[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
BUILDING A 21ST-CENTURY INFRASTRUCTURE FOR AMERICA: ECONOMIC
DEVELOPMENT STAKEHOLDERS' PERSPECTIVES
=======================================================================
(115-24)
HEARING
BEFORE THE
SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT
OF THE
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 13, 2017
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
______
U.S. GOVERNMENT PUBLISHING OFFICE
26-805 PDF WASHINGTON : 2018
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee, ELEANOR HOLMES NORTON, District of
Vice Chair Columbia
FRANK A. LoBIONDO, New Jersey JERROLD NADLER, New York
SAM GRAVES, Missouri EDDIE BERNICE JOHNSON, Texas
DUNCAN HUNTER, California ELIJAH E. CUMMINGS, Maryland
ERIC A. ``RICK'' CRAWFORD, Arkansas RICK LARSEN, Washington
LOU BARLETTA, Pennsylvania MICHAEL E. CAPUANO, Massachusetts
BLAKE FARENTHOLD, Texas GRACE F. NAPOLITANO, California
BOB GIBBS, Ohio DANIEL LIPINSKI, Illinois
DANIEL WEBSTER, Florida STEVE COHEN, Tennessee
JEFF DENHAM, California ALBIO SIRES, New Jersey
THOMAS MASSIE, Kentucky JOHN GARAMENDI, California
MARK MEADOWS, North Carolina HENRY C. ``HANK'' JOHNSON, Jr.,
SCOTT PERRY, Pennsylvania Georgia
RODNEY DAVIS, Illinois ANDRE CARSON, Indiana
MARK SANFORD, South Carolina RICHARD M. NOLAN, Minnesota
ROB WOODALL, Georgia DINA TITUS, Nevada
TODD ROKITA, Indiana SEAN PATRICK MALONEY, New York
JOHN KATKO, New York ELIZABETH H. ESTY, Connecticut,
BRIAN BABIN, Texas Vice Ranking Member
GARRET GRAVES, Louisiana LOIS FRANKEL, Florida
BARBARA COMSTOCK, Virginia CHERI BUSTOS, Illinois
DAVID ROUZER, North Carolina JARED HUFFMAN, California
MIKE BOST, Illinois JULIA BROWNLEY, California
RANDY K. WEBER, Sr., Texas FREDERICA S. WILSON, Florida
DOUG LaMALFA, California DONALD M. PAYNE, Jr., New Jersey
BRUCE WESTERMAN, Arkansas ALAN S. LOWENTHAL, California
LLOYD SMUCKER, Pennsylvania BRENDA L. LAWRENCE, Michigan
PAUL MITCHELL, Michigan MARK DeSAULNIER, California
JOHN J. FASO, New York
A. DREW FERGUSON IV, Georgia
BRIAN J. MAST, Florida
JASON LEWIS, Minnesota
------ 7
Subcommittee on Economic Development, Public Buildings, and Emergency
Management
LOU BARLETTA, Pennsylvania, Chairman
ERIC A. ``RICK'' CRAWFORD, Arkansas HENRY C. ``HANK'' JOHNSON, Jr.,
BARBARA COMSTOCK, Virginia Georgia
MIKE BOST, Illinois ELEANOR HOLMES NORTON, District of
LLOYD SMUCKER, Pennsylvania Columbia
JOHN J. FASO, New York ALBIO SIRES, New Jersey
A. DREW FERGUSON IV, Georgia, GRACE F. NAPOLITANO, California
Vice Chair MICHAEL E. CAPUANO, Massachusetts
BRIAN J. MAST, Florida PETER A. DeFAZIO, Oregon (Ex
BILL SHUSTER, Pennsylvania (Ex Officio)
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
William C. Seigel, Assistant Executive Director, SEDA-Council of
Governments.................................................... 6
Justin Hembree, Executive Director, Land of Sky Regional Council,
on behalf of the National Association of Development
Organizations.................................................. 6
Brett Doney, CEcD, SCLA, AICP, President and CEO, Great Falls
Montana Development Authority, on behalf of the International
Economic Development Council................................... 6
Steve Linkous, President and CEO, Harford Mutual Insurance
Company, and Chairman, National Association of Mutual Insurance
Companies, on behalf of the BuildStrong Coalition.............. 6
Jessica Grannis, J.D., LL.M., Adaption Program Director,
Georgetown Climate Center...................................... 6
PREPARED STATEMENTS SUBMITTED BY WITNESSES
William C. Seigel................................................ 27
Justin Hembree................................................... 30
Brett Doney, CEcD, SCLA, AICP.................................... 39
Steve Linkous, President and CEO................................. 49
Jessica Grannis, J.D., LL.M...................................... 55
SUBMISSIONS FOR THE RECORD
Report submitted by witness Brett Doney, CEcD, SCLA, AICP,
``Critical Condition: Infrastructure for Economic
Development,'' February 11, 2016, by Emily J. Brown, et al.,
published by the International Economic Development Council.... 63
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
BUILDING A 21ST-CENTURY INFRASTRUCTURE FOR AMERICA: ECONOMIC
DEVELOPMENT STAKEHOLDERS' PERSPECTIVES
----------
WEDNESDAY, SEPTEMBER 13, 2017
House of Representatives,
Subcommittee on Economic Development,
Public Buildings, and Emergency Management,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m. in
room 2167, Rayburn House Office Building, Hon. Lou Barletta
(Chairman of the subcommittee) presiding.
Mr. Barletta. The committee will come to order. The purpose
of this hearing is to examine how we build a 21st-century
infrastructure for America in the context of economic
development and disaster resilience.
First, as the chairman of the subcommittee with oversight
over FEMA [Federal Emergency Management Agency], we are working
closely with the Members, States, and communities devastated by
Hurricanes Harvey and Irma. Our thoughts and prayers go out to
the families and the communities that are impacted.
I also want to acknowledge the brave and tireless work of
the thousands of first responders, volunteers, and members of
the Federal family that are helping respond to these
catastrophic storms and pave the way for recovery.
I have seen firsthand how disasters can upend and devastate
communities: the loss of homes, jobs, cherished belongings,
and, most tragically, lives.
We must work to ensure the States and communities impacted
by these hurricanes recover, and recover quickly. And, in
recovering, it becomes even more critical to ensure that we
rebuild smarter and better. It will not serve anyone well if we
simply rebuild without incorporating mitigation measures that
will minimize the impact of future disasters.
Investment in mitigation ensures the wise investment of
taxpayer dollars because mitigation strengthens infrastructure,
saves lives, and reduces future disaster costs and losses.
Today I hope we can find ways to ensure mitigation is built
into our building and rebuilding process so that we can save
lives and property.
Critical in the recovery following a disaster is ensuring
businesses and jobs return. Agencies like the Economic
Development Administration, or EDA, provide critical assistance
to help with economic recovery following a disaster.
For example, in the district I represent, many businesses
were impacted by floodwaters during Tropical Storm Lee,
threatening businesses and hundreds of jobs. EDA's investment
of $15 million for flood control systems in Bloomsburg,
Pennsylvania, leveraged an additional $10 million in private
investment and saved nearly 900 jobs.
Today we also want to explore how we can strengthen
economic development programs to more effectively leverage
private investment in infrastructure and create jobs. And we
want to examine how we can build and rebuild better to save
lives, strengthen our communities, and reduce disaster costs
and losses.
But the mission of agencies like EDA and the Appalachian
Regional Commission, or ARC, extend well beyond natural
disasters. Federal economic development programs often provide
the last piece of the puzzle distressed communities need to
attract private investment, businesses, and jobs.
For example, ARC's Partnerships for Opportunity and
Workforce and Economic Revitalization, also known as the POWER
Initiative, invested $9 million in Pennsylvania that will
attract $33 million in private investment and create over 600
jobs in coal-impacted communities.
The grants from these agencies are usually tied to specific
outcomes that increase their impact in distressed communities
and ensure jobs are actually created and other goals achieved.
I look forward to hearing from our witnesses how these
programs work and what programs exist to improve upon them.
In rebuilding our Nation's infrastructure, we cannot do it
alone. It takes all levels of Government and the private
sector. How do we maximize these economic development and
disaster response programs to ensure good outcomes and quick
recovery, while creating lasting jobs and economic growth? I am
sure our witnesses today will help us answer these questions. I
thank you all for being here.
I now recognize the ranking member of the subcommittee, Mr.
Johnson, for a brief opening statement.
Mr. Johnson. Thank you, Mr. Chairman, and good morning. I
wish to extend my condolences to those who have lost loved ones
during the recent hurricanes. And my thoughts and prayers are
with the survivors of both hurricanes. I wish them a successful
recovery.
Given the recent back-to-back hurricanes, which also went
through Atlanta and other parts of Georgia as a storm, today's
hearing on the importance of resilient infrastructure and
promoting strong economic development is timely.
The American Society of Civil Engineers, ASCE, has noted
that the Nation has an infrastructure deficit. In fact, the
ASCE has graded the Nation's infrastructure a D-plus. Between
2016 and 2025, ASCE found that households will lose $3,400 each
year in disposable income due to infrastructure deficiencies.
Loss of individual income affects the ability of businesses
to provide well-paying jobs, which in turn further reduces
incomes. If this investment gap is not addressed by 2025, ASCE
determined that the economy is expected to lose almost $4
trillion in gross domestic product, resulting in a loss of 2.5
million jobs by 2025.
While the sorry state of infrastructure has a devastating
impact on our national economy and its citizens in ordinary
times, during times of disasters it also increases costs.
Hurricane Harvey damage estimates range from $100 billion up to
$180 billion. Swiss RE, a private reinsurance company,
estimates that Hurricane Irma damage could cost $100 billion to
$300 billion. The infrastructure damage caused by these
hurricanes will negatively impact and affect the local
economies with business disruptions and workers left jobless,
or at least temporarily unemployed.
The Nation cannot afford to continue on this path. We must
rebuild, but it must be stronger, safer, and smarter. While
devastating, these hurricanes provide the affected areas with
an opportunity to be more resilient, going forward. For those
communities that are not affected, this should be a wake-up
call to invest in resilient infrastructure before disaster
strikes.
Studies have shown that investments in mitigation before
disaster strikes saves $3 to $4 for every dollar spent on
mitigation. FEMA's Pre-disaster Mitigation Program provides
grants specifically for this purpose. By all accounts, FEMA's
PDM program is working, which is why it is so baffling that
President Trump proposed to reduce PDM funding by over $60
million in his fiscal year 2018 budget. He wants to build a
wall, rather than put America's infrastructure and the American
taxpayers first.
But President Trump has gone further. Instead of requiring
communities to build back stronger, last month he revoked the
Federal Flood Risk Management Standard. This standard would
have required infrastructure projects built with Federal funds
such as those the hurricane-impacted communities are about to
undertake, be built back more resilient.
This standard would have required projects to be rebuilt to
one of three standards: the 500-year flood standard, a
reasonable requirement, given that Texas suffered its third
500-year flood in 3 years; using climate science-informed data;
or constructing critical infrastructure 3 feet above the base
flood elevation, and other infrastructure 2 feet above the base
flood elevation.
President Trump would be wise to follow the old adage: If
something isn't broke, don't fix it. We have an opportunity to
diminish future losses. Let's not throw it away. Congress needs
to look out for all taxpayers and require these impacted
communities to recover smarter and stronger where Federal funds
are used. This is the only way to end the cycle of build,
damage, rebuild.
After a disaster, all sectors need to recover. FEMA
estimates that up to 40 percent of small businesses do not
return after a disaster. This means we need to invest in
economic development activities in those areas and elsewhere.
The Economic Development Administration, EDA, has a disaster
assistance recovery program that affords local communities the
flexibility necessary to recover economically after a disaster.
As Congress looks at supplemental appropriations for
disaster-affected areas, this committee must ensure that
funding is provided for this program. For years, regional
organizations in other parts of the country have successfully
assisted local communities in achieving economic development
through infrastructure investments. While Congress has
authorized the Southeast Crescent Regional Commission, Congress
has only appropriated minimal funding, and the President has
yet to appoint a Federal cochair that would allow the
Commission to become operational.
My district, which is within the Commission's boundaries,
has an unemployment rate of 8.9 percent, and a poverty rate of
15 percent. We are already behind, and my district cannot
afford to lose $3,400 per year due to infrastructure
deficiencies.
It is time for EDA to be reauthorized and adequately
funded, and the Southeast Crescent Regional Commission must be
stood up so that my district can experience desperately needed
economic development. Investment in resilient infrastructure
works, and is one of the best tools to address unemployment and
poverty, and reduce disaster costs and losses.
President Trump has called for infrastructure investments,
yet has not provided a plan forward. Not only that, he has
proposed to eliminate EDA and the only regional organizations
despite their success. Congress needs to ignore President
Trump's ill-conceived proposals and support local communities
by reauthorizing funding for these proven programs.
Thank you, and I look forward to today's testimony.
Mr. Barletta. Thank you. At this time, I would like to
recognize the chairman of the full committee, Mr. Shuster.
Mr. Shuster. Thank you, Chairman Barletta. And thank you
and Ranking Member Johnson for holding this important hearing
today exploring what our Nation needs to build a 21st-century
infrastructure.
I want to welcome Mr. Seigel, whose SEDA-COG [Susquehanna
Economic Development Association-Council of Governments]
encompasses counties that are near and dear to my heart:
Mifflin, Juniata, Snyder, Perry County, great places that I
used to represent, and now I know--I believe Mr. Barletta and
Mr.--no. Perry has a piece of that, too, but so does Marino.
Yes. So again, great part of the State of Pennsylvania. And I
miss them very much because they are strong Republican
bastions.
[Laughter.]
Mr. Shuster. So, anyway, I was happy that Mr. Perry and Mr.
Barletta and Mr. Marino got that part of the world.
Again, before we start, also I want to offer my condolences
to those who have lost loved ones, and to the families that
were affected by Hurricanes Harvey and Irma, and our thoughts
and prayers are with them.
I also want to recognize the professionals at FEMA who are
working night and day to manage the disaster response to those
hurricanes, as well as, you know, across the States; the
responders as well as the folks in the local communities. It
has been a terrible tragedy. But again, watching America pull
together, it is always--makes you feel proud and renews your
strength and belief that America is the greatest nation in the
history of the world.
When these tragedies strike, as we have learned with
Katrina, Rita, and Sandy, we need to be able to effectively
help the people and those communities impacted. And from a
policy perspective, we can never stop exploring ways to improve
and invest in those disasters, in the preparedness, response,
and recovery, and how these programs and capabilities can be
improved.
I know the folks from the BuildStrong Coalition are here
today, and they are doing great work on--I have been to their
facility in South Carolina. I think they burned a building the
day I was there. But, you know, they can blow a building up,
but it is a great facility, I would encourage everybody to go
down there and see it--and the work they are doing is really
great work--so that as we rebuild these communities, we are
learning the lessons from what those folks are doing and that
that industry is doing to make sure that we are doing the right
thing as we rebuild these communities.
I expect our witnesses today to address the critical
issues. I know we got a great panel here today.
But investment in infrastructure goes beyond disasters. On
the economic development side, we have communities all across
this Nation: struggling coal communities, small Appalachian
towns, communities that are suddenly hit by disasters, and
businesses are closing. And I know where I come from in
Pennsylvania, it is all small, small and rural communities. So
this is an incredibly important aspect of what we do.
For many of these communities, agencies like the EDA and
ARC provide the technical expertise and the seed money they
need to spur the economic growth and create and save jobs. So
it is incredibly important, I know, across the country. But
certainly, I know in my district and Congressman Barletta's
district and Mr. Johnson's district and the State, there is a
great need for it.
So I look forward to hearing from our witnesses today. And
again, I want to--everyone affected by the hurricanes that have
just occurred, we know that, as I said earlier, they are in our
thoughts and our prayers. And we stand ready to help rebuild
and recover those areas. So thank you very much.
Mr. Barletta. Thank you, Mr. Chairman. We now welcome our
witnesses. On our panel we have Mr. Bill Seigel, assistant
executive director of SEDA-Council of Governments; Mr. Justin
Hembree, executive director, Land of Sky Regional Council,
representing the National Association of Development
Organizations; Mr. Brett Doney, president and CEO, Great Falls
Montana Development Authority, representing the International
Economic Development Council; Mr. Steve Linkous, president and
CEO of Harford Mutual Insurance Company, and chairman of the
National Association of Mutual Insurance Companies,
representing the BuildStrong Coalition; and Ms. Jessica
Grannis, adaption program director, Georgetown Climate Center.
I ask unanimous consent that our witnesses' full statements
be included in the record.
Without objection, so ordered.
For our witnesses, since your written testimony has been
made a part of the record, the subcommittee would request that
you limit your oral testimony to 5 minutes.
Mr. Seigel, you may proceed.
TESTIMONY OF WILLIAM C. SEIGEL, ASSISTANT EXECUTIVE DIRECTOR,
SEDA-COUNCIL OF GOVERNMENTS; JUSTIN HEMBREE, EXECUTIVE
DIRECTOR, LAND OF SKY REGIONAL COUNCIL, ON BEHALF OF THE
NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS; BRETT DONEY,
CECD, SCLA, AICP, PRESIDENT AND CEO, GREAT FALLS MONTANA
DEVELOPMENT AUTHORITY, ON BEHALF OF THE INTERNATIONAL ECONOMIC
DEVELOPMENT COUNCIL; STEVE LINKOUS, PRESIDENT AND CEO, HARFORD
MUTUAL INSURANCE COMPANY, AND CHAIRMAN, NATIONAL ASSOCIATION OF
MUTUAL INSURANCE COMPANIES, ON BEHALF OF THE BUILDSTRONG
COALITION; AND JESSICA GRANNIS, J.D., LL.M., ADAPTION PROGRAM
DIRECTOR, GEORGETOWN CLIMATE CENTER
Mr. Seigel. Thank you, and good morning. Good morning,
Chairman Barletta, subcommittee members, and guests. I am Bill
Seigel, I am the assistant executive director of SEDA-Council
of Governments, a regional local development agency serving 11
counties in central Pennsylvania. On behalf of SEDA-COG and the
nearly three-quarters of a million residents of our region, we
thank you for the opportunity to share our perspectives on
infrastructure needs and the role of the Federal Government in
our region.
We are a rural region, historically defined by agriculture,
anthracite coal, and manufacturing. Today we are challenged to
redefine ourselves by maintaining and growing our manufacturing
sector, while building our service industries.
We look to the Federal Government to partner with us as we
confront these challenges. Roads, bridges, and rail are
important, but not to the exclusion of flood resiliency and
technology in our 18th- and 19th-century communities. The funds
offered through the Economic Development Administration, the
Community Development Block Grant program, the Appalachian
Regional Commission, and the Federal Emergency Management
Agency, to name a few, are critical catalysts for our
infrastructure projects.
How do we build a 21st-century infrastructure in America?
In central Pennsylvania it is through Federal, State, local,
and private partnership, partnerships that protect and enhance
the infrastructure in which we have already invested, and by
complementing that investment with new infrastructure that
allows the region and its industries to remain competitive.
Allow me to share a success story. The town of Bloomsburg,
as the chairman made reference, is located on the banks of the
Susquehanna River and, until recently, was the only
municipality on the Susquehanna without flood protection.
Autoneum North America, a manufacturer of automotive
carpet, today employs over 650 workers with an annual payroll
of over $30 million. If you traveled here today by car, you
likely placed your feet on their carpet. Autoneum faced a
serious dilemma. Located in the special flood hazard area,
their 100-year-old plant flooded every several years.
If they chose to remain at this location, they placed
themselves at risk of financial devastation, as is evidenced by
their $60 million loss in 2011. The entire automotive
manufacturing system and supply chain was slowed by the
unavailability of automotive carpet while Autoneum struggled
through shutdown and recovery. It affected the entire Nation.
Relocation out of the flood hazard area had similar
impacts, due to lost production time ripping through Detroit.
They could not stay, they could not leave. But after Hurricane
Lee and Tropical Storm Sandy, long-term customers began to
waffle at contract renewal, and to investigate alternative
suppliers, including foreign suppliers, to avoid the cost of
flood-induced shutdowns.
In 2014, SEDA-COG and the Columbia County commissioners
were successful in obtaining a $15 million EDA grant to
construct a flood protection system around Autoneum. With the
EDA commitment, we leveraged $12 million from the Commonwealth
of Pennsylvania, along with $2.5 million of private funds to
construct a $30 million flood control system. SEDA-COG staff
managed the funding and the project. We broke ground in 2015
and completed the project last year under budget and ahead of
schedule.
I recently learned that several of Autoneum's major
customers had placed contract renewals on hold until we broke
ground for that project. Without the partnership of the Federal
Government through EDA, it is with near certainty that I can
say we would have lost this manufacturer, leaving the town of
Bloomsburg without the employment and with a 42-acre vacant
manufacturing facility falling into blight and generating
little to no taxes.
Protecting the existing infrastructure, in this example
Autoneum North America, is a priority of SEDA-COG. Using the
Federal tools such as EDA, CDBG, and FEMA pre-disaster
mitigation, SEDA-COG is able to incentivize public and private
partners. EDA support of LDDs [local development districts]
allows us to develop and maintain a caliber of staff that
otherwise would not exist in rural Pennsylvania, and which is
critical to leading the economic and community development
activities.
In deference to time I would conclude by saying in order to
build a 21st-century infrastructure, we must continue to
partner at all levels of Government and business to address all
three legs of this stool. We need to first maintain what
exists. We need to protect it from the new threats.
And we need to expand it to become globally competitive.
Thank you very much.
Mr. Barletta. Thank you for your testimony, Mr. Seigel.
Mr. Hembree, you may proceed.
Mr. Hembree. Thank you, Chairman Barletta, Ranking Member
Johnson, members of the subcommittee, for the opportunity to
testify this morning on infrastructure and the EDA's role in
aiding rural and distressed communities. My name is Justin
Hembree. I am the executive director of Land of Sky Regional
Council. We are a public entity dedicated to economic and
community development headquartered in Asheville, North
Carolina.
I am also a board member of the National Association of
Development Organizations, known as NADO. NADO is a member-
based association of more than 350 regional development
organizations throughout the country.
NADO provides advocacy, education, research, and training
to members, including 368 EDA funded and designated economic
development districts, or EDDs. NADO members support local
governments, communities, and economies through regional
collaboration, comprehensive planning, and program
implementation.
I come before the committee to speak on EDA's role as a key
facilitator of economic opportunity for distressed and
underperforming communities. Since its creation under the
Federal Public Works and Economic Development Act of 1965, EDA
has provided direct financial and technical assistance,
resulting in business and job growth, especially for small and
rural communities.
From fiscal years 2012 to 2016, EDA steered $2 billion
towards local and regional initiatives, leveraging nearly $39
billion in private investment, while helping to create and
retain 321,000 jobs.
Infrastructure investments are a major part of EDA's
assistance to communities. A good example is the agency's
recent investment of nearly $400,000 into a sewer line
expansion and wastewater system upgrade for the small town of
Mars Hill, North Carolina.
The funding addressed additional capacity needs for the
town's wastewater treatment plant, due to an expansion of Mars
Hill University as well as the creation of a new industrial
site.
The sewer line also contributed to business expansion along
the I-26 corridor. Overall, EDA's investment leveraged at least
$585,000 in local and State funding. The project helped to
create and retain 95 jobs with a private investment of $35
million.
The project also shows how EDA serves as an integrator of
public and private resources. EDA identifies and invests in
projects, in part, based upon participation from local and
State partners. EDA investments also combine with resources
from other Federal agencies such as HUD, Department of
Agriculture, and the Appalachian Regional Commission.
EDA also offers loan servicing for small businesses. EDA's
revolving loan fund responds to the challenge of cost and
access to capital involved with small business startup and
expansion. EDA loan funding is often the last resort for small
businesses seeking resources to launch and grow operations.
Loans are managed by economic development districts to provide
direct local oversight and compliance between lenders and loan
recipients.
To improve local processes, NADO has recommended the
suspension of RLF [revolving loan fund] burdensome reporting
requirements following loan repayment. A defederalization of
the loan would cut unnecessary requirements currently endured
by local administrators.
As Congress considers a proposal to rebuild our Nation's
infrastructure, EDA remains a strong resource to assist in
Federal, State, and local economic development activities.
Strategic movement of Federal resources will be key to ensuring
taxpayer dollars are directed to the greatest infrastructure
needs. EDA offers both a successful record and structure
responsive to local and regional needs in infrastructure
development, especially in rural areas.
Again, thank you for the opportunity to address the
subcommittee, and I look forward to answering your questions.
Mr. Barletta. Thank you for your testimony, Mr. Hembree.
Mr. Doney, you may proceed.
Mr. Doney. Good morning. On behalf of the International
Economic Development Council, our board of directors, and over
5,000 members, thank you, Chairman Barletta and Ranking Member
Johnson, for inviting me here today to share our perspective on
this critical issue.
Before delivering my prepared remarks, I would like to note
that our full testimony includes a report written by our
economic development research partnership of IEDC, titled,
``Critical Condition: Infrastructure for Economic
Development.''
[The IEDC report entitled ``Critical Condition: Infrastructure for
Economic Development'' is available on pages 63-150.]
I would also like to take a moment to thank you for your
kind remarks and appreciation of disaster recovery and response
workers and volunteers. Across Montana and the West, we are
fighting thousands of fires right now, and there are a lot of
people this morning working out there, protecting lives and
community.
As economic developers, every day we work with businesses
of all sizes to help them start up, expand, address adversity,
and take advantage of new opportunities. Infrastructure is
often a deal-breaking challenge to overcome. Iconic projects,
such as the Erie Canal, the Hoover Dam, and the Interstate
Highway System reflect investments that revolutionized the
economic futures of the people and regions they touched.
In economic development, more often we are challenged with
smaller but no less critical infrastructure needs. Gaps in our
local infrastructure that prevent businesses from creating the
higher wage jobs desperately needed in too many of our
communities and regions.
EDA has been a critical partner in overcoming these deal-
killing infrastructure gaps. Our challenges today are greater
than ever before. We need your help to ensure that EDA remains
an instrumental resource and partner in helping those of us on
the ground at the local level get things done.
In my submitted testimony, in addition to the detailed
report on how economic developers work with infrastructure, I
provide a few examples of successful projects that have taken
place in my community. I am happy to discuss these and answer
questions about them, as well as our statewide Montana
Infrastructure Coalition, but I will use my time to discuss
suggestions for how economic developers might like to see this
committee proceed as it addresses our infrastructure crisis.
There are two opportunities we would like to highlight for
EDA to advance infrastructure for the purpose of economic
development.
First, as has been discussed by this committee in the past,
and by Mr. Hembree, the defederalization of revolving loan
funds will allow communities to leverage existing funding with
State and private-sector funding to potentially great impact.
Second, the advancement of the division of economic
development integration at EDA would result in streamlined
processes and leveraged Federal investments, with the outcome
of a better, more coordinated Federal engagement in local
economic development efforts.
I would also like to point out one other opportunity for
your consideration. Economic recovery following disaster is a
critical component to restoring communities. The national
disaster recovery framework identifies the Department of
Commerce, via EDA, as the lead Federal agency on economic
recovery. Yet the Department was left out of Sandy's
supplementals. We encourage the members of this committee to
ensure the Department is included in future supplemental
related to Hurricanes Harvey and Irma, hopefully also the
western fires, as well as any future legislation regarding the
role of the Federal agencies in disaster response and recovery.
It has been suggested an explanation for calling for the
elimination of the Economic Development Administration that the
Department of Transportation could fulfill EDA's role in
infrastructure. This demonstrates a lack of understanding of
the type of infrastructure that EDA supports. The most
straightforward description would be to consider it as ``last
100 yards'' infrastructure.
These are the sewer lines and rail spurs running into
industrial parks and manufacturing plants that DOT money does
not cover. These are the renovations of existing buildings that
take the idea of a business incubator in a small town to
reality. These are the expansion of broadband capacity that
allows a Rust Belt city to move into the 21st century. These,
to put it a different way, are the targeted, locally driven,
strategically planned investments in infrastructure that EDA
makes that no other Federal agency does on a national scale.
We encourage this committee to look to the strengths of EDA
and the regional development agencies, their institutional
knowledge of local economic needs and abilities, and invest in
them. Thank you.
Mr. Barletta. Thank you for your testimony, Mr. Doney.
Mr. Linkous, you may proceed.
Mr. Linkous. Good morning. Thank you, Chairman Barletta,
Ranking Member Johnson, and members of the subcommittee. Thank
you for inviting me today to testify. My name is Steve Linkous,
and I am the president and chief executive officer of the
Harford Mutual Insurance Company. I also serve as chairman of
the board of directors of the National Association of Mutual
Insurance Companies. NAMIC is a founding and executive
committee member of the BuildStrong Coalition, on whose behalf
I am testifying today.
Founded in 1842, Harford Mutual Insurance Company has grown
from a small, local insurer serving homeowners and farmers in
rural Bel Air, Maryland, to a regional company protecting
policyholders in seven States and the District of Columbia.
One of the reasons we have been providing property and
casualty insurance products to our policyholders for over 175
years is the mutual insurance model, where policyholders are
put first.
Harford Mutual is a member of NAMIC, the largest property
and casualty insurance trade association in the country, with
more than 1,400 member companies. As we have seen in recent
days, now is more important than ever to consider the
devastating and growing impact of severe disasters. And during
this critical time for everyone in the path of these
hurricanes, we commend the leadership of Chairman Barletta, who
has never wavered in his mission to reduce disaster losses and
better protect communities ahead of the next storm.
As victims recover from the massive destruction left behind
in the wake of Hurricanes Harvey and Irma, we should remember
that the storms have not only destroyed lives and homes, but
will have a devastating effect on the local economies for years
to come. According to FEMA, 40 to 60 percent of small
businesses never reopen their doors after a disaster. And 90
percent of smaller companies fail within a year if they cannot
resume operation within 5 days.
But it is not just small businesses that suffer the long-
term effects of extreme weather. Rather, catastrophes have
lasting ramifications on entire communities. A recent study by
the National Bureau of Economic Research shows that counties
hit by severe disasters experience greater out-migration, lower
home prices, and higher poverty rates.
As they wreak havoc on our economies and communities,
natural catastrophes are also drastically increasing in
frequency and severity, and creating an enormous burden on the
Nation's taxpayers. Between 1976 and 1995, there were an
average number of only 39 annual Federal disaster declarations.
This number has skyrocketed to 121 between 1996 and 2015,
during which we experienced Hurricane Katrina and Superstorm
Sandy, storms that resulted in almost $180 billion in combined
Federal aid. And many expect the combined aid sent to victims
of Harvey and Irma could reach $200 billion.
While victims of catastrophes like Harvey and Irma should
always be the first priority, we owe it to America to
drastically change our approach. We will always help victims
get back on their feet. But I believe we should be doing more
to keep them from becoming victims in the first place.
Research has shown repeatedly that pre-disaster mitigation
and more resilient construction is our best line of defense in
the face of disasters. But the Federal Government has taken a
reactive posture, spending 14 times more on rebuilding
communities after, instead of preparing before the catastrophes
strike. We have the science and the ability to do better, and
we must implement a national strategy for investing in disaster
mitigation in order to protect lives, communities, and taxpayer
dollars.
First, we must incentivize States to adopt and enforce safe
construction standards. As part of this critical reform,
essential assistance made available to communities after
disasters could be used to develop and enforce such standards.
Next, we must shift reactive post-disaster mitigation
dollars to a new national Hazard Mitigation Grant Program,
where funds could be used by communities to protect homes and
mitigate risk before a disaster strikes.
Additionally, Congress should adjust the Federal minimum
cost share following a major disaster, based upon a State's
resiliency. We should not treat States that put responsible
mitigation measures in place the same as those that needlessly
leave lives and homes vulnerable.
Finally, the Federal Government should respond more
efficiently to victims of disasters like Harvey and Irma by
consolidating all Federal disaster assistance programs under
FEMA.
As Congress and the President work together to help the
victims of disasters and improve the Nation's infrastructure,
the time has never been more urgent to adopt a national
strategy for investing in disaster mitigation, which will save
lives, property, and billions of taxpayer dollars.
Chairman Barletta, Ranking Member Johnson, and members of
the subcommittee, thank you again for holding today's critical
hearing. I look forward to answering any of your questions.
Mr. Barletta. Thank you for your testimony, Mr. Linkous.
Ms. Grannis, you may proceed.
Ms. Grannis. Thank you to the distinguished members of the
House Transportation and Infrastructure Committee for inviting
me to testify on this important topic. My name is Jessica
Grannis, I manage the adaptation program for the Georgetown
Climate Center, an institute based at Georgetown University Law
Center that supports State and local efforts to reduce carbon
pollution and prepare for the impacts of climate change. Part
of my work focuses on how Federal programs can better support
State and local efforts to prepare for future climate impacts.
This year of record-breaking weather and devastating
impacts provides a sobering preview of what we can expect with
greater frequency and intensity as the climate changes. Sea-
level rise, more intense heavy downpour events, and more
extreme heat will increasingly affect people, property, and
infrastructure.
These events have also had significant economic and fiscal
impacts. According to NOAA [National Oceanic and Atmospheric
Administration] data adjusted for inflation, we saw an average
of two billion-dollar disaster events per year in the 1980s.
That number has risen to 10 per year since 2010. And 2017 is
likely to break yet another record as the most costly year for
natural disasters that this Nation has ever experienced.
It is essential to talk about resilience now, as Congress
makes billion-dollar decisions about how to fund long-term
recovery. A fiscally responsible approach does not put
communities back to the status quo and in harm's way. Congress
should require that Federal investments account for anticipated
future conditions and provide incentives to encourage
communities to take proactive steps to reduce their own risks.
Many cities and States are already taking action. Miami
Beach, Florida, is investing $500 million to elevate roads and
install new pumping systems, which the mayor reported helped
the city avoid some flood losses during this week's Irma storm
surge. After impacts from Hurricane Sandy, Fort Lauderdale
rebuilt Highway A1A to provide additional flood protection. And
cities in the Midwest like Chicago are upgrading their sewer
systems and deploying green infrastructure to better manage the
increasing rainfall that is already overwhelming their
antiquated systems.
Federal agencies have also been developing commonsense
measures that ensure that taxpayer dollars are not being
wasted. After Hurricane Sandy, disaster-affected communities
were required to build back stronger. FEMA is also requiring
States to consider climate change and hazard mitigation plans.
Congress should support and encourage these types of proactive
Federal agency actions.
Although promising resilience practices are being developed
at all levels of Government, much more needs to be done to help
our communities respond to the increasing threats, and Congress
should lead these efforts.
First, Congress can reform and modernize Federal disaster
recovery programs under the Stafford Act. Rebuilding to replace
exactly what was damaged or destroyed to the pre-storm
standards is not the responsible nor the fiscally prudent thing
to do in an era of climate change. Congress can require
recipients of disaster recovery funds to consider climate
projections when reconstructing infrastructure with disaster
recovery funds. Reinstating the Federal Flood Risk Management
Standards that required projects using Federal funds to build
to higher standards would be a good start.
Congress should fund the programs that provide science and
technical assistance that help State and local governments
understand their risks and design assets to be more resilient
to future changes, including supporting FEMA's flood plain
mapping program.
Congress can also simplify and harmonize administrative
requirements for deploying disaster recovery funds to enable
State and local grantees to more easily combine funding streams
and reduce redtape for both grantees and administering
agencies.
Second, Congress should fund and encourage communities to
proactively implement measures to reduce risks by funding
FEMA's Pre-disaster Mitigation Program. More help is needed for
communities preparing for other impacts, like extreme heat,
droughts, and wildfires.
Congress could also consider FEMA's proposal to create a
disaster deductible, which would allow communities to be
rewarded for the mitigation measures that they are already
implementing on the ground.
Finally, much more investment is needed in sound
infrastructure, even without disasters. Congress could create
and fund and consider infrastructure banks that are being
deployed at the State level, or even look at a national
infrastructure bank to enable private-sector investment in
upgrading and enhancing the resilience of U.S. infrastructure
systems.
Thank you for the opportunity to discuss some commonsense
actions that Congress can take to build the resilience of our
communities and our Nation. More information about these
examples is available in my written testimony and on our
website. And I welcome your questions. Thank you.
Mr. Barletta. Thank you for your testimony, Ms. Grannis. I
will now begin the first round of questions, limited to 5
minutes for each Member. If there are any additional questions
following the first round, we will have additional rounds of
questions as needed.
I ask unanimous consent that Members not on this
subcommittee be permitted to sit with the subcommittee at
today's hearing and ask questions.
With that, I will begin the first round. Mr. Seigel, as you
point out in your testimony, economic development funding was
critical in saving hundreds of jobs in Bloomsburg,
Pennsylvania. Can you talk about the challenges small and
distressed communities have in attracting private investment?
And how do economic development programs help address those
challenges?
Mr. Seigel. Certainly, Mr. Chairman. The challenges we have
in the small and rural communities of the SEDA-COG region
begins with the fact that many of our communities have very
limited staff.
One of the important things that the Economic Development
Administration as well as the Appalachian Regional Commission
provides is support to organizations such as SEDA-Council of
Governments to actually step in and serve as virtual staff to
these communities in pursuing and in administering the Federal
funds that are available.
That is the same service that we provide to small
businesses as they try to develop. We not only support
communities, but we support the individual businesses and
provide financing and assistance in pursuing and obtaining the
funding that is necessary to move their projects forward.
Mr. Barletta. Mr. Seigel, as you know, there are many coal-
impacted communities in Pennsylvania. How have EDA and ARC
helped in getting these communities back on their feet?
Mr. Seigel. Thank you. Currently, the Northumberland County
and SEDA-COG are working jointly on a project that was actually
funded through the POWER Initiative that you referenced
earlier. That program is to assist coal-impacted communities.
And while the program is aimed principally at current coal-
impacted communities, the reality is that within the SEDA-COG
region, the anthracite coal was key to the development of this
country many years ago. They are still impacted communities,
with the loss of the anthracite coal industry that has
declined.
The POWER Initiative has provided us an opportunity to
utilize over 6,000 acres of coal-damaged land located in Lower
Northumberland County in the anthracite fields. And that
acreage was virtually vacant. It was destroyed through many of
the mining operations and disposal operations. And today we
have converted that, and are in the process of converting that
into the Anthracite Outdoor Adventure Area. We are sponsoring
Jeep jamborees, four-wheel drive off-road jamborees, and it has
turned into an outstanding economic development engine for that
otherwise distressed community.
Currently, the projects include the construction of
communications towers, so that we have connectivity. An earlier
comment was made about broadband and the importance of that in
our region, and I have many examples of that critical need:
roadways, camping, and spin-off businesses associated with the
Anthracite Outdoor Adventure Area, which was funded through the
POWER Initiative. So I offer that as an example of the tools we
use.
Mr. Barletta. Mr. Linkous, I know it is too early to tell
the full extent of the devastation caused by Hurricane Irma,
but we have heard about the many changes Florida made following
Hurricane Andrew to reduce the damages, losses, and costs from
future disasters. Are we able to gain any lessons learned from
Florida as to how we, as a Nation, can strengthen our
infrastructure to withstand the next disaster?
Mr. Linkous. Thank you. Absolutely. As we have seen from
some of the terrible images coming out of Florida, there has
been a dramatic shift, due to the building codes and seeing the
resiliency to the storm that hit, compared to Hurricane Andrew
some 25 years ago.
Senator Nelson recently, as he flew over the State,
commented to CNN that he was able to clearly distinguish
between buildings that were build pre-Andrew and post-Andrew.
So it went to prove very dramatically that sensible and strong
building codes can have a dramatic impact on protecting lives
and the building properties that are all around them.
Unfortunately, events like Andrew come along every now and
then, and we are devastated by their impact. But we certainly
learn from them. And Florida certainly shines as an example in
this country, where they took the opportunity to increase their
building codes, enforce their building codes in order to make
their State far more resilient.
In many ways Florida was lucky with Irma in the way she
took her path; a direct strike on Miami that is at a very low
flood level already could have been devastating. And I think
that, as the State continues to see more disasters head their
way, enforcing these building codes across the State--and as we
migrate these across the country--will be extremely important
to saving lives and property.
Mr. Barletta. Thank you. The Chair now recognizes Ranking
Member Johnson for 5 minutes.
Mr. Johnson. Thank you.
Ms. Grannis, what is the long-term funding impact of
rescinding the Federal Flood Risk Management Standard? And has
your organization studied the long-term fiscal impact of
implementing the standard versus not implementing the standard?
Ms. Grannis. We have not studied the long-term fiscal
impact of implementing the standard or not implementing the
standard. I think what we do know is, from the figures that you
pointed out earlier, $1 in mitigation saves us $4 in cost
avoided.
And the Federal Flood Risk Management Standard was to
implement a commonsense mitigation approach to make sure that
when we were building infrastructure with Federal dollars it
would be either elevated to account for the future flood risk
that we are seeing in our communities now and that we expect to
see with greater intensity and frequency in the future, and to
encourage people to think about relocating infrastructure out
of flood plains and out of high hazard areas so that they are
not as exposed to those flood risks in the first place. So that
would be a good metric to look for when you are funding
disaster recovery dollars this time around.
Mr. Johnson. Thank you. What is the order of magnitude of
funding necessary to fund resilience in a manner that bends the
cost curve on disaster funding?
Ms. Grannis. Another great question. As a lawyer, I don't
have as good a sense of the economic case for some of these
investments that we need to make, in terms of pre-disaster
mitigation. But I would say again the numbers that have come
out of studies in the past that $1 saves $4 are a good metric.
And we have other studies that look at other mitigation
approaches, like restoring and enhancing natural flood plains.
And the amount that that can help communities reduce their
flood impacts are a good benchmark to look to when looking at
Federal investments.
Mr. Johnson. Thank you, Ms. Grannis.
Mr. Linkous, do you think that there will be a difference
in property damage between Florida and Texas, due to the
different emphasis on the use of building codes?
Mr. Linkous. Thank you. Most certainly. We saw that in
Houston, especially with the flood impact, that it is estimated
that only 20 percent of the flood victims actually have flood
insurance, whereas flood insurance is owned by nearly 80
percent of those affected in Florida. I think this speaks to
the State's preparation of not only their own infrastructure,
but also communicating to the citizens of their States the
importance of having those protections at their disposal.
Mr. Johnson. What about the use of building codes in
Florida, versus lack thereof in Texas?
Mr. Linkous. Well, certainly, as I mentioned earlier, we
have seen that, in Florida, it is very clear, the distinction
between those homes and buildings that are built to the newer
standards.
In various parts of the country, the building codes are
mandated either at the State level or even at a county level,
and they can vary widely.
On top of the building codes, an important factor is the
enforcement of those codes, especially in rapidly developing
communities. The resources at the county and State level are so
limited that it makes it difficult to even enforce the higher
standards that are there. Florida has put forth money to make
sure that the enforcement is in place. And certainly, what we
have proposed to Congress in our BuildStrong Coalition is that
there are funds available to those communities to make sure
that they are trained, licensed, and enforced when dealing with
these building codes.
Mr. Johnson. Thank you.
Mr. Hembree, in 2009 the American Recovery and Reinvestment
Act provided funding for the Economic Development
Administration. Are there any lessons learned from
implementation of that act that could be incorporated into an
infrastructure bill so that members of your organization could
use funds more efficiently?
Mr. Hembree. Absolutely. I think if you look at the lessons
learned from our implementation of those funds through that
program, we found that a lot of times construction ready
doesn't really mean construction ready. I think what we found
through that process was that there needs to be more
flexibility at the Federal level, working with EDA's regional
offices, to move those funds through quicker to help us
implement the projects that we know are in place.
I think the other thing that is important with that is an
understanding that sometimes, from the Federal level with these
programs, one size doesn't fit all when it comes to the types
of projects that funds are dedicated to or being directed to.
Mainly, when you are talking about rural and distressed
communities, there are various different needs and different
capacity at the local level for the ability for organizations
to effectively administer that type of program. There was such
a large amount of funds trying to be moved out in such a short
period of time.
Mr. Johnson. Thank you, and I yield back.
Mr. Barletta. Thank you. The Chair now recognizes Mr.
Ferguson for 5 minutes.
Mr. Ferguson. Thank you, Mr. Chairman, and thank you all
for your testimony today.
One of the things I want to comment on is my experience as
a mayor in using EDA funding. In two examples that I have, we
had a revolving loan fund that we used to stabilize buildings
in our downtown. And it was pretty effective in closing the
economic viability gap in some of those instances, going in and
providing funding that a traditional lender simply would not
touch. And what we found, we had a high level of success with
that.
And then we also had success using EDA grants for that last
mile of infrastructure on water and sewer projects. The net
result is that we were able to create about 16,000
manufacturing jobs in our community, and revitalize the
downtown. And these were two important tools that we used.
One of the things I would like to get you all's thoughts
on, it was--we touched on rural broadband. One of the things
that I have seen going into rural areas--and my part of Georgia
certainly has a very rural component to it--have you all ever
thought about rural broadband development, and how a revolving
loan fund or a grant program might be used for that?
And, Mr. Hembree, I will start with you on that.
Mr. Hembree. Thank you. I have actually not given any
specific thought to the revolving loan fund program as part of
a broadband initiative. But just in terms of my knowledge of
the way that that program works, and some opportunities that
are there, I think it could certainly work.
Particularly, at least in North Carolina, we have to take
the approach, based on some State statutes, all broadband
projects have to be public-private partnerships. Localities
can't control or operate broadband systems as a utility. So, an
RLF program or a grant program can certainly provide funds that
would facilitate those types of partnerships to make it work.
The challenge that we face--and I think all of us face
across the country when we are talking about rural broadband--
is that, in terms of our economic competitiveness, in terms of
us being able to have the ability to compete on the national
and global market, we have got to have that connection. But the
flip side of that is the density is not high enough in rural
areas for the market to drive deployment of those resources and
those infrastructures to the area--so that is sort of the
catch-22--and where EDA and other programs could step in to
fill that gap.
Mr. Ferguson. And that is my point in that, is that, you
know, a lot of times we will use either the grant program or
the revolving loan fund program to close the economic viability
gap in these other types of economic development projects. And
I think that we all recognize that the rural broadband
infrastructure is really critical to really making sure that we
stay competitive on a global stage.
But, quite candidly, it is really the best way forward for
rural America. It is the way that we connect young people in
those communities to economic opportunities in the metropolitan
areas. And I would say that using--now beginning to change our
model for economic development may be moving away from
traditional infrastructure projects to putting a heavy emphasis
for the next few years into broadband development and tie that
directly to our education system to develop students that can
use this to earn a living. I think it is pretty important to
do.
So, whether it is a revolving loan fund, or a grant
program, or whatever it is, I think we need to look at this
maybe the same way that we have traditionally, putting in water
and sewer lines for an economic development project.
So, with that, Mr. Chairman, I will yield back.
Mr. Barletta. Thank you. The Chair now recognizes Ms.
Norton for 5 minutes.
Ms. Norton. Thank you very much, Mr. Chairman. And I thank
you for this hearing, which I am going to say, unfortunately,
is very timely, in light of recent events.
I think this question is really for Mr. Linkous--am I
pronouncing your name correctly--because of a suggestion in
your testimony.
And in my own district, the Nation's Capital, the threat of
not hurricanes--although that does happen here--but certainly
of floods on the Mall are imminent. And we just finished
working through this committee, constructing a levee there. And
I have two bills where construction is underway now, literally
on the water, the Southeast Waterfront, the Southwest
Waterfront. This is fairly typical of building in the United
States. So the notion of protections not only against disasters
like hurricanes, but of surges, of floods is nationwide.
Now, in your testimony, Mr. Linkous, you proposed something
very interesting. First of all, you say in your testimony that
only 15 percent of those affected by Harvey were covered by
insurance. That ought to shake us up. I can't imagine how we
are going to rebuild, when you pile on Irma and the rest.
And you are making a suggestion that I would like to have
you justify. It is perfectly understandable that you would
focus--as the Congress has not sufficiently--on pre-disaster
funding. And so you proposed that 10 percent--and here I am
reading from your testimony--of all funds appropriated for the
existing post-disaster Hazard Mitigation Grant Program be
allocated to a new program, a new mitigation program, where
funds would be available with regards to whether a disaster
occurred and could be used for strengthening homes and
businesses.
So essentially, you want to take funds from disaster funds.
It is kind of tough love to make perhaps the Congress and maybe
even the States do what they haven't done in the past. Is it--
have you concluded that the only way to get sufficient
attention on pre-disaster funds is this kind of tough taking
from Peter to pay Paul, as some would say? If you say to Sandy,
for example, which is still going on, the rebuilding there,
that part of those funds, which I must tell you they had a
harder time getting than it looks like we are having getting
for the Texas and Florida disasters, if you were to, say, take
away 10 percent of the funds that are being used to rebuild New
York and New Jersey and set them aside for whoever needs funds,
we are likely to get members from those delegations saying,
``Really?''
So, would you explain why you come to that conclusion, and
if you think it would be successful here in the Congress.
Mr. Linkous. Thank you. You know, a wise person once said
that an ounce of prevention is worth a pound of cure. And, as
we know, that was Benjamin Franklin, who also happens to be a
Founding Father of our mutual insurance industry, and his
company continues 265 years later in Philadelphia. I think we
need to take that sage wisdom when we go into addressing our
Nation's disaster recovery.
As we have heard, $1 equals $4 on the back end. And if we
continue to----
Ms. Norton. But everybody in the Congress will give
lipservice to what you have just said. But you have cited in
your own testimony that sometimes 80 percent--I think one of
your figures, the amount--go in to post-disaster than Congress
has been willing to put in to pre-disaster.
So they--everybody believes it, but it is in our DNA to
help people when disasters occur. But cannot be found anywhere,
apparently among Democrats or Republicans to take a big chunk
of money and use it for pre-disaster, even though you won't
find any Member who disagrees with what you just said.
So I am really looking for the remedy. Do you think this
notion of saying, OK, you are willing to generate funds after
disaster, because you have no--you really have no alternative.
So if there is a provision that says some of that money has to
go into pre-disaster, then maybe we will build up a pre-
disaster mitigation fund. That is what you seem to be
proposing.
And I am asking--this is taking away from a disaster to pay
for the next disaster, whoever gets it--it might not even be
the particular jurisdiction--I am asking you do you think that
that is really all that is left to do now to get Congress
focused on the importance of pre-disaster funding.
Mr. Linkous. I agree with you, that we must focus on
recovering those that are impacted by Harvey and Irma, or
whatever the major disaster that may be striking in the Nation.
Our priority must be, first and foremost, there.
That being said, what we have laid out is simply
incentivizing States to take measures to prevent the damage
that would come from the next hurricane. Whether we like it or
not, the frequency and severity of weather events are
increasing on a dramatic pace. Our funding of these events from
a disaster situation on a post-disaster basis is unsustainable.
We will not have the funds to----
Ms. Norton. Well, people who lose funds--let's say people
in New York and New Jersey----
Mr. Linkous. One----
Ms. Norton [continuing]. By having these funds taken from
their post-disaster funds, would they be available to them for
pre-disaster mitigation?
Mr. Linkous. Yes. What we are recommending is taking a set
percentage of the annual funds that are coming out of disaster
relief, and setting them aside for pre-disaster mitigation. As
you mentioned, 10 percent. So, if $200 billion was in the
package for 1 year, we would be setting aside $20 billion for
the States to recover. One key element of what we are proposing
is also having FEMA oversee all dollars that are being spent on
a disaster basis.
Billions of dollars were set aside for Sandy. Most of that
should have gone to New Jersey and New York, where the disaster
actually happened. But as we know, slush funds were created
across the board that impacted 25 States that got Sandy relief
funds. So we believe that there is sufficient dollars within
the disaster recovery funds that can be utilized toward pre-
disaster mitigation.
Ms. Norton. I think it should be considered. As tough as it
is, I think that the gentleman's proposal should be considered.
Thank you very much.
Mr. Barletta. Thank you. The Chair now recognizes Mr. Faso
for 5 minutes.
Mr. Faso. Thank you, Mr. Chairman.
Mr. Linkous, I recently met with a mutual insurance company
located in my district. And, as you know, we had significant
damage due to Irene and Lee back in 2011, as did the State of
Vermont. And all through the Catskills we had serious flooding
and property damage. And one of the things that the folks from
the mutual company told me was that, ironically, the people who
did not have flood insurance, they received compensation
quicker than the people who had flood insurance. And I am
wondering if you could comment on that, and what your
experience and the opinion of your association and your
coalition is on that topic.
Mr. Linkous. Thank you. Well, certainly, when we are
proposing recommendations to Congress, one of them is not to
have insurance programs run by the Federal Government. We know
that the large bureaucracy that is created around FEMA creates
problems when it ultimately takes place in delivering a check
to an affected business owner or homeowner.
We, as mutual insurance companies, are based in the
community. We were formed because of the community. And we are
there to closely monitor their impact, and can have a far
quicker and more responsive mitigation of their disasters
because we are there.
When you take it to a Federal level, you are inherently
going to build in some lag of time as the Government is dealing
not only with the flooding, but also the impacts of the
hurricane and infrastructure, gas shortages, and everything
else that inherently get in the way.
We would call for more privatization of the National Flood
Insurance Program. We have put forth key elements to
revitalizing the National Flood Insurance Program, one of them
being allowing data to be supplied by the National Flood
Insurance Program to the private market, so companies like us
could assess that information. Right now that information is
only in the hands of FEMA. In order for us to adjust the rates
according to the exposure, so that it does not jeopardize our
companies, we need that information at our level in order to do
that.
Mr. Faso. So streamlining the information, making it
accessible, in your view, would allow for quicker compensation
for those that are adversely affected by these events.
Mr. Linkous. Absolutely.
Mr. Faso. And I don't know if Ms. Grannis or another member
of the panel would like to comment. One of the things I hear
consistently from people in my district is the dissatisfaction
with the FEMA mapping process, and that this process is often
convoluted, filled with mistakes, et cetera. Could the
panelists, Ms. Grannis or any of the other panelists, care to
comment on that issue?
Ms. Grannis. Sure, I would be happy to. I think that is a
common critique in many communities, that the flood plain maps
are underpredicting what actually floods during these events,
that FEMA is underfunded to update the maps. Many communities
have maps that are, you know, many decades old.
We have looked at solutions to try to have Federal agencies
work better together. You have a multitude of different Federal
agencies that are collecting data relevant to flood risk: USGS
[United States Geological Survey], FEMA, NOAA. So, creating a
facility that allows those different data sets to be combined
and used to more easily update flood plain maps and give
communities better flood risk information.
So I think, when looking at the National Flood Insurance
Program, looking at options for improving FEMA's flood plain
mapping program is going to be really key, and also giving FEMA
the funds they need to make sure that those maps are up to date
and accurate, and including future conditions information for
communities.
Mr. Faso. Any of the other panelists have a thought on this
issue?
Mr. Linkous. If I could just add, as well, myself, as a
company, we are looking at multiple exposures: hurricanes,
severe convective storms, tornadoes, severe weather events. We
utilize modeling companies in the industry--RMS, AIR--to
provide us data. They change their models, if not once a year,
multiple times a year, based on the information they are
receiving from the disasters. The more disasters we have,
unfortunately, provide more data to us to be able to deal with
those.
When flood plains are changed on a multiyear basis, we know
immediately that they are out of date. And so they cannot be
used as a basis to adequately charge a rate to the consumer or
a business that is in a flood plain, or even for them to
determine are they truly in a flood plain to begin with. And
so, we need to update the data, as Ms. Grannis said, and that
would certainly go a long way to supporting the Federal
insurance flood program.
Last thing I would say on flood is that we all have to
understand that the rates being charged by the NFIP [National
Flood Insurance Program] are pre-subsidized. So the dollars
that are determined internally to charge for a risk is already
subsidized when it reaches the consumer. We are giving them a
false sense of security by them thinking, oh, it only costs me
$500 for my flood policy, it must not be a big risk, when
really it has been subsidized by 90 percent by the Federal
Government.
More importantly, we know that there are some living in
those flood-affected areas that can't afford the higher flood
rates, but there are many that can afford the higher flood
rates, but we are pre-subsidizing across the board, and not
looking at this in the proper way. NAMIC has called for many
changes in the NFIP that we would look for Congress to passing.
Mr. Faso. Thank you, Mr. Chairman. I yield back.
Mr. Barletta. Thank you. The Chair now recognizes Mr.
Smucker for 5 minutes.
Mr. Smucker. Thank you, Mr. Chairman. I thank you for
holding this hearing, which, of course, is timely in regards to
disaster relief and mitigation, and also I think it is timely
in terms of the Federal role in infrastructure, as we talk
about an infrastructure package that we hope to see come
forward in the next few months or so.
And I want to target at least my first two questions in
that regard, and this is specifically to Mr. Doney. And just to
provide just a little context, or background, a community that
I represent is the city of Lancaster, about 60,000 people, in
Pennsylvania. And if you visit Lancaster now--again, this is
happening in many areas, but specifically in my district--it is
a vibrant, downtown area that is important to the entire
county.
And that didn't just happen by accident. It was really the
result of, you know, a lot of community leaders who focused on
that for several decades. And we now see the outcome of that.
And people recognize, you know, that that is a very important
development to the region, as well as to the downtown.
And it didn't come about entirely by private investment. It
really was targeted--in this case it was mostly State dollars
that--if you look back specifically, a baseball stadium and a
convention center, which would not have happened without
targeted investment. It was a public-private partnership.
And that is why I am excited about what we are talking
about, in terms of our infrastructure package. We are talking
about spurring private investment dollars, which--neither of
those projects that I mentioned would have happened without a
public-private partnership, but neither would have a lot of
other ancillary businesses and development occur that didn't
require any State dollars, but was all private investment
driven by the initial investment into the community.
I am not--you know, I am new here, I am not as familiar
with the Federal role. And so I guess I am interested in
hearing from you about the role of the Economic Development
Administration. What specifically can the Economic Development
Administration provide that other agencies cannot? If you
would, speak to that.
Mr. Doney. Well, I think in two respects. And it approaches
the need for economic opportunity and healthy, vibrant
communities and regions, as well as emergency preparedness.
One is capacity on the ground. EDA invests in building that
capacity. One thing about economic development is we cross just
about every area. So we develop the relationships with our
healthcare, with housing, with transportation, certainly with
the business community, with education. Those relationships
help us address things and creatively package things together.
So capacity is one.
Two is that last bit of money to make something happen. EDA
tends to focus on those catalytic projects that you get one
thing going and it gets the ball rolling. We have a revolving
loan fund that is 20 years old. We have recycled that money
many times. We average 17 percent into a deal, so that we push
the conventional lenders to do as much as possible, we push the
business to raise as much equity as possible, and then we fill
that gap.
It is frustrating at times, when we come here to
Washington, that we don't think the role of that is as greatly
appreciated. We are the dealmakers there, and we are trying to
close that last gap.
Mr. Smucker. I wonder if you--do you have--as we look at
spurring additional public-private partnerships, do you have
suggestions for improvements, based on your experience, to that
agency or other Federal agencies?
Mr. Doney. Well, two things. One, streamlining things at
EDA. They have much lower staff than they used to have. The
regulatory burdens certainly don't go away, environmental
review and things like that. That is one of the reasons we have
suggested the defederalization of the revolving loan funds.
Again, our loan fund is 20 years old, and we still have to file
regular reports, and then EDA staff have to review those.
The proposal that was before the House last year would have
removed that for revolving loan funds that had proven
themselves over a number of years to be performing well. So
that would give them the flexibility there.
The other is let EDA play its congressionally mandated role
of being the lead agency in economic development, and
developing those relationships to eliminate stovepipes between
other agencies. Usually, when we are working on something,
whether it be broadband, disaster recovery, or just trying to
put a deal together, as you know from being mayor, we are
cobbling together a whole variety of public and private
resources.
EDA is the one agency that has the flexibility to fill
whatever gap that we have. It is really the only resource that
we have that has that flexibility to fill that last gap.
Mr. Smucker. Thank you. I see I am out of time.
Mr. Barletta. Thank you. I am now going to begin a second
round of questions, if any other Members want to participate.
Mr. Hembree, are there ways in which we can ensure agencies
like EDA and ARC encourage mitigation when funding disaster-
related projects?
Mr. Hembree. Absolutely, I think there are. I think there
are probably both some requirements--maybe regulatory-type
requirements--that could be put in place tied to funding
levels. Well, I guess you would call that probably the stick
approach.
Probably what your local communities and we would like to
see more is sort of the carrot approach. And from that, what I
mean, and traditionally what has been successful with some
programs in the past when we have dealt with similar issues, is
identifying what those communities' needs are, in terms of
potential mitigation, what happens, what if, and encourage that
planning process beforehand.
I think we, as a nation and as regional development
organizations, and even as local governments, have become much
better at doing that. I think there is still a lot of work to
go. So, I guess what the bottom line could be, one of the
things that could be done is that could be tied to funds, sort
of getting back to the same thing we are talking about, you
know, in terms of the actual recovery funds to put in place, if
that makes sense.
Mr. Barletta. Yes, thank you. That is--thank you very much.
Mr. Doney, in recent years, as you point out, EDA has
served as an integrator of Federal economic development
programs working with other agencies and streamlining the
application process for distressed communities. Can you talk
about why this role is important, and how it can be
strengthened?
Mr. Doney. Certainly. EDA plays the--again, that last-gap
role. When it comes to infrastructure, it has the flexibility
that if our need on a project is a sewer line or a water line--
maybe it is a building renovation, maybe it is broadband, a
whole variety of different things usually at the scale that
won't reach the level of other Federal programs, EDA can fill
that gap.
The programs of economic adjustment have been particularly
critical in my region. The U.S. economy, the global economy, is
so dynamic that the economic adjustment program allows us to
develop plans and implement plans at the local level to react
and take advantage of new market opportunities and address
market challenges that come up.
So, the public works program is that last gap of
infrastructure. I don't know where else to turn to, if it is
not EDA. It is not like we have choices. We turn to EDA because
there is nothing else that we can do, we have exhausted
everything at the local, regional, and State level. We are very
creative at getting everything we can to put something
together. We turn to EDA when there is no other resource left.
Mr. Barletta. Thank you.
Mr. Seigel, you highlight the significance of disaster
mitigation in your testimony. Mitigation not only saves lives
and reduces property damage, but it can also save jobs. Can you
talk more about how mitigation is critical in economic
development?
Mr. Seigel. We have just completed a very intense community
education and outreach program in the SEDA-COG region, and we
are actually going to be taking that across the local
development districts through 52 counties and Pennsylvania. And
the purpose of that was to hear from the businesses and the
citizens about how we can plan for resiliency.
It is a critical element of job retention and job creation.
In terms of the retention, we have actually proposed and rolled
out some concept ideas, suggesting offering tax credits,
targeting revolving loan funds, revenues to businesses in order
to build resiliency into their facilities.
The types of things we are looking at are relocation, flood
proofing, those types of things, all of those things that would
allow a business to come back into operation quickly after an
event occurs. And we are utilizing the EDA revolving loan funds
for that, as well as advocating for certain interests and tax
credit benefits for those purposes.
Mr. Barletta. Thank you. The Chair now recognizes Ranking
Member Johnson.
Mr. Johnson. Thank you.
Mr. Linkous, what aspects of the National Flood Insurance
Program, if privatized, or--let me ask the question like this.
You recommend that the National Flood Insurance Program be
privatized, but what would the current market for flood
insurance--or would that current market for flood insurance be
served under a privatization model?
Mr. Linkous. Thank you. We are calling for increased
privatization of the National Flood Insurance Program, not
necessarily the complete elimination of the flood. Flood is a
very difficult loss to model. That being said, I think the
appetite of carriers and reinsurers would be quite healthy.
We know that there is a significant capital surplus in both
the reinsurance and carrier markets. Carriers are looking for
areas to deploy that capital in order to serve markets, grow
their market share. So I think it would be quite extensive.
That being said, insurance companies are not going to take
that first step to entering that risk until they understand
fully the risk. And so that information coming to us being
allowed to set actuarially sound rates for the risk that is
there needs to be part of the reforms that--to the overall
protection of flood in the Nation.
Mr. Johnson. Would the private market be amenable to
assuming the FEMA mapping process, along with this
privatization proposal?
Mr. Linkous. Well, certainly, because we know that the
better data we have, the better we can manage the overall risk.
If we don't manage properly the risk of our company, small or
large, we ultimately will go out of business. That is why we
have been around for 175 years, because we look at the risk
appropriately.
Our owners are our policyholders. So I am not the owner of
the company, I am the steward of the company. So the
policyholders expect me to make sure that I am mitigating the
risks that ultimately protects their surplus, the
policyholders' surplus.
So I would see that the industry would enjoy engaging with
the NFIP to make sure that the maps are correct, that they are
updated on a frequent basis, and adapt to the changing climate
that we see all around us that are driving more and more floods
into these programs.
I think there is an opportunity with the insurance industry
coming in with its massive infrastructure of data, that it can
supplement and help not only policyholders at the home and
business level, but also communities that are looking for ways
to improve their infrastructures.
Mr. Johnson. Ms. Grannis--thank you, Mr. Linkous--Ms.
Grannis, what would privatization look like if it were to
become the policy of the country?
Ms. Grannis. I think there would be a couple things that I
would look to in thinking about how the private insurance
market would play a role within and to complement the NFIP.
The first is the flood plain mapping program. You know, we
want that information to be public, we want that information to
be updated and accurate, because it drives so many decisions
about how we set insurance prices, where we build, how we
build, who has to purchase insurance. So, you know, we want
that information to be maintained as a public good.
There has been proposals to include, like, a surcharge on
policies to make sure that the flood plain mapping program
continues to have the resources it needs. The second component
that I would want to preserve is the role of the NFIP in
encouraging communities to mitigate risk, and to do things like
have better land-use practices in flood plains, have better
codes and standards on the books. So we want to make sure that
that public good is still preserved with a private role, as
well.
And then I think the third prong of the National Flood
Insurance Program that really has to be managed carefully is
the affordability of flood insurance. This is the last line of
defense for people if they are affected by flood insurance.
This is the only money they have to rebuild. And so, if those
insurance prices go through the roof and lower income
homeowners are not able to continue to maintain coverage, or
are priced out of their home, that will have significant
resilience effects on communities and the ability of households
to recover in the event of these extreme storms.
Mr. Johnson. Thank you. I yield back.
Mr. Barletta. Thank you, Mr. Johnson. And I thank you all
for your testimony today.
If there are no further questions, I would ask unanimous
consent that the record of today's hearing remain open until
such time as our witnesses have provided answers to any
questions that may be submitted to them in writing, and
unanimous consent that the record remain open for 15 days for
any additional comments and information submitted by Members or
witnesses to be included in the record of today's hearing.
Without objection, so ordered.
I would like to thank our witnesses again for their
testimony today.
If no other Members have anything to add, this subcommittee
stands adjourned.
[Whereupon, at 11:30 a.m., the subcommittee was adjourned.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]