In the Matter of JACKSON COUNTY SCHOOL DISTRICT

April 9, 2014

CBCA 3528-FEMA

In the Matter of JACKSON COUNTY SCHOOL DISTRICT

Jack C. Pickett, Pascagoula, MS, counsel for Applicant.

Allison Killebrew, Senior Attorney, and Robert R. Latham, Jr., Executive Director,

Mississippi Emergency Management Agency, Pearl, MS, appearing for Grantee.

Christie E. Rachal and Linda D. Litke, Office of Chief Counsel, Federal Emergency

Management Agency, Department of Homeland Security, New Orleans, LA; and John M.

Ebersole, Office of Chief Counsel, Federal Emergency Management Agency, Department

of Homeland Security, Washington, DC, counsel for Federal Emergency Management

Agency.

Before the Arbitration Panel consisting of Board Judges DANIELS (Chairman),

KULLBERG, and ZISCHKAU.

Jackson County School District (JCSD), supported by the Mississippi Emergency

Management Agency (MEMA), filed a request for arbitration from a denial by the Federal

Emergency Management Agency (FEMA) of JCSD’s 2013 request to expand the scope of

a project to restore school facilities destroyed as a result of Hurricane Katrina in 2005.

JCSD states that the $11 million expanded scope would allow it to use the cost under-run

of over $11 million remaining under the obligated spending cap for the improved project.

We determine that FEMA properly denied the requested scope expansion because JCSD

received full funding for bringing the destroyed facilities to pre-disaster functionality in

2010. JCSD has not demonstrated that the type of work covered by the proposed new

expansion constitutes legitimate replacement work for the destroyed facilities. Rather, the

requested scope expansions are simply desired improvements to various school facilities that

are not properly reimbursable as federal public assistance disaster funding.

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Background

On August 29, 2005, Hurricane Katrina struck the Mississippi Gulf Coast, damaging

or destroying multiple JCSD facilities. From 2006 to 2008, FEMA prepared seventeen

project worksheets (PWs) to cover eligible replacement costs for JCSD’s St. Martin Upper

Elementary School and Middle School, which were deemed totally destroyed, for a total

obligated amount of $46,223,782.29.

On May 8, 2007, JCSD submitted an improved project proposal to realign the student

body at its St. Martin Attendance Center and replace the destroyed upper elementary and

middle school buildings by constructing a new high school at a new location which was not

in a flood hazard zone (as was the case for the two destroyed school facilities). On July 12,

2007, FEMA notified MEMA that the conceptual plan was eligible for consideration as an

improved project, that public assistance funding from the destroyed upper elementary and

middle school buildings could be used to construct the new high school, and that the amount

of funds for the improved project would be capped at the obligated funding specified in the

associated seventeen project worksheets. By a letter of December 10, 2007, JCSD formally

requested an improved project consisting of a new high school for grades nine through

twelve (covering the student populations of the existing junior high school and high school),

while the existing junior high school facility would be converted to a new fourth and fifth

grade upper elementary school and the existing high school facility would be converted to

a new sixth through eighth grade middle school. On January 29, 2008, MEMA submitted

to FEMA an improved project request form showing the estimated cost of the project at

$44,600,000 for the construction of the new high school, to be paid by a public assistance

share of $13,811,029.17, other FEMA funds, insurance proceeds, and district funds. It is

not clear if this request included in the public assistance share any amounts for the

renovations of the existing junior high school and high school facilities to convert them to

a new upper elementary school and middle school.

During the period from March through June 2008, FEMA completed the revisions

and obligation of public assistance funds for the seventeen PWs arising from the destruction

of the upper elementary and middle school facilities. In a July 7, 2008 letter, JCSD

requested a revision to the improved plan to increase the square footage of the proposed new

high school gymnasium as well as to include renovations of the existing junior high school

and high school facilities. The overall square footage and student capacity for the renovated

facilities and the proposed new high school would exceed the prior square footage and

capacities of the old facilities. In an August 7, 2008 letter, JCSD asked if the obligated

eligible funds for the improved project would be “available to us in their totality to construct

the proposed improved project St. Martin High School and renovate the exiting Jr. High

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School and High School as described in the SOW [statement of work], or will FEMA

require the funds not utilized under specific Parts of CEF [the cost estimating format] be

remitted to FEMA?” On August 11, MEMA approved a revised request for the improved

project, covering the new high school and renovations to the existing junior high school and

high school facilities, with a FEMA funding cap of $42,757,587.29. The estimated cost of

the high school construction project was $41,420,000. This amount matched the amount of

a contractor bid accepted by JCSD’s board of education a month earlier. MEMA transmitted

the revised improved project request to FEMA on August 11.

On August 18, MEMA referred to FEMA the funding question of August 7 from

JCSD and also requested that FEMA make a written determination on the funding for this

improved project. On August 20, 2008, construction work began on the new high school.

In a September 4, 2008 response to MEMA’s August 18 letter, FEMA stated that funding

for a project such as this improved project “is capped at the aggregate of the eligible costs

estimated to restore the original facility or facilities to pre-disaster condition,” that “the

intent of this process is to complete the applicant’s improved project scope of work, not to

expend all potentially available funding,” and that “at final inspection Federal regulations

and FEMA policy guidance stipulate that funding is limited to the CEF-derived costs or the

actual costs of completing the project, whichever is less.” FEMA stated that under OMB

Circular 133-83, if final construction costs are lower than anticipated, and total actual costs

are lower than the approved eligible costs, FEMA will make an adjustment to reduce the

eligible costs to the total actual costs.

On October 29, 2008, FEMA advised MEMA that it concurred in the approval of the

improved project request and FEMA issued a new PW consolidating the prior seventeen

PWs associated with the replacement of the old upper elementary school and middle school

facilities. Later, another PW was issued by FEMA, obligating over $5 million in additional

funds for site work and ancillary costs in connection with relocating the two destroyed

schools. In early 2010, the site work and ancillary costs PW was revised downward by

$512,535.20 to reduce eligible costs associated with 463 parking spaces at the new high

school that JCSD claimed were required by changes in a zoning ordinance. FEMA later

granted an appeal of that reduction and restored funding for the additional parking spaces.

On April 21, 2010, JCSD entered into a separate construction contract for renovations

to the old junior high school and high school according to the revised improved project

statement of work. The total cost of the renovations came to $1,431,100. It appears that the

old junior high and high school renovations, and construction of the new high school, were

substantially completed by August 2010. The new high school opened for classes on

August 5, 2010.

CBCA 3528-FEMA

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On June 25, 2013, JCSD requested that additional items be added to the scope of the

improved project because the construction and renovation work was completed, using about

$11 million less than the FEMA-obligated public assistance available under the PWs. The

savings came from insurance proceeds and other funding sources. JCSD concluded that it

should be permitted to expand the scope of the improved project to use the unexpended $11

million up to the obligated funding cap. JCSD’s additional items are: (1) construction of

a new kindergarten through sixth grade facility in the Latimer community to offset the

“increased enrollment as a result of the shift in population to the north after Hurricane

Katrina;” (2) “revamp” of the air conditioning piping at the middle school ($400,000); (3)

additional classroom wing at the upper elementary school ($2,500,000); (4) gymnasiums for

St. Martin East and North elementary schools ($2,000,000); (5) enclose atrium at St. Martin

East ($1,000,000); (6) additional buses ($1,280,000); (7) “update #VAC” on all other units

($500,000); (8) construction of a field house at the middle school ($500,000); and (9)

additional classrooms at the middle school ($2,000,000).

By letter of July 29, 2013, FEMA denied JCSD’s request for further expansion of the

scope of work, noting that it is bound by regulation to reduce the funding for the improved

project to the actual eligible costs to complete the current approved project scope of work.

JCSD claims in a supplemental brief that in preparing its proposed improved project,

it “limited its plan to obtaining adequate facilities so as to allow the return of all students

from temporary facilities but omitted items that were needed to restore the School District

to pre-disaster functionality and give it the ‘new’ facilities it was originally eligible to

receive.” We find no support in the record for this assertion. Rather, the record indicates

that JCSD had designed and received a new state-of-the-art high school along with

renovations to the old junior high and high school to make fully functioning upper

elementary, middle, and high schools and provide increased student capacities and facility

square footage as desired by JCSD under its realignment plan.

Discussion

FEMA moved to dismiss the arbitration request on the ground that JCSD untimely

filed its request and, alternatively, that JCSD has not alleged that FEMA violated any statute

or regulation. The record shows that the request was filed timely within thirty days of

JCSD’s receipt of the denial letter. Further, we find that JCSD interprets the applicable

statutes and regulations in a manner differently from FEMA and that this dispute adequately

makes the matter proper for our arbitration.

On the merits, we agree with the action taken by FEMA. JCSD prepared a

comprehensive and reasonable plan to replace the destroyed upper elementary school and

CBCA 3528-FEMA

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middle school by renovating and converting the existing junior high and high school

facilities to serve as the new upper elementary and middle school facilities with added

student capacities and square footage. In addition, the bulk of the replacement public

assistance funding would be used to construct a brand new, state-of-the-art high school with

many new features not previously found in the existing high school, along with added

student capacity and square footage. The new high school would be located very near the

converted upper elementary and middle school facilities, which provided further benefits to

JCSD. We have carefully reviewed the wish list of new improvements requested by JCSD

nearly three years after completion of the new construction and renovation work, but

conclude, as did FEMA, that JCSD has not shown that these new items are within the scope

of work necessary to obtain pre-disaster functionality of the destroyed facilities. One

purpose of the Stafford Act is to provide public assistance to state and local governments

for repairing and restoring facilities damaged or destroyed as a result of a declared natural

disaster. 42 U.S.C. § 5172 (2006). That populations in the school district shifted at some

point after Hurricane Katrina, or that the school district experienced increased student

populations in specific areas, is not a valid basis under the Stafford Act for federal public

assistance.

JCSD’s request is denied.

______________________________

JONATHAN D. ZISCHKAU

Board Judge