Jackie Bell knew the whole story and was upset. John Markham heard it for the first time, and was stunned.
“It’s feels like somebody pulled the rug out from underneath your life,” Markham said.
The two neighbors were sitting on the comfy front porch of Bell’s nicely kept home at 220 Dix Drive — and seemed equally unhappy. The difference was that Markham looked completely baffled by what was being discussed.
“Poor John,” Bell said later on that sunny afternoon. “He didn’t know anything yet, and it was like somebody walked up and hit him over the head with a baseball bat.”
Markham’s shock — and Bell’s distress, for that matter — came from pulling apart the details of a new federal law that dramatically changes the landscape for property owners who live in “high-risk flood zones.”
Since 1984, when Kansas joined the National Flood Insurance Program (NFIP), homeowners like Bell and Markham who live in areas considered susceptible to a “100-year flood” have been able to purchase their mandatory flood insurance at relatively cheap rates.
That’s been a pretty important budget item for almost everyone in Dix Addition — a quiet, leafy, 160-home neighborhood east of Casement Road — and for plenty of other Manhattanites, as well.
“The truth is that we live at the bottom of a bowl, and water follows gravity,” said city planner Chad Bunger. “Flooding is always going to be a worry and a regular part of life, in Manhattan and some of the areas around us.”
But the Dix Addition presents a particularly difficult situation, sitting just west of that horseshoe bend in the Big Blue River and bordered on the north by the old river channel — an obvious place for water to flow if the river jumps its bank.
“Every time I think about that neighborhood and the northeast part of town in general, I get a knot in my stomach,” Bunger said.
The flood issue in Manhattan has just become a whole lot more serious – and without a drop of water flowing anywhere.
Faced with intense pressure from taxpayers across the country who don’t live in flood-risk areas, Congress has taken two stabs since 2012 at halting the longtime subsidies NFIP has offered when selling flood insurance.
Well, gigantic sums of money flowed out in claims following two huge natural disasters — Hurricane Katrina and Superstorm Sandy — and suddenly the NFIP was $24 billion in debt.
Taxpayer groups were irate, in part because a lot of the claims paid out were to repeat “victims” — people who lived in high-risk areas, had houses washed away, gladly took the government’s money and promptly rebuilt in the same spot.
The fact that a hefty chunk of these folks were millionaires with homes on dangerous coastal property — a good number of them vacation properties, to boot — helped prompt Congress to enter the battle.
LEGISLATION called the Biggert-Waters Act was passed in 2012, essentially killing subsidies on the spot and aiming to raise NFIP rates quickly (and often spectacularly) until they reached “risk-neutral” amounts.
In other words, the federal government wanted customers to pay full dollar for their insurance, with enough padding in additional fees to get rid of that $24 billion albatross, and to do so immediately.
But Biggert-Waters barely even got to residential customers. It was too much, too soon, and blowback hit Congress from the other side of the flood-map fence.
Thus, a compromise law was passed and signed earlier this year.
“This one has the same general goal of getting flood insurance premiums in line was actual risk,” Bunger said, “but it uses a shallower glide path.
“Premiums can only be raised a maximum of 18 percent per year, but that’s still a shock to people who have gotten used to the idea of paying a couple hundred bucks — then suddenly somebody says they’ll be charged $2,500 or $5,000.”
In a neighborhood like the Dix Addition, the reality of the new law has been stunning. It even has residents wondering if the area can survive in its present incarnation.
“Let’s start with simple math,” suggested Bell, who has been in her home 27 years, owns it outright and therefore doesn’t need to buy flood insurance — and she doesn’t. “The average home price around here is between $140,000 and maybe $170,000. If you add something like $3,000 per year over the life of a 30-year mortgage and total it up, a potential buyer is looking at a house costing $200,000 or more.
“So why would anyone buy here?”
In fact, that unsettling math already is resonating around the neighborhood. Houses are up for sale on almost every block.
“I know someone who has her home listed for $185,000, and she told me that if somebody offered $150,000 tomorrow, she’d grab it and go,” Bell said.
“What’s scary is that those signs all popped up at once, when everyone realized that it’s going to get tougher and tougher to get out.
“There are a lot of retirees here, and most have their houses paid off. They can stay, and they don’t have to buy flood insurance. But what happens to their equity as time goes by and the neighborhood goes downhill?”
That’s what Markham is wondering.
A 36-year-old high school teacher who has lived at 2005 Lilac Lane for 10 years, he doesn’t see much room to maneuver with his $150,000 home.
“I can handle my mortgage now…just,” Markham said. “But if my flood insurance goes up, it could be too much for me. So how would I get out? I still owe on the house.”
Residents have reason to be concerned about their own finances and those of their neighbors.
“You can already see houses that people bought and then just gave up,” Bell said. “Some are deserted. There are trashy places showing up. Eventually we could be in a situation where the only people who would buy in Dix are paying cash – parents getting their kids a place to live during college, or even drug dealers.
“I remember how thrilled I was to live here at one time. Now we’ve already had a drug bust just a street or two over.”
Bell is not exactly a lone voice crying wolf about the future of Dix Addition.
Manhattan City Commissioner Karen McCulloh has expressed a similar worry. During a formal commission meeting, said she feared creation of “a flood-plain slum.”
RILEY COUNTY Commissioner Ron Wells, still upset years later at the 1993 flood he called “a man-made disaster” — because the Corps of Engineers failed to release water from Tuttle Creek Reservoir soon enough — sees the plight of Dix Addition residents and feels the frustration all over again.
“It shouldn’t have flooded in ’93, for starters,” Wells said. “But it happened, several homes had to be purchased (in a city-county effort) because people couldn’t stay, and now it’s happening all over again — except this time it’s the financial hit for flood insurance.
“What happens when those houses become impossible to sell?”
IT’S A scary question.
No one has a magic answer, at least none that can be implemented immediately.
But there may be hope.
First, the city is working on every possible option to help residents lower their premiums – for instance, explaining ways to make structures more flood-resistant.
“There are several things that can be done,” Bunger said. “We’ve got information on the city website now, and eventually we want to have a manual available to everyone in the process — homeowners, Realtors, insurance agents and so on.”
The true light at the end of the tunnel, though, might be private flood insurance.
Historically, for-profit companies have stayed out of the flood business in the United States. But now a handful of large firms have noticed a desperate marketplace.
“A private company never would have let these mistakes happen,” said Mike Widman of Charlson & Wilson Insurance Agency in Manhattan. “Massive losses that we saw after Katrina and Sandy…those would have been foreseen well in advance, and rates adjusted accordingly.
“Look, FEMA was never meant to be in the insurance business. It was supposed to be a disaster relief agency. So it’s not a surprise that this insurance has become a mess.”
Private insurance, in fact, could save a neighborhood like Dix Addition by keeping rates down — while still covering actual risks.
As an example, the global insurance giant Lloyd’s of London is now selling flood insurance in Florida and California, and it has announced it will expand to other states.
No two parcels of land or structures are exactly the same, but consider Lloyd’s rates for a $146,000 home (a fair average for Dix Addition) in a Florida flood-risk area.
The first-year premium is listed at $1,367, compared to an existing NFIP rate of $6,685.
The numbers actually become more amazing along the way: Over the term of a 30-year loan, NFIP flood insurance would cost $200,550 — more than the price of the house — while the Lloyd’s tab totals $41,010, a savings of $159,540.
“These people are experts,” Widman said. “They can do it cheaper because they do it accurately. And because you don’t have government inefficiency and waste and outdated maps and all the rest of it.
“I really don’t think there’s any realistic way out besides private flood insurance. And there’s precedent for it: Wind and hail damage used to be covered in a regular homeowner’s policy, but insurance actuarial specialists found out that the incidents were rising and claims would increase, so companies took wind and hail out of the homeowner’s policy, and now they sell it separately.
“That’s what may happen with flood insurance. You’ll still have to have it if you live in certain areas, but it could be cheap enough to make the home price worthwhile.”
“I think private insurance is the answer,” the commissioner said, “so I think we need to explore all the avenues to see how quickly it can be made available here.”
Markham, for one, is more than ready.
“Anything that helps… anything that keeps us from being financially trapped without options, I’m anxious to hear it,” he said.
“This is a nice neighborhood, and it shouldn’t just disintegrate.”
In fact, no neighborhood ought to be in such a fix — in Manhattan or anywhere else.
“It’s enough to worry about the water itself, right about this of time year,” Bunger said.
“But people who use common sense and make sure they know what to do can learn to live with a flood once every few years.
“They just shouldn’t be penalized financially, too.”
Bell laughed at that sentiment.
“It’s true,” she said. “You feel like it’s not fair. But all we can do is keep our fingers crossed for some good news.
“I think we deserve some.”