NCPA - National Center for Policy Analysis


October 25, 2006

Nearly three-quarters of 14,534 New Orleanians who've applied for federal grants say they'll rebuild their Hurricane Katrina-damaged homes in flood zones, says USA Today.

The latest plan calls for the Louisiana Recovery Authority to dole out grants of up to $150,000 to cover uninsured losses, which residents can use to rebuild or relocate, with only minor restrictions.  Overall, the plan could prove quite costly to taxpayers:

  • The program collected only $2.2 billion last year in premiums but will pay out more than $20 billion in Katrina claims, leaving taxpayers on the hook for the rest.
  • Worse, the program encourages development in areas subject to flooding -- not just in New Orleans, but everywhere -- by offering insurance at bargain rates in areas where private insurers fear to tread.

Certainly, the homeowners in and around New Orleans deserve some assistance because of the magnitude of the disaster.  But encouraging rebuilding in the most flood-prone areas and leaving taxpayers on the hook for subsidizing reconstruction, underwriting the insurance on rebuilt homes and forced to bail out the flood insurance program in the event of future disasters is both unfair and foolhardy, says USA Today.

Source: Editorial, "New Orleans plan: Rebuild in flood zones, hand you the bill," USA Today, October 25, 2006.


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