In a victory for state officials, a federal arbitration panel today said $474.8 million should be provided to replace Katrina-damaged Charity Hospital, substantially more than the Federal Emergency Management Agency’s $126 million repair estimate.

The three-judge panel has ordered FEMA to issue a new project worksheet to award the amount to the state’s Office of Facility Planning and Control as the replacement value for the state-owned hospital, which has been shuttered since the August 2005 hurricane.

The Louisiana State University System, which used Charity as a teaching hospital, had challenged FEMA’s valuation, saying to was too low.

Today, LSU System general counsel and lead counsel in the arbitration Ray Lamonica lauded the panel’s decision.

“We are very happy that facts and law finally prevailed as opposed to irresponsible and unsupported statements that many people have made during this process,” he said.

Facility Planning and Control, in challenging FEMA’s figures, used the work of a team of architects and engineers headed by Blitch Knevel Architects to argue that the replacement costs were $491.9 million.

The panel determined that the cost of repairing the hospital would exceed 50 percent of the cost to replace the facility. In its decision, the panel said FEMA “did not present a sound basis” for challenging Facility Planning and Control’s expert witnesses.

Lamonica said the arbitration panel’s figure does not include about $35 million to $55 million to cover the hospital’s equipment. That amount has to be applied for separately, he said.

When asked when FEMA will provide the money, Lamonica said, “I’m sure the bureaucracy will have to address that. That’s not a serious issue; it’s determining the amount.”

Today’s ruling, he said, means “we know how much we’re going to get from FEMA” and efforts to line up financing to build a new teaching hospital can continue.

Whether to reopen Charity or build a replacement teaching hospital in Mid-City has been a contentious issue since Katrina and one that has popped up in the ongoing race for New Orleans mayor. Building a new teaching hospital and an adjacent medical complex for the U.S. Department of Veterans Affairs would require the demolition of Mid-City homes.

Proponents of renovating and returning to use the old Charity Hospital were not disappointed by today’s ruling. Instead, they hailed it as a victory for Louisiana that creates an opportunity to fast-track their proposal.

The $474.8 million approved today combined with $300 million already appropriated by the Legislature nearly funds the estimated $900 million needed to renovate Charity Hospital, said Jack Davis, president of Smart Growth for Louisiana and a board member of the National Trust for Historic Preservation.

“Reusing Charity Hospital would allow the project to begin right away,” Davis said. “But if the state moves forward with plans for the new $1.2 billion hospital they still have to raise $400 million. And most people agree that raising anything on the bond market right now is going to be extremely difficult and could take several more years.”

Davis and Sandra Stokes, executive vice chairwoman for the Foundation of Historic Louisiana, are in Baton Rouge today to testify before the Joint Government Affairs Committee. They will pledge their support for a cost-benefit analysis recommended by the state Senate’s streamlining commission that will determine the best plan to return a state hospital to New Orleans.

“We are thrilled and so happy the state has money coming in and now we have to make sure we use the money in the best interests of the people of New Orleans,” Stokes said. “We’re hopeful the state just doesn’t take the money and move forward with an untenable plan. It’s more important than ever to make sure we use this money correctly.”

The arbitration panel, in its ruling, did not insert itself into the debate over whether to reopen Charity.

“The panel understands that differences of opinion exist in New Orleans as to whether the public is better served by rebuilding Charity Hospital in its present location or by construction a new hospital elsewhere in the city,” the ruling says. “This issue is not relevant to our determination in this case, and we did not consider it in the course of our deliberations. How to proceed with the rebuilding or new construction is a matter for decision by other authorities.”