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Federal Flood Insurance Program Swamped by Climate Change

FloodNOAAMany waterfront developments across the country would never have been built without the implicit backing of U.S. taxpayers.

The National Flood Insurance Program, created by Congress in 1968, provides insurance to more than 5 million property owners in flood-prone areas across the country.  Many could not have obtained mortgages to build or buy their properties without the government program.

But with climate change driving up sea levels, some argue the government should stop subsidizing waterfront construction in the Chesapeake Bay region and elsewhere that is inevitably going to be flooded out by a combination of rising storm surges and (in some areas) slowly sinking land. Critics also contend flood insurance can encourage building in wetlands and on top of environmentally critical areas.

“If I was king of the waterfront, I would abolish flood insurance immediately, ”  said Orrin Pilkey, Professor Emeritus at Duke University who studies waterfront construction.   “I think anything that would discourage intensification of development at the waterfront will be a good thing for long term future of the country.”

The National Flood Insurance Program has been underwater financially since Hurricane Katrina in 2005, and was also swamped by Superstorm Sandy last year, according to the Government Accountability Office (GAO).  The program is now $24 billion in debt to the U.S. Treasury, a July 2013 GAO report reveals.

 In an effort to make the program solvent, Congress last year passed a law that is now raising flood insurance rates for about 280,000 policy holders across the country, including thousands in Maryland, Virginia, Pennsylvania and across the Chesapeake Bay region.

A U.S. Senate subcommittee held a hearing on the flood insurance reform measures (called the Biggert-Waters law) last month, before the chaos of the government shutdown.

Louisiana Senator David Vitter complained that a few property owners in low-lying areas are drowning financially because of rate hikes of more than $2,000 a month.

“This is not some parochial Louisiana issue. This is a national issue, be assured,” Vitter said. “We might be feeling it first… But this movie is coming to a theater near you. And it ain’t a good ending right now.”

But Stephen Ellis, vice president of Taxpayers for Common Sense, said the Obama Administration should press ahead with the flood insurance rate increases.

“People deserve to know the costs and risks of where they live,” Ellis said. “And taxpayers deserve to have those who choose to live in harm’s way pick up their fair share of the tab.”

In the Chesapeake Bay region, one of the largest concentration of properties with federal flood insurance is in Ocean City, Maryland.

Reese Cropper, president of Ocean City-based Insurance Management Group, said it is unfair when people from inland areas demand an elimination of federal flood insurance.  He noted that Midwestern states, for example, receive taxpayer subsidies in the form of federal crop insurance against other climate-related disasters.

“There isn’t any place in at least the United States that I know of that you don’t have some level of risk from natural disasters, whether it be droughts, flooding, earth quakes, tornadoes. It’s throughout the whole United States,” Cropper said.

For years, the U.S. Army Corps of Engineers has been pumping sand on the shrinking beach at Ocean City.  Cropper hopes this defense against waves will justify the lowering of federal flood insurance rates.  But who paid for the beach replentishment? Taxpayers.

It is unclear how long this sand -- or this logic –- will hold against the rising ocean.

By Tom Pelton

Chesapeake Bay Foundation

(Photo from NOAA) 

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