Florida isn’t the only state with NFIP compliance problems

by R.J. Lehmann on April 19, 2012

Florida isn’t the only state where local laws have recently placed its participation in the National Flood Insurance Program in jeopardy.

In Mississippi, state housing codes that proposed to exempt hunting and fishing camps from floodplain regulations had threatened to see that state’s roughly 75,000 NFIP policyholders ejected from the federal program, as well.

As reported by National Underwriter’s PropertyCasualty360.com site, requests by state Attorney General Jim Hood to earn an exemption from the rules were denied in November 2011, with a warning from the Federal Insurance and Mitigation Administration that the state would be kicked out of the program if it didn’t reinstate floodplain regulation of its hunting and fishing camps by May 5, 2012.

The Legislature responded earlier this year with H.B. 773, which clarified that building codes for new structures on hunting and fishing camps would be the same as those for other residences. The law treats existing structures under grandfathered rules, but elevation and other floodplain requirements would be applied should those structures ever need to be rebuilt or repaired after suffering more than 50% damage. Gov. Phil Bryant signed the bill March 31.

Louisiana’s St. Bernard Parish also recently announced that, given the expiration of the post-Hurricane Katrina state of emergency that temporarily exempted the parish from complying with Advisory Base Flood Elevation standards adopted in 2007, the parish will no longer honor permits and meter releases for pre-ABFE properties that have not been completely renovated. The move was necessary for St. Bernard to continue its participation in the NFIP and to apply to participate in FEMA’s Community Rating System, which could result in local NFIP premiums being reduced by 5% or more.

The new rules take effect May 1, and the parish and FEMA extended the demolition process for storm-damaged structures through the end of June.

ABFE evaluations will be based on current cost data and the pre-Katrina market value of the structure. Renovation permits will require proof of the pre-Katrina value of the home (without land) as well as a detailed cost breakdown for the renovation of the structure. When a structure is found to have been substantially damaged or a proposed renovation is found to constitute a substantial improvement, the property owner will be required to elevate the structure to the current ABFE.

Meanwhile, there remains no clear-cut resolution of the issues surrounding legislation passed in Florida that looked to speed up building and development permits. The state has been warned by FEMA that, because the bill – which Gov. Rick Scott has yet to either sign or veto – indicates that counties and municipalities cannot make permit issuances dependent on either state or federal approvals, it would seem to put Florida out of compliance with the NFIP floodplain regulations.

Heartland Institute Vice President Eli Lehrer, the national director of the Center on Finance, Insurance and Real Estate, was quoted extensively on the subject in an April 17 article in the Orlando Sentinel, where he noted that Florida “is a low-lying peninsula with a lot of land at or below sea level. It’s got to have flood insurance.” Florida’s 2.1 million NFIP policyholders account for 37% of the program’s 5.5 million policyholders nationwide, while its $471 billion of flood insurance coverage accounts for 38% of the nationwide coverage in-force.

The hitch underscores the importance to Florida of the controversial flood-insurance program.

“It’s $18 billion in debt, with no way to pay it back,” said Lehrer, one of many critics. “It encourages construction where it shouldn’t happen, damages the environment and impedes the development of a private market for flood insurance.”

But unless the private market presents a real alternative, he said, states like Florida will depend on the govenment subsidized program.

Congress has allowed it to lapse in recent years before renewing it long enough for members haggle over a long-term extension. It will expire on May 31 unless Congress takes action.

The House passed a bill last year to revamp the program. The Senate is considering its own version.

Each time the program nears an expiration date, Florida real estate agents fret they will not be able to process new home loans.

“If it is not renewed, there would be a lapse, which would wreak havoc with real estate closings, particularly in Florida.” Lehrer said. “This has happened several times in the last five or six years. It’s not an end-of-the-world situation. They (Congress) just kick the can down the road again.”

In other NFIP news, on April 12, U.S. Direct Court Judge Ricardo Martinez handed down a decision denying the National Wildlife Federation’s request for a preliminary injunction to block FEMA from issuing new NFIP policies in the Puget Sound. As detailed in last week’s FIRE Podcast, the NWF was seeking the injunction on grounds that FEMA had yet to implement policies to curb the destructive impact subsidized federal flood insurance has on endangered stocks of salmon and orcas in the region.

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