Katrina renews calls for change in rebuilding rules

DAUPHIN ISLAND, Ala. -- This island's website couldn't be blunter: "Dauphin Island is in a precarious position of being a barrier island, in essence an overgrown sandbar. This gives us a potential of being a disaster in the making. We have been hit by numerous hurricanes, Ivan, Frederic, Georges, Danny and many more!"

Hurricane Katrina was the latest storm to punish this 14-mile-long island of 1,400 residents. Yet nearly two years after Katrina wiped out 350 homes and dislodged 1.5 miles of land, new and bigger homes are rising. A 9-foot-high sand dune was built with about $3.4 million in federal funds to prevent flooding. But it's already been breached by the Gulf of Mexico's waters.

So why are people rebuilding on such a vulnerable island? The answer lies in a maze of emotions and financial incentives that encourage them to rebuild again and again. Residents point to government-subsidized flood insurance, repairs made to roads and other aid that arrives after storms. They also cite the island's serenity and its sugary white sand.

It's "paradise," says Carol Clark, owner of a bed-and-breakfast that's been damaged six times in 17 years. "The Gulf, all the fresh fish — it's the kind of place you never want to leave."

All that romance aside, Katrina's impact here and in other beach communities on the Gulf Coast has revitalized a debate over whether federal, state and local governments should do more to discourage rebuilding in areas particularly vulnerable to hurricanes, earthquakes and flooding.

The magnitude of Katrina's destruction — and concern that people will rebuild in the same way, in the same precarious places — have sparked calls for new regulations on a range of matters, including flood insurance and the funding of coastline restoration.

Such efforts, though, have foundered, largely over resistance from developers and politicians who fear that such changes would stem coastal development and the revenue it brings, says Oliver Houck, an environmental law professor at Tulane University.

Meantime, thanks to government help, "You'd be a fool not to live on the beach," he says. "We're building highways to them, causeways to them, sewage-treatment plants to them. We're paying their (flood) insurance to live there."

In risky areas, many homeowners enjoy artificially low flood insurance rates — a legacy of the government's effort to prod communities to join the federal flood insurance program, which began in 1968. Properties initially developed before their community joined the program are eligible for discounted flood insurance.

Thanks to the subsidies, a high-risk property — such as one on Dauphin Island — might pay $990 to $1,646 a year for the first $100,000 of coverage on a property and $30,000 on its contents. Without subsidies, the rate would more than double, according to federal data. Communities also get flood insurance discounts for educating residents about flood risks or requiring them to build more safely.

Through the years, properties that have suffered repeated damage have claimed a rising share of flood insurance payouts. And in years when the typical $2.2 billion to $2.5 billion in premiums collected from policyholders can't cover payouts, the program has borrowed from the government to cover the losses.

Proposals to end insurance subsidies or flood coverage for such properties have yet to gain momentum. Meantime, a 2004 federal law that lets flood insurance rates rise sharply if homes with repeated flood damage aren't moved or elevated hasn't taken effect because the government is still ironing out details of how to implement it.

Donald Powell, federal coordinator for post-Katrina rebuilding along the Gulf Coast, says raising insurance rates on subsidized properties that flood repeatedly would put the struggling flood insurance program — which has borrowed more than $17 billion from the U.S. Treasury to pay Katrina claims — on sounder financial footing. Building codes, materials and elevations, Powell says, are also "important components" that need to be reviewed.

But as more time passes after Katrina, the momentum for revising the flood insurance program and ending federal aid to risky coastal areas is fading, says J. Robert Hunter, insurance director for the Consumer Federation of America.

And with Congress not moving forcefully on the issue, people are likely to continue to build on Gulf beaches, betting that the government will provide a financial net if disaster strikes.

"You can make a lot of money by developing the coast, and as long as people are making money, why would they stop?" says Robert Young, a professor of coastal geology at Western Carolina University.

'I'm not bashful' seeking aid

On Dauphin Island, the government has paid more than $30 million for damage to flood-prone properties since Katrina.

It's committed hundreds of thousands more for fixing roads, drainage systems and street signs. That's on top of funding the sand dune that guards rows of vacation homes on a private beach, raising questions about why federal money was used for a project on private property.

Dauphin Island Mayor Jeff Collier says, "Federal funds can be used for private use as long as it's for the public good." In this case, he says, the berm is protecting not just the homes but also the island's roads and drainage system.

"It's easy to point and say that Dauphin Island is a small island, they should take care of themselves," Collier says. But the island's annual budget is only $2.5 million to $3 million, so "as long as the system is set up the way that it is to assist communities, I'm not bashful" about asking for financial aid.

Cindy Armour, 48, who lives along the beach here, has spent more time building and rebuilding her house than occupying it. Having adored the beach as a child, Armour jumped at the chance to buy beachfront property a few years ago so she could wake up to the sound of waves lapping the shore.

A year after she moved into her house, Hurricane Ivan blew through in 2004 and destroyed it. She was rebuilding when Katrina swept it away again less than a year later. Armour has rebuilt a second time. She moved in this month.

Even so, she doesn't know whether she'd have the fortitude to start over again if another hurricane struck.

"My philosophy is three strikes and you're out, or the third time's a charm," Armour says. "This next (storm) will decide" whether she stays or goes.

Collier says rebuilding on Dauphin Island is occurring more slowly than after previous hurricanes because prices on homeowners insurance — issued by private insurers, unlike government-issued flood insurance — are rising and because of the one-two punch of Ivan in 2004 and Katrina in 2005. But it's a matter of time, he says, before the majority of destroyed homes rise again on these sandy shores.

Along the Gulf Coast, some insurers have stopped offering new policies in high-risk, beachfront areas after paying record losses from Katrina. But those in well-to-do communities are likely to be able to get homeowners insurance more easily because they have money to build their homes to standards that exceed building codes, says Robert Hartwig of the Insurance Information Institute.

Some coastal analysts argue that vulnerable areas such as Dauphin Island shouldn't be rebuilt at all, at least not with help from taxpayers.

"Here's where the government can help people prevent themselves from shooting themselves in the foot," says Orrin Pilkey, director emeritus of Duke University's Program for the Study of Developed Shorelines. "I would give no support to any beachfront development in any form whatsoever. We should take away that insurance money, that nourishment money."

But Harry Simmons, president of the American Shore and Beach Preservation Association, which lobbies for beach-nourishment funds for coastal communities, says that view is shortsighted because a growing number of people are populating America's coastlines.

Also, "Beaches are the No. 1 tourist destination in the U.S., and if you don't do something to maintain this economic resource, that will hurt people all over the U.S.," not just in one area, says Simmons, the mayor of Caswell Beach, N.C.

A history of big losses

The three coastal states that were hit hard by Katrina — Alabama, Mississippi and Louisiana — share a history of severe flood losses. Since 1978, they've received more than half of all flood insurance payouts nationwide.

Across the USA, properties with repetitive flood losses — two or more flood claims within 10 years — make up only 2% of all flood insurance policies but account for nearly one-quarter of all payouts, according to federal data.

Subsidized flood insurance isn't the only reason people are rebuilding in vulnerable places. Inconsistent building rules are also a factor.

After Katrina, the Federal Emergency Management Agency issued advisory flood maps for rebuilding higher, and safer, houses in affected counties in Mississippi and Louisiana.

Gulfport, Mississippi's second-largest city, has adopted FEMA's latest guidelines for elevating homes. Homeowners with at least 50% damage must raise their homes to a specified level or see their flood insurance premiums rise dramatically.

In neighboring Biloxi, though, the city council didn't approve the advisory maps, effectively letting residents rebuild without elevating their homes to those levels. (The city, however, plans to adopt FEMA's final flood map when it comes out.)

The elevation of new homes also has been a hot topic in New Orleans, although the low-lying city's vulnerability to flooding differs from that of beach communities. New Orleans residents note that the failure of the levee system that's supposed to protect the city — rather than Katrina itself — led to most of the damage there.

"In New Orleans, you live in a city that's reliant on (water) pumps, so you don't have to be up in the air," says Angele Givens, president of the Gentilly Civic Improvement Association.

Even so, the city late last year adopted new FEMA guidelines for home elevations. Those who began rebuilding their homes at lower elevations before the guidelines were imposed, however, are being allowed to proceed. Marilyn and Clarence Thomas, of the Gentilly neighborhood, began rebuilding in early 2006 and had no problem erecting their tan-brick home flat on the ground, as it was before Katrina.

"The city told us that we don't have to elevate," says Marilyn, 71.

Residents in New Orleans and elsewhere also do not need to abide by the latest elevation maps if their house sustained less than 50% damage. But figuring out the extent of damage to a house isn't easy. The U.S. government leaves that task to the affected city.

In New Orleans, some residents say that in case of doubt about the extent of damage to a home, the city typically sides with the resident.

"We were 70% damaged, but we got it down under 50%," says Rita Legrand, a resident of the Lakeview neighborhood who helped fellow homeowners get their damage assessments adjusted. "You could go down and get it changed depending on what you wanted."

Most homeowners in the neighborhood, Legrand says, wanted to be told they had less than 50% damage so they could rebuild without having to tear down their house and elevate it.

The city's approach on whether homes need to be elevated is, "in some respects, good, (because) it gives people a lot of choices," Givens says. "In some respects, it's bad because it gives people no guide."

Powell, the federal coordinator for post-Katrina rebuilding, says the U.S. government has "not seen any evidence that there has been abuse of the program. The city's numbers (on damage assessments) track closely" with the government's numbers.

Hunter, the insurance director for Consumer Federation of America, says homeowners in flood-prone areas should be required to elevate their homes, regardless of when they got their building permits.

"I understand the tension, I understand about worrying about people" rebuilding, says Hunter, the head of the federal flood insurance program in the 1970s. "But you're not doing people a favor" by letting them rebuild in the same way, he says.

Pushing their luck

Young, of Western Carolina University, believes that authorities should rethink development of particularly low-lying areas in New Orleans. But a higher priority, he says, should be cutting off funding to those who keep building second homes along beaches that flood repeatedly.

Dauphin Island is one of those vacation-home areas. Well-to-do professionals and investors flock to the island's west end each year to build second homes, well aware that a hurricane could destroy their investment in one blow.

Some fall in love with the island and stay year-round. Buddy and Angie Holland owned five properties on the beach before Katrina. The storm damaged their house and a rental property and sank three other investment properties.

This isn't the first time the Hollands' properties have been damaged or washed away, and they acknowledge it's not likely to be the last. Even so, they've rebuilt their house. They've filed flood insurance claims for all their properties and are selling one of their rentals.

One day, the Hollands say, they may build more houses along the water. But they know they'd be pushing their luck.

"If the government told me I couldn't build, I wouldn't," Buddy says. "At some point, when we lose these properties, we're going to have to say, 'That's it.' What we've done here is that we've taken this end of the island, and we've stopped Mother Nature from doing her job."