Hurricane Sandy's Wake-Up Call

By Edward Lynch

On October 29, 2012, coastal communities in the Northeast were preparing for the onslaught of Hurricane Sandy. It came, but about two and a half hours before landfall, Sandy was technically no longer a hurricane. It had been reclassified to "post-tropical cyclone." Whatever the meteorologists called it, Sandy caused more than 100 deaths and damages greater than $60 billion, which, after Hurricane Katrina in Louisiana, represented the second costliest hurricane in U.S. history.

Now that more than two years have passed, it's time to ask how well regional recovery is progressing and whether those doing the rebuilding are taking a tougher stance toward resiliency. Planners may also be looking for lessons that might suggest national policy changes.

Recovery progress, Sandy versus Katrina

If current Federal Emergency Management Agency staffing levels are used as a metric, the Sandy response appears to have been quicker than the Katrina response. In mid-December 2014, the field offices set up by FEMA for Katrina recovery (more than $120 billion in damages) still had more than 300 employees almost 10 years after the event (2005), while FEMA's field offices in New York and New Jersey were operating with only 60 more individuals.

Federal, state, and local governments can be credited with a quick and focused response to Sandy, although a great deal of challenging work remains to be done to complete hundreds of infrastructure projects and to relieve the suffering of displaced and unsettled victims.

FEMA and the U.S. Department of Housing and Development, two federal agencies responsible for distributing some of the largest post-Sandy monetary appropriations, have developed a closer working relationship since 2005. Although congressional politics delayed votes on the Disaster Relief Appropriation Act of 2013 by almost three months, the Act did establish firm deadlines for federal agencies to distribute funds to the impacted states and other government beneficiaries.

Division B of the 2013 Act (also known as the Sandy Recovery Improvement Act of 2013) established guidance for streamlining procedures to satisfy environmental and historic preservation reviews. It created the legal authority to use alternative procedures for distributing public assistance — FEMA's primary source of grants for repairing local government facilities and infrastructure. Most of the eligible public assistance projects in the FEMA pipeline are being considered for the alternative procedures program, called Section 428, which allows fixed-amount settlements mutually agreed to by FEMA and the grantee — instead of relying on a FEMA-calculated reimbursement budget, as in the past.

New York and New Jersey quickly learned the often complex and evolving rules of federal government engagement in disaster recovery. Both states now have policies and programs in place to address housing and infrastructure losses. However, they have come to realize that the Disaster Relief Appropriation Act will fund substantial but not all recovery needs.

New York City, which received its own $3 billion HUD appropriation (separate from New York State's), produced a first-class policy document within eight months of Sandy's landfall: A Stronger, More Resilient New York. It contains a thorough analysis of storm impacts with well-reasoned recovery and resiliency recommendations. Commonly known as the SIRR report (for Special Initiative for Recovery and Resiliency), it set a high standard for recovery initiatives and challenged mainstream thinking about how to rebuild resiliently.

The SIRR analysis concluded that, in New York City, most Sandy-related damages were nonstructural in nature, largely due to flooding of building systems and equipment (including electrical, sanitary, and life-safety systems) located on ground floors or below. Infrastructure and utilities, being predominantly at grade or underground, were also severely impacted.

Although the New York region continues to suffer from a severe housing shortage, especially of low- and moderate-income units, an innovative program introduced by the administration of former New York City Mayor Michael Bloomberg with FEMA approval, called Rapid Repairs, provided immediate resources to keep many residents in place while other building repairs could be considered. Within 120 days of the storm. Rapid Repairs provided critical heat, hot water, and power systems to about 70 percent of the 20,000 flooded, but not excessively damaged, homes were in the application pool.

According to a Wall Street Journal interview with Cas Holloway, the former deputy mayor of New York City, "No city (or any other federal or local recovery effort) has invested as much funding in as many homes as quickly as New York City did after Hurricane Sandy. As a result, most families impacted by the storm were able to avoid the long-term temporary housing problems that have been a fixture of other recovery efforts."

Volunteers helped, too. New York City's large network of leaders, benefactors, and individuals immediately became engaged and continue to provide nongovernment assistance. In fact, much of the Sandy-impacted coastal region benefited from its physical proximity to other large population centers in the Boston–Washington corridor. The assistance of these volunteers and benefactors facilitated an earlier response and rebuilding of the coastal areas than in the Gulf region.

Resilient recovery

In some ways, Sandy represented for New York City a "perfect storm" of converging and challenging conditions: First, Sandy was an immediate wake-up call about climate change, sea-level rise, and potential flood impacts on low-lying coastal areas, because the storm's impacts were so broad and unexpected. In introducing the SIRR report, Mayor Bloomberg acknowledged that rising sea levels and ocean temperatures could mean that, by the 2050s, a storm similar to Sandy might result in $90 billion in losses (in current dollars) — more than four times the $19 billion of estimated losses that Sandy caused within the city.

Preliminary Work Maps developed by FEMA after Sandy predicted that more than 67,000 buildings would be located within the amended 100-year floodplain. That number was nearly twice the number of buildings located by the Flood Insurance Rate Maps adopted by New York City in 1983. After two years of public review, the PMWs will become the new FIRMs. Neither type of map may take sea-level rise into account because sea-level rise is a projection, not historical fact. According to the SIRR report, however, more than 88,000 buildings could be sitting in the city's floodplain by 2020, if high-end projections for sea-level rise materialize.

Second, in contributing to the "perfect storm" scenario, the Biggert-Waters Flood Insurance Reform Act adopted by Congress in 2012 included provisions that would trigger an enormous post-Sandy financial blow to many home owners who had been enjoying federal flood insurance subsidies or who were located in areas that were excluded from the 1983 FIRM Maps.

Implementation of full risk rates for properties affected by FEMA map changes had originally been scheduled to kick in by late 2014. The act removed subsidies for newly purchased properties, properties where National Flood Insurance Protection coverage was deliberately allowed to lapse, repetitive loss properties, businesses, and nonprimary residences.

However, in March 2014, reacting to various pressures, Congress modified the Act. It agreed to stagger the implementation schedule of the National Flood Insurance Program for certain properties, to allow insurance premiums for participating properties to increase more gradually to full actuarial rates over a five-year period. That was welcome news for storm-
impacted home owners who had borrowed money or dipped into savings to repair properties or to pay for alternate temporary housing (or job loss) and who consequently might be unable to carry another significant housing maintenance cost.

The "grandfathering" provision enabled properties that were mapped into higher risk A and V zones on amended flood maps to retain rights to the former, subsidized rates. FEMA estimated that roughly 20 percent of all policyholders in the program had been paying subsidized rates. For some properties, these rates are significantly lower than the actuarial rates.

The SIRR report warned that the Biggert-Waters Flood Insurance Map Act may be particularly severe for New York policyholders who occupy buildings constructed before the city adopted the FIRMs of 1983 and who earlier were entitled to heavily subsidized premiums. The report estimated that about 75 percent of the nearly 26,000 NFIP policies in effect during Sandy were eligible for these lower rates.

Amendments approved by Congress in March 2014 did not totally eliminate insurance premium increases. Property owners within the expanded 100-year floodplain are required to buy flood insurance if they have a mortgage that is federally backed or issued by a federally regulated lending institution. Also, a property owner who received a Small Business Administration loan to repair damaged residential or commercial property must maintain flood insurance during the life of the loan.

When full actuarial rates become effective, property owners who have not elevated their properties may be faced with insurance premiums that may rival home mortgages.

A third consideration was that Sandy's damages were concentrated in built-up coastal areas that are physically unlike those of hurricane-prone southern coastal communities, whose recovery needs had historically guided much of FEMA and NFIP policy. Much of FEMA's original messaging to Sandy survivors reflected those precedents.

The June 2013 SIRR analysis and research published in June 2014 by the Furman Center for Real Estate and Public Policy (of New York University) suggested that NFIP policies are unsympathetic to building conditions in New York or other older northeastern coastal cities. It offers almost no financial incentives for residential property owners who make mitigation investments to protect buildings from future flood damage, for example by raising HVAC systems and electrical systems — but not the structures — above the base flood elevation. Such steps effectively lower the risk of damage and reduce the insurer's potential losses.

The SIRR and Furman Center reports argued that raising buildings above the BFE may be a reasonable option for smaller, detached wood-frame structures but cannot easily be accomplished in older, densely populated neighborhoods. New York City, Boston, Philadelphia, Baltimore, Washington, Providence, Hoboken, and Jersey City all have filled-in waterfront areas that commonly contain large industrial buildings.

Building lots in these older cities typically are narrow and irregular, with side-wall-attached (row) structures that may be in fee-simple or common ownership, extensive older masonry construction, and large apartment structures. The SIRR report estimated that in New York City, about 26,300 buildings in the newly expanded FIRM-mapped areas have characteristics or site conditions that would make elevation enormously challenging or impossible.

The SIRR report argued that it may be feasible to vacate underground and ground floor space in some lower density areas. However, in parts of New York City, because of high real estate costs, the abandonment or filling in of ground floor and underground space would result in significant economic losses to property owners.

The report further postulated that greater flood protection in built-up areas would pose urban design challenges — both for building retrofitting and new construction. Elevating structures or providing permanent flood walls could interfere with the connectivity between the first floor of a building and the public sidewalk, creating inaccessible entranceways and streetscapes that are not pedestrian-friendly. Therefore, traditional flood-protection methods were considered inappropriate for many New York City mixed use neighborhoods. It was argued that traditional FEMA-recommended flood mitigation methods could undermine the vitality of street life and destroy neighborhoods.

The 2014 Furman Center research also concluded that, for many rent-subsidized apartment buildings, the removal of basement and ground floor dwelling units (or the reduction of living space to accommodate relocated HVAC and electrical systems) could jeopardize the buildings' financial solvency. Many of these rent-subsidized or rent-controlled buildings have legal restrictions that prevent property owners from increasing rents to cover improvements. The Furman Center estimates that "there are as many as 87,000 first floor units in multifamily rental buildings in the 100-year floodplain in New York."

In considering cost-effective and resilient ways to rebuild damaged infrastructure and buildings, the SIRR report drew heavily on research and findings from the Department of City Planning's "Urban Waterfront Adaptive Strategies" study, which had been funded by a HUD Sustainable Communities Regional Planning grant.

The pioneering UWAS study, issued in June 2013, provided an analytically rigorous approach for targeting coastal resiliency best practices with the needs of distinctive flood-prone city neighborhoods.

Vulnerabilities and resiliency

The UWAS research suggested that optimum coastal protection solutions would involve an integrated and multilayered system approach. That approach would diversify infrastructure resiliency and reduce the possibility of a catastrophic failure resulting from dependence on a single engineering solution, as occurred in New Orleans during Katrina, when the levees, the city's main flood defense, failed.

The SIRR report argued that an integrated system approach is scalable to available financial resources and would allow infrastructure recommendations to be implemented quickly. The alternative is to wait years for a solution that might never obtain the permits or resources needed for construction. As the UWAS study made clear, different coastal areas are exposed to different risks and require protection that is tailored to their specific needs.

Coastal protection strategies

SIRR suggested that it would be impractical to retreat from the coast, except in limited circumstances. Instead, SIRR recommendations focused on the following three strategies:

• Increase the height of vulnerable coastal edges with bulkheads, beach nourishment, and other measures and focus improvements on wave attenuation — knocking down waves, or diminishing their velocity — before they reach neighborhoods.
• Use flood protection structures, such as floodwalls, levees, and local storm surge barriers built, where possible, to the 100-year flood elevation with an additional allowance for future sea-level rise.
• Study how natural areas and open spaces can be used to protect adjacent neighborhoods and maintain neighborhood quality of life.

The SIRR report and subsequent funding proposals emphasized infrastructure resiliency improvements. Still, the city quickly realized that federal funds offered in the Disaster Relief Appropriation Act of 2013 were inadequate and that it would have to count on the private sector and its own resources to achieve more resilient protection.

After Mayor Bill de Blasio took office at the beginning of 2014, he acknowledged that, in terms of the city's response to the long-term housing needs of Sandy victims, major problems existed and he promised to streamline the approval process. Even so, it took until the summer of 2014 before the city was able to get HUD funds into the hands of storm victims whose improvements fell outside the limits of the "Rapid Repairs" pilot program.

Insurance issues

When discussing long-term sustainability, the 800-pound gorilla in the room may be the insurance industry, which continually reassesses its risks and will pass on financial risks to property owners in the form of actuarial flood insurance premiums when subsidies phase out in 2019, through gradual rate increases allowed by the Homeowner Flood Insurance Affordability Act of 2014. If annual premiums are excessively high for non-elevated properties, neighborhoods and businesses may suffer serious disinvestment and decline.

Swiss Re, a $28 billion reinsurer, buys portions of risk portfolios from the traditional home insurance companies that underwrite retail insurance coverage. In early September 2014, Swiss Re modeled the great Norfolk and Long Island Hurricane of 1821 using current New York City data to calculate the potential impacts of a similar storm. It concluded the result might be $100 billion in property losses, comparable to the amount Mayor Bloomberg had estimated in his introduction to the SIRR report.

Swiss Re had worked closely with New York City in 2013, using climate change and sea-level rise scenarios to estimate potential economic losses. In that way, the company provided local officials with an independent, market-based estimate of the city's hurricane risk and cost-benefit data to apply to resiliency measures being considered by the SIRR.

While providing legal authority for the phased-in transition to full actuarial rates, Sections 14 and 26 of the Homeowner Flood Insurance Act of 2014 also required that FEMA study alternative mitigation strategies and incorporate new guidelines into its flood insurance regulations.

Traditionally an "elevation certificate," produced under rigorous FEMA requirements, confirms the base floor building elevation in reference to FIRM flood levels. The survey-precise elevation certificate is accepted by local building officials and insurance companies. Currently, there is no nationally accepted certificate that recognizes limited flood mitigation improvements, such as can be made to HVAC systems, or that confirms the elevation of those multiple improvements relative to FIRM maps. Without such documentation, the insurer is at risk of offering inappropriate credits on flood insurance and the property owner is unable to get credit for mitigation investments.

In the future, states may have to help limit financial risks of private insurance companies, in the same way the federal government has been subsidizing policies. In Florida, after Hurricane Andrew caused severe damage in 1992, a state-run insurer of last resort was created to provide affordable coverage to home owners and businesses. Citizens Property Insurance Company is Florida's largest property insurer, but many experts believe its reserves would be inadequate to pay claims in the event of another major disaster.

More lessons

Sandy was a wake-up call to coastal communities in the U.S., where almost 40 percent of the population lives. The storm has triggered debates about climate change and sea-level rise and about the best infrastructure practices to protect cities from future storms. And it has challenged the federal government to reassess its policies and programs in responding to disasters.

Among the lessons: Government funds probably may not suffice to rebuild public infrastructure and provide adequate protection from sea-level rise. Integrated and multilayered solutions will be needed. The insurance industry will play a major role in attracting private property investment and achieving long-term sustainability in coastal areas. Federal and state partners will need to work closely with private insurers to reassess policies and practices, especially to find ways to recognize and certify limited mitigation improvements that might reduce flood insurance settlements.

As a result of rigorous analysis and creative thinking that occurred after the storm, Sandy has changed the game in terms of hurricane response, recovery, and resiliency initiatives.

Edward Lynch is the former planning director of two New York coastal cities impacted by Sandy (New Rochelle and Newburgh). For two years, he was a senior planner and analyst for FEMA on recovery and resiliency initiatives.

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Resources

Image: Fifteen million gallons of seawater destroyed New York City's state-of-the-art South Ferry subway station complex. In December 2014, the Metropolitan Transportation Authority awarded a $194 million contract to rebuild and floodproof the station. Completion is expected in 2017. Photo by Hiroko Masuike/The New York Times.

This time-lapse video shows the evolution of Hurricane Sandy on the day it hit: www.youtube.com/watch?v=t9XAAw5nFes

A Stronger, More Resilient New York, June 2013, NYC Special Initiative for Recovery and Resiliency (SIRR): www.nyc.gov/html/sirr

NYC Department of City Planning, "Urban Waterfront Adaptive Strategies": www.nyc.gov/html/dcp/html/sustainable_communities/sustain_com7.shtml

Furman Center for Real Estate and Public Policy, "The Price of Resilience: Can Multifamily Afford to Adapt?" June 2014: http://furmancenter.org/thestoop/entry/the-price-of-resilience-can-multi-family-housing-afford-to-adapt