Around the GO Zone in 60 Seconds: Lipstick on a Taxpayer Subsidy, Confidence and Cottages

As I once again catch up to the news I was struck by the assortment of local stories that dovetail nicely with our theme and recent posts here on Slabbed. We’ll start with the Sun Herald editorial board and a recent Op-ed that left me scratching my head as I was reminded of the old popular stock cliche’ in “Lipstick on a pig”.  Let’s start with some excerpts:

Lawmakers need to do all they can do during this legislative session to ensure that insurance will be both affordable and available for homeowners in South Mississippi.

To provide further proof of the necessity of such legislative action, the Gulf Coast Business Council has commissioned an independent study by the Stennis Institute to calculate the statewide economic impact of current insurance rates on the Coast. The report will estimate how much tax revenue — from sales taxes on construction materials to income taxes on those employed in every phase of the housing industry — the state is losing due to current insurance rates.

That report is expected to more than justify putting more money into the “wind pool” to lower premiums.

That, in turn, should result in increased economic activity on the Coast.

With this new report, all legislators should be convinced that Mississippi needs to make a clear commitment to the Coast in recognition of this region’s economic importance to the entire state.

And of course the swine lipstick slather party is couching a taxpayer subsidy in terms of economic development. We’ve covered these concepts many times on Slabbed and it doesn’t take an expensive study to figure the obvious that the high cost of insurance costs Mississippians taxes, money and jobs. But does that justify putting more taxpayer money into the Mississippi wind pool? The editorial board at the Sun Herald seems to think so as the editorial continues:

That is why additional funds for the “wind pool” are being described as an economic stimulus.

It has even been referred to as an economic development project — the only difference is that this will assist thousands of individuals rather than one industry.

As we’ve covered many times here on Slabbed the reason our wind pool rates are so high is the pool itself is not prohibited by law from building meaningful reserves. The effect of that restriction is the pool is forced to buy reinsurance to cover claims from the first dollar low tranches up and that is very expensive. * The wind pool people will tell you they are set up to price gouge by design so that the mythical insurer can profit from underwriting wind risks on the coast by being able to undercut the wind pool’s very high pricing. The state pools are almost all set up this way so they do not have a competitive advantage over for profit insurers. Of course I use the term mythical insurer because no private carriers are writing wind policies most anywhere close to the shoreline in Mississippi or elsewhere.  In the end consumers get gouged protecting a private market that does not exist.

From that perspective putting more taxpayer money into the bottomless Bermuda reinsurance pit at the Mississippi Wind Storm Underwriting Association is throwing good taxpayer money after bad, especially when there are solutions that will bring premium relief to the consumer such allowing the pool to build reserves. In the meantime we’ll continue to enjoy the spectacle of watching  so called fiscal conservatives justify shipping taxpayer money off to a reinsurer based Bermuda that is most likely partially owned by the same bunch that refuses to write wind-policies on the coast. In the end the complexities involved (as with most complex financial topics) surpass the financial acumen of the average local paper editorial board to do these complex financial topics justice. In this case the commenters to this particular Op-ed have a better grasp of the reality over the wind pool pump parroted by the S/H.

Next up are the quarterly business survey results put out by the Gulf Coast Business Council. I was one of the 320 who took the online survey and the results were somewhat surprising, especially in food and beverage industry which is really hurting as witnessed by the closing of places like Daniels in Bay St Louis. With so relatively few respondents it is statistically meaningless to break the results out by sector but overall the results captured the flavor of what is on the minds of the business community as this excerpt illustrates:

Among the chief concerns of respondents looking to the future were the ability to obtain credit and high insurance costs.

Next up is a Slabbed funny at the expense of WLOX. Our readers may remember I linked a WLOX video report yesterday on a freeloader in Waveland that AJ Giardina featured on his action report. Evidently the folks at WLOX were not very proud of that piece of TV “journalism” as the link was broken quicker than you can say “Toni Miles yer fired”. Even better AJ has run for the hills and Al Showers name now appears on the print story LOL. The couple featured in the story remain freeloading losers.

Of course we finish with cottage news from Waveland which is being flooded with out of state housing advocates intent on dictating how the people of Waveland run their city. These advocates have already made a tough situation worse for both homeowner and cottage dweller alike IMHO. In any event there is nothing like a 60’s style protest though I’m told that at yesterday’s protest in Waveland the locals were greatly outnumbered by the out of state advocates. Al Showers truly did file this report for WLOX:

Two national social justice organizations brought their voices to Hancock County Monday. The Poor People’s Economic Human Rights Campaign, based in Minnesota, and the Social Welfare Action Alliance of Tennessee sent representatives to Waveland.

The groups are trying to rally support for those who want to make Mississippi Cottages permanent homes. Cheri Honkala helped to organize the rally because of what she calls a reluctance by elected leaders to allow the Mississippi Cottages to become permanent homes.

“I’m with the Poor People’s Economic Human Right’s Campaign. I’m a formerly homeless mother and I’m very passionate about this issue.You dare touch any of these families, we’ll come make Mississippi our home. We will set up tents. We will go to jail,” Honkala said.

The protestors then paused for prayer. Rev. Bruce Wright with Refuge Ministries of Florida said, “I believe firmly that people that claim to follow Jesus should be concerned about people having a place to live, and not being put out on the streets.”

The people in Waveland are not shrinking violets though, especially when these out of towners want to turn neighborhoods rebuilding with flood mitigated housing that costs several hundred thousand dollars into a community trailer park as the story continues:

The rally sparked a counter protest from people who don’t want to see the cottages become permanent.

“Not everybody’s for this. Not everybody’s for the cottages next to their houses that they built brand new and spent thousands and hundreds of thousands and their whole grant money. Some people are responsible, some people are not,” Waveland resident Scott Peterson said.

John and Silvia Peterson said, “Why not go into a trailer park? No, they think they’re too good for that.”

The hardening of feelings toward cottage residents as illustrated by the Peterson’s on air comments show how yesterday’s developments has made a bad situation worse as the story continues:

Waveland Resident Mary Sherrouse says it’s not her fault the cottage has become a necessity.

“I have tried to rebuild, but had to let go of a contractor that wasn’t building to code and lacking some money because of it. And I love my MEMA cottage and am just horrified to think people are so, the city is so heartless to want to throw us out,” Sherrouse said.

Bayside Park resident David Winkles agrees.

“Don’t put the old people, the sick people, the people with no place to go, the people with kids out on the streets – don’t send them to trailer parks. Do the right thing. Let them have MEMA cottages on their own property,” Winkles said.

Mr Winkles looked neither old nor feeble to me as he spoke those words and it is not the first time I’ve heard them. It may sound good to non slabbers but does not hold up under closer scrutiny. The reason for that would be stairs and lots of them. You see every cottage south of the tracks will have to be elevated by around 8 feet to comply with the new floodplain requirements. I am blessed to still have my elderly arthritic Momma alive who was quick to make certain we had an elevator in our design along with a first floor bedroom for her to sleep in when she visits as she is unable to climb stairs very well. I don’t think the sick and elderly residents of Waveland would do any better with stairs, especially when these folks are way too poor to afford adding a lift  to their elevated cottages.

In the end if Gulfport’s cottage ordinance, which is now being used as the model in Bay-Waveland, is too restrictive I fear there will be no room to find common ground on this issue. I know this, I’ll never build out my property in Waveland if my neighborhood is allowed to turn into Shoreline park south.

sop

* See comments

5 thoughts on “Around the GO Zone in 60 Seconds: Lipstick on a Taxpayer Subsidy, Confidence and Cottages”

  1. Sop. please elaborate on the “pool” cannot acumulate reserves and must buy reinsurance for first dollar. That is insane. The idea of the pool is build reserves during non-event years which should eventually reduce reinsurance costs as the reserves build.

    Are these funds “state” funds that the pols in Jackson have access? If so, that is terrible. You can never let pols have access to funds designated for a specific need.

  2. Sup the topic deserves it’s own post. We’ve chatted on this before on this blog and the answer is far more complex than not being allowed to build reserves, which I’ll go on record now as saying is not accurate. I’ve had a couple of emails on this as well.

    The Mississippi wind pool is designed to operate as an exempt organization. It is exempted from compliance with most state laws including the public purchasing statute. Once the money goes in the wind pool hopper it is most likely gone for good.

    sop

  3. The wind pool is not controlled by politicians. It is controlled by insurance companies. It is supposed to be a risk pool backed by insurers, not by taxpayres.
    Before Katrina, the insurers took any reserves that built up. Since Katrina, the pool is permitted to build a reserve but the cost of reinsurance makes that impossible.
    The pool has a reserve of about $60 million which is only one percent of the insurance in force. It has a deductible of $20 million and then there are several layers of reinsurance totaling $470 million of the next $550 million. Ther other $80 million is self-insured retention to be paid by the wind pool and/or state taxpayers. The $80 million is in scattered pieces of risk in between layers of reinsurance.
    The $470 million of reinsurance cost $65 million in premiums. Passing that cost on makes the homeowners premiums completely unreasonable and unaffordable except that the state has used federal and state taxdollars to pay a large share of the reinsurance cost.
    There is no chance that the wind pool will build up reserves, because if it were possible to raise premiums, the insurance representatives that control the wind pool would demand that it buy more reinsurance coverage to shield the companies from the assessments for losses above $570 million.

  4. Brian, can you speak to the reported near depletion of the funds in the Texas windpool. As I recall, you have previously commented on the significant reinsurance purchased to back up that fund.

    Also, I’ve seen legislation here to purchase $120million in reinsurance for the State’s windpool over the next four years.

    Has Congressman Taylor been involved in conversation with members of the Legislature? Given the information you have provided, it seems questionable to increase the State’s windpool investment and reduce state agency budgets to the extent needed services are also reduced.

  5. I guess we should call it a wind re-insurance program? Of course the transparency of re-insurance purchases is probably crystal clear?

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