HARRISBURG - With ghost towns being predicted by some as the end result of the Biggert-Waters Flood Insurance Reform Act of 2012, the state Senate Banking and Insurance and the Environmental Resources and Energy committees held a joint hearing Tuesday to delve into possible solutions for these far-reaching effects.
The hearing, chaired by state Sens. E. Eugene Yaw, R-Loyalsock Township, and Don White, R-Kittanning, welcomed 17 senators from both parties across the state, and they heard testimony from statewide organizations, county officials and residents.
"Without a change to the current law, property owners across Pennsylvania will not be able to afford flood insurance. That's the bottom line," Yaw said.
Statewide organizations’ representatives, county officials and residents testified at a state Senate hearing on flood insurance Tuesday. Shown here are Jersey Shore residents Mike and Lurie Portanova.
With the act's passage, the ringing question is, "What do we do when the rules of the game are completely changed halfway through?" questioned Lycoming County Commissioner Jeff Wheeland.
Fran McJunkin, deputy director of Lycoming County Planning and Community Development, suggested the state create a loan bank from which those hit by soaring flood insurance rates can borrow, and the borrowers would be responsible to pay it back. The concept is important as banks don't always lend if there isn't enough equity, she noted.
This would "help people help themselves," McJunkin said. "It's important that people are responsible for mitigation themselves. This is not a give-away program."
The Federal Emergency Management Agency has a "backwards" system, she said, where it gives help after the damage is done. She advocates a proactive system where homeowners prepare for flooding ahead of time, and the loan bank could assist.
The numbers tell the story: In the last quarter of 2013, there were 17 sales in the county's floodplain, compared to about 50 in 2012's final quarter, McJunkin said. The good news is that nine sold above assessed value - and they had all been mitigated.
Basements are the culprit thanks to FEMA's regulations, as they cause premiums to increase with each foot below the 100-year floodplain, she said.
Jersey Shore residents Lurie and Mike Portanova testified that their annual premiums jumped from about $2,000 to $40,000 - and while they have a basement, there's nothing in it. Their house has historical value and would not be able to be sufficiently mitigated, they said.
Yaw remarked it seems FEMA didn't consider "old buildings built to withstand flooding and basements."
Wheeland said basements could be filled and the higher premium costs negated, but that too comes with a cost, and won't address each situation. He heartily questioned how the severe impacts weren't foreseen before the law's passage.
"The biggest shock came to homeowners and business people who purchased in good faith after July 6, 2012, only to find out the premium quoted upon renewal after Oct. 1, 2012, was 1,000 percent higher than the quote they received at their original closing," Wheeland said. "Barring full repeal of this law, what do we do as community officials? What is the path out for our constituents?"
As Wheeland sits on the board of assessment appeals, he said, "We'll get flooded with appeals."
Muncy resident Jeff Waltman called Biggert-Waters "nothing short of a lemon purchase." His premium jumped from $592 to $9,096 on a $60,000 home, which he calls "now worthless."
Lurie Portanova noted with the Rails to Trails revitalizing the town, they were hoping to invest in Jersey Shore, which is now impossible. "Millions of dollars already have been poured into these Pennsylvania communities, only to end up as ghost towns," she said.
Vince Matteo, president and CEO of the Williamsport/Lycoming Chamber of Commerce, said jobs will be lost along with homes.
"This is Washington's mess, and Washington's got to fix it. But this act has to be repealed, and it has to be repealed now because jobs are going to be affected, businesses are going to be affected," Matteo said.
Dan Berninger, president and CEO of Muncy Bank and Trust Co., said the bank determined about 210 mortgages require flood insurance, and they are mandated to require flood insurance on all loans in the floodplain.
In Muncy, he hasn't seen any sales paid since the law's impact hit. "What's the true resale value on homes nobody's buying?" Berninger asked.
The effects are truly far-reaching, with about 4 million property and business owners nationwide seeing their flood insurance premiums skyrocket on Oct. 1, 2013, as the result of Biggert-Waters.
However, Barry Denk, executive director of the Center for Rural Pennsylvania, pointed out that these high premiums hit rural residents harder due to income gaps, but also because it strikes at the heart of the population "least able to sustain these costs and hits."
Those most affected are the elderly, less financially stable, those with less valuable homes, and in communities where any negative change on the tax base will cause vast ripple effects, Denk said.
Pennsylvania ranks 12th in the nation with more than 73,000 policyholders, and has the nation's seventh-highest number of subsidized policyholders, just under 34,500 or 47 percent. Lycoming County ranks third in the state for the most subsidized policyholders at 1,961, Denk said.
Donald L. Griffin, vice president of Personal Lines at Property Casualty Insurers, suggested that all homeowners in a floodplain should have to carry flood insurance, not just those with a federally backed mortgage, as spreading risk is key, like with car insurance.
Further, Griffin said with 54 percent of homeowners living within 50 miles of a coastline, it creates an unnecessary burden. "We can't always live where we think we should," he said.
Yaw said basically every major population center is near a body of water. "It used to be people paid their own way or moved. Somewhere along the way, we said we can live along the water and fix it for them," Yaw said. "... This may impact the way we live" with a lifestyle and societal shift.
However, Berninger noted, "Living near water isn't just a lifestyle choice - that's where commerce has always taken place."
With all the testimony adding to the picture, yet showing the issue's depth of complexity, Yaw said, "I'm not sure what the solution is, quite frankly."
The state Senate will have follow-up hearings on some of the issues brought to light at this hearing, Yaw said.