- The Washington Times - Monday, January 1, 2007

The federal flood-insurance program may be going broke after incurring $20 billion in debt from storms such as Hurricane Katrina. Still, politicians want to extend the taxpayer-subsidized coverage for some of the riskiest — and potentially most valuable — properties in the country.

Congress passed two bills carving out exceptions to a law enacted two decades ago to phase out federal spending that might encourage development in environmentally sensitive and disaster-prone areas.

One of the bills benefited Jekyll Island, a vacation spot off Georgia’s coast that is poised for redevelopment. The other helped a mostly undeveloped 10-lot subdivision on Florida’s Gulf Coast.

Similar proposals are pending. After seeing the success of the Georgia and Florida bills last year, property owners in Alabama, Texas and elsewhere are lobbying for their own continued coverage.

“You only have to look at 300 miles of Katrina and Rita wasteland to see that bankrolling federal flood insurance in high-risk areas is just asking the American taxpayer to flush money down the toilet,” said Oliver Houck, director of the environmental law program at Tulane University in New Orleans. “If people want to build out there, that’s one thing. But to build out there with federal support is insane.”

The debate involves a Reagan-era environmental law called the Coastal Barrier Resources Act that was hailed as a free-market approach to conservation. Instead of restricting where private landowners could build, the law, nicknamed Cobra, mandated that the government not subsidize such construction, whether through flood insurance, roads or otherwise.

However, Congress has chipped away at the covered territory, often in response to wealthy property owners who argue that they were included mistakenly. Lawmakers have redrawn Cobra maps more than 40 times in the past 15 years, according to the U.S. Fish and Wildlife Service, which oversees the maps.

At least four other bills stalled last year, and Fish and Wildlife officials say they have received more than 20 other requests for changes.

Even critics say that mapping corrections sometimes are warranted and that the two exemptions approved last year are hardly a blip in the federal flood portfolio, which carries 5.4 million policies and recently eclipsed $1 trillion in coverage. But they say Congress’ continued willingness to extend coverage is alarming, particularly in the hindsight of Katrina.

“The underlying principle is that every time Cobra runs up against individual interests, it’s always Cobra that loses,” said Steve Ellis, vice president of the watchdog group Taxpayers for Common Sense.

Federal subsidies have put the system in need of a taxpayer bailout. The program owes the Treasury $20 billion, but takes in just $2 billion a year in premiums. More than a third of that, nearly $720 million a year, is eaten up by interest on the debt.

Congress has wrestled with reforming the system by raising premiums and placing new requirements on homeowners, but lawmakers adjourned last year without acting.

Instead, the two Cobra bills that were passed added hundreds of high-risk properties and paved the way for new construction on vulnerable land.

Six of the 10 lots exempted in the Grayton Beach, Fla., bill are vacant, owned by out-of-state investors. About two-thirds of the 600-plus houses on Jekyll Island are vacation homes, and state officials are reviewing sweeping proposals for new construction on the island.

In both cases, owners insist that their properties were included mistakenly in Cobra maps after being mixed up with adjacent or overlapping state parks.

In April, Grayton Beach resident Cynthia Turner told a congressional panel that she and her fellow property owners could go “permanently homeless” if the insurance stopped.

“It is an outrage … all because they erroneously said this was part of Grayton Beach State Park?” she said. “I’m a middle-class homeowner.”

Cobra backers point out that structures were visible on maps that Congress adopted and that lawmakers knew existing houses would be included. Under Cobra, such homeowners are entitled to keep federal insurance unless they file claims costing more than 50 percent of the property value or if they substantially improve or expand their homes.

Critics question whether “middle-class” homeowners are in jeopardy. For example, one Memphis, Tenn., family that owns three of the vacant lots covered by the Grayton Beach bill also owns millions of dollars in nearby property. As for Mrs. Turner, she and her husband also own a vacant lot about a half mile away from their house valued at $675,000 by the county tax office.

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