Land buyout plan shocks Hancock

Theresa Thomas Ray of Waveland expresses her doubts about the Army Corps of Engineers ability to protect the Mississippi Coast during a citizens meeting. "If the Army Corps does anything like what they did in New Orleans, we don't need them here," said Ray.
photo by AMANDA McCOY/SUN HERALD


Public meeting draws hundreds
By J.R. WELSH
baybureau@aol.com


More photos: Hancock County Corps meeting (Sept. 18)

BAY ST. LOUIS -- Hancock County was still reeling Tuesday from revelations that the U.S. Army Corps of Engineers is proposing to buy hundreds of acres from private owners to wipe clean flood-prone land in Bay St. Louis.

The plan is part of the Mississippi Coastal Improvements Program, which has been in the working stages for months but only became common knowledge this week. The issue boiled over Monday at a public meeting held by the corps and the Mississippi Department of Marine Resources that was attended by well over 250 people.

Citizen reaction developed immediately. One activist group, Coastal Community Watch, is soliciting questions from citizens for submission to the corps, and is asking the government to provide written answers on a Web site.

Another group created a Web site called savebaywaveland.com, and officials are working on a resolution formally opposing a mandatory buyout and asking that any properties purchased be bought under strict conditions governing future use.

A buyout would be the first step in the 30-year, Coastwide program. In Hancock County, it includes a possible levee, a 40-foot-high seawall around Old Town Bay St. Louis and flood gates at the mouth of the Bay of St. Louis. Targeted areas include Shoreline Park and much of Cedar Point in Bay St. Louis. Hollywood Casino is included.

DMR Executive Director Bill Walker spoke and moderated the meeting at Bay Middle School and caught the wrath of residents opposed to a buyout.

Suspicion were strong Tuesday that buyouts would remain voluntary. "I still believe they'll get to the point where it's going to be mandatory if they start building levees," said Hancock supervisors President Rocky Pullman.

Some also were angry because the plan has barely been publicized, although Walker said it "is a partnership that has been developed over the last two years" by his agency and the corps. Walker said meetings were publicized and held but did not elaborate.

The Sun Herald confirmed Tuesday that corps officials met with Hancock County supervisors and other officials and briefed them on the program in August. The meeting was held in executive session.

[A.M. in the Morning! Note: "Executive session" means that the public officials cannot disclose--even to their staff members--the contents of the meeting.]

Bay St. Louis City Council President Jim Thriffiley was critical, saying it was not good business. "I think any compulsive buyout is dead and over," he said.

Thriffiley said a joint resolution by the City Council, the Chamber of Commerce, the Waveland Board of Aldermen and supervisors will oppose mandatory buyouts and request that properties purchased be bought under the Stafford Act.

That would allow the government to buy property where a home was destroyed by the hurricane, at a price based on both the current value of the land and the value of the home before the storm.

In addition, the land could never be sold by the government and would be used only for public purposes.

Monday night, residents were opposed to even a voluntary buyout. They said such a plan would weaken the community, leave some people living in isolated areas and destroy small businesses if enough homeowners sell.

Then there was the matter of governmental distrust.

"How can the people of Mississippi trust the Corps of Engineers after what they did to New Orleans?" one woman said.

Another said: "You come in here and scare people to death with a plan that's not even thought out. You're not offering these people anything but terror. We already know what terror is."

On the Web

Information on the Mississippi Coastal Improvements Program can be found at:

• coastalcommunity watch.blogspot.com

• savebaywaveland.com

• mscip.usace.army.mil

• hancockchamber.org

Sun Herald original story published here on September 18, 2007.

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Tiny Katrina-Battered Miss.Town Triumphs Over Bush Administration

by Ana Maria

An article in today's Sun Herald, a McClatchy newspaper, accurately reflects the jam-packed, standing room only public high school cafeteria at last night's meeting with the residents of my own hometown and the U.S. Army Corps of Engineers. Titled Residents dispute Corp plan: Hancock may be removed from plan, the article reflects the tone and outcome of local residents at a meeting that was relatively unknown about until a few days ago. The only exception to the article that I have is that it wasn't just 200 people, but more like 1,000 who attended.

The Corps of Engineers had apparently originally intended the meeting to take place in a small facility like a trailer, but the ever vigilant and truly beloved county chamber of commerce secured the cafeteria. One woman's pointed question easily summed up the perspective of the crowd, myself included.

"How can we trust the Corps after what you did to New Orleans? We may be form Mississippi, but we're not stupid."

Huge applause erupted.

The plan appears, for now, to be essentially DOA.

Two years ago, the Republican-controlled Congress tasked the Corps of Engineers with developing a plan to "fix the coast." Putting the Corps' proposed 40 foot wall around our tiny town--which is bigger in land mass than San Francisco, I kept thinking of my SF friends and imagining the kind of public response to this same proposal over there. After all, a small tsunami off the Pacific Coast isn't a wild-eyed idea. The wall, however, is a stupid and impractical response. Put a 40 foot wall around the Bush Administration. Hell, at least that way we can be partially protected from more of its insanity.

Employing boring bureaucratic babbling to lull the crowd into seeing the "wisdom" of its proposed plan, Corps spokeswoman Susan Rees babbled on about in terms of 100, 500, and 1,000 year trends. We were having none of it.

So let me let this straight. The Republican Congress with a Republican White House speculated that it could buy up whole communities that have developed over a few hundred years, that has been screwed over by the White House buddies in the insurance industry, and that is willing to rebuild using more hurricane proof standards--if only the insurance companies would pay on the wind premiums we faithfully paid over the years.

Did Karl Rove come up with this plan to starve us financially to the point that we'll just gladly take a few pennies in exchange for our lives, communities and livelihoods? Move where? Work where? Afford housing where? And what about family? What about community?

Thankfully we now have a Democratically-controlled Congress, which I think means that it will listen to the will of these battered and beleaguered residents. After all, Democratic Speaker of the House Nancy Pelosi led a delegation of congressional leaders here to this very tiny town TWICE since Katrina hit. How many Republican delegations have come here? Uh, none. Not ONE. Bush flies in now and again for photo ops. When Republican Dennis Hastert ran Congress, he didn't bother to lead any delegation down here. Bush himself didn't call a conference of leaders to meet down here with residents.

No, ma'am and no, sir. The Democrats provided the only political leadership that came, looked around, and then sat there and listened to the beaten down and battered, but not broken, residents who are surviving Katrina, insurance insanity, and Bush's compassionless FEMA.

The residents of this tiny town of Bay St. Louis and of Hancock County--which Katrina hit the worst, successfully stood up to these ridiculously Republican-propagated policy proposals. The news reports indicate that our verbal pitch forks ran off the Bush-induced proposals--for now.

Amazing how a tiny town triumphs over the Bush Administration.

What's our recipe? Well, down here, there is no greater compliment than to ask for a recipe. So here it is.

Stand up.
Be strong.
Speak your mind.
Join hands with your neighbors--both literal and figurative neighbors.
Engage in battle.
Be fully committed to your goal.

The Corps thought that by doing the bidding of the White House and the then Republican-controlled Congress, it could walk in here relatively unannounced and just have its way with us. All of these players underestimated the landscape. The Republicans thought that they had a lock on their political power, and the 2006 election cycle proved them dead wrong on that. The Corps thought that their secretive plans to demolish our communities would have no formidable opposition. Again, dead wrong.

This provides the last ingredient in the recipe for success.

Allow opponents to underestimate you. Then overwhelm them when the time comes.

When followed, this is a recipe that can do plenty of good any time and any where, most especially in the political arena.

Political lessons from the battered, but not beaten, Katrina-ravaged region. Who'd have ever thought of that?

Read the Sun Herald article here.

© 2007 Ana Maria Rosato. All rights reserved.
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Al Showers Reports On The Need For Dredging In Bay St. Louis

By Al Showers

The water near Ben Gibbens' neighborhood used to rise and fall with the tide from the St. Louis Bay. But mud and silt dumped there by Katrina has clogged the estuary, causing flooding in the neighborhood.

"The stream before Katrina was probably three to five feet deep. Now, it's probably three to five inches deep," Gibbens said. "Now when there is a heavy rain, the street floods cause there's no place for the water to go to."

The bayous and lagoons are part of the natural drainage system. And just like man made drains, when the water flow stops, there's flooding.

"It's just growing more and more. It's completely taken over the lagoon," resident Edward Prados said.

Prados moved to a place on Bass Lagoon six weeks before Katrina.

"You'd see crabs, you'd see fish, it was beautiful. That's the reason why we moved back here and we want it back, we just want it back."

The peaceful beauty of the lagoon isn't Prados' only concern. He too worries if the area isn't dredged, the continued build up of silt and sediment will cause serious flooding.

"We're like the lost paradise back here and nothing's happening. Somebody should come back here and at least look over the situation and consider dredging."

Dr. Bill Walker with the Mississippi Department of Marine Resources says he's encouraged that FEMA has authorized dredging sediment out of public marinas. He hopes, eventually, the same thing will be done along the bayous, lagoons and estuaries across the coast.

But according to FEMA, it's unlikely the federal government will pay for additional dredging.

FEMA Spokeswoman Marcia Hill told WLOX News, "All eligible areas for dredging have already been identified. Silt is not considered marine debris, unless it is blocking navigation in a previously maintained waterway."

The Department of Marine Resources is urging residents who live near a clogged bayou to contact their County Supervisor to see if it's on the dredging list. If not, FEMA says any dredging will have to be done by county or city governments.


Originally aired on WLOX-TV 13, an ABC affiliate in Biloxi, Miss., on September 17, 2007.

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Residents dispute corps plan

Hancock County may be removed from scheme

By J.R. WELSH
baybureau@aol.com

BAY ST. LOUIS --
The top dog at Mississippi's marine resources agency said Monday that if resistance persists here toward a massive federal buyout of private lands envisioned by his agency and the U.S. Army Corps of Engineers, he will drop Hancock County from a scheme that was to include all three coastal counties.

"From what I've heard tonight, this is not a very popular idea here," said Bill Walker, executive director of the Mississippi Department of Marine Resources. "Chances are, we're not going to pursue this in Hancock County."

His remarks came at a public meeting held to explain portions of the Mississippi Coastal Improvements Program, a 30-year, multimillion-dollar plan by the corps and DMR. By the time the evening ended, resident rancor grew so intense that Walker was promising to not only drop the buyout plan, but also remove Hancock County from the entire program.

Aside from property buyouts, it would include extensive hurricane protection projects along the Mississippi Coast.

"If they tell us, 'Stay out of it,' we will remove Hancock County from the entire MSCIP," Walker said.

He repeated throughout the night that the buyout program would be purely voluntary, and no one would be forced to sell his home to the government. That seemed to be a cold comfort to distraught residents, who at times jeered.

Although officials say no firm plan proposal yet exists in writing, the Hancock County meeting was a trial balloon for the program that calls for buying thousands of flood-prone acres and removing current private owners in Hancock, Harrison and Jackson counties. Corps of Engineers maps that have been circulating in recent days show proposed buyout areas that include all of Shoreline Park and parts of the Cedar Point area in Bay St. Louis.

Corps of Engineers representative Susan Rees assured the crowd that a buyout would not be "a land grab to give to some sort of developer out there." Land acquired by the government would remain as marshes or green spaces, she said.

Although she spoke extensively about hurricane data, Rees gave few specifics on the overall plan. And although a study has been under way for two years, nothing yet exists on paper, she said. Officials have until Dec. 31 to file a written plan with Congress.

The plan envisions building a Coastwide hurricane protection system that in Hancock County could include a 40-foot-high seawall around Bay St. Louis, elevated roadways and levees as high as 30 feet along the CSX Railroad tracks, or huge flood gates obstructing the mouth of the Bay of St. Louis. According to a corps artist's concept, a Bay St. Louis seawall would block any view from Old Town of the bay.

After changing the meeting location twice on short public notice, the corps and DMR held the gathering Monday night at Bay Middle School. Despite location confusion, word got around and at least 200 residents packed the school's cafeteria. The mood began as polite and reserved but heated up to a level near hostility toward the two agencies as the night wore on.

Original Sun Herald article published September 18, 2007.

Read A.M. in the Morning's take on the meeting.

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Merlin Group: 103 paid in State Farm settlement

Merlin Group secured the deal

By ANITA LEE
calee@sunherald.com

GULFPORT -->State Farm Fire & Casualty Co. paid for the peace of mind Curtis and Joan Lee feel after two years of fighting with the insurance company over Hurricane Katrina damage.

The Lees' claim was among 103 settled between the nation's largest property and casualty company and the Merlin Law Group.

State Farm spokesman Fraser Engerman said: "We are pleased that we were able to settle these claims without further costly and lengthy litigation. We continue to hope we can resolve other claims still outstanding in the same manner."

The Lees can't discuss the settlement amount, but the $40,000 check State Farm offered him earlier this year obviously pales in comparison. That offer came through the Scruggs Katrina Group, the law firm then representing the Lees.

The Diamondhead couple had already gone twice to state-sponsored mediation with State Farm, where they turned down offers of $100,000 and then $110,000 for destruction of their South Diamondhead home, valued at $360,000 several years before the hurricane.

They then turned to the Scruggs Group, which has by far the longest insurance client list on the Coast. They assumed the amount would be more than State Farm had previously offered.

"You can imagine what we thought when we were handed a check for $40,000," Curtis Lee said. "We told (the Scruggs Group) what to do with it."

The Scruggs Group could not discuss the Lees' settlement, but the firm secured more than $80 million for 640 State Farm clients. Under that settlement, State Farm deducted any previous insurance payments, even if they came from the federal flood program, which paid the Lees policy limits for water damage.

They depended on wind coverage from State Farm to make them whole.

The Lees picked up their settlement check Monday at Merlin's Gulfport office.

"It was such a relief," said Joan Lee, who is retired from D.H. Holmes department store. "We were so nervous this morning. We've done this before. We were very, very pleased with our settlement."

The Merlin Group still has several lawsuits pending against the company.

"State Farm will never admit it owed anything," said the Florida attorney, William F. "Chip" Merlin Jr., who spent part of his childhood in Bay St. Louis and now specializes in litigation against insurance companies. Boyhood friends William Weatherly and Randy Santa Cruz, now attorneys on the Coast, helped persuade Merlin to join them in representing policyholders after Katrina.

The settlement agreement was signed before a late August ruling from the 5th U.S. Circuit Court of Appeals in the case of Leonard vs. Nationwide. The ruling validated policy language that excludes coverage for wind damage when it occurs simultaneously with destruction from tidal surge, covered under federal flood policies.

State Farm has maintained that its policies cover wind damage only when it is "discernible" and separate from water damage. The 5th Circuit has heard arguments about whether State Farm can exclude coverage for wind damage when water contributes, but has not yet ruled.

Joan Lee said when she and her husband saw the newspaper headlines about the Leonard ruling, they fell into a "blue funk," but were assured their agreement was still good. They're hoping the emotional roller-coaster ride is over.

"It was a fight from day one with the insurance companies," Joan Lee said, nodding toward her husband, a retired Whitney Bank vice president. "He was in the fight mode. I was in the flight mode."

Curtis Lee said, "In the past two years, we've had nothing but turmoil." Now, he said, they plan to travel.

Original article published September 18, 207.

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Mississippi Insurance Commissioner's Race Has Far-Reaching Implications

Policyholders of America Endorse Gary Anderson for Miss. Insurance Commissioner

“Illness and fatigue” plagued incumbent Insurance Commissioner, George Dale, who was unseated in the Democratic Primary on August 7. Voters were just plain “sick and tired” of Dale’s proinsurance industry positions and wanted a more consumer-friendly Commish.

Dale had held the position for 32 years but Hurricane Katrina proved too tough a test for the man who basically gave insurers permission to price gouge, deny, delay and lowball legitimate claims in Mississippi.

The State’s Democratic Party didn’t even want Dale to run as a Democrat. They felt the Republican ticket suited him better.

Gary Anderson, a Jackson, MS resident, won the Democratic Primary and will face Republican candidate and State Senator, Mike Chaney, in the November General election.

Anderson’s platform includes implementing several programs that will reduce skyrocketing premiums and give Mississippians a greater field of carriers from which to choose. He also will enforce “best practices” for claims handling. Anderson’s ethics reports filed with the state show he has honored his promise to refuse campaign contributions from insurance companies and/or their executives.

Chaney on the other hand promised to refuse contributions from insurance companies and their “suits” but his ethics report filings tell a different story. Moreover, his Senate voting record gives us a glimpse of what’s to come if he’s elected Insurance Commissioner and it’s not pretty.

Mississippi may be a preamble to future races in states impacted by severe weather. As such, POA feels the need to weigh in on this important race.

Mr. Anderson gets POA’s endorsement.

Read endorsement published in POA's October 2007 newsletter, The Policy Advocate.


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Santa Barbara's ABC Affiliate Airs Compelling 2-Part Original Katrina Series

by Ana Maria

Last night, the Santa Barbara ABC affiliate interviewed Kevin Davis, a budding would-be reporter who had just returned from his self-financed trip to the Katrina-ravaged region. In his interview on InFocus, Kevin aired part 1 of his two-part video titled Katrina Revisited.

Kevin’s mini series demonstrates compellingly the devastating financial crisis that can befall the 55% of Americans who live within 50 miles of our nation’s beautiful coastlines. His series demonstrates further that Taylor’s multiple peril insurance proposal is the answer to protect the financial security of everyday Americans who work hard, play by the rules, and expect an insurance policy to provide the financial security we pay for it to provide.

While doing his research long before coming to the area, Kevin came across my blog A.M. in the Morning! which I had posted on my Daily Kos diary. Regular readers know I focus exclusively on real life inside Katrina Land, with a specific focus on the Mississippi Gulf Coast. Kevin decided to contact me to share his plans to come to New Orleans. I recommended that he consider including three parts of the Katrina story that would surely be overlooked by most of the mainstream programs.

1. The ongoing devastating economic harshness of living on the Mississippi Gulf Coast.

2. How the insurance companies have played a major role in preventing its policyholders like Joe De Benvenutti and Congressman Gene Taylor and plenty of other throughout the Katrina area from rebuilding their homes, businesses, lives, and communities.

3. The absolute necessity of passing the multiple peril insurance policy that Gulf Coast Congressman Gene Taylor (D-MS) sponsored, legislation that is now a part of the federal flood insurance reauthorization bill on which Congress will soon vote. Brilliantly, Kevin incorporated everything into a two-part short video, the first part of which aired last night on Santa Barbara’s popular Sunday evening program InFocus during his interview on the program.

Here is part 1 that Kevin showed on InFocus.



I’m hoping that the popularity of Kevin’s interview and the compelling story he revealed in part 1 of this series will assist in guaranteeing that he will land a follow-up interview where the second part can also be aired. In Part 2, Kevin addresses the multiple peril insurance act directly and ends the piece with his interview with Congressman Taylor, the original sponsor of this landmark legislation. The congressman's interview provides undeniably persuasive and convincing reasons that the nation must offer its citizens one policy for both flood and wind damage, a policy option which private industry does not offer.

My favorites in the series are Congressman Taylor, Joe De Benvenutti, and Lisa Palumbo. In the spirit of full disclosure, however, Kevin also included two clips of yours truly as well.

Taylor told Kevin,

“People say ‘Well, gee. How is it the flood program loses $19 billion the same year that the insurance industry collectively cleared about $60 billion?’ Well, it’s no coincidence. The tax payers paid bills that the insurance companies should have paid.”

Taylor explained how families and businesses benefit from his proposed multiple peril legislation.

“and you can buy an option on your flood insurance for all perils. So that whether the wind did it, the water did it, if you come home to a slab, if you come home and your home was substantially destroyed, it doesn’t matter.

If you built it the way you were supposed to, if you paid your premiums, and the storm gets it, you’re gonna get paid. You don’t have to hire a lawyer. You don’t have to hire an engineer . . . and wait years to get the check that you should have gotten within days.”

That is how is should be.



To help propel the airing of this second part—seen here courtesy of Kevin Davis and A.M. in the Morning!;), let’s channel our political hell raising energy into contacting the station to request that they air Part 2. Santa Barbara is an important media market.

Contact the station know that their budding reporter has provided the world with a gift and that we’d like them to consider bringing him back on to show part 2. As always, A.M. in the Morning! provides a phone script with the phone number to achieve this important goal to help get this series aired in an important media market.

Hopefully, this bright, young, energetic, soulful man’s two-part series will also launch his new on-camera reporting career. Our nation needs more reporters who deliberately seek out the stories that need talents like Kevin’s that can tell the story in a movingly compelling manner.


Kevin Davis works as a production assistant for KEYT-TV, an ABC affiliate in Santa Barbara, CA, and is currently looking for his first reporting job. Last week, A.M. in the Morning! published an interview with CNN’s Kathleen Koch that Kevin Davis shot here in Bay St. Louis. Kevin can be reached at 925-788-1803 and kdavis2600@gmail.com.


© 2007 Ana Maria Rosato. All rights reserved.
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Children Slipping Further Behind after Katrina

A recent report published by the Southern Education Foundation, Inc. entitled “Education After Katrina: Time for a New Federal Response,” documents the complete lack of federal support for education access and opportunity in the Gulf Coast since Katrina. As Lynn Huntley, President of SEF, notes in her cover letter, “In the world’s richest nation…it is hard to accept the neglect and poverty in the Gulf Coast region and the limited engagement of the federal government in education reconstruction.”

She goes on to report: “Two years after the storms, thousands of Gulf Coast children are still without needed early childhood care and education. Displaced students are still struggling without needed counseling and other services as they fall further and further behind. Schools remain inadequately repaired or staffed and are still unable to provide students with the resources, rigor and hope needed for excellence in educational achievement and attainment. Thousands of students of all ages have simply dropped out of view or out of school, and impoverished Gulf Coast institutions of higher education are still trying to fulfill their mission against the odds. The nation can and must do better.”

(A wealth of data is available from a Boston Consulting Group report entitled "The State of Public Education in New Orleans," June 2007.)

Particularly upsetting to me was news of the tens of thousands of students who missed some or all of the past two years of school. From what I’ve seen of the FEMA housing “parks,” the kids who are staying at home from school (from 15% to nearly 25% of the kids, depending on age group) are cooped up and far, far away from the resources they need to connect to society.

Not investing effectively to restore the homes, roads, hospitals, schools, offices, and historic treasures of the area is a conundrum and a waste. Not investing in the affected kids is a travesty. We’d love to hear from experts on the ground what can be done.

Carla E. Dearing

Originally posted here on September 17, 2007.

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IRS has bad news on Road Home

Posted by David Hammer, staff writer September 16, 2007 8:48PM

Now that the Road Home has paid out more than 50,000 grants, many of those recovering homeowners are encountering a new cruel reality: They may have to send up to 35 percent of the federal grant right back to Washington in the form of income taxes.

If they claimed a casualty loss for their damaged property as a deduction on their 2005 tax return, they must add the grant to their taxable income in the year it's received.

Or, worse, they may find that their decision to claim a casualty loss -- made long ago, in some cases before the federal government sent billions to Louisiana for the Road Home program -- will suddenly thrust them into a higher tax bracket, forcing them to pay higher taxes on all of their income for this year.

The Internal Revenue Service would normally treat Road Home grants as nontaxable gifts, but if the grant applicant claimed a casualty loss from the 2005 hurricanes and later gets the Road Home compensation, the IRS considers the grant a duplication of the 2005 tax break, and it becomes taxable income in the year it's received.



Wayne Taylor of Slidell said he did a double-take when he read in the newspaper that his Road Home grant would be counted as taxable income in 2007 if he claimed the loss in 2005. He had claimed a loss totaling as much as his grant. He called his brother, an accounting clerk in Tulsa, Okla., who immediately started warning the dozens of elderly displaced Road Home applicants he knows in his community. None of them was ready for the shock.

"I'm lucky," said Taylor, a retired technician who supplements his pensions with a $40,000-a-year job. "I have people to advise me, and I'm still working, so I can absorb the hit. But a lot of people don't even know they have a liability."

Delivering bad news

New Orleans accountant Jerry Schreiber has spent much of the past year delivering the bad news about the taxability of Road Home grants to angry clients and colleagues.

For example, he said if Social Security recipients claim sizable casualty losses and then get large Road Home grants, they could go from not having to file a federal tax return to having to pay taxes on all their income: their pension and their grant. "When you lose your world and your comfort zone, it's very difficult," Schreiber said. "This is the emotional toll of all of this. And it's why it's so, so difficult to get people to pay attention to the tax issue. It comes in now, along with everything else: the insurance companies, the LRA, whether the levees are rebuilt. It's too much for a lot of people."

As few taxpayers understand the intricacies of the tax code, even fewer thought to consider the potential Road Home taxation issue back when they decided whether to claim a casualty loss on their 2005 return -- or, through a special provision, their 2004 return. The IRS decided only late last year that the grants would be taxable. That left local accountants giving clients nebulous advice, even as they met with them this year to prepare 2006 or 2005 returns, which could be filed all the way up to April 24.

U.S. Rep. Bobby Jindal, R-Kenner, and Sen. Mary Landrieu, D-La., each submitted legislation to exempt the grants from taxes, but the chances of passage aren't good.

"There are definitely very panicked people calling here about it, so she'll do everything in her power to get it done. But it's a challenging thing to get done," said Landrieu spokeswoman Stephanie Allen.

Not much optimism

As he prepared to push other priorities to Congress, Andy Kopplin, the executive director of the Louisiana Recovery Authority, the state agency that created the Road Home, was even less optimistic about the tax-break bill's chances in Washington.

"We're going to be pragmatic and work with our delegation to pass the bills we can pass," Kopplin said. "There hasn't been as positive a reception to that piece of legislation,"

Landrieu's staff said it has met with congressional budget staff to find out how much it would cost in lost tax revenue. IRS spokeswoman Deirdre Harris said it's hard to get a good count of how many Louisiana taxpayers claimed casualty losses from the hurricanes because they can still do so up until April 24, 2010, and Schreiber expects many of them to wait until the last possible moment to decide.

Geralyn Suhor, an accountant from St. Bernard Parish who prepares tax returns for homeowners in that hurricane-ravaged community, said ever-changing rules in the Road Home program and the IRS uncertainties made complex accounting work even more difficult.

She didn't know all the tax implications for Road Home grants while she was working with clients on 2005 and 2006 returns, but she made sure to warn them anyway.

"Now, I get calls from people who've just gotten their Road Home money, and they want to know what the tax implications are," Suhor said. "If I claimed a loss for them in 2005, I say you ought to think about putting some of the money away for taxes before using it for rebuilding. ... They've been waiting on this money to rebuild, and now this."

Nervous accountants

Suhor advised clients who claimed casualty losses on their 2005 returns to make estimated future tax payments. She also advised some to elect to take the Road Home payments in installments to spread out the income over two tax years, if possible.

The tax issue was so uncertain for much of last year that the IRS turned to a group of New Orleans-area accountants to come up with special breaks for Katrina victims.

Suhor said the problem is exacerbated because, in many cases, hurricane victims are making significantly more money in 2007 than they did in 2005, when Katrina's wrath cut off employment income for some taxpayers for the final third of the year. That's another reason a sudden uptick in income this year could push so many into higher tax brackets.

"It's very difficult for us to know what is impacting people, so working with local practitioners helps us give better guidance," said Harris, who recommended that taxpayers check www.irs.gov and search under "Help for Hurricane Victims."

Schreiber was the federal government's key local contact. He said tax professionals -- the ones who must decipher how Katrina's damage is handled in the infamously esoteric tax code -- are more nervous than ever. They want to produce solid tax returns for clients who lost everything, but they also depend on those traumatized clients to provide detailed records of their losses, he says.

He said the IRS still has yet to give guidance on the various tax implications of the three Road Home options of rebuilding, selling to the state and buying a new home in Louisiana, or selling to the state without buying again in Louisiana.

Meanwhile, the state has decided not to distribute Form 1099 to Road Home recipients, leaving the door open to the possibility that the IRS may never find out about the grant income. Schreiber said he and other CPAs are worried about taxpayers using that as an invitation to avoid reporting the Road Home money, which he said would be a big mistake.

"Of course, you'll have to be careful to explain to the client the tax consequence, but people will still want to roll the dice," he said. "Cheating on taxes is a game, but I hope they know if they get caught, the penalties and interest will eat them alive."

David Hammer can be reached at dhammer@timespicayune.com or (504) 826-3322.

Originally published here on September 18, 007.

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Legal tactics stall insurance reform

Companies' court fights upset lawmaker who wanted home rates cut

11:01 PM CDT on Sunday, September 16, 2007
By TERRENCE STUTZ / The Dallas Morning News
tstutz@dallasnews.com

AUSTIN – Four years after the Legislature took aim at runaway premiums for home insurance, two of Texas' biggest insurers are battling state efforts to lower their rates, and sponsors of the 2003 insurance reform law say homeowners are still paying too much.

State Farm and Allstate, the two largest property insurers in the state, have used their sizable legal staffs to fight the Texas Department of Insurance in various courts, allowing them to keep charging what state regulators say are inflated rates for their policies.

The companies argue that the state is overstepping its authority and trying to deny them the ability to have sufficient reserves for the massive weather-related losses that regularly plague Texas.

Watching from the sidelines – for now – is House Insurance Committee Chairman John Smithee, who has been discouraged by the legal tactics of insurers and the failure of insurance prices to come down significantly for many homeowners. He estimated that the cost of many policies is still at least 7 percent to 12 percent too high.

"Lawyers for insurance companies have been very creative in finding ways to not comply with the law," said Mr. Smithee, an Amarillo lawyer and Republican who sponsored the 2003 reform law. "You can draft a statute very carefully, but they [insurers] have the best lawyers in the business trying to work around the law."

Mr. Smithee said legislators need to find a way to strengthen the law in their next session, or "This will come up again and again in the future, particularly if Allstate or State Farm is successful in their litigation."

He also acknowledged that the regulatory approach set up under the 2003 law – the so-called file and use system – has not work as well as lawmakers hoped.

Under the system, insurers can start using the higher rates for auto and home coverage once they have notified the insurance department. The insurance commissioner has authority to review the new rates and can reject them if they are excessive – subjecting the company to refunds and penalty interest.

That is exactly what Insurance Commissioner Mike Geeslin did last month when he cancelled Allstate's proposed 5.9 percent statewide rate hike. But Allstate went to court, getting a temporary restraining order against the insurance department that allowed Allstate to keep charging its higher rates.

"The rates we implemented were accurate and actuarially justified," insisted Allstate spokesman Bill Mellander. "We have been acting well within the bounds and spirit of the law."

Further, he added, "You don't have to be a meteorologist to see we are living in an increasingly prolific environment of catastrophes. In the last month, Texas has seen landfall of a hurricane, a tropical storm and the near miss of another hurricane."

The two sides will return to state court in Travis County in early October.

4-year fight
State Farm has been locked in a legal fight with the insurance department for four years after the state's largest insurer ignored an order from the commissioner to cut its "excessive" rates by 12 percent. No end to the standoff is in sight.

Mr. Smithee said the Legislature needs to give more power to the commissioner to counteract the extensive legal resources of big insurance companies. He hopes that will happen when insurance regulation comes under scrutiny next year as lawmakers draft "sunset" legislation to revamp and renew the insurance department.

"The industry will have to deal with a lot of issues they have not been dealing with in recent years," he said. "They will be fair game when we consider the sunset bill."

Lt. Gov. David Dewhurst, a strong backer of the 2003 reform law, said he still believes it has been good for consumers and "created a healthy, competitive marketplace that is attracting new insurers to Texas."

"Companies that try to charge excessive rates are finding it won't be tolerated, and I will continue to watch the industry closely and take whatever action is necessary to keep rates low and insurance affordable," he said.

Mr. Smithee and industry observers say increased worries that another major hurricane, similar to Katrina or Rita, will hit the Texas coast is a factor in keeping insurance rates too high.

Insurers have been reducing their business along the Texas coast to lower their exposure to a hurricane, forcing homeowners there to buy coverage from the Texas Windstorm Insurance Association. The TWIA is the "insurer of last resort" set up by the state to provide windstorm and hail coverage for homeowners in the 14 coastal counties who can't get protection from private companies.

While the TWIA collects premiums on its policies, it currently is able to cover only $1.8 billion in potential property losses from a hurricane – a fraction of the $58 billion worth of property that TWIA insures up and down the coast. Should its losses exceed $1.8 billion, insurance companies will be required to cover additional damages based on their market share in Texas – though they can eventually recover those payments through premium tax credits.

That potential liability has kept some insurance companies from expanding their business in the state and kept other companies from entering the Texas market, according to Mr. Smithee. That has resulted in less competition among insurers – and less desire to lower prices to get new customers.

"We have not had the influx of new policies we thought we would have," Mr. Smithee said. "As a result, home insurance rates have remained artificially high. Companies don't want to expand in Texas because of the risk they would have to take on the coast."

Consumer groups have grown impatient with the protracted litigation between big insurers and state regulators.

"This whole, sad state of affairs is exhibit A in the case for stronger, stricter oversight of insurance companies," said Alex Winslow of Texas Watch, a consumer group active in insurance issues.

"Big insurers are exploiting a loophole in the law as they continue to try to bully the insurance department," he said. "We need a new regulatory system that gives the commissioner authority to approve insurance rates before they go into effect. It is time to have prior [state] approval before insurance rates can be imposed on policyholders."

Regulation questioned
Industry representatives argued the state needs less, not more, regulation of rates.

"There is not enough competition in the insurance market because companies are reluctant to enter a state that can require prior approval of rates," said Jerry Johns, president of Southwestern Insurance Information Service, referring to two current orders by Mr. Geeslin that bar Allstate and State Farm from raising rates further without prior approval.

Mr. Johns also rejected the claim that insurers are using loopholes to get around state regulation, saying they are entitled under the law to contest orders they don't agree with. "It doesn't send a good message when an insurer can't get rates sufficient to pay the claims of customers," he said.

Mark Hanna of the Insurance Council of Texas said state regulators need to remember that the primary mission under state law of the Texas Department of Insurance is "to maintain the solvency of insurance companies that do business in Texas. That means that companies must have adequate reserves on hand and charge appropriate rates to cover claims."

He said homeowner rates have fallen for most customers since 2003, and the number of complaints against insurance companies also has dropped each year since then.

"Unfortunately, Texas remains prone to devastating weather conditions," he added, citing the reason for some insurers to increase their rates.


Oriinally published in the Dallas Morning News on September 16, 2007.



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