The cost of flood insurance will shoot up this year as a federal law that changed the program takes effect. That’s bad news for post-disaster villages like Schoharie, where officials are still trying to refill storefronts wiped out after tropical storms Irene and Lee. And it’s added pressure for homeowners and businesses still struggling to rebuild.
Jim Cooke, who opened the Village Hardware on Main Street in Schoharie after Irene swamped the village, said business remains a struggle. Higher flood insurance rates just add another hurdle, he said. Business activity remains slow, as does the pace at which residents and consumers return to the village.
Cooke said he’s already facing hefty credit card bills since rebuilding and restocking the store.
“If I didn’t have three apartments up above here to support the building, or if I had to rent the storefront, this would’ve never happened,” Cooke said.
He’s still trying to iron out flood insurance with an agent and he’s being told different parts of the building are in either a 500-year or 100-year flood zone.
The new flood insurance rates are part of the Biggert-Waters Flood Insurance Reform Act of 2012, which calls for rates to rise by 25 percent each year until they reflect “full risk rates,” as an effort to ensure sufficient money is available to pay claims after disasters.
The act, signed into law by President Barack Obama last summer, began hitting rates Jan. 1 for non-primary residences with flood insurance. Business and other properties will begin seeing increases in premiums later this year.
Several factors in the new the law will also prompt changes in rates, including change of ownership and a lapse in insurance coverage.
The national flood insurance website, www.floodsmart.gov, provides a search function that includes estimates of the cost of flood insurance. A quick search by address shows properties on Main Street in the villages of both Schoharie and Middleburgh as “high-risk” because of their proximity to the volatile Schoharie Creek.
The cost varies for insurance premiums, but rough estimates for coverage in a moderate- to low-risk area show an annual premium covering both building and contents can range from $641 to $1,014. In that area, a $500,000/$500,000 policy for a business property is estimated at between $2,878 and $4,805.
In a high-risk area like Schoharie and Middleburgh, that same coverage — $500,000 for building and $500,000 for contents — can cost as much as $13,743 each year.
At the Harva Co., a plastics fabrication company that is the village of Schoharie’s biggest employer, president Susan McGiver said flood insurance now costs $2,878. For her home down the road, it’s nearly double that: $5,294.
Since the company took on a Small Business Administration loan, all the properties are required to have flood insurance.
McGiver said the company hasn’t finished repairing damages from Tropical Storm Irene, so an anticipated insurance rate increase of 25 percent annually is particularly troubling.
“It would be a very difficult thing on top of everything else. We have an extra million worth of debt that we did not have before the flood,” said McGiver, who estimates the company suffered $2 million in damage.
“We have a lot of work to do as far as the front part of the building is concerned. We’re still feeling the effects of it and probably will for a long time.”
Middleburgh Mayor Matthew Avitabile said via email that increasing flood insurance rates will add to the difficulties Main Street businesses are facing.
“The lower real estate values in the flooded areas may seem attractive to new home buyers or potential businesses. However, having to fix the buildings and provide flood insurance is making people nervous,” Avitabile said.
The town of Esperance is among only 28 municipalities in New York State that take advantage of the federal government’s Community Rating System program.
The CRS provides localities with steps they can take to improve flood-readiness and minimize flooding threats, and in return community members get a discount in insurance rates.
The steps come in four categories: public information, mapping and regulations, flood damage reduction and flood preparedness, according to FEMA.
Participating municipalities get points for actions such as sending out information to residents about flood hazards and protection measures.
Developing regulations that require potential buyers to be notified of properties in special flood hazard areas and updating flood hazard mitigation plans are among other qualifying actions.
Esperance joined in 2010 and early stage work so far yields residents and businesses in the town with a 5 percent discount on flood insurance premiums.
“It benefits the town’s people,” Esperance Supervisor Earl Van Wormer III said. “It doesn’t seem like a lot, about $5 for every $100. If the premium is $1,600, you save eighty bucks. Eighty bucks is eighty bucks,” Van Wormer said.
And with rates on the increase, he said the program is valuable.
Esperance took several steps over the past two years to maintain the discount. The town has to provide flood risk information to those who inquire about building in a flood plain, and create a brochure detailing information about requirements to do so.
Information is also sent out to all property owners in flood hazard areas to inform them of the availability of the discount, and all the activity related to it has to be logged. Certificates of elevation, which record structures built above the flood levels, have to be maintained on file, and the town has a process to issue permits for activities in the flood plain.
Some town land was also turned into fishing access sites — minimizing the risk and liability involved in building in a flood plain.
Van Wormer said the town is exploring ways to improve its rating, which could entail additional training for town employees and officials.
Interest in the program has been growing recently, as it typically does in the wake of major storms like Hurricane Sandy, according to Crystal Tramunti, CRS program coordinator for FEMA Region 2.
She said the program serves as one of the few means by which localities can shave off some of the increasing cost of flood insurance.
“I think the CRS program itself is going to be the best way for the community to go above and beyond on their end because of the rising cost of insurance,” she said. “The main benefit, the point of the program, is it improves your flood protection.”
Municipalities can opt into the program twice a year, in May and October. The process begins with a municipal CEO sending a letter and asking for a Community Assistance Visit, Tramunti said.
Prospective municipalities are evaluated to ensure they meet minimum standards and then a plan is put in place to go beyond the minimum. New York state communities already have some credits because the state has an active Dam Safety Program.
And some steps to add points are just plain easy. “One could be putting brochures in the local library. That gets you points,” Tramunti said. “It’s a way to counterbalance the increases we know are going to happen.”
More information about the program can be found on the FEMA website at www.fema.gov.