Long Beach Boardwalk FEMA Hurdles

As we reach the 100 day milestone for the Long Beach Boardwalk construction, there are still a number of unanswered questions concerning the payment of the 44.2 million dollar contract to Grace Industries.  Announcements have been made that FEMA will pay up to 90% of the cost, but that number does not necessarily tell the entire story.  As many of us have learned, there are many hurdles that FEMA makes us jump in order to get the funding that they dangle in front of us.  

I have taken the time to review the FEMA Public Assistance Guide, and try to get a better understanding of how and what they will pay for the Boardwalk and other Long Beach projects that fall under FEMA jurisdiction.  I have also run some numbers to try to better understand how the payments may apply, and what, as taxpayers, we may be in the hook for in the end.  

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. [See FEMA Policy 9524.4, Eligibility of Facilities for Replacement (the 50% Rule).] The following calculation, known as the "50 Percent Rule," is 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

Replacement Cost 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. The replacement cost does not include demolition, site work, and applicable project management costs, even though these costs may be eligible for Public Assistance.

The city has the burden of proving that the cost of repairing the boardwalk would have exceeded half of the 44.2 million dollar price tag.  

Salvage Value
When applicable, salvage value should be deducted from the estimated replacement cost. Disposition of salvaged materials must be at fair market value and the value must be reimbursed to FEMA to reduce the total project cost. For example, debris resulting from disasters, such as timber debris, mulched debris, and scrap metal, may have a market value. Reasonable costs for administering and marketing the sale of the salvageable materials is allowed to be recouped by the applicant from the fair market value. To reduce contract costs, applicant debris removal contracts may provide for the contractors to take possession of salvageable material and benefit from its sale in order to lower bid prices. When the salvage values are taken into account in the bid and award, no salvage value needs to be recouped at the end of the project. (See FEMA Policy 9525.12, Disposition of Equipment, Supplies and Salvaged Materials.)

Contracts

What this means:

Additionally, there is a city ordinance that does not allow the use of Tropical wood such as Ipe for the city’s boardwalk.  There is a measure in the ordinance that specifies that if the wood is of obtained in an environmentally sound manner then its use would be acceptable.  As of now no proof of the woods origin has been offered.

Contracts (continued)

Sealed Bids. Sealed bid procurement is a formal method where bids are publicly advertised and solicited, and the contract is awarded to the bidder whose proposal is the lowest in price (this method is the preferred method for procuring construction contracts).

Competitive Proposals. Competitive procurement is a method similar to sealed bid procurement in which contracts are awarded on the basis of contractor qualifications instead of solely on price (this method is often used for procuring architectural or engineering professional services).

What this means:

Unfortunately what this all means is that even if they pay 90%, it may not be as large of a payment as the Long Beach Council and others have made it seem.  

Most other boardwalks in NJ have received around 75% funding from FEMA.

Avon, NJ
Square Feet: 63,360
Cost: $3 Million
Cost Per Square Foot: $59.19
FEMA Reimbursement: $2,301,359 (77%)

Scenario #1 (Best Case):

FEMA Pays 90% of entire cost
Boardwalk Replacement: 44.2 million
FEMA Reimbursement: 39.8 million
Cost to local taxpayers: 4.4 million paid via BAA3 Bond (6%)
Interest Paid: 5 million
Total Cost for Boardwalk: 9.5 million over 30 years

FEMA Pays 75% of entire cost
Boardwalk Replacement: 44.2 million
FEMA Reimbursement: 33 million
Cost to taxpayers: 11 million paid via BAA3 Bond (6%)
Interest Paid: 12.75 million
Total Cost for Boardwalk: 23.75 million over 30 years

FEMA Pays 90% of original estimate
Boardwalk Replacement: $44.2 million
Original Estimate: $25 million
FEMA Reimbursement: $22.5 million
Cost to local taxpayers: $21.7 million paid via BAA3 Bond (6%)
Interest Paid: $31 million
Total Cost for Boardwalk: $58.2 million over 30 years

FEMA Pays 90% of cost as compared to NJ boardwalks ($60 per square foot)
Boardwalk Replacement: $44.2 million
FEMA Reimbursement: $30 million
Cost to taxpayers: $14.2 million paid via BAA3 Bond (6%)
Interest Paid: $16.5 million
Total Cost for Boardwalk: $30.65 million over 30 years

FEMA Pays 75% of cost as compared to NJ boardwalks ($60 per square foot)
Boardwalk Replacement: $44.2 million
FEMA Reimbursement: $25 million
Cost to taxpayers: $19.2 million paid via BAA3 Bond (6%)
Interest Paid: $22.2 million
Total Cost for Boardwalk: $41.4 million over 30 years

Even with the best case scenario, this is still going to hit the tax payers of Long Beach in the pocket.  There is no way that a city suffering from a descrease in revenue can add another bond on our books and survive.  The city’s credit rating continues to falter, and adding more debt can only continue that downward trend, or at best keep it steady.  

Source: http://www.fema.gov/public-assistance-local-state-tribal-and-non-profit/public-assistance-guide-0