Flood Maps Re-engineered for Big Bucks
Condo developments across the Alabama coast are each saving millions of dollars a year in flood insurance, thanks to recently engineered revisions in FEMA flood maps.
A Gulf Shores condominium destroyed by the flood waters of Hurricane Ivan, which made a direct hit on coastal Alabama Sept. 16, 2004 — the year before Hurricane Katrina sent another reminder of the perils of flood tides.
AP Photo/Joe Cavaretta
Dozens of new beachfront condos built in Orange Beach and Gulf Shores, including many condos built in place of developments destroyed by Hurricane Ivan, are no longer considered to be in high-risk flood zones, according to the Federal Emergency Management Agency.
FEMA is in the process of reissuing flood zone maps for the Gulf Coast, which control how much flood insurance a property owner must have. The maps are supposed to include information about coastal flooding in recent storms, such as hurricanes like Ivan, Katrina and Rita. But a funny thing happened after the agency began working on those maps.
In dozens of cases, after objections from condo owners, FEMA has redrawn the maps, issuing a decision known as a “letter of map revision.” In the process, the agency has re-designated multimillion-dollar developments from the highest risk “VE” category to a much lower risk “AE” category. The difference can amount to millions of dollars a year in savings on flood insurance premiums for each development. In every case, the flood categories were changed over the objections of local officials in Orange Beach and Gulf Shores.
“It supposedly requires the concurrence of the local community,” to change the flood zone maps, says Landon Smith, flood zone coordinator for the City of Orange Beach.
“When I got these applications from FEMA for the changes, I said that due to my local knowledge of past storms, I was unable to concur that these properties will not be subject to flooding. Lo and behold, they got it done anyway.”
FEMA made the changes after being petitioned by a handful of engineering companies hired by the condo owners. Companies like Flood Risk Solutions, which also does business as Flood Zone Corrections, appeal the FEMA maps on a contingency fee basis for the condo owners. Flood Zone Corrections’ website says the company’s fee is 100 percent of the premium savings realized in the first year. That can amount to hundreds of thousands of dollars in each case.
Flood Zone Corrections CEO Dan Freudenthal says his company is able to get the flood zone maps changed by doing a more detailed analysis of the shoreline than FEMA typically does, relying on newer, more accurate data. The company is simply correcting flaws in the federal flood zone maps, he says. In addition to the map work, Freudenthal says his company does consulting work for municipalities and real estate developers, and sells flood insurance. The insurance branch of the company earned the National Flood Insurance Program’s “Agency of the Year” award in 2010.
“It’s unfortunate and disheartening when community officials and insurance agents tell people like you that what we are doing is wrong, when we are producing a far superior product,” Freudenthal says of his map revisions. Instead of attacking his company for correcting the maps, he says, “Somebody should be faulting the federal government for creating a map that has been overcharging these people for all these years. And the insurance agents should be returning these premiums they have been overcharging.”
More than 60 developments in Orange Beach and Gulf Shores have had their flood zone classification changed, according to an investigation by NBC News. Ultimately, almost all of the beachfront property in Orange Beach was reclassified into AE, and even X zones, considered the safest from flooding, despite a well-documented history of frequent and destructive flooding.
Smith says FEMA authorized the flood zone revisions based on calculations Flood Risk Solutions performed using shoreline measurements made after beach nourishment projects on Alabama’s beaches. The sand added to the beaches in the nourishment projects is likely to wash away in the first major storm, Smith says.
“They went to all these great lengths using our nourishment as the basis. The problem with that kind of modeling is you put garbage in, you get garbage out,” Smith says. “It’s a spreadsheet with calculations in it. None of the people doing this work have actually set foot on our beaches.”
Particularly troubling, Smith says, are beachfront locations that were changed from VE zones, meaning areas most likely to flood, to X zones, which should not flood even in the kind of severe storm expected just once every 500 years.
“Look at the definition of what a velocity (VE) zone is and tell me we don’t have any here on the Gulf of Mexico beaches. That’s ludicrous,” says Smith. “Some of them are repetitive loss properties, places that have flooded again and again. One of the criteria for a letter of map revision is there is no history of flooding. Well, the repeat loss list is maintained by FEMA. So not only is there a history of flooding on these properties, but FEMA has it.”
Freudenthal says he knows the flood plain managers in Orange Beach and Gulf Shores and has discussed their refusal to sign off on the map changes.
“They’re both really good guys, and want to do what is best for their communities. But they are not coastal engineers. They are not accustomed to making FEMA flood maps,” Freudenthal says. “We understand they don’t have coastal engineers on staff to review our cases, but FEMA does.”
Scott Douglass, a professor of coastal engineering at the University of South Alabama and author of a book titled “Saving America’s Beaches,” says he believes Freudenthal’s company is taking advantage of a long-time flaw in the FEMA flood maps. The agency’s definition for a 100-year flood changes at the Alabama/Florida line. Along the Florida panhandle, the 100-year flood is 13 feet, Douglass says, but once you cross into Alabama, the 100-year flood height has historically been 7.9 feet, or five feet lower.
When beaches are nourished with sand from offshore, Douglass says, the elevation above water changes. And in the case of Orange Beach and Gulf Shores, the height change after the nourishment projects was enough for Freudenthal’s company to make a case the condos were now above the flood zone.
“If the beach is wider and higher, the flooding risk is reduced. We can model that. But there is no way it is reduced enough to pull those beachfront condos out of the flood zone. It’s crazy,” Douglass says, adding that he had not studied the properties in question in detail. “But I’ve been on those beaches. I think those people are manipulating the data to get a ludicrous answer.”
On its website, Flood Zone Corrections claims it succeeds in having FEMA redraw the maps more than 80 percent of the time.
“The flood zones and 100-year flood elevation for our client’s parcel of land change to lower risk zones that deliver substantially lower flood premiums. Over 80 percent of the cases show results that reduce (National Flood Insurance Premiums) by more than 90 percent,” reads the site.
In effect, say the local officials, the map changes shift the cost of insuring the beach to private homeowners and businesses too small to foot the cost of appealing FEMA’s maps.
“They changed a huge area down here, from 4th Avenue west to 11th Avenue. It had been a VE zone since I’ve been here, for 10 years. That’s a considerable difference,” says Norris Cole, a coastal insurance executive with Gulf Shores Insurance Agency. “Changing people from a VE zone to an AE zone drastically reduces their flood insurance costs.”
In numerous cases, according to local insurance officials, individual condo developments stand to save hundreds of thousands, or even $1 million annually on their flood insurance. One agent said he recently rewrote a condo policy based on flood zone revision that dropped the insurance cost from $300,000 to $12,000, annually, though they remain just as likely to flood as they were before FEMA changed the flood zone designation.
In fact, insurance agents and city officials say several repetitive loss condo properties on the Gulf beach are claiming flood damage from flooding at the end of April caused by a simple rainstorm, a far less destructive event than a hurricane.
“I know that in Orange Beach and Gulf Shores, you’ve got a lot of angry insurance agents. I understand their anger because they lost a lot of revenue,” Freudenthal says. “If you think in that area there were millions of dollars in higher premiums that were reduced 90 percent on average, that means the insurance industry lost millions in revenue. I can understand as a business owner why they would be upset.”
FEMA officials did not respond to a request for comment about the changes, which media reports suggest are being investigated by the FBI. The Alabama Department of Economic and Community Affairs did not reply to questions concerning the state’s position on the redrawn flood maps.
It is possible that FEMA could redraw the maps again when updated versions are released, placing the beachfront property back in a high risk VE flood zone. Brandon Franklin, floodplain manager for Gulf Shores, says it will be awhile before new maps are issued.
“We just got an email that said it may be the spring of 2015 before we even see the preliminaries. That means at least one more hurricane season with these properties not designated as VE,” says Franklin.
Critics of FEMA’s move to lower flood zones for beachfront property say the agency is encouraging more development in high risk zones by creating artificially low insurance rates. What’s more, when those areas suffer future catastrophic losses, the federal government’s National Flood Insurance Program will be on the hook. That program is now $25 billion in debt, thanks to record losses from Hurricanes Ivan, Katrina and Sandy.
“It got to be very obvious that the (insurance) burden was being shifted off the beachfront developments, which will naturally be the most exposed, and is being shifted inland to our citizens,” says Smith. “Especially with the flood insurance legislation getting kicked around in Congress, I don’t see how you tell a single-family homeowner his flood insurance is going to be $12,000 for his house, while a multi-million dollar condo is also going to be $12,000 because he got a flood zone re-designation.”
Ben Raines is a freelance writer for Business Alabama. He lives in Fairhope.