the potential of future, similar disaster damage.  The Applicant’s HMP, however, addressed non-damaged elements of the subdivision’s collection system.  Therefore, inclusion of funding for the HMP in PW 6495 was contrary to Stafford Act implementing policy, and de-obligation of that funding does not fall within the scope of Section 705(c) of the Act.

Conclusion

The HMP originally funded in PW 6495 was the replacement of an entire sewage collection system, even though the event only damaged a portion of the existing system.  The HMP addressed undamaged elements of the collection system and, therefore, is not eligible under Section 406 of the Stafford Act.  Section 705(c) of the Stafford Act does not bar the de-obligation of the HMP funding from PW 6495.

[1]  See generally Response and Recovery Policy 9526.1, Hazard Mitigation Under Section 406 (Stafford Act) (Aug.. 13, 1998).

[2]  Id. at 2.

[3] In this appeal, the Applicant urges FEMA to consider the project for funding under Section 404’s HMGP.  FEMA already considered and took action on the Applicant’s HMGP application.  FEMA denied the HMPG application on October 30, 2007 because the Applicant began construction prior to FEMA completing its environmental review.  The Applicant thereafter submitted an appeal, which FEMA denied on April 28, 2008, citing the early construction commencement and further stating that, under 44 C.F.R. § 206.434(c)(4), the project “must solve a problem independently.”  In this case, the chief problem identified was the power loss.  As the project addressed the sewage backup problem, not the issue of the power, it was not eligible for funding under Section 404’s HMGP.

[4]  Stafford Act § 705(c), 42 U.S.C. § 5205(c).