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Welcome to the X zone – hold on to your insurance

“There is a fifth dimension beyond that which is known to man. It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science and superstition, and it lies between the pit of man’s fears, and the summit of his knowledge. This is the dimension of imagination. It is an area which we call … The Twilight Zone.” – from Rod Serling’s “Twilight Zone”

(Oct. 25, 2013) Or when it comes to flood risk, it could be the X zone for Ocean City.

In keeping with the common horror B-movie trope of “be careful what you wish for,” it appears that the city’s desire to have its federal flood risk reduced has actually swung the proverbial pendulum of liability too far into the other corner.

Some resort leaders have said the expectation of a massive ease-up in flood requirements could put the city in extreme danger.

“I’m more than grateful that they moved the ‘V’ zone out onto the beach, but to give people the option not to buy [insurance] just doesn’t make sense to me,” said Igor Conev of Mann Properties.

Earlier this year, Conev and other industry leaders had lobbied the Federal Emergency Management Agency (FEMA) to re-classify the town’s oceanfront properties into a less intense flood risk zone, to account for the resort’s highly successful dune system.

The expectation was that this would reduce those properties’ rates under the National Flood Insurance Program (NFIP). But what was not anticipated was that FEMA would go so far as to completely eliminate the flood hazard zone for vast swaths of the resort, giving property owners the option to go uninsured.

Under the current revision of flood maps, the agency appears to have done just that.

While not having to pay premiums will have a face-value benefit to the taxpayers, the tax base as a whole could suffer a major blow if the city was left to look after derelict properties itself, without federal insurance assistance, following a catastrophic storm.

“It looks to me like it’s great for the consumer, but scary for our city as a business,” said Reese Cropper, a broker with Insurance Management Group. Cropper had also pushed to get lower rates for his clients, but now fears many will drop out of the program all together.

Since the inception of the NFIP in 1968, FEMA has been authorized to provide insurance policies with premiums based on Flood Insurance Rate Maps (FIRMs), which indicate what areas have greater danger of high water and should thus pay larger premiums for their insurance.

The FIRMs also allow FEMA to designate Special Flood Hazard Areas (SFHAs), in which flood insurance purchase is mandatory.

In recent years, however, the NFIP has experienced considerable financial difficulties, with payouts – especially after Hurricane Katrina – far exceeding the premiums collected. Part of the program’s re-authorization last year was a comprehensive re-mapping of all risk areas, as well as across-the-board rate hikes.

Prior to the current re-mapping, most of the resort’s oceanfront was in a “V” zone, an area subject to the highest insurance rates given the risk of both static flooding as well as impact from waves and debris.

What the city was expecting in the re-mapping was that those areas, given the dune buffer, would be re-classified as “A” zones, which are assigned a high water mark or ‘base flood elevation’ but not subject to additional damage from impact.

However, much of the resort has now been labeled an “X” zone, meaning one that is outside of the 100-year floodplain and thus has no base flood elevation or insurance mandate.

“The thing I don’t understand – and I agree completely that the dune is a wonderful mitigation and the ‘V’ zone should change – is how you can go from a ‘V’ zone right to an ‘X’ zone,” Cropper said.

“Most of Ocean City in the past has been an ‘A’ zone, which makes sense. You have some flooding but it’s not intense and the rates are fair,” he said. “But to take it completely out [of the SFHA] as though we have no flooding at all, just doesn’t make sense when you’re on a barrier island.”

Still, private lenders may themselves require flood insurance as a condition for financing. But those without real estate debt will be able to go it alone.

“That’s like saying that if you don’t have a lender behind you, you should just stop buying fire insurance,” Cropper said. “I don’t think that’s a smart thing to do.”

In many cases, it is feared, the city will be getting the boot from the NFIP under FEMA’s expectation that most of the resort’s properties will not get insurance if they aren’t required to.

“If you’re an independent business, and as part of your business model you don’t’ want to be insured, I can see that,” Conev said. “But when you’re dealing with condo boards, the implications are a little bigger.”

Conev noted that the State of Maryland changed its own regulations regarding condo insurance four years ago, so that condos with 20 units or less would not have to purchase property insurance. As such, many of Conev’s client properties dropped their policies, even though he warned against doing so.

“If you make it an option, they won’t do it,” he said.

Further, the change leaves the city as somewhat of a crossroads as to what it will be doing with its own flood measures. These measures garner city property owners a discount on their insurance from FEMA, and would thus also become fiscally – but not necessarily practically – a moot point.

Specifically, the city requires the first floor of all new buildings to be raised to base flood elevation, plus a certain level of extra space or “freeboard.” Currently, the town measures maximum building height from starting at the grade of the adjacent road.

However, even before the new maps were revealed, the city was already planning to change this measurement to starting at the base flood elevation, in order to remove the de-facto reduction of usable vertical space imposed on properties in higher flood elevations.

But with the revelation that the “X” zones in the new maps may not have a base flood elevation, the city’s Planning and Zoning Commission approved a further change, stating that height be measured from base flood elevation or two feet above the crown of the road, whichever is higher.

This essentially builds in a minimum flood elevation of two feet, even in the “X” zones, as far as the city is concerned.

“Our codes are still going to provide a buffer to what it looks like the federal government will take away,” said city Planning Director Matt Margotta

However, Cropper said he was confused as to why the city would go along with the new FEMA maps, but still impose its own tighter codes.

“If people are not going to be flooded, per these new determinations, why are you still going to make them spend more money on an elevated foundation that they don’t

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