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Agenda 09/09/2014 Item #16K3 9/9/2014 16.K.3. EXECUTIVE SUMMARY, Recommendation to approve filing a Second Appeal from the Federal Emergency Management Agency's (FEMA) First Appeal level decision concerning the Hurricane Wilma (FEMA-1609-DR-FL) PW-2700 fund deobligation in the amount of$11,172,272; the expenditure of additional funds for legal and engineering expenses;and approve all necessary budget amendments. OBJECTIVE: To obtain Board authorization to file a Second Appeal from FEMA's First Appeal level decision that partially reinstated $1,853,755.68 of the $11,172,272.00 in deobligated funds; to expend additional legal and engineering resources necessary to file the Second Appeal;and approve all necessary budget amendments. CONSIDERATIONS: On August 1, 2014, Collier County received notice from the Florida Department of Emergency Management ("FDEM")that the County's First Appeal to the $11,172,272 deobligation of Hurricane Wilma-PW 2700 was approved in part and denied in part.See FEMA's August 1, 2012, Correspondence. FEMA reinstated$1,853,755.68 in expenses for soft costs such as dune repairs, engineering and surveys as outlined in the original Version 0 of PW 2700. However, FEMA failed to address the County's argument concerning the application of additional sand quantities needed following the sand loss after Hurricanes Katrina and Wilma and denied reinstatement for that portion of the deobligated funds. In addition, FEMA failed to include all of the environmental monitoring costs required as part of the beach restoration project. Outside counsel,Ernest Abbott with the law firm Baker Donelson,Bearman, Caldewll &Berkowitz,P.C.,believes that there is a reasonable chance of receiving a significantly increased reimbursement of the remaining deobligated funds and recommends filing the Second Appeal. See Mr.Abbott's Attached August 26,2014,Memorandum. It is also Mr.Abbott's opinion that because the reinstatement of the $1,853,755.68 in deobligated funds was to correct a FEMA error, those funds should not be in jeopardy by pursuing a Second Appeal. The legal costs to pursue the $9.2 million by filing a Second Appeal is estimated to cost less than$50,000. The County must file its appeal with FDEM no later than September 30,2014. At Mr.Abbott's suggestion,the Department of Growth Management is also requesting authorization to allow a peer ' review be conducted on the original CP&E technical sand analysis with the objective of strengthening and justifying the technical discussion. The estimated additional engineering costs are believed to be approximately $36,000. County staff will work with the County Attorney's Office, outside legal counsel and the county's consultants to integrate this additional analysis into a comprehensive appeal document. FISCAL IMPACT: The Board approved initial funding in the amount of$100,000 for this matter on September 11, 2012. (Agenda Item 11H). Approximately $26,000 of the original $100,000 remains uncommitted. Staff is anticipating approximately an additional $50,000 in legal costs and $36,000 in engineering expenses to finalize a second appeal. The new funding of approximately$60,000 will initially be provided from the General Fund Other G&A cost center (001-103010). Follow up action will be taken to present a funding request to the Tourist Development Council recommending that the subject appeal costs be funded from TDC Beach Renourishment Fund (195) consistent with previous appeal costs. The Board will subsequently be asked to approve shifting funding to TDC Fund(195). GROWTH MANAGEMENT IMPACT: There are no Growth Management Impacts from this action. LEGAL CONSIDERATIONS: This item is approved as to form and legality, and requires majority vote for Board approval.—JAK RECOMMENDATION: That the Board of County Commissioners approve filing a Second Appeal from the Federal Emergency Management Agency's (FEMA) First Appeal level decision concerning the Hurricane Wilma (FEMA-1609-DR-FL) PW-2700 fund deobligation in the amount of $11,172,272; authorize the additional expenditure of up to $86,000 in legal and engineering expenses; and approve all necessary administrative/fmancial activities and budget amendments. Prepared by:Jeffrey A.Klatzkow,County Attorney Attachments:(1)FEMA's August 1,2012 First Appeal Letter,and(2)Ernest Abbott Memorandum Packet Page-3135- 9/9/2014 16.K.3. COLLIER COUNTY Board of County Commissioners Item Number: 16.16.K.16.K.3. Item Summary: Recommendation to approve filing a Second Appeal from the Federal Emergency Management Agency's (FEMA) First Appeal level decision concerning the Hurricane Wilma (FEMA-1609-DR-FL) PW-2700 fund deobligation in the amount of$11,172,272;the expenditure of additional funds for legal and engineering expenses; and approve all necessary budget amendments. Meeting Date: 9/9/2014 Prepared By Name: CrotteauKathynell Title: Legal Secretary,CAO Office Administration 8/28/2014 3:29:54 PM Approved By Name: TeachScott Title: Deputy County Attorney, County Attorney Date: 8/28/2014 4:01:17 PM Name:MarcellaJeanne Title: Executive Secretary, Transportation Planning Date: 8/28/2014 4:37:51 PM Name: FinnEd Title:Management/Budget Analyst, Senior,Transportation Engineering&Construction Management Date: 8/29/2014 10:26:36 AM Name:KlatzkowJeff Title: County Attorney, Date: 8/29/2014 10:51:43 AM Name: IsacksonMark Title: Director-Corp Financial and Mngmt Svs,Office of Management&Budget Date: 9/2/2014 8:57:50 AM Name: OchsLeo Packet Page-3136- 9/9/2014 16.K.3. Title: County Manager, County Managers Office ,^ Date: 9/2/2014 9:17:22 AM Packet Page-3137- U.S.Jet;art:nieac 9/9/2014 16.K.3. Region PI 3003 ChambleeThckcr R()ad Atlanta,Ga 30341 ,ze try4 1 . ;: ) FEMA August 1,2014 Mr. Bryan Koon, Director Florida Division of Emergency Management 2555 Shumard Oak Boulevard Tallahassee, Florida 32399-2100 Attention: Steven Hyatt Reference: FEMA-1609-DR-FL Collier County PA ID 021-99021-00 First Appeal, Project Worksheet 2700 Dear Mr. Koon: This is in response to Collier County's (Subgrantee) first appeal of Project Worksheet(PW) 2700. The Subgrantee has appealed the Federal Emergency Management Agency's (FEMA) disallowance of costs associated with renourishing sand on public beaches. The amount in dispute is $11,095,283.52. Background High winds and strong wave action during FEMA-1609-DR-FL(Wilma) in October 2005 caused erosion to nearly six miles of sand from Naples Beach. As a result of this damage, FEMA obligated PW 2700 version 0 to renourish 58,641 cubic yards (CY) of disaster-related sand lost on the county-maintained beach. The PW also included costs associated with dune repair, mobilization, demobilization, engineering and surveys. The estimate for PW 2700 version 0 was $3,381,940.54. FEMA subsequently processed PW 2700 versions 1 and 2 which did not modify the scope of work or related estimates, but revised the funding to account for the cost share increase granted for the disaster declaration. At the Grantee's and Subgrantee's request, FEMA later obligated PW 2700, version 3, on August,27, 2010,nearly five years after FEMA-1609-DR-FL (Wilma) was declared. This version captured a pro-rated amount of the total sand renourishment quantities that the Subgrantee attributes to FEMA-1609-DR-FL (Wilma). This increased the PW funding from $3,381,940.54 to $12,868,465.94. In addition to the FEMA-1609-DR-FL (Wilma) PW, the Grantee submitted final inspection PWs for FEMA-1393-DR-FL (Gabrielle) and FEMA-1602-DR-FL (Katrina)which likewise requested costs at the pro-rated amount of the 1 wwwfema.gov Packet Page-3138- 9/9/2014 16.K.3. total renourishment project. FEMA denied the final inspection amount for FEMA-1393-DR-FL (Gabrielle) and the Subgrantee appealed this denial. Due to permit requirements causing delays in the FEMA-1393-DR-FL (Gabrielle) renourishment, the Subgrantee performed a single beach renourishment project incorporating the PWs from FEMA-1393-DR-FL (Gabrielle),FEMA-1602-DR-FL (Katrina) and FEMA-1609- DR-FL (Wilma). Then, in draft final inspection reports, the Grantee pro-rated the costs across all three disasters. As stated above, when the costs were presented to FEMA for reimbursement, the cost overruns due to this pro-rated costs claimed for FEMA-1393-DR-FL (Gabrielle) were denied. The Subgrantee appealed this decision and FEMA denied both the first and second appeals. As the re-nourishment was completed through a combination of PWs across all three disasters, the second appeal also addressed all PWs associated with the renourishment project,to include PW 2700 for FEMA-1609-DR-FL (Wilma). The second appeal decision stated that"Given that the mainland and Marco Island renourishment projects included both eligible and ineligible work, and the fact that this response only affects the PWs under FEMA-1393-DR-FL, Regional PA staff should reexamine the costs funded by PWs under FEMA-1602-DR-FL and FEMA- 1609-DR-FL to deobligated duplicative environmental and turtle monitoring costs and to ensure FEMA reimburses only eligible sand replacement costs." In accordance with the second appeal decision's guidance, the Regional PA staff reviewed PW 2700, and in Version 61 disallowed $11,095,283.52 in costs, reducing the final cost to $1,773,192.42 in June 2012. This deobligation was the result of adjusting the scope of work back to the original 58,641 cubic yards (CY) of sand that was calculated in PW 2700 version 0 based upon pre- and post-storm surveys of Naples Beach. These surveys were conducted by the Subgrantee's engineering firm, Coastal Planning & Engineering, Inc. (CPE). This deobligation is the subject of this appeal. FEMA's rationale for determining that the original sand volumes as captured in the original PW versions were the eligible amounts of the disaster loss to be funded under the PW, and not the pro-rated amounts presented by the Grantee in the final inspections, was explained in the second appeal as follows: There is too much uncertainty about typical erosion before, between and after the events (Gabrielle, Katrina, and Wilma) for reliable use of this information to determine disaster damage. The sand volumes calculated for the eligible scopes of work are based on survey data that was available when the PWs were prepared and represent the most reliable pre- and post-storm profile data. The Applicant has not demonstrated that a survey of losses (from its consultant, Coastal Planning and Engineering (CPE)) over a nearly six year period is more accurate than the (unit cost) estimates prepared for the PWs. ' FEMA prepared PW 2700 versions 4 and 5 to capture administrative changes that did not modify the approved scope of work or cost estimate. 2 Packet Page-3139- 9/9/2014 16.K.3. Discussion The Grantee's first appeal letter presents four separate issues; each will be discussed and addressed separately. Issue 1 —FEMA has Not Correctly Determined the Amount of Eligible Replacement Sand In its appeal, the Subgrantee maintains that its consultant's calculations of sand loss already have taken the placement of yearly maintenance sand into account, and that FEMA has erred in not recognizing this fact. The Subgrantee maintains that the CPE engineering report presents evidence that hidden damages were present on the beaches that were not discovered until the pre- nourishment survey was done for the 2006 nourishment. As discussed in the above-mentioned second appeal, sand volume losses are to be based on pre- and post-storm surveys, as these surveys best represent the storm-related sand loss. FEMA recalculated the original sand volume loss to Naples Beach using the recommended unit cost method identified in the second appeal. The 58,641 CY loss, as identified in the approved PW scope of work for Naples Beach,was multiplied by $30.2381 per CY which represents the actual contract costs plus a unit cost for monitoring, resulting in the revised PW cost of$1,773,192.41. The Subgrantee's argument that FEMA did not take into account maintenance sand does not apply to this method of calculating the FEMA-eligible scope of work. FEMA's methods for calculating eligible sand loss resulting from a disaster declaration, as confirmed by the FEMA- 1393-DR-FL (Gabrielle) second appeal response, is to calculate sand loss based upon the pre- and post-storm profiles. The maintenance sand placed on the beach before the pre-storm profile or after the post-storm profile has no bearing on the calculations of eligible sand loss as a result of the damage event. The engineering report provided by CPE dated October 15,2012 and revised on January 23, 2013, states that the increase in its sand loss calculations is due to hidden damages, as the post storm survey measured the beach changes before full equilibration occurred. The claimed sand loss measured by CPE in the pre-and post-disaster surveys for Wilma was 58, 641 CY. The sand loss proposed in this report for FEMA-1609-DR-FL (Wilma) was 304,598 CY. However, the sand loss claimed for FEMA-1393-DR-FL (Gabrielle) and FEMA-1602-DR-FL (Katrina) appear to remain the same in the report produced after the second appeal response. In addition, as stated in the second appeal decision for FEMA-1393-DR-FL (Gabrielle), "These projects renourished the beaches to their design for the first time since original nourishment in 1996. While they did replace the eligible sand losses from the three disasters, they also replaced sand eroded from the beaches before,between and after the declared events, as well as sand placed on areas outside of the eligible projects." Therefore,the most reliable source of disaster related damages are the pre- and post-disaster surveys. Issue 2—FEMA has Not Afforded Proper Deference to the Subgrantee's Engineering Report In its appeal,the Subgrantee states its consultant's beach engineering report satisfied, in part, the environmental monitoring requirements imposed by the Florida Department of Environmental 3 Packet Page-3140- 9/9/2014 16.K.3. Protection(FDEP). The report then became a part of the State's permit,thus entitled to a higher degree of deference. FEMA,the Subgrantee claims, should be required to prove why the report is wrong, rather than tasking the Subgrantee to prove why the report is true. FEMA maintains that there is no conclusive evidence in the engineering report that the sand loss is storm-related, and that the report raises no substantive new issues than what was addressed and referred to in the previously discussed second appeal decision under FEMA-1393-DR-FL (Gabrielle). A Subgrantee's engineering report used for the purposes of documenting environmental monitoring compliance and obtaining permits, does not establish FEMA eligibility, but rather documents the Subgrantees plans for re-nourishment and monitoring. In addition,the documentation used to prepare the original PWs and establish the approved scope of work, which is sand loss demonstrated through pre- and post-storm beach profiles, was also provided by the Subgrantee's Engineering Reports. Also, the Subgrantee's pre-nourishment survey of June 2006 extended out to the 400 foot distance mark, while the November 2005 and all previous surveys extended out to the 800 foot distance mark. This inconsistency in surveying has not been explained. Issue 3 —FEMA is Improperly Holding the Subgrantee to the Initial Approved Scope Estimates In its appeal,the Subgrantee presents information as to why it believes FEMA returned to the original version 0 project costs and scope. One issue raised was that the PW stated that the increased amount of sand would be ineligible because it represented an ineligible scope of work change. When FEMA obligates a PW, it contains an approved Scope of Work for which the Subgrantee can seek reimbursement of actual costs. Importantly,the approved scope of work is not an estimate, but rather the cost to complete the approved scope of work is estimated. If, as work progresses, a change in scope of work is needed,the Subgrantee must demonstrate that the change is due to storm-related damages in order to make the work eligible for FEMA funding. As such, changes in scope of work should be requested and evaluated by FEMA prior to the work being done, so that eligibility can be determined and proper environmental compliance be completed and documented. For this appeal, however,the issue is not necessarily the timing of the request, but the fact that the work has not been demonstrated to be storm-related. Inclusion of this ineligible sand in the original scope of work constitutes an ineligible scope of work change. Issue 4—Section 705(c) of the Stafford Act Precludes FEMA's Deobligations Section 705(c) of the Stafford Act provides that 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." In its appeal, the Subgrantee asserts that the Subgrantee met these three criteria. FEMA obligated PW 2700 Version 3 for FEMA-1609-DR-FL (Wilma) on August 27, 2010, to increase the PW funding from $3,381,940.54 to $12,868,475.94 as a result of the Subgrantee's 4 Packet Page-3141- 9/9/2014 16.K3. method of pro-rating the project costs across the three disasters and its claim that there was an increased sand loss due to hidden damages. The second appeal for FEMA-1393-DR-FL (Gabrielle) was dated May 14, 2012,which required FEMA to revisit PW 2700 for FEMA-1609- DR-FL (Wilma) and fund only the eligible sand loss resulting from the declared event as documented by pre- and post-storm surveys. As a result of that review,FEMA completed the deobligation action for FEMA-1609-DR-FL (Wilma) in PW 2700, in version 6 on June 21, 2012. The increase in work is not eligible, which makes the costs for the ineligible work inherently not reasonable. Section 705(c) of the Stafford Act is thus inapplicable. Dune Repair, Mobilization and Demoblilization, Engineering and Survey Costs FEMA has reviewed all the documentation provided with the appeal and our PW files. Based upon the information,FEMA has determined that the pre- and post-storm surveys conducted by the Subgrantee's engineering firm, CPE,best represent the storm-related sand losses eligible under PW 2700. In reviewing PW 2700 version 6, FEMA reduced the eligible costs to include the 58,641 CY in sand loss resulting from FEMA-1609-DR-FL (Wilma) and used the unit cost identified in FEMA's second appeal response for FEMA-1393-DR-FL (Gabrielle), which is $30.2381. The unit cost includes the contract costs for sand, as well as a unit cost to cover the force account monitoring costs. The method for deriving this cost is described in the second appeal for FEMA-1393-DR-FL (Gabrielle). The PW 2700 version 6 also disallowed the costs for dune repair, mobilization and demoblilization, engineering and survey costs which had been allowed in version 0 of PW 2700. As these costs were eligible, FEMA will reinstate these costs as provided in version 0, as depicted below: PW 2700 Collier County FEMA-1609-DR-FL Item Measure Unit Unit Cost Total Sand replacement CY 58641 $30.23812* $ 1,773,192.42 Dune repair LF 21850 $50 $ 1,092,500.00 Mob and de-mob LS 1 $506,273 $ 506,273.00 Engineering LS 1 $171,982.68 $ 171,982.68 Survey LS 1 $83,000 $ 83,000.00 Total $ 3,626,948.10 Conclusion Based on all available information,the appeal is partially approved. FEMA will prepare a version to PW 2700 to reinstate $1,853,755.68 in costs for dune restoration, engineering, mobilization and demobilization and surveys at the original obligated amount. The Subgrantee may appeal this determination to the Assistant Administrator,Recovery Directorate, at FEMA Headquarters pursuant to 44 CFR § 206.206, Appeals. If the Subgrantee elects to file such a second appeal, the appeal must: (1) contain documented justification 2 This unit cost was taken from FEMA's second appeal response for FEMA-1393-DR-FL(Gabrielle),which included the force account monitoring costs into the unit cost. The number of units remains the same as PW 2700 version 0. 5 Packet Page-3142- 9/9/2014 16.K.3. supporting the Subgrantee's position, (2) specify the monetary figure in dispute, and (3) cite the provisions in federal law,regulation, or policy with which the Subgrantee believes the initial action was inconsistent. A second appeal must be submitted to the Florida Division of Emergency Management(FLDEM) by the Subgrantee within 60 days of the Subgrantee's receipt of this letter. FLDEM transmittal of that appeal, with recommendation, is required to be submitted to my office within 60 days of your receipt of the Subgrantee's letter. My office will transmit the second appeal to FEMA headquarters. If you have questions or need additional information,please contact Mr. Jesse F. Munoz, CEM, Director, Recovery Division, at(770) 220-5300. ely, e / for lur• A. tiro Andrew V elasquez III Acting Regional Administrator 6 Packet Page-3143- 9/9/2014 16.K.3. BAI ER.,DONELSON !920 MASSACHUSETTS AVE,N.W. SUITE 900 BEARMAN,CALDWELL&,BERKOWITZ, PC WASHINGTON,D.C.20001 PHONE: 202.508.3425 FAX: 202.222.2225 ' 9@@LTTOBAKERDQN.ftSON.COM www.bokerdonebon.com ATTORNEY-CLIENT PRIVILEGED MEMORANDUM TO: Jeffrey A.Klatzkow County Attorney Collier County,Florida FROM: Ernest B.Abbott Of Counsel Baker Donelson DATE: August 26,2014 RE: Recommendation that Collier County File a Second Appeal of FEMA's Disallowance of Reimbursement of Beach Restoration Costs This memorandum summarizes my recommendation that Collier County file a"Second Appeal" from FEMA's First Appeal Decision of August 1,2014 denying reimbursement of$9.2 million of the cost incurred by Collier County to restore its engineered beaches after Hurricanes Katrina and Wilma. The First Appeal did restore funding of$1.8 million of eligible soft costs(such as engineering,survey,and dune repair). Note that,pursuant to FEMA's regulation governing appeals submission,if the County accepts my recommendation to file a Second Appeal,this complete package will need to be submitted to the Florida Department of Emergency Management no later than September 30. The primary rationale FEMA gave for disallowing$9.2 million was that FEMA concluded that only 136,095 cubic yards of sand had been lost from the County's beaches after Hurricanes Katrina and Wilma. This was the difference between a sand survey performed in 2004(the most recent pre-Katina survey)and a sand survey performed in November 2005,and FEMA concluded that"the most reliable source of disaster related damages are the pre-and post-disaster surveys." Collier County presented evidence in the First Appeal,and will submit additional engineering evidence on Second Appeal,that the immediate post-Wilma survey had been performed before the beach had recompressed after the disaster,and there are a number of surveys performed less than 6 months after Wilma which measured 412,690 cubic yards of sand loss after Hurricanes Katrina and Wilma. This additional measured sand loss accounts for$8.2 million of the disputed Packet Page -3144- 9/9/2014 16.K.3. MEMORANDUM Collier County August 26,2014 Page 2 costs. The remainder of the amount at issue is accounted by FEMA's failure to include all of the environmental monitoring costs required as part of the beach restoration project. We believe that,on Second Appeal,Collier County has a reasonable chance of receiving significantly increased reimbursement. • FEMA Region IV appeared not to have carefully examined all of the engineering evidence provided by Collier County-and even invited the County to provide further explanation of the difference sand surveys performed. Our experience on Second Appeal is that FEMA reviews documentation submitted with far greater care. • We understand that the County plans to provide FEMA with additional engineering support,from engineers who had not been involved in the Project, demonstrating that the sand loss suffered by the County was far larger than the amount approved by FEMA. • The position taken by FEMA on the First Appeal provides no explanation as to how the survey results in November 2005 were so dramatically different than those four months later. We will demonstrate that there were no events between the two surveys that could have accounted for the difference. • The First Appeal decision's reinstatement of$1.8 million was explained as correction of a FEMA error,since the$1.8 million in costs were clearly eligible under FEMA policies. filing of an appeal should not jeopardize this recovery. • FEMA has just implemented a new Public Assistance Appeals Branch within its Headquarters office.This Branch is specifically tasked with review of FEMA's First Appeal decisions and our experience has shown that they take this responsibility very seriously. We have a good working relationship with the Branch Chief and would request an in person discussion once the Second Appeal is filed. We believe that the legal costs of preparing and filing a Second Appeal will cost less than $50,000. The amount at issue is$9.2 million. Because the potential recovery on appeal dwarfs the cost of pursuing an appeal,I would recommend that the County authorize the preparation and filing of a Second Appeal in this matter. Please do not hesitate to call if you have any questions. Cc: Scott R.Teach,Deputy County Attorney Gary McAlpin,Director,Coastal Zone Management Packet Page-3145-