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Mississippi Department of Finance and Administration Global Match Project for Pilot Reconstruction of Commercial Structures (3 casinos)

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

ApplicantMississippi Emergency Management Agency
Appeal Type2nd
Date Signed2009-10-09T00:00:00
1st Appeal
• Issue
o Mississippi Emergency Management Agency supported an application for mitigation measures undertaken at three casinos to serve as non-federal matching funds (Global Match) under the Mitigation Reconstruction Pilot Program. The Mississippi Recovery Office (MSRO) denied the application based on ineligibility due to: 1) one structure being located in a Coastal High Hazard (V Zone); 2) one structure being subject to change of ownership post-event; and 3) insufficient data on the third structure.
• Reason for Denial
o Region IV upheld the MSRO’s denial on the same grounds as those rendered by the MSRO, for Hard Rock Casino (sited in a V Zone), and for Island View Casino (change of ownership post-event).
• Reference(s)
o 44 CFR 206.434 Eligibility;   44 CFR 206.440 Appeals, HMGP Reconstruction Grant Pilot for Hurricanes Katrina, Rita and Wilma (HMGP Pilot Program)
2nd Appeal
• Issue
o The applicant filed a second appeal through Region IV asking for a review of the justification and rationale originally set forth in the first appeal. They stated that FEMA’s Reconstruction Pilot Manual discussed reconstruction in the V-Zones, that projects in the V-Zone in Louisiana were funded, and that the casino was functionally dependent on the V-Zone location based on regulations governing the location of casinos. They also contended that the change in ownership was immaterial as the reconstructed structure was built to replace two destroyed during the storm event.
• FEMA Findings
o FEMA HQ supported Region IV’s decision to deny the 1st appeal, however they noted that a policy clarification resulted in the first structure being eligible.
o Rationale: FEMA HQ determined that a policy clarification effective after the Region’s denial provides for the eligibility of the first structure, Hard Rock Casino, because it was damaged less than 90%. HQ also identified issues with the calculations of the Global Match, specifically the requirement that Duplication of Benefits (DOB) be calculated and taken into account, and that the Disaster Specific Guidance Limited Waiver to Allow Retroactive Funding does not exempt projects from programmatic requirements such as DOB consideration, as argued by the subapplicant. Additional data needs were identified and HQ offered technical support to explore HMPG match opportunities.
o Reference(s):  44 CFR 206.440 Appeals; 44 CFR 206.434 Eligibility, HMGP Pilot Program; Policy Clarification of July 8, 2009 – HMGP Pilot Reconstruction Projects in V-zones.

Appeal Letter

OCT 09 2009
 
Thomas M. Womack
Executive Director
State of Mississippi
Mississippi Emergency Management Agency
Post Office Box 5644
Pearl, Mississippi 39208-5644
 
RE: Second Appeal for Mississippi Department of Finance and Administration Global Match Project Application for Pilot Reconstruction of Three (3) Commercial Structures (casinos), HMGP DR-1604-MS, State NUID-ber 856
Total Project Cost: $190,534,217
Federal share of$952,671 (5%)
Non-Federal Share $189,581,546 (95%)
 
Dear Mr. Womack,
 
I am responding to your request dated July 13, 2009 for FEMA to review the second level appeal for Pilot Reconstruction of three commercial structures (casinos), the Hard Rock, the Hollywood and the Island View, submitted under the Hazard Mitigation Graot Program (HMGP). You are asking that our office consider the information you submitted in the appeal package, and you indicated that this project is designed to contribute essential non-federal match, which is critical to the state's recovery.

This second appeal follows the decision by the FEMA Region IV Office in Atlanta dated April 30,2009, which upheld the Mississippi Recovery Office (MSRO) position of December 5, 2008 that certain components of this project are not eligible activities, and cannot be considered for funding or as match contribution for this project. FEMA understands the challenge of providing the non-federal cost share in difficult fiscal circumstances; however, this statutory requirement cannot be set aside. We are very interested in working together to identify mutually acceptable methods to meet this requirement.

FEMA Region IV Hazard Mitigation Assistance Branch upheld the ineligibility determination of the MSRO for two specific components of this pilot reconstruction project:
1. Hard Rock Casino is not eligible as it is sited in a Coastal High Hazard Area. or V zone.
2. Island View Casino is not eligible due to a change of ownership post-event.
I have concluded that a policy clarification in regards to HMGP Pilot Reconstruction Projects located in V-zones dated July 8, 2009 allows the Hard Rock casino to remain eligible, as your letter dated September 4, 2009 documents that the Hard Rock casino/hotel was damaged less than 90% by the event. This is a change from the Region IV decision, which was based on existing policy at the time of their evaluation. We also reviewed the Island View casino appeal and determined that the ownership requirement has not been met, and therefore the reconstruction of the Island View casino is not eligible. However there may be opportunities to explore retrofit activities at this site, which do not have the same ownership conditions as the pilot reconstruction program.

This global match project was submitted under the Memorandum of Agreement (MOA) between FEMA and the State of Mississippi which requires that match projects meet all criteria of those for which a standard federal cost-share is requested. OMB Circular A-87 (codified in 2 CFR Part 225) identifies costs covered by insurance proceeds as 'eredits', which are deducted from the total cost of a project. Once all credits are deducted, the remainder of eligible costs is cost-shared. DOB must be calculated in order to determine the final, eligible costs. The remaining eligible costs that are not federally funded may contribute to the nonfederal cost match.

The perception that a match project is exempt from this calculation is not accurate. The Agreement does not relieve FEMA, the state or the applicant from meeting all statutory, regulatory and programmatic requirements. These requirements are the same-regardless of the percentage of the federal contribution, even if no federal funds are requested for a match project. FEMA considers the grant award to be the total of Federal and non-Federal contribution necessary to complete the approved scope of work, as referenced in 44 CFR §206.431. The noted DOB calculation is a statutory requirement from Section 312 of the Stafford Act (42 USC 5155).

Your appeal indicates that this global match project is submitted under the Disaster Specific Guidance (DSG) Limited Waiver to Allow Retroactive Funding. The sub-grantee contends that this application concerns privately funded commercial projects initiated or completed without FEMA approval, but that nonetheless are eligible for HMGP consideration by virtue of the DSG. While the DSG provides for consideration of certain activities that were initiated prior to FEMA approval, it does not constitute a full eligibility determination. All program requirements must be met, with the exception of the applicant receiving prior approval to initiate the action. Further, the DSG requires that all DOB information be provided with the
application. Since these activities were completed prior to submission of the application, DOB information is required in order to determine allowable costs. It is my understanding that this documentation has not been provided to the MSRO.

These casino/hotel buildings are unique and additional technical assistance may be necessary to determine appropriate eligible unit costs. FEMA is prepared to provide this technical support, along with programmatic assistance to help the applicant identify necessary documentation to support the eligibility of this project, or to identify individual components or portions of these structures that may be eligible as a match source project.

The current budget is inadequate and does not provide sufficiently specific information. If the State wishes to continue to seek approval for this project, the budget will need to be revised and resubmitted to the TRO, along with pertinent doeumentation. Also, you contend in your letter that Louisiana has received special consideration for V-zone projects than that which is available to Mississippi. I would like to assure you that this is not
the case. Project eligibility in Louisiana is based upon the same criteria as those in Mississippi. The V -zone policy clarification for HMGP Pilot Reconstruction activities may have allowed some structures and actions to be reconsidered that were not eligible based on the 12/2/08 memo. These allowances are available to Mississippi as well.

In conclusion, afier review of the second level appeal documentation, FEMA Headquarters concurs with the decisions of the Region, but we believe that recent policy clarification may result in portions of this project being eligible. FEMA will allow the applicant 60 days from receipt of this letter to submit the necessary documentation and to revise the budget. FEMA can also provide program and technical support to assist with data collection and evaluation. I understand that this project may only provide a partial solution to obtain the necessary match for this disaster. Thus, I also offer support to assist in exploring other submitted projects and options to help you meet the HMGP match requirement within program allowances.
The recovery from Katrina has been challenging, and FEMA is committed to providing continued assistance as you rebuild your communities. I look forward to collaborating with you to address these issues.

If you have any additional questions regarding this issue or would like to request additional assistance, please contact Mike Grimm, Acting Director, Risk Reduction Division, Mitigation Directorate at (202) 646-2878.
 
Sincerely,
 
Deborah S. Ingram
Acting Deputy Assistant Administrator
for Mitigation
 
cc: Major P. May, Regional Administtator, FEMA Region N
Brad Loar, Hazard Mitigation Assistance Branch Chief
John LaBrune, Mitigation Section Chief, MSRO

 

Appeal Analysis

A policy clarification in regards to HMGP Pilot Reconstruction Projects located in V-zones dated July 8, 2009 allowed the Hard Rock casino to remain eligible, because the Hard Rock casino/hotel was damaged less than 90% by the event. This is a change from the Region IV decision, which was based on existing policy at the time of evaluation. Reconstruction of the Island View casino was not eligible, because the ownership requirement had not been met. However there may be opportunities to explore retrofit activities, which do not have the same ownership conditions as the pilot reconstruction program.
 
The global match project was submitted under the Memorandum of Agreement (MOA) between FEMA and the State of Mississippi which requires that match projects meet all criteria of those for which a standard federal cost-share is requested. OMB Circular A-87 (codified in 2 CFR Part 225) identifies costs covered by insurance proceeds as 'credits', which are deducted from the total cost of a project. Once all credits are deducted, the remainder of eligible costs is cost-shared. DOB must be calculated in order to determine the final, eligible costs. The remaining eligible costs that are not federally funded may contribute to the nonfederal cost match.

The Agreement does not relieve FEMA, the state or the applicant from meeting all statutory, regulatory and programmatic requirements. These requirements are the same-regardless of the percentage of the federal contribution, even if no federal funds are requested for a match project. FEMA considers the grant award to be the total of Federal and non-Federal contribution necessary to complete the approved scope of work, as referenced in 44 CFR § 206.431. The noted DOB calculation is a statutory requirement from Section 312 of the Stafford Act (42 USC 5155).
The sub-grantee contends that this application concerns privately funded commercial projects initiated or completed without FEMA approval, but that nonetheless are eligible for HMGP consideration by virtue of the Disaster Specific Guidance (DSG). While the DSG provides for consideration of certain activities that were initiated prior to FEMA approval, it does not constitute a full eligibility determination. All program requirements must be met, with the exception of the applicant receiving prior approval to initiate the action. Further, the DSG requires that all DOB information be provided with the application. Since these activities were completed prior to submission of the application, DOB information is required in order to determine allowable costs.
 
The current budget is inadequate and does not provide sufficiently specific information. The budget will need to be revised and resubmitted to the TRO, along with pertinent doeumentation.

 

Last updated Aug 19, 2014