Downtown flood insurance rates soar (Stanwood/Camano, Washington)

Posted: Tuesday, January 14, 2014 11:00 am

By SARAH ARNEY Staff Reporter

Business owners in downtown Stanwood are facing scary flood insurance rates.

After major storms Katrina and Sandy, the federal government ordered the National Flood Insurance Program (NFIP) to stop subsidizing the cost of flood insurance, said Deborah Knight, Stanwood city administrator.

The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) requires rates in high-risk areas to reflect the true risk, which was to be calculated by new maps.

The Federal Emergency Management Agency (FEMA) started creating new maps in the late 1990s, when FEMA initiated a flood map modernization program to convert the nation’s existing outdated paper Flood Insurance Rate Maps (FIRMs) to a new digital format.

In 2003, Congress appropriated money for the project, with a goal of effectively completing digital mapping of the floodplains for 90 percent of the U.S. population by 2010.

Snohomish County began working with FEMA and the Department of Ecology to remap the county’s floodplains in 1999. The county was a high priority for remapping efforts due to the number of floods that have occurred, the high level of damages incurred, the relatively large population base and the high number of repetitive loss ofstructures, especially homes which have been flooded more than once in a 10-year period. 

Then Katrina happened and FEMA got distracted. Then Sandy happened, and Congress passed flood insurance reform.

Congress is now figuring out a way to implement the Biggert-Waters Act, said Ryan Ike from FEMA District 10 in Bothell.

Congress is reviewing “how we map,” and how lending institutions calculate the amount needed to protect their investments.

Recognizing that local residents are the best informed about flood patterns, Snohomish County communities were encouraged to take an active role through the Cooperative Technical Partners (CTP) program. The program allowed qualified communities to direct selected flood hazard mapping projects themselves, using FEMA funding and standards. 

Stanwood’s maps have not been updated since 1999.

The city did launch the effort Thursday to get certified with a Community Rating System (CRS), when council agreed to sign a contract with TetraTech. A CRS rating will help provide discounts on premium by meeting NFIP requirements for an accurate rating system and promoting awareness of flood insurance.

Downtown business owners are hoping to see relief from some really high numbers.

The owner of Life Plan Financial, Harald Schot said that his rate was increased from $1,600 to $16,400 this year.

He has been working with his agent and negotiated a slight reduction, down to $15,700.

Ashley Abrams, an agent with Thomas & Associates Insurance Broker, Inc., specializes in commercial flood insurance.

She has seen some serious impacts in downtown Stanwood from BW-12.

“I recently quoted flood insurance for a commercial building in downtown Stanwood. The premium was $28,000, which must be paid in full,” she said.

The problem, she said, is that most of the buildings in downtown Stanwood are below the flood base level, which has a huge impact on premiums. 

Abrams has seen across-the-board flood insurance premium increases of at least 10 percent, since Oct. 1, 2013.

“Many flood insurance premiums have increased by 20 percent or more,” Abrams said. “The premiums will continue to increase each year until the premium is no longer subsidized by the federal government.”

According to Ike, most affected properties are those built before communities joined the National Flood Insurance Program (NFIP), in the late 1960s when the first Flood Insurance Rate Maps (FIRM) were adopted.

FEMA’s new maps are intended to show the real risk of flooding, including 100-year floods that are infrequent, but large, events.

“FEMA wants to find a way to model risk more accurately,” Ike said.

A program specialist for FEMA’s District 10, Deborah Farmer, said that Biggert-Waters also changed the penalty for a federally-backed lender that did not require flood insurance in risky areas.

“The penalty was raised from $350 to $2,000,” Farmer said.

Knight said the new rates are most likely to impact property owners who are trying to refinance, or who sell to a new owner — but that wasn’t the case for Schot.

“Nope, no change,” he said. “I just got a bill in the mail with the new rate.”

Along with the CRS, the city of Stanwood also has a goal of making its temporary berm along SR 532 permanent, but that would not impact the rates, Ike said.

“It’s not uncommon for communities to take action to prevent impacts,” he said. “But FEMA would not take that into account.”

Especially since the city prefers the $1.3 million price tag of its proposed project, compared to $5 million for a project approved by the U.S. Corps of Engineeers.

“There is an ongoing effort to limit future development in the flood plain,” Knight said. “They would like to have people move out altogether.”

Indeed, the city of Stanwood discussed a couple years ago the possibility of moving City Hall out of the floodplain, but largely due to the measely economy decided to fix up the old building instead.

Ike believes FEMA’s new program is a good thing.

“A big flood could happen any time,” he said. “We just want property owners to be aware of their risk.”

Stanwood is in a very vulnerable position, set on the estuaries of two rivers and at the level of the Salish Sea.

“But there have been no major floods since the 1950s,” Knight said.

Flood insurance policies are rated individually. New rates vary from pre-FIRM to post-FIRM structures and between businesses and private residences.

Farmer said that rates should not increase any more than 25 percent each year.

“Anyone who sees a drastic increase should contact their agent,” Farmer said. “There must be some trigger.”

Abrams and Knight are both concerned about the impact on local businesses.

“I’ve even seen sales fall through because the prospective owner wasn’t able to satisfy their lender’s flood insurance requirements,” Abrams said. “I can only assume that businesses who aren’t able to afford the coverage will close their doors.”  

She said there are several alternatives to NFIP-backed flood insurance policies.

“However, the guidelines are extremely strict,” she said. “So far, I’ve only had one building in downtown Stanwood qualify.”

Knight suggests that property owners facing extreme rate hikes call Congressman Rick Larsen’s office, 425-252-3188, ext. 1002.

“The real terrible tragedy,” Knight said, “is that those most affected by the new rates are least likely to see a flood in their lifetimes.”