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4 The National Flood Insurance Program OVERVIEW In the mid 1960s the federal government began to address the need for nonstructural approaches to flood loss reduction through land use planning, building/construction standards, and an insur- ance program. Policy makers realized that structural flood hazard controls (e.g., dams and levees) and disaster relief could not fully alleviate the nation's mounting flood losses. The financial cost of these past strategies, their environmental impacts, and their failure to do anything to minimize future flood hazards led to the conclusion that new program initiatives were needed. Congress responded to this need by passing the National Flood Insurance Act in 1968 (P.~. 100-242, Title 13, codified at 42 USC 4001 et seq.~. Key provisions of the act relevant to this study are in Appendix D of this report. This act established the National Flood Insurance Program (NF1P), with the objectives of providing affordable insurance coverage and reducing future flood Tosses. It required community management of new development in identified flood hazard areas consistent with minimum federal standards. The basic premise of the NF1P is clear: if communities act to limit future flood losses by instituting sound floodplain management, the government will help by assuming the financial risk faced by existing structures. Floodplain management includes, but is not limited to, 71

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72 MANAGING COASTAL EROSION building and land use regulations adopted and enforced by the local community and pursuant to national standards, established by the Federal Emergency Management Agency (FEMA). A fundamental goal of the NF1P is to be fiscally sound, namely to cover all claims out of premium income and thereby reduce future dependence on federal tax money to subsidize the program. The act notes the importance of establishing community pro- grams to reduce future floor! loss. The National Flood Insurance Act explicitly notes that sound land use management can rn~nimize flood losses. The act requires adoption of local land use ordinances that meet minimum federal standards as a precondition to the availability of flood insurance (see Sections 4002, 4012 in Appendix D). The gen- eral content of these minimum local management and loss prevention programs also is set out in Section 4102. A key requirement of the act and NF1P was the identification of the degree of flood hazards and risks that form the basis for the land use measures and insurance rate setting (Section 4101~. NFIP EROSION PROVISIONS Congress explicitly dealt with the question of erosion as a flood loss in 1973, based on a finding that damage resulting from erosion and consequent undermining of structures is related in cause and is similar in effect to damage that results from floods per se. The Flood Disaster Protection Act of 1973 (P.~. 93-234, Section 107) added the following: Section 4121 (Section 1370 of Act) (c) "The term 'flood' shall also include the collapse or subsidence of land along the shore of a lake or other body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels, and all of the provisions of this title shall apply with respect to such collapse or subsidence in the same manner and to the same extent as with respect to Roods . . . including the provisions relating to land management and use.... n (codified at 42 U.S.C., Section 4121) In response to this amendment, several sections were added to the NF1P regulations in 1976 to address erosion problems. First, "areas of special flood-related erosion hazards" were defined as a separate and distinct hazard area category, to be designated as "Zone E" on flood hazard maps (44 CFR, Part 65.1~. Second, a statement of purpose was adopted "that all eligible communities must take into account flood, mudslide (i.e., mudflow), and flood-related erosion hazards, to the extent they are known, in all official actions relating

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THE NATIONAL FLOOD INSURANCE PROGRAM 73 to land management and user (44 CFR, Part 60.1~. This regulatory definition of erosion hazards is limited because it excludes erosion that occurs on a gradual scale unrelated to a flood event. Still, it did establish a framework for communities to address the problem. The provisions for how communities are to address the erosion issue were also set forth in the 1976 addition to the regulations. Part 60.5 indicates that if a community has identified erosion as a problem in its area but has not formally established ~zones, it is required to determine, for each individual development proposal, "whether the proposed site alterations and improvements will be reasonably safe from flood-related erosion...." If an Ozone has been designated, in addition to the above re- quirement, the community must "require setbacks for all new development from the ocean, lake, bay, riverfront or other body of water to create a safety buffer consisting of a natural vegetative or contour strip. This buffer will be designated by the Administrator according to the dood-related hazard and erosion rate, in conjunction with the anticipated 'useful life' of structures, and depending upon the geologic, hydrologic, topo- graphic, and climatic characteristics of the community's land. The buffer may be used for suitable open space purposes, such as agriculture, forestry, outdoor recreation and wildlife habitat areas, and for other activities using temporary and portable structures only. Additional sections of the regulations set out provisions for com- munity erosion area management that are encouraged but not re- quired. Part 60.24 encourages localities with erosion problems to direct future development to noneroding areas; to reserve erosion- prone areas for open space; to coordinate planning with neighboring communities; and to adopt preventive measures for ~zones, "includ- ing setbacks, shore protection works, relocating structures in the path of flood-related erosion, and community acquisition of flood-related erosion-prone properties for public purposes." Part 60.22 encourages adoption of postflood recovery programs to preserve open space, relocate threatened development, and acquire hazardous lands and frequently damaged properties. Despite the inclusion of flood-related erosion hazards in the act in 1973 and the adoption of administrative regulations to address erosion hazards in 1976, the NF1P has failed in the intervening years to take action to implement these changes. No E-zones have been designated, no "safety buffers" have been designated by the administrator, and no mandatory community land use management measures for erosion hazards have been required.

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74 MANAGING COASTAL EROSION EXPERIENCE WITH HAZARD DELINEATION IN THE WHIP A great deal of time and resources have been devoted to identi- fying flood hazard areas under the NFIP. FEMA has initiated 12,058 detailed community flood hazard studies of which 10,799 were in effect as of October 1, 1988. The total cost of this hazard-mapping program has exceeded $800 million. For regulatory purposes NF1P has defined its "base flood" as a flood that has a 1 percent chance of being equaled or exceeded in any given year (100-year flood). Areas subject to inundation by the base flood are called Special Flood Hazard Areas and are designated as A-zones on Flood Insurance Rate Maps (FIRMs) (see Figure 3-2~. In coastal areas V-zones (also called "coastal high-hazard areas" ~ are designated along open coasts subject to significant wave action from hurricanes and other storms and tsunamis. V-zones usually are seaward of A-zones, which comprise the remainder of coastal areas within reach of the 1 percent flood. In practice, V-zones are areas estimated to be subject to at least a 3-foot breaking wave during a 100-year storm. Recent regulations adopted by FEMA have included primary frontal sand dunes in the definition of V-zones (44 CFR, Part 59.1~. In addition, these new regulations define criteria (44 CFR, Part 65.11) for evaluating whether a sand dune would be expected to survive intact as an effective barrier to waves and surge during a base flood event. The new definition for V-zones and the erosion criteria are to be used in areas where the extent of existing V-zones, as shown on FIRMs, underestimates the flood hazard. Erosion is only considered in the mapping of V-zones where it affects the potential survivability of sand dunes and the height of waves during a base flood event. Long-term erosion trends are not taken into account nor are future sea level rise, subsidence, or other factors. At the present time, V-zones have been mapped only in areas along the Atlantic and Pacific oceans and the Gulf of Mexico. How- ever, FEMA is in the process of developing a wave runup methodol- ogy that will be used to determine and map V-zones along the Great Lakes. This remapping effort is expected to begin in 1990. Since 1968 FEMA has gained valuable experience in floodplain management, and this program, with both its insurance and land use management components, has in many respects been the nation's pri- mary too! for addressing development management in coastal hazard

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THE NATIONAL FLOOD INSURANCE PRO G~M 75 areas. Over 16,000 local governments nationally have adopted man- agement programs that meet minimum federal standards (Godschalk et al., 1989~. Within mapped V-zones, participating communities must: 1. aObtain the elevation (in relation to mean sea level) of the bottom of the lowest structural member of the lowest floor . . . of all new and substantially improved structures . . . and maintain a record of all such information...." "Provide that all new construction within V zones . . . is located landward of the reach of mean high tide." "Provide that all new construction and substantial improvements . . . be elevated on pilings and columns . . . to or above the base flood level, and the pile or column foundation and structure attached thereto ~ anchored to resist flotation, collapse, and lateral move- ment.. . .n "Provide that the space below the lowest floor be either free of obstruc- tion or constructed with non-supporting breakaway walls, open wood latticework, or insect screening intended to collapse under wind and water loads.... "Prohibit the use of fill for structural support of buildings within V zones. 6. "Prohibit man-made alteration of sand dunes and mangrove stands within V zones which would increase potential flood damage. (44 CFR, Section 60.3) 2. 3. Thus, local communities are not required to prohibit new con- struction or substantial improvements within V-zones, despite the high level of hazard they represent. Instead, such construction is simply required to meet certain minimum standards designed to re- duce potential flood damage. No horizontal setback is required inland of mean high tide. The committee dotes several incongruities in FEMA's coastal hazards delineation. In general, V-zones are narrowly drawn. The V-zones frequently exclude adjoining areas with virtually indistin- guishable hazard characteristics. The adjacent A-zones are not sub- ject to as stringent development controls as the V-zones. In Newport Beach, California, for instance, the boundary between ZONE VE (EL 11) and ZONE AE (EL 11) runs down the middle of the beach in places. However, within ZONE AE commercial development may be constructed at grade level if flooUproofed to 11 feet (i.e., base flood elevation). In the VE zone, it must be elevated on pilings to that level. There is also disparity in requirements regarding V-zones in con- trast with riverine floodways. A floodway is defined as "the channel of a river or other watercourse and the adjacent land areas that must

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76 MANAGING COASTAL EROSION be reserved in order to discharge the base flood without cumulatively increasing the water surface elevation more than t1 foot]." Within designated floodways, the community must "prohibit encroachment, including fill, new construction, substantial improvements, and other development within the adopted regulatory floodway that would re- sult in any increase in flood levels within the community during the occurrence of the base flood discharge" (44 CFR, Section 60.3~3~. Although the concept of restricting development of the floodway dears with increasing the hazard for others, the regulations have the eject of restricting development in areas of the floodplain that are normally deeper and with higher velocities and thus more haz- ardous. New construction virtually is prohibited within floodways. Such restrictions do not apply in the most hazardous open-coast areas. Development may and widely does occur in V-zones. The fail- ure to identify a comparable area of highest hazard (both in terms of potential for damage to structures located within such areas and in terms of their contribution to increasing the hazards to other structures from their floating debris in storms) is of serious concern, particularly given the potential for future coastal erosion. Another concern is the infrequency of map updates. Given the high cost of individual map preparation, the experience in flood haz- ard mapping has been to remap on an average frequency of once every 9 years. In addition to these full reviews, FEMA has com- pleted numerous minor map revisions, either physical map revisions or letter amendments, more frequently. In highly dynamic coastal ar- eas, particularly those with severe erosion problems, such infrequent remapping could cause hazards to be seriously underestimated. Per- haps a Geographic Information System (GIS) system could be used to facilitate revisions to coastal maps. EXPERIENCE WITlI COSTS Several factors in the early years of NF1P implementation de- rayed realization of the expected cost savings relative to structural controls and disaster relief (Houck, 1985). Detailed and costly maps of flood hazard areas had to be prepared. During the detailed map- ping process, property owners in participating communities were allowed to obtain a limited amount of insurance, even though the full program development management ordinances were not in place. Insurance rates were subsidized to secure widespread property owner participation. As a result, the flood insurance program paid $651.6

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THE NATIONAL FLOOD INSURANCE PROGRAM 77 million more in citrons than was received in premiums during the 1978 1987 period (General Accounting Office, 1988~. When the costs of hazard mapping and administration are considered, the govern- mental costs of this program are even higher. For example, FEMA reported that for 1987 alone, its costs that were not included in the charges against premiums totaled $54.5 million (including $36.5 million for flood studies and hazard mapping) (FEMA, 12/28/87~. These trends have been reversed in recent years Most of the initial detailed flood hazard mapping has been completed. Approx- imately 2.1 million policies with $162 billion in coverage were in effect on December 31, 1987 (General Accounting Office, 1988~. The policies in force generated an estimated $481.3 million in insurance premiums in 1987 (General Accounting Office, 1988~. Over 16,500 communities have adopted full "regular program" status floodplain ordinances that meet minimum federal standards. In addition, in- surance premium rates have doubled since 1981, bringing the NF1P closer to being actuarially sound and self-supporting. As of August 31, 1987, V-zones that are often synonymous with areas subject to erosion hazards accounted for 64,000 policies (3.1 percent of NF1P total) and $5.2 billion in total coverage (3.3 percent of NF1P total). The average annual premium charge in V zones was $469, in comparison with $259 for the program as a whole (General Accounting Office, 1988~. NF1P losses for V-zones totaled 11,253 claims for the period January 1, 1978, through September 30, 1988 (3.3 percent of NF1P total). These losses totaled $92.9 million paid to insured property owners compared to total premium revenue from V-zone policies of approximately $138 million during that same period. The average amount of loss in V-zones was $8,260, slightly higher than $7,069 for the program as a whole. V-zone policies also accounted for 3,000 repetitive losses totaling $24.4 million during this same time period, amounting to about 2 percent of program totals for this category (General Accounting Office, 19883. To date, V-zone policies have paid their own way and have not generated excessive or unacceptable numbers of losses or repetitive losses. The foregoing data, however, may well provide a misleading picture of the potential liability to the NF1P posed by coverage in V-zones. Hurricane Hugo in 1989, the first category 4 hurricane since Camille in 1969, will result in revision of estimates of flooding zones on the Atlantic coast. Much of the coverage in V-zones applies to structures built since the occurrence of the most recent hurricane

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78 A~lHAGING COASTAL EROSION in that locality but prior to current NF1P elevation requirements. Furthermore, all V-zone structures on eroding shorelines are subject to rising levels of risk due to major storms. FEMA's experience suggests that older structures not built to the more stringent building standards will suffer greater losses. For example, the 1978-1987 average operating surplus per policy for pre- FIRM structures in V-zones was only $12.97, compared to $185.22 for similar post-FIRM structures (Federal Emergency Management Agency, 1988~. The stage therefore is set for major losses to V-zone property (as well as the neighboring A-, B- and Ozone property) in the event of a major storm in the future. Most significantly, the level of risk to existing development in V-zones (as well as in other zones near coastlines of the oceans, Gulf of Mexico, and the Great Lakes) is increasing along eroding shorelines. LOSS PR1:VENTION UNDER THE NFIP: THE UPTON-JONES AMENDMENT In 1987 Congress became concerned over the ever-increasing number of structures threatened by coastal erosion. Rising water levels in the Great Lakes threatened to undermine the trend toward fiscal integrity for the NF1P and become a serious drain on other federal fiscal resources. Much attention has been focused on managing the location and construction of new coastal development. A 1986 survey of coastal states indicated that 19 of 23 responding states were involved in managing new development in coastal natural hazard areas through setbacks, construction standards, and/or land use controls (Coastal States Organization, 1986~. (See Chapter 5 for a detailed review of some of these management programs.) However, little attention had been given to addressing problems of existing development that is increasingly at risk as shorelines continue to retreat. In view of the number of flood insurance policies in coastal areas and their exposure to Toss, this concern was well placed. In response to these concerns, the Upton-Jones Amendment (Section 544, Housing and Community Development Act of 1987, see Appendix A) was enacted into law. The Upton-Jones Amendment was proposed by Representative Fred Upton (A-Michigan) in the spring of 1987. Abnormally high water levels in the Great Lakes had destroyed a large number of structures. Many houses literally fell over eroding bluffs into the lakes, creating debris and safety problems for neighbors and local

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THE NATIONAL FLOOD INSURANCE PROGRAM 79 governments. To assist these beleaguered communities, Representa- tive Upton proposed allowing flood insurance loss payments to be made after threatened structures were condemned but before they actually collapsed. Payments of 110 percent of the insured value would be authorized, with the extra 10 percent covering the cost of demolition and debris removal. When the Housing Act containing this amendment was being considered by the House of Representatives in the summer of 1987, Representative Walter Jones (D-North Carolina) proposed a floor amendment to include coverage of the costs of relocating structures endangered by coastal erosion. Although minimum ocean-front set- backs had been imposed by his home state in 1979, an ever-increasing number of existing beach cottages in North Carolina were facing eventual collapse into the sea. In 1986 the state estimated that in North Carolina alone some 750 ocean-front structures insured at an estimated $50e6 million would be lost to erosion in the next 10 years, with the number rising to some 5,000 structures potentially being lost over a 60-year period. Further, some 4,200 of these structures, insured at an estimated $314.5 million, were predicted to be at imme- diate risk in the event of a major coastal storm (Division of Coastal Management, Department of Natural Resources and Community De- velopment, 1986~. Faced with these potential losses, Representative Jones proposed avoiding these near-certain 100 percent losses by paying up to 40 percent of the insured value for the purposes of relocating the endangered structures to safer locations. The combined amendment, commonly called the Upton-Jones Amendment, was adopted unanimously by the House of Represen- tatives on June 11, 1987. It was incorporated with modest revisions by the conference committee into the final version of the Housing and Community Development Act adopted by the full Congress in December 1987 and was signed into law by the President on February 5, 1988. Prior to the Upton-Jones Amendment, NF1P paid claims only on insured buildings that had actually sustained physical damage as a result of flooding or flood-related erosion. The amendment allows for the payment of a claim prior to actual damage for the purpose of relocating or demolishing the structure. For purposes of a claim payment under the amendment, the value of the structure is determined by the lowest of the following: . the value of a comparable structure that is not subject to imminent collapse;

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80 MANAGING COASTAL EROSION . the price paid for the structure and any improvement to the structure, adjusted for inflation; or ~ the value of the structure under the flood insurance contract. Compensation up to the allowable limits, as applicable, is in- cluded for removing the structure from the site, site cleanup, debris removal, moving the structure to a new site, and, at the new site, construction of a new foundation and related grading and utility connections. There Is no compensation for land values, sheds, fences, walls, and driveways. The cost of purchasing additional property, if needed, Is the responsibility of the insured. To be eligible for a citron payment, the structure must have been covered by a contract of flood insurance on or before June 1, 1988, for a period of 2 years, or for the term of ownership if less than 2 years. The structure also must be subject to imminent collapse as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels. In making imminent collapse determinations, FEMA has adopted interim criteria based on a setback from the shoreline. Specifically, the building must be located within a zone defined as an area sea- ward of a line that is 10 feet plus five tones the local average annual shoreline recession rate as measured from a prominent physical ref- erence feature, such as the edge of a bluff or dune escarpment or the normal high-water limit. The normal high-water limit may be indicated by a Ime of permanent vegetation, a sharp escarpment on the beach, a debris line deposited by the normal tide, or the upper limit of wet sand. For structures that fall outside this zone, FEMA will consider any technical or scientific data submitted with the claim that demonstrates a unique or highly unstable condition at the site. Once FEMA has approved a determination of imminent collapse on a property, future flood insurance coverage and certain types of federal disaster assistance will be available only for buildings on that property that are constructed or relocated beyond the area that is expected to erode within the next 30 years (i.e., Midyear setback) for One- to four-family dwellings. All other buildings must be located beyond the area expected to erode within the next 60 years (i.e., Midyear setback) In order to be Insurable under the NF1P. Structures that are relocated to a different property also must meet these set- back standards for future insurance coverage availability. In addition, relocated structures must comply as well with minimum floodplain management regulations such as elevating or floodproofing to the base flood elevation if the new site is in a designated Special Flood

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THE NATIONAL FLOOD INSURANCE PROGRAM 81 Hazard Area. Owners of structures that are not relocated or demol- ished within a reasonable amount of time following a determination of imminent collapse by FEMA will be eligible to recover only 40 percent of their covered losses should the structure be damaged sum sequently by a flood. The amendment directs FEMA to issue regulations defining cri- teria and procedures whereby state and local governments may cer- tify that a structure is subject to imminent collapse as a result of erosion or underpinning caused by waves or currents of water exceed- ing anticipated cyclical lever. This certification process replaces the interim condemnation requirement now operating that varies widely among municipalities. To bridge the gap between condemnation and the issuance of a final rule for a state and local certification process, FEMA has published an interim rule (44 CFR, Part 63, Subpart B) for state certification. States are eligible for this interim certifica- tion process if they meet certain qualifications. These qualifications include the existence of a statewide coastal zone setback program; ~ the existence of data on long-term shoreline recession rates developed for the state's coastal shorelines; and ~ a setback standard that is based, at least in part, on a multiple of the local shoreline recession rate. States that have applied for and been approved to make certifi- cations to date include, with date of approval indicated parentheti- cally, North Carolina (10/13/88), Michigan (2/8/89), South Carolina (3/2/89), and Pennsylvania (3/2/89~. States that qualify for this interim certification process are re- quired to collect data and information demonstrating that the struc- ture is within a zone near the shoreline (i.e., 10 feet plus five times the recession rate) or otherwise is in an area that is unique or highly un- stable, rendering the structure subject to imminent collapse. These data and information are reviewed by FEMA when a claim is filed by the insured in making a determination of imminent collapse. The final rule wit! further define the qualification requirements for both state and local governments and the criteria and procedure for is- suance of a certification of imminent collapse. In addition to the statutory provisions in the amendment, the accompanying conference committee report for the housing act ap- proved by Congress (Report 100~426) urged FEMA to take additional

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THE NATIONAL FLOOD INS URi4NCE PROGRAM 83 program was also discussed, as was its relation to the postdisaster mitigation plans prepared under Section 406 of the Disaster Relief Act and implementation of the FEMA regulations on special erosion hazard areas (i.e., zone E). Several of these issues were discussed in the conference report, but many were held over for resolution when Congress considers extension of this program after a 2-year trial. On January 3, 1985?, Congressmen Jones and Upton introduced legislation to extend this program for 2 additional years and to make several technical changes in its provisions (H.R. 236~. These changes included clarifying that the requirement to take mitigative action or face reduction of future flood insurance benefits is triggered upon a certification of imminent collapse rather than submission of a claim by the property owner. As of fall 1989 Congress was considering an extension without change of the Upton-Jones provision as part of a 2-year extension of the overall NF1P. EXPERIENCE TO DATE WITH THE UPTON-JONES AMENDMENT As of August 28, 1989, experience with the implementation of the loss prevention provisions included in the NFIP by the Upton- Jones Amendment has been very limited. Approximately 29 percent of these claims were for structures located in noncoastal settings (i.e., riverine) since the amendment specifically includes all "bodies of water." It is somewhat surprising that only 266 claims had been filed since the amendment was enacted into law on February 5, 1988, particularly in view of the estimates on the number of threatened structures in North Carolina and Michigan, which account for 41 percent of all claims and 58 percent of the coastal claims (Table 4-13. The relatively high number of claims from North Carolina (81) is at- tributed in part to a March 1989 storm that caused significant beach and dune erosion in the Nags Head area. Many of the structures in these claims sustained significant damage during this event and were beyond repair. It should be noted that these figures do not include any claims resulting from Hurricane Hugo's impact on the South Carolina/North Carolina coast in September 1989. Prelimi- nary reports indicate that over 350 Upton-Jones claims may result in North Carolina with a substantially larger number expected from South Carolina. The overall Tow response to the coverage and benefits provided

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84 MANAGING COASTAL EROSION TABLE 4-1 Upton-Jones Claims Summary (August 28, 1989) Total Claims Filed Relocation Demolition Unknown Approved for payment (average $47,109) Demolition Relocation Claims denied Withdrawn Pending Coastal Claims (Average age of structure Delaware Florida Maryland North Carolina Ohio Texas Massachusetts Michigan New York Pennsylvania Virginia South Carolina Coastal claims approved (Average age of structure (Average amount approved Relocation (Average age of structure (Average amount Demolition (Average age of structure (Average amount Coastal claims denied No condemnation, in AEZ Condemned, not in AEZ No condemnation and not in AEZ Other Coastal Claims Withdrawn Coastal Claims Pending 266 77 143 46 86 70 16 92 24 64 188 32 years) 1 s 1 81 11 9 21 29 2 19 7 2 74 33 years) $49,601) 14 22 years) $25,455) 60 35 years) $55,235) 45 23 2 15 s 16 53

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THE NATIONAL FLOOD INSURANCE PROGRAM 85 by the Upton-Jones Amendment could be attributed to a number of reasons, including the following: 1. The requirement of sufficient actual structural damage to warrant condemnation of the structure, a requirement ~ place for most states prior to early 1989 (and remaining in effect for all but four states as of October 1989~. 2. Lack of awareness of the changes in coverage and the pro- cedures for filing a claim (although FEMA has Indicated that each policy holder was sent a notice of change in their policy). 3. Reluctance to remove or interrupt income from rental prop- erty. 4. Lack of suitable and affordable alternate property for reloca- tion. 5. Lower Great Lakes water levels in the past 2 years have provided some relief from the threat of damage. 6. The lack of coverage for the cost of land acquisition for relo- cation sites. It is interesting to note that 24 (16 coastal) claims were with- drawn. According to FEMA, these claims were withdrawn for a variety of reasons, including the following: the appraised value of the structure was lower than expected, the house fell into the ocean, the house was sold, and the claim was submitted as a casual inquiry. In addition, coverage for actual damages, should they occur, would still be covered in the event of flooding or flood-related erosion for the replacement cost, which may be higher than the "actual cash value" criteria used in a claim filed under the Upton-Jones Amendment. Demolition is the favored option, accounting for approximately two out of three claims filed and four out of five ciairns approved, a factor likely related to the condemnation requirement. The average value of settlement on approved claims for relocation and demoli- tion claims has been $47,109 for all claims and $49,601 for coastal claims. The average approved settlement amount on coastal claims for demolition ($55,235) ~ more than twice the amount for relocation ($25,455). Of the 45 coastal claims that have been denied, the primary reason was lack of a condemnation notice (23 of the 45~. Fifteen of the structures for these claims were also found to be outside the "active erosion zone. It is noted that the average age of structures for approved coastal claims was 33 years, with those preferring the demolition option 13 years older (35 years) than those preferring the

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86 MANAGING COASTAL EROSION relocation option (22 years). Finally, 53 of the 188 coastal claims filed as of August 2S, 1989, are still pending. It should be noted that these statistics are very preliminary in nature and have limited applicability to a full-scale relocation initiative. This is primarily due to the lack of implementation of the relocation option without a condemnation prerequisite. The Upton-Jones Amendment adds an important new capability to the NF1P. For the first time, benefits are available to insured prop- erty owners before an actual loss occurs, provided steps are taken to prevent a subsequent larger loss. The opportunity thus is provided for structures to be removed from erosion-prone locations by demo- lition or relocation in an orderly manner and with minimum threat to public safety or private investment. This anticipatory approach should help reduce public and private costs related to erosion. The Upton-Jones Amendment is a tentative step in the direction of a strategy that emphasizes retreat from eroding shorelines. This approach represents an appropriate means for reducing NF1P Toss payments and promoting public coastal management objectives. But so far the Upton-Jones Amendment has had modest influence on the owners of property at risk from erosion. Only 266 claims had been filed as of August 28, 1989 (Table 4-1~. This is a modest number in comparison with the total number of coastal structures threatened by erosion. In North Carolina alone it, is estimated that 4,200 structures are within the 100-year average annual erosion rate (AAER) zone, of which 777 are within the 10-year AAER zone (response of the North Carolina Department of Natural Resources and Community Development to the Association of State Floodplain Managers [AS FPM] Survey, September 1988~. While North Carolina is not typical of all coastal states (there is no "typical" state), this example makes it clear that the provisions of Upton-Jones are not yet being taken advantage of by the owners of a large segment of insured structures threatened by erosion. The limited response to Upton-Jones to date apparently has resulted in part from a narrow reading by FEMA of the statutory language regarding eligibility for benefits under the amendment. Sec- tion 544 (amending Section 1306(c) of the National Flood Insurance Act) states that the provision applies to insured structures that are certified by an appropriate state or local land use authority to be: ". . . subject to imminent collapse or subsidence as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels. . .."

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THE NATIONAL FLOOD INSURANCE PROGRAM 87 FEMA in its interim regulations issued September 23, 1988, defines "zone of imminent collapses to mean a. . . an area subject to erosion adjacent to the shoreline of an ocean, bay, or lake and within a distance equal to 10 feet plus 5 times the average annual long-term erosion rate for the site, measured from the reference feature.n If the intent of Congress is that the Upton-Jones A~nendment be used to encourage anticipatory action to remove structures threat- ened by erosion, then FEMA's interim definition of "zone of imminent collapse" is too narrow and restrictive to accomplish this. For shore- lines experiencing an AAER of 1 to 2 feet, a structure would need to be within 15 to 20 feet of the "reference features (e.g., frontal edge of bluff or dune, normal high-water line, or seaward line of vegetation) before it could be certified to be eligible for Upton-Jones benefits. Such a narrow zone of eligibility leaves little margin of error for miscalculation of the AAER, rn~sIocation of the reference feature, or trust that a large storm event will not soon occur. Furthermore, the occurrence of a major storm (such as Hurri- cane Hugo) causing severe erosion would jeopardize many structures in this narrow zone and render their subsequent orderly relocation or demolition infeasible. The narrow definition of "zone of imminent collapse" (see Figure 4-1) adopted by FEMA thus defeats the objec- tives of the Upton-Jones Amendment by forcing property owners to wait until orderly removal may be impossible before structures can be certified as imminently endangered. The definition reflects an unre- alistic level of confidence in our ability to estimate exact AAER rates and to identify appropriate reference features in the field. A larger margin of error is needed to afford more time to relocate threatened structures. This is the basis for the comrn~ttee's recommendation that FEMA expand its definition of "zone of imminent collapse" at least to a distance of 10 times the long-term AAER. Following are other considerations that would improve the efl5ec- tiveness of the Upton-Jones element of the NF1P: . Relocation should be encouraged in preference to demolition wherever feasible. Structures being relocated pursuant to Upton-3ones should be required to be relocated landward of the ~30 line. Section 544 prohibits the availability of flood insurance or federal disaster assis- tance to relocated structures that do not meet that test. The statute suggests that FEMA may deny an Upton-3ones payment to struc-

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THE NATIONAL FLOOD INSURANCE PROGRAM 89 tures that are not relocated landward sufficiently to at least gain protection for an estimated period of 30 years. FEMA should require as a condition to any payment under Section 544 that the vacated site be legally restricted (preferably through a recorded easement) against any reuse involving an enclosed and habitable structure, whether or not it is covered by a flood insurance policy. Such an easement would not involve public access but would permanently divest any right to obtain a building permit for rebuilding on the vacated site. . After a structure ~ certified as being within the "zone of imminent collapse" and after proper notification of the owner, FEMA should terminate insurance coverage of the structure under the NF1P or substantially increase the premium if relocation or demolition does not occur within a reasonable period of time. ~ Care should be exercised by FEMA to assure the compatibil- ity of new erosion-related development standards with the existing flood-related construction standards. . An appeal procedure should be established by FEMA whereby aggrieved property owners may challenge a presumption that erosion is continuing at the estimated rate. DELINEATION AND LOCAL MANAGEMENT OF E-ZONES FEMA has not yet designated any erosion hazard zones (~zones) or established national standards for setbacks or other management requirements for erosion-prone coasts under 44 CFR, Section 60.5. As discussed in Chapter 5, about 11 states have independently estab- lished setback regulations based on estimates of long-term AAERs or some other criterion. Now that FEMA is mandated by the Upton-Jones Amendment to facilitate retreat from eroding shores, through insurance claim pay- ments for relocation or demolition of buildings subject to imminent collapse, it is essential that it address the need for comprehensive approaches to the management of erosion-prone areas within com- munities participating in the NF1P. Upton-Jones was meant to be a first step toward a broader FEMA role as stated by Representative Walter B. Jones: The Amendment does not constrain FEMA from taking additional steps to further reduce the hazards related to erosion.... The section should be viewed as an important first step in dealing with the problem of erosion, and FEMA should be encouraged to take additional actions to fully utilize

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go MANAGING COASTAL EROSION its existing authorities to address this problem on a broader scale." (Federal Rcgi~tcr, November 19, 1987, P.E. 4547) FEMA needs to implement 44 CFR, Section 60.5, to establish E-zones and set appropriate minimum standards for management of land use within such zones by communities participating in the NF1P. Such requirements would augment and not replace existing floodplain management standards. Zones should encompass areas along eroding coasts to a land- ward limit equivalent to an ~60 line (see Chapter 6 for the methodol- ogy for setting this line). The foregoing limits correspond to those in the Upton-Jones Amendment and are used in several states, notably North Carolina and Michigan. However, FEMA should, through education and insurance rate setting, encourage communities to require a more restrictive set- back for example, a Midyear AAER for small structures and 100- year AAER for larger ones. Communities could be encouraged to exceed the FEMA minimum by offering reduced premiums for NF1P insurance coverage. In 1987 FEMA began to formulate a new approach to community flood hazard management. Under the proposed Community Rating System (CRS), communities that exceed minimum NF1P floodplain management standards would be rewarded with credits toward re- duced premium rates communitywide. Two of the activities that would be "credited" by CRS would be "acquiring additional data" and imposing "higher regulatory standards." If CRS is implemented, coastal communities should be encour- aged by FEMA to acquire additional erosion data and to impose stronger limits on new construction. Specifically, communities should be rewarded by CRS if they adopt setbacks of ~50 for small struc- tures and ~100 for large ones, in place of the minimum standards of ~30 and ~60 proposed in this report. FEMA should incorporate state and other existing erosion rate data that conform with federal technical standards wherever justified (see Chapter 6 for details). There is no reason to undertake inde- pendent federal studies of erosion rates where the state already has a good data base and program for monitoring ongoing erosion. State AAER data may be used directly in the designation of ~zones. When Zones are designated, FEMA should implement 44 CFR, Section 60.5, so that state or local government shall require a setback for all new development from the ocean, lake, bay, or other body of water to create a safety buffer consisting of a natural vegetative or

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THE NATIONAL FLOOD INSURANCE PROGRAM 91 contour strip. All new construction (except water-dependent struc- tures, such as docks and piers) should be located landward of the established setbacks. These recommended setbacks are (1) between the water and the ~10 line, no habitable structures; (2) between the ~10 and ~30 lines, only readily movable single-family dwellings, and these only if the ~30 setback cannot be met on a preexisting Tot and this limited development is allowed by a state or local variance; (3) between the ~30 and ~60 lines, any readily movable structures; ancl (4) large structures (e.g., those more than 5,000 square feet) landward of the ~60 line. In addition, FEMA should consider imposing a premium sur- charge on existing structures within an Ozone that are insured under the NF1P to be used to finance necessary relocations and higher ex- pected loss rates. Structures within the "zone of imminent collapse" (10-year AAER as suggested herein) would be subject to substantial annual increases in this surcharge or, at the option of FEMA, ter- mination of coverage within a reasonable time after notification of the property owner of eligibility for Upton-Jones benefits. The latter consideration requires legislative action. Finally, FEMA should decline to insure new structures or sub- stantial improvements within ~10 zones. This would require leg- islative action. Currently, there are about 64,000 NF1P policies in V-zones totaling $5.2 billion in coverage. ~10 zones by definition are areas of imminent hazard and represent a nonactuarial risk. Cov- erage of new structures on the open coast in areas exposed to both flood and erosion hazards encourages undesirable building practices. Hurricane Hugo, which hit the South Carolina coast in late September 1989, caused major destruction and loss of property. Ac- cording to the Federal Insurance Administration, preliminary esti- mates for the total payment on all claims for flood damage resulting from Hurricane Hugo will be between $225 million and $275 mil- lion. At this time, the flood insurance fund generated from premium income is sufficient to pay this amount, and there will be no need to rely on tax dollars to compensate those who have suffered flood damage. INCLUSION OF EROSION IN UNIFIED NATIONAL PROGRAM Section 1302(c) of the National Flood Insurance Act states that " . the objectives of a flood insurance program should be inte-

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92 MANAGING COASTAL EROSION "rally related to a unified national program for flood plain manage- ment...." Pursuant to this mandate, a document entitled A Unified National Program for Floodplain Management was first published by the U.S. Water Resources Council at the direction of the Office of Management and Budget in 1977. This document was revised in 1979 to reflect Executive Orders 11988 and 11990 concerned respec- tively with flood hazards and wetlands. With the terrn~nation of the Water Resources Council in 1981, responsibility for updating and implementing the unified program shifted to FEMA, which issued a further revised version in March 1986. The unified program in its current form articulates a framework for achieving floodplain management objectives through cooperative use of a broad range of existing institutional and legislative arrange- ments at the federal, regional, state, and local levels of government. Coordination of relevant federal agencies having authority over as- pects of land use in flood hazard areas is pursued through a federal interagency task force for flood loss reduction with FEMA as the lead agency. In this matter FEMA seeks to reinforce its flood loss reduction efforts under the NF1P by collaborating with agencies that exercise public works, regulatory, or other statutory functions in floodplains. The unified program, however, lacks any component that ad- dresses erosion hazards. There is no explicit discussion of the role of erosion as a contributing factor in exacerbating coastal flood losses. Nor is the occurrence of erosion outside designated flood hazard zones addressed (e.g., from blu* undermining and collapse). There is no consideration of the interaction of shoreline protection activ- ities, either ~hard" or Soft, with the natural processes of beach formation and erosion. And the use of setbacks, relocation, and other nonstructural responses to erosion-related flood hazards is not discussed. FEMA should revise the Unipled National Program for Flood- plain Management to include erosion hazards along the nation's coasts. This discussion should address the nature of erosion both as a contributing factor in flood losses and as an independent hazard. The pros and cons of alternative forms of public response should be reviewed. The respective roles and responsibilities of the federal, state, and local levels of government should be articulated in parallel with the present treatment of flood hazards. FEMA also should convene a special task force on coastal erm sion management. This body would include experts from federal

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THE NATIONAL FLOOD INSURANCE PROGRAM 93 agencies and universities having policy or program responsibilities affecting coastal erosionfor example, FEMA, the Army Corps of Engineers, the Environmental Protection Agency, the Department of the Interior (U.S. Geological Survey and National Park Service), and NOAA (Office of Ocean and Coastal Resource Management). Experts from states with critical erosion problems and/or significant coastal erosion management programs should be invited to partici- pate in the task force. The purposes of the task force would include the following: . Assist FEMA in developing and promulgating a nationwide standard for erosion hazard reduction equivalent to the Midyear hood standard. Review internal procedures of participating agencies to d~ term~ne compatibility with erosion management provisions of the Unified National program (as revised). ~ Review the applicability of Executive Orders 11988 and 11990 to the management of erosion hazards and, if appropriate, recom- mend revisions thereof to the President. ~ Serve as an ongoing technical advisory commuttee concerning coastal erosion with the capability of commissioning special stud- ies and research projects where appropriate to further goals of the Unified National Program. FERENCES Coastal States Organization. 1986. Coastal Hazard Reduction Surrey. Division of Coastal Management, Department of Natural Resources and Com- munity Development. 1986. North Carolina Threatened Structure Survey. Document INS 173(a) and North Carolina National Flood Insurance Pro- gram Case Study. Document INS 174 (b). Federal Emergency Management Agency. 1988. Various handouts and memos to the committee. General Accounting Office. 1988. Flood Insurance: Statistics on the National Flood Insurance Program. April. Godschalk, D., D. grower, and T. Beatley. 1989. Catastrophic Coastal Storms: Hazard Mitigation and Development Management. Houck, O. A. 1985. Rising water: The National Flood Insurance Program and Louisiana. Tulane L. Rev. 60:61.