Increased Operating Costs, Immediate Threat, Work Completion Deadline

Appeal Brief

Summary Paragraph

A severe wildfire caused damage throughout the state of California. Lake Madrone Water District (Applicant) requested Public Assistance (PA) funding for: the bulk purchase and delivery of potable drinking water for its residents; contract labor and force account materials for emergency repairs to the damaged system to address underground leaks; 742.03 hours of force account equipment (FAE) for a pickup truck used for repairs of water mains and service laterals; renting portable restrooms for workers performing repairs and damage assessments to the damaged water distribution system; conducting water testing for volatile organic compounds (VOC) contamination within the damaged water distribution system; and installing a water tank and associated components (temporary water system) for use by the Applicant’s sole technical maintenance employee. FEMA issued a Determination Memorandum, partially approving the Applicant’s request. FEMA denied the remaining claimed costs, finding they were increased operating costs of providing water to the residents, including the costs of bringing in water from an alternate source, mass purchasing, and transportation of that water; FAE; portable restrooms; water testing for VOCs, and a temporary water system for the technical maintenance employee. The Applicant submitted its appeal to the California Governor’s Office of Emergency Services (Recipient), appealing the cost denied for the purchase of bulk water; hours of vehicle use; rented portable restrooms for workers; water used to flush the damaged water distribution system to test for VOCs; technician and laboratory testing costs for VOC; the temporary water system installed for its technical employee. FEMA sent the Applicant a Request for Information, seeking it demonstrated that it restored damaged line items to predisaster design and function, and clarifying the cause of damages. The Applicant responded that based on the perceived risk, it tested the water for VOC contaminants. The Applicant further stated that after the fire, but before heavy debris removal activities, it made temporary repairs to the water distribution system. FEMA partially approved the appeal. 

Authorities and Second Appeals

• Stafford Act § 403.
• 44 C.F.R. §§ 206.223(a)(3), 206.225(a).
• PAPPG, at 96, 113-14, 196.
  • For emergency protective measures to be eligible, the applicant is responsible for showing the work is required due to an immediate threat resulting from the declared incident. Generally, increased costs of operating a facility or providing a service are ineligible for PA funding, even when directly related to the declared incident. There are some exceptions, including costs for water testing and treatment, including supplies, in the immediate aftermath of the incident to counter a specific threat. Increased operating costs that are ineligible, even for a limited time, include costs for obtaining water from an alternate source.

Headnotes

• The purchase and delivery of potable water to affected residents was an ineligible increased operating cost. However, the Applicant’s purchase of water from an alternate source for the Panorama tank was necessary to cleanse the harmed water distribution system to ascertain the location of the damage and test for VOC contaminants and was not an increased cost of providing the Applicant’s ordinary services.
• The Applicant has not demonstrated costs for FAE, portable restrooms, or a temporary water system were directly tied to the performance of eligible emergency protective measure.

Conclusion

FEMA finds that the Applicant demonstrated that the $9,660.00 for water testing and treatment is eligible. However, the Applicant has not provided documentation to support the remaining costs were directly related to the performance of eligible emergency protective measures. Therefore, the appeal is partially granted.

Appeal Letter

Appeal Analysis

Background

On August 22, 2020, the President issued a major disaster declaration for damages caused by wildfires throughout the state of California.[1] The Lake Madrone Water District (Applicant) provides water services to its residents on a year-round basis and provides water to property owners who use the land seasonally. As a result of damage to its water distribution system, the Applicant requested Public Assistance (PA) funding for: (1) the bulk purchase and delivery of potable drinking water for its residents; (2) contract labor and force account materials for emergency repairs to the damaged system to address underground leaks; (3) 742.03 hours of force account equipment (FAE) for a pickup truck used for repairs of water mains and service laterals; (4) renting portable restrooms for workers performing repairs and damage assessments to the damaged water distribution system; (5) conducting water testing for volatile organic compounds (VOC)[2] contamination within the damaged water distribution system; and (6) installing a water tank and associated components (temporary water system) for use by the Applicant’s sole technical maintenance employee who was affected by the disaster, to allow the employee to remain in the area to perform disaster-related repairs.

FEMA issued a Determination Memorandum on November 15, 2021, approving $22,284.78 in contract labor and materials for emergency repairs to the damaged system. However, FEMA denied $258,247.21 of the remaining claimed costs, finding they were increased operating costs of providing water to the residents. These included the costs of bringing in water from an alternate source, mass purchasing, and transportation of that water; FAE; portable restrooms; water testing for VOCs; and a temporary water system for the technical maintenance employee.

First Appeal 

In a letter dated January 14, 2022, the Applicant appealed costs denied for: (1) the purchase of bulk water from an alternate source to supply potable water to residences affected by the disaster;[3] (2) 742.03 hours of vehicle use to repair the damaged system; (3) rented portable restrooms for workers performing repairs and damage assessments in the field; (4) water used to flush the damaged water distribution system to test for VOCs in the system that occurred as a result of the disaster; (5) technician and laboratory testing costs that confirmed VOC contamination within the damaged system; and (6) the temporary water system installed for its sole technical maintenance employee. 

The Applicant explained that the wildfires compromised its water distribution system and halted the predisaster potable water services to its residential customers. The Applicant stated that in response, it purchased and delivered potable water from an alternate source for residential customers to allow residents to stay in their homes and mitigate health and safety concerns. The Applicant claimed the increased costs were due to supply interruptions, rather than an increased demand for services, and were related to eligible items specifically enumerated in federal statute and FEMA’s non-congregate sheltering policy during the coronavirus (COVID-19) pandemic. Next, the Applicant requested reimbursement for the emergency repair-related costs (i.e., FAE and rented portable restrooms) previously denied that it stated were necessitated by incident-related damages. Then, the Applicant addressed the VOC costs, stating that they were necessary to pressurize the predisaster water distribution system, locate additional damages to the system, and conduct VOC testing to that system, which confirmed widespread VOC contamination.[4] Lastly, the Applicant claimed that the temporary water system it purchased for its sole technical maintenance employee allowed that employee to remain in his residence and perform disaster-related repairs, rather than relocate outside the affected area. In a letter dated February 7, 2022, the California Governor’s Office of Emergency Services (Recipient) supported and transmitted the Applicant’s first appeal.

FEMA sent the Applicant a Request for Information (RFI) dated June 2, 2022, requesting the Applicant demonstrate that it restored damaged line items to predisaster design and function. In addition, FEMA requested the Applicant clarify the cause of damages for requested repairs and specify the immediate threat addressed by VOC testing. On July 1, 2022, the Applicant responded to the RFI. The Applicant referenced FEMA projects involving other applicants, where backflow and burned structures contaminated the water infrastructure with VOCs and FEMA funded the work. The Applicant explained that because of the risk, it tested the water for VOC pollution after the fire destroyed 62 homes. The Applicant further stated that after the fire, but before heavy debris removal activities, it made temporary repairs to the water distribution system by cutting distribution laterals at the residential valve boxes and capping them to prevent VOC contaminants from backflow into burned structures.

On January 30, 2023, the FEMA Region 9 Regional Administrator partially approved the appeal. FEMA approved $4,622.89 for VOC costs, which included the technician and laboratory testing, after the Applicant demonstrated that it was directly related to eligible emergency actions to save lives or protect public health. FEMA determined, however, that the Applicant did not demonstrate that the remaining costs were directly associated with the performance of eligible emergency work, or completed before the emergency work deadline, but were rather ineligible increased operating costs or costs associated with work performed after the work completion deadline.[5] 

Second Appeal

In a letter dated March 30, 2023, the Applicant requested $68,355.87 and reiterated arguments raised on first appeal for previously denied costs.[6] Regarding the VOC costs, the Applicant noted that while FEMA approved funds for VOC testing, it did not provide PA for the predicate steps necessary to perform that testing, such as the purchase of water to flush the damaged water distribution system prior to testing. It also noted that FEMA denied a portion of the costs for its VOC testing that were incurred outside the approved period of performance but given that it requested a time extension and submitted it to the Recipient prior to the established deadline, the remaining $810.91 in costs for the VOC sampling should be eligible for reimbursement. On May 4, 2023, the Recipient transmitted the Applicant’s second appeal to FEMA, and its supporting letter reiterating previously raised arguments.  

Discussion

FEMA is authorized to provide assistance for emergency protective measures to save lives or to protect public health and safety.[7] For emergency protective measures to be eligible, the applicant is responsible for showing the work is required due to an immediate threat resulting from the declared incident.[8] Generally, increased costs of operating a facility or providing a service are ineligible for PA funding, even when directly related to the declared incident.[9] There are some exceptions, such as costs for water testing and treatment, including supplies, in the immediate aftermath of the incident to counter a specific threat.[10]The additional costs are only eligible if (1) the services are specially related to eligible emergency actions to save lives or protect public health and safety or improved property; (2) the costs are for a limited period of time based on the exigency of the circumstances; and (3) the applicant tracks and documents the additional costs.[11] In contrast, increased operating costs that are ineligible, even for a limited time, include costs for obtaining water from an alternate source.[12]FEMA only provides PA funding for work completed and costs incurred within regulatory deadlines.[13] The deadline for emergency work is 6 months from the declaration date.[14] The recipient has authority to extend deadlines for individual projects based on extenuating circumstances.[15] The burden to substantiate appeals with documented justification falls exclusively on the applicant and hinges upon the applicant’s ability to not only produce its own records, but to clearly explain how those records support its appeal.[16]

On second appeal, the Applicant has explained that it was necessary to flush the damaged water distribution system with $9,660.00 in purchased water in order to conduct the VOC testing approved on first appeal. The Applicant emphasized this prerequisite step was necessary to eliminate an immediate threat as the testing confirmed the presence of VOC contaminants within the damaged system. Because costs related to water testing and treatment (including supplies) is eligible to address an immediate threat, the cost of the water to perform the testing is eligible, as it was done in the immediate aftermath of the incident to counter the specific threat of VOC contamination. Therefore, $9,660.00 in costs is an eligible expense.

Separately, the Applicant has claimed various expenses related to acquiring and delivering bulk water from an alternate source to provide temporary potable water to disaster-affected residents. However, per FEMA policy, these are ineligible increased operating costs. The Applicant has also claimed various expenses that it states were used in the performance of disaster repairs and related emergency work. Specifically, it claims 742.03 hours of FAE for a pickup truck used for repairs of water mains and service laterals, as well as rented portable restrooms for workers performing repairs and damage assessments, and a temporary water system to allow its technical maintenance employee to remain in the area and perform necessary repairs. However, it has not tied the costs for the pickup truck, portable restrooms, or the temporary water system directly to any specific emergency repairs or other eligible emergency work. Although the Applicant claims that the FAE was only used for repair of water mains and sewer laterals, which FEMA previously found eligible, it has not explained specifically how the pickup truck assisted in these repairs or was otherwise required due to an immediate threat. Further, the documentation provided demonstrates that the incurred FAE cost extended beyond the emergency work deadline of February 22, 2021. Therefore, the Applicant has not demonstrated these expenses directly relate to an eligible emergency action to save lives or protect public health.  

In addition, the Applicant claimed $810.91 for VOC testing that was performed after the emergency deadline to complete the work.[17] However, neither the Recipient or FEMA has granted a time extension for this project. Therefore, this additional VOC testing is ineligible for PA funding.[18] 

Conclusion

FEMA finds that the Applicant demonstrated that the $9,660.00 associated with water testing and treatment is eligible. However, the Applicant has not provided documentation to support the remaining costs were directly related to the performance of eligible emergency protective measures. Therefore, the appeal is partially granted.