Return to Home Page Follow us on Twitter Follow us on Facebook Follow us on Instagram Follow us on Youtube

BLOGS

SANDY’S FIRST BIRTHDAY—IS IT A HAPPY ONE? October 2013

SANDY’S FIRST BIRTHDAY—IS IT A HAPPY ONE?

By James W. Fossett


James W. Fossett

October 29 is the first anniversary of the landfall of Superstorm Sandy. Sandy was the second costliest hurricane in American history, inflicting damage estimated at close to $70 billion. It caused an estimated 159 casualties, damaged or destroyed an estimated 650,000 homes, left 8.5 million customers without power, took 25 percent of cell sites in the affected area out of service, caused widespread disruptions of gasoline and diesel fuel supplies, flooded eight major tunnels in the New York subway, and did widespread damage to transportation systems and other infrastructure.[1] A year after Sandy hit, it’s worth asking how well federal, state, and local government efforts to help the region recover from the storm are proceeding.



Email a Friend

Bookmark and Share
James W. Fossett is a senior fellow at the Rockefeller Institute and associate professor of public administration and public health at the Rockefeller College of Public Affairs and Policy, University at Albany.

While the record’s not the same everywhere, a fair verdict on government’s overall performance in expediting recovery to date has to be somewhere in the vicinity of “mixed.” The recovery is far from complete— there are plenty of people still living in motels or other temporary housing, waiting for insurance settlements or government assistance. Physical evidence of the damage from the storm is still plentiful and easy to find. Significant numbers of businesses have not reopened, and evidence from past storms suggests many are not likely to ever do so. Programs already in place managed by the Federal Emergency Management Agency (FEMA) have made significant payments for individual assistance, flood insurance, and clean-up. Payments for the repair or replacement of public facilities are proceeding at a more rapid rate than earlier disasters. Programs that weren’t funded until the Sandy relief bill was signed in late January are not as far along. The state and federal governments have done well in getting funding allocated and programs approved, but the procedures for actually distributing assistance to homeowners and businesses are complex and cumbersome, and the flow of money to date has been limited.

The initial response and short term recovery efforts clearly went more smoothly for Sandy than for many earlier large scale efforts such as that after Hurricane Katrina in 2005. FEMA deployed large numbers of personnel to the affected area and processed some 450,000 applications for individual assistance within four weeks.[2] FEMA obligated in excess of $3.4 billion for Sandy, mostly for individual assistance and initial clean-up expenses within 3 months of landfall.[3] In a major policy change, FEMA allowed local governments to charge “straight time” for clean-up work done by their own employees for a period of a month to encourage rapid clean-up. Previous policy had limited FEMA reimbursement for local workers to overtime. Through the end of August, 2013, the most recent figures that are available, FEMA estimates that it has obligated slightly more than $6 billion, and spent more than $4.2 billion on Sandy related expenditures.[4] As of July 31, 2013, FEMA’s National Flood Insurance Program (NFIP) had paid over 127,000 claims amounting to $7.2 billion,[5] although there have been complaints of uneven performance among the several insurance companies that manage the claims process and significant mistakes made by inexperienced adjustors.[6] NFIP has just granted a six-month extension of the time period for homeowners to file claims, allowing for those who have not previously filed or have discovered damage beyond the initial estimate additional time to do so.

It is harder to gauge the progress of spending under FEMA’s programs which support the repair or replacement of facilities such as public buildings, sewers, roads, hospitals, parks, and museums (referred to as “permanent work” in FEMA jargon). FEMA’s process for allocating these funds has historically required a detailed up-front review of storm damage and repair or replacements cost for each of a large number of individual projects of widely varying sizes. Negotiations over these issues can be contentious and lengthy for particular projects, of which there can be a sizeable number—for Hurricane Irene, which was a considerably smaller storm than Sandy, there were approximately 15,000 and there will doubtless be significantly more for Sandy. For most projects, governments have been required to lay out their own funds to pay for renovation or reconstruction and are not reimbursed by FEMA until the project is complete.

After Sandy, FEMA adopted procedural changes intended to expedite the process of project approval, lessen documentation requirements, and reimburse governments for their costs as the project is underway rather than waiting until the project is complete. These “progress payments” lessen the pressure on local governments’ cash flow by reimbursing them faster. Taken together, these changes may have speeded up the flow of funds by making it possible for work to proceed more rapidly than in earlier storms such as Katrina and Irene. Since April 2013, FEMA has averaged over $400 million in new obligations per month for Sandy related projects, suggesting that work is well under way, if not concluded. Construction employment in New York, New Jersey, and Connecticut has increased over pre-Sandy levels, suggesting further that the flow of funds is well under way.[7]

Conflicts have surfaced in both New York and New Jersey around FEMA’s National Flood Insurance Program (NFIP), which insures some homeowners against flood loss or damage. NFIP coverage is available for homeowners in flood plains, with premiums varying according to the risk of the area for flooding damage. The program has been under attack for years for the large subsidies it provides for some significant classes of property and has been carrying a $20 billion deficit incurred as a result of Hurricane Katrina. To address these issues, Congress enacted the Biggert-Waters Act in 2012, which ended subsidized premiums for certain classes of property and provided for substantial premium increases of up to 20 percent a year.[8] After Sandy, FEMA issued revised flood plain maps which significantly increased the number of people living in the highest risk areas. Many homeowners in these areas were faced with the necessity of incurring considerable outlays to raise their houses above the flood level or face increases in flood insurance premiums up to as much as $30,000. Not surprisingly, these homeowners and their elected representatives protested vociferously. FEMA issued further revisions which significantly reduced the population living in the highest risk areas, but conflict persists over the premium increases and the revised maps, which won’t be finalized until sometime in 2014.

The Small Business Administration (SBA), which is a major source of loans for home repair as well as for small businesses, appears to have done less well in getting funds dispersed in a timely manner. SBA increased staffing significantly in the areas affected by Sandy, but experienced a very large volume of loan applications and accumulated a considerable backlog, resulting in delays in processing loans. Average processing times for homeowners and businesses were almost triple those for Hurricanes Ike and Irene.[9] There have been further delays in disbursing funds once loans have been approved, so that as of October 2013, SBA had disbursed only about 24 percent of the $2.4 billion in home repair and business loans that had been approved.[10]

Spending by other federal agencies got off to a slower start because of conflict in Congress, particularly the Republican controlled House of Representatives, over the Obama Administration’s $60 billion emergency appropriations request for Sandy relief.[11] The final Sandy relief bill wasn’t passed by Congress and signed by President Obama until January 29, 2013, a full three months after Sandy’s landfall.

Subsequent movement by federal and state agencies to get programs and administrative procedures in place to address the needs of hard-hit homeowners, businesses and communities has been rapid, particularly given many of the programs and procedures have had to be devised from scratch. President Obama vested responsibility for overseeing the federal response to Sandy in a Hurricane Sandy Rebuilding Task Force, chaired by the Secretary of Housing and Urban Development (HUD). The largest part of the funds in the Sandy relief bill—some $17 billion—comes not from FEMA, but from the Community Development Block Grant (CDBG), administered by HUD. CDBG is extremely popular with mayors and governors because it can be used for a wide range of purposes, including the local share of FEMA supported projects and facility upgrades or relocation which FEMA funds do not cover. Large amounts of CDBG funds have previously been used for disaster recovery after Hurricane Katrina and the terrorist attacks on 9/11 and smaller amounts have been used to support recoveries from smaller disasters.

Federal and state agencies moved rather rapidly to make initial allocations of these funds and develop plans for their use. HUD announced initial allocations of some $5.4 billion in CDBG funds to New York City, New Jersey, and the state of New York within 10 days of the Sandy relief bill being signed. These jurisdictions developed detailed plans documenting the storm’s damage and proposing detailed plans for using funds. These plans for all three jurisdictions were approved by HUD by late April or early May 2013—an impressive performance, given that many program components in all three places had to be devised from scratch by local housing and economic development agencies with little experience in disaster recovery and minimal experience with FEMA’s rules and procedures.

Progress in spending funds once programs are put in place has been considerably slower. Flood insurance penetration is extremely low in the Northeast. Estimates by Resources for the Future and the Wharton School indicate that NFIP “take up” rates in many New York, New Jersey, and Connecticut ZIP codes affected by Sandy were below 15 percent.[12] There thus would appear to be significant numbers of potential applications from homeowners who have been compelled to continue to make mortgage payments, pay for repairs to their damaged dwellings, and pay for alternate housing while repairs are being made. While all three jurisdictions will reimburse homeowners for out of pocket repairs, there have been few payments made to date. As of the end of August, 2013, only about $130 million of the $5.4 billion approved in CDBG funds has been spent. States were required to establish lengthy and complex application procedures to prevent fraud and duplication of benefits between CDBG funds, FEMA, and private insurance proceeds which impose a considerable burden on applicants. Individual projects may also be subject to environmental, historical and procurement reviews, a process which was interrupted by the recently ended shutdown of the federal government.

The recovery from Superstorm Sandy at the first anniversary of landfall, in short, is still very much a work in progress and likely will be for some time to come. Government’s performance in the recovery has been uneven. FEMA has performed better in getting money allocated and spent than in earlier recoveries, while SBA appears to have done worse. Federal and state governments have done well in allocating funds and getting programs established after Congressional delays in enacting the Sandy relief bill, but the procedures put in place to provide funds to individual homeowners and businesses are complex and little money has been spent to date. Funding flows are widely expected to pick up over the next year for many programs that have been slow to get going, so hopefully things will look significantly better by Sandy’s second birthday.

[1] Hurricane Sandy Rebuilding Task Force, Hurricane Sandy Rebuilding Strategy (August 2013), pp. 22-23

[2] Hurricane Sandy Rebuilding Strategy, p30.

[3] FEMA, Disaster Relief Fund: Monthly Report Through August 31, 2013. Appendix B: Disaster Relief Fund Estimated Monthly Obligations FY 2013.

[4] FEMA, Monthly Report, p.15.

[5] FEMA, “Significant Flood Events” http://www.fema.gov/significant-flood-events.

[6] “FEMA Data Suggests Some Insurers Handling NIP Claims Faster Than Others” Insurance Journal (February 17, 2013); on-line at http://www.insurancejournal.com/news/east/2013/02/17/281517.htm; and Associated Press “Many Hurricane Sandy Victims Getting Shortchanged on Flood Insurance” Daily Finance Investor Center (October 13, 2013): on-line at http://www.dailyfinance.com/2013/10/20/hurricane-sandy-victims-shortchanged-flood-insurance/?a_dgi=aolshare_email.

[7] Seasonally adjusted construction employment in New York increased from 309,000 in August 2012 to 320,000 in August 2013, an increase of 4%. Comparable percentage increases for New Jersey were 3.5% and for Connecticut, 7.7%. Bureau Of Labor Statistics, “Table 5: Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted”http://www.bls.gov/news.release/laus.t05.htm

[8] Rawle O. King, “The National Flood Insurance Program: Status and Remaining Issues for Congress” (Congressional Research Service (February, 2013) On-line at http://www.fas.org/sgp/crs/misc/R42850.pdf

[9] “Despite Reforms, SBA’s Sandy Response Lags” A Report prepared by the Democrats of the House Committee on Small Business, May 2013.

[10] Patrick Clark, “Tallying Disaster Loans One Year After Hurricane Sandy” Bloomberg Business Week (October 21, 2013). On line at http://www.businessweek.com/articles/2013-10-21/tallying-disaster-loans-one-year-after-hurricane-sandy#rshare=email_article

[11] See James W. Fossett, “The Changing Face of Disaster Relief Politics” Rockefeller Institute of Government, January 2013. (http://www.rockinst.org/observations/fossettj/2013-01-the_changing_face_of_disaster_relief_politics.aspx) for details

[12] Carolyn Kousky and Erwann Michel-Karjan “Hurricane Sandy, Storm Surge, and the National Flood Insurance Program: A Primer on New York and New Jersey” Resources for the Future Issue Brief, November 2012. On-line at http://www.rff.org/RFF/Documents/RFF-IB-12-08.pdf. “Take up rate” refer to the percentage of housing units in a given ZIP code that have flood insurance coverage from NFIP.


ABOUT THE ROCKEFELLER INSTITUTE OF GOVERNMENT

The Nelson A. Rockefeller Institute of Government, the public policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments. It works closely with federal, state, and local government agencies nationally and in New York, and draws on the State University’s rich intellectual resources and on networks of public policy academic experts throughout the country.