With the cost of federally required flood insurance expected to rise, local officials may seek taxing authority from residents in flood-prone neighborhoods to build their own protections -- and eventually escape the federal mandate.
Currently, about 5,400 residents of Palo Alto, Menlo Park and East Palo Alto pay average annual premiums of $1,300 under the National Flood Insurance Program, which requires homeowners subject to flooding up to once in 100 years to hold insurance as a condition of their mortgages.
Under scenarios floated to a local inter-governmental panel Thursday, Nov. 15, single-family home residents would pay anywhere from $280 to $815 a year to a yet-to-be-created "special finance district." The district would fund protections against a 100-year flood, enabling residents to apply as a group to the Federal Emergency Management Agency (FEMA) to escape the current federal requirement to buy flood insurance.
Local officials -- including representatives from Palo Alto, Menlo Park, East Palo Alto and the Santa Clara Valley Water District -- gave the go-ahead Thursday for further research and preparation for a possible ballot measure in November 2014. They were acting as the San Francisquito Creek Joint Powers Authority (JPA) Board, which oversees joint interests in solving creek-related problems.
Representatives included Palo Alto council member and JPA Board Chair Pat Burt, Menlo Park Mayor Kirsten Keith, East Palo Alto Vice Mayor Ruben Abrica and Santa Clara Valley Water District Board member Brian Schmidt.
The JPA hired consulting firm NBS to sketch out scenarios for a "special finance district," which were presented to JPA board members Thursday.
One scenario would address creek flooding only and increase protections from the current 50-year flood level to the 100-year flood level at an estimated cost of $36 million to $75 million. Annual maintenance costs would be $80,000.
A second, broader scenario would encompass creek flooding as well as tidal flooding, creating a larger tax base to cover project costs estimated between $90 million and $130 million. Annual maintenance costs would be $325,000.
Consultants stressed the cost estimates vary widely depending on the scope of the flood-protection projects and the areas they would encompass.
"Community outreach would be a big portion," NBS consultant Adina Light told the JPA board.
"You'd want to get their support but also do studies on what are your tolerance levels in the zones, in different areas, and design a tax to fit within tolerance levels."
Burt said he was worried about a period in which homeowners could have overlapping payments -- still federally required to buy flood insurance before the local protections are in place.
JPA Executive Director Len Materman said financing firms have indicated they could extend homeowners a two- to three-year startup period in which they would not be charged, possibly giving them time to gain FEMA approval to escape the federal requirement.
JPA Board members gave Materman the green light to continue research and outreach for a possible November 2014 ballot measure, and to include the option of encompassing neighboring communities of Mountain View and Redwood City, if they are interested in joining the effort.
Materman said a recent overhaul of the National Flood Insurance Program is certain to raise premiums for residents in flood-prone areas required to buy insurance as a condition of their mortgages.
He said FEMA has told him "we can expect annual increases of 20 percent beginning next year."
By November 2014, he estimated average local premiums would go to $1,900 a year, increasing annually to cover the expected actuarial value of future loss: $4,500 a year for a $250,000 policy.
Commercial properties, he said, will pay the full, unsubsidized rate under the federal program by 2013.
"This is an estimate of course, and the key point is that people might be asked to vote on a tax that will reduce their risk, and for most it could also eliminate a flood insurance premium that is substantially higher than the tax," Materman said.
The San Francisquito Creek Joint Powers Authority was created after a 1998 flood damaged some 1,700 local properties. In addition to Palo Alto, Menlo Park, East Palo Alto and the Santa Clara Valley Water District, the panel includes representation from the San Mateo County Flood Control District.