Government’s NFIP Harms Puget Sound

Government’s NFIP Harms Puget Sound
May 17, 2012

Puget Sound plays a vital role in Washington’s economy. Two of the state’s four largest cities are on the Sound, much of the state’s tourism relies on it, and the quality of life that attracts so many people here would not exist if not for the Sound.

Given Puget Sound’s importance, the two of us, as conservatives, believe private landowners and independent entrepreneurs are usually the best stewards of the millions of acres that touch the Sound. That’s why we’re concerned about a little-known federal program that’s breaking its own rules, wasting taxpayers’ money, and damaging the Sound.

Some background: The National Flood Insurance Program (NFIP) insures property owners against flooding. Unlike private insurers, who set rates based largely on risk and thereby discourage development in particularly disaster-prone areas like steep hillsides and sand dunes, NFIP charges far less than private insurers would for the same coverage. As a result, it actually encourages development in some of the most flood-prone areas of the country.

Not surprisingly, NFIP also loses a lot of money for taxpayers. In the past 40 years it has run up about $18 billion in debt to the federal Treasury. There is no practical way for NFIP to pay it back, so eventually it’s going to add to the already huge federal deficit.

Around Puget Sound, experts consulted by the NFIP’s overseers at the Federal Emergency Management Agency agree providing flood insurance in certain areas would, for all intents and purposes, give developers an incentive to destroy flood plains and damage key wildlife habitat.

It’s an awful idea. Letting local communities and private developers decide how to use land in flood plains is one thing. Saying they’re entitled to government subsidized insurance to do it is quite another. But that’s just what NFIP is doing.

Stopping the federal government from subsidizing environmental destruction, after all, is something people on both the Left and the Right should agree on. That’s why we’re pleased that a liberal environmental organization—the National Wildlife Federation—is fighting a court battle to get the federal government to follow its own rules and stop harming the environment in this way. If anything, we would have preferred if NWF had gone even further. Its current lawsuit seeks only to prevent new subsidies; it doesn’t attack the billions of dollars in flood-related liability that developers have already foisted on taxpayers.

The government is not always a friend to the environment. In fact, because it’s the nation’s largest employer and spends more money than any other entity in the country, the federal government’s actions can do outsized damage to the environment.

No private entity does or even could do as much damage to Washington State’s flood plains as the National Flood Insurance Program already does. Letting it grow further, as many developers want it to do, would inflict real environmental harm.

Although a few more tract houses, shopping malls, and the like might help the local economy in a few places, a healthy Sound is key to Washington State’s economic future, and those who want to take the risk of building on flood plains should at least be required to insure it themselves at appropriate rates. Government should get out of the way and let the market deal with flood problems. That would save taxpayers money and help the environment.

Eli Lehrer (elehrer@heartland.org) is vice president of Washington, DC operations for The Heartland Institute and national director of its Center on Finance, Insurance, and Real Estate. Jim DiPeso, a Seattle resident, is Vice President and Policy Director of ConservAmerica, a conservative environmental organization.