Former FEMA director promotes government-industry disaster mediation

Federal and state governments should work with private insurance companies to sponsor disaster mediation programs, according to a former head of the Federal Emergency Management Agency.

James Lee Witt, president of James Lee Witt Associates and FEMA director in the Clinton Administration, said this type of public-private cooperation is necessary so that communities can recover quickly, before individuals who have worked hard all their lives lose everything, before businesses remain closed for good, and before municipalities lose tax revenues needed to pay for police, fire and other key services.

“It’s important that local communities recover much faster than ever before, simply because if you can not get that community back up and running right away, it is devastating,” maintained Witt.

The longer recovery takes, the harder it gets, he added.

He said a FEMA survey done when he was in office found that 25 to 30 percent of the businesses that are affected by a hurricane or similar catastrophe never reopen.

“That’s the heart and soul of the community, that’s the largest employer,” he said. “We are not only losing jobs, we are losing tax revenues.

Witt, who was responsible for FEMA’s last overhaul in 1996, and became the first FEMA head to be elevated to a Cabinet position, was a keynote speaker during the June Florida Association of Insurance Agents Conference

Louisiana an example
The loss of tax revenues due to slow recovery can exacerbate problems, he continued, citing post-Katrina Louisiana as an example.

“FEMA’s program for local and state governments will only refund reimbursable costs, particularly for police, fire, paramedics and city workers, but only overtime, not straight time,” Witt noted. “In a lot of parishes they do not have any revenue; their tax base is gone. In St. Bernard Parish, with 70,000 population they have only one drug store and one grocery store open. The parish president has zero tax revenue coming in. How are they going to pay for their police, fire and teachers?”

Witt urged that the Stafford Act that provides for emergency funds be rewritten . Now if a community has $85 per capita costs it can get federal sharing up to 75 percent, local and state 25 percent. He said the Northridge earthquake was $110 per capita cost; 9/11 in New York was $400 per capita cost, and President Bush gave them 100 percent.

Hurricanes Katrina and Rita, in Louisiana the per capita cost is $6,000 and they gave them a 90/10 cost share.

He asked agents to imagine how Louisiana could match 10 percent of $100 billion when the state lost $1.5 billion in taxable revenue.

Making insurance available
Witt saluted the important role that the insurance industry plays in helping people and communities recover.

“What you do is important, the insurance you sell is important,” Witt said. “We have to make insurance more available, more affordable, with a lower deductible, so we can get more people insured.”

Witt and Admiral James M. Loy are national co-chairs of www.protectingamerica.org, a coalition with the goal to establishing catastrophe funds in each state, and a federal fund as a backstop.

CAT funds inadequate
He pointed out that Florida’s catastrophe fund was almost wiped out after the four hurricanes. In California, the Earthquake Authority has a $6 billion fund.

In 1906, some 6,000 people lost their lives and 225,000 were homeless. The cost in 1906 of that earthquake was $6 billion.

“You know what, if the same earthquake occurred today, with the same intensity, the damages would cost $400 billion,” Witt calculated. “And only one of seven people in California has earthquake insurance because although it is available, it is not affordable with a deductible of $25,000 to $30,000–and the average damage to a home during an earthquake is $25,000.”

Witt said his goal is to open a state-managed catastrophe fund for each state that would be a backstop for what can not be reinsured.

“We need reinsurance and we need insurance,” Witt said, “but take 10 to 20 percent of that fund as it grows each year and make grants to communities for mitigation prevention, public awareness and public education.”

Devastating events
Witt offered that as he has been traveling across Florida, the Gulf coast states and America recently, he has seen more devastating events than have ever been witnessed in the history of the nation. Thus, he pointed out, in today’s world and with the risks, it’s critical to have viable and strong insurance companies.

“We are facing another hurricane season this year that potentially could be as devastating as last year with Katrina and Wilma,” he said. “The storms they forecast could be another $100 billion event. How are we going to survive and recover? How are we going to keep your industry strong and make it viable so people are able to have insurance on their homes and belongings?”

Witt said at FEMA he went through the 1993 Mississippi flood, the 1994 earthquake in California, then in 1995 dealt with the bombing in Oklahoma, and numerous hurricanes, tornadoes and floods.

“In eight years I went to all 50 states and three territories for a disaster declaration,” he said.

He maintained that under his stewardship, FEMA worked closely with local governments and insurers.

“One of the things that we believed in and started at FEMA — and I was at FEMA when people worked–was to put in a mitigation prevention division with a strong base and foundation to work with governments and individuals to identify the risks they faced and start to mitigate that risk.”

He said this approach was cost-effective for government and let insurers do what they do best.

“Our goal was to eliminate the risk, cut the cost to the federal budget and taxpayers and support the insurance industry in a way that would give them an opportunity to do better, because if the industry does better, insurance is more affordable, with a lower deductible.”

Insurance agents are an important part of the solution, he continued, while warning that steps are underway to undermine the role of agents. According to the former federal official, Washington is now thinking about cutting the commission agents make from flood insurance from 33 to 25 percent.

“I told them if they do that, they had better hire some more federal employees because they aren’t going to have anyone to write it for you,” he said.

He maintained that the federal flood insurance program has been spending $200 million a year on repetitive flood claims. Some 10,000 properties have had three or more claims filed over a 10-year period.

This prompted him when he was at FEMA to propose that over a four-year period the government either buy out or elevate these properties on a voluntary basis to eliminate the $200 million annually.

But Congress did not take his advice, despite his pointing out that the government was subsidizing what were for many people secondary and vacation homes.

“One congressman who represents a state on the Gulf coast told me, ‘James Lee, if you go mucking with my fishing camps I’ll have you mounted on that wall.'”

“We can do it for $400 million,” he told Florida agents.

Witt said he saw lots of people who did not have flood insurance hit by Katrina and Rita. “They were even in areas that FEMA told them they didn’t need flood insurance,” he maintained. “Here you are sitting six feet below sea level and FEMA says you don’t need flood insurance. That really makes sense.”

Project Impact
He used the occasion of the Florida gathering to speak about one FEMA project he spearheaded to help mitigate disasters’ effects.

“So in today’s world how do we get people to change? How can we put in better practices?” Witt asked.

He described FEMA’s former Project Impact, a plan for a public and private partnership of businesses and corporations in local communities that helped them minimize their risks during a catastrophe. FEMA had 250 communities participating.

“We had communities join just because they thought it was a good idea,” Witt explained.

“They didn’t want any money, they just liked the concept of building a partnership and doing it themselves.”

He shared a memory from the those days. “I’ll never forget after we left office Seattle, Washington was celebrating its third year anniversary in Project Impact,” he said. “They took it seriously, retrofitting everything, schools, hospitals, nursing homes, low rent housing and bridges.”

On the evening of the anniversary of Project Impact, Seattle had a 7.0 earthquake. The next morning the mayor of Seattle was interviewed on CNN. “Seattle had a major earthquake and you only had one death and it was a heart attack, and very little damages, to what do you attribute this?” the mayor was asked. The answer: Project Impact.

“Guess what, that very same day the government cut that program,” Witt added.

Witt said part of his agency’s strategy was to use disaster costs to increase mitigation funding to state and local governments after a disaster. “We used HUD, CDC dollars and FEMA mitigation dollars. In Missouri alone we were able to buy up 4,000 pieces of property, take that land, put deed restrictions on it and give it back to cities and counties for open green space.”

In 1995 Missouri had another flood and not one dollar was spent on response, he maintained.

Witt said the federal government should focus its energy and money on helping people help themselves by taking the lead in building a partnership to build better, safer communities.

“I don’t want to continue to see people lose their hopes and dreams that they have worked for all their lives,” Witt concluded.

Topics California Florida Catastrophe Agencies Louisiana Flood Hurricane