Rebuild in flood zones, hand you the bill ...

From an editorial in USA Today:

The definition of insanity, according to Benjamin Franklin, is doing the same thing over and over and expecting different results.

Ben, welcome to New Orleans.

Nearly three-quarters of 14,534 New Orleanians who've applied for federal grants say they'll rebuild their Hurricane Katrina-damaged homes in flood areas — even though city restrictions are unlikely to protect their homes if the levees fail again, USA TODAY's Anne Rochell Konigsmark reported last week.

The latest plan calls for the Louisiana Recovery Authority to dole out grants of up to $150,000 to cover uninsured losses, which residents can use to rebuild or relocate. To qualify, homeowners in and around the city must raise their homes by at least 3 feet and purchase federal flood insurance.

So let's see. Federal taxpayers will be subsidizing reconstruction in flood areas, underwriting the insurance on those homes and will no doubt have to bail out the flood insurance program if the homes get wiped out again. The program collected only $2.2 billion last year in premiums but will pay out more than $20 billion in Katrina claims, leaving taxpayers on the hook for the rest. Worse, the program encourages development in areas subject to flooding — not just in New Orleans, but everywhere — by offering insurance at bargain rates in areas where private insurers fear to tread. That increases the population in vulnerable areas, leading to more costly disasters.

It is an absurd use of taxpayers' money, to which New Orleans is adding an expensive new twist.

Certainly, the homeowners in and around New Orleans deserve some assistance because of the magnitude of the disaster and the failure of federally constructed levees to protect them. But encouraging rebuilding in the most flood-prone areas is foolhardy.

The 3-foot rule, adopted Sept. 1 by the New Orleans City Council, makes little sense and is a poor substitute for a comprehensive rebuilding plan. An extra yard of elevation isn't needed in areas that didn't flood after Katrina, and it's too low in areas that saw as much as 20 feet of water. Just ask those who had to be rescued from their rooftops. If there's another catastrophic event, thousands of homes could flood again under the new rules, says Federal Emergency Management Agency Deputy Director Doug Bellomo.

To prevent such an event, $6 billion is being spent to upgrade the 350 miles of levees around New Orleans. But parts of that system remain suspect, and work won't be done until 2010 at best. This year's tame hurricane season is no reason for complacency. The truth is, New Orleans won't be safe from a Katrina-scale storm for many years.

Recovery after Katrina is a mammoth undertaking that should be managed at the municipal and state level. But if local authorities allow residents to rebuild in the most dangerous areas, it should be at their own risk. Asking taxpayers around the USA to subsidize, underwrite and bail them out again fits Franklin's definition of nuts.

See some interesting responses to this editorial.

jbv's Competitive Edge