```

[Senate Hearing 114-617]
[From the U.S. Government Publishing Office]

                                                       S. Hrg. 114-617

                   HOW FLOOD INSURANCE RATE INCREASES
                 AND FLOOD MAPPING POLICY CHANGES WILL
              IMPACT SMALL BUSINESSES AND ECONOMIC GROWTH

=======================================================================

                             FIELD HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 1, 2015

                               __________

    Printed for the Committee on Small Business and Entrepreneurship

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         Available via the World Wide Web: http://www.fdsys.gov
         
         
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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED FOURTEENTH CONGRESS

                              ----------                              
                   DAVID VITTER, Louisiana, Chairman
             JEANNE SHAHEEN, New Hampshire, Ranking Member
JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington
MARCO RUBIO, Florida                 BENJAMIN L. CARDIN, Maryland
RAND PAUL, Kentucky                  HEIDI HEITKAMP, North Dakota
TIM SCOTT, South Carolina            EDWARD J. MARKEY, Massachusetts
DEB FISCHER, Nebraska                CORY A. BOOKER, New Jersey
CORY GARDNER, Colorado               CHRISTOPHER A. COONS, Delaware
JONI ERNST, Iowa                     MAZIE K. HIRONO, Hawaii
KELLY AYOTTE, New Hampshire          GARY C. PETERS, Michigan
MICHAEL B. ENZI, Wyoming
                  Zak Baig, Republican Staff Director
                 Ann Jacobs, Democratic Staff Director
                           
                           
                           C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Vitter, Hon. David, Chairman, and a U.S. Senator from Louisiana..     1
Cassidy, Hon. Bill, a U.S. Senator from Louisiana................    14

                               Witnesses
                                Panel 1

Kieserman, Brad J., Deputy Associate Administrator for Federal 
  Insurance, Federal Emergency Management Agency, Washington, DC.     4
Wright, Roy, Deputy Associate Administrator for Mitigation, 
  Federal Emergency Management Agency, Washington, DC............     5

                                Panel 2

Bourgeois, Dwayne, Executive Director, North Lafourche 
  Conservation, Levee, and Drainage District, Thibodaux, LA......    21
Passman, Jerry, President, Louisiana Home Builders Association, 
  Passman Homes, Inc., Baton Rouge, LA...........................    27
McKey, David, Managing Broker, Coldwell Banker One, Baton Rouge, 
  LA.............................................................    36

                          Alphabetical Listing

Bourgeois, Dwayne
    Testimony....................................................    21
    Prepared statement...........................................    24
Cassidy, Hon. Bill
    Opening statement............................................    14
Kieserman, Brad J.
    Testimony....................................................     4
    Prepared statement...........................................     7
McKey, David
    Testimony....................................................    36
    Prepared statement...........................................    38
Passman, Jerry
    Testimony....................................................    27
    Prepared statement...........................................    29
Vitter, Hon. David
    Opening statement............................................     1
    Prepared statement...........................................     2
Wright, Roy
    Testimony....................................................     5
    Prepared statement...........................................     7

 
                   HOW FLOOD INSURANCE RATE INCREASES
                    AND FLOOD MAPPING POLICY CHANGES
                      WILL IMPACT SMALL BUSINESSES
                          AND ECONOMIC GROWTH

                              ----------                              

                          FRIDAY, MAY 1, 2015

                  University of New Orleans
                                                   New Orleans, LA.
    The Committee met, pursuant to notice, at 9:55 a.m., at the 
Homer Hitt Alumni Center, University of New Orleans, 2000 
Lakeshore Drive, Hon. David Vitter, Chairman of the Committee, 
presiding.
    Present: Senator Vitter.

 OPENING STATEMENT OF HON. DAVID VITTER, CHAIRMAN, AND A U.S. 
                     SENATOR FROM LOUISIANA

    Chairman Vitter. Well, that's a pretty natural segue into 
hearing from our witnesses, and as I suggested, we have two 
panels of witnesses today, two witnesses from the Federal 
Government, who I will introduce in a minute, and then 
following our discussion with them, we'll have a second panel, 
three witnesses from Louisiana, including those representing 
the real estate market and small business.
    But first we'll hear from Brad Kieserman. Brad serves as 
the FEMA Deputy Associate Administrator for Insurance. Prior to 
serving in this position, he was Acting Assistant Administrator 
for Recovery and as FEMA Chief Counsel.
    Brad is a graduate of State University of New York. 
Received his JD magna cum laude from Columbus Law School at 
Catholic University, in DC.
    And following Brad, we'll hear from Roy Wright. Roy is a 
native of California and serves as FEMA's Deputy Associate 
Administrator for Mitigation, where he's responsible for FEMA's 
risk analysis and risk reduction programs.
    Roy holds a Master's of Public Administration from George 
Washington and a Bachelor's in Political Science from Asuza 
Pacific.
    His joint testimony, with Mr. Kieserman, will discuss the 
impacts of NFIP on small businesses. And, again, Bill and I 
will specifically ask them to address the Executive Order. 
Thank you all both for being here and for your work, and Brad, 
we'll start with you.
    [The prepared statement of Chairman Vitter follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
STATEMENT OF BRAD J. KIESERMAN, DEPUTY ASSOCIATE ADMINISTRATOR 
  FOR FEDERAL INSURANCE, FEDERAL EMERGENCY MANAGEMENT AGENCY, 
                         WASHINGTON, DC

    Mr. Kieserman. Chairman Vitter and Senator Cassidy, thank 
you very much for having Deputy Associate Administrator Wright 
and I here today, and I really appreciate the opportunity to 
come and talk about flood insurance with you all, and we would 
ask that our statement be entered into the record.
    So, I guess, you heard the Senator talk for a moment about 
my bio. The most important fact about my bio is that I was 
stationed here for two years and lived in Jefferson Parish, and 
my oldest son was born here. He referred to himself as the 
``Fresh Prince of New Orleans.'' Never actually been here as an 
adult, but we're working on that, so we'll see.
    So having lived here, I do think I have a--not just having 
lived here, but having worked on the river for two years, I 
think I have some understanding of the complexity of the 
landscape when it comes to flood insurance.
    So let me begin. I have prepared remarks, which I am not 
going to read. I'm just going to chat with you all for a few 
minutes. Then I'll turn it over to Mr. Wright.
    First of all, flood risk, as you all know, is probably one 
of the most significant hazards in the United States. If you 
look from like 1980 to 2013, the United States suffered more 
than $260 billion in flood-related damages. That's one of the 
reasons we have a National Flood Insurance Program is because 
the market and the industry really can't afford to provide you, 
whether you're a small business or a residence, with affordable 
flood insurance.
    So all these concerns that you've expressed about 
affordability are spot-on, and I thought that the Senators 
answered your questions exactly as I would have answered your 
questions. Better, in fact, Senator Cassidy. So I think the 
affordability issue is critical, right.
    So this is why you have a National Flood Insurance Program 
that was never designed to be actuarially sound. It was always, 
by design, meant to be a subsidized program, and now, as we've 
gotten further and further into the program, Congress has 
determined that we need to move from subsidized rates to 
actuarially sound rates, and there's a lot of tension around 
this issue, and Senator Vitter was spot-on.
    Congress heard what the people had to say and slowed down 
the rate increases and tried to make those more affordable, but 
in the end, as I think you all know, the rates are going up, 
and so the question is how do we manage that and what 
protection can you get from it, and how can you mitigate your 
risk.
    I guess I would turn for a minute, because this is a--the 
hearing is focused on small businesses. I do want to focus on 
small business, for a second, and the reason for that is small 
businesses, as you all know, are the economic engines of our 
community. The statistics vary a little bit, but the best 
numbers I see tell me that 40 percent of small businesses 
affected by floods don't reopen, and that's because they can't 
afford to repair, to recover, their merchandise is damaged, 
they lose their customers, people move.
    And so while a lot of what we do is talk about the flood 
insurance program as it relates to residences--and that's 
because over 91 percent of the policies in the United States 
are residential-type policies--but the fact of the matter is, 
here in Louisiana, here in Louisiana, 11 percent of the flood 
insurance policies in the state are nonresidential policies. 
They deal with businesses, churches, schools.
    So the small business issue is particularly important here, 
and I know from having lived here that many of you simply--you 
can't relocate because your business is the water.
    The gentleman earlier talked about oil and gas, the 
chemical industry, the seafood industry, fishermen--and I was 
in the Coast Guard when I lived here. I was a buoy tender. So I 
really couldn't relocate. I needed to be near the boat and get 
out on the water. So we understand that.
    But that means that we've got to figure out how to price 
that risk and how to make those prices affordable, and that's a 
challenge.
    The National Academy of Sciences is working on several 
reports right now on affordability, and they have issued the 
draft of the first report, and they're going to produce a 
second report that will help us understand how to get through 
the cost-benefit analysis.
    But it's a challenging issue and I don't want to come here 
and make it seem like there's simple answers. I do believe 
strongly, though, that your elected representatives are 
aggressively working these issues. You see that they both have 
an incredible command of the issue here, and we, in the 
Executive Branch, are here to try to make sure that we execute 
the law in a way that protects the public and the community and 
also in a way that gets you affordable rates.
    So I'll be happy to take any questions you have, and then 
I'll turn the mike over to Mr. Wright.
    Chairman Vitter. Great, thank you. Roy.
    Mr. Kieserman. Thank you, Senator.

  STATEMENT OF ROY WRIGHT, DEPUTY ASSOCIATE ADMINISTRATOR FOR 
MITIGATION, FEDERAL EMERGENCY MANAGEMENT AGENCY, WASHINGTON, DC

    Mr. Wright. I appreciate the opportunity to join you, 
Chairman Vitter and Senator Cassidy, and like Mr. Kieserman, 
I'm committed to make sure that we're collaborating with you 
all and the communities to make sure that we deliver on our 
commitments through the National Flood Insurance Program.
    Mr. Kieserman spoke to the elements of insurance and 
affordability. I'm really here on the other complement to that 
program related to the flood hazard mapping and floodplain 
management and how we deal with mitigation grants and 
incentives.
    At NFIP, when we talk about this, this is 22,000 
communities across the country that are in partnership with us 
related to this. We've partnered with them. We've seen this as 
really some of the charges that Senator Vitter led us through 
that led into putting in place revisions to our Levee Analysis 
Mapping Process that we did three years back, where we slowed 
down that mapping process. We put in place those local levee 
partnership teams, and we're ensuring that the lines on the map 
reflect the best data from the community.
    And we know that the risk changes, and as it changes, we 
see lines move, and we see structures come in and come out. In 
any given year, we see, on average, about as many come in as 
come out.
    We have some updates happening in Orleans and Jefferson 
Parish right now. As those maps in Orleans Parish move forward, 
over the next year, 77,000 structures are going to come out of 
the Special Flood Hazard area. They will no longer have that 
mandatory purchase requirement. The risks changed; our maps 
changed.
    And so as we look at these elements, we want to make sure 
that we have worked with communities, we're reflecting the 
risk, and we're preparing for what is to come.
    And so the law requires that, as we lead these programs, we 
identify those flood risks, we engage communities to increase 
their understanding. We want to make sure we're reflecting the 
best credible data available. We look to set those kind of 
standards related to future construction in that area of known 
flood risk.
    And we want to make sure that when Federal funds are used 
for projects, in communities, that we do build them higher and 
stronger so that the taxpayer doesn't need to come back and pay 
for that same building twice, and I think there's some of those 
elements that we can share together.
    And so, with that, I'll say thank you, and we're available 
for your questions on the topics throughout that we've talked 
about this morning.
    [The prepared statement of Mr. Kieserman and Mr. Wright 
follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Chairman Vitter. Great. Thank you both very much. I'll get 
things kicked off, and then we'll turn to Senator Cassidy.
    You both heard a lot of concern about this Executive Order. 
What we're talking about, just for everyone's benefit, is an 
Executive Order by President Obama, 13690, and the 
corresponding Federal Flood Risk Management Standards, that 
they would be raised significantly and that this Executive 
Order basically directs all Federal agencies to define the 
floodplain in a different way than we have traditionally, at 
the 100-year floodplain, and in a more draconian way, either a 
floodplain based upon, quote, ``climate-informed science,'' 
closed quote, whatever that means, or No. 2, a 500-year 
floodplain, or No. 3, expanding the existing 100-year 
floodplain to add an additional two or three feet of freeboard 
elevation, which is a big deal.
    Now, FEMA has said none of this is going to impact NFIP, 
but under the terms of the Executive Order, it's supposed to 
include all Federal grants, loans, and federally backed 
financing programs, like FHA-backed single family mortgages.
    Those two statements seem to be in conflict. What are we 
missing?
    Mr. Wright. So when this Executive Order came out, it put 
some new pieces in motion, Senator Vitter, but it also went 
back and amended an Executive Order from President Carter, in 
1977. And so what we were directed to do----
    Chairman Vitter. Just as an aside, the fact that we're 
building on a Carter Executive Order does not give us great 
comfort either. I'm sorry, I couldn't help myself.
    Mr. Wright. Fair enough. And so it is that piece from 1977 
that looks across all federal action, and it then told agencies 
to go through and look at the impact on various programs.
    In an attempt to be open and transparent with folks, what 
came out was a document that looks at how these two fit 
together, and that document has been something that we have 
been going around the country, sitting and talking with people, 
because it's in draft, and it needs to be clarified.
    And so one of the points is--I've gone to eight different 
cities, I've held public meetings, and I was even meeting with 
some folks here in New Orleans last night on this topic, 
because we have the ability to ensure that the implementing 
guidelines match what people's expectations are.
    And so to this point, it will not change the National Flood 
Insurance Program in terms of how we map today, the rates that 
are set on the ability for people to have claims. It will not 
do that. We don't see that the Executive Order directs us to do 
so.
    What I was asked last night, and I think it was very fair, 
is they said if that's the case, show us that language directly 
in that implementing interagency guideline.
    And so one of the challenges I offered back to folks is, 
that is the intent. Can you tell me what words that we would 
put on this page that would bring that level of assurance?
    The intent of the Executive Order, and it's clear in the 
policy section of Section 1, is to focus on federal investments 
in construction projects. So that's if there's going to be 
Federal dollars put in, we should build it higher and stronger 
so that it can withstand. That's the intent.
    Part of what has been going on, through this now 90 days of 
public engagement, has been, help us understand where these 
uncertainties may be and help me understand what words would 
bring the kind of certainty that people want.
    Chairman Vitter. Roy, let me follow up on that. So you're 
saying that this Executive Order would not change the 
definition of floodplains for NFIP?
    Mr. Wright. That is correct.
    Chairman Vitter. Okay. Now, you just said it would be about 
any federal investment.
    Mr. Wright. Investment.
    Chairman Vitter. Aren't mitigation programs, all sorts of 
things directly related to NFIP, federal investments?
    Mr. Wright. So this is where I will separate the part 
related to those who have insurance policies, the 5.2 million 
people who have insurance policies. It does not change it for 
that.
    If you received a grant from FEMA for a mitigation 
project--and there is one grant program under the NFIP, it's 
called Flood Mitigation Assistance--and we do a number of 
different kinds of projects, including elevations, and if you 
are getting an elevation funded through a grant, this could 
have an effect on that part, but we're already paying to build 
something up at that point, so that's the incremental element, 
but as it gets to the insurance piece of the equation, how the 
maps are drawn, how the policies are sold, rated, priced, it 
does not.
    And one of the things that we've been asked is--we see that 
we can make that interpretation, based off the Executive 
Orders, both the one from 1977 and the new one. Folks have 
said, if that's the case, then make that plainly clear in this 
document that that separation exists.
    Chairman Vitter. And wouldn't it still potentially impact 
federally supported mortgage programs that are all balled up 
for a homeowner with NFIP?
    Mr. Wright. So it's not best for me to speak definitively 
for another Federal agency, but as I've worked with the other 
agencies and had these conversations, the way that HUD, for 
example, has looked at this--because, frankly, they've been 
implementing this requirement already over the last 37 years, 
under the old Executive Order--and what they have determined, 
and we believe is the right answer to continue, is if you're 
getting a loan for construction, as a Federal dollar for 
construction, this would likely have an application to you.
    But if you are getting a federally backed mortgage, if 
you're getting financing or refinancing, those agencies have 
determined that the structure already exists. There would be 
nothing to implement. It's simply a financial transaction.
    Some of that is already in the document, but we have been 
asked, again, make that plainly clear, plainly clear that this 
application to this would not have an adverse impact on the 
availability of mortgage financing.
    Chairman Vitter. Right. Well, I would just echo that 
request.
    Mr. Wright. Okay.
    Chairman Vitter. I mean, if that is the absolute 
commitment, it can certainly be stated in a much more precise 
way, including in an actual Executive Order, not just, you 
know, agency guidelines, so that's No. 1.
    And to the extent anybody in the Administration doesn't 
want to do that, it obviously makes us ask, ``Why not?'' And 
you're saying, ``No problem.'' But why not state it very 
precisely in an actual instrument that has the same standing as 
the Executive Order we're talking about, that's No. 1.
    No. 2, I would just restate that even were that to occur, 
there are plenty of other impacts about federal investments 
that you are saying are directly impacted that we think is 
going to shut down a bunch of necessary activity in large parts 
of the United States, huge parts of Louisiana.
    Mr. Wright. And so, again, I have learned, and again, 
having conversations last night, I learned more, and what I 
said to folks, ``Help us with those words.'' I'm not in a 
position to make a commitment about a subsequent Executive 
Order, but I am in a position by which we were very clearly 
directed to look at this implementation and start by putting a 
draft out so people could legitimately respond to it, and bring 
the kind of clarification that you are seeking on this.
    As that comment period is played out, I do believe, even 
talking to some folks last night, there are specific comments 
that will come in that say, ``Here's the kind of words in the 
interagency guidance''----
    Chairman Vitter. Right.
    Mr. Wright [continuing]. ``That would produce that kind of 
increased certainty.''
    Chairman Vitter. Well, again, you just said in the 
interagency guidance. I mean, my request is for more than that, 
because guidance can change on a moment's notice.
    Mr. Wright. It can. In this instance, this document was 
last updated in 1978. It's not one that has been frequently 
changed, but as you well know, I can't make a commitment about 
the issuance of an Executive Order.
    Chairman Vitter. Right.
    Mr. Wright. But I can make sure that, consistent with those 
Executive Orders, the interpretation of it is clear and sound 
and aligned to the outcomes that we're describing today.
    Chairman Vitter. Right. Brad, do you have anything to add? 
And then we'll move to Senator Cassidy.
    Mr. Kieserman. Nothing, Senator, thank you.
    Chairman Vitter. Okay, Bill.
    Senator Cassidy. So just to be sure--and, again, I 
apologize if I was gathering wool or a little dense, but you 
said if it is a federally backed mortgage for an existing 
structure, I've already laid the foundation, not affected, but 
what if I'm a developer about to make a lot of small 
neighborhoods so people can move to, you know, to respond to 
the need for housing, and those are federally backed mortgages 
to be issued in the future? Would it affect those federally 
backed mortgages?
    Mr. Wright. So I want to be clear and precise with you, to 
the best of my ability. In almost--there's--and I'm trying to 
be precise, because there is one particular program----
    Senator Cassidy. You may have to bring the microphone to 
you.
    Mr. Wright. I'm sorry. As I understand it, HUD has one 
small program by which they do, in a rural context, provide 
funding for construction. It's a very small part of the FHA 
portfolio, very small.
    And the other instance is when people are getting loans 
for--when they're getting loans for construction, those are not 
federally backed mortgages, and so usually what happens is the 
end----
    Senator Cassidy. Yeah, but they sell it. They sell it.
    Mr. Wright. At the end. So the financing for the 
construction is a much riskier proposition than when it's 
complete. So the homeowner is involved with a completed 
structure, and so at that point, it exists.
    Chairman Vitter. So are you saying definitively that it 
would not in any way affect federally backed mortgages for new 
construction homes?
    Mr. Wright. If the--to the degree that there is not a 
Federal dollar involved in the construction. If there's Federal 
dollars in the construction, this will have an application to 
them. But if it is simply using a financial instrument, for a 
Freddie, Fannie, FHA kind of loan----
    Chairman Vitter. Well, I mean, I'm sure in some of these 
sorts of developments Bill is describing, I would guess----
    Senator Cassidy. Community block grant. A community block 
grant that's going to make mixed use housing.
    Mr. Wright. Okay. So now we're going to a different 
category. We're not talking about a financial transaction any 
more. This will have an impact on the CDBG funds, and when 
we're doing those kind of housings, we should build them higher 
and stronger and plan for it on the way in.
    And I think that there's some sound public policy behind 
that. Often, we're dealing with those with less income means, 
and that means they also have less economic means to recover 
from a given disaster, and so we want to make sure that they 
can withstand, in that instance.
    Again, I can't speak definitely for HUD, that's not my 
agency, but as we've looked at this across, the conversations 
with others, if you're receiving CDBG for a construction 
project, this would have an application.
    Senator Cassidy. So let me ask you another point. How do 
you figure out assumptions for a 500-year flood risk? Could you 
have imagined the Army Corps would have built levees that would 
fail? That's one example.
    Can we imagine that Sandy, where it was a new moon, with a 
high tide, with a storm at a certain angle--you follow what I'm 
saying? There's so many assumptions, and are you being 
transparent about your assumptions? Because whether or not, in 
500 years--500 years ago, it was 1514. Who would have known 
that they would have leveed the Mississippi River in a way that 
our wetlands have died and not have helped us mitigate the 
wetlands lost? And so New Orleans, which formerly was 
protected, is now at high risk? You follow what I'm saying? How 
in the heck can you do that?
    Mr. Wright. So--I follow the line of questioning and I'm 
going to give you a statistical answer, which is to say, what 
is usually referred to as the 100-year is actually a one 
percent annual chance statistical calculation, and what is 
often referred to as the 500-year is actually a .2 percent 
annual chance statistical calculation, and it is not a 
presumption related to whether or not certain structures would 
fail or not.
    None of the calculations are related to that. Rather, it's 
looking particularly at what does it mean to deal with the 
rainfall that would occur under the .2 annual chance.
    But let me use this as a point to highlight for you why, in 
this instance, the standard gives three options. Because if we 
look at various places across the country, different options 
may be the right answer.
    So the first one says, do you have data about the future 
risk, and if you're doing a specific project, whether it's a 
flood control project or a large-scale transportation 
interchange, in those instances, they're looking for over the 
life of that project, often 50 years, and they are making some 
projections about what they would anticipate, and frankly, 
that's where we're going to largely see that first approach 
related to the future risk informed science.
    In other instances, dealing with the plus two-foot 
freeboard, is the right answer, which has been an engineering 
safety factor that has been in practice for more than 40 years, 
or other cases by which the .2 percent annual chance piece or 
the 500-year may be applicable.
    Those are the three options that are on the table, and 
those options are intended to ensure we have flexibility so 
that we can look at the realities in a community and separate 
them.
    Senator Cassidy. So who chooses the option to use? If I am, 
again, a small businesswoman trying to develop a neighborhood, 
and I have got to comply--maybe I'm doing low income houses as 
part of a CDBG, then can I pick which of those three apply to 
my project?
    Mr. Wright. So this has been part of the conversation, as 
I've talked across the country, and right now the guidance is 
silent about which one to choose. There's a preference that 
says if you've got the climate-informed science about the 
future, you should use it. But when you're looking at the other 
options, it doesn't.
    The thought behind that was that as you look at the 
different character of various Federal programs, we should 
ensure that you choose an option that is consistent with its 
mission, consistent with the intent of that program.
    What I have heard from folks is that they are looking for a 
way to have more predictability in this, and we've had some 
great conversations with folks about how we live in this 
tension between predictability that says you must take this 
path and also having flexibility so that the realities in a 
given community can be incorporated and addressed.
    And so that's one of the things, as we've gone through the 
public engagement, we've asked for insight from folks about how 
they would prefer for that decision to be made.
    Senator Cassidy. David.
    Chairman Vitter. Okay. Two things, as we close out this 
panel. First, there are obviously a lot of continuing questions 
about this. The comment period on this closes next Wednesday. 
Can the Administration extend the comment period, which has 
been formally requested?
    Mr. Wright. Right. So I have a number of requests to extend 
this. Initially this was a 60-day comment period, and given the 
nature of the conversations we were having, we agreed and we 
extended it to make it 90 days, and that's where we're at, so 
we've already given an extension.
    And when we come out of this, each agency is going to be 
directed, later in the year, to engage, as they do their own 
protocols, with another engagement of the public. We are all 
being directed and mandated to do that.
    We have a request. I am working with the team in D.C. so 
that we can make a decision on that. I expect that to happen 
early next week.
    Chairman Vitter. Okay. And, finally, Brad, you have looked 
at a lot of things in the program, particularly in the context 
of Superstorm Sandy. Do you have any developing or formed 
thoughts including about the ``Write Your Own'' end of the 
program?
    Mr. Kieserman. Thank you. Roy says, ``Thank you, Senator, 
for moving on,'' for moving to something I will talk about. 
Thanks for doing this. So just to give you some background, --
--
    Chairman Vitter. Actually, I didn't think you were minding 
that I was staying with Roy.
    Mr. Kieserman. I wasn't minding at all. I had some of the 
same questions and now I've got the answers.
    So in the aftermath of Superstorm Sandy, as many of you may 
know, there's an extensive amount of litigation that's going on 
up in New York and New Jersey, on the eastern seaboard. Sixty 
days or about 70 days ago, I was brought in to troubleshoot 
that, and I have been drinking from the fire hose ever since, 
but I will share with you my initial observations, if that's 
okay.
    First of all, the National Flood Insurance Program, which 
is run--the gentleman talked about resources at the NFIP 
earlier. Here's 70 Federal employees in Washington. They are 
the National Flood Insurance Program, Risk Insurance Division. 
They are the ones who--who do what? And here's the answer. What 
they do and what they're supposed to do--and they're hard-
working people just like you are--but they're in a program that 
frankly is in dire need of an overhaul.
    So what's happened, over the course of the years, there are 
82 companies that sell flood insurance, as well as the National 
Flood Insurance Program itself, that has about 20 percent or 18 
percent of the policies that we actually sell and market 
because other companies won't do that. Generally, they're 
higher-risk policies.
    So between us and one other company, Wright Flood 
Insurance, between the direct side and Wright Flood Insurance, 
we have about 30 to 40 percent of all the policies nationally. 
Then the other 81 entities have the other 60 percent. Does that 
make any sense to anybody?
    So it made sense before the internet. It made sense before 
you could go online and by E-insurance, because you needed 
people all over the country to sell and market your product.
    So it is very clear to me that 31 percent of every premium 
dollar you pay, at least 31 percent, goes to a ``Write Your 
Own.'' I don't know about you all, when I give to charity, I 
look and see what their overhead costs are, because what I want 
is my dollars going to the people I'm giving to. I don't want 
my dollars going to overhead.
    And so as I've looked at the program just over the last 70 
days, Senators, what I am seeing is that we are paying a lot 
more in overhead than we should be in 2015. The program 
structure is a 1980s era business structure. I don't think it's 
the correct business model today.
    And I want to be clear. A lot of people say, the Write Your 
Owns are bad and the insurance companies are bad, and I'm not 
saying that. Insurance companies are necessary, they serve a 
purpose, and there are many responsible insurance companies. I 
just don't know that the business model for delivering a 
subsidized Federal program that is virtually unavailable 
anywhere else in the commercial market is the model we have 
today.
    What's clear to me is that we have a capacity issue, 
especially in disaster or catastrophic events. Where are the 
agents coming from? Where are the adjusters coming from? Where 
are the engineers coming from? And who's making sure that the 
people who come to your homes and your businesses are 
reputable, reliable people of integrity? Because as John 
Houghtaling knows, we have encountered--and I know you all 
encountered it down here, as well--but we have seen, in the 
Sandy aftermath of the Sandy storms, that not everybody who 
came to somebody's home or business was reputable or a person 
of integrity, and we certainly have seen evidence that fraud 
was committed. So there's a huge need to fix the oversight 
piece of this.
    There's another part, if I can, for just one moment. We've 
lost touch with the customer. I'll tell you what, the people 
who are running the program at the national headquarters, they 
are good people, but they view their customer as the ``Write 
Your Own'' insurance company, and there's a reason for that. 
They have virtually no contact with you at all. The contact is 
carried out through--by literally a hundred thousand people, 
agents and adjusters and engineers and people that--we've lost 
touch. We have just lost--and I can show it to you in the 
numbers.
    The last piece, not only have we lost touch, many people 
who buy a flood insurance policy don't know what they bought, 
and they are very surprised at the time of their loss that 
something's not covered, or that the pricing that we're using 
to replace something or repair it is way off what their 
expectations were.
    So we have to do a couple things. We have to get way 
better--and I'm not talking about little increments here, I'm 
talking about way better--at educating policy holders and 
perspective policy holders about what their policies really 
cover. And I have to say, I have never seen so many exclusions, 
exceptions. And I know why they're there. They're there because 
this is a subsidized program, and so you have to have a lot of 
exclusions and exceptions to keep it affordable.
    But you have to understand what those are and make 
decisions about your risk, and we have got to just up the game 
on that.
    So I see the reforms going forward as evaluating the 
business model and making sense about--making better decisions 
about what an efficient, economically efficient customer 
survivor-centric business model looks like. I don't think it's 
the model we have today, but I don't have a replacement in 
mind.
    I just know that we've got to look at it, and we're going 
to look to our partners to help us understand that, including 
insurance companies, Congress, the plaintiffs' bar, our policy 
holders, small businesses to help us understand that, that 
business model change.
    We've got to get more survivor-centric and get back in 
touch with the customer, and we've got to do a better job 
providing customer service and that's--if you've ever been 
frustrated trying to get your paperwork cleared, you've been 
frustrated with your adjuster or your engineer--many of you are 
small business owners. You wouldn't run your business that way, 
and we've got to run our business that way. So thank you.
    Senator Cassidy. David, can I ask him one question?
    Chairman Vitter. Sure.
    Senator Cassidy. I want to link the next panel with this 
panel. My concern is that if we go to this 500-year or three 
feet above the base flood elevation, et cetera, that that will 
impact the real estate market indirectly, but profoundly.
    For those of us who are homeowners in this room, our 
principal investment, our principal equity in life is our home.
    Now, David McKey is going to be on as a real estate broker, 
and he is going to be on a follow-up panel, but just for the 
benefit of us homeowners, David--and then if you could 
respond--to what degree do you think that the proposed 500-year 
storm surge, et cetera, for Federal buildings, will spill over 
into the risk underwriting or risk perception of a primary 
residence which would otherwise be unaffected?
    Mr. McKey. Well, the critical factor that we have is--and 
what a lot of people don't understand is the flood insurance 
impacts, and if it increases on one piece of property, that's 
not just an impact on that piece of property. It impacts the 
subdivision, it impacts the community, so it's really a 
widespread effect anytime we see rates on our homes or even our 
businesses increase.
    Senator Cassidy. So if we have a Community Block Grant 
Development with mixed-income housing, and it has to be built 
to a certain level in order to be certified, and that is 
different from the neighborhood next door. Nonetheless, you 
feel as if--I'm asking, I don't know this--that there will be a 
spillover of increased rates because a perception has been 
created that it is a higher risk than previously assumed?
    Mr. McKey. That would be absolutely correct. When an 
appraiser comes into an area, a lot of times he doesn't look 
strictly at that particular subdivision when he's trying to 
assess the value of that home. He looks around the area and 
tries to pick up comparables to make an evaluation of that 
property. So if he's picking up comparables in an area that, 
like you're talking about, it is going to, no doubt, affect 
surrounding properties.
    Senator Cassidy. And I was going to say, my fear is that 
the Administration is so committed to climate science and their 
understanding of it that they are going to make assumptions 
which are quite variable. Forty years ago, we thought we were 
entering a mini ice age, and now we speak of global warming, 
that we will have assumptions made that will impact, sure, 
federally, but then spill over. Roy, any comment to that?
    Mr. Wright. What I would simply say is that building higher 
and stronger in areas of flood risk is a good idea. It is 
something that communities and parishes here----
    Senator Cassidy. I accept that, but if you take that to a 
logical extension, we'd all live in lighthouses.
    Mr. Wright. No, I--no, sir, I wouldn't assert that. What I 
would say is there are elements related to additional 
freeboard. We see this in places like Mandeville Slidell, St. 
James, St. Tammany, Ascension parishes, in which people have 
looked and said, building higher and stronger is the right 
answer for what we're doing, going forward.
    And I understand there may be some debate about exactly 
what to forecast, yet whether it's through subsidence, other 
kinds of elements by which we deal with changes in risk, here 
in southern Louisiana, on an ongoing basis, that we want to 
ensure that when future events come in, we are creating an 
ability by which the community and those who live there will be 
able to withstand that event, and to the degree that it has an 
impact on them, they would be able to recover and rebound 
quickly.
    And so we need to do that in a way that is consistent and 
engaging with the community so that they understand where they 
are headed with these elements.
    Chairman Vitter. Okay. I think this is a good transition to 
our second panel, of which David is a member, but let's give 
our first panel a round of applause.
    [Applause].
    Now, I'd like to ask our second panel to come up. I'll be 
introducing them as they get situated, if I could have 
everybody's attention.
    Dwayne Bourgeois is a native of Thibodaux and a lifelong 
resident of Lafourche Parish. He serves as the Executive 
Director for the North Lafourche Levee District. Hurricane 
Katrina brought about many changes, including involving FEMA, 
that have caused Dwayne to become much more involved regarding 
flood elevations and related issues in Lafourche.
    Jerry Passman is a native of Baton Rouge and Immediate Past 
President of the Louisiana Home Builders Association. He has 
been a member of the Capital Region Builders Association for 18 
years and has been very involved in that directly related 
industry.
    And David McKey, who you've already heard from briefly, is 
the Broker/Owner of Coldwell Banker One, a real estate company 
in Baton Rouge. He serves as Chairman of the National 
Association of Realtors Work Group on Flood Insurance. He's 
been very, very involved in his related part of business for 
many years.
    Welcome to all of you. I really appreciate your being here, 
and we'll hear from each of you, in turn, for five minutes, 
starting with Dwayne, and then we'll have a conversation about 
it. Dwayne.

   STATEMENT OF DWAYNE BOURGEOIS, EXECUTIVE DIRECTOR, NORTH 
     LAFOURCHE CONSERVATION, LEVEE, AND DRAINAGE DISTRICT, 
                         THIBODAUX, LA

    Mr. Bourgeois. Good morning, and I'd like to thank you, 
Chairman Vitter and Senator Cassidy, for the opportunity to 
testify today.
    I am the Director of the North Lafourche Levee District, a 
political subdivision in the state of Louisiana, but I'm here 
today representing a broader group of agencies, citizens, 
businesses in the state of Louisiana who rely heavily on the 
National Flood Insurance Program.
    As I am sure everyone here is aware, the Biggert-Waters 
Flood Insurance Reform Act of 2012 extended the authorization 
of the NFIP for a 5-year period, which ends September 30th, 
2017. Biggert-Waters 2012 was supposed to be a permanent fix to 
the solvency of the NFIP. It clearly was not.
    In 2014, the Homeowners Flood Insurance Affordability Act 
was passed to fix parts of Biggert-Waters 2012, and from a 
residential homeowner's point of view, it repealed the most 
damaging parts of Biggert-Waters 2012; but most everyone 
agrees, there is still much room for improvement across the 
board.
    So now we find ourselves with another opportunity to 
address the issues of this very important Federal program. 
Biggert-Waters 2012 has caused many organizations locally and 
nationally to take a close look at the NFIP and to question the 
approaches taken to address solvency and long-term stability. 
The Association of Levee Boards of Louisiana, working with 
other state and local organizations, has compiled suggested 
changes to the NFIP into a few specific reforms that I would 
like to outline for you today.
    First and foremost, all new changes to the NFIP will have 
made, going forward, should be looking forward, okay. We can't 
punish people who have followed FEMA's rules for participation 
in the NFIP.
    So with the exception of Severe Repetitive Loss properties, 
we suggest that all new legislation should be structured so 
that the existing policyholders of any property class must be 
allowed to purchase Flood Insurance at approximately the same 
cost as before any new legislation as long as there is no lapse 
in coverage or accumulative flood claims equal to the fair 
market value of the property.
    Further, these same property owners should be allowed to 
sell or otherwise transfer the title of their property to a new 
owner who will then be able to continue with insurance 
coverage, as described.
    Flood insurance policies are offered by FEMA as part of a 
quid pro quo arrangement to mitigate flood-related cost to the 
Federal Government. They are offered by the Federal Government 
to the policyholders under the belief that doing so was equally 
beneficial to the Federal Government. All policies came with 
floodplain management restrictions that FEMA required for a 
community to participate in the National Flood Insurance 
Program.
    The Federal Government not only implied that this 
affordable insurance would be available for the life of the 
property; it published and promoted the program accordingly. 
Citizens and businesses made huge financial decisions, in most 
cases the largest financial decision of their entire life, 
based on the promise of the Federal Government.
    Second, the solvency of the program must be addressed in a 
more equitable manner. We need to address program cost, not 
just revenue. From 1978 to 2013, the program collected over 
$9.67 billion more in premiums than it paid in claims, and yet 
the program remains $25 billion in debt. This suggests severe 
issues with the cost of administrating and operating the 
program. The ``Write Your Own'' insurance companies make a 30 
percent margin on policy sales without having to underwrite any 
of the risk.
    In all of the NFIP reform legislation proposed and passed, 
to date, the only group asked to give more to correct the 
programmatic deficit in the NFIP was the policyholders through 
increased premiums. There must be alternatives.
    Third, there appears to be a huge lack of mandatory 
participation in the program. It has been law since 1973 that 
any property mapped by FEMA in a Special Flood Hazard Area must 
purchase flood insurance if the property is mortgaged by a 
lending institution regulated by the Federal Government. 
Nationally, a study done in 2006 showed that only 49 percent of 
those required to have flood insurance actually had it.
    Further, it was estimated that when Superstorm Sandy was 
heading up the U.S. eastern seaboard, only 15 to 25 percent of 
the at-risk population had flood insurance. Biggert-Waters 2012 
increased the penalties to lending institutions for non-
compliance, but this law must be rigorously enforced in some 
manner.
    The Federal Government has performed very poorly at 
enforcing this cornerstone issue in the NFIP. The intent was to 
have all of these properties in the NFIP for two primary 
reasons. First, to increase the revenue base of the NFIP, and 
second, to be able to use the insurance principle of the Law of 
Large Numbers to spread the risk to the program geographically.
    Fourth, Biggert-Waters 2012 caused a big problem with the 
actuarial calculations used to determine the cost of insurance 
for the program by requiring FEMA to include catastrophic loss 
years in the actuarial calculations. This greatly changes the 
method FEMA uses to determine the cost of insurance.
    The American Academy of Actuaries reported to Congress that 
including catastrophic loss years in these actuarial 
calculations was not in line with Standard Actuarial Principles 
before Biggert-Waters 2012 was even passed into law.
    So, finally, we must also consider how a program designed 
to mitigate for a 100-year flood loss through a quid pro quo 
relationship with local community's floodplain management can 
reasonably be expected to absorb the cost of 400-year events.
    In conclusion, I would like to point out that ours is a 
working delta, the fruits of which are enjoyed by and enrich 
our entire Nation. As such, the availability of federally 
backed affordable and financially stable flood insurance is of 
vital importance to our region and the entire Nation.
    We commend the Committee for addressing long-term 
reauthorization and reform of the National Flood Insurance 
Program. We thank you for this opportunity to share both our 
situation and our views on this important issue.
    [The prepared statement of Mr. Bourgeois follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Vitter. Thank you very much, Dwayne, and now we'll 
hear from Jerry Passman. Jerry.

STATEMENT OF JERRY PASSMAN, PRESIDENT, LOUISIANA HOME BUILDERS 
       ASSOCIATION, PASSMAN HOMES, INC., BATON ROUGE, LA

    Mr. Passman. Well, again, I would also----
    Chairman Vitter. If you can pull the mike to you. Thank 
you.
    Mr. Passman. I would also like to thank you all for the 
opportunity to testify today. Again, I'm Jerry Passman. As you 
mentioned, I'm a third-generation home builder and small 
business owner from Baton Rouge, Louisiana, and the Immediate 
Past President of the Louisiana Home Builders Association.
    We, the home builders, have a long history of supporting 
the NFIP. However, recent actions of FEMA and the 
Administration continue to create uncertainty for home buyers, 
home builders, and small businesses. Due to major disasters, 
NFIP solvency has been threatened. Many thought Biggert-Waters 
would ensure the physical soundness of the NFIP; however, there 
were unintended consequences.
    Biggert-Waters impacted to sell both pre-FIRM and 
grandfathered properties by triggering an immediate shift of 
full rate risk with premiums increasing by 25 percent with a 
full rate risk each year. Home builders from across the country 
were witnessing how drastic rate increases were negatively 
affecting the sales of homes and saw rates increase 10-fold 
over what homeowners were previously paying
    For example, due to inaccurate mapping, a young couple from 
New Orleans had to cancel the purchase of their first home 
because of an unexpected increase in the flood insurance rates, 
from $2,000 to $6,550.
    In another example, a Louisiana builder bought a home, only 
to realize that the flood insurance rates on the home had 
increased from the anticipated $412 to over $13,000.
    Home remodels were severely affected by Biggert-Waters with 
a substantial improvement threshold rate increasing from the 
traditional 50 percent to 30 percent or more of the market 
value of the structure.
    This provision represented a major deterrent for 
grandfathered property owners located within the floodplain for 
making minor renovations, such as adding energy efficient 
appliances to a kitchen or updating their homes, or even 
performing normal maintenance, at the risk of paying 
significant premium increases.
    Under your leadership, Congress acted quickly to change 
many of the unintended consequences of Biggert-Waters. The 
Homeowner Flood Insurance Affordability Act of 2014, HFIAA, no 
longer triggered the immediate increases to full-rate risk for 
pre-FIRM or grandfathered properties, and FEMA was required to 
provide refunds to eligible property owners whose NFIP rates 
increased.
    Additionally, the important substantial improvement 
threshold was restored to the traditional 50 percent, giving 
homeowners the ability to make needed renovations without 
risking drastic increases in their insurance rates.
    Thanks to Congressional oversight, FEMA is now required to 
notify the community affected and their Congressional 
delegation before updating new mapping models. They are 
required to reimburse the policyholders or the communities for 
successful challenges to the errors, in confirmed maps.
    Although there are many positive changes that arose from 
HFIAA, some changes with the NFIP remain. Specifically, a 
recent Executive Order that President Obama signed will require 
each Federal agency to expand the definition of a floodplain 
well beyond the longest 100-year floodplain for all federally 
funded or approved projects.
    In establishing the definitions, agencies may use the best 
available climate-informed science, the freeboard approach, 
which adds two to three feet of freeboard to the base flood 
elevation, on the 500-year floodplain, or any combination of 
the three.
    While FEMA stresses that this will not impact NFIP rates, 
home builders and property owners are left wondering if 
structures in these new areas will soon require mandatory 
purchase of flood insurance. This uncertainty will devalue land 
and existing homes and businesses well beyond the 100-year 
floodplain.
    Home builders are also concerned about the EEOs impact to 
private construction receiving Federal financing or permitting.
    According to my experience, almost every home I've built 
has either had some sort of Federal financing, i.e., a 
government guaranteed mortgage, such as Fannie Mae, Freddie 
Mac, or VA, or requires some sort of permit. Every home I've 
built, we have to get a permit because we have to comply with 
the Clean Water Act.
    I'd like to thank the Committee for this opportunity to 
testify before you today and allow small builders from Baton 
Rouge, Louisiana, to have a voice on this issue. I'd also like 
to express my and my fellow home builders gratitude to Chairman 
Vitter for your leadership on this issue. We, the home 
builders, look forward to working with Congress on the NFIP 
reauthorization to ensure homeowners, home builders, and small 
businesses are protected from exorbitant rate hikes, inaccurate 
mapping, as we have seen in the past.
    [The prepared statement of Mr. Passman follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Vitter. Great. Thank you very much, Jerry. And now 
we move on to David McKey. David, welcome.

STATEMENT OF DAVID McKEY, MANAGING BROKER, COLDWELL BANKER ONE, 
                        BATON ROUGE, LA

    Mr. McKey. Thank you, Chairman Vitter, and thank you, 
Senator Cassidy. You have been friends of realtors for many 
years, and also, you have been great supporters of home 
ownership and business property ownership, in Louisiana, and we 
appreciate that.
    Chairman Vitter. Thank you.
    Mr. McKey. My name is David McKey. I am a managing broker 
and owner of Coldwell Banker One, in Baton Rouge, Louisiana. 
I've been a realtor for 23 years, and I am speaking to you on 
behalf of 11,350 realtors across the state of Louisiana that 
are members of Louisiana Realtors. I'm also one of over a 
million realtors that are members of the National Association 
of Realtors across the country, one of the largest trade 
associations in the country.
    Every community across the Nation, realtors help citizens 
from all walks of life to achieve their dream of home 
ownership. We also help small businesses find locations and 
open their doors to business.
    One of the inalienable truths of working in real estate is 
the big surprises just before a closing or at the closing 
table, and it's rarely good news. Transparency and certainty 
are vital to running a good business and not the fear of 
uncertainty.
    We appreciate your continued support and your leadership on 
the flood insurance, especially your hard work last year, in 
Congress. One year later, we believe the Flood Insurance 
Affordability Act has succeeded in reining in most of the 
excessive and inaccurate rates across Louisiana, but as you 
know, we still have work to do.
    Small businesses employ over half of the state's private 
work force. At the same time, flood insurance has become a 
significant expense for many property owners, especially small 
business owners who tend to have smaller production lines over 
which to spread costs relative to their larger competitors.
    For this reason, it is especially important to phase in 
gradual increases in flood insurance so that there's a 
transition period, a planning period, and an adoptability 
period for small businesses. In our state, however, that's not 
always been the case.
    Let me give you a practical example. Before the 
Affordability Act, there were news reports of surprise 
increases in flood insurance premiums, up to $30,000 or more, 
for some businesses, businesses that had never flooded or had 
flood issues in the past. It didn't matter if the information 
was factual, misleading, and in some cases, not factual. Buyers 
feared the worst. They were scared that they would wake up with 
a $30,000 flood insurance bill in their mailbox, and that's a 
death for a small business. Perception is reality, and in real 
estate, that's why we need certainty in the flood insurance 
program.
    Our realtors have told us that often clients' first words 
are not to show them properties in an area that would require 
them to carry flood insurance for their mortgage. This 
certainly rules out a number of properties being marketed, and 
as a result, many owners find their property unsalable or hard 
to sell.
    It also creates a rippling effect throughout the 
communities. As values decline on these properties, it also 
affects surrounding properties, as we just talked about, and in 
turn, the community tax base. It costs our citizens income, 
loss of equity in their real estate, and in some cases, jobs 
were lost.
    So while the Affordability Act has been a success, there 
are still some issues, and I'll discuss five with you.
    First and foremost, we need long-term reauthorization. The 
National Flood Insurance Program will sunset in 2017. We urge 
Congress to reauthorize a program for a minimum of another five 
years.
    Second, it's important to have rate accuracy. There's too 
much confusion over rates and fees. Clarity on something like 
the 25 percent increase, for example. We'd also like to see a 
strengthening of training for our insurance agents so 
everybody's on the same page, and consider other incentives for 
accurate rates.
    Third, let's identify programs and funding opportunities 
for additional investments in strengthening older, pre-FIRM 
properties against flooding.
    Fourth, the Office of Flood Insurance Advocate, created by 
the Affordability Act, needs additional authority and staffing 
to be a full-fledged advocate for homeowners when the insurance 
companies--there's clarity or flaws in the insurance rates that 
the insurance companies are quoting. The office should also 
report on these issues it is not able to resolve, under 
existing NFIP authorities.
    And, finally, we absolutely must fix the flood map appeals 
process. Right now FEMA must first issue regulations before it 
can begin reimbursing property owners. This could take a while. 
Many property owners might succeed if they appeal the flood 
map, but could be discouraged from doing so because they are 
outside the formal window of 90 days to appeal, or the cost to 
appeal may be too high. Let's expedite reimbursement of 
successful appeals by allowing FEMA to issue guidance.
    In closing, let me say that I hope we continue down the 
path of increased certainty and accuracy. Most people are 
afraid of the unknown, and this holds true in the case of 
future affordability of flood insurance.
    We look forward to working with you in the future to try 
and keep the current flood insurance in place past that 
September 30th date, and I thank you for your time and allowing 
me to be here today.
    [The prepared statement of Mr. McKey follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Vitter. Great, David. Thank you very, very much. 
Thanks to all of you. And now I'm going to turn it over to 
Senator Cassidy for comments and questions, to begin.
    Senator Cassidy. Mr. Bourgeois, I really liked your 
comments, but I think it's also important to understand that, 
one, we've got to have a five-year reauthorization, at least, 
and we have to put in those reforms that will actually lower 
the premium for those of us who are purchasing insurance, 
absolutely.
    But we would not be totally kind of in the right context to 
understand, this is going to be a political battle. It really 
is. Because if there's somebody on a mountaintop in New Mexico, 
they may wonder why they, quote/unquote, are subsidizing us. 
Now, that is, until they have a flash flood and they are now 
rated--since they live next to a stream--as in a 500-year flood 
zone.
    Now, I say that not tongue in cheek, but accurately 
describing what takes place. Because once you start talking 500 
years, there is no place in the Nation, including mountaintops 
in Colorado, that are not at risk.
    So just to say, in a political context, what Senator Vitter 
and Congressman Scalise and the others do is going to be tough 
because people do not yet understand their own community's 
risk.
    Let me point out a couple other things just in comment to 
what you all said. You are right. A minority of people who 
should have flood insurance have it. But that's actually not 
FEMA's fault--although it's always wonderful to blame FEMA--
it's actually the banking, the judiciary. It's another 
government department that should require that.
    And there is some reticence when we have a program that has 
been broken, charging rates that are too high, to go start 
tracking down a middle-income homeowner to pay a rate that is 
not actuarially sound. Do you follow what I'm saying?
    So if you are in the middle of Kansas and all of a sudden 
you're rated because you live near a river, for a high premium, 
but your premium is too high because the flood map is wrong, 
are you really going to take them to court because they're not 
doing it?
    Now, I say all of this to give a context of what Senator 
Vitter and I will be working with in the Senate and our 
Congressmen and women will be doing on the House side, and that 
is, all your ideas are good. It's going to be tough.
    Let me finish by something optimistic before I turn it over 
to David. The way it worked last time is you all got involved. 
The way it worked last time is that people got on their 
Facebook page, reconnected with someone they went to high 
school with and who lived in Wisconsin, and said, ``By the way, 
do you know what's about to happen to your rate,'' and when she 
got involved, she contacted her Congresswoman, and all of a 
sudden it began to work. Realtors, bankers, home builders, 
insurance brokers all began to contact----
    The best example I can give, I was on the House side. We 
were setting up a caucus, a homeowners' caucus, to advocate for 
this, and I went up to a fellow from southern Florida and I 
said, ``Are you familiar with Biggert-Waters, the rate 
increases? We need your help on this caucus.'' He goes, ``I 
haven't heard from my constituents about this.'' So I walked 
out, I called up some realtors in Louisiana and I said, ``Light 
up south Florida.'' They lit it up, and he got on the caucus 
and became one of our biggest advocates.
    Now, this is something where y'all being involved will make 
a difference on a national level. David.
    Chairman Vitter. Great. Thank you, Bill. I want to start by 
going to Jerry Passman. Jerry, we're all concerned about this 
new Executive Order related to climate science and floodplain 
management.
    You heard what Roy Wright said. Based on that, if all of 
that were truly nailed down, if all of that were accurate, 
would that affect your new construction activity still or not?
    Mr. Passman. Well, we think, if you go to the preamble, the 
intent is for Federal buildings, Federal highways and that sort 
of thing.
    As a home builder, if the Federal government wants to apply 
it to buildings they are building or highways they are 
building, we're fine with it, but the EEO clearly states that 
it applies to all federal actions, and we can see where that 
would go to private construction, because as I had mentioned in 
my testimony, many of the houses I sell are bought with a 
mortgage that is backed by the Federal government, like Fannie 
Mae and Freddie Mac, so that's a federal action.
    Also, there could be a 404 Wetlands Permit. There's 
definitely a 402 Clean Water Permit on those. Again, those are 
federal actions.
    And my experience is, and from what I've seen from being 
active in my trade association, if you give a Federal regulator 
an inch, they will take a mile. And you can just look how 
convoluted the word Navigable Waters has become. They've 
tortured, twisted it, and then everyone in this room would 
probably come up with a definition of Navigable Water that's 
definitely not the definition of Navigable Water in Washington, 
DC.
    Chairman Vitter. Right. Okay. And following on from that, 
even in the areas that it's clearly meant to be about, like a 
federal highway project or a Federal building, certainly that's 
going to impact us and the economy here, right?
    I mean, building these things to a much, much higher 
standard often means they never get built. I mean, we've sort 
of dealt with that, Dwayne, with some of the demands post-
Katrina in terms of levee standards, correct? Can you expand on 
that?
    Mr. Bourgeois. Well, in the guidance, in the Federal Flood 
Risk Management Standard gives an example of a post office, and 
suggests that just placing a post office somewhere within this 
floodplain encourages other people to be there. Because you've 
got the construction of the post office and the roads, the 
highways and the infrastructure leading to it, and then the 
fact that you've got a post office, it suggests that that's 
going to bring people to the area because of the Federal 
services.
    So, you know, it's clearly stated to try to avoid, directly 
or indirectly, encouraging development inside, and that's 
inside the guidance more than the Executive Order itself, that 
modifies the things, but yes, we definitely had similar 
problems.
    You know, if it's going to be more costly to be 
constructed, with the limited availability of funds across the 
board, it's just not going to get selected. And it's also a 
good opportunity for an agency to make a determination not to 
select something. That's another reason to check off not doing 
it.
    Chairman Vitter. Okay. And, also, Dwayne, to you, as a 
follow-up on the FEMA flood mapping side, how would you grade 
how FEMA is doing in that regard, including this so-called LAMP 
process that has a lot of applications in Louisiana?
    Mr. Bourgeois. Well, the LAMP process, the Levee Analysis 
Mapping Procedure, has to do with getting some credit in the 
flood insurance study for noncertified levees, okay. You guys 
did a great job convincing FEMA to include this legislation, in 
the first place, so that the Without Levees Policy, which was 
quite archaic, was removed.
    Currently there's 25 communities throughout the United 
States that are doing a pilot of this LAMP, with five of them 
in Louisiana.
    The biggest issue about that, to me, that we need is 
flexibility, because in all of the documentation and all of the 
processes they created in LAMP, they were more riverine-
oriented, and we did get the folks that were developing this to 
eventually say that they realize that most of the processes 
they've looked at there weren't suitable for coastal levees. 
The flood source is opposite. The time of the flood source is 
much, much shorter, and you just have to hang on for the length 
of the storm versus a riverine flood that could last for weeks.
    To that, they purposely made some of the coastal issues 
vague. My biggest concern is that we have flexibility. So far 
it looks like we are getting that, but, again, when you get 
into the realm of guidance as compared to something that's 
truly codified, it's difficult to be assured that they're going 
to let the regional offices and their mapping partners aware 
that they have the flexibility to look at alternatives to 
determining the still-water elevations and the wave run-offs 
and other things of that nature.
    Overall, it seems like they are, but I would have loved to 
have seen something in writing that tells those good-intended 
FEMA partners that they have that authority.
    Chairman Vitter. Right, okay.
    Senator Cassidy. David, can I?
    Chairman Vitter. Sure.
    Senator Cassidy. Jerry, how much more will it cost to build 
a home compliant with these recommendations, two to three feet 
higher than currently being elevated?
    Mr. Passman. Well, when we build in a flood area and we 
have to build a pad for it, we typically figure about 10--and 
it depends on the size of the home. I mean, you know, obviously 
a 2,000 square foot house is going to cost less than a 3,000, 
but say the average house I build is 22-, 2300 square foot. We 
generally figure $10- to $12,000 feet per foot higher that we 
have to build the house.
    Senator Cassidy. So if you have to build it three feet 
higher, it will be $36,000 more for the same square footage?
    Mr. Passman. That is correct, yes.
    Senator Cassidy. And, David, if you're reselling your home, 
and people rode down the block, and this one's three feet 
higher than yours, at least, in my mind, it makes me think that 
the one that's not elevated is at greater risk. Will that 
affect the resale, if there is a patchwork of homes elevated 
and homes not?
    Mr. McKey. I don't think it's any doubt that it will. And, 
again, as I mentioned earlier, perception is reality, so when 
they do see that elevated home and they see that one that's 
built on a slab, I think--the first thing, in their mind, is 
how much in flood insurance am I going to have to pay for the 
one that's just a slab house, and it makes it less appealing, 
No. 1.
    And No. 2, again, the likeliness of that house selling is 
going to be reduced pretty dramatically, and it's going to have 
an impact not only on that house, but it's also going to have 
an impact on that house that you just put 35,000 additional 
dollars in.
    Senator Cassidy. I see. So it drags down that value because 
of the surrounding property. And by the way, my point with Roy, 
who was here, of course, we want higher and better, but you 
could, you know, build a castle, and it's not practical, but at 
some point there's a cost-benefit ratio.
    Mr. McKey. That's correct, yes.
    Senator Cassidy. Okay. David.
    Chairman Vitter. Great, okay. We're going to wrap up. 
Thanks to all of our witnesses on the second panel who have 
given a great Louisiana real-world perspective. Let's give them 
a round of applause.
    [Applause].
    And thanks to all of you. Obviously, the Flood Insurance 
Program, flood mapping, all of those related issues are 
critically important to south Louisiana. They're important to 
small businesses, they're important to economic growth, and 
that's why we had this town hall meeting and hearing, and 
that's why Bill and I, with the rest of our delegation, will 
continue to work on these crucial issues, and we certainly 
don't want this exchange to be an isolated visit.
    I believe each of you walking in got a hand-out. On the 
left-hand side of the hand-out, in that blue column, is all of 
my contact information, so please keep that handy, and please 
don't hesitate to call, write, email about these and other 
related issues, whenever it's appropriate. Thank you all very 
much.
    Thank you for being here today.
    [Whereupon, at 11:04 a.m., the hearing was adjourned.]
  

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