Political Tap Dancing Ground Zero Style

Frankly I’m surprised the Bay St Louis NFIP letter contraversy is just making the Sun Herald but then again I recall only one short report on the same topic from WLOX a few weeks ago. I’m going to be completely honest and say I’ve been ducking this issue for weeks because the implications for impacted residents are severe despite the double talk coming from Bay St Louis city officials. Unfortunately if you are an impacted homeowner looking for straight answers, you’ll find none in the JR Welsh report on the topic in today’s Sun Herald which focuses on political finger pointing instead. First we’ll begin with the reporting which conveys some facts and then I’ll give some analysis including what I tell my paying clients from the area:

Hundreds of homeowners here are scratching their heads after receiving letters informing them they must either elevate, tear down or move their houses more than three years after Hurricane Katrina.

The letters were mailed to property owners by the city’s Building Department at the behest of the federal National Flood Insurance Program. About 1,300 of the letters have gone out over the last two months or so, city officials said.

The ominous letter informs property owners a “Substantial Damage Determination” found their property, located in a special flood-hazard area, had suffered hurricane damage in 2005 that equals or exceeds 50 percent of the current market value. Their options: Tear down the house, raise it higher or move it.

The problem is, the letters mean essentially nothing, a city official said, even though the communication has caused widespread confusion. Officials are now telling homeowners to “disregard the letter, but keep it,” said city Operations Manager Buz Olsen.

At least one City Council member acknowledges FEMA, not city officials, is ultimately responsible for the letter. But Ward 2 Councilman Jim Thriffiley said he wants more answers.

“That was stupid. That’s the only way to describe it,” he said. “This is a federal deal, for somebody to write a report and say, ‘I’ve done this and that.’ It’s worse than immoral.”

Letter recipients were urged to make an appointment with the Building Department and were told they may qualify for up to $30,000 under their flood insurance policies to help with the cost of elevating, removing or dismantling their homes.

Long before the letter was mailed, many owners already had spent thousands to rebuild their homes since the hurricane. Others who lost their homes in Katrina have left the area or simply have no intention of rebuilding on the old site.

Some property owners who got the letters “panicked,” Olsen said: “Unfortunately, we sent them out to 1,300 homeowners. We mailed that two months ago. It should have been mailed two-and-a-half years ago.”

But he said federal officials gave the city no choice about sending the letter. And of the 1,300 recipients, it actually should have gone to “maybe 200 or 300,” Olsen said.

He said the letter was required under the Community Rating System, which allows homeowners who comply with federal flood requirements to receive discounts on flood-insurance premiums. “We were under the gun to get that letter out,” Olsen said. “We’re correcting that now.”

Under the same logic, city officials ordered last year that the Bayou LaCroix Marina on Mississippi 603 be forced out of business. Because the building fell below FEMA elevation requirements, allowing it to remain would have jeopardized flood-premium discounts for other city homeowners under the rating system, officials said at the time.

Thriffiley objects that the recent letters were unnecessary, and only added to the burden and stress for homeowners who already face skyrocketing insurance costs and higher taxes under a new county property reappraisal. The reappraisal was mandated by the state.

A year or so after the storm when my wife and I decided to eventually move back home to Hancock County instead of rebuilding in Harrison, we began the hunt for land in Bay-Waveland. We found a vacant lot (with slab) in a nice neighborhood close to the water where around half of the houses remained post Katrina.  The price was right so we put in an offer subject to several contingencies.  Word of the lot selling (and not at an inflated price) spread fast and within a day I received a phone call from my best friend with word from one of the existing homeowners.  “Tell (Sop) we have covenants in this neighborhood and we don’t want any “fish camps” built here”.  In local parlance any house that is raised qualifies as a fish camp and since the seller did not disclose any covenants I immediately called the local attorney I use there and inquired. The answer soon came back that this subdivision, within plain sight of the Mississippi sound, had a restrictive covenant that limited a homeowner essentially to a slab on grade. Aside from the manifest shortsightedness of such a restrictive covenant and given the results of slab living at 15 feet above sea level I was dumbfounded at the sheer stupidity involved with the “anti fish camp” sentiment. I flushed the deal and decided before I continued with the land hunt it would be wise to consult with local building officials, in this case my friend Otis who was volunteering in the City of Waveland’s building department.

“Those people are in denial” was the first words I heard. “Every house in that neighborhood was assessed at over 50% damage and one more insurance claim (and it doesn’t have to be a flood claim) will result in them being booted from the flood program.”

We eventually found a lot elsewhere that had no impediments to flood mitigation but the lesson of the conversation was not lost on me: Buy a Katrina damaged house and you take your chances.

That ugly truth was hammered home by Hurricane Gustav. I am familiar with one structure that flooded with a few feet of water with Gustav that was built after Katrina but before the new flood maps were issued that now must be torn down because it is non-compliant. The owners are now sitting on a 6 figure uninsured loss.

Is that letter NFIP mandated really meaningless to the homeowner/recipients? If it were truly meaningless Mr Olsen would not be advising people to save it. At a minimum it should serve as warning to those who now live below base flood in Katrina damaged structures they are living on borrowed time. No amount of sweet baby talk out of the Bay St Louis city officials can change that.

Finally does anyone remember a possible reason why those letters were mailed “two months ago” instead of “two-and-a-half years ago”.  IMHO a possible reason would be the former Bay St Louis building inspector, whom Mayor Farve defended to the bitter end, was moonlighting for six figures consulting fees with the County instead of earning his full time salary with the City. The lack of leadership out of the Mayor’s office in Bay St Louis is simply astounding and one of the better kept dirty little secrets on our post Katrina coast.

While I’m on my soapbox I’ll add that as much as I personally respect and admire Councilman Thriffiley, the people in Bay St Louis would be far better served without the finger pointing. People can’t plan the future without good information. Instead of wasting energy finding who at City Hall mailed the mandated letters the public would be better served if they knew the true implications of life below “base flood”.

Finally some areas in Bay St Louis, especially the newly annexed areas, are far better off never being developed/redeveloped. A year ago I would have been shouted out of the room for saying that. Now post Gustav/Ike, people that have flooded out three times since Katrina understand why living on a slab at 6-8 feet above sea level is simply a bad idea.

I’ll close this post with the lone comment left on Mr Welsh’s story that shows the locals “Do C It”:

Olsen said the issue is typical of trying to wade through myriad federal requirements and complications that follow a hurricane. “We will be trying to decipher all this for years,” he said. Residents will also be trying for years to decipher all the new ordinances/codes that the building department makes up. An engineer’s signature/stamp necessary on your site plan for example. BSL City Council has been blaming their decisions and actions on FEMA and MEMA for over three years but those “in the know” know that the majority of those decisions and actions are made locally. No wonder recovery and rebuilding is progressing at a snail’s pace. Without new leadership this scenerio will continue.

Readers can direct their hate mail on this post to Proximo via slabbed. I’ll make certain he gets it. 😉

sop

10 thoughts on “Political Tap Dancing Ground Zero Style”

  1. No hate mail here Sop. I agree with what you are saying in part. The letters SHOULD have gone out 3 years ago. If FEMA says you have houses below a ‘safe’ level and they are the ones with the insurance you are asking to collect on, then you should build to what they want. Simple as that. If that doesnt seem “fair” and people think they should continue to dip into mine and yours tax dollars because they keep having claims in an area where THEY KNOW THEY WILL EVENTUALLY, then kick them out of the taxpayer pocketbook. The fact that the city elected officials have probably kept FEMA at bay, and from what I last read, apparently are still fighting FEMA on the elevations, is probably more indicative of these officials playing to the electorate and not to what is in the best long term interests of their city. When ALL of your residents there lose their taxpayer subsidized way of living, then WHO will be to blame? In response to your other post as well let me tell you: I would rather have the insurers run the program you talk about (an all inclusive, no windflood differentiated insurance policy) than uncle sam. I would like the govt to be the backstop due to the potential size of the disaster (it does no one any good if you have to go through bankruptcy court to get your claim paid.) BUT, I bet my reasons are different from what you think. 1) I DO NOT TRUST GOVERNMENT PROGRAMS 2) I DO NOT WANT TO LIVE IN A SOCIALIST COUNTRY 3) IF A PRIVATE OR CORPORATE ENTITY DOES SOMETHING ILLEGAL OR DAMAGING, THEY CAN BE PENALIZED ANDOR PUT IN JAIL (prosecuted) Did congressman Schumer go to jail for single-handedly causing the failure of that northern bank he criticized? Is anyone being put in jail or punished for the piss poor job FEMA did after katrina? NO. Govt. wont punish itself. What about punishing congress for NOT DOING A DAMN THING about the low flood limits that are still in place to this day? What if you guys had gotten your butts waxed by another storm this year? What about Texas and Ike? Did anyone even HAVE THE OPPORTUNITY TO BUY LARGER LIMITS FROM FEMA? WHO IS IN CHARGE OF THAT SITUATION? NOT THE PRIVATE INSURERS! The fact that a democratic led house and senate could not get something like this through speaks volumes about your boy Taylor and his ability to be a player. Government simply doesnt like punishing its own but they can throw the book at the corporate types (Ken Lay, Bernie Ebbers, and the list goes on.) That is why the private sector needs to be in charge. Ok, I have now gotten all worked up after getting back from church in a peaceful frame of mind. I’m gonna throw a few logs on the fire, what the snow thaw and see what comes at me next. Good day.

  2. By the way Sop, I hope you, Nowdy, and everyone on the Gulf Coast had a great Thanksgiving. I hope the country has a great Christmas and better 2009.

    P

  3. Thanks, Proximo, had a very pleasant Thanksgiving and hope yours was as well.

    I, too, wish the country a great Christmas, I think most everyone will have a simple Christmas this year – and that’s good in many ways IMO – too much can have too little meaning.

    We always got an orange along with our “Santa” – and my mom’s annual reminder that some children would be thrilled to have anything, even an orange.

    Throw another log on the fire and I”ll be back shortly with response to your to your other comment.

  4. Proximo, I’ve been pro-insurer in past debates of private insurer versus public program related to health care coverage.

    However, I’ve examined the private insurer role and responsibilities re NFIP pretty closely – and I use the word responsibility loosely because I see very little at all.

    The insurance industry has no capacity advantage over government – insurers are “middle men” between the government and a set of subcontractors. Cutting out the “middle men” would save a ton of money.

    What troubles me most is the little evidence I see of industry integrity. I realize that’s a broad brush but I believe it paints an accurate picture. Congress certainly did not come up with the idea of deviating from the most basic principles of accountability for the use of public funds.

    Contrast the property insurance industry with that of health care. Everyone seeking treatment lists any/all coverage and signs a release.

    If Medicaid is a part of the coverage, it is a secondary provider. Private policies always pay first.

    A responsible corporate citizen would INSIST on following the rules. A responsible corporate citizen would INSIST on adding disclosure requirements when an individual is cover by both policy with WYO and NFIP.

    I find it hard to believe the members of Congress would want insurers to be exempt from the very rules they have to follow in operating their offices. So, the glorious mess is of the industry’s own making.- applying their influence/lobbying

    There is no evidence to suggest otherwise.- and no way to separate those insurers who are responsible from those who knew what was right and didn’t speak up.

    Just thinking about the situation “disturbs my peace of mind” – but its too late to light a fire so I’m going to have a glass of wine – will toast you and your thought provoking comment when I do. Cheers!.

  5. The phrase “getting away with what they can get away with” comes to mind Nowdy. And that was one of my points to Sop. Corporate entities -can- be nailed, if the government will stand up and do it. I may be politically naiive but I just dont see how anyone can say insurance company lobbyists have more power than a wronged electorate. I agree that there were probably some “innocent bystanders” that let things go the way they did without saying anything, but to pitch the system to the government is just not the way I would like to see this go. It strikes against everything I believe in as a corporate American citizen. Have a sip for me and I’ll chat back at ya later in the week when I am back by a computer.

    Peace

  6. Naive is not a word I associate with you, Proximo, When you’re back, be sure to check out chapter 6 of the scheme as it speaks to some of these issues. Never had it happen before but the post disappeared when I hit “save” and I’m having to rewrite. Hopefully, it will be up tomorrow.

  7. I don’t perceive any benefit from hiding the obvious Proximo but the story is far more complex than either the news story or the post indicates.

    In the case of the Gustav flooded bldg it was new post Katrina construction built to the specs of the old flood maps. It took FEMA almost 3 years to issue new maps so people essentially had to guess at their elevations.

    In the meantime people like my friends G & T, who had three young children to think about decided the best route for them after Katrina was to fix their flooded but otherwise still standing house. Given the circumstances on the ground in late 2005 I don’t blame them for going that route. They never flooded prior to Katrina but I’m certain they are below base flood now.

    NFIP is intended to be a subsidy BTW. The concept is a carrot and stick approach to making entire communities less flood prone. Structures below the new flood elevations are not being subsidized by you though. NFIP premiums are very high if the structure is under the new base flood elevations. OTOH if a homeowner exceeds base flood the premiums are much cheaper.

    The problem comes when solving one risk in flood increases another in wind. IMHO land that is too low on ground (against required elevations) should not be developed for that reason.

    Finally FEMA needs to update their maps nationwide, especially if warnings concerning the implications of global warming are halfway accurate.

    Thanksgiving here was great thanks for asking.

    sop

  8. There are several issues here.
    First, FEMA/NFIP go out of their way to pretend that the federal government is not imposing requirements on local communities. They did not impose new elevations, but instead issued advisory base flood elevations. Several local governments allowed residents time to get permits under the old elevations before they imposed new ones.
    FEMA also left it to local building officials to make the 50% call, but three years later FEMA is getting around to checking the permits and finding that some that were deemed under 50% should have been over 50%.
    The NFIP 50% rule does not work very well in my opinion. It is much too common for the original estimate to be under 50% and the eventual work to be well over 50%. The local government is not going to take a hard line against local homeowners in order to save the federal government from subsidizing flood coverage.
    If a house is deemed to be more than 50% damaged, the ICC payment is not enough to cover the additional cost of rebuilding at a higher elevation, especially when the demand surge inflates building costs after a major catastrophe such as Katrina.
    If the 50% rule were strictly enforced, a lot of repairable homes would have to be demolished and rebuilt. For that to happen, the state and local governments would need to use their Hazard Mitigation Grant Program funds to help cover the costs.

  9. Brian thank you for the additional explanation and unmixing our apples and oranges.

    The number I heard the most for properly fixing a house with 5 feet of water or so was around $70/sq ft compared to $110 to $135 (and up) new depending on foundation and height.

    This property tells the tale. I wonder how much the wind insurance runs on that place. It has been on the market forvever and had water under the living areas for both Ike and Gustav.

    Steve may have some additional insight if he drops in.

    sop

  10. Another issue – Some homeowners made improvements (adding a bathroom, for example) while repairing storm damage.
    After the fact, FEMA does not distinguish between the repairs and the renovations. FEMA counts it all as one project. If the total project cost is more than 50% of the value of the home, FEMA says the home should have been elevated.

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