Many in La. face big flood insurance bills
BY JORDAN BLUM
jblum@theadvocate
September 19, 2013
WASHINGTON — The head of FEMA told federal lawmakers Wednesday that the government is “bound and boxed into” skyrocketing flood insurance rate hikes, unless a fix is approved by Congress.
But partisan conflicts, lately, have stalled much of the legislative progress in Congress.
Federal Emergency Management Agency Administrator Craig Fugate told U.S. Sens. David Vitter and Mary Landrieu, both from Louisiana, that only so much can be done to avoid upcoming National Flood Insurance Program premium rate hikes.
Fugate delivered the message during a U.S. Senate Banking, Housing and Urban Affairs Committee hearing on Wednesday to discuss the matter. “Sen. Vitter, let me put my cards on the table, I need your help,” he said.
Vitter, a Republican, said one extreme and worst-case scenario in Plaquemines Parish is that a home worth roughly $250,000 could have its annual NFIP premiums increase from $633 to more than $28,000 a year.
Fugate acknowledged such a possibility if the $250,000 home is built about eight feet or so below elevation standards in new flood maps.
The National Flood Insurance Program, called NFIP, was changed last year by Congress to make the program more financially self-sustainable. Many of the changes amount to phasing out the status that allowed properties built decades ago to be grandfathered into the flood insurance system at much lower rates. Premiums for newer properties also are being increased.
The NFIP has been in financial distress with a loss of nearly $25 billion, largely due to payments made after hurricanes Katrina and Rita in 2005. Louisiana has nearly 500,000 NFIP policies and there are more than 5.5 million policyholders nationwide.
“This is not some parochial Louisiana issue. This is a national issue,” Vitter said. “This movie is coming to a theater near you and it ain’t a good ending right now.”
When Vitter and others backed the legislation, he said moderate premium hikes were needed to keep the program affordable.
Fugate pledged to work with lawmakers. But he said he believes rates should go up for second homes, newly built properties, repetitive-loss properties and businesses.
Fugate expressed concerns about the impact of dramatic flood insurance rate increases on properties whose flood insurance rates were grandfathered and those being added into flood zones for the first time. He said Congress could approve some “affordability” fixes
FEMA asserts the NFIP reauthorization will implement rate hikes of up to 25 percent a year on nonprimary residences, businesses and homes that have flooded multiple times. Primary residences currently receiving subsidized “grandfathered” rates are not affected until the home is sold or the policy lapses. But Landrieu, a Democrat, and others said the change makes such homes unsellable and that FEMA is underestimating the impacts.
“They can’t put their homes for sale,” Landrieu said, adding the issue is much more than vacation homes. “People aren’t sunbathing there. We’re operating the biggest port systems in the country,” Landrieu said.
The law was approved “without the data to measure compassion or common sense,” Landrieu said, and it is devastating to banks as real estate companies, as well as to the property owners.
Landrieu said the ongoing flooding problems in Colorado and last year’s devastating Hurricane Sandy flooding in New York and New Jersey are indications of the needs outside of Louisiana.
Senators from such states, as well as from Massachusetts, Minnesota, Oregon and more also expressed concerns Wednesday. Christine Shirley, an NFIP coordinator for the state of Oregon, said there is a lot of fear and misinformation. “No homes in any flood areas are selling,” she said.
The congressional fight to delay increasing flood insurance premiums is currently mired in the federal budget stalemate. Most of the Louisiana congressional delegation sent a letter to congressional leaders Monday asking that a one-year delay of upcoming flood insurance rate increases be included in any federal budget stopgap approved this month.
Language to delay by one year the National Flood Insurance Program premium increases on “grandfathered” properties is currently written into both the House and Senate Homeland Security funding bills thanks to the Louisiana congressional delegation.
But the partisan fight over total federal spending levels is holding those bills and other appropriations bills hostage. So the delegation is pushing for a delay to the NFIP rate hikes to also be written into any short-term budget compromise, called a continuing resolution. The resolution may be needed to avoid a partial government shutdown at the end of September.
But not everyone wants to further tweak the law. Stephen Ellis, of the nonprofit group, Taxpayers for Common Sense, argued against burdening the average American taxpayer with the costs of flood insurance for others. If any affordability change is made, it should be funded through surcharges on the insurance policies.
Any subsidy to help lower-income property owners with affordability issues should only be short term to help avoid “sticker shock,” Ellis added.
“To delay or derail the reforms enacted a year ago would put this program on perilous footing, fiscally, politically, and existentially,” Ellis stated.
Just prior to the Senate committee, U.S. Rep. Bill Cassidy, R-Baton Rouge, who sponsored the flood insurance delay in the House, held a task force meeting with finance and insurance experts to discuss potential fixes. He said the meeting went great.
“We discussed a variety of issues, most importantly how to make sure flood insurance is affordable and accessible,” Cassidy said in an email response.
“This is a national issue and we need a national solution. I look forward to working with colleagues on both sides of the aisle to make sure we deal with this critical problem.”
