Flood Insurance May Dry Up

The Passaic River roars through Little Falls.
Yet new developments continue to be planned on flood plains.

From Monday's Star Ledger:
Repeatedly Flooded Properties Targeted
Insurance overhaul likely to Affect Thousands in N.J.

BY STEVE CHAMBERS
Star-Ledger Staff

Concerned about the solvency of the National Flood Insurance Program, federal lawmakers are poised to slap new restrictions on some of New Jersey's most valuable real estate: thousands of flood-prone homes that sit along barrier islands and rivers.

Legislation likely to be introduced in the coming weeks will target "repetitive-loss" structures across the country, congressional officials said. Possible solutions include buying and demolishing homes that flood repeatedly, stripping them of insurance coverage or greatly raising premiums.

Congress, which today returns from a two-week break, has been forced to remake the controversial flood insurance program in the wake of hurricanes Katrina, Rita and Wilma. The devastating storms plunged the program into a $20 billion-plus deficit and few experts believe the program can recover without a massive overhaul.

In New Jersey, which has one of the nation's worst records on repetitive claims, legislative changes would affect 7,376 structures. The state's 7,376 flood-prone buildings represent less than 4 percent of the 200,000 properties covered by the program but account for more than 50 percent of the claims paid since 1978, amounting to $334.2 million, according to federal data.

Roughly 2,700 of New Jersey's flood-prone structures are on the barrier islands off Atlantic and Cape May counties. About 1,000 are on the flood-prone rivers of the Passaic River basin, mostly in Morris and Passaic counties.

In interviews, residents of these vulnerable neighborhoods say they worry about becoming the focus of debate and argue it would be unfair to punish them for decisions made decades ago when their houses were built.

"What are you going to do, level the houses here?" said Gordon Araujo, a union electrician who moved to the bayside of Ocean City five years ago. "These houses didn't go up in the last 15 years. They've been here since the 1800s."

BLAME GOES AROUND
Critics of coastal development argue a decade-long building boom has put billions of dollars worth of real estate in harm's way. They say New Jersey is overdue for a destructive, catastrophically expensive storm, and they point to the flood insurance program as being responsible.

"These spikes in repetitive damage are created by flood insurance itself," said Tim Dillingham of the American Littoral Society, a coastal environmental group based on Sandy Hook. "It pays people to rebuild in the same spot. It's crazy."

Officials with the flood insurance program, however, point out the worst properties were built decades before the insurance program was created in 1968 -- putting reformers in the politically unpalatable position of forcing people out of their houses.

"We have not had a good nor'easter or tropical storm yet that tests these things," said Jim Fox, emergency management coordinator in West Wildwood. "But the local codes are very, very strict. They should hold up."

Critics like Jeff Tittel of the state Sierra Club aren't impressed.

"The next storm is going to turn those raised buildings into house boats," he said. "We have a misguided belief that we can engineer our way out of disaster. We can't."

BUYING OUT OWNERS
New Jersey passed a $30 million bond for that purpose in 1995, designating $15 million for the Passaic River basin and $15 million for the Shore.

Today, $21 million has been spent, with $9 million banked to buy shorefront properties that lose at least 50 percent of their value in the next big storm.

The $15 million set aside for riverine flooding paid for 125 houses in Wayne, Pompton Lakes, Little Falls, Lincoln Park and Fairfield, but the U.S. Army Corps of Engineers says 800 more structures remain in harm's way. In 1994, it estimated the cost of buying them all at $200 million.

FEMA, meanwhile, has targeted 1,115 New Jersey structures as the most flood-prone. All have had four or more $1,000-plus claims or two or more claims that, together, exceed the current value of the structure.

Only two states, Louisiana and Texas, have more of these "severe repetitive loss" properties.

The corps recently announced plans to buy 135 of the most flood-prone houses in Wayne and Pompton Lakes and hoped to begin purchases earlier this year. But funding all but evaporated after Katrina hit.

Almost all those houses were in Hoffman Grove, a tiny section of Wayne along the Pompton River that was founded as a summer colony a century ago. It remains isolated today, with a 10-foot railroad berm on one side and the river wrapping around the other.

Many residents want the buyout, according to town officials, but in the past they were ineligible because an association owned their land. It has since been subdivided and passed to homeowners.

"We want to provide relief to the residents," said George Holzapfel, Wayne's director of public works. "Many of them want to get out. It floods almost every year. They are trapped out there."

Steve Chambers covers land-use issues. He may be reached at schambers@starledger.com or (973) 392-1674.