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Published June 22, 2009, 12:00 AM

Cass County push for buyouts unlike 1997's

Experts explain why fewer homes qualify
Cass County is pushing hard for buyout money from a different federal source than it tapped after the 1997 flood, and for good reason.

By: Mike Nowatzki, INFORUM

Cass County is pushing hard for buyout money from a different federal source than it tapped after the 1997 flood, and for good reason.

This time, that’s where the bigger pot of cash lies.

But the focus on the Flood Mitigation Assistance program also has frustrated county officials and homeowners who wonder why fewer homes seem to be eligible for buyouts this time around.

To clear up the confusion, the Federal Emergency Management Agency sent a team of disaster mitigation experts to Fargo this past week.

Meanwhile, weary homeowners displaced by spring flood damage are left to ponder their next moves while receiving somewhat mixed messages from government officials.

On the one hand, FEMA wants them to spend their insurance checks, fix their homes and get on with their lives until answers arrive on whether they’ll be eligible for a buyout.

County officials would rather they wait, knowing that once people invest time and money into fixing their homes, they’re less likely to be interested in a buyout, County Engineer Keith Berndt said, adding he saw it happen in 1997.

“The thought of selling their house and moving out again is a lot less attractive,” he said.

Sorting out the differences between the FEMA programs is key to understanding the county’s buyout strategy.

Criteria same as in ’97

Cass County acquired about 60 homes after the 1997 flood, primarily through FEMA’s Hazard Mitigation Grant Program.

The program used then and the program being pursued now basically have the same goal: eliminating risk of future damage to property and moving people out of harm’s way.

Both use a “benefit-cost analysis” to determine if the avoided risk justifies the cost of a buyout.

If the ratio is 1.0 or greater – in other words, at least dollar-for-dollar – the project may qualify for federal funding.

Only flood-insured homes are eligible for FMA funds. The county has 107 such homes out of a total of 140 whose owners expressed interest in buyouts.

Of the 107, only 10 had reached the ratio threshold as of last week.

The county has hired a consultant, and the congressional delegation is working with state and federal officials to try to tweak the formula to make more homes eligible.

Grumblings that FEMA has changed its buyout formula since 1997 are unfounded, said Ken Goettel, the county’s hired consultant who designed the analysis software for FEMA in the early 1990s.

“There’s really nothing fundamental that’s changed with respect to the FEMA criteria,” he said by phone last week from his California office. “It’s a matter of doing a careful calculation and trying to capture the maximum benefits from each house.”

So far, the calculations haven’t worked in Cass County’s favor.

During a meeting Wednesday, Berndt told FEMA officials the FMA program “is just too rigid to fit our circumstances.”

The main complaint is that the analysis puts too much emphasis on a property’s elevation and not enough on the damage it’s incurred in recent floods.

“This program is not really about one event,” said Amber Schaan, the Lake Agassiz Regional Council program administrator who’s entering the data into the formula for the county. “It’s about the likelihood of these houses being flooded regularly.”

A FEMA chart shows homes protected to a 10-year flood elevation have a “very high” likelihood of being cost-effective. Those with a “low” likelihood are in the 50- to 100-year flood range, where the majority of Cass County’s potential buyout properties lie.

FEMA has allowed a couple of exceptions to help homes reach the ratio.

The county was allowed to use a revised flood plain map that has more favorable elevations, even though it hasn’t been adopted. FEMA also is accepting a finished basement as a home’s first-floor elevation, although there’s a damage curve that must be adjusted to account for when water actually enters the basement.

It’s helped a little, but not enough to significantly change the numbers.

“If your first floor isn’t below the 10-year flood elevation, you’re in trouble,” council Director Irv Rustad said.

Different programs used

As county officials have noted, that’s hard to swallow for some residents south of Fargo whose neighbors’ homes were eligible for buyouts in 1997.

“We have more damage right now than we did in ’97,” said Al Frisinger, who lives in the Heritage Hills subdivision south of Fargo.

But FEMA officials say there are a couple of key differences in play.

Severe damage was more widespread in 1997, and mitigation steps taken since then were evident in this spring’s flood fight, said Lonnie Hoffer, FEMA’s hazard mitigation officer for North Dakota.

“So, we were able then (in 1997) to find good, cost-effective ratios,” he said.

But the biggest difference is that most buyouts in 1997 occurred through the Hazard Mitigation Grant Program, which contains a “substantial damage waiver” not available under the FMA program.

The waiver allows homes that sustained damage equal to 50 percent or more of their value to be eligible for FEMA buyouts.

“You don’t have to do the analysis. It’s a fact that the structure is substantially damaged,” said Mike Hillenburg, FEMA’s Denver-based regional hazard mitigation assistance branch chief.

It’s unclear how much the waiver would help this year.

As of Thursday, only 16 of the 107 flood-insured properties and 17 of the total 140 properties had 50 percent damage or greater, Schaan said. The council is still waiting for information from some homes, so that number could change slightly, she said.

Based on past experience, Berndt said homes that had water on the main floor or up to the floor joists normally meet the 50 percent threshold.

“We believe we’ll end up where these properties, or quite a number of these, have been substantially damaged,” he said.

Less money available

But even if a large number of homes qualify for the waiver, the HMGP funds will likely be limited, which is why the county is pushing so hard for the FMA funds, Berndt said.

The county estimates the cost of buyouts for all 140 properties at about $30 million. The federal share of that would be 75 percent, with the state picking up 10 percent and the county responsible for 15 percent.

North Dakota’s HMGP money will be based on 15 percent of the federal share of public assistance, individual assistance and other support provided during the current presidential disaster declaration period, which is still open.

In 1997, more than $64 million in HMGP funds were available to the state.

This year, Hoffer estimates the state is in line for $8 million to $10 million, although that could grow to as much as $20 million depending on damage totals. Other counties and cities also will likely apply for those funds.

The FMA program, on the other hand, has about $25 million available. Those are “unsubscribed” dollars from states that didn’t use their annual allocation, Hillenburg said.

North Dakota’s allocation for fiscal year 2009 was $136,500, but it can apply for the pool on a nationally competitive basis.

While there’s no way of knowing how many states will apply, “the indication that we’re getting … is that there’s not expected to be a huge number of applicants,” Berndt said.

The county also plans to look at FEMA’s other mitigation programs, including the Severe Repetitive Loss Program. One home on the list already qualifies for that program after sustaining flood damage in 1997, 2001, 2006 and this year, Berndt said.

Tough decisions ahead

Derek Jensen, FEMA external affairs officer for the Denver region, said agency officials “understand the angst that’s out there” and that people want answers.

But buyouts aren’t an overnight process, and those whose homes need repairs should be taking those steps, he said.

Hillenburg pledged to work with the county toward a successful buyout project. He said he supports the county’s goal to clear the flood plain.

“But as a steward of the federal dollars, I’ve got to make sure that my programs fall into line with what the rules and regulations require, which is basically any dollar invested gets a dollar in return,” he said.

Berndt said telling people to repair their homes before they know whether they’re getting a buyout may cost taxpayers more money, because the acquisition costs for repaired homes will be higher.

Berndt said he expects to hear from Goettel early this week on what, if anything, can be done to make more homes eligible.

Depending on the feedback, the FMA application could be ready to send to FEMA by the end of the week, he said. County officials have been told to expect an answer within 60 days of applying.

The HMGP process will take considerably longer.

Application forms will be sent to entities with eligible projects after July 1, said Ray Morrell, hazard mitigation specialist with the state Department of Emergency Services.

“I would forecast about a 90-day, maybe 120-day period to really fulfill all the questions and requirements from that application form and get it submitted to the state,” he said.

Meanwhile, homeowners are faced with the difficult decision of how to proceed.

Berndt said that when the county started asking who was interested in buyouts this spring, it initially wasn’t aware that the substantial damage waiver wasn’t available through the FMA program.

“I think we were optimistic, and I think we had good reason to be given the information we had available at that time,” he said. “In retrospect, yeah, maybe we were more optimistic than we are now, but I still – I would contend that the county’s not giving up.”

Regardless of what happens with FEMA buyouts, the county needs a long-term strategy for acquiring flood-prone homes, he said.

Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528