Dennis Persica: Flood policy ‘reforms’ soak policyholders

One person’s government reform is another one’s financial burden.

Last week, U.S. Sen. Mary Landrieu, D-La., vowed to object to all Republican amendments to a farm bill unless something is done about planned increases in the premiums property owners pay for flood insurance. She wants to enact a three-year delay in National Flood Insurance Program premium hikes. Without the delay, Landrieu said, rates would jump by at least 20 percent.

Landrieu brought the same issue up in early May when the Senate considered the Water Resources Development Act. Her counterpart, Republican Sen. David Vitter has been on this issue, too. So has Sen. Robert Menendez, D-N.J.

Menendez’s interest in this is obvious if you remember the path Hurricane Sandy took late last year. If you want a good gauge of Sandy’s impact, compare NFIP statistics from 2011 to those from this year. Between January 1978 and March 2011, New Jersey had gotten $971 million in flood-insurance claims payments. Neighboring New York got $627 million during that same time. But if you extend that period to March 31 of this year, New Jersey’s total NFIP payouts swelled to $4.8 billion, while New York’s grew to $4.4 billion. (Louisiana, which often leads the nation in bad things, is at the top of this list, with $16.6 billion in flood claims paid.)

In all, NFIP has paid $48 billion in claims from Jan. 1, 1978 through this March. Last year, in part as a response to the massive costs of Hurricane Katrina, Congress passed a law that aims to reform NFIP by making it “fiscally sound.”

In her May speech on her proposed amendment to the WRDA bill, Landrieu said the rate increases under the new law will reduce property values.

“My constituents tell me that their properties will become worthless,” she said. That same day, Vitter told the Senate it must ensure that people “aren’t priced out of their homes.”

Last week, the House of Representatives passed an amendment by Rep. Bill Cassidy, R-Baton Rouge, that would prevent FEMA from implementing the premium increases, but the Senate still has to concur.

Some people may scoff at seeing “government program” and “fiscally sound” in the same sentence, and justifiably so. For example, while the NFIP reform tries to save the government money through rate increases, it also shells out money to help homeowners overhaul their properties to avoid the higher premiums.

Granted, the funds used in those mitigation programs may not come close to matching the financial hit NFIP would take if another Sandy or Katrina were to strike. But there’s a robbing-Peter/paying-Paul aspect to all of it that makes this seem like a law passed by the government of Bizarro World.

Those who are facing higher premiums may wonder why they’re being sacrificed on the altar of “fiscal soundness” virtually by themselves. Has anyone looked into the soundness of the various guarantees the government offers, such as backing home mortgages or loans in favored industries? What about the countless federal tax credits that are available if you put your money in the right project?

If the move toward fiscal soundness for NFIP were part of a top-to-bottom review of all government programs with the goal of eliminating waste and inefficiency, the increases would be easier to swallow, at least psychologically if not financially. But as things stand now, flood insurance policy holders have to feel like they are the only ones being soaked and hung out to dry.

Dennis Persica is a New Orleans-area journalist. In his weekly column he shares his thoughts and observations about people, places and issues in the New Orleans area. Persica’s email address is dpersica@gmail.com.