[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]




                               BEFORE THE

                            SUBCOMMITTEE ON

                                 OF THE


                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION


                             JULY 19, 2001


       Printed for the use of the Committee on Financial Services

                           Serial No. 107-36

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                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice      BARNEY FRANK, Massachusetts
    Chair                            PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska              MAXINE WATERS, California
RICHARD H. BAKER, Louisiana          CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama              LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware          NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma             KEN BENTSEN, Texas
ROBERT W. NEY, Ohio                  JAMES H. MALONEY, Connecticut
BOB BARR, Georgia                    DARLENE HOOLEY, Oregon
SUE W. KELLY, New York               JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                MAX SANDLIN, Texas
CHRISTOPHER COX, California          GREGORY W. MEEKS, New York
DAVE WELDON, Florida                 BARBARA LEE, California
JIM RYUN, Kansas                     FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama                   JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina      CHARLES A. GONZALEZ, Texas
DOUG OSE, California                 STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois               MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania      RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
GARY G. MILLER, California           WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia                STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York       MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania         

             Terry Haines, Chief Counsel and Staff Director

           Subcommittee on Housing and Community Opportunity

                    MARGE ROUKEMA, New Jersey, Chair

MARK GREEN, Wisconsin, Vice          BARNEY FRANK, Massachusetts
    Chairman                         NYDIA M. VELAZQUEZ, New York
DOUG BEREUTER, Nebraska              JULIA CARSON, Indiana
SPENCER BACHUS, Alabama              BARBARA LEE, California
PETER T. KING, New York              JANICE D. SCHAKOWSKY, Illinois
ROBERT W. NEY, Ohio                  STEPHANIE TUBBS JONES, Ohio
BOB BARR, Georgia                    MICHAEL E. CAPUANO, Massachusetts
SUE W. KELLY, New York               MAXINE WATERS, California
BOB RILEY, Alabama                   BERNARD SANDERS, Vermont
GARY G. MILLER, California           MELVIN L. WATT, North Carolina
ERIC CANTOR, Virginia                WILLIAM LACY CLAY, Missouri
FELIX J. GRUCCI, Jr, New York        STEVE ISRAEL, New York
                            C O N T E N T S

Hearing held on:
    July 19, 2001................................................     1
    July 19, 2001................................................    43

                        Thursday, July 19, 2001

Baker, Hon. Richard H., a Member of Congress from the State of 
  Louisiana......................................................     5
Bentsen, Hon. Ken, a Member of Congress from the State of Texas..     7
Bereuter, Hon. Doug, a Member of Congress from the State of 
  Nebraska.......................................................     3
Blumenauer, Hon. Earl, a Member of Congress from the State of 
  Oregon.........................................................     9
Conrad, David R., Water Resources Specialist, Office of Federal 
  and International Affairs, National Wildlife Federation........    35
Czerwinski, Stanley J., Director, Physical Infrastructure Issues, 
  U.S. General Accounting Office, accompanied by Bob Procaccini, 
  Associate Director.............................................    20
Quinn, Rebecca, ASFPM Legislative Officer, Association of State 
  Floodplain Managers, Inc.......................................    22
Richards, Timothy, President, New Jersey Association of Realtors, 
  on behalf of the National Association of Realtors..............    30
Shea, Robert F. Jr., Acting Administrator, Federal Insurance and 
  Mitigation Administration, Federal Emergency Management Agency, 
  accompanied by Howard Leikin, Deputy Administrator for 
  Insurance......................................................    19
Willey, Fletcher, Government Affairs Committee, Independent 
  Insurance Agents of America....................................    33


Prepared statements:
    Roukema, Hon. Marge..........................................    44
    Oxley, Hon. Michael G........................................    46
    Baker, Hon. Richard H........................................    50
    Bentson, Hon. Ken............................................    65
    Bereuter, Hon. Doug..........................................    69
    Blumenauer, Hon. Earl........................................    73
    Carson, Hon. Julia...........................................    47
    Kelly, Hon. Sue W............................................    48
    Conrad, David R..............................................   123
    Czerwinski, Stanley J........................................    89
    Quinn, Rebecca...............................................   103
    Richards, Timothy............................................   112
    Shea, Robert F...............................................    75
    Willey, Fletcher.............................................   118
              Additional Material Submitted for the Record


Baker, Hon. Richard H.:
    East Baton Rouge Parish, Office of Emergency Preparedness 
      letter, July 9, 2001.......................................    63
    Policy Statistics Country-Wide Year End Results..............    61
Bereuter, Hon. Doug:
    Comparison of Repetitive Loss Property Proposals.............    72
Shea, Robert F.:
    Written reply to a request from Hon. Marge Roukema...........    87
Shipley, Dale W., Chairman, Legislative Committee, National 
  Emergency Management Association; Executive Director, Ohio 
  Emergency Management Agency, prepared statement................   134



                        THURSDAY, JULY 19, 2001

             U.S. House of Representatives,
 Subcommittee on Housing and Community Opportunity,
                           Committee on Financial Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:23 a.m., in 
room 2128, Rayburn House Office Building, Hon. Marge Roukema, 
[chairwoman of the subcommittee], presiding.
    Present: Chairwoman Roukema; Representatives Bereuter, 
Barr, Kelly, Oxley, Miller, Grucci, Tiberi, Carson and Israel.
    Chairwoman Roukema. This hearing on the Subcommittee on 
Housing and Community Opportunity will come to order. 
Officially we are now in session. Without objection, all 
Members' opening statements will be part of the record, and if 
Members do have opening statements, they may have 3 minutes in 
which to speak. And also, and I believe that our panelists know 
this, but I would like to repeat it, that without objection, 
all the written statements, full written statements of 
panelists on each of the panels will be made part of the 
record, but we should try to limit our statements to a 5-minute 
summary of the testimony, and we will have to try to be aware 
of that 5-minute restriction because we want to get through 
this hearing today before we get interrupted over and over 
again with the voting session on the floor.
    So with that as the opening, we hope that Mr. Frank or 
other Members of the minority will be here shortly. But in any 
case, we will continue now with our hearing or begin our 
hearing. And I'd like to say that this certainly is an 
important hearing, and I appreciate our witnesses providing all 
the information for us, because this is a very complex issue 
and one that has been around for quite some time, National 
Flood Insurance, and specifically the issues regarding 
repetitive loss properties.
    The floods have been and continue to be one of the most 
destructive natural hazards in terms of economic loss, but also 
emotion loss and in many cases the health and safety of people 
throughout the Nation. The National Flood Insurance Program is 
a valuable tool in addressing the losses that are incurred, 
because it assures that businesses and families have access to 
afford flood insurance that would otherwise be unavailable on 
the open market.
    The National Flood Insurance Program has been of 
immeasurable help to families, not only in New Jersey, but 
certainly in every State across the country. And it's an 
integral part of the question of the American Dream and owning 
one's own home and how we balance these competing needs.
    The National Flood Insurance Program was created in 1968. 
Prior to that time, insurance companies generally did not offer 
coverage for flood disasters, because obviously the high risks 
involved. National Flood Insurance is now available in more 
than 19,000, almost 20,000 communities across the United 
States. In order to participate in the program, communities 
must agree to abide by certain hazard mitigation provisions. 
And these provisions include adopting building codes that 
require new floodplain structures to be protected against 
flooding or elevated above the 100-year floodplain.
    New Jersey, of course, is no stranger to the floods, and we 
have over 400 communities that have partnered with FEMA to 
provide policies that would give $239 million in property loss 
coverage. That in a small State like New Jersey, and you can 
expand it into what the costs are across the country.
    Clearly, that is why we need to take steps to reform the 
National Flood Insurance Program, and today we have not only 
our panelists of Members here, but others who are knowledgeable 
on the program and certainly the GAO today will testify that 
the program and the questions of actuarial soundness, and we 
know that is a growing issue.
    Clearly, repetitive loss properties are a main drain on the 
current system. FEMA defines repetitive losses as two or more 
losses greater than $1,000, each within a 10-year period. About 
38 percent of all program claims are repetitive losses, and 
currently about 45,000 properties nationwide have been flooded 
on more than one occasion and have received payments of $1,000 
or more.
    I won't go into any more of the numbers and the statistics 
on this, except that it is known that this is a huge and costly 
and growing problem. The repetitive loss structure is not only 
a serious drain on the program, but the high cost of multiple 
loss properties leads to increased premiums for all 
policyholders. And I believe that's what our Members, our 
colleagues here on the first panel have recognized, and that is 
one of the motivating forces for them taking action to deal 
with this long overdue reform that is necessary. Whether or not 
we're going to be able to come to that reform in the very near 
future, we shall see. But certainly I appreciate Congressmen 
Bereuter, Bentsen and Blumenauer for being here today to help 
us direct our focus on this issue. And I do believe that 
Congressman Baker will be joining us at this time as well, and 
he is a Member of this subcommittee as well.
    So I welcome you and recognize that our time is limited, so 
without further questions or further comments, having outlined 
the dimensions of the problem, I will introduce Congressman 
Bereuter, who was the one person who first came to me, 
enlightened me on the subject and has introduced his own 
legislation. And so we recognize him as the first Member of our 
first panel. Mr. Bereuter from Nebraska.

                       STATE OF NEBRASKA

    Mr. Bereuter. Good morning. Thank you, Madam Chairwoman, 
Members of the subcommittee. Thank you for holding this 
hearing. Mr. Blumenauer of Oregon and I reintroduced 
legislation we introduced in the previous Congress, and we had 
the assistance and support of former FEMA Director James Lee 
Witt. Before this in previous Congresses, I worked with 
Congressman Joseph Kennedy, a former Member of this 
subcommittee, on legislation. And I want to thank Congressmen 
Bentsen and Baker for their interest and concern for the 
functioning of the NFIP as well.
    If enacted, the Two Floods and You're Out of the Taxpayers' 
Pocket Act will help turn the tide against the huge costs 
associated with repetitive loss properties. Right now, people 
who own, sell or construct these repetitive loss structures 
want us to turn our back on the loss to the taxpayers and the 
huge cost shifting that goes on among premium payers, but we 
ought to address it. We should have addressed it many years 
ago, either that or the Federal Government should get out of 
the business altogether.
    The policyholders of many of these repetitive loss 
properties are currently not being charged anything close to 
actuarially sound rates under the NFIP. The legislation 
addresses repetitive loss properties in a simple, 
straightforward manner. The owner of a repetitive loss property 
will be charged the actuarial risk-based rates for the National 
Flood Insurance policy if two conditions are met. First, two or 
more NFIP claims must have been paid on an individual property, 
which is thereby defined as a repetitive loss property. Second, 
the policyholder of the property has refused a buyout, 
elevation or other flood mitigation measure funded by FEMA.
    Today I'd like to use this opportunity to explain in 
greater detail, but in the very limited amount of time, the 
five reasons for my support of H.R. 1428.
    First I support the legislation due to the widespread abuse 
among some policyholders who own repetitive loss properties who 
are not paying the actuarial rate for their flood insurance. 
FEMA has identified over 45,500 insured properties nationwide 
under NFIP which would be categorized as repetitive loss 
properties using FEMA's definition of two or more flood 
insurance losses of $1,000 or more within any 10-year period.
    Of these 45,000-plus properties, approximately 10,000 have 
experienced either four or more flood losses or two to three 
flood losses that cumulatively exceed the value of the 
property. This subset of properties is costing the NFIP over 
$80 million annually, and the average payout is $200 million 
overall for repetitive loss structures.
    Under NFIP, a regional cross subsidy is flowing from the 
policyholders in non-repetitive loss areas of the country to 
those policyholders in repetitive loss areas of the country. In 
FEMA's defense, it does not have the Congressionally mandated 
tools to address the cost of repetitive loss. The Two Floods 
and You're Out of the Taxpayers' Pocket Act will give FEMA the 
authoritative tools to reduce repetitive loss and to stop this 
Federal handout and cost shifting to other NFIP policyholders.
    Second, this legislation will save Federal taxpayers by 
reducing the NFIP unpaid debt to the Treasury. They pay it 
periodically, as they recently have. Since 1994, FEMA has been 
forced to borrow over $2 billion from the U.S. Treasury to 
cover NFIP claims and operating expenses.
    I certainly know of no private insurance company that can 
long stay in business if it disregards good actuarial 
practices. American taxpayers are paying the cost for those 
individuals who choose to live in higher flood risk areas and 
who fail to make the prudent mitigation actions.
    This bill will help to ensure the future solvency of the 
NFIP and to reduce the need for NFIP to borrow from the 
Treasury. Moreover, the bill would also save substantial 
taxpayer money the cost of Federal disaster relief assistance 
as many properties will be bought out and removed from Federal 
disaster aid-prone areas.
    In addition, the legislation explicitly provides that many 
types of Federal disaster relief assistance will be not given 
to the owners of repetitive loss properties if they refuse to 
accept mitigation assistance.
    Third, the legislation is based on the fact that NFIP gives 
subsidized flood insurance to disaster-prone areas. The Federal 
Government is encouraging development in these areas. The 
question needs to be asked whether rebuilding is merited in 
repetitive loss high-risk areas. I certainly believe in many 
cases the answer is no.
    Fourth, because of a predicted future change in weather 
patterns, this legislation should be enacted. Dr. William Gray, 
a highly respected Professor of Atmospheric Science at Colorado 
State University, for example, one of many respected 
climatologists, predicts that over the next decades, the East 
and Gulf Coast States will be subject to more frequent and 
forceful tropical storms, including hurricanes.
    Due to the number of repetitive loss properties on the 
coast, additional hurricanes will result in huge numbers and 
amounts of additional claims against the NFIP. It is imperative 
that the NFIP is changed before the eye of yet another 
hurricane is upon us.
    Lastly, the demographic reality is that millions of 
Americans are living closer to the ocean, closer than ever 
before in numbers and in percentage. According to the Census 
Bureau, within the next 10 years, 75 percent of the U.S. 
population will live within 100 miles of the U.S. coastline. 
Due to this demographic factor, the time is ripe to change the 
structure of the NFIP and the way it works.
    In summary, this legislation is needed. It will stop 
treading through waters of repetitive loss after repetitive 
loss. This legislation is the right thing to do at this time. I 
look forward to the hearing and the hearing of the others of my 
colleagues and others who will testify here today, and I pledge 
to try to work with you, Madam Chairwoman, and the subcommittee 
of which I am Member to craft legislation to address these 
    Thank you.
    [The prepared statement of Hon. Doug Bereuter can be found 
on page 69 in the appendix.]
    Chairwoman Roukema. I thank you, Mr. Bereuter.
    I do want to acknowledge the fact that the Chairman of the 
full Committee, Mr. Oxley, has arrived. Do you just have an 
opening minute or so statement, Mr. Oxley?
    Mr. Oxley. That's correct, Madam Chairwoman.
    Chairwoman Roukema. Pardon me?
    Mr. Oxley. That is correct.
    Chairwoman Roukema. Thank you. Go ahead.
    Mr. Oxley.. It's good to be here, and thank you for your 
leadership on this issue. And let me commend my colleagues for 
their interest in this very important issue. And I'm sorry that 
the Emergency Management Director from Ohio called, but 
ironically, he couldn't be here, because he's with the governor 
looking at the flood damage in Hamilton County along the Ohio 
River. So this is indeed timely in that respect.
    For sheer inventiveness, I have to congratulate the authors 
of H.R. 1428. ``The Two Flood Insurance and You're Out of the 
Taxpayers' Pocket Act of 2001.'' I've been around here 20 years 
next week, and that will be one of the most inventive titles 
for a piece legislation. So, Mr. Bereuter and Mr. Blumenauer, 
you are to be congratulated on that as well.
    This subcommittee will take a serious look at both pieces 
of legislation and the overall effect this has not only on the 
taxpayers, as Congressman Bereuter pointed out, but also the 
effect it has on people and their lives. This is something that 
I've had an interest in for a number of years. We've had some 
flooding in my district for a number of years, and the farther 
south you get, the worse it gets in Ohio and certainly Northern 
    So my hat's off to the Chairwoman for her leadership and 
also to my colleagues for what I think will be an excellent 
hearing and an opportunity to explore some of these issues that 
we've grappled with in the past. And I think if you look at the 
graph that Congressman Bereuter passed out, it gives a pretty 
stark appraisal of where we have been the last few years 
resulting in appropriations and the need for FEMA to borrow 
substantial amounts of money.
    So with that, Madam Chairwoman, I would ask unanimous 
consent to make my full statement part of the record. Thank 
    Chairwoman Roukema. Thank you. Yes, unanimous consent is 
there for all Members of the subcommittee.
    And with that, we will now recognize Congressman Richard 
Baker from Louisiana, also an active Member of this 


    Mr. Baker. Thank you, Madam Chairwoman and Members of the 
subcommittee. Madam Chairwoman, I have some additional 
addendums I would like to include with my written testimony for 
inclusion in the record.
    Chairwoman Roukema. Without exception, so moved.
    Mr. Baker. Thank you, Madam Chairwoman. Often, and far too 
often, the refrain is heard in Louisiana, we're a State that's 
either underwater or under indictment.
    Mr. Baker. And I appear here today, Madam Chairwoman, as an 
expert on any subject the subcommittee wishes to pursue.
    First I'd like to tell you that I have never met anyone in 
my State who likes to flood. Now I'm sure there are some who 
profit from repetitive loss activities, and that's regrettable. 
But most folks I visit with during the floodwater's 
encroachment are very pained and angered by their circumstance. 
They don't care if it's local water, State water or Federal 
water, all they know is they've got water in the bedroom, and 
they're not happy.
    Second, floods are dynamic events. They're like animals. 
They change from day to day. Depending on wind, tide and moon, 
we have varying circumstances resulting from the same amount of 
rainfall, also where the water comes down to a large extent 
determines where the damage occurs. A property which is not 
flooded today has no assurance it won't flood in the future as 
new developments continue, as local governments fail to 
maintain appropriate drainage standards, circumstances are 
often very unpredictable.
    Third, significant efforts are being made in some 
jurisdictions to mitigate losses and to make changes. For 
example, the Congress and the State together have appropriated 
funds necessary to construct a $150 million drainage canal in 
my district, the most important aspect of which is local folks 
who are very tax averse voted a property tax on themselves to 
provide the local share of construction cost. We're making 
    So, what's the problem? When you begin to look at the 
nature of the repetitive loss properties, FEMA knows who they 
are. To a large extent, I know who they are in Louisiana. We 
know where they are. We know what the claims amount to, and we 
could buy them out. I suggest we could take that line of credit 
we now have for FEMA, extend it to identifiable repetitive loss 
properties, buy them off and get them off the list.
    As you will note, over the line of the program, it is a 
line of credit. No other natural disaster is treated similarly. 
The premiums, in fact, pay off the debt. Today if you look at 
the status of the fund, there is a surplus of money in the 
fund. Now we have a contingent liability we've all identified 
known as Tropical Storm Allison, which will easily eat through 
that collective body of money. But over the near term, the 
premium flow will greatly diminish the losses incurred. So it's 
a line of credit extended by some States to other States, which 
is then paid off by those who benefit from the program.
    I reference, in fact, year-end results, the chart which has 
been included in the record, which shows since 1994 when a 
structural change was made where no more Congressional 
appropriations are utilized to pay off flood loss mitigation 
and where premium dollars pay off the borrowed funds, and today 
we have a small fund balance.
    Second, there are a number of ways to solve the problem of 
repetitive loss properties and those who engage in abusive 
practices. One, as my friend from Nebraska has suggested, is to 
cut people off who flood repetitively. The problem with that 
can be best exemplified by a member of my own staff, a young 
lady recently married with children decided to buy their first 
home. I can tell you, they went through extraordinary due 
diligence. They did everything one could reasonably expect to 
be done in order to determine if the property they were 
acquiring was subject to flooding.
    Two months after occupying the house, it was the only 
house, but the house that flooded in a very recent storm. They 
moved out. Damages were paid. The house was renovated. Two 
weeks after moving back in, Tropical Storm Allison came through 
and they were again the only house to flood within the 
subdivision. Were they in bad faith? They did not exercise good 
judgment? They certainly bought flood insurance. They paid the 
premium. Should we now tell this young family whose value of 
the house has fallen below the mortgage they owe that we are 
going to be out of the program and have to sustain repetitive 
loss, can't sell the property for now what they owe on it? I 
don't think that's fair, and I don't think that's what most 
Members of this subcommittee would like to see happen to their 
    There is another remedy. And let's look at the premium 
flow. Where does the money come from to now pay off the losses 
we incur? It comes from people paying the premium. Let's talk 
to FEMA. What's the percentage in your State of people subject 
to high-risk flooding hazard that actually paid premium to the 
program? My State is one of the best in the country.
    For example, not to pick on my colleague from Texas, but 
just by way of example--we share the same view on this matter--
when you look at the relative size and relative value of 
property in Texas as contrasted with Louisiana and then look at 
the premium dollars currently in effect, in Louisiana we have 
$140,398,000 worth of premium in effect. Texas, by contrast, 
has $127,620,000. We have $20 million more premium being paid 
by our State than those in the State of Texas, which has a 
similar concern about the proposal.
    What we should do is condition I think participation levels 
by a State with identifiable flood problems to a certain level 
so that we have more premium flow. My concern, however, is when 
we get to the 50 percent level that Louisiana now enjoys, for 
example, we will have significant funds in the pot, which then 
may be subject to interest by others for other purposes.
    This is a problem which can be fixed. I simply call on the 
subcommittee to exercise great caution, not to move quickly. 
The value of this program to the people who suffer the ravages 
of flooding is immeasurable. And the losses to unreasonable or 
arbitrary constraints and denying people access to this help I 
think would be regrettable.
    Madam Chairwoman, I appreciate your courtesy and this 
opportunity to participate.
    [The prepared statement of Hon. Richard H. Baker can be 
found on page 50 in the appendix.]
    Chairwoman Roukema. I thank you, Mr. Baker.
    Congressman Bentsen from Texas. Already been referenced. 
Would you like to explain your legislation?

                         STATE OF TEXAS

    Mr. Bentsen. Thank you, Madam Chairwoman. And I appreciate 
the subcommittee holding this hearing. As with Mr. Bereuter and 
Mr. Blumenauer, I also reintroduced the bill that I had 
introduced in the last Congress to reform the National Flood 
Insurance Program as it relates to repetitive loss properties. 
And I am hopeful that the subcommittee will be able to come up 
with a bill this year.
    We in the last Congress tried to work to resolve the 
differences between our bill. We got close. We didn't quite get 
there. And I hope that we can and take into account the 
information that Mr. Baker brought as well.
    Since the last time I testified on this bill, my district 
and the districts around my district have suffered a storm of 
severe proportions that is estimated to be somewhere about a 
500-year event, a storm that has flooded, I believe at last 
count, around 70,000 homes. There have been about 90,000 claims 
made to FEMA. FEMA estimates that their obligation at this 
point is about $2.4 billion, and the property assessors assume 
that the total damage is close to $5 billion.
    Included in that are a large number of people who are in 
the Flood Insurance Program, and it's estimated that overall, 
the number of claims that will be made to the NFIP as a result 
of Tropical Storm Allison will be about 25,000 when it's all 
said and done. That being the case, it puts me a little bit 
awkward situation to talk about reforming the NFIP program when 
I have so many constituents who have just been affected by this 
terrible tropical storm. But in fact, I think that that is 
something that we ought to do, and I think those of us who 
represent constituents who participate in the program should be 
at the forefront of trying to protect this program.
    Because I do not believe that the NFIP program for the vast 
majority of American homeowners who use it is a boondoggle. The 
vast majority, in fact, all of my constituents who use the NFIP 
program, and it's 30,000 or more, don't live in fancy beach 
houses along the Gulf Coast, they live in suburban 
neighborhoods along watershed, some that are undergoing flood 
control projects, some that are projects that have been 
authorized for 40 years, but Congress hasn't funded.
    Some of the worst abusers of the repetitive loss program 
are, in fact, in my district, and I think we ought to work to 
buy those out. But I also have a number of constituents who 
went through flooding in 1994 and went through flooding in 1978 
and 1976 and were told that they might be bought out. But as it 
turned out, there wasn't enough money for the buyout. So all we 
could do was repair their homes and let them get flooded again. 
I talked to a woman the Sunday after the flood who was flooded 
seven times. Actually, she flooded eight times, because she 
flooded twice during this last storm. But she holds on. She's a 
cancer survivor, and she raised eight kids in that house, and 
she said she's prepared to go back if we're not going to be 
there to buy her out.
    I have a constituent of mine, Mayor Wayne Riddle of Deer 
Park, who is an insurance man who was about to give up his 
flood insurance, but chose to keep it because he wanted to 
practice what he preached, and he was glad he had it, because 
he hadn't flooded in 20 years.
    Madam Chairwoman, the difference between the bills are 
this. Both of us believe that we should put money in for 
mitigation and put money in for buyouts. And Congress has been 
deficient in the past of giving FEMA the funds they need to do 
it. Both of us believe that the most repetitive properties 
ought to be bought out. But where we have a disagreement is how 
you define a repetitive loss property. In my bill, I think that 
we should tie that definition to the value of the house.
    I don't think that we should define it to the number of 
times that you are flooded, because as I read Mr. Bereuter and 
Mr. Blumenauer's bill, you could be flooded twice in a period 
20 years or 30 years and file two claims totaling as little as 
a couple of thousand dollars and FEMA could decide that they 
want to buy you out. I think that's too broad of a targeting.
    I think that we should focus on the worst abusers of the 
system, not the American people who have paid in thousands of 
dollars of premium to this program only to be caught up in 
trying to clear the watershed.
    The other thing I would tell you is this. The statistics 
show that 96 percent of the repetitive loss properties are what 
are called pre-FIRM properties. These are before FEMA went in 
and began mapping the floodplain. So a lot of people are in the 
floodplain that didn't realize they were getting into it in the 
first place that are being caught up in the repetitive loss 
    And we also know that the floodplain moves. FEMA went 
through a remapping of some of the major watersheds in the 
Greater Houston area last year and the previous couple of 
years. I had 9,000 constituents who prior to that time were not 
in the floodplain who are now in the floodplain and are now 
subject in many cases to having to get flood insurance.
    So I think we have to be careful who we think the culprits 
are here. And I don't think it's the majority of the people who 
are in the program, and I think we also have to be careful 
about what we do to this program that will affect the property 
value of these homeowners going forward. It is a program that 
we need to fix. I think we can get there and fix it, but we 
need to keep into consideration the homeowner's property 
rights, who the culprits are in this. And I would hope that we 
would keep in mind that the NFIP program is a good program, 
because the private market does not write this insurance. And 
when you flood, you have nowhere else to turn.
    I appreciate the gentlelady for having these hearings.
    [The prepared statement of Hon. Ken Bentsen can be found on 
page 65 in the appendix.]
    Chairwoman Roukema. All right. Thank you, Congressman 
    Now we welcome Congressman Blumenauer to the panel.

                      THE STATE OF OREGON

    Mr. Blumenauer. Thank you, Madam Chairwoman. I was 
heartened by Chairman Oxley's comments, and I deeply appreciate 
your leadership in allowing this hearing to move forward.
    As was referenced, I have been working for the last couple 
of years with Congressman Bereuter on this legislation. My goal 
in Congress is for the Federal Government to be a better 
partner, promoting the livability of our communities. And it's 
hard to imagine a simple, direct step that can have more impact 
on more people, and on improving the environment and quality of 
life, than moving forward with meaningful reform of the Flood 
Insurance Program.
    I won't repeat the details. My colleague, Mr. Bereuter laid 
them out more clearly than I. I have a statement that I have 
submitted for your record.
    I would make a couple of points if I may. One is that this 
legislation is not designed to force anybody to do anything. 
FEMA has had excellent leadership with Mr. Witt previously and 
Mr. Allbaugh, who I think has been an excellent appointment by 
this Administration. FEMA is doing a good job, but they need 
more tools to help move people out of harm's way.
    I think we do people no benefit by enabling repetitive 
flood loss, having people in harm's way. And I think the thrust 
of the legislation is not a situation where we're going to move 
people who had de minimis losses. You will hear from people at 
FEMA that this is not the intent. But the broader definition is 
important to be able to move forward when you have a number of 
properties and you need to be able to have funds available.
    FEMA wants to concentrate on the areas with the greatest 
impact. We have used as a poster child one property in Houston 
that in less than 20 years has had over $800,000 worth of 
repetitive flood loss for a home that is valued at less than 
$115,000. I haven't seen the results since the last flood, but 
it's very likely that that total has been boosted.
    But it's not just a case of the loss of money, although the 
Bush Administration has estimated that they could gain $10 
million in budget savings and are supporting something similar 
in this area.
    There is another important advantage, and that is improving 
the environment. If we encourage people to live in areas that 
are repeatedly flooded, it is harder to move forward with 
mitigation that FEMA has done with spectacular success moving 
people out of harm's way and site hardening their locations.
    This legislation would simply require that people pay full 
freight or they accept funding to move or to harden the site. 
And if we do that, it's going to make flooding over the long 
haul less damaging, because we will have people moved out of 
harm's way. We'll be able to allow that land to be used as 
nature had intended, to be able to absorb flood damage. So 
rather than contributing to stormwater runoff in the future, it 
will actually make future flood losses less, reducing the 
demands on the program.
    And last, but not least, I want to talk about the human 
impact, because I agree with, although I haven't had a 
devastating situation in my State as Congressman Bentsen has 
experienced, that we do people no favors to subsidize their 
continuing to be in harm's way. In the last session of Congress 
I think all our hearts were touched by the people in North 
Carolina and the devastation there.
    Americans are instinctively I think heroic. They look out 
for their neighbors. And it isn't just a case of somebody 
deciding to live in a home where they've raised their kids. We 
saw in North Carolina where people died trying to save their 
neighbors, or in Houston just last month, there was a man 
electrocuted by his television, and his mother moved forward to 
try and help him and lost her life. If we have a Federal 
program that is not an efficient use of tax dollars, that's 
subsidizing people living in harm's way, that is encouraging 
more flooding over time and is encouraging people to put not 
only their own life at risk, but that of others, I think it's 
time for us to take a hard look, step back, approve reasonable 
reforms that have been supported by this Administration, by 
prior Administrations, and most importantly I think, be able to 
give the tools to the dedicated men and women who are trying to 
solve a problem.
    I deeply appreciate your courtesy in allowing this hearing. 
And I think that with the help of this subcommittee, we can 
make whatever fine-tuning is necessary as far as definitions 
are concerned. But we can make sure that we make this program 
work better over time, improve the environment, save money, and 
save lives.
    Thank you very much.
    [The prepared statement of Hon. Earl Blumenauer can be 
found on page 73 in the appendix.]
    Chairwoman Roukema. I thank you, Congressman Blumenauer. I 
will make the point and I suppose we have some questions for 
our panelists before we get on to our next panel. But I would 
simply say that at this point, as you probably know, I am a 
strong supporter and co-sponsor of Mr. Bereuter's bill. I've 
heard and I associate myself with his comments regarding the 
Federal handout with respect to cross-subsidies.
    But I have heard your other comments. I don't know that 
I've heard anything that can help us reach an accommodation to 
balance out these cross purposes here or the individual needs 
of States like Louisiana and Texas. But as opposed to 
constituents who are cross-subsidizing and paying much higher 
premiums. But we'll go into those questions with our later 
panelists and certainly work with all four of you to see if we 
can come to an accommodation on this or some sort of a 
compromise. And with that, I'll call on Mrs. Kelly if she has 
questions. Yes?
    Mrs. Kelly. Thank you, Madam Chairwoman. I've looked at 
both your bills. My area has experienced tremendous storm 
damage a couple of times, and the latest was Hurricane Floyd 
where we had severe losses.
    I am interested, Mr. Bentsen, in your definition. I have 
some concern about where your definition defines three or more 
losses with cumulative damages equal to 125 percent of the 
market value of the structure. I'd like a little more 
explanation of that. Because after you've been flooded out a 
couple of times, there's not a whole lot of market value for 
your home.
    What I'm really kind of finding out is this a kind of a 
sleight of hand here so the Government's not going to pay these 
people? Or is that the original mortgage on the house? How are 
you going to define what the market value of the structure is?
    Mr. Bentsen. Mrs. Kelly, that's a good question. The way 
that that's determined, and we crafted this in working with 
FEMA and working with other State emergency people, buyouts 
occur already under the program. It's a voluntary system. The 
way they determine market value is they look at pre-event 
market value of the property. That's how they determine market 
value. In Houston right now they're looking to buy out 2,000 
homes if they have the money. But that's how you determine it.
    It's an established mechanism with which you do it.
    Mrs. Kelly. Excuse me, but I want to follow up on that just 
a minute. Pre-which event? The first event, the second event, 
or the third event?
    Mr. Bentsen. They would look at the claims that were filed 
and paid and compare that with the market value of the house 
after the third event.
    Mrs. Kelly. After the first event?
    Mr. Bentsen. After the third event.
    Mrs. Kelly. After the third event?
    Mr. Bentsen. Yes.
    Mrs. Kelly. So they would look at the claims and compare on 
a lowered market value, if I understand you correctly?
    Mr. Bentsen. The market value depends on many factors, as 
you know, but market values fluctuate in every part of the 
Nation. So they would just look at--I mean, market value, 
basically you go and look at what the appraisal district or 
whoever the entity is. In our case it's an appraisal district, 
determines what your property value is for property tax 
    Mrs. Kelly. I don't want to belabor this, but on the other 
hand, it seems to me you pointed out exactly what I was trying 
to drive at, is market values do fluctuate. You could have a 
home for $150,000. It gets flooded once. It's now worth a lot 
less than $150,000. The second time it gets flooded, everybody 
in the neighborhood, everybody in that community, everybody in 
that town knows that house got flooded.
    Just take the example that Mr. Baker brought up. That one 
individual house. That couple now lives in a house that does 
not have any market value compared to what they owe on the 
original mortgage.
    You're talking about a third flood, and they only get 125 
percent of what their market value would be after that third 
flood. I submit to you that that's not going to be enough to 
help this poor couple.
    Mr. Bentsen. Well, Mrs. Kelly, two points I would make. I 
don't necessarily agree that market values continue to decline 
as a result of flooding events. It may be in some cases true 
and not in others. But second of all, the buyouts are already 
determined,that are conducted by FEMA through the States, are 
already determined on what the prior event market value is, 
regardless of whether we pass a bill or not. That's just the 
way they run the program.
    And the third point I would make is this. For those who 
might feel that having three events within a 5-year period--and 
I'm very flexible in the definition. I just think it should be 
tied to the market value and not just any de minimis value. If 
it's a decline in value, it would make it more likely that you 
would breach the threshold under that scenario than the 
reverse, which would be property values continue to rise as 
they rise in the entire geographic area.
    Mrs. Kelly. Mr. Baker, do you want to follow up on that for 
a minute?
    Mr. Baker. I just want to emphasize the point that there 
are two cures possible. One, as Mr. Bentsen and Mr. Bereuter 
and Blumenauer have pointed out, is on the payment end and the 
repetitive loss end. I hope the subcommittee will examine the 
front end. In private life, if you don't have car insurance and 
you're in a wreck, you not only lose the value of your car, you 
may go to jail in some States.
    If you don't have flood insurance, you can have two events 
at least, maybe more depending on FEMA's judgment, you still 
get coverage. If you look at the percentage of people who have 
exposure to flood events who do not have insurance and force 
those individuals into the pool to pay the premium in advance, 
you will have more than adequate resources to pay off losses.
    By virtue of explanation, New York has $55 million worth of 
premium in force as contrasted with Louisiana at $140 million. 
No other insurance program I know of says we will pay your 
damages. And by the way, you could start paying premium in 2 
years. If you don't pay the premium, you don't get coverage. 
Now that's a very stringent requirement, but that's how life 
works in all other cases. No other natural disaster is treated 
the way the Flood Insurance Program is paid. A line of credit, 
which is repaid with premium. You have more premium, we don't 
have to worry about it, and we will have the cash that FEMA 
needs to buy out repetitive loss properties. Baton Rouge has 
279. FEMA has money to buy 50.
    Give us the money. We'll get rid of those properties. We 
protect the environment. We get those people out of harm's way 
at true market value, not subsequent to the loss. I thank you.
    Mr. Bereuter. Mrs. Kelly, may I respond?
    Chairwoman Roukema. I'm going to let Mr. Bereuter respond, 
but I do want you to know that we've gone well over the 5-
minute period.
    Mr. Bereuter. Mrs. Kelly, Members of the subcommittee, the 
market loss criteria creates all kind of difficulties. You 
pointed out one. The legislation that we have, on the other 
hand, continues to permit the property owner, that is a 
repetitive loss property owner, to buy insurance, to pay the 
premiums. And they don't even have to go to actuarial rates 
after the second flood if the other condition isn't met. We 
don't force anybody out of their homes. We're simply saying, if 
FEMA comes along, offers a buyout, an elevation or other kind 
of mitigation and the property owner refuses, then, in fact, 
and only then do they begin to pay actuarial rates.
    Mr. Bentsen has $100 million authorization for 
appropriation for this mitigation fund. They need more money, 
obviously. We have $120 million, by $70 million transferred 
into $50 million. But I think that the market value criteria 
actually is tougher in some cases on the property owner than 
ours which requires two conditions to be met.
    Chairwoman Roukema. Thank you all very much.
    Next we have Congresswoman Carson.
    Ms. Carson. Thank you very much, Madam Chairwoman. You have 
probably answered this question three different ways, and I 
still don't get it. An analogy would be when the highway 
program first originated, they would give homeowners 
replacement value. And when they tried to get moved, they would 
find that inflation had, in fact, spiraled and had not met the 
actual cost of their places of abode. In Princeville, those 
homes were absolutely worthless to everybody but the people 
that owned them. They had historic value, significance and 
that. And when you put a price tag on replacement value, the 
people in Princeville are out to lunch. I mean, they don't get 
anything, because according to the appraisers, the property was 
worth nothing. But it was worth something. But in terms of the 
dollar application to the property, it was nothing.
    How then do these measures undergird those kind of 
circumstances to ensure that the homeowners are not abandoned 
if you will, because their properties, according to appraisers, 
were worthless? You know what I'm saying? I don't care who 
answers, Madam Chairwoman.
    Mr. Bereuter. May I respond first briefly, and that is----
    Chairwoman Roukema. And we'll be very mindful of the fact 
that we have only 3 minutes left.
    Mr. Bereuter.
    Mr. Bereuter. First of all, of course, the value of the 
property in a buyout by private sector, whoever, will never be 
enough to satisfy the owner, because they're looking at their 
original investment in most cases. But in most cases, when 
there is a buyout, FEMA is the most generous purchaser of that 
property, because it's been subject to flood. So their best 
option usually is a FEMA buyout.
    Mr. Bentsen. If I can just add very quickly, we're not 
talking about what the buyout price is. There is existing law 
that covers that and property values. What our difference is is 
when do you give FEMA the authority to raise the premiums? Both 
of us have a condition that if you don't accept a buyout or 
mitigation, then they can raise your premiums. We have 
different standards of when they can do that based upon what 
you define as a repetitive loss property. And in my case, I use 
based upon the claims paid out against the value of the 
property. They use the number of claims that are paid out.
    Mr. Baker. Mrs. Carson, if I might jump in real quickly, I 
would refer you to the Corps of Engineers Acquisition and 
Replacement Methodology when you're building a construction 
project. The Corps goes in and not only provides you with 
actual replacement value, they help you with packing costs, 
moving costs, if there's special considerations. There's a 
gentleman who is handicapped who has a home built entirely 
around his particular need. Those assets have no value to 
anybody else but him. But the Corps, because of the 
construction project, is going to rebuild a replica of his 
    Now there would be no way on an appraisal basis for him to 
be made whole. This is a separate methodology than what is in 
the National Flood Insurance Program. And I recommend to you 
the Corps' process is very fair and equitable as compared to 
what is being proposed.
    Ms. Carson. So you gentlemen are dealing strictly with the 
flood insurance and the premiums?
    Chairwoman Roukema. Yes. All right. Thank you. Mr. Grucci, 
do you have a question? No question? Mr. Quinn? I'm sorry. I 
didn't mean Mr. Quinn. I meant Mr. Miller.
    Mr. Miller. Thank you, Madam Chairwoman. One of you 
mentioned a 500-year flood. Where was that at?
    Mr. Bereuter. Houston.
    Mr. Miller. Houston? I know most communities if they have a 
100-year preparation they're happy, and if they have 200 years, 
they take a lapel and fluff it, because they're kings. I can't 
imagine what in the world you could do to prevent a 500-year 
    Mr. Baker. Move.
    Mr. Miller. I mean, that is an incredible flood.
    Now FEMA is talking about requesting $1 billion for new 
mapping basically is what they--and the Administration has got 
$17 million proposed or something. I don't know what city 
they're going to map for $17 million, but obviously, we're 
    One of you had mentioned that we should acquire the 
property based on property values rather than the amount of 
losses that a property has incurred. And one of you said that 
the National Flood Insurance Program--NFIP--is not a productive 
use of dollars, and I kind of agree in some form. I have a 
question that relates the following scenario: Someone owns a 
home, and because of climatic changes or whatever, topographic 
changes that might have occurred, ends up in a flood hazard 
area that they have to buy insurance through the NFIP. It was 
something they could not have known about going into it, but 
they buy flood insurance from NFIP that will cover it, because 
nobody in the private sector is going to write them a policy 
knowing that they're most likely going to lose money in writing 
them a policy.
    My question is, how do we deal with the individuals who go 
into an area that is prone to risks like this and still buy the 
house, and we sell them a policy? Is there anything being done 
about that?
    Mr. Baker. Let me jump in because, again, it's repetitive.
    Mr. Miller. And this is the question.
    Mr. Baker. There are people who get benefits today who do 
not pay premium. That doesn't happen anywhere else. If you 
require the person to pay a premium to get a benefit, much of 
this goes away.
    Second, the chart shows that although there are years where 
you run an excess draw on our line of credit, the line of 
credit is repaid entirely with premiums. Since 1994, that's the 
way this program works.
    Mr. Miller. You're saying if you don't pay the premiums, 
you don't get the benefit?
    Mr. Baker. That's the way life works everywhere else.
    Mr. Miller. I like that.
    Mr. Baker. Well, my answer is on the front end of the 
problem, not the back end. Rather than identify--now, we should 
get the repetitive abusers out.
    Mr. Miller. Yes.
    Mr. Baker. Once that's gone, which is a relatively small 
pool--that's roughly $200 million a year of repetitive annual 
losses--take them out of the program, require people to pay a 
premium, and let a good program work. Don't pay people a 
benefit if they're not participating voluntarily and paying a 
    Mr. Miller. I can't agree with you more. In my home area, 
we don't have flooding as a rule. I mean, occasionally, some 
minor thing happens that usually the Government has not 
provided flood control channels to accommodate it because of 
growth in areas. But currently, are we selling insurance 
premiums to people who are buying in an area that is prone to 
floods already?
    Mr. Bentsen. Yes.
    Mr. Bereuter. Yes.
    Mr. Miller. Does your bill address that?
    Chairwoman Roukema. Excuse me. Excuse me, Mr. Bereuter, I 
didn't hear what you said. You said yes, but in response to 
    Mr. Bereuter. Yes. Several of us said yes.
    Chairwoman Roukema. In response to what? Yes, what?
    Mr. Bereuter. That, in fact, they are buying flood 
insurance. It's available to them.
    Mr. Miller. We have areas that we know are likely to flood. 
We know that we're likely to be put in the position to have to 
buy that home back if we have a fault, and we're selling 
policies in those high-risk areas today, putting ourself in the 
    Mr. Bentsen. If I might answer, Mr. Miller, I'm from 
Houston, Texas. It's the fourth largest city in the United 
States. It's the third largest county in the United States. In 
my district alone, there are about 30,000 people who are within 
the floodplain. And we sell insurance to them.
    The law says that if you have a mortgage through a 
federally insured institution you have to have flood insurance, 
or if you've ever received any assistance or have an 
outstanding SBA loan through disaster assistance. But the point 
is, if we were to stop selling insurance to people in what are 
called pre-FIRM, the homes that were built before the 
floodplains were mapped--and the floodplains change because of 
upstream development and other things like that--you would have 
to go through, say, Southwest Houston and wipe out entire 
neighborhoods. I don't think the Federal Government is prepared 
to underwrite the cost of doing that.
    Mr. Miller. Are we still building new homes in these 
floodplain areas and then selling those insurance policies to 
those people in those areas?
    Mr. Bentsen. You're not allowed to--FEMA has agreements 
with--and they'll talk to this point. But they have agreements. 
In fact, we're going through this in Houston right now, where 
when cities and counties came into the Flood Insurance Program, 
they had to agree on plotting land and elevation requirements 
and the like, mitigation requirements, once they figured out 
where the floodplains were.
    Mr. Baker. It's extensive. You can drive through a city 
street, see one house that's 10 years old sitting on the 
ground, and you can drive right next to it, a new construction, 
it's five feet in the air. Those are all results of the FEMA 
    Mr. Miller. So the new homes are in compliance?
    Mr. Baker. Built above what they believe to be is a 
    Mr. Miller. I'm familiar with flood hazard areas, but I 
know in your specific communities, it's a real problem because 
it encompasses a huge area, and I'm not even implying that we 
should not provide that insurance. Are we still allowing homes 
to be built that are going to be in these risk areas that 
we're--the Federal Government--are likely to suffer a loss, but 
we nonetheless provide the homeowners' NFIP policies?
    Mr. Blumenauer. And if I may?
    Chairwoman Roukema. Yes, Mr. Blumenauer.
    Mr. Blumenauer. You started by talking about an 
unimaginable 500-year event. You've seen in Northern 
California, since I've been in Congress, I think there have 
been three floods of the century in a decade.
    The impact of unplanned growth, paving wetlands, and global 
climate change suggests that what we have seen now is the tip 
of the iceberg. And if we don't get this program right, we're 
going to find that FEMA and this Congress is contending with 
paying for it in disaster relief, more people in harm's way, 
and it's going to be more serious over time. I mean, look what 
happened in West Virginia two weeks ago. There's something 
going on here, and if we don't give them the tools to start 
getting ahead of the program, it's going to eat us alive. And 
flood insurance actually would be just a small part of the 
    Mr. Miller. Thank you, Madam Chairwoman.
    Chairwoman Roukema. All right. Thank you.
    Mr. Israel.
    Mr. Israel. Thank you, Madam Chairwoman. I appreciate your 
leadership and the leadership of our colleagues on this issue.
    FEMA reports that New York State has experienced about 
7,600 floods since 1978; 2,886 of those are repetitive loss 
properties. Last Monday I stood in my district on something 
called the Ocean Parkway, which was aptly named, because the 
parkway almost fell into the ocean 10 years ago during severe 
flooding. It came within 15 feet. And a breach of the Barrier 
Islands in my district would cause dramatic surges of flooding 
on Long Island's mainland, threatening thousands of homes, 
businesses, even a hospital.
    I believe that the homeowners and businesses there have a 
reasonable right to protect their investments, but that that 
protection should be fair and should not be abusive. And I 
agree with Chairman Baker when he says that we have to act in a 
responsible and fair manner to solve repetitive loss problems.
    My question is to Congressman Blumenauer who is a champion 
of sustainable living and sustainable growth in this House. 
Separate and apart from H.R. 1428, are there sustainable growth 
strategies that attempt to strike a reasonable balance between 
those who are living in coastal areas and natural flooding 
conditions? What should we be doing separate and apart from 
this legislation in order to try and strike that balance?
    Mr. Blumenauer. I would hope, Congressman Israel, that we 
can use the attention that's being focused on your work here 
and the problems that have resulted to look at other areas 
where we're investing in infrastructure, in water resources, 
working with the Corps of Engineers to help encourage simple, 
common sense steps like removing people who are on the water 
side of dikes and levies. And Congress has not enabled the 
Corps to remove them, for instance.
    It would seem to me that we ought to have a broader view of 
this as being a larger picture. And the men and women who are 
going to be testifying after us have chapter and verse in terms 
of things that they're trying to do on the ground. We're seeing 
tremendous leadership on the State and local level where people 
are trying to move ahead of it, and I would just hope that 
Congress in our funding programs, in terms of disaster relief, 
in terms of infrastructure investment, and encouraging 
communities to plan on a regional basis, that we can be a full 
partner with them. Right now I feel Congress is a little bit 
missing in action.
    Mr. Israel. Are there sufficient funding programs at the 
Federal level to encourage partnerships with local governments 
and State governments for voluntary acquisition programs and 
property buyback programs?
    Mr. Blumenauer. I think all of us agree we need to be 
putting more money into that. It's seriously underfunded.
    Mr. Bentsen. If I might, Mr. Israel, there are a couple of 
programs. One is Project Impact which the Administration chose 
not to fund, and FEMA is relooking at how they're doing that. 
It's a pre-disaster mitigation program both for flooding, 
earthquakes and the like. And we've used that in my district. I 
got a grant for an area in my district to buy out 20 homes in 
the area of Cresthaven that had been flooded repetitively, and 
the people wanted to be bought out.
    And as I stated in my testimony, a lot of times what 
happens is there are people who want to be bought out, but we 
don't have enough money. Because the way the law is written is 
15 percent of the total disaster assistance--there's money 
appropriated equal to 15 percent of the total disaster 
assistance for a federally declared disaster area that can be 
used by FEMA and their State partners for buyout in other 
    In Harris County, as I said, they're looking to buy out 
2,000 homes out of this program, but they're probably not going 
to be able to get there, because they may not have enough money 
to do it. So Congress really does need to step up to the plate 
where people do want to be bought out. But the only difference 
between us is we have to be careful in how much authority we 
give to FEMA and the Federal Government in determining where 
they want to buy out--the most repetitive, the worst abusers, 
or the houses that have flooded the most versus whether we want 
to give the Federal Government broad authority to clear the 
floodplain, and I think we have to think very carefully about 
how we want to do that.
    Mr. Israel. Thank you.
    Chairwoman Roukema. All right. Thank you. I thank the 
panel. Certainly as I said in my opening statement, there are a 
lot of complexities to this subject, and you've outlined them 
very well, and we shall see if we can come to an accommodation. 
This dialogue has even added more questions in my own mind.
    But we'll work with you. And certainly we will--I'm sure 
that you have raised a number of issues that the next panelists 
with their experience in the field will be able to help give us 
some relief and direction and counsel on. Thank you very much.
    Will the second panel please come forward? All right. I 
would like to welcome you here today and thank you for your 
participation. I would note for all here in attendance that we 
have a panel of three members who will be speaking accompanied 
by assistants. But the three who are speaking have considerable 
experience in the field, and we're very grateful for you being 
here to not speak necessarily in abstractions, but attending to 
principles as well as experience that you've had.
    And with that, I will introduce you as you speak. The first 
one will be Mr. Robert Shea, who is accompanied by an 
assistant, Mr. Howard Leikin. Mr. Shea is the Director of the 
Federal Emergency Management Agency as of June of this year. Is 
that correct, Mr. Shea?
    Mr. Shea. Actually, the Director is Joe Allbaugh, Madam 
Chairwoman. I'm the Acting----
    Chairwoman Roukema. Oh, I'm sorry. Deputy Administrator. 
I'm sorry. I'm sorry. Deputy Administrator for Mitigation.
    Mr. Shea. That's correct, Madam Chairwoman.
    Chairwoman Roukema. Federal Insurance Administration. But 
the point is, of course, that you have not just come to this 
department, but you've had nearly 25 years of emergency 
management experience serving in various capacities in FEMA. 
And for that, we are most grateful for you being here and 
giving us your advice and counsel. And you are accompanied by 
your Deputy Administrator who will not be speaking formally, 
but will be adding his supplementary understanding when 
necessary. Mr. Shea.


    Mr. Shea. Thank you very much, Madam Chairwoman. And thank 
you, Members of the subcommittee. As Madam Chairwoman said, my 
name is Bob Shea.
    Chairwoman Roukema. Excuse me. I think you're going to have 
to pull those microphones closer. I don't quite know what the 
problem is with these microphones, but you have to speak 
directly into them and very close up. Thank you.
    Mr. Shea. Thank you. I am the Acting Administrator of the 
Federal Insurance and Mitigation Administration. And as you 
indicated, joining me today is Howard Leikin. Howard is the 
Deputy Administrator for Insurance. I have been in my job for 
about 30 days, as you indicated, but I have extensive 
background in mitigation. Howard, however, is a wealth of 
information on Federal insurance issues.
    I appreciate the fact that you are willing to put our 
testimony in the record, and I wonder if I might just make a 
few brief opening comments, Madam Chairwoman.
    Chairwoman Roukema. Please. You have 4 minutes left. Thank 
you. Of your time.
    Mr. Shea. Well, it won't take me anywhere near that long. 
So we'll speed this along. I would really like to thank the 
subcommittee, Chairwoman Roukema, and particularly 
Representatives Bereuter, Blumenauer and Bentsen and now 
Representative Baker for addressing an issue of importance not 
only to the health of the National Flood Insurance Program, but 
to the many citizens living in flood-prone areas.
    Congress and the Executive Branch have built an enviable 
arsenal of tools to respond to disasters, both pre-disaster and 
post-disaster. But one of the primary tools, the National Flood 
Insurance Program, is seriously challenged by the subject of 
this hearing. That is, repetitive loss or multiple loss 
properties. These properties have a disproportionate impact on 
the National Flood Insurance Fund. Thirty-eight percent of our 
losses are associated with just 15 percent of the insured 
properties that have had any loss at all, a very small 
percentage. Not to mention, of course, the impact on human 
    FEMA has done much to counteract the impact of these 
properties on people and Government. The implementation of a 
repetitive loss strategy, including the identification of the 
10,000 most egregious cases, and frankly, the enforcement in a 
pre-disaster setting of National Flood Insurance building 
standards. These building standards alone save us as much as $1 
billion annually.
    We have also developed very effective tools in a post-
disaster environment to acquire, elevate or relocate these 
properties. But we do that really in partnership with State and 
local government. They are an integral part of how we operate.
    We know that these tools work, and we also know that they 
are cost effective. But the job is immense, as has been 
indicated here earlier this morning. We have paid out in excess 
of $900 million in claims for these 10,000 properties, and 
frankly, while they continue to drain our resources, we can 
never achieve the vision that we jointly hold of a self-
supporting National Flood Insurance Program that is the 
cornerstone of the Federal response to flooding.
    Just as an anecdote, in Houston, as was indicated earlier, 
we are moving ahead more forcefully and more aggressively than 
we ever have. We have just announced a buyout of 200 properties 
in Friendswood, Texas. Of those 200, 122 are in the repetitive 
loss family. So we can make some progress. But I have to say 
that the job is so overwhelming that really we can't do it 
without your help.
    So we are grateful for your time and your efforts and your 
support, and Howard and I stand ready to answer your questions. 
Thank you, Madam Chairwoman.
    [The prepared statement of Robert F. Shea can be found on 
page 75 in the appendix.]
    Chairwoman Roukema. I thank you.
    And now second we have Mr. Czerwinski. Mr. Czerwinski is 
the Director for Housing at the GAO, U.S. General Accounting 
Office. And Mr. Czerwinski, I understand that you have been 
with the GAO for approximately 21 years, and so you must be 
able to give us some perspective over time as to how we've 
effectively been dealing with the Flood Insurance Program. And 
I believe you've had a direct connection with that program 
since 1999 and have your experience.
    But I would appreciate it if you would give us the benefit 
of that experience and help us with your assistant, Mr. Bob 
Procaccini and help us understand in context repetitive loss 
strategies. And maybe you can help us with the reference to 
what the previous speaker has said about building standards. I 
don't know if that's part of your testimony or not. Mr. 


    Mr. Czerwinski. Thank you, Madam Chairwoman. I very much 
appreciate the kind comments. And perhaps the toughest part of 
our hearing today is going to be trying to pronounce Bob's and 
my names.
    Mr. Czerwinski. We had the opportunity to testify before 
this subcommittee in the last session of Congress, so we would 
like to commend you for revisiting what we consider to be a 
very important issue. And you just heard Members Baker, 
Blumenauer, Bentsen and Bereuter, as well as FEMA talk about 
some proposals for curbing repetitive losses.
    We agree that repetitive losses are an important issue and 
we back the principles behind those proposals. What I would 
like to do first, though, is take a step back and provide a 
broader perspective in the Flood Insurance Program. There are 
three issues I would like to address today. First is the 
soundness of the fund. Second is repetitive losses, 
specifically some of the proposals we heard about, and third is 
some of the implementation issues, such as building standards, 
that these proposals raise.
    The Flood Insurance Program is not actuarially sound, and 
this is by design. As the chart on your left shows, this 
program has suffered losses of up to $600 million in a given 
year. This is primarily because, as Mr. Bentsen mentioned, 
there had been a large number of properties that were 
grandfathered into the program, and many of these properties 
are substandard. These properties, which are substandard, 
represent about 30 percent of the portfolio, and as such, there 
is an $800 million subsidy that goes to them. These 
grandfathered properties pay about twice the normal premium, 
but that premium is still only about one-third of what is 
actually needed to cover the costs.
    The question is if we were to raise the premiums, could 
those owners pay the higher premium? Would they pay, and what 
will we do if they don't? These questions also apply to 
repetitive losses. Repetitive losses comprise about 1 to 2 
percent of the portfolio, yet they represent about 38 percent 
of the claims--a $200 million annual loss to the Federal 
Insurance Program. So you can see why we agree with the 
proposals. And targeting repetitive loss is essential for the 
subcommittee to consider.
    The proposals we talked about today essentially have two 
parts. I consider them to be a carrot and a stick. The carrot 
is mitigation. And mitigation, simply put, is getting the 
properties out of harm's way. You may either want to move the 
property off the floodplain or elevate it above the flood 
    The stick is, if properties are not mitigated, then you 
raise the premiums so that they cover the costs. But what if 
the people with higher premiums can't or won't pay? Do we have 
the will, do we have the discipline, is it appropriate for us 
to deny any types of assistance? This raises several 
implementation issues.
    Mitigation is neither simple nor cheap nor quick. At the 
funding levels for the proposals we've heard today it would 
take about 25 to 50 years to mitigate all repetitive loss 
properties. As such, that places a premium on having the worst 
properties mitigated first. This makes it very important that 
we have the information needed to do so. Essentially, you want 
to identify the worst properties. You also want to determine 
who is in them. Because who is in them affects their ability to 
    FEMA is taking the first steps toward gathering this 
information, but there's still a long way to go. So if the 
carrot fails, what about the stick. Typically, repetitive loss 
properties belong to the poorest homeowners. So it is a 
legitimate question as to whether they can pay the higher 
premiums or not. If they don't, can we deny them disaster 
assistance, and will we do that?
    The 1994 Act gives us an indication. That Act contains a 
provision that would deny disaster assistance to those who did 
not get required flood insurance. We've had a number of floods 
since 1994. There have been a large number, as we know, of 
homeowners who haven't had the required insurance, yet I don't 
know of any examples of us denying assistance to them.
    What this points out is that flood insurance is not 
separate from the rest of the disaster assistance framework. It 
also means that repetitive losses by themselves cannot correct 
all the flood insurance challenges. But repetitive losses is 
certainly a good place to start. Taken together with repetitive 
losses, if we address such structural problems as those 
properties that were grandfathered in at subsidized rates, we 
will go a long way toward reducing the problems faced on a 
financial level by the Flood Insurance Program. It will also 
help us make disaster costs more manageable.
    That concludes my statement, Madam Chairwoman. I would be 
glad to respond to any questions that you or the subcommittee 
Members may have.
    [The prepared statement of Stanley J. Czerwinski can be 
found on page 89 in the appendix.]
    Chairwoman Roukema. Thank you. Thank you very much.
    And now we have our final panelist is Rebecca Quinn. Ms. 
Quinn is President of R.C. Quinn Consulting Incorporated, which 
is a specialized program that deals with floodplain management 
and mitigation. I guess she has been a volunteer for many years 
and has put her volunteer experience into dealing specifically 
with floodplain management and has had extensive experience in 
Maryland, as I understand it.
    Thank you very much. And Ms. Quinn, we're ready to hear 


    Ms. Quinn. Thank you, Madam Chairwoman. I certainly have a 
challenge to rise to since my colleagues here all finished 
under 5 minutes.
    As you indicated, I am the volunteer legislative officer 
for the Association of State Floodplain Managers. Including our 
14 chapters, we represent over 4,500 State and local officials 
and other professionals engaged in all aspects of floodplain 
management and hazard mitigation.
    I'll just jump right into it. We believe that there are 
some fundamental premises that any strategy to deal with 
repetitive losses should address. The details are in our 
written statement. I'll touch on six elements quickly.
    As other witnesses have indicated, a strategy must be 
considered cost containment for the NFIP. This is not an 
entitlement program, it's not an enrichment program, it is a 
cost containment for the current policyholders and all future 
    A program to mitigate less than 1 percent of the insured 
properties could save millions of policyholders hundreds of 
millions of dollars each year if the rates don't have to 
increase to continue to cover repetitive losses. Plus, more 
people will actually choose to buy flood insurance if the cost 
of insurance becomes more in line with their perception of 
    The repetitive loss strategy should address cost-effective 
projects that are in the best interests of the NFIP. These are 
not arbitrary terms. They are defined. FEMA has some rather 
extraordinary tests one has to go through to determine whether 
a project is cost beneficial.
    We also think it's important to realize that not all 
repetitive loss properties will fall into the group targeted 
for mitigation, especially those that get low-level, low dollar 
value damage. In those cases, we believe the best protection is 
continued purchase of flood insurance. It provides financial 
protection, although not property protection.
    People who buy flood insurance don't usually qualify for 
various forms of Federal disaster assistance, including 
subsidized loans, nor do they usually claim the casualty loss 
deduction on their Federal income taxes. Because the repetitive 
loss strategy will ultimately save tax dollars, we believe it 
is appropriate to be supported by new general funds.
    A strategy must encourage local planning for comprehensive, 
community-based solutions. Mandating only acquisition or 
projects that only deal with repetitive losses is too narrow.
    We support focusing on projects that primarily address 
repetitive losses, but let's not cut the community out of the 
planning cycle. When you increase funding for projects, we urge 
a commensurate increase in funding for planning and technical 
    Existing insurance-based mechanisms need to be used 
effectively. The NFIP is, of course, an insurance program. Most 
flood insurance policies include coverage called Increased Cost 
of Compliance--ICC--that, in certain qualifying circumstances, 
helps to pay for mitigation using premium dollars.
    We know FEMA is doing several things to make significant 
progress to make the ICC mechanism work more effectively, and 
we believe it is time for FEMA to exercise some authority 
granted to it in 1994 to allow the director to focus this 
mechanism on repetitive loss properties. If there are obstacles 
to implementation, we would urge that the subcommittee request 
a report so that you can determine what resolution might be 
    Canceling flood insurance on certain repetitive loss 
properties is short-sighted. We have serious concerns with that 
approach and would much rather see an increase in premiums to 
actuarial rates if an owner declines a reasonable offer.
    The subcommittee asked for several other topics to be 
addressed. One is the effectiveness of the NFIP. Where do I 
start? Our members definitely believe the NFIP is an effective 
program. No program is ever perfect. But clearly, without it, 
we would have more homes built flat on the ground rather than 
elevated to the current building standards.
    We look forward to a comprehensive evaluation of the 
program that FEMA will be initiating shortly.
    The current Flood Mitigation Assistance Program we believe 
is effective, although somewhat hampered by limited funding 
that is distributed to all States. Sometimes, because of the 
funding limitation, some of the quantities are rather small to 
deal with, but it is an important program and does foster local 
    Mitigation of repetitive loss properties can be 
accomplished under existing authorities with some 
modifications, and we do support some elements of H.R. 1428, 
particularly the addition of new funds and the focus on 
repetitive losses.
    I would like to end with a comment about flood hazard maps, 
a critical component of an effective repetitive loss strategy. 
The best mitigation is to ``build it right'' the first time. 
You asked for an additional comment on the building standards. 
The floodplain used for regulatory purposes is the 1 percent 
annual chance, commonly known as the 100-year. It is not all 
flooding. If we build to the minimum standard required, then in 
the long run, it is a cost effective construction standard.
    But we do need to recognize that most flood maps only 
reflect current conditions, or, in fact, a large percentage of 
them are 15 to 30 years old. Good maps are important for 
mitigation projects, as well. If you're going to elevate a 
home, you need to know that the elevation you're raising the 
house to is the proper elevation. So we do urge support for the 
Administration's map modernization program which does identify 
a significant funding need over the next 6 to 7 years.
    I look forward to any questions you may have.
    [The prepared statement of Rebecca Quinn can be found on 
page 103 in the appendix.]
    Chairwoman Roukema. All right. Thank you. I'm going to 
limit my own time hopefully. But I'll tell you, I haven't been 
clear about what you have stated.
    Let me ask whether it's Mr. Shea or Mr. Czerwinski who 
wants to answer first. We talked about the building standards, 
and Ms. Quinn has referenced that, and we should have firmer 
building standards. But given the present circumstances, why 
can we not be actuarially sound and make that our goal? I 
didn't get the feeling that Mr. Shea agreed with that. Maybe 
I'm wrong. And Mr. Czerwinski indicated that it's by design 
that it's not actuarially sound? Can you help us deal with 
that, and if we can't--because I think that is an absolute 
standard for myself. Would the two of you please comment 
further on that?
    Mr. Shea. Let me begin, if I can, Madam Chairwoman, and 
then I'm going to ask my colleague here, Mr. Leikin, to also 
address this issue. But the fact of the matter is, when the 
Congress passed the National Flood Insurance Act, it did not 
envision a program which would be actuarially sound. In other 
words, they always envisioned a program which would be required 
to provide subsidies to certain types of construction. Those 
are buildings that were built over the last 20 or 30 years that 
may have been built prior to the implementation of our flood 
mapping program or to the implementation of building----
    Chairwoman Roukema. You haven't done that component of it?
    Mr. Shea. Right.
    Chairwoman Roukema. All right. Continue.
    Mr. Shea. Let me turn it over to my colleague, Mr. Leikin.
    Chairwoman Roukema. All right. Yes, Mr. Leikin.
    Mr. Leikin. As Mr. Shea just mentioned, the program was 
implemented as really a three-pronged effort. There is risk 
identification to let people know what the risk zones are and 
how they can build to avoid losses. It was a floodplain 
management program to effect better construction than had 
occurred prior to the program through lack of knowledge of the 
risk, and also to provide insurance.
    We provide insurance really two basic ways. For structures 
that were built prior to the implementation of the National 
Flood Insurance Program, insurance was, in fact, made available 
at less-than-full-risk premiums. This was a tradeoff for 
communities joining the program.
    Chairwoman Roukema. Excuse me, Mr. Leikin, I'm sorry. I 
think we understand the past history. I'm trying to focus now 
on the future and how we get to reaching the future, whether 
it's actuarially sound, what the building standards are, and 
how we, in my mind, correct the mistakes or the growing 
mistakes, the growing body. We didn't realize, I don't believe 
we realized how large this problem was becoming until recent 
years. So I want to focus on what we do, and I think we should 
have the nerve or the desire or the intensity to raise the 
premiums to the point of where we may have to deny assistance 
    Mr. Czerwinski, please.
    Mr. Czerwinski. Madam Chairwoman, I think there are three 
parts to the question you ask. The first one is for newer 
properties, we want to definitely, as you point out, enforce 
building standards and sound location. Now there's a lot of 
properties that are already out there. We can't enforce 
building standards on the properties that are out there or 
change the location except through mitigation. And that's where 
mitigation comes into call. You move the property to a safer 
location, or you change the standard of the property by 
elevating it above floodplain.
    Also, as you point out, properties that aren't mitigated 
bear a higher risk. Therefore, that calls for a higher premium. 
That becomes an issue of our discipline to enforce that, 
especially in the case of low-income homeowners. There also may 
be some type of program you might want to set up to assist 
those who can't afford higher premiums, but that's a separate 
    The third part is how we set the rates right now, which is 
based on historical experience. It does not include a component 
for reserves. If there is a particularly catastrophic year, the 
program will go into the red, so we would need to set premiums 
also with reserves.
    So, it's a matter of new building standards, dealing with 
the buildings that already are substandard, and building in 
adequate reserves for the program.
    Chairwoman Roukema. Thank you. My time is just about up, 
and I'm going to yield to my colleague, Mr. Bereuter, because 
he can take my time as well as his own, because he is the 
primary sponsor of the most outstanding bill that we have on 
the table here.
    Mr. Bereuter. Thank you very much, Madam Chairwoman. Thank 
you very much for the testimony, gentlemen. Mr. Czerwinski, in 
the GAO report it indicates that currently Administration 
officials estimate total premiums income from unsubsidized 
policyholders is currently about $500 million less than it 
would be if the rates had been actuarially based and 
participation had remained the same.
    And then looking at the chart that shows the money coming 
in and money going out of the NFIP, Mr. Baker referenced that 
perhaps it was his handout, should I draw the conclusion--I'll 
let any of you respond to this--that many premium payers across 
the country are subsidizing others that are not paying 
actuarially sound rates, and that by making up this perhaps 
$500 million difference, they are also, by paying the higher 
rate, not contributing to the reserves that you mentioned are 
not being accumulated for the catastrophic events. Isn't cross-
subsidization a significant burden on many taxpayers and many 
premium payers around the country that really shouldn't be 
paying as high a premiums as they are?
    Mr. Leikin. May I respond to that please? There are two 
pieces of the program. New construction is charged premiums 
that are actuarially sound, and they're based on the long-term 
expectations of the losses.
    The shortfall that you refer to, the $500 million, in fact, 
it's somewhat larger today. Our recent estimates would place 
that at $780 million. That shortfall is attributed to the older 
construction, the so-called ``pre-FIRM'' construction. Pre-FIRM 
policyholders are paying substantial premiums, an average of 
$610 per year, but they're inadequate for that risk for these 
older properties, not having been built to the program 
    Mr. Bereuter. Would you say that's true across the whole 
    Mr. Leikin. For those older properties, it's true that 
they're all paying approximately 35 to 40 percent of what their 
true full risk premiums should be.
    There's no charge built into the new construction to 
subsidize those properties. We have, in fact, a premium 
shortfall. And the impact of that premium shortfall is that the 
program will go into borrowing more often. It impedes our 
ability to build up the reserves that Mr. Czerwinski mentioned, 
and it impedes our ability to repay borrowing. It's that 
shortfall that we can make great inroads in by addressing these 
most egregious properties that are these so-called repetitive 
loss properties. Of that shortfall, $200 million essentially is 
going to very few properties per year. That represents--well, 
even a smaller subset of that, the 10,000 that we would like to 
particularly target, represent approximately 15 to 20 percent 
of the premiums that the rest of the pre-FIRM policyholders are 
paying just to cover those properties.
    So, there is certainly within that class of older 
structures, a fair amount of this subsidy, cross-subsidization 
to those who are having the most losses.
    Mr. Bereuter. Thank you very much. The bells are ringing. 
I'll ask just one more question, but it's a very basic one, and 
it's for you, Mr. Shea, or perhaps Mr. Leikin. What is FEMA 
looking for in repetitive loss legislation?
    Mr. Shea. Thank you, Mr. Bereuter. One thing I should note 
for the record initially is that both bills that are being 
considered by this subcommittee right now do contain additional 
resources. We think that would be clearly necessary in order to 
address this problem.
    Second, we would appreciate flexibility in being able to 
determine the composition of repetitive loss properties.
    Third, mitigation offers are to be made only when we know 
that funding is available. The offers should not be automatic 
based on a loss occurrence.
    Fourth, we would use the existing mitigation program, that 
is, the Flood Mitigation Assistance Program, as the vehicle to 
carry this out.
    Fifth, some limited non-cost-shared mitigation grant 
capability would be critical for us to have in order to target 
what we would think of as orphaned properties, where the 
community itself or the State would not particularly be 
interested in providing the cost share match for that.
    Sixth, we need flexibility in defining the target group of 
properties. We need broad definition in the statutes, and we 
can refine that through regulation.
    Seventh, we think it is preferable that if the mitigation 
offer is refused to go to full actuarial rates rather than some 
other more onerous measure.
    Eighth, FEMA should not at any time really take ownership 
of properties. Our strength, the strength of our program, is 
built on our relationship with State and local governments, and 
that's where that should take place.
    Let me observe as well if I can, for just one second, that 
both bills have laudable features to them. But we believe that 
the Bereuter-Blumenauer bill contains most of these features 
that we're looking for in terms of trying to administer this 
    Mr. Bereuter. Thank you, Madam Chairwoman. Thank you, Mr. 
    Chairwoman Roukema. Oh, I'm sorry. We have two votes on the 
floor, so I think we're going to have to recess for a period of 
20 minutes at least. So if our panelists will be patient, we 
will return in approximately 20 minutes for continuing 
questions, and we will continue with Mrs. Kelly when we return.
    Chairwoman Roukema. If the panel will take their seats, 
let's get started again with Congresswoman Kelly.
    All right. We appreciate it. I am sorry 5 minutes later 
than I thought we'd be in returning.
    Congresswoman Kelly.
    Mrs. Kelly. Thank you, very much, Madam Chairwoman.
    Mr. Shea, I'm going to cut right to the chase on the 
mitigation situation, because I think mitigation offers a great 
    Just how much does FEMA need to be adequately funded for 
mitigation opportunities?
    Mr. Shea. Well, Congresswoman Kelly, the bills provide 
somewhere between $100-$120 million annually. We think that 
would be necessary for a 4- to 5-year period in order to fully 
address all of the ten thousand most egregious cases.
    Mrs. Kelly. So you believe that the bill has enough money 
in it to adequately address all of the mitigation that you feel 
is necessary?
    Mr. Shea. Yes. When you take these bills in combination 
with the other tools Congress and the Executive Branch have, we 
believe the answer is yes.
    There is also the Hazard Mitigation Grant program, which is 
obviously driven by disasters but does provide some 
opportunity, as well, and that averages around $250 million a 
year. So the combination of resources really is going to get us 
    The importance of these bills, however, is that they are 
specific and targeted toward the area that we're trying to go 
after, and so they provide us the flexibility we need in terms 
of administering a program to address them.
    Mrs. Kelly. I want to go on. There are a couple of things.
    During Hurricane Floyd, I learned a lot from some really 
wonderful FEMA people who came into my area. We were really 
heavily devastated. They came in and they taught me a lot of 
things. I think they taught a number of other people in the 
area what FEMA can and can't do and it raised my awareness of 
the need for education.
    I am wondering about what you have been doing to amplify, 
and what you see we need to do to amplify people's awareness of 
flood insurance, its availability, how it works for.
    Mr. Shea. If I can, Congresswoman Kelly, I'll start on that 
question, then ask my colleague, Mr. Leikin also to fill in a 
little bit.
    In general, one of the things that we've done recently, 
through Director Joe Allbaugh, is we have realigned, and we 
have now brought mitigation and insurance together in one 
house. That was a major step forward for us.
    Part of that reorganization was recognizing the importance 
of educating everybody at all levels of Government and the 
population at large about what needs to be done in this area.
    In many respects, my belief is that we're somewhat like 
environmental awareness was about 30 years ago. Thirty years 
ago, I didn't have much of an understanding of tin cans, but 
now my daughters teach me the importance of recycling is just 
the normal course of business. So we hope at some point in 
history, that we will be able to imbue a lot of the American 
public with that kind of understanding of risks in areas that 
they are living in, and how they can combat them.
    The fact of the matter is, and I'm sure sensitive to this, 
when we understand the risks that we face, we can do something 
about them. That gives us control over our own lives and it's a 
very nice position to be in.
    We also think that some of the other initiatives that the 
Agency's undertaken over time have been very beneficial. Our 
previous work in Project Impact, Joe Allbaugh's interest in 
supporting that and moving it to the next level, as you know, 
we are examining that, but that was a wonderful mechanism to 
educate people in general. And I think we are going to be able 
to build on the success of that initiative.
    Mrs. Kelly. Thank you very much.
    The only other thing I wanted to ask you very quickly about 
is whether or not you feel that we have adequate mapping. I'm 
beginning to believe that we need to readdress the whole issue 
of mapping and remapping.
    For instance, there are people in my area, because as you 
know we live in a semi-mountainous area, the people who live on 
the mountain tops, because they are classified on maps as 
living in floodplains, are having to pick up the insurance, 
when I don't think you live on a mountain top and there's no 
possibility that your house is going to be flooded, I'm not 
quite sure why they should be assessed this, and perhaps you 
could address that for me.
    Mr. Shea. Yes. I mean certainly there are cases like where 
the maps show individuals being in the floodplain that are so 
clearly outside, and of course we have processes to deal with 
that, administrative processes to deal with that. Generally 
speaking, the maps that we have in this country from a flood 
standpoint are really egregiously out of date and I think we're 
all aware of that.
    We've talked about our map modernization program and we 
are, we believe, beginning to make some progress in that area, 
but again I think funding is a major consideration in terms of 
an ability to bring our mapping in this area and all over the 
country up to a point where it becomes a real useful tool on a 
daily basis.
    Mrs. Kelly. Madam Chairwoman, I would like to ask one 
follow-up question here. And that is whether or not there are 
any plans for cost-sharing with other agencies who would use 
the new maps?
    Mr. Shea. Yes, Congresswoman Kelly. We are investigating 
mapping across the entire Federal spectrum, and we are looking 
at the possibility of new technologies maybe playing a role in 
this. There are some exciting developments in that area. I 
think we need to investigate them, assess them, and make sure 
that we're comfortable, and they'll bring us to the level of 
information that we all need to have to work with.
    But it's really a constant effort on our part to reach out 
to the U.S. Geological Survey and some of the other mapping 
agencies in the Federal Government, to make sure we and they 
are in lock-step. Of course, we also have mapping going on or 
mapping capability going on through satellite imagery and we're 
working in that arena as well.
    Mrs. Kelly. Thank you very much.
    Thank you, Madam Chairwoman.
    Chairwoman Roukema. Thank you, Congresswoman. I did 
appreciate your question on cost-sharing and that does open up 
a very intelligent component of this discussion that we should 
all be paying some attention to.
    I'm not going to take any more time with this panel. We do 
have to get on to the third panel. But I would throw out to you 
a question that I have that if you choose to put in writing an 
answer to it for me directly, and I guess that's because I come 
from a State like New Jersey where zoning is very much a State 
and local prerogative, and I guess that is true across the 
    But I'm deeply concerned that local zoning and State zoning 
ordinance have not dealt intelligently or responsibly with this 
question. Why do we permit such, you know, and recommit to such 
flagrant violations of sensible zoning in the floodplain.
    And if you could please give me some advice and counsel on 
that subject, and how we can deal with it, because after all, 
they are pushing up to the Federal level and other people, the 
cost, and the cost sharing for their own irresponsible actions.
    And that's like putting a tax on all the rest of us rather 
than taxing those that have been responsible for the problem. 
So if you could give me some advice and counsel on that aspect 
of the question, I'd appreciate it. But we certainly appreciate 
your attendance here today and your patience, and I can 
guarantee you that all of this information in your testimony 
will be quickly distributed to the Members of the subcommittee.
    Mr. Shea. Thank you again for your interest and support.
    Chairwoman Roukema. Hopefully we can get some action 
    Mr. Shea. We would appreciate it.
    [The information referred to can be found on page 87 in the 
    Chairwoman Roukema. If the next panel, Panel 3, will come 
forward please.
    Chairwoman Roukema. All right, thank you. Thank you very 
much. I'm very pleased to welcome here today one of New 
Jersey's own, Mr. Tim Richards, who is President of the New 
Jersey Association of Realtors, and he has been active in 
realty functions for many years and has received recognition 
all over the State, particularly in Cape May, identified as the 
realtor of the year. Mr. Richards, I believe, can give us a 
perspective from the realtor's point of view on this subject, 
and I hope my statement just previously made to the previous 
panel about the indicting local zoning ordinances, perhaps you 
would like to counter that inference, or at least give your own 
perspective, Mr. Richards. You don't have to be limited by that 
question of mine. But you know the legislation that's before 
us, please give us your evaluation.
    Thank you.

                          OF REALTORS

    Mr. Richards. Thank you for those kind remarks, Madam 
Chairwoman. Thank you for the opportunity to present the views 
of the National Association of Realtors on H.R. 1428, the Two 
Strikes You're Out of the Taxpayers' Pocket Act, and H.R. 1551, 
the Repetitive Flood Loss Reduction Act.
    I'm Timothy Richards, a realtor from Ocean City, New 
Jersey, and the current President of the New Jersey Association 
of Realtors.
    I own a full service residential real estate company and 
have been a real estate professional for many years. I wish to 
thank Chairwoman Marge Roukema and Ranking Member Barney Frank 
for holding a hearing on an issue that is of great concern to 
the realtors.
    I would also like to thank Representatives Doug Bereuter, 
Earl Blumenauer, and Ken Bentsen for introducing legislation 
that would reform the Nation's current repetitive loss policy.
    It is often said, and I agree, that realtors don't sell 
homes, we sell communities. The 760,000 members of the National 
Association of Realtors are concerned and active members of our 
communities. When a flood strikes, our members are on the front 
lines to help our neighbors put back their lives.
    Realtors care about flood insurance issues for a number of 
reasons. For realtors who sell houses in a floodplain, the cost 
of flood insurance is a critical part of the transaction. For 
low or middle income purchasers, it may even determine whether 
or not they can purchase the home.
    For repetitive loss properties, realtors have a keen 
interest in having the appropriate information on the flood 
losses for disclosure purposes, making sure that flood 
insurance is accessible for those properties and keeping the 
costs of the premium as low as possible.
    I would like to briefly discuss three issues with you 
today. First, the importance of the National Flood Insurance 
Program in protecting our homes and communities; second, NAR's 
perspectives on the concept of repetitive loss; and finally the 
issue that ties many of these matters together-the floodplain 
maps developed by the Federal Emergency Management Agency 
[FEMA] and how to update and modernize them.
    The National Flood Insurance Program currently operated by 
FEMA partners with 19,000 communities nationwide and holds four 
million policies and provides approximately $5 billion in 
property loss coverage.
    In my home State of New Jersey, some 546 communities of a 
total of 567 communities, partners with FEMA and there are over 
175,000 policies in force that provide over $239 million in 
property loss coverage.
    As realtors, we benefit from this program because it allows 
people to buy homes that are safe from flooding through flood 
mitigation activities taken by the participating community, and 
further protects that investment by providing access to 
affordable flood insurance that would otherwise be unavailable 
on the open market.
    The strength of the National Flood Insurance Program in my 
State has allowed many people of all incomes to own a piece of 
the American dream. Unfortunately, owning a home in a 
floodplain can sometimes be a nightmare. This occurs when a 
property is subject to multiple floods and must dip into the 
National Flood Insurance Program more than once.
    Currently, 45,000 properties nationwide have incurred two 
or more losses over a 10-year period. These properties cost the 
flood insurance program over $200 million annually. The top 
10,000 structures alone cost the program over $80 million 
    In New Jersey, over 5000 properties are considered 
repetitive loss properties with total payments of over $174 
million. These multiple loss properties inflict serious 
economic harm to the flood insurance program by driving up the 
premiums for all policyholders and by allowing the entire 
system to rest upon an unsustainable actuarial foundation. 
These properties are not paying a premium that adequately 
reflects the risks they incur by residing in a floodplain.
    NAR believes that the repetitive loss issue must be 
resolved and the flood insurance program be placed on firmer 
financial ground. However, we do not agree with the 
Administration's proposal to terminate flood insurance coverage 
for repetitive loss properties. By terminating a property's 
participation in the flood insurance program, it would be 
difficult for the owner to find affordable flood insurance on 
the open market. This draconian measure would result in a 
significant decrease in the value of the property and wipe out 
any previous investment the owner may have in that property.
    NAR supports an approach to the repetitive loss issue that 
has three components. First the property is kept in the NFIP 
with access to flood insurance. Second, incentives to 
participate in flood mitigation measures or accept a buyout at 
fair market value or higher for the worst repetitive loss 
properties; and third, if both the buyout or the offer of 
mitigation is refused, the owner will be required to pay the 
highest premiums allowable.
    This win/win approach allows the owner to stay in the 
property while paying a premium that reflects the risk of 
living in the floodplain. This approach will also reduce the 
Federal disaster assistance over long term by getting the worst 
repetitive loss properties either properly mitigated or bought 
out by FEMA.
    A comprehensive reform of the current repetitive loss 
property must also reflect three additional issues that are of 
importance to realtors. First, some properties may experience 
repetitive losses as a result of upstream or downstream 
development that occurred after the properties were purchased 
or constructed. Some exception should be made for floods that 
were caused due to development activities.
    Second, once a buyout has been completed, NAR has concerns 
about the use and ownership of the acquired floodplain 
property. We would encourage flexibility in determining how 
these properties are being used and maintained so that they do 
not become eyesores in the community and decrease the value of 
adjacent properties.
    Finally, NAR would encourage the use of local appraisers 
and others who have knowledge of the local real estate market 
in determining fair market value for buyouts.
    In addition to FEMA's proposal to the repetitive loss 
issue, NAR also has concerns regarding their proposal to 
increase flood insurance premiums on second homes and vacation 
homes. We would be troubled if these homes were denied access 
to flood insurance as well.
    The last issue I want to discuss is the issue of FEMA's 
Flood Insurance Rate Maps, the well-known and much maligned 
``floodplain maps.'' Accurate floodplain maps are crucial 
during a real estate transaction in determining whether or not 
a property is in a floodplain, which in turn determines whether 
or not the owner will require flood insurance. NAR is concerned 
that sufficient budgetary resources are not being identified 
for FEMA to improve these maps, although we are pleased at the 
recent action of the House Appropriations Committee to provide 
FEMA with an additional $50 million to improve these maps. NAR 
supports all full funding for modernization of the Nation's 
flood hazard mapping program.
    I would like to thank you for allowing the National 
Association of Realtors to comment on these critical flood 
insurance issues and repetitive loss challenges. We encourage 
the Members of this subcommittee to fashion a workable, 
bipartisan approach to resolving these issues, and we stand 
ready to work with you to get an equitable and cost effective 
law passed that would financially strengthen the National Flood 
Insurance Program and further protect all of our citizens from 
the ravages of flooding.
    And I thank you very much.
    [The prepared statement of Timothy Richards can be found on 
page 112 in the appendix.]
    Chairwoman Roukema. I thank you. I was generous with your 
time, but I hope that we'll have time before the next vote for 
everyone to be heard on this panel.
    Mr. Fletcher.
    Mr. Willey. Willey.
    Chairwoman Roukema. Willey, all right, thank you. Mr. 
Willey has been in the insurance business in North Carolina for 
many years since 1974. He's a member of the Board of Directors 
of the North Carolina Insurance Underwriting Association and 
the North Carolina Joint Underwriting Association.
    Certainly he has extensive experience in this area, and we 
look forward to your advice and counsel.


    Mr. Willey. Thank you, Chairperson Roukema and Members of 
the subcommittee.
    My name is Fletcher Willey, and I'm pleased to have the 
opportunity this afternoon to give you the views of the 
Independent Insurance Agents of America on the National Flood 
Insurance Program. I am the Chairman of the Flood Insurance 
Task Force of the IIAA.
    Let me begin by thanking Chairwoman Roukema, along with 
Chairman Baker, Chairman Bereuter, and Congressman Bentsen, 
along with Congressman Blumenauer for taking a lead on this 
very important issue.
    I want to clearly state that IIAA supports the NFIP. The 
NFIP provides an important service to people and places that 
have been hit by a natural disaster. The private insurance 
industry has been almost entirely unwilling to underwrite flood 
insurance because of the catastrophic nature of these 
    Therefore, the NFIP is virtually the only way for people to 
protect themselves against the loss of their home or business 
by flooding. The NFIP has saved disaster assistance money and 
provided a reliable system of payments for people whose 
properties have suffered flood damage. We want this program to 
continue and we hope it will get stronger.
    Our members, independent insurance agents, play a vital 
role in the delivery system for flood insurance. This system 
operates well and does not need revision. IIAA has not taken a 
position on these two bills yet. It is clear, however, that 
reforms in the program are necessary--I was referring to the 
delivery system, Chairwoman--necessary to address operating 
losses to make the NFIP actuarilly sound.
    We support the intent of these bills and believe that 
introducing them is a step in the right direction. The GAO has 
pointed out that cumulative operating losses of the program 
totaled $1.56 billion from 1993 through 1998.
    According to the GAO, multiple loss properties account for 
$200 million in claims per year and about 36 percent of all 
claims paid on an historical basis. We support the NFIP and we 
hope we will be able to work with this subcommittee as you 
evaluate the different proposals for reform to meet the fiscal 
goals of the program with the least disruption in the people's 
lives as possible.
    Our members have significant experience with the NFIP and 
with the people who will be directly affected by reform: the 
flood insurance policyholders.
    In fact, this is not just a professional matter for me. I 
live on Roanoke Island on the Outer Banks of North Carolina, 
and many of my neighbors suffered through the flooding of 
Floyd. So I have a degree of personal experience and personal 
investment in this issue.
    What I would like to do this morning is to describe for you 
the five principles that IIAA believe to be essential to this 
needed reform.
    First, strengthen building regulations. These regulations 
require communities to ensure that any new construction in the 
floodplain is built above elevation.
    Second, any substantial improvement of existing structures 
is built with similar safeguards. Experience with the program 
demonstrates that building regulations work. In fact, only four 
percent of repetitive loss properties were built after 1974. In 
fact, damages to structures built to the current elevation 
standards are 40 percent less per claim than damages to older 
    Second, increase compliance with the mandatory purchase 
requirements. FEMA has found that fewer than 25 percent of the 
buildings in some of the areas with mandatory purchase 
requirement are actually covered by flood insurance.
    Third, the NFIP should have additional funding to provide 
resources for buyouts and mitigation grants. Buyouts allow 
residents to escape the cycle of damage and repair and damage 
and repair and the repetitive losses that we've heard discussed 
today. We should avoid creating new problems by pushing 
residents out of their homes without sufficient resources to 
    As long as the program is sensitive to the potential 
dangers of buyouts, buyouts can be a beneficial tool to improve 
the financial state of the NFIP. Former FEMA Director James Lee 
Witt has estimated that there will be a two dollar return on 
every dollar spent on buyouts of repetitive loss properties.
    Experience with building standards has shown that many 
owners can elevate their homes and effectively mitigate their 
flood risk. In some cases, modifying the current property is 
less expensive and almost as effective as buyout. This option 
can help to preserve communities to the fullest extent 
possible. NFIP needs the authority and the resources to help 
property owners improve their properties before additional 
losses are incurred.
    Fourth, we must stop abuse of the program through multiple 
claims. Some individuals have bought property in flood zones in 
order to take advantage of repeat payments from the NFIP. While 
this is a small subset, we must take action to have them out of 
the program or paying actuarial rates.
    We need to also recognize that all repeat claimants are not 
abusing the system. There are some people who bought property 
without full knowledge of the flood exposure, and we must help 
those people.
    Fifth and last, one of the best ways to avoid future 
problems with the NFIP is to give people full information about 
flood risk. As I said before, many people originally bought 
their properties without knowledge of the risk of flood. 
Therefore, reform of the NFIP needs to include mandatory 
disclosures of the flood claim history of the property so that 
buyers can make an informed choice on their purchases and so 
that they can properly value the home.
    To make mandatory disclosure effective, we should create an 
accessible electronic database of flood losses.
    Thank you for giving me the opportunity to express the 
views of the Independent Insurance Agents of America. We look 
forward to working with the subcommittee on this issue, and 
I'll be happy to take any questions that you might have.
    [The prepared statement of Fletcher J. Willey can be found 
on page 118 in the appendix.]
    Chairwoman Roukema. Thank you very much.
    And now our final witness is Mr. David Conrad, who is a 
water resources specialist for the National Wildlife 
Federation. Certainly we all know that Federation as one of the 
largest conservation organizations in the country.
    And it is my understanding--well, of course, you've had 
extensive experience over the years--but it is my understanding 
that you have recently been the author of a report called 
``Higher Ground.'' A report, and there we have it and you're 
going to insert that into the record, I'm sure, a report on 
voluntary buyouts in the Nation's floodplains, a common ground 
solution serving people at risk, taxpayers and the environment.
    And I hope we are able to have some communication here 
between yourself and the insurance and real estate people that 
we have.
    Mr. Conrad.


    Mr. Conrad. Thank you, Madam Chair. I do think from what we 
have just heard that we do have a lot of common ground on the 
issue of how to deal or work on repetitive losses as a problem 
and the National Flood Insurance Program.
    Again, my name is David Conrad. I am water resources 
specialists for the National Wildlife Federation, and I am very 
pleased to present the Federation's views on the National Flood 
Insurance Program.
    I also wish again to thank Representatives Bereuter, 
Blumenauer, and Bentsen for continuing their efforts to focus 
the Nation's attention on these problems, and thank Madam 
Chairwoman for holding these hearings.
    Our written testimony includes quite a bit of material that 
came from our report that was issued in July of 1998, and I 
think I will dispense with going through a lot of the 
statistics that we have there, because I think a number of the 
facts that we found have been reflected in previous testimony.
    But I would want to comment on maybe one issue that I heard 
in the last panel to start with that we found also that the 
National Flood Insurance Program was not actuarially sound. 
That has been verified by other witnesses. But I think an 
important thing to focus on was that while it may have been 
originally recognized that that was the case when the program 
was originally designed, I think it was always intended that it 
be moving toward actuarial soundness over time.
    And that we found that progress has been greatly hampered 
by the way we have implemented the program. So that's really 
what the issue of this legislation is partly about, trying to 
get back to the progress toward an actuarially sound approach 
for the program.
    I would like to focus I think the rest of my attention in 
this short time on the value of non-structural approaches and 
that are represented by the ideas behind these bills, and also 
our thoughts about the bills.
    Madam Chairwoman, primarily since the 1993 midwest flood, 
FEMA reports that approximately 27,000 properties have been 
voluntarily purchased and removed from the Nation's floodplains 
and another 2800 damaged properties have been elevated or 
flood-proofed largely after flood disasters. Hundreds of 
communities across the Nation have begun to utilize voluntary 
buyouts as a cost effective alternative means of reducing flood 
damages, and often, at the same time, restoring environmental 
health to streams and coast lines through establishment of open 
space, greenways, bike ways, parks, buffer zones, wildlife 
habitat areas and other such uses.
    But in light of the NFIP's repetitive loss history, there 
is a strong need for additional funding that can be used for 
pre-disaster mitigation efforts that can save enormous private 
and public sums in the long run.
    The National Wildlife Federation urges strong support for 
particularly H.R. 1428, because we believe the legislation 
provides the best framework for FEMA and NFIP participating 
communities to address a full range of problems associated with 
repetitive losses.
    H.R. 1428 clearly addresses the need for increased funding 
for pre-disaster repetitive loss mitigation. The bill would 
fully engage States and communities in developing and 
implementing hazard mitigation plans, particularly by using the 
existing Flood Mitigation Assistance Program approach, and it 
is critical for the financial health and safety of the Flood 
Insurance Fund that owners of repetitive loss properties would 
pay rates that reflect the true risk associated with their 
properties especially if reasonable mitigation plans are 
offered and are refused.
    We might add the following suggestions though that maybe 
could possibly improve this legislation. We would urge that the 
director and communities be given sufficient flexibility to 
address not only or not just repetitive loss structures, but 
also other structures or properties close by in the vicinity 
that are flood prone. This is the idea that flexibility may be 
needed to help communities establish cohesive plans for wide 
use of floodplains and sensible public infrastructure 
    We also would urge that new funds be made available for 
planning hazard mitigation projects. We would urge that 
mechanisms be established to assure that reasonable hazard 
mitigation offers would not cause severe hardship for owners 
and occupants of modest means particularly.
    Successful hazard mitigation should include plans for 
adequate and affordable relocation opportunities for any 
residents involved.
    As a means of addressing those concerns, we urge that FEMA 
be directed, to the maximum extent practicable, to coordinate 
efforts with Federal housing, disaster relief, and natural 
resource management agencies to help State and local agencies 
in developing mitigation plans.
    We would also say while we fully agree with the objectives 
of H.R. 1551, it would require development of a wholly new 
program that we don't believe is actually necessary, given the 
success of Section 1366. The proposal of the Administration to 
cut off availability of flood insurance to repetitive loss 
properties after one additional claim would address the 
enormous financial strain these properties represent for the 
NFIP, but this approach would not guarantee that there would be 
action to remove high risk properties from harm's way.
    We do support, however, the Administration's proposal to 
phaseout subsidized flood insurance rates for certain vacation 
homes and rental properties. Such subsidies can ultimately 
result in high cost to taxpayers, and much greater effort 
should be made to establish this program on an actuarially 
sound basis.
    The last thing I would like to mention is just the map 
modernization program also. We strongly support the FEMA 
efforts to modernize the flood insurance maps. It is clear that 
many of these maps are reaching an antiquated age and no longer 
really reflect the risk involved. And, because the maps 
constitute basic planning documents for the Nation's urban and 
rural areas, they need to be accurate and updated.
    They are of such fundamental importance to community 
development that it would be entirely justifiable, we think, to 
finance their updating with considerable general taxpayer funds 
and with appropriate fees and other contributions.
    We strongly urge the subcommittee to identify and support 
approaches to provide the necessary funds for map 
    Again, on behalf of the National Wildlife Federation, I 
wish to thank the Chairwoman and other Members of the 
subcommittee for the opportunity to present our views, and 
would be happy to respond to your questions.
    Thank you.
    [The prepared statement of David R. Conrad can be found on 
page 123 in the appendix.]
    Chairwoman Roukema. Thank you.
    I don't really know where to or how to question on this. 
The complexity of it has now been clearly identified here 
between what this panel is saying and what the previous panel 
has said except for, well, even Mr. Conrad, actually you have 
quite an overlay with both the insurance people and the 
    But I've got to say, and I think Mr. Bereuter, before he 
returned here, I had made the point that there have to be 
incentives for State and locals to have proper zoning, and I 
firmly believe that.
    And I've got to say that we've got to recognize that the 
cost of flood insurance--and I'm very sensitive to the 
realtors, I'm very sensitive--but I cannot continue to let the 
subsidies, what we're doing to absorb the costs of these 
things, the cost of the insurance for people continuing in the 
floodplain, and with their multiple numbers of repetitive 
losses, we cannot continue to let them drive up the cost for 
all, and that to me is unsustainable.
    I don't want to terminate flood insurance, I'm not yet at 
the point, unless Mr. Bereuter can convince me otherwise, to 
have FEMA absorb the costs of these buyouts, of all these 
buyouts. I don't know how we're going to deal with that.
    But I do again, coming from New Jersey, where I have great 
belief in local zoning, that the local zoners are going to have 
to have the responsibility and recognize that the Federal 
Government should not be continuing to subsidize and sustain 
    I don't know if anyone wants to come back to me on that 
before I turn it over to Mr. Bereuter for his questioning. I 
don't have the whole answer, but I'm trying to integrate.
    Yes, Mr. Conrad.
    Mr. Conrad. I see. Yes. Well, when we did our major study, 
and we spent a lot of hours thinking--days, weeks, months--
thinking about these problems, I think our view is that the 
programs for buyouts and elevation, floodproofing, and so 
forth, probably should be considered a temporary or sort of 
transition program to deal particularly with existing problems 
that a lot of communities have.
    But I think behind that needs to be a renewed focus on 
working with communities to properly grow and to take full 
awareness of the risks of locating in high hazard areas, such 
as floodplains, so that's my answer to your question, if that 
    In other words, this shouldn't be a permanent situation.
    Chairwoman Roukema. You don't want to zone out?
    Mr. Conrad. I think that most communities should be using 
zoning to identify or to locate homes and businesses away from 
high hazard areas, yes. And that is really part of the Flood 
Insurance Program.
    There were two parts, the provision of insurance and the 
guiding development away from harmful or----
    Chairwoman Roukema. But that hasn't really been in action.
    Mr. Conrad. I don't think we've had enough attention put to 
    Chairwoman Roukema. That's what I'm saying.
    Anyone else?
    Yes, Mr. Richards, my friend from New Jersey.
    Mr. Richards. Concerning the zoning issue, in some parts of 
the country, I think it could be done, and I think it could be 
done very successfully.
    In the very dense population areas, and New Jersey is 
certainly considered one of those where the horse is already 
out of the barn, and the majority of the land is already owned 
by someone, a rezoning that dramatically devalues a property 
can very easily be construed as a taking. And without some type 
of compensation, either from local zoning board, local 
community, Federal Government, State government, whatever, it 
could be a very, very difficult situation.
    So I don't know that zoning will solve the problem 
    Chairwoman Roukema. Excuse me, but this is done regularly 
across the country and certainly in New Jersey, this is done on 
a regular basis. Is there any legislation, whether it's for 
flood control or whatever, about rezoning and compensation? I 
don't think so, or is there?
    Mr. Richards. There are issues that surround that, yes.
    Chairwoman Roukema. No, there are issues that surround it, 
but there's no legislation that requires compensation, is 
    Mr. Richards. Not that I'm aware of.
    Chairwoman Roukema. For flooding or for other reasons, 
rezoning for other reasons, not that I was aware of either.
    All right, I'm sorry, I interrupted you. Do you want to add 
    Mr. Richards. There was other point made about the 
taxpayers subsidizing all flood insurance and to me, there may 
be a perception that flood insurance is something for more 
expensive housing. And I think one of the areas that we've got 
to be ever aware of are the gentlemen from Louisiana and Texas, 
West Virginia, and areas that, you know, are not necessarily 
real expensive homes, but yet these are valuable family estates 
that have got to be maintained.
    Chairwoman Roukema. Someone else on the panel had made that 
point as well.
    All right, thank you.
    Mr. Bereuter.
    Mr. Bereuter. Thank you very much, Madam Chairwoman.
    Gentlemen, I'm sorry I missed the first part of your 
presentations. I've been reading your testimony and I think 
I've caught up with those elements of testimony that you 
presented orally here or in writing.
    And I must say, I thank you for a very positive set of 
testimony. Mr. Richards, I think in particular, if I might say 
so, the National Association of Realtors, in your testimony has 
been a very positive approach in looking for a win/win 
situation to protect your own customers.
    The items that you go through, on page five, for example, 
are principles and concerns that are exactly those that I 
share. And so I appreciate the very positive and constructive 
tone of your testimony.
    Mr. Conrad, I thank you for your support for the 
legislation offered by Mr. Blumenauer and myself. I certainly 
share your concerns about the need for a map modernization 
program that's accelerated. Many communities are waiting so 
long for the kind of modernization of their floodplain zoning 
areas, and in the meantime things have changed, and we provided 
some flood control protection which should exempt property 
owners from being required to have flood insurance, and that 
just is not reflected in many cases.
    In other cases unfortunately the floodplain has expanded, 
and we need to have an indication of what really the flood 
hazards are in a community.
    I followed Chairwoman Roukema's comments about zoning, and 
having written a lot of zoning ordinance myself, before I was 
elected to Congress, I'm certainly very much supportive of the 
need to avoid flood losses through the zoning ordinance. 
Generally, it is problem avoidance, and we're stuck, as one of 
you pointed out, with areas that have many, many nonconforming 
uses. Most of those repetitive loss structures are 
nonconforming uses that were built many years ago, especially 
in the older cities in this country, and so it's a big problem.
    Earlier on, we had comments about Project Impact, which is, 
as I understand it, is not proposed for funding under fiscal 
year 2001 budget recommendation of the Administration. I must 
say I think that's a mistake. I know Project Impact has had a 
good impact within my own State and it's been used as a model 
for other communities to emulate, and so I think it's a big and 
very positive step forward.
    One of you gentlemen, I think Mr. Willey, it was you, who 
cited former FEMA Director James Lee Witt as suggesting that 
for every two dollars spent in buyout or mitigation, every one 
dollar spent provides two dollars in return. And I suspect 
that's true, and I think that's something that needs to be 
    When you referred in your testimony, Mr. Willey, to the 
athletic director of your local high school, that of course 
brings it down to a personal kind of note. And I think what 
we're looking for is a program to accelerate the mitigation and 
buyout circumstances that give him an alternative.
    Right now, he would, as you suggest, be happy to have a 
solution, but, in fact, the Government is not there for a 
buyout program or a mitigation program. Though both Mr. 
Bentsen's and my bill attempts to deal with that by additional 
resources for FEMA for that purpose.
    Let me ask you a couple of general questions--well, not so 
general, specific questions perhaps with respect to a 
comparison of the Administration's approach, which is only 
identified through their budget proposal at this point and, for 
example, the bill that Congressman Blumenauer and I offered.
    Their definition of a repetitive loss structure would be 
properties with two or more losses of a thousand dollars in 
greater than a 10-year period, whereas ours are property at two 
or more NFIP claims have been paid.
    So the burden is, the definition for the Administration is 
much more comprehensive in its impact, it seems to me. And then 
they lose their policy after the first flood.
    Do you want to make a comment about the Bentsen, the 
Bereuter/Blumenauer versus the Administration's definitions on 
repetitive loss.
    I saw your hand, Mr. Willey. I'm not sure if you want to 
address that or not, but I'd welcome you.
    Mr. Willey. Yes, sir. Thank you for that opportunity. I 
think that's a crucial question, sir. People that have been hit 
by Floyd, which was supposedly a 1,000-year storm, and then one 
other $100 claim, or $250 claim, are, quote, ``out of the 
program,'' by one standard.
    We would support a standard that would be broader than 
that. By that I mean perhaps four claims of at least $1,000 
dollars or more, or the standard that would be based on the 
value of the building.
    We believe that it is important to keep people in the 
program, because once they're out of the Federal flood program, 
they have no incentive to build at proper elevations.
    We would like to see as many people included in the 
National Flood Insurance Program an early strikeout, if you 
will. An early cancellation of the citizen's availability to 
participate in the National Flood Insurance Program, we think 
could result in some areas that would go downhill quickly. We 
would like to see people striving for elevation and striving 
for mitigation, but just to kick them out of the program would 
be tough to enforce.
    Mr. Bereuter. Do you think it's fair----
    May I continue? I know I'm beyond my time here.
    Chairwoman Roukema. Yes, please another minute or two. Yes, 
two more minutes.
    Mr. Bereuter. Thank you very much.
    Is it fair in your judgment, I would ask the two of you 
that represent the business-related associations, for example, 
for actuarial rates to be paid by a property owner that has had 
two NFIP claims paid if, in fact, they have turned down 
mitigation or buyout assistance?
    Mr. Richards. If I understand your question, that they 
would have a much higher premium to pay if they elected not to 
do one of the other two things. That was a recommendation that 
we had made in our remarks believing that we are providing 
something for that homeowner. If they are kicked out of the 
program, we also have a mortgaging issue, which could create 
some economic difficulty down the line.
    Mr. Bereuter. I don't see how we can kick them out of the 
program if we're not willing to buy them out. You know they 
have no alternative. In some cases, this is a desperate 
situation, as Ms. Carson raised the question, for example, well 
what's the real value of that home if we do get to a buyout 
    Mr. Willey. We would support the actuarial rate 
availability and the fair determination of an actuarial rate 
from an insurance perspective. We have to support actuarial 
soundness, otherwise the system doesn't work.
    I would point out very quickly, if I may, Madam Chairwoman, 
that we recognize that many, many, I think 96 percent or so of 
the repetitive loss properties are those properties that were 
built before we knew anything about the science of elevations.
    These were places, my athletic director example, the house 
was built before 1972. Other houses surrounding that house are 
properly elevated and haven't suffered that same flood 
recurrence. So there is a great deal of value in the elevation 
requirements of the program, and offers for mitigation or 
buyout, and then an actuarial rate are the way to go.
    Mr. Bereuter. And actually the newer homes may have caused 
additional flooding for the original home that was built pre-
    Mr. Willey. I've seen that happen, yes, sir, but not in 
this case.
    Mr. Bereuter. Yes. I wonder if you have any comments about 
the desirability of the 125 percent figure that Mr. Bentsen 
uses? He's indicating property in three or more flood related 
damages with a cumulative cost of repairs equal or greater to 
125 percent of the structure's fair market value would be 
considered a repetitive loss structure.
    Mr. Willey. Yes, sir, I've looked at that. And I think it's 
important to determine whether or not we're talking about 125 
percent of the market value after it's flooded three times, or 
before it had flooded three times.
    Mr. Bereuter. We got a response, by the way, from behind us 
when we were testifying in response to Ms. Carson's questions, 
and I might say it here for the record. FEMA said that they go 
back to the pre-flood valuation. However, if there are several 
floods, they don't go back to the first flood, they go back to 
the pre-most recent flood basis. So that's the calculation they 
use on the buyouts.
    Anybody else have a comment regarding 125 percent element?
    Mr. Richards. I do it find difficult to put a blanket on 
any type of valuation, because community after community is 
completely different, different market areas, different 
localities, all carry different ways of establishing value, and 
I really don't know that you can put a blanket on that type of 
    Mr. Bereuter. Thanks to all of you, including you, Mr. 
Conrad, and Madam Chairwoman, I want to express my sincere 
appreciation for the fact that you've held this hearing and 
that we've had excellent panels of witnesses.
    Thank you very much.
    Chairwoman Roukema. Well I thank you for your cooperation 
and your leadership, not only cooperation, but it's your 
leadership that really motivated the subcommittee to have this 
hearing and hopefully we can all move together and get 
something expedited for consideration in this Congress.
    I would also point out, as I think I made reference to in 
my opening statement, the fact that Mr. Dale Shipley, the 
Executive Director of the Ohio Emergency Management Agency was 
not able to be with us today. He was to have served on this 
panel, and I would ask unanimous consent to insert into the 
record his prepared statement for this hearing. The irony of it 
is that he is not here because he is attending to needed 
flooding concerns in Ohio that have been afflicting southern 
Ohio, so he's out there taking care of flooding problems in 
Ohio. Perhaps he'll come back and put in an addendum to his 
testimony based on his experience this week. I thank you very 
    [The prepared statement Dale W. Shipley can be found on 
page 134 in the appendix.]
    Mr. Bereuter. Madam Chairwoman.
    Chairwoman Roukema. Yes.
    Mr. Bereuter. I would ask unanimous consent to include the 
appendix prepared by staff, a Comparison of Repetitive Loss 
Property Proposals.
    Chairwoman Roukema. Yes, that will be included. Thank you 
again and we look forward to working with you and hoping that 
we can expedite something for this Congress.
    [Whereupon, at 1:20 p.m., the hearing was adjourned.]

                            A P P E N D I X

                             July 19, 2001