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COASTAL PROPERTY OWNER FACT SHEETS

Floodplain Focus:  NFIP Probation & Suspension

The National Flood Insurance Program (NFIP) is based on a cooperative agreement between the local community and the Federal Emergency Management Agency (FEMA).  FEMA can only make flood insurance available in those communities that agree to regulate development in the floodplain. To join the NFIP, a community must adopt a floodplain management ordinance or regulation that meets or exceeds the minimum NFIP criteria and enforce these requirements for new or substantially improved structures and other development within the floodplain. The community’s overall floodplain management program is reviewed periodically by the FEMA Regional Office or the State NFIP Coordinating Agency (Connecticut Department of Environmental Protection). Either agency may inspect records as part of a community assistance visit (CAV).  If a community does not uphold its part of the agreement and fails to adequately enforce its floodplain management requirements, FEMA has three methods of recourse: 1) reclassification under the Community Rating System (CRS), 2) probation, or 3) suspension from the NFIP.

CRS Reclassification

The Community Rating System (CRS) provides a discount in flood insurance premiums for properties in communities that participate in the CRS program.  CRS Communities in Connecticut are: Cheshire, East Lyme, Hamden, Newtown, Stamford, West Hartford, and Westport.  CRS communities that are deemed to no longer be in full compliance with the NFIP requirements can be reclassified to Class 10 and residents would not receive a discount on flood insurance.

Probation

Probation represents formal notification to the community that FEMA regards the community’s floodplain management program as non-compliant with the NFIP criteria.  Prior to imposing probation, FEMA provides the community a 90-day written notice and lists specific deficiencies and violations.  It also notifies all policyholders of the impending probation, telling them that an additional $50 premium will be charged on policies sold or renewed during the probation period.  The objective of this surcharge is to bring the policyholders’ attention to the fact that their community is not compliant and failure to correct the problems may lead to suspension. 
 
The community has 90 days to avoid this sanction by correcting deficiencies and remedying identified violations.  Probation may be continued for up to one year after the community corrects all program deficiencies.  This ensures that the community has truly changed its ways and become compliant and that all policyholders are advised of the situation when their policies are renewed.

Suspension

If, after a period of probation, a community fails to remedy its program deficiencies, it will be suspended from the NFIP.  Suspension means the community no longer participates in the NFIP.  It is subject to the sanctions for non-participation, including:  no resident will be able to purchase a flood insurance policy (or receive a mortgage since the purchase of flood insurance is a requirement of a mortgage for homes located in the flood zone), existing flood insurance policies will not be renewed, no Federal grants or loans for development may be made in identified flood zones under programs administered by Federal agencies (such as HUD, EPA, or SBA), no Federal disaster assistance may be provided to repair insurable buildings located in identified flood zones for damage caused by flood, no Federal mortgage insurance or loan guarantees may be provided in identified flood zones, federally insured or regulated lending institutions such as banks and credit unions must notify applicants seeking loans for insurable buildings in flood hazard areas that the property is not eligible for Federal disaster relief and is located in a flood hazard area. These sanctions can be severe on any community with a substantial number of buildings in the floodplain, such as a coastal community.  

 

FEMA grants a community 30 days to show why it should not be suspended and then issues the community a 30-day suspension letter. FEMA may also conduct a written or oral hearing before suspension takes effect. A community can automatically be suspended if, following due notice, it failed to adopt revisions to its floodplain ordinance or regulation in response to flood map revisions or amended minimum NFIP criteria. A community suspended from the NFIP may apply to the FEMA Regional Office for reinstatement by submitting the following:  a local legislative or executive measure reaffirming the community’s intent to comply with the NFIP criteria, evidence that all program deficiencies have been corrected, and evidence that any violations have been remedied to the maximum extent possible. FEMA may reinstate the community to full program statues, bring it to a probationary status, or withhold reinstatement for up to one year after a satisfactory submission from the community. 
 

 More information, go to the FEMA website.

Floodplain Focus: Substantial Improvement

Floodplain management regulations are most effective in reducing flood damage to new construction.  Buildings built before the adoption of the National Flood Insurance Program (NFIP) regulations are often subject to repeated flood damage, flood insurance claims, and federal disaster assistance.  The NFIP regulations address this problem by requiring that substantially improved and substantially damaged buildings be brought up to the same standards as new buildings built in the 100-year floodplain.  
 
Substantial improvement is defined as “any reconstruction, rehabilitation, addition, or other improvement of a structure, the cost of which equals or exceeds 50 percent of the market value of the structure before the “start of construction” of the improvement. The term does not include either: 
 
  1. Any project for improvement of a structure to correct existing violations of state or local health, sanitary, or safety code specifications which have been identified by the local code enforcement official and which are the minimum necessary to assure safe living conditions, or
  2. Any alteration of a ‘historic structure’, provided that the alteration will not preclude the structure’s continued designation as a ‘historic structure’.”  A substantially improved structure must be brought into compliance with the NFIP regulations.  Typically this means the structure must be elevated to or above the base flood elevation (BFE).
For purposes of determining substantial improvement, market value pertains only to the structure in question.  It does not pertain to the land, landscaping or detached accessory structures on the property.  Acceptable estimates of market value can be obtained from the following sources:  
 
  1. An independent appraisal by a professional appraiser;  
  2. Detailed estimates of the structure’s Actual Cash Value;  
  3. Property appraisals used for tax assessment purposes (Adjusted Assessed Value);  
  4. “Qualified estimates” based on the sound professional judgement made by staff of the local building department or local tax assessor’s office;  or
  5. Replacement cost minus depreciation. Items that should be included in the cost of repairs are all materials, all structural elements, all interior finishing elements, all utility and service equipment, demolition costs, labor (including donated or volunteer labor), overhead and profits. Items that should not be counted toward the cost of repairs include the cost of plans and surveys, permit fees, post-storm debris removal, landscaping, swimming pools, and detached structures.
A single large improvement or repair project is clearly a substantial improvement no matter how many separate permits are issued.  However, the NFIP regulations do not require that smaller individual improvements made over a period of years and that add up to 50% be considered a substantial improvement. Theoretically, the property owner could beat the system by applying for a 40% improvement project one year and applying for another 40% project the following year. Communities can eliminate this loophole by strengthening their local floodplain ordinance or regulation above the minimum NFIP standards. Improvement and repair projects can be counted cumulatively so that buildings will be brought into compliance with flood protection standards sooner. Examples would be to have a cumulative substantial improvement requirement over a 5 or 10 year period, or over the life of the structure.  Another way to bring more buildings into compliance with the standards for new construction is to use a lower number than 50% in the substantial improvement requirement. A building is more likely to be brought up to code sooner if the threshold is lower, such as 25%, 30% or 40%. In communities with many older buildings that are exposed to flood damage, this is an effective means of speeding up compliance.  
 
Structures are substantially improved in one of four ways:  
 
  1. Rehabilitation (improvements that do not affect the external dimensions);  
  2. Addition (improvements that increase the square footage);
  3. Reconstruction (entire structure is destroyed or purposefully razed and a new structure built on the old foundation);  
  4. Substantial Damage. Substantial damage is defined as “damage of any origin that is sustained by a structure where by the cost of restoring the structure to its before damaged condition equals or exceeds 50 percent of the market value of the structure before the damage occurred”.  All structures that are substantially damaged are automatically considered to be substantial improvements, regardless of the actual repair work performed.
 
FEMA publishes a guide entitled “Answers to Questions About Substantially Damaged Buildings” (FEMA 213) that may be helpful to local officials in determining substantial damage or substantial improvement. Contact Diane Ifkovic or Carla Feroni, CTDEP, at (860) 424-3706 to obtain this publication and for any further questions.  More information can also be found at the FEMA website.