Result of Declared Incident, Allowable & Reasonable Costs

Appeal Brief

Summary Paragraph

During November 12-15, 2020, tropical storm Eta impacted North Carolina. The City of Statesville (Applicant) requested Public Assistance (PA) for multiple repairs, including the motors, within the South Yadkin River Pump Station (Pump Station). FEMA completed a site inspection noting the floodwater level within the Pump Station. FEMA sent a Request for Information (RFI) requesting predisaster conditions and technical reports of the motors. The Applicant did not provide the information requested. FEMA issued a Determination Memorandum denying PA funding to restore the motors because the Applicant did not provide adequate documentation to establish that the equipment was in good operational order prior to the disaster, nor that the disaster caused the damage. The Applicant appealed, stating that the motors were subject to high humidity and moisture because of the disaster, and provided a visual assessment from an engineer. FEMA sent an RFI asking for elevation measurements above the floor and the cost to repair or replace the motors. In response, the Applicant provided the requested elevation and cost estimates. The Region 4 Regional Administrator denied costs. FEMA found that the Applicant did not demonstrate the damages were disaster related. The Applicant submits a second appeal requesting $180,131.00 for the replacement of the motors. As support, the Applicant submits a technical assessment for the motors, a cost estimate for the replacement of the motors, and an engineer’s opinion regarding the effects of exposure to moisture on the motors. 

Authorities

• Stafford Act § 406(a).
• 2 C.F.R. § 200.404; 44 C.F.R. §§ 206.223(a)(1), 206.226(h).
• PAPPG, at 51-52, 63-65, 172, 187.

Headnotes

• FEMA may provide funding to a local government to repair a public facility damaged by a major disaster. Work must be required as a result of the disaster, and the applicant must demonstrate that the damage was directly caused by the incident. Repairing damaged—or replacing destroyed—equipment with equivalent items is eligible. If the cost to replace the item is less than the cost to repair it, FEMA limits PA funding to the replacement cost. When equipment is not repairable, FEMA uses other sources to estimate the eligible cost.
  • On second appeal, the Applicant submitted a technical assessment and an engineer’s opinion finding that the motors were affected by moisture attributed to the declared disaster. Therefore, the Applicant demonstrated disaster related damages. In addition, the Applicant demonstrated that replacement costs for the motors are eligible for PA funding.

Conclusion

FEMA finds that the damages to the motors were caused directly by the disaster and the replacement costs for the motors are eligible for PA funding.

Appeal Letter

Appeal Analysis

Background

During November 12-15, 2020, Tropical Storm Eta caused damage throughout the state of North Carolina.[1] The City of Statesville (Applicant) claimed that various components at the South Yadkin River Pump Station (Pump Station) were damaged during the disaster and needed to be replaced, including the US Motor 350HP Vertical Motor (pump motor 1) and the Electric Machinery 600HP Vertical Motor (pump motor 2) (collectively referred to as “motors”).[2] FEMA conducted a Site Inspection of the Pump Station, photographed the damages, and prepared Grants Manager Project 187773 documenting the requested cost of $2,583,000.00.

FEMA requested documentation showing that the motors were submerged by the flood water, a troubleshooting analysis to determine the most cost-effective method of repair or replacement, and a standard itemized cost validation. The Applicant responded, indicating that all electrical equipment in the Pump Station was submerged. Additionally, the Applicant submitted maintenance logs for the motors. 

On June 22, 2022, FEMA issued a Determination Memorandum denying $2,532,257.77 in costs for Pump Station equipment, including the motors. FEMA stated that the equipment was not eligible for Public Assistance (PA) because the Applicant did not demonstrate the equipment was damaged by the disaster. FEMA stated that the Applicant based its request on visual observations and did not submit documentation demonstrating the damage was disaster related or that all equipment was in good operational order prior to the incident. 

First Appeal

The Applicant submitted a first appeal dated August 15, 2022, requesting $1,544,00.00 for the replacement cost of the motors, as well as other Pump Station components. The Applicant stated that equipment was submerged and that the motors were subject to high humidity and moisture because of the disaster. The Applicant also stated that it performed routine operability checks at the Pump Station and submitted maintenance records in support. It also provided a visual assessment from an engineer addressing the motors’ operability prior to the disaster.[3] In the assessment, the engineer stated that his company repaired the motors prior to the disaster and that the motors were operational.[4] Finally, the Applicant provided a revised cost estimate for the replacement of the motors. On September 22, 2022, North Carolina Emergency Management (Recipient) transmitted the Applicant’s first appeal to FEMA, expressing its support. 

In a letter dated October 23, 2023, FEMA requested additional information, including the height measurements above the floor level of all the equipment in the Pump Station, a detailed list of the damages claimed, costs for repair or replacement of each item, and documentation to demonstrate the actions the Applicant took before, during and after the disaster to minimize the damages claimed. On December 12, 2023, the Applicant responded by providing the motors’ heights, elevations and damages, cost estimates for the motors, and a spreadsheet comparing the repair and the replacement costs.[5]

On July 23, 2024, the FEMA Region 4 Regional Administrator denied costs for Pump Station components, including $289,000.00 for the motors, finding that the Applicant had not substantiated that the requested costs were for damage incurred as a result of the disaster.[6] FEMA concluded that the Applicant did not provide an after-incident damage assessment evaluation of the motors and that even though the Applicant indicated the motors were submerged by flood water, the evidence did not support that claim. As such, FEMA found that the motors were ineligible. 

Second Appeal

In a letter dated September 19, 2024, the Applicant submitted a second appeal limiting its request to $180,131.00 for replacing the motors. The Applicant states that it contracted with professional engineers to assess the motors’ water damage and prepare a cost estimate for their repair and replacement. The assessment performed included removal, dismantling, visual inspection, and electrical testing of the motor’s components as required by the industry standard and manufacturer. For pump motor 1, the Applicant engineer provided a repair cost, $78,886.00, and a replacement cost for a new motor, $54,356.00. For pump motor 2, the provided repair cost is $83,864.00 and the replacement cost is $125,775.00. Additionally, the Applicant submits an engineering opinion that concluded that the “pattern and extent of rust suggest[s] that the motor has been exposed to water, not just humidity.”[7] In a letter dated September 23, 2024, the Recipient transmitted the Applicant’s appeal with its support.

Discussion

Result of Declared Incident 

FEMA may provide funding to a local government for the repair of public facilities damaged by a major disaster.[8] To be eligible for PA funding, work must be required as a result of the disaster and the applicant must demonstrate that damage was caused directly by the declared incident.^[9] 

The Applicant claims that the motors were damaged as a result of the disaster. On first appeal, the Applicant provided documentation from an engineer showing that the motors were repaired and in good working condition prior to the disaster. In its second appeal, the Applicant further explained that the motors were evaluated by an engineer, who submitted a detailed assessment for each motor. The damages outlined in the assessment submitted by the Applicant included significant rust, evidence of moisture and water in the lubricants and internal components of the motors and are consistent with those caused by flooding.

Additionally, the Applicant submitted a letter from a Professional Engineer concluding the motors were exposed to water, not just humidity.[10] Even if the motors were not fully submerged in water, industry standards, manufacturer guidance, and the Applicant’s engineer reports demonstrate that moisture causes similar damage to motors.[11] The assessment inspection and electrical test results submitted by the Applicant identified these types of damages. The administrative record demonstrates that the motor damages claimed by the Applicant are consistent with water exposure that occurred as a direct result of the disaster.

Allowable & Reasonable Costs

Repairing damaged—or replacing destroyed—equipment with equivalent items is eligible.[12] If the cost to replace the item is less than the cost to repair it, FEMA limits PA funding to the replacement cost.[13] When equipment is not repairable, FEMA uses “blue book” values or similar price guides to estimate the eligible cost.[14] FEMA accepts an Applicant-submitted cost estimate if the estimate is prepared by a licensed Professional Engineer or other estimating professional, such as a licensed architect or certified professional cost estimator who certifies that the estimate was prepared in accordance with industry standards and is reasonable.[15] A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the Applicant makes the decision to incur the cost.[16]

With its second appeal, the Applicant submits a cost estimate to repair and replace each motor prepared by an engineer from a pumping services company. For pump motor 1, the Applicant’s engineer’s repair cost is $78,886.00, while the replacement cost for a new motor is $54,356.00. When the cost to replace is less than the cost to repair, FEMA can approve PA funding in the amount of the replacement cost. Therefore, FEMA finds the requested $54,356.00 to replace pump motor 1 eligible. For pump motor 2, the repair cost is $83,864.00 and the replacement cost is $125,775.00.[17] Here, the Applicant demonstrated that repair was not feasible because a necessary part was unavailable. Further, the Applicant’s cost estimate was prepared by a professional engineer, and the Applicant demonstrated that the cost is reasonable. Therefore, the $125,775.00 for replacement of pump motor 2 is eligible for PA funding. 

Conclusion

FEMA finds that the damages to the motors were caused directly by the disaster and $180,131.00 in replacement costs for the motors are eligible for PA funding.