Time to brace for flood insurance rate hikes

John Doyle | Nov 12, 20140

There has been significant press coverage lately, both locally and nationally, regarding flood hazards. The Oso landslide reminds us that catastrophic events are usually infrequent, often unexpected in the moment they occur but predictable.

While it has been decades since there has been significant local flooding, it’s important to note that 70 percent of La Conner is in the Skagit River 100-year floodplain.

All of this sets the stage for recent changes to the National Flood Insurance Program administered by FEMA. Residents are likely to see those changes reflected in premiums they pay for flood insurance.

Two driving forces have dramatically changed regulations and development within the 100-year floodplain. The first driving force is Congress and the financial status of the NFIP.

Originally, NFIP was established to provide uniform, affordable insurance coverage to developments in areas of the country that potentially flood. With a succession of natural disasters, including hurricanes Katrina and Sandy as well as Midwest flooding in Missouri and Mississippi over the last decade, the NFIP has a huge deficit of over $24 billion.

To make the flood insurance program solvent, Congress enacted legislation in 2012 — the Biggert-Waters Flood Insurance Reform Act — to assess properties at their actual risk. Subsidized rates were eliminated, and rate increases of 25 percent per year were proposed until actuarial rates are achieved.

There was a strong public reaction to the bill regarding property values and affordability. In March 2014, the bill was revised to cap the annual increases at 18 percent and extend the time period. This will delay the rate increases, but they are on their way. The objective is still to achieve actuarial rates; that is, rates that reflect the actual risk of property loss to flooding.

The second driving force affecting the rates is litigation; the National Wildlife Federation successfully sued FEMA over the National Flood Insurance Program. Their claim was that the NFIP “…encouraged development in the floodplain and harmed salmon in violation of the Endangered Species Act.”

In 2004, the Federal Court in Seattle ruled in favor of the Wildlife Federation, and the National Flood Insurance Program was remanded to the National Marine Fisheries Service for review.

In 2008, National Marine Fisheries Services issued a “Biological Opinion,” which found “…that floodplain development insured by the NFIP was specifically endangering Puget Sound Steelhead, Puget Sound Chinook salmon, Hood Canal summer-run chum, Lake Ozette sockeye, and southern resident killer whales.” The biological opinion also contained different approaches that would lessen the adverse impact.

Communities are given three options to comply with the Biological Opinion.

Option 1 requires developers to hire a biologist to document the specific compliance of each development with the Biological Opinion permit by permit.

Option 2 allows communities to document their compliance with current stormwater and floodplain management ordinances and policies.

Option 3 imposes a stringent code that dictates a wide array of mitigations on development.

La Conner submitted the documentation for Option 2 compliance over a year and a half ago, and the National Marine Fisheries Services is still reviewing our submittal. Currently, we are proceeding under the presumption that we are compliant with Option 2 until we hear otherwise.

The net result is that any development or redevelopment in the floodplain will be more tightly regulated and more expensive to insure.

This will have a long-term effect on property values in town, but it’s too soon to say how much.

Congress is likely to take some additional action regarding both the budget issues and litigation. Stay tuned.

Next: Steps La Conner residents can take to help keep their flood insurance premiums from rising drastically.

Town tries to keep flood premiums down

Sandy Stokes

La Conner’s Town Adminis-trator, John Doyle, recently completed a week-long course to update his credentials as a certified floodplain manager.

It’s one of many steps the town has taken to help ease the sticker shock for residents when they get their next flood insurance bill.

The Federal Emergency Management Agency, better known as FEMA, rates the town at 7 in its Community Rating Service — which is on a scale of 1 to 10, with 10 being the worst. For La Conner, the number 7 means that residents will receive a 15 percent premium savings on flood insurance over areas that are rated a 10.

Most Washington communities fall in the 5 to 8 rating range.

And except for people who live on the hill, anyone in town with a federally insured mortgage must purchase flood insurance from FEMA — which requires lenders to require borrowers to buy its insurance.

The yearly policies generally run anywhere from $1,000 to $3,000, depending on where a particular structure sits in the flood plain and its value. If a home is at grade, like many of La Conner’s older buildings — including the home of this writer — the premium is higher. If the structure is elevated, like most newer homes, the premium is lower.

Helping to keep a lid on premiums, the town has received good scores from FEMA-contracted inspectors for its drainage system, regulatory standards and efforts to keep residents informed of flood risks. Also, the town is setting aside money for future major upgrades to the drainage system.

And flood mitigation is a regular topic at Town Council meetings, with council members, especially Jacques Brunisholz, constantly keeping their eyes on the issue.

Since 1984, when national flood insurance was established, La Conner residents have shelled out many millions of dollars in premiums that total well over $150,000 per year. Yet, in all those years the flood claims have amounted to less than $2,500.

Now the insurance premiums residents pay are set to help to make FEMA solvent, since the agency is billions of dollars in the red after several natural disasters in the past decade including Hurricane Katrina and Hurricane Sandy on the East Coast.

Though La Conner hasn’t flooded in decades, most experts say it’s not a matter of if there is a great flood here, but when. And when that happens, the FEMA flood insurance will be expected to be there to replace destroyed homes.

Town Administrator Doyle has said the town is prepared to handle a 25-year to 50-year flood event. But should a once-in-100-year, or even a once-in-a-500-year flood wash through, property losses would be substantial.