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goal of protecting environmental and natural resource values in their response to the flooding. For example, when considering applications for levee repair and restoration, OMB and OEP direct the Federal agencies to consider nonstructural alternatives that could reduce future potential flood damages, lower long-term cost to the Federal Government, and provide for natural resource protection. Important first steps toward meeting these three critical goals-reduce future flood damages, lower costs to the Federal Government and protect the environment-would be gained if S. 1405 were enacted.

S. 1405 would help Congress reach out to flooded Midwest towns and cities.

The new mitigation grants program created by S. 1405 would provide crucial planning and financial assistance to flooded and flood-prone communities along the Nation's rivers and coasts. From Davenport, Iowa, to Hatteras Island, North Carolina, flood- and storm-prone communities would have access to funding to help make themselves less vulnerable to future floods. This would provide real, immediate aid to current flood victims while helping to avoid future flood victims.

Nothing in S. 1405 constitutes a Constitutional "takings."

In order to protect the Federal taxpayer, public safety and ecological resources, S. 1405 would prohibit new Federal flood insurance for new development in areas of the coasts that will be under water from erosion within-at a minimum-30-60 years. S. 1405 does not prohibit development in these areas. It does not require communities to prohibit development in these areas. It does not "take" a person's property. What it does "take" is the Federal taxpayer out of the business of insuring development in these areas. Since there is nothing in the United States Constitution guaranteeing a citizen access to Federal Flood Insurance, there is no abridgment of the Constitution through S. 1405.

NEEDED CHANGES TO THE NFIP

The following changes must be made to the NFIP to make it meet its original lifeand money-saving mandate. These changes are included in S. 1405.

1. Compliance With NFIP Insurance Purchase Requirements is Improved

A. We strongly support the provisions of S. 1405 that will substantially strengthen and improve compliance with the NFIP's notice and mandatory purchase require

ments.

The improved compliance resulting from S. 1405 will, in turn, help reduce taxpayer costs for flood damages and disaster relief, while limiting significant current risk to national deposit insurance programs.

Key provisions of S. 1405 that will improve NFIP compliance include:

• Clarifying the applicability of the mandatory purchase requirement to all mortgages purchased by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, in addition to those mortgages directly backed by the Federal Government;

• Requiring escrow deposits for flood insurance and directing lender placement of insurance, if the borrower fails to make the required insurance purchase;

• Assessing a fine ($350/policy/year) against lending institutions that fail to require flood insurance coverage of mortgaged buildings in the floodplain (maximum $100,000/year);

• Establishing a standard flood hazard determination form that includes essential data, such as the map and panel number, date, and property location, and requiring redetermination with any note change if it has not been done within the past five years;

• Requiring lenders to notify all borrowers of the flood insurance purchase requirements; and,

Requiring Federal banking agencies to regularly review compliance by lenders with the NFIP requirements.

We strongly support the immediate adoption of these measures. These measures will increase individual participation in the NFIP, particularly in less risk-prone areas, which currently are disproportionately uninsured as compared to higher risk sites. This will generate more money for the NFIP Fund, which in turn can be used for proactive flood loss reduction initiatives, such as community and individual mitigation measures. In addition to reducing the costs of disaster relief, these provisions will also reduce casualty loss deductions for uninsured flood related losses on income tax forms.

2. The Community Rating System is Codified

We support the codification of the Community Rating System (CRS) as provided for in S. 1405. The CRS reduces premium rates for communities that undertake

floodplain management measures in addition to those required for participation in the National Flood Insurance Program. We strongly support the bill's provision that will give communities participating in the rating system "extra credit” points for measures that protect undeveloped floodplains. The entirely voluntary CRS credit incentives will encourage communities to exceed minimum NFIP risk reduction standards, and at the same time, will improve the public's safety and enhance protection of the floodplain environment.

3. A Flood and Erosion Damage Mitigation Grants Program for States and Communities is Established

Currently, the NFIP fails to address adequately the mitigation of flood losses. Although the building standards required under the NFIP have helped reduce damage to structures, repetitive losses are not discouraged through premium increases nor are the owners of repetitive loss properties encouraged to take steps to reduce future flood losses. As a result, in the 1980s, about 2 percent of all flood insurance policies accounted for approximately 33 percent of total loss payments made.

The NFIP offers no encouragement to communities or individuals to manage erosion-prone areas, despite the increased risk of flood losses from erosion. The only exception is the Jones-Upton amendment, which recompenses policy holders who relocate or demolish buildings in imminent danger of collapse due to erosion. Federal flood insurance policies are available for new construction in eroding coastal areas without any regard for rates of erosion and at no extra cost relative to similar noneroding areas. In many cases, this puts the NFIP in direct conflict with Federallyapproved coastal zone management programs.

S. 1405 establishes a mitigation assistance program to encourage State and community action to reduce the risk of flood losses. A critical aspect of this program is that actions can be taken before devastating floods occur, rather than after damages have been sustained. In particular, the mitigation assistance program is expected to target repetitive claim areas that have contributed heavily to the draining of the Flood Insurance Fund.

Mitigation assistance is made available in the form of cost-shared grants for community or State planning efforts to reduce risk, and for technically feasible and costeffective mitigation activities such as elevating, relocating, floodproofing, or demolishing flood-prone structures; purchase of lands for public uses that are compatible with good floodplain management; and technical assistance by States to communities to develop community mitigation activities.

S. 1405 makes available from the National Flood Insurance Fund $10 million in the first year, rising to $20 million in the third and subsequent years, for these purposes. It is important to keep in mind that while mitigation costs are borne by all policy holders, benefits also flow to all policy holders by reducing many of the highest risk situations that are drawing Fund resources.

S. 1405 also provides an option of additional coverage for policy holders to meet costs of elevation or relocation in the event that property is substantially damaged and must be brought up to new community building codes, or comply with new land use control requirements. This insurance will ease the burden on policy holders that otherwise has often prohibited responsible actions to move buildings out of flood hazard areas.

4. New NFIP Policies are Prohibited in Erosion Hazard Areas

The Flood Insurance Fund will not be fiscally sound nor will the original mandate of the Program be met as long as taxpayer-backed insurance is offered for development in the areas most subject to erosion, wind, waves, storms, hurricanes, tsunamis and seiches.

Under S. 1405, new Federal flood insurance would not be available for new construction in the 30-year erosion hazard area, or for an addition to an existing structure if the addition makes the structure not readily movable (i.e., larger than 5,000 square feet). For those properties outside the 30-year erosion hazard area and within the 60-year erosion hazard area, Federal flood insurance would not be available for any new nonresidential structure, a residential structure that is not readily movable, or an addition to an existing structure if the addition makes the structure not readily movable.

The erosion hazard area would be calculated by determining the average annual rate of erosion in coastal areas, and multiplying it by a given number of years. This information is already readily available in several coastal States. According to the National Research Council's 1990 report, Managing Coastal Erosion-which was commissioned by the Federal Insurance Administration-about one-third of the coastal States have active erosion hazard area management programs that include the establishment of erosion setbacks for new construction. The FIA-commissioned

report recommended the establishment of 30- and 60-year erosion hazard zones nationwide in which new Federal flood insurance for new construction should be prohibited. This recommendation is based on solid science and practical experience in States like North Carolina, which established 30- and 60-year erosion setbacks years ago.

Policies affecting the Great Lakes shores have been under scrutiny by the International Joint Commission (IJC), which recently came to conclusions very similar to those reached by the National Research Council and included in S. 1405. The IJC's Levels Reference Study Board recommended in March 1993 that the following measures be implemented around the Great Lakes and St. Lawrence River:

• Erosion setbacks that include minimum requirements for a 30-year erosion zone for movable structures and a 60- to 100-year erosion zone for permanent structures plus an adequate distance to assure a stable slope;

• Real estate disclosure requirements where the seller should be required to disclose to prospective buyers that the property is within a mapped or known flood or erosion hazard area;

• Changes to the National Flood Insurance Program to encourage community-based erosion management by establishing setbacks for new construction; and,

• Changes to the National Flood Insurance Program to provide mitigation assistance for structures imminently threatened by erosion with an emphasis on relocation of structures out of the hazard area.

Both the IJC and the National Research Council have concluded that rates and types of shoreline erosion are well-known; that programs addressing erosion hazards are already in effect on the State level; and that prudent policy dictates that Federally-insured development in erosion hazard areas is patently unwise.

Erosion hazard areas differ from coast to coast. For example, the highest rates of erosion along the Atlantic's 295 barrier islands from New England to Florida are in Virginia's 11 islands where the ocean shore is eroding an average of 10-25 feet per year. However, Maryland's island erosion rate is roughly 2-5 feet annually. North Carolina's Outer Banks average an annual loss of 2–5 feet in most areas, but as much as 15 feet a year in others.

It makes no sense for the Federal taxpayer to be involved in insuring construction in areas that are disappearing. An average annual rate of erosion of 10 feet would trigger, under S. 1405, the prohibition of new Federal flood insurance 300-600 feet from the first delineation point: that is, the first stable line of vegetation or a similar marker. Not only is this relatively discrete band of land eroding under normal circumstances, it suffers huge losses from erosion when storms, hurricanes and nor'easters slam into the coast.

Arguments have been made that instead of prohibiting Federal flood insurance in eroding coastal areas, insurance should be made "actuarial" in cost. There are two fatal flaws with this argument.

First, former FIA Administrator Hal Duryee testified before the House Banking Committee in 1990 that if Federal flood insurance were actuarial for the risks posed by erosion, the cost of a policy should be in the $11,000-a-year range. Currently, a Federal flood insurance policy in eroding coastal areas costs, at most, $1,200 a year. This is because Federal flood insurance does not calculate the risk posed by erosion when drawing up its Flood Insurance Rate Maps and determining the cost of a policy.

Therefore, an actuarial Federal flood insurance policy in erosion hazard zones should cost ten times what its maximum cost is today.

For Congress to impose actuarial rates in erosion hazard zones, policy holders would see a $10,000 jump in the cost of their policy. Historically, Congress has been extremely reluctant to impose even extremely modest increases in the cost of Federal flood insurance, denying 10 percent increases on policies that average only $350 a year. It would be politically remarkable for Congress to impose a $10,000 rate increase on flood insurance participants. It is therefore highly improbable that true actuarial rates—not those in the one or two or three thousand dollar range, but in the $11,000 range-would be imposed in coastal erosion hazard areas.

Second, it is not the purpose of the National Flood Insurance Program to make Federal insurance expensive in hazardous, storm- and flood-prone areas. It is the purpose of the Program to,

"(1) encourage State and local governments to make appropriate land use adjustments to constrict the development of land which is exposed to flood damage and minimize flood damage caused by flood losses, (2) guide the development of proposed future construction, where practicable, away from locations which are threatened by flood hazards. . ."

The Flood Insurance Program was created to save Federal tax dollars and human lives by entering into an agreement with flood-prone communities in which the government would exchange Federal flood insurance for development already in place with communities guiding new construction out of the floodplain. This would save disaster relief and other Federal expenditures, and lives, for the law further states that, "the Nation cannot afford the tragic losses of life caused annually by flood ocBy continuing to offer Federal flood insurance in erosion hazard areas, the NFIP would continue to ignore its mandate to save lives and money by getting people and their structures out of the floodplain.

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Even the most expensive Federal flood insurance policy fails abjectly to reflect the true cost to the Federal Government of floodplain development. The Department of Interior has estimated that every developed acre of coast consumes $50,000 in taxpayer-funded subsidies. Hurricane Andrew was a $20 billion storm because development prone to hurricanes was in place. The GAO determined that Federal flood insurance acts as a "financial safety net" for development. As long as this net is in place, development far beyond the capacity of the Flood Insurance Fund will continue to occur in areas that have an inescapable rendezvous with nature.

5. Natural and Beneficial Functions of Floodplains are Better Protected

FEMA has long known the valuable role that natural floodplains play in the reduction of flood damages, in addition to their environmental benefits. Yet, the NFIP has done little to explicitly promote their protection. S. 1405 directs FEMA to recognize and promote the natural and beneficial functions of the floodplain and specifies that communities in the Community Rating System can receive extra credit points for implementing measures that protect these functions.

We strongly support this provision. We further recommend that States or communities that wish to receive mitigation assistance be required to implement measures that provide for the protection of the natural and beneficial functions of floodplains. In addition, we strongly urge that an interagency task force be established to make recommendations to FEMA on the implementation of measures to improve protection of natural floodplain functions. Such a task force should include at least the following four Federal agencies: U.S. Fish and Wildlife Service, NOAA, EPA and the National Park Service.

RECOMMENDED ADDITIONS TO S. 1405

The Coast Alliance and the groups it represents today strongly support the rapid enactment of S. 1405. We believe that some strengthening refinements should be added to the bill, but not at the cost of quick affirmative action.

1. S. 1405 should more clearly state a preference against structural erosion control measures, such as seawalls and groins, as a response to coastal erosion.

According to Dr. Stephen Leatherman's Barrier Island Handbook, "Large amounts of money have been spent on coastal engineering structures, but many are ineffective and some have aggravated existing problems. The best solution is to employ more natural approaches, such as dune building and beach nourishment. These nonrigid techniques do not interfere greatly with natural processes."

A study done by Duke University researchers on the South Carolina beaches following Hurricane Hugo found that in some areas with structures, damage from the storm was actually worse than in areas without structures. On Folly Island, South Carolina, storm surge ebb (water returning to the sea from behind the island after the passage of the storm) was blocked by seawalls. The seawalls caused flooding and property damage by preventing the flow of water receding seaward.

S. 1405 should be clarified to assure that the NFIP policy is to discourage, and not to encourage, unwise and costly structural manipulation of coastlines and shoreline areas as a response to coastal erosion problems. We recommend that criteria be employed to evaluate any erosion control project that is proposed to affect FEMA's classification of erosion hazard areas. Evaluation criteria should at least include consideration of the type of activity proposed, degree of assurance of commitment to long-term maintenance, and assurances that the activity will not aggravate or affect erosion problems in adjacent or other coastal areas.

2. S. 1405 should require that sea level rise zones are delineated.

We strongly support S. 1405's inclusion of a new Congressional finding that acknowledges the greater risk to the National Flood Insurance Program posed by sea level rise and fluctuations in Great Lakes levels, and the need to adequately consider these factors in assessing overall risk under the Program.

However, S. 1405 should require that FEMA delineate sea level rise zones for areas likely to be affected in the next 100 years. Participating communities should be required to enforce building code restrictions that ensure the movability of new

construction within this zone, as would be the case under S. 1405 for erosion hazard zones. The NFIP must begin now to address the problem of sea level rise. Although major changes in sea level may not be experienced in many places for another 50 years, the average life span of a building is 74 years, according to the National Association of Homebuilders. As a result, development occurring now will feel the impact of sea level rise.

Such a sea level rise provision could be modeled after the State of Maine's sand dune rules. To ensure the future mobility of a structure, Maine limits the size and height of new construction within its sand dune system to 35 feet in height and 2,500 square feet in area. Maine also prohibits the construction of larger buildings on any site within the sand dune system that cannot be proven to withstand a three foot sea level rise.

We further recommend that FEMA be explicitly required to review erosion rates in areas likely to be affected by sea level rise with each Flood Insurance Rate Map (FIRM) update.

3. S. 1405 should require a review of the implementation of Executive Order 11988. We are concerned that a key oversight function from Executive Order 11988, the landmark Floodplain Management Executive Order, is no longer being carried out since the Federal Water Resources Council ceased activity in 1982. E.O. 11988 required periodic review of Federal agency compliance with many of the same requirements now placed on non-Federal floodplain_development. We suggest that some form of review of the implementation among Federal agencies of this Order should be required as a part of this legislation.

Additionally, the NFIP is currently failing to meet its land management mandate by allowing and implicitly encouraging development in environmentally sensitive floodplains. We recommend that one of the explicit purposes of the NFIP should be to minimize damage to floodplains in order to protect their natural and beneficial functions as described in the "Unified National Program for Floodplain Management."

CONCLUSION

The National Flood Insurance Program is at a crossroads. Unless Congress acts quickly and in a thorough, comprehensive manner, the taxpayer will be left holding the bill for a Program whose weaknesses have been recognized for years and whose failures reflect a long-term unwillingness to meet the mandate that Congress gave it when it was created a quarter-century ago.

There is no longer any time or money for failure by the Program to meet its Congressional charge. The Federal Treasury is stretched to the limit and the National Flood Insurance Fund is on its knees. Precious tax dollars should not be diverted from the myriad of worthy Federal programs to bail-out structures that were built intentionally by the water's edge: a pretty area but one that is a sitting duck for deadly, costly and repetitive acts of nature. It is not the taxpayer's Constitutional or moral responsibility to subsidize a person's decision to construct a private residence or investment property in an extremely hazardous area.

There is no more time to wait before we protect the coastal environment from the onslaught of pollutants that comes with shoreside development. By the time the hearing is completed today, another dozen or more acres of coastal wetlands-nature's fish nurseries-will have been destroyed, primarily from development. By the end of today, another 13.7 billion gallons of sewage wastes will have been discharged into coastal waters and the rivers that dump into them. The fish and shellfish, and the wildlife and economies that depend on them, are being lost daily as shellfish beds, fishing areas and beaches are closed from development-related pollu

tion.

There will not be sufficient time or money to save the millions of people who moved to the coasts during the development "boom" of the past forty years when the next Hurricane Andrew-or a bigger storm-hits the heavily populated Gulf of Mexico and Atlantic coasts. Adequate evacuation in the event of a major hurricane making landfall is not problematic: it is impossible. In the Florida Keys alone, State emergency officials estimate a minimum evacuation time of 30 hours, but hurricane officials can only determine the area where the storm will hit 16 hours before it slams into land. Federal subsidies, like the National Flood Insurance Program, that encourage waterfront development encourage people to engage in a game of residential Russian roulette.

Now is the time for Congress to save money, human lives and the aquatic environment by immediately enacting S. 1405.

For the past six years, the Coast Alliance and the 85 organizations it is representing here today have urged Congress to reform the dangerously imbalanced National

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