In the Matter of ROMAN CATHOLIC CHURCH

April 8, 2020

CBCA 6469-FEMA

In the Matter of ROMAN CATHOLIC CHURCH

OF THE ARCHDIOCESE OF NEW ORLEANS

Christopher M. Gaffney and Michael G. Gaffney of Gaffney & Gaffney, Metairie,

LA; and Charles V. Cusimano, III of Cusimano Law Firm, Metairie, LA, counsel for

Applicant.

Lynne Browning, Assistant Deputy Director, Veronica Howard Sizer, Executive

Counsel, and Jaron Herd, Appeals Manager, Governor’s Office of Homeland Security and

Emergency Preparedness, Baton Rouge, LA, appearing for Grantee.

John Dimos and Charles Schexnaildre, 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.

This arbitration matter is essentially a sequel to a prior arbitration, which we decided

in July 2018. See Roman Catholic Church of the Archdiocese of New Orleans, CBCA

5549-FEMA, 18-1 BCA ¶ 37,089. Following our prior remand of the issues raised in this

matter to the Federal Emergency Management Agency (FEMA), the Roman Catholic Church

of the Archdiocese of New Orleans (ANO) submitted a new request for arbitration 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 regulations, 44 CFR 206.209 (2019),

challenging FEMA’s remand decision.

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Background

In the prior arbitration, the issue before us was whether, in accordance with what is

known as the “50 Percent Rule,” the ANO was entitled to recover the costs of replacing a

former convent building that was damaged during Hurricane Katrina or, instead, was limited

in its recovery to the costs of repairing the existing building. As we discussed in our prior

decision, “[u]nder [Federal Emergency Management Agency (FEMA)] regulations

implementing the [Robert T. Stafford Disaster Relief and Emergency Assistance Act

(Stafford Act), 42 U.S.C. §§ 5121-5296 (2006)], 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.” Roman Catholic Church, 18-1 BCA at

180,563 (citing 44 CFR 206.226(f) (2017)).

The ANO claimed in the prior arbitration that the cost of restoring the convent

building, which the ANO hopes to use as a homeless shelter called “Hotel Hope,” to its

predisaster condition exceeds fifty percent of the cost of replacing the facility, entitling the

ANO to the replacement cost. FEMA, through an analysis reflected in Project Worksheet

11678 Version 6 (PW 11678-v6 or v6), came to a different conclusion, determining that the

repair costs to which the ANO was entitled were far less expansive than the ANO wanted and

finding that the repair-to-replacement cost ratio was 37.65%. At the conclusion of the prior

arbitration, we denied the ANO’s request for replacement costs, but did so without prejudice.

We found that, in conducting its calculations, FEMA had incorrectly excluded certain repair

costs in the numerator and sometimes in the denominator of its fifty-percent calculation, and

we directed FEMA to reconsider repair and replacement cost values for various items in

accordance with the findings in our decision. Roman Catholic Church, 18-1 BCA at

180,570. Familiarity with our prior arbitration decision is presumed.

After we issued our arbitration decision, FEMA prepared a new project worksheet,

Project Worksheet 11678 Version 7 (PW 11678-v7 or v7), reflecting the results of its new

analysis. In conducting that analysis, FEMA decided to remove from its v7 repair cost

assumptions certain costs—particularly, painting and ceiling repair costs for the second floor

of the convent building—that it had authorized in PW 11678-v6, stating that the Board in its

arbitration decision had indicated that those costs were not reimbursable. Based upon its new

v7 analysis, FEMA again found that the cost of repairing the former convent was only

37.76% of the building’s replacement cost, far below the necessary fifty-percent threshold,

and again denied the ANO’s request for replacement costs. Nevertheless, the amount of

reimbursable repair costs that FEMA obligated in v7 increased from those obligated in v6

by $296,678.08, making the ANO eligible for repair costs totaling $1,285,318.97.

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The ANO then filed its arbitration request with the Board, challenging FEMA’s v7

analysis and, once again, asking us to find that it is entitled to replacement costs for the

former convent. The ANO provided the Board with a list of the various alleged errors that

it had identified in FEMA’s replacement model and described how it believed FEMA had

misinterpreted and misapplied the panel’s prior arbitration decision. FEMA responded to the

ANO’s submission, and the arbitration panel subsequently conducted a two-day hearing

during which the parties each presented witnesses to support their respective positions. At

the hearing, to ensure a full evidentiary record, the panel elected to incorporate the record

from the prior arbitration, CBCA 5549-FEMA, into the record of this arbitration.

Subsequently, because it was having difficulty comparing the parties’ competing estimating

models for repair and replacement costs, the panel requested after the hearing that the parties

present a joint chart that, in simple terms, identified the cost estimates upon which the parties

agreed, those upon which they disagreed, and the specific dollar amount by which they

disagreed. The development of that chart proved somewhat difficult, but the chart that the

parties eventually submitted, though somewhat difficult to understand, eventually provided

great assistance to the panel.

Discussion

We review the fifty-percent calculation de novo, rather than through a deferential

standard of review. Bay St. Louis-Waveland School District, CBCA 1739-FEMA, 10-1 BCA

¶ 34,335, at 169,579-80 (2009). Accordingly, we are not bound by FEMA’s prior

determinations and do not provide any deference to its views of what the ANO’s costs should

be. City of New Orleans, CBCA 5684-FEMA, 18-1 BCA ¶ 37,005, at 180,199.

With that standard of review in mind, we make the following observations about the

repair and replacement cost assumptions that support either the ANO’s or FEMA’s 50%

repair-versus-replacement cost calculation:

First, we do not understand the basis under which FEMA, after authorizing

second-floor ceiling repair and painting in its v6 repair cost analysis, renounced authorization

for those costs in v7. FEMA says that, in our arbitration decision addressing PW 11678-v6,

we held that the ANO had not proven that Hurricane Katrina damaged the second floor of

the convent building, meaning that FEMA should not have awarded the ANO any

second-floor costs for painting or ceiling repair. Yet, the second-floor damage that we

addressed in our prior decision was directly tied to the damaged elements that FEMA had

challenged—mainly second-floor doors and windows. We did not consider, address, or

reject second-floor painting or ceiling work because it was not at issue—FEMA had already

conceded causation for those repairs. In light of acknowledged roof damage to the convent

caused by Katrina and the humidity effect of hurricane waters sitting inside the building for

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a long period of time after Katrina hit, FEMA’s concession was not unreasonable. Had

FEMA wanted to contest entitlement to second-floor painting and ceiling costs, the time to

do that was in the first arbitration. FEMA should restore authorization for those repair costs,

which we found to be $15,935.40 for painting and $12,314.72 for ceilings. Although the

ANO asserts that heating, ventilation, and air-conditioning (HVAC) diffusers should also be

added, FEMA has shown that it accounted for those costs elsewhere in its repair cost

calculation.

Second, we reject FEMA’s position that the ANO, when it restores the existing

convent building, will be able to continue to use the second-floor hallway as a return air

plenum for the HVAC system. FEMA has repeatedly maintained (both in this and the prior

arbitration) that, because the second-floor hallways were used as plenums when the building

originally served as a convent and then as a homeless shelter, both the state and local

governments would permit the ANO to continue that use when the convent building is

restored. At the end of the first arbitration, we remanded this issue for further development.

At the hearing in this arbitration, the ANO presented definitive evidence—including

testimony from Zachary Smith, the Director of the Department of Safety and Permits for the

City of New Orleans—that such a use is considered dangerous and unacceptable under

today’s applicable codes (and the codes as they existed when Hurricane Katrina hit) and that

the ANO, before local officials will allow individuals again to occupy the convent building

(either as a convent or as a homeless shelter), will have to create a new plenum system in the

building consistent with current safety codes. Beyond conjecture, FEMA presented nothing

to challenge this evidence. We reject FEMA’s argument that the ANO would be able to use

the building’s current return air plenum system if it repaired the convent building.

That does not mean, however, that the estimated $86,640.60 cost of creating a new

return air plenum (through installation of new ducting) to comply with existing codes is

included in the numerator of the 50% repair-versus-replacement cost calculation. The FEMA

policy in place at the time of the Katrina disaster provided that the repair cost numerator

“equals the cost of repair of damaged components only” and “does not include codes and

standards upgrades, demolition, site work, or applicable project management costs.” Public

Assistance Policy Digest FEMA-321 (Oct. 2001), at 106; see Public Assistance Guide

FEMA-322 (Oct. 1999), at 29 (“Repair cost includes only those repairs associated with the

damaged components, . . . not upgrades triggered by codes and standards, . . . even though

such costs may be eligible for public assistance.”). FEMA has identified a slight exception

to the exclusion of code-triggered upgrades from the repair cost calculation: such costs will

be considered in the repair costs if, and only if, a particular required upgrade is an integral

part of a disaster-damaged element or component within a covered building. As such,

FEMA’s policy treats triggered codes inside a damaged element differently than triggered

codes related to but outside a damaged element. An example that FEMA provided of such

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a situation was a window in a damaged building that has to be replaced: if current codes

require the glass in new windows to be impact-resistant, the cost of replacing the windows

as part of the building repair would include the price of impact-resistant glass, rather than

regular glass, as there is no way to segregate impact resistance from the glass itself. Here,

though, the ducting that the ANO needs to install to create a new return air plenum is not one

of the HVAC components that Katrina damaged. Although the plenum is plainly related to

the rest of the HVAC system, the plenum itself is a separate part of that system, was not

damaged by Katrina, and would not have to be reconstructed in a new manner but for the

codes that now apply to HVAC systems in buildings such as the one at issue here. See

Webster’s New Twentieth Century Dictionary of the English Language Unabridged 372 (2d

ed. 1975) (defining “component” as “a part; a constituent; an ingredient”). As one of

FEMA’s witnesses, Eddie Williams, testified during the hearing, FEMA’s role in Stafford

Act cases is to repair disaster-related damage, “not to come in and try and replace every old

building that ha[s], over the years, not been brought up to compliance.” Hearing Transcript,

Vol. 2, at 316. Although the ANO refers to more recent revisions to FEMA policy

documents as evidencing a more accurate interpretation of the manner in which FEMA is

supposed to address triggered code and upgrade costs in the numerator calculation, we simply

cannot agree, after reading those revisions, that FEMA’s policy, even if we were to apply it

retroactively, has changed in the manner that the ANO alleges. Accordingly, although the

ANO would be entitled to receive the costs of creating a new return air plenum as a triggered

code cost, which is added at a later stage of FEMA’s total repair-cost reimbursement

calculation, it cannot include that amount in the “repair cost” numerator of its fifty-percent

repair/replacement calculation.

Third, in its replacement cost denominator (but not the repair cost numerator), FEMA

included $51,030.56 for adding an elevator to the building, even though the building has

never had an elevator, because, according to FEMA, a new structure would be required to

have an elevator to comply with the Americans with Disabilities Act (ADA), 42 U.S.C.

§§ 12101-12213. FEMA asserts that, because the bedrooms in the building are exclusively

on the second floor, the ADA requires any replacement building to have an elevator to allow

bedroom access to disabled individuals. Under FEMA policy, FEMA defines the

replacement cost as “the cost of reconstructing the facility and includes current codes and

standards upgrades.” PA Policy Digest at 106. Such codes and standards upgrades are not

included in the repair cost calculation, however. See id. Accordingly, if the ADA mandates

that a replacement building would have to have an elevator to operate, FEMA includes the

cost of that elevator only in its replacement cost calculation. Further, because “FEMA will

restore an eligible facility to its pre-disaster design,” the “design capacity of the facility,

either as originally designed or as modified by later design, will govern the extent of eligible

work when a facility is being replaced.” PA Guide at 28-29. FEMA acknowledged during

the hearing, however, that the ADA would not require construction of an elevator if, prior

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to Katrina, there had been sufficient ADA-compliant bedrooms and services on the first floor

of the building to accommodate individuals who might need them. See Hearing Transcript,

Vol. 2, at 167-68, 200. Although FEMA cites to the original design drawings for the convent

from the early 1960s to indicate that there are no first-floor bedrooms, we find it more likely

than not that, when the building was operating as a homeless shelter prior to Katrina, the first

floor was used as a bedroom site to accommodate individuals who needed it. Further, the

ANO has indicated that, because of its concern about putting an elevator in a building that

is being used to accommodate children, it has no intention of installing an elevator. We

discount FEMA’s concern that any pre-Katrina first-floor bedroom use needed to be

ADA-compliant, given that virtually nothing in the pre-Katrina building was

ADA-compliant. We remove the $51,030.56 elevator construction cost addition from

FEMA’s replacement cost denominator.

Fourth, in its replacement cost estimates, FEMA uses upgrades and other

improvements based upon the anticipated uses of the building that differ than what was in

the building prior to Katrina—examples include wall-hung toilets rather than the floormounted toilets that were originally in the building (for what the ANO contends is an

unnecessary price increase in the replacement cost estimate of approximately $18,000), the

addition in FEMA’s replacement model of thirteen showers that did not exist in the original

building rather than the three showers that the ANO proposes, the use of a “finned tube”

heating system rather than the same type of boiler heating system currently in place (allegedly

a $11,000 difference). FEMA’s stated “goal is to estimate the reasonable cost of the

damaged facility restored to what’s the same function and capacity, restored using current

codes and standards.” Hearing Transcript, Vol. 2, at 24. FEMA asserts that, in estimating

replacement costs, it does not replace the pre-existing damaged building exactly the way that

it existed, but attempts to “restore the facility based on the pre-disaster design with a modern

day version of that, meaning that, whatever codes and standards affect the function or

capacity in the building that existed prior would be implemented in the replacement.” Id.

FEMA’s reliance on such upgrades and improvements in quality and/or quantity does not fit

the apples-to-apples comparison upon which FEMA purports to want to rely, yet it can

unnecessarily increase the divide between the numerator and the denominator in the 50%

repair-versus-replacement cost calculation. We are wary of including such unnecessary

improvements and upgrades in the replacement cost denominator.

Fifth, in reviewing the various cost calculations that each of the parties has presented

both in this arbitration and the prior one, it is clear that there is a great deal of discretion and

judgment that goes into the process of creating the repair and particularly the replacement

cost estimates. Both parties have relied in their estimating on RSMeans, which “is a cost

estimator that accounts for regional differences in labor and materials costs by using zip

codes to factor in the specific costs of nearly any type of construction in a particular area of

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the country,” In re CertainTeed Fiber Cement Siding Litigation, 303 F.R.D. 199, 205 (E.D.

Pa. 2014), and “is a generally accepted method of calculating building costs.” In re ChineseManufactured Drywall Products Liability Litigation, MDL No. 2047, 2017 WL 1421627,

at *11 (E.D. La. Apr. 21, 2017). Nevertheless, “[e]stimations . . . are still merely

estimations,” and at least one court (citing to a leading treatise, Standard Estimating

Practice, from the American Society of Professional Estimators) has found that, even using

RSMeans, “variations even among several competitive [cost estimates for the same

construction work] can reach up to 30% with an average of a 17% difference.” ChineseManufactured Drywall Products, 2017 WL 1421627, at *14 n.1; see Department of Defense,

Unified Facilities Criteria Handbook: Construction Cost Estimating, UFC 3-740-05, ¶ 2-4.2

(Nov. 8, 2010) (“Estimates made with this method [using RSMeans] can be expected to be

accurate between -15% to +25% notwithstanding abnormal market conditions”), available

at https://www.wbdg.org/ffc/dod/unified-facilities-criteria-ufc/ufc-3-740-05 (last visited Apr.

8, 2020).

It appears fairly easy to manipulate whether the repair cost exceeds the replacement

cost by fifty percent or more, or to render it less than fifty percent, by giving greater credit

here, taking away credit there, or using a higher- or lower-grade product in this place or that

place. This is borne out by the fact that, when we asked the parties to provide a joint chart

to help us compare their competing cost estimating models, FEMA noted that a number of

its estimated replacement costs were in “a category where the replacement model [that

FEMA was using] is high,” but that the use of overstated costs in one category “partially

offsets other categories where the replacement model is low,” without detailing all of the

costs or the amount of such costs that it thinks it underestimated in its replacement model.

In the end, we have to evaluate the evidence before us as best we can. We have full

confidence that everyone involved in these matters and in the estimating of the various costs

worked in good faith to attempt to come to proper estimating numbers, as is evidenced by the

detailed record before us and the large number of hours that numerous FEMA and ANO

representatives clearly have put into efforts to estimate these costs. Having evaluated all of

the evidence presented in this matter and its predecessor, while recognizing the fluidity in

and discretionary nature of some of the cost numbers used in the cost models, we believe that

the cost of repairing the convent building, using only those repair costs that are appropriate

under FEMA’s 50% repair-versus-replacement cost calculation formula, is at least fifty

percent of the building’s replacement cost. Accordingly, we direct FEMA to provide funding

to the ANO for replacement, rather than repair, of the convent building.

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Decision

The arbitration panel determines that the ANO is eligible for the costs of replacing,

rather than merely repairing, the convent building at issue in this matter.

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