In the Matter of ROMAN CATHOLIC CHURCH

July 9, 2018

CBCA 5549-FEMA

In the Matter of ROMAN CATHOLIC CHURCH

OF THE ARCHDIOCESE OF NEW ORLEANS

Michael G. Gaffney of Gaffney & Gaffney, Metairie, LA, counsel for Applicant.

Mark S. Riley, Deputy Director, and Carla Richard, Appeals Manager, Governor’s

Office of Homeland Security and Emergency Preparedness, Baton Rouge, LA, appearing for

Grantee.

Michelle Buckalew, Office of Chief Counsel, Federal Emergency Management

Agency, Department of Homeland Security, Washington, DC; and John Dimos, Office of

Chief Counsel, Federal Emergency Management Agency, Department of Homeland Security,

Baton Rouge, LA, counsel for Federal Emergency Management Agency.

Before the Arbitration Panel consisting of Board Judges BEARDSLEY, LESTER, and

RUSSELL.

As Sister Mary Lou Specha describes it, Hotel Hope, a non-profit organization that

she leads, has extensive plans for the reuse of a two-story building, formerly known as St.

Matthias Convent, located in the Broadmoor neighborhood in New Orleans, Louisiana.1

1

In a prior decision, we mistakenly referred to the convent building as “Hotel

Hope.” See Roman Catholic Church of the Archdiocese of New Orleans, CBCA

5549-FEMA, 17-1 BCA ¶ 36,892, at 179,784-85. In reality, Hotel Hope is a non-profit entity

that would like to take residency within the building, rather than the current name of the

building itself.

CBCA 5549-FEMA

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Before Hurricane Katrina devastated the area in 2005, Catholic Charities had used the

building as a homeless shelter for women. Hurricane Katrina caused severe damage to the

building, and, for the past thirteen years, the building was left unused and essentially

unattended but for some minor repair and roofing work. Hotel Hope now intends to use the

building as a shelter that would provide temporary housing and a safe space for women and

their children who are in need of shelter, as well as job training, child care, and other services

designed to assist those residents’ transition towards self-sufficiency in permanent

residences.

Hotel Hope has already obtained from the Roman Catholic Church of the Archdiocese

of New Orleans (ANO), which owns the convent, a lease that would allow Hotel Hope to use

the building as a shelter into the foreseeable future. Nevertheless, the damage to the

long-vacant building is severe, and it will take a large infusion of funds to restore the

building to a habitable state. The ANO, through this arbitration, is seeking to obtain at least

some of those funds through entitlements authorized by the Robert T. Stafford Disaster

Relief and Emergency Assistance Act (Stafford Act), 42 U.S.C. §§ 5121-5207 (2006).

FEMA does not dispute that the ANO, which is sponsoring the request for funding

and this arbitration, may recover certain repair costs for the building through a grant under

the Stafford Act. There is a dispute, however, as to the scope of funding that should be

available for this project. Under FEMA’s regulations, if the cost of repairing the damage to

the building caused by Hurricane Katrina exceeds fifty percent of the cost of replacing the

building, the ANO would be entitled to recover the replacement costs. The ANO believes

that it has met the requirements to allow it to recover the full cost of replacing the facility.

The ANO submitted a request for arbitration (RFA) to the Board pursuant to section

601 of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat.

115, 164 (2009), and its implementing regulation, 44 CFR 206.209 (2017), and we conducted

a four-day hearing during which the parties presented testimony in support of their positions,

followed by post-hearing briefing on specific topics. As FEMA recognized during the

hearing, there is no question as to the desirability of the project that Hotel Hope is pursuing

or its value to the community that it will serve. Yet, we cannot allow the merits of the

proposed project to affect our interpretation or application of the rules applicable to disaster

relief.

In the end, based upon the evidence before us, we cannot currently find that the repair

costs for damage shown to be caused by Hurricane Katrina exceed fifty percent of

replacement costs, meaning that we cannot award the ANO its full calculated replacement

costs. Nevertheless, because there were several errors in FEMA’s original cost inputs, and

because there are documents supportive of costs that we cannot consider because they were

CBCA 5549-FEMA

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not included in the record before us, we remand this matter to FEMA for further factual

investigation and analysis regarding the ANO’s ability to recover certain repair costs, in

accordance with our guidance below, after which it should make a new comparison of repairversus-replacement costs.

Background

The two-story building at issue here is configured in an L-shape, with 6509 square feet

of internal space. It was constructed around 1960 as a convent.

Beginning in March 1984, the building was used as a homeless shelter to house

women in crisis and their children, which was called the Crisis and Residential Emergency

(CARE) Center and run by Catholic Charities. Residents in the CARE Center would stay for

up to thirty days.

On August 29, 2005, six feet of sea water flooded the first floor of the building as a

result of Hurricane Katrina. The parties agree that the first floor of the facility suffered

significant damage as a result of the inundation of the brackish water. The ANO also

contends that winds from Hurricane Katrina peeled the roof from the building, allowing

rainwater to cause extensive damage to the roof insulation, ceiling, and floors on the second

floor. FEMA maintains that the second floor sustained only minor damage.

FEMA received its first request for disaster assistance associated with the convent in

2005, soon after Katrina. That request related solely to the contents of the building, which

Catholic Charities asserted were damaged by the hurricane. FEMA created its first project

worksheet (PW) for this building – PW-11678, version 0 (V-0) – at that time, but it only

addressed the contents of the first floor of the building (including furniture), for which

FEMA, on October 12, 2006, obligated $65,765.22. When developing V-0, FEMA toured

the convent building and, in its written V-0 report, stated that “[t]he second level [of the

convent building] was not damaged by Hurricane Katrina,” although the purpose of the

written V-0 PW was “to capture contents damaged as a result of flooding from Hurricane

Katrina to the 6,250 [square foot] Care Center.”

In 2010, five years after Hurricane Katrina, Hotel Hope was created as a non-profit

entity with the goal of creating a shelter for women and children, along with job training and

other support services for residents. At some point soon thereafter, the ANO leased the

building to Hotel Hope for the extended future. Hotel Hope wants to restore the building and

use it for purposes very similar to those in place when the Catholic Charities’ CARE Center

was operating there in 2005. Although the ANO has an interest in Hotel Hope, which is run

by Sister Mary Lou Specha, the ANO has retained ownership of the building.

CBCA 5549-FEMA

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On April 2, 2014, nine years after Hurricane Katrina struck, the ANO submitted its

first request for disaster assistance to repair damage to the building itself. That request

resulted in FEMA’s development and obligation in 2015 of version 5 (V-5) of PW-11678,

which reflected FEMA’s initial cost estimate to repair the damage that Katrina caused to the

building. After considerable discussions between FEMA, the ANO, the Governor’s Office

of Homeland Security and Environmental Preparedness (GOHSEP), and the ANO’s architect,

FEMA issued version 6 (V-6) of PW-11678, which reflected FEMA’s updated cost estimate

of $407,147.19 (not including costs associated with mandatory state- and city-required

building code upgrades) to repair the disaster-related damage to the building and its cost

estimate for replacement of the entire facility of $1,081,511.81. FEMA denied the ANO’s

request for replacement costs because the repair-cost-versus-replacement-cost ratio was less

than fifty percent, but obligated funding for repairs, including reimbursable code upgrades,

of $913,331.92. V-6 is the version of the PW before the Board for consideration.

The ANO engaged a local architectural firm to assess and quantify the damage caused

by Hurricane Katrina to the building. That firm ultimately estimated a cost to repair the

damage that the hurricane caused to the facility of $997,051 and, in addition, estimated a cost

to replace the facility of $1,572,112.89. GOHSEP prepared its own analysis of the cost to

repair the disaster damage, which identified a repair cost of $997,220, and did not question

FEMA’s replacement cost estimate.

On November 18, 2016, the ANO submitted a twenty-two-page RFA to the Board,

requesting that an arbitration panel find that the cost of the repairs necessary to restore Hotel

Hope to its pre-Katrina condition is greater than fifty percent of the replacement cost of the

building, which would entitle the ANO to a public assistance grant in the amount of the

building’s replacement cost rather than simply the cost of repair. In the RFA, the ANO

identified what it described as errors in FEMA’s analysis of costs, alleging that, in

conducting the fifty-percent analysis, FEMA improperly applied specific requirements of its

Cost Estimating Format (CEF) for Large Projects Instructional Guide and its CEF Standard

Operating Procedure. In addition, the ANO described the manner in which FEMA allegedly

had improperly estimated the cost of a proposed cost savings project in particular rooms in

Hotel Hope rather than (as the ANO alleged FEMA should have done) estimating the cost

of disaster damage; had misapplied its CEF escalation factor in calculating disaster damage;

had assumed that the Louisiana Office of State Fire Marshal would waive certain life-safety

codes in any repair of the homeless shelter; had determined that the ANO and GOHSEP had

intermingled “union shop” and “open shop” labor rates in an inconsistent manner in their

repair and replacement estimates; had failed to recognize certain costs associated with

complying with the Americans with Disabilities Act (ADA); had misapplied certain building

codes in its estimates; had failed to take into account increased repair costs required under

the National Historic Preservation Act and the Department of the Interior’s Standards for the

CBCA 5549-FEMA

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Treatment of Historic Properties; and had determined that particular damages were not

caused by Hurricane Katrina, but, instead, by other factors. Accompanying the RFA were

fifteen exhibits, which included, among other things, cost estimates from the local

architectural firm that the ANO used and from GOHSEP, a copy of the relevant project

worksheet (PW 11678, V-6) identifying the costs at issue, and a side-by-side comparison of

the FEMA and GOHSEP CEFs.

We subsequently denied a motion that FEMA filed seeking to dismiss the RFA, see

Roman Catholic Church, 17-1 BCA at 179,786, and conducted a four-day hearing at which

the parties presented witnesses to testify about the scope of damage to the convent building.

Unfortunately, neither party was able to present any witnesses who had first-hand knowledge

of the building’s condition either before or within a few years after Hurricane Katrina hit.

Little repair work had been performed on the building as of the date of the hearing, beyond

the removal of a boiler, removal of cabinets and appliances, and removal of mud and

sediment that entered the facility.

Discussion

Standing

Pursuant to the Stafford Act, the President has the authority to make public assistance

disaster grants “to a person that owns or operates a private nonprofit facility damaged or

destroyed by a major disaster for the repair, reconstruction, or replacement of the facility”

on the basis of “the design of the facility as the facility existed immediately before the major

disaster” and “in conformity with codes, specifications, and standards . . . applicable at the

time at which the disaster occurred.” 42 U.S.C. §§ 5172(a)(1)(B), (e)(1)(A) (2012). FEMA

does not dispute that the building is an eligible nonprofit facility damaged by Hurricane

Katrina, that the ANO owns that eligible facility, or that the ANO is an eligible applicant for

public assistance funding. During the arbitration proceeding, though, FEMA repeatedly

raised questions about the identity of the true party pursuing arbitration, suggesting that it is

Hotel Hope, which did not exist when Katrina struck and lacks standing to pursue this matter,

that is the entity pushing for recovery here. See Public Assistance Guide (FEMA-322) (PA

Guide) at 25 (Oct. 1999) (applicant may be reimbursed for work to repair damaged property

only if the work was “the legal responsibility of the applicant at the time of the disaster”).

Although it is clear that Hotel Hope has a vested interest in, has provided the ANO with

extensive assistance during, and is likely the driving force behind this arbitration, the ANO,

not Hotel Hope, is the applicant, and Hotel Hope is acting in this arbitration only at the

behest of and on behalf of the ANO. To the extent that FEMA has raised a challenge to the

applicant’s standing, it is denied.

CBCA 5549-FEMA

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Documents Introduced During and After the Hearing

Pursuant to 44 CFR 206.209, an applicant is to include in the RFA that it submits to

the Board “all documentation supporting the position of the applicant” upon which the

applicant will rely during the arbitration. Id. 206.209(e)(1). It may include “supporting

documentation not previously included in the project worksheet or the application to FEMA,”

and “[t]here is no limit on the amount of documentation that may be provided.” 74 Fed. Reg.

44761, 44763 (Aug. 31, 2009). There is no need to limit the submission to documents

previously presented to FEMA because, in this type of arbitration, we are not deferentially

reviewing FEMA’s decision for abuse of discretion, but instead review matters de novo

without deference to FEMA’s prior findings. Bay St. Louis-Waveland School District,

CBCA 1739-FEMA, 10-1 BCA ¶ 34,335, at 169,577 (2009).

During the hearing, the ANO brought to the Board’s attention and sought to introduce

several documents – invoices supporting costs for (among other things) a boiler and roofing

work, an old architectural drawing of the property, and documents from the files of the City

of New Orleans addressing the building’s occupancy code – that were not previously

included in the ANO’s RFA, but that supported its case. We marked those documents as

Hearing Exhibits 5, 9, and 10, but deferred ruling on whether they would be admitted into

the record. FEMA, citing to 44 CFR 206.209(h)(3), objects to the Board’s acceptance of any

of the documents that the ANO attempted to introduce at the hearing, as well as additional

documents dealing with an occupancy code issue that the ANO discovered in the files of the

City of New Orleans after the hearing and attached to its post-hearing brief.

FEMA’s regulations governing these arbitration proceedings provide that a party,

when presenting its case at a hearing, may only “reference documents [previously] submitted

pursuant to paragraph [206.209(e)]” and “may not provide additional paper submissions at

the hearing.” 44 CFR 206.209(h)(3). Yet, the same regulations also allow the arbitration

panel, in its discretion, to “request additional materials from either or both parties,” as well

as to seek input from expert witnesses. Id. For reasons that will become clear later in this

decision, we exercise our discretion to accept these documents, as it will not prejudice

FEMA. With regard to the invoices, we review all matters de novo, making prior review by

FEMA not of absolute importance, and it was clear at the hearing that the invoices were

authentic and that FEMA did not seriously question that they represented actual incurred

costs. The architectural drawing is similarly authentic. With regard to the documents from

the City of New Orleans, FEMA will have an opportunity to consider them when it prepares

a new project worksheet.

CBCA 5549-FEMA

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The ANO’s Request for Replacement, Rather Than Repair, Costs

The ANO asks us to find that it is entitled to reimbursement of the full replacement

cost of the building, rather than merely the costs of repairing disaster-related damage in the

facility.

Under FEMA’s regulations implementing the Stafford Act, an applicant is eligible for

reimbursement of the costs of replacing, rather than merely repairing, a damaged facility if

the cost of repairing the disaster-damaged elements of that facility to their “predisaster

condition” exceed fifty percent of the cost of facility replacement:

(1)

A facility is considered repairable when disaster damages do not exceed

50 percent of the cost of replacing a facility to its predisaster condition,

and it is feasible to repair the facility so that it can perform the function

for which it was being used as well as it did immediately prior to the

disaster.

(2)

If a damaged facility is not repairable in accordance with paragraph

(f)(1) of this section, approved restorative work may include

replacement of the facility.

44 CFR 206.226(f). In its October 1999 PA Guide, FEMA further defines the manner in

which it calculates repair versus replacement costs in what it calls the “50 Percent Rule”:

Repair vs. Replacement (50 Percent Rule)

FEMA will restore an eligible facility to its pre-disaster design. Restoration

is divided into two categories: repair or replacement. If a facility is damaged

to the point where the applicant thinks the facility should be replaced rather

than repaired, the following calculation, known as the “50 Percent Rule,”

should be used to determine whether replacement is eligible:

IF

Repair Cost

Replacement Cost

< 50%

THEN only the repair cost is

eligible

IF

Repair Cost

Replacement Cost

> 50%

THEN the replacement cost

is eligible

PA Guide at 28-29.

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In applying the “50 Percent Rule,” the ANO begins with FEMA’s V-6 figures for

pre-upgrade repair cost ($407,147.19) and replacement cost ($1,081.511.81), placing them

respectively in the numerator and denominator positions, and then adding additional costs

to the repair cost numerator that it contends were incorrectly removed or reduced in FEMA’s

calculations. Viewing FEMA’s $1,081,511.81 replacement cost denominator as a fixed

number, the ANO argues that, if it can show that repair costs will exceed $540,755.91 (or

fifty percent of the stipulated replacement cost amount), the ANO will have shown

entitlement to replacement cost under the “50 Percent Rule.” The problem with the ANO’s

theory is that, because the ANO’s approach would result in something other than an “apples

to apples” comparison of costs, FEMA’s replacement cost estimate cannot be the static

number that the ANO suggests. Both the repair and replacement cost estimates are equally

dependent upon the cost of materials that will be used in the project as FEMA identified and

input them when creating its cost calculations. As an example, the building walls are made

of plaster placed on horsehair. In creating its repair and replacement cost estimates, FEMA

elected to estimate the cost of gypsum board walls, which it viewed as an adequate substitute

for the existing plaster-on-horsehair walls. If, as the ANO argues in this arbitration, it is

entitled to repair the existing walls using the same type of plaster-on-horsehair materials that

currently exist, FEMA’s repair cost estimate would necessarily increase because plaster on

horsehair is significantly more expensive than gypsum board. Yet FEMA, to permit an

“apples to apples” comparison, used gypsum board in both its repair and replacement cost

calculations. If we were to increase FEMA’s repair cost estimate to account for a switch

from gypsum board to plaster, we similarly would have to increase the replacement cost

calculation in the same manner. See, e.g., Transcript at 4-167 (testimony of Eddie Williams,

Infrastructural Branch Director, Louisiana Recovery Office, FEMA: “If we were to include

plaster in the repair, then we would have to reciprocate that into the replacement and it

actually increases the replacement cost that you see here.”). We must treat FEMA’s

replacement cost calculation as a number as susceptible to fluctuation, depending upon

changes to the types and costs of materials that were used to create the calculation, as is the

repair cost calculation.

Given that FEMA’s replacement cost calculation is not an unbending fixed number,

and in light of the manner in which Hurricane Katrina damaged this particular building, we

cannot find, based upon the evidence presented during the arbitration, that the cost of

repairing the disaster-damaged elements of the facility would be more than fifty percent of

the facility’s replacement cost. The ANO’s main factual argument in support of meeting the

“50 Percent Rule” is that Katrina caused serious water damage to both the first and second

floors of the building – the first floor by flood waters, and the second floor by rainwater that

seeped through a damaged roof and left, according to the ANO, two inches of water on the

second floor. There is no question, and FEMA does not contest, that Katrina caused

significant damage to the first floor, and FEMA has authorized the repair/replacement of

CBCA 5549-FEMA

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walls, doors, and other aspects of rooms on the first floor. For the second floor, though, there

is no contemporaneous evidence of significant damage from Katrina, other than some roofing

damage that was quickly fixed. Although it is clear that, by 2014, the second floor had been

seriously damaged by water and weather, no witnesses with first-hand knowledge testified

about, and no contemporaneous photographs showed, how Katrina caused any such damage

in 2005. As FEMA indicated during the hearing, there have been at least sixty-two serious

intervening weather events causing heavy rains in New Orleans since Hurricane Katrina.

The only photographs in the record showing water damage on the second floor of the

building were taken in 2015, ten years after Katrina hit. The only contemporaneous

post-Katrina documentation – FEMA’s PW-11678, V-0, from October 2006 – expressly

stated that there was no damage to the second floor.2 We cannot find that second floor water

damage was caused by Katrina, and, without being able to include second-floor repair costs

in the disaster-related repair cost numerator, the repair-cost/replacement-cost calculation will

not surpass the fifty-percent mark in the circumstances here.

The ANO argues that it might be able to hit the fifty-percent target if we add the cost

of complying with current safety codes to its repair cost. In applying the “50 Percent Rule,”

though, FEMA includes in the repair cost “only those repairs associated with the damaged

components” and not “upgrades triggered by codes and standards, demolition, site work, or

applicable project management costs, even though such costs may be eligible for public

assistance.” PA Guide at 29; see FEMA Response & Recovery Directorate Policy No.

9524.4, “The Eligibility of Facilities for Replacement Under 44 CFR 206.226(d)(1) (Sept.

24, 1998) (repair cost portion of equation does “not includ[e] code triggered upgrades”).

Conversely, the replacement cost portion of the calculation “includes the costs for all work

necessary to provide a new facility of the same size or design capacity and function as the

damaged facility in accordance with current codes and standards.” PA Guide at 29. Because

upgrade costs triggered, or necessitated, by current code requirements are excluded from the

repair cost but not the replacement cost portion of the “50 Percent Rule” calculation, they do

not assist the ANO in getting the cost of its repairs to the fifty-percent mark.

2

Further, two of FEMA’s witnesses noted that, when they visited the building in

2015, there were shallow pools of standing water on the second floor. Transcript at 4-173,

-174, -181. Damage from water still standing in 2015 could not have been caused by

Hurricane Katrina unless, over the course of the ten years since the event, the ANO had

failed to take proper corrective action to stop roof leakages, a failure that would preclude the

applicant’s recovery for the resulting damage. City of New Orleans, CBCA 5684-FEMA,

18-1 BCA ¶ 37,005, at 180,198-99; see 44 CFR 206.223(e) (FEMA will not provide

assistance “for damages caused by [the applicant’s] own negligence”).

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Although we are not able to find in the ANO’s favor on the current record, we believe

that further development of the record is appropriate. As discussed below, we find errors that

may affect both the repair and replacement cost computations, but others that would appear

to increase only the repair cost computation. In such circumstances, we believe it appropriate

to direct FEMA to allow the ANO to supplement its written submission with additional cost

information, to the extent that it wishes to do so, and to issue a new project worksheet that

incorporates the directions that we provide below regarding specific repair cost calculations

and reconsiders whether, applying revised cost figures, the ANO’s repair cost exceeds fifty

percent of the replacement cost.

FEMA’s Challenges to the ANO’s Repair Costs

I.

Code Triggers

Normally, repair costs to restore disaster-damaged elements are reimbursed for work

necessary to return the facilities to “the design of such facilities as they existed immediately

prior to the disaster.” 44 CFR 206.226. Nevertheless, although excluded from the “50

Percent Rule” analysis, certain costs required to upgrade disaster-damaged elements of a

building may be reimbursed in certain instances as part of a facility’s repair cost, even though

it “change[s] the predisaster construction of [the] facility,” if a local standard or code triggers

the mandatory upgrade. Id. 206.226(d). Reimbursement for such triggered costs is available

only if, among other things, the local code or standard is “appropriate to the predisaster use

of the facility.” Id. 206.226(d)(2); see State of Louisiana, Facility Planning and Control,

CBCA 1768-FEMA, 10-1 BCA ¶ 34,452, at 169,993 (“The object of repair is to enable the

facility to perform the function for which it was being used as well as it did immediately

prior to the disaster.”).

There has been a great deal of confusion in these proceedings about code triggers.

FEMA originally argued that Hotel Hope intends to change the use of the facility from a

convent to a homeless shelter and that, since it did not intend to restore the building to use

as a convent, no code triggers were reimbursable. For much of this proceeding, neither the

ANO nor the Board understood FEMA’s argument, given that, when Katrina struck in 2005,

Catholic Charities had been using the building as a homeless shelter for more than twenty

years. FEMA represented that there was no evidence that Catholic Charities had ever

obtained a certificate of occupancy converting the building’s use from a convent residence

to a homeless shelter and that, therefore, the use of the building from 1984 to 2005 was

illegal. Because the last legal use of the building was as a residence for members of a

religious community, the ANO would need to be restoring the building to that use for code

triggers to come into play.

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During the arbitration, FEMA was able to clarify what it really meant: that the ANO

will be changing the occupancy classification of the building and that it is the change in

classification, rather than the change in the type of resident, that will trigger mandatory code

upgrades. The building code for the City of New Orleans is, with certain amendments, the

International Building Code (IBC), which establishes the code requirements for construction.

Section 310 of the IBC identifies the residential Group R occupancy requirements and

includes everything from a boarding house, to a congregate living facility, to a dormitory, to

a group home, to a place for personal care services, to transient housing. Within the Group

R, there are sub-occupancies: Type R-1 deals with transient housing, such as “[b]oarding

houses (transient) with more than 10 occupants,” while Type R-2 is for nontransient housing,

such as convents and “[b]oarding houses (nontransient) with more than 16 residents.”

Similarly, the National Fire Protection Association (NFPA) Life Safety Code, 1981 edition,

made applicable through the Louisiana Code, identifies several occupancy categories,

including IBC R-1, which applies to “Hotels, Motels (transient use),” and IBC R-2,

applicable to “Dormitories” and “Apartments.”

We understand that, when St. Matthias Convent was first built and occupied by a

group of religious community members, it received a Type R-2 occupancy classification.

FEMA believes that, when the building’s use was converted to a homeless shelter in 1984,

Catholic Charities should have obtained, but did not obtain, a change in the occupancy

classification to Type R-1. Because Hotel Hope will use the building as a homeless shelter,

FEMA asserts, it must be classified as Type R-1. Under article 502 of the 1980 City of New

Orleans Building Code, no change in “the use of any building which would place the

building in a different Group of Occupancy” can be made “unless such building is made to

comply with the minimum requirements of this Code for that Group.” FEMA argues that,

because code upgrades necessary to use the facility as a Type R-1 shelter are triggered only

because there is a change in the building’s occupancy classification, any mandatory code

upgrades are not a result of Katrina, but instead are required because Hotel Hope is changing

the occupancy classification from R-2 to R-1.

When the ANO realized during the hearing what FEMA’s argument was, it attempted

to obtain documents from the City of New Orleans to establish that Catholic Charities’

twenty-one-year use of the building as a homeless shelter was compliant with city

requirements. The only documents that the ANO was able to gather in the short time allotted

were documents showing City inspections or permit approvals while the building was being

used as a shelter. Attached to the ANO’s post-hearing brief were additional similar

documents indicating that the building was approved as a home for the “aged, infirm, [and]

indigent,” along with information that it says it was able to obtain after the hearing. It is

unclear the extent to which there may be other public records in existence, though not in our

record, from the period when the building began to be used as a shelter.

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The record here is less than clear as to what occupancy classification the building

currently has or whether, since Catholic Charities (as we understand it) provided shelter to

residents for extended periods of time (rather than single overnight stays), the proper

occupancy classification differs from its original R-2 categorization. We cannot rely on new

information in the ANO’s post-hearing brief without providing FEMA a full opportunity to

evaluate and respond to it, and, even then, the information about the proper occupancy

classification for the building, including what it should be when Hotel Hope occupies it, is

uncertain. In these circumstances, we remand this issue to FEMA for further evaluation and

development. We recognize that, ultimately, the ANO, as the applicant, has the burden of

proving its claims, City of Kenner, CBCA 4086-FEMA, 15-1 BCA ¶ 35,875, at 175,389, but

we cannot fault the ANO for not understanding FEMA’s position prior to the hearing.

Although FEMA has argued that, even if Hotel Hope will be using the currently existing

occupancy classification for the building (whatever that is), there may be no code-triggered

upgrades, we think it more appropriate to request a more thoughtful and thoroughly

developed record on this issue than to guess at its impact.

II.

Specific Repair Costs

Items 1 and 2:3 Asphalt (Pitched) Roof and Flat Roof Repairs. FEMA has obligated

$10,944 that the ANO has already incurred for repairs to the building’s asphalt (pitched) roof

and $2241.69 for repairs to a flat roof on the back of the building. Two invoices that the

ANO submitted in support of these roof repair costs show payment by the ANO of $30,630

and $11,300, respectively, and the ANO seeks the unreimbursed portions of these invoices.

However, the roofing invoices were not just for the building, but also included work on other

ANO buildings. See FEMA Exhibit 24. The ANO presented no evidence allocating the

costs that were for the roof work at the building at issue here or segregating them from those

costs applicable to roof work on the other listed buildings. FEMA made its own adjustment,

attempting to create a reasonable allocation of the amounts, Transcript at 3-122, and we find

no basis for adjusting that estimate. We accept FEMA’s estimates.

Item 3: Plaster Walls. The building was constructed with Portland cement plaster

walls with a thickness of two-and-a-half inches. Those walls – on both the first and second

floors of the building – extend nine feet and three inches from floor to ceiling, framed out

with 1/8th-inch deep sixteen-gauge metal studs at sixteen inches on center with an expanded

metal lath on both sides. There is no cavity inside these walls, but electrical wiring is

concealed in recessed junction boxes.

3

Our reference to item numbers here and later in this decision matches the

numbering contained in Hearing Exhibit 1.1.

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FEMA proposes to replace these walls with 5/8ths gypsum board, which the ANO

contends is not of equivalent quality to the existing walls. The ANO finds the current plaster

walls of far superior durability, strength, rigidity, abrasion resistance, and sound control than

gypsum board. The ANO presents evidence that the plaster walls provide a sound

transmission coefficient (STC) rating of up to fifty-two, to which FEMA’s proposed gypsum

board replacement does not come close. The ANO proposes to increase FEMA’s repair cost

calculation by $54,568.43 to allow for reconstruction of the first floor walls using a threecoat cement plaster. FEMA contends that the ANO is not entitled to compensation for

rebuilding existing walls using the wall’s original materials, but instead must apply “modern

means and materials,” as directed in a FEMA policy paper. Because plaster-on-horsehair

walls are not the modern way, according to FEMA, the ANO is only entitled to the cost of

replacing the existing walls with drywall, which FEMA says is comparable to what was

originally there.

Without addressing whether FEMA’s internal policy direction regarding “modern

means and materials” is consistent with FEMA’s published policy directives, we find no

basis upon which to require the ANO to use gypsum board to replace its existing walls.

Plaster walls are listed in RS Means, their cost can be estimated, and there is nothing

inherently antiquated about plaster walls. Transcript at 3-245, -253; see Abercrombie v.

Allstate Insurance Co., 891 S.W.2d 838, 839-41 (Mo. Ct. App. Dec. 27, 1994) (permitting

insured to recover actual cost that it would have taken to restore house to its pre-fire

condition, including the cost of repairing lathe and plaster walls to their original condition).

Further, as one of FEMA’s witnesses acknowledged, gypsum board is unlikely to have the

same sound insulation qualities as the existing walls. We accept the ANO’s estimate for the

cost of repairing or replacing the first floor walls. To the extent that the ANO is also seeking

costs associated with the second floor walls, we find insufficient evidence to attribute the

damage on that floor to Katrina.

FEMA has suggested that the ANO’s request to use plaster walls should not be

granted because it represents a change in the ANO’s original position. When the ANO made

its original request for compensation, its architect indicated that the ANO would use gypsum

board walls in the facility, which FEMA thought was reasonable. As FEMA acknowledges,

though, the ANO subsequently changed its request to plaster. Because FEMA has not

identified any kind of estoppel or other theory that would preclude the ANO from making

that change, FEMA cannot hold the ANO to its original request simply because FEMA

prefers it. The ANO’s original request does not create any kind of presumption against its

current request for plaster.

Item 4: Floor Tile in Kitchen. The parties disagree about whether quarry tile was

damaged by the flooding. FEMA has allocated costs for cleaning the tile, but not for

CBCA 5549-FEMA

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replacing it with a new floor. According to FEMA, the only reason to replace the tile is

because it would need to be ripped up to allow access to the plumbing beneath it, which

FEMA contends is not a disaster-related damage. Transcript at 3-164, -165. The ANO has

not established that the flooding necessitates replacement of the quarry tile or that FEMA’s

estimate is too low.

Item 5: Metal Windows. The current exterior windows for the convent building are

steel-framed double-hung windows. FEMA has estimated replacement costs for wood

double-hung windows with metal cladding. Further, FEMA’s estimate assumes stock

windows of three-and-a-half-feet by five-feet-six-inches, which will not fit the varying

window frame sizes that will necessarily have to be custom-built. We agree with the ANO

that FEMA’s proposed replacement framing does not possess the same longevity as the

existing windows in a humid environment like New Orleans. See Transcript at 4-252.

FEMA has agreed to fund $22,709.40, but we find the ANO’s estimate of $45,498.40 more

appropriate.4

To the extent that there are additional code triggers for fire safety upgrades to

windows that FEMA believes will be required only because the ANO is changing the

approved occupancy use of the property, see Transcript at 3-166 to -171, FEMA shall

reevaluate that position in its next project worksheet. To the extent that the ANO is seeking

replacement of windows on the second floor, we find insufficient evidence to warrant

reimbursement of those costs.

Item 6: Stained Glass Window Refurbishment. On the first floor of the building,

there are eight pairs of operable out-swinging casement windows in industrial steel sashes,

all of which contain stained glass. Flooding from Katrina covered approximately seventy

percent of the stained glass windows and rusted the framing. FEMA is willing to fund

replacement of the windows with regular glass, but not to repair the stained glass itself.

We find that, in the circumstances here, FEMA should fund the repair of the stained

glass elements of these windows in the amount of $8956.32 that the ANO claimed.5 We

4

Both parties agree that the windows, because of code upgrade requirements, will

need impact-resistant glass. Transcript at 2-48, -49, -51. Because such glass needs to be part

of a tested assembly, it increases the cost of the framing. Id. at 2-52.

5

Although we believe that repair funding for the stained glass is appropriate here,

we reject the ANO’s argument that certain historical preservation requirements applicable

to these windows affect reimbursement entitlements. We cannot find that any such historical

preservation requirements exist. Further, the ANO sought to increase the cost sought for

CBCA 5549-FEMA

15

specifically asked FEMA to provide us with post-hearing briefing directing our attention to

FEMA’s regulations or policies – whether it be the October 1999 PA Guide, its October 2001

Public Assistance Policy Digest (PA Policy Digest), or something else – that would help us

understand FEMA’s reimbursement obligations for the type of windows at issue. In

response, FEMA informed us that, although it restores facilities to predisaster design,

function, and capacity (as set forth on page 88 of its PA Policy Digest), the stained glass at

issue is a remnant of the building’s former life as a convent, that “[s]tained glass is not a

requirement for a homeless shelter to function,” and that “[c]lear glass, as provided in

FEMA’s repair estimate, serves the function of a homeless shelter.” FEMA’s Post-Hearing

Brief at 14. Beyond a lengthy discussion of the limits of the Board’s authority in arbitrations,

FEMA cited no other reason justifying replacement of the stained glass with clear glass.

Although FEMA’s stated reason for denying stained glass repair focuses on its function

within a homeless shelter, FEMA does not discuss why the stained glass is not a part of the

predisaster design of the windows. Without further explanation from FEMA, we cannot

accept that the stained glass is not a predisaster design element that should be restored.

There may be other provisions within FEMA’s policy statements that would normally

affect reimbursability of stained glass window repairs. We note that, in its October 2001 PA

Policy Digest, FEMA indicates that it will not replace one-of-a-kind art objects, although it

may “fund stabilization efforts” so that the art “can function in the same capacity as it did

prior to the disaster.” PA Policy Digest at 8. In effect, repair of the stained glass could be

viewed as a stabilization effort of an artistic element. To the extent that there are limitations

on this type of stabilization funding, FEMA did not rely upon or cite to them in its

post-hearing briefing, so we do not address them here. We direct FEMA to fund the stained

glass repairs.

Items 7, 8, and 9: Doors and Frames. The doors on the first floor of the building were

an inch-and-three-quarters solid core doors and were heavily damaged by floodwater as a

result of Katrina. In pricing new doors, FEMA developed an estimate assuming the use of

hollow core doors, with a thin veneer over a frame, rather than solid core doors of the

thickness that previously existed. Further, FEMA assumed use of standard size doors, even

though those would not necessarily fit all of the door frames that exist on the first floor of

the building. The hollow core doors that FEMA proposes do not offer the same sound

attenuation, safety, and security as the damaged solid core doors. The ANO is entitled to

reimbursement for solid core doors. We find the ANO’s estimate of $43,000 for those doors

more appropriate than FEMA’s estimate of $21,822.16.

stained glass repair during the hearing, but could not cite any record evidence to support that

increase. We do not consider the cost increase request here.

CBCA 5549-FEMA

16

To the extent that there was water damage to the second floor doors, we cannot find

that the damage was caused by Hurricane Katrina. If there are additional code triggers for

fire safety upgrades to doors that FEMA believes are required only because the ANO is

changing the approved occupancy use of the property, FEMA shall reevaluate that position

in its next project worksheet.

Item 10: Ceilings. The building currently has a twelve-inch 2x2 z-frame ceiling.

FEMA proposes to reimburse the ANO for the cost of a 2x4 lay-in ceiling suspension system,

including a washable ceiling in the kitchen area, at an estimated cost of $15,872.04. The

ANO has proposed replacing the existing 2x2 system to match what currently exists. We see

no reason for FEMA’s change from 2x2 to 2x4, although the cost difference is apparently

negligible. Further, the ANO contends that FEMA’s estimate does not include the cost of

restoring those areas within the ceiling that meet with windows, which the ANO says will

require a four-and-seven-eighth-inch channel with a cross member (a different method of

attachment than the rest of the suspension ceiling). The ANO asks to increase FEMA’s

estimate by an additional $16,718.96, for a total first-floor ceiling cost of $32,591. We grant

the ANO’s request.

Item 11: First Floor American with Disabilities Act (ADA) Upgrades. FEMA has

estimated $11,937.11 in recoverable expenses for changes or upgrades to disaster-damaged

elements required by the ADA, but the ANO’s estimate is $31,484.01. The differences

appear to relate to changes that the ANO would like to make to create a more accessible

building – for example, raising the floor level in a bathroom to allow wheelchair access, as

well as plumbing, sewer, and water upgrades – that FEMA contends is not related to damage

caused by Katrina. The ANO has not shown that, even if Katrina caused a need to conduct

certain repairs to the first-floor bathroom, the repair would trigger a code necessitating

changes to plumbing fixtures, piping, and floor levels to comply with the ADA.

Items 12, 13, and 14: HVAC System. The building had a central air handling unit

installed in a mechanical room on the first floor, along with a cooling tower that served as

a heat transfer mechanism. FEMA does not dispute entitlement to replacement costs, but

does not believe it appropriate to pay for certain code-triggered upgrades because the trigger

occurred only, according to FEMA, because the ANO is changing occupancy classifications

from a convent to a homeless shelter. For the reasons previously discussed, FEMA shall

reevaluate this position in its next project worksheet after receiving additional information

about the building’s Type R-1 or R-2 classification.

Another disputed element of the HVAC system involves the duct work and the

diffusers themselves. The issue is whether the ANO is entitled to the cost that it would have

incurred to clean them or, instead, to the cost of replacing them throughout the building. The

CBCA 5549-FEMA

17

ANO contends that, because of problems associated with mold in ducts and the manner in

which mold spores migrate through a building, it is less expensive and more reliable to

replace the ductwork than to try to remediate mold in the ducts. FEMA believes that a mold

report is necessary to confirm the presence of mold and to establish that the mold is a direct

result of, rather than pre-dated, Hurricane Katrina. In considering this cost claim, we

recognize that the first floor of this building was, because of Katrina, filled with brackish

water for an extended period of time in a humid environment. Further, the building prior to

Katrina housed, and once it is restored will once again house, a large number of children for

extended residencies, lessening the appropriateness of experimenting with the use of only a

bleach wash to clean the duct work, as FEMA proposes. Considering the prior and future

use of the facility, we find the evidence here sufficient to warrant replacement of the duct

work and diffusers throughout the building.

A final issue associated with the HVAC system in the building deals with its design.

The old system was designed to use the corridors in the building as a plenum, through which

the return air runs through the hallways before entering a grill back to the air system handling

unit. That type of design is barred by current codes because, if there is a fire in the building,

the means of return air handling creates a likelihood that fire will spread faster down

hallways than with a ducted supply return air handling system. FEMA speculates that the

ANO may not be required to change the current corridor plenum system if it uses the building

as a homeless shelter, Transcript at 1-170, a belief that seems unlikely given the safety issues,

see id. at 1-202, or, if the system has to be changed, the change would result from a code

trigger caused by an occupancy code change, which FEMA asserts would not be

reimbursable. The record here is too undeveloped to allow us to evaluate this issue. In its

next project worksheet, FEMA should reevaluate the costs associated with fixing the plenum

issue once it has additional information about whether Hotel Hope would require a changed

occupancy code and the extent to which there are code-triggered upgrades in this project.

Items 15 and 16: Kitchen Hood and Cabinets. FEMA asserts that the kitchen hood,

which was stainless steel, was not damaged by the hurricane because it was above the flood

waters, but FEMA has agreed to refurbish the existing hood at a cost estimate of $3300.

Transcript at 3-183 to -184. The ANO’s request for kitchen hood replacement costs totaling

$11,730 is not supported by the record. As for kitchen cabinets, there is no reliable record

of what cabinets were in the kitchen at the time of Hurricane Katrina, as they were ripped out

long ago, but FEMA has created a replacement estimate of $8108 based on what it asserts

is the best available information. Id. at 3-184. We find FEMA’s estimate reasonable.

Item 17: Boiler Demolition and Remediation of Asbestos. The ANO is relying on

an invoice from October 2015 (Hearing Exhibit 5, Invoice 3654) for removal of the boiler

CBCA 5549-FEMA

18

and asbestos on the first floor in the amount of $3900.6 Although FEMA questions whether

a small portion of that money might have been attributed to asbestos removal unrelated to

disaster-damaged items, it acknowledges that the heating piping that went to the boiler was

insulated with asbestos materials. Transcript at 3-185. The ANO is entitled to this funding.

Item 18: Boiler. FEMA has authorized $25,540 of the ANO’s requested $33,757.54

for the cost of a replacement boiler. The ANO’s request is supported by an invoice, and we

grant the ANO’s request for reimbursement.

Item 19: Electrical Underground Service. Although the ANO is seeking authorization

for electrical underground service, FEMA was informed when it met with the ANO’s design

team that Entergy New Orleans, the public service utility, would no longer permit the ANO

to reinstall underground service and wanted equipment panels installed outside the building.

FEMA has agreed to include funds to provide for overhead service. Transcript at 3-186.

Item 20: Store Room Electrical Demolition. The ANO seeks an additional $881.08

for electrical demolition. FEMA disputes that anything is missing from its $2180.80

estimate. Transcript at 3-191, -192. The ANO has not established any deficiencies in

FEMA’s estimate.

Item 21: Other Electrical Demolition. The ANO is no longer claiming costs

associated with this category.

Item 22: Telephone Line Service Throughout the Building. Neither the ANO nor

FEMA identified damage to previously existing phone lines in its original cost calculations.

Transcript at 2-131, 2-132, 3-172 to -175. Nevertheless, it became clear at the hearing, after

the parties realized that FEMA had placed a sum for communications wiring in its

replacement cost calculation but not its repair cost calculation, that these repair costs had

been overlooked. The ANO estimates a cost of $7290.08. At the hearing, FEMA did not

dispute that the cost was reasonable, and we direct FEMA to authorize the cost.

Item 23: Water-Cooled AC Units Demolition. The ANO has withdrawn its request

for this cost.

Item 24: Blocking for New Doors (First Floor). FEMA believes that the door

estimates otherwise detailed in item 7 cover the $2477.25 in costs claimed here for the

6

The invoice also identifies $4950 in asbestos removal costs for the second floor,

but that work was not shown to be necessitated by disaster-caused damage.

CBCA 5549-FEMA

19

framing necessary for the blocking of first-floor doors and that no additional costs are

necessary. Transcript at 3-193. The ANO did not establish these costs at the hearing.

Item 25: Paint (Unit Cost Difference). FEMA acknowledges that, in light of the

manner in which painting is procured in New Orleans, the price of $33,243.31 that the ANO

has quoted for first-floor painting is reasonable. Transcript at 3-193. FEMA believes,

though, that the dollar amount includes preparation of the wall surface for painting, which

FEMA believes is unnecessary because the surfaces should be drywall, and that paint prices

in New Orleans are too high. Accordingly, FEMA has only obligated $18,706.54 for

painting. Id. at 3-193. Because we previously allowed the ANO to replace its plaster walls

with plaster, we reject FEMA’s reduction based upon drywall. Further, the ANO is entitled

to the reasonable costs of painting as those costs exist in the New Orleans area. Because

FEMA did not viably challenge the reasonableness of the ANO’s estimate, we accept that

estimate.

Item 26: Building Exterior Cleaning. Although the ANO seeks $6207.38 for cleaning

the exterior of the building,7 FEMA has granted only $779.10. FEMA asserts that the

building is twelve feet high, but that the flood water was only six feet and that FEMA can

only authorize cleaning of the bottom six feet of the building. Transcript at 3-195. We can

find no basis upon which to question FEMA’s estimate.

Item 27: Selective Demolition and Construction Material Not Captured Elsewhere.

FEMA claims that it does not know what costs for repair of eligible disaster-damaged items

would not be captured elsewhere in the ANO’s claim. Testimony at the hearing suggested

that this category of costs is a bit of a “catch-all” for costs that the ANO might otherwise

have overlooked. Transcript at 4-281, -282. The ANO has not supported recovery of such

undefined costs.

Decision

For the foregoing reasons, the ANO’s request for replacement costs is denied without

prejudice. FEMA shall create a new version of PW-11678, taking into account the

discussion about repair costs above, after providing the ANO an opportunity to investigate

and attempt better to define the occupancy classification issues discussed above. In its new

7

The ANO originally claimed $8507.38, but reduced the amount during the hearing.

Transcript at 4-280.

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20

version of PW-11678, FEMA shall reconsider whether the ANO’s repair costs are greater

than fifty percent of replacement costs under the “50 Percent Rule.”

Harold D. Lester, Jr.

HAROLD D. LESTER, JR.

Board Judge

Erica S. Beardsley

ERICA S. BEARDSLEY

Board Judge

Beverly M. Russell

BEVERLY M. RUSSELL

Board Judge