Multi – Hazard Resilience Revolving Loan Program is coming

A Message from Roderick Scott, CFM
Flood Mitigation Industry Association
November 29, 2021

Hello NHMA,

As the climate changes continue and accelerate, millions of the 3-4 million older high flood risk pre-FIRM buildings are at increasing risk of flooding and that translates into much higher flood insurance rates. Now we will ad the “grandfathered” buildings with NFIP 2.0, which may number 10-20 million buildings in US flood zones. The banks estimate the asset values at $1.5 trillion and the flood mitigation industry estimates the retro fit, hazard mitigation project costs at $600 billion. Flood hazard mitigation of our assets is a proven method of increasing flood resilience into the future.

For the last 50 years the US has used a FEMA NFIP system for regulating development in US flood zones. A changing climate is now making us evaluate our systems in relationship to the changes. The millions of older buildings in flood zones, many historic, are a viable remnant of our settlement patterns along water ways. Urban and regional support communities have flood risks that are rising and a lot of rural America is facing dramatic drought or rising flood risk. The Treasury is engaged as are the Congress and Executive Branches of the US Government.

Financing the retro fit has always been the big issue. Federal funding of mitigation of hazards pre and post disaster pale in comparison to the need/demand and the grants take forever to get on the ground for our industry to do our work. The idea of a revolving loan to finance the work has been batted around for over a decade. During the early days of NFIP reform there was a proposal to create a low interest long term loan program to finance flood mitigation projects. Then the Select Committee on the climate crisis issued a +400 page report on the needed adaptations to the changing climate. Included in those ideas was a multi hazard mitigation revolving loan program. In the spring of 2019 at a meeting in the Treasury Building, the banks asked our industry if we could keep up if financing was made available, the answer was financing was the issue and yes we would keep up with increased demand for our services. At the end of that meeting the banks told Treasury that if a revolving loan program was made law that they would be willing to loan the federal government several hundred billion dollars to finance the loan program. In late 2020 the STORM Act was passed out of Congress and signed into law in early 2021 – PL 116-284. The 2021 Infrastructure law funded the new loan program $500 million and now FEMA will write the program administration in advance of deployment.

In preparation for the deployment of the revolving loans the states must create their own multi-hazard resilience revolving loan programs. For the last year the National Conference of Insurance Legislators – NCOIL has worked to develop model state resilience revolving loan program legislation. November 20, 2021 the NCOIL voted to approve and forward to the states the attached model legislation. Unfortunately their version did not include an important section providing an “Income Disadvantaged” forgivable option for state and local revolving loan programs. It is critical that the loan program provide governments the option for LMI property owner forgivable loans. This also aligns with the Biden Administration “Justice 40” Executive order. The attached State model version 5 is the complete bill and is the one we ask you review and offer out to states to get into law in 2022 sessions so that they are ready for a hoped for late 2023 launch of the loan program. This is historic and will be the largest multi-hazard mitigation program in US history.

Thus begins a new era of financing natural hazard mitigation projects at the community and property level. Please have someone get back to me on this.

Roderick Scott, CFM
Flood Mitigation Industry Association