Memo To City Council Regarding Buyout

Link to KCRG News Story - http://www.kcrg.com/news/local/24333699.html

See memo below:

Date: July 10, 2008

To: City Council

From: Jeff Davidson, Director of Planning and Community Development

Re: FEMA Buyout Program questions and answers


In the course of our discussion of FEMA’s Hazard Mitigation Grant Program (HMGP) you asked for a question-answer summary of the information that we have reviewed. The following information provides a summary of what we know to date.

1. Q: What is the purpose of the FEMA Buyout Program?

A: The FEMA Buyout Program is intended to permanently reduce a community’s vulnerability to flooding by moving people out of harm’s way. When a community purchases flood-prone property as part of a FEMA-sponsored buyout, it acquires title to the land, clears any structures from the property, and preserves property forever as open space. Buyouts are intended to permanently reduce local government costs for emergency rescue, infrastructure repair, debris removal, and emergency shelters. Future disaster payments are prohibited at the purchased site.


2. Q: What is the timeline for the buyout program?

A: At a meeting on July 7 in Schueyville, John Wageman of the Iowa Homeland Security and Emergency Management Division said:

Step 1. The City must submit the Notice of Intent (NOI) by September 12, 2008.

Step 2. The State will review NOI.

Step 3. The State will ask communities to submit formal applications about mid-October.

Step 4. The City will be given a minimum of two (2) months to submit a formal application.

Step 5. The State will send the application to FEMA. FEMA will take two (2) or three (3) months to award the grant.

Step 6. The City will sign a grant agreement with the State.

Step 7. The buyouts may begin.





3. Q: What uses can be made of purchased property?

A: Purchased property becomes public open space that can be used to create parks, wildlife refuges, ball fields, etc. but cannot be developed or sold to private individuals or entities. Levies, flood walls and other flood mitigation appurtenances cannot be constructed on property purchased with FEMA funds. It is intended that areas purchased be allowed to be inundated during flood events.


4. Q: Can homeowners be forced to sell their property?

A: Acquisition projects are strictly voluntary and homeowners are never forced to sell their property. All sales must involve willing sellers. Prospective sellers must be informed in writing that the program is voluntary and that the City will not use its eminent domain authority to acquire their property for the project purposes should negotiations fail.


5. Q: Who makes the decision to submit damaged property to the HMGP for buyout?

A: The decision to submit damaged property for buyout is made by the local government, not the state or federal government. The state and federal government will make the ultimate determination of which properties receive buyout funds.


6. Q: How are purchase prices arrived at for properties submitted for buyout?

A: The purchase price for properties and buildings must be at their pre-flood fair market value. For purposes of the NOI, the State has told us to use 110% of the assessed value. For purposes of the offer to the homeowners, the written guidance provides that property value must be derived from a methodolgy that results in a reasonable determination of market value. This may be based on an appraisal and/or an adjustment to assessed value. If an appraisal or recent sale is not available, comparisons of recent actual sales to assessed value provided by the City Assessor, suggest that 113% of assessed value for the Parkview Terrace neighborhood and 100% of assessed value for Idyllwild would be representative of market value.


7. Q: Who pays for the buyouts?

A: The HMGP calls for costs to be shared on a 75% federal, and 25% non-federal. Of the non-federal costs, the state will contribute10% (anticipated), and 15% will be local or individual basis.


8. Q: Can individuals apply for HMGP buyouts?

A: No; the City is the applicant.





9. Q: Do specific properties have to be identified when the NOI is submitted?

A: Yes, specific properties must be identified and property data sheets completed for each property. A copy of the property data sheet is attached.


10. Q: How will FEMA and Iowa Homeland Security conduct evaluation of flood-damaged properties for buyout?

A: They will conduct a benefit/cost analysis of each property. They will assess the vulnerability of each property for flooding. It can be expected that properties in the floodway will receive higher priority than properties in the 100-year flood plain; properties in the 100-year flood plain will receive higher property than properties in the 500-year flood plain. In addition, the state has told us that it will rank properties in the following prioritized order:

1. Owner occupied homes substantially damaged or condemned.
2. Occupied rental properties substantially damaged or condemned.
3. Secondary residences or recreational properties substantially damaged or condemned.
4. Commercial properties substantially damaged or condemned.


11. Q: Are cost/benefit criteria used to target those who need help the most?

A: Yes; the State Mitigation Plan takes need into consideration. Cost-effectiveness is important in evaluating who to buy out, and the cost per unit for lower income properties is less. For example, buyout of a single $1 million home with two people in it is not as cost-effective as buying out ten $100,000 homes with 40 people in them. The second scenario reduces much more flood vulnerability. A goal of the buyout program is to permanently reduce local government costs for emergency rescue, infrastructure repair, debris removal and emergency shelters, and lower income folks require more of these services.


12. Q: What are the potential local match options?

A: The State has told us that FEMA and the State do not care how we provide our local match, they only care that it is provided. Besides City bonding capacity or cash, other possible options for local match include special CDBG funding that may be allowed to be used for local match, the homeowner providing all or part of the local match, or a special County open-space levy.


13. Q: Do buyouts apply to commercial property?

A: Yes; but they are a lower priority than residential properties.






14. Q: Can the local match be provided, in whole or part, by the homeowner?

A: Yes. Buyouts can be structured such that the homeowner donates a percentage of the value of the home. The donated value is allowable as a third party in-kind contribution of the local match.


15. Q: Are General Obligation Bonds used for the City’s local match share in a FEMA buyout considered “essential corporate purpose” or “general corporate purchase”, thereby requiring a referendum?

A: Because it falls into the category of nuisance abatement and demolition of dangerous or dilapidated buildings, use of General Obligation Bonds for the City’s share of a FEMA buyout of homeowners would be considered an “essential corporate purpose” and would not require referendum.


16. Q: What other City-related incidental costs are associated with the FEMA Buyout Program?

A: Loss of property tax revenue, park construction expense, and cost to perpetually maintain land as parkland open space. The City will also have to pay to demolish the house, but FEMA assistance may be available.


17. Q: What would be the estimated hit to the City’s tax base in the event of a buyout?

A: This cannot be determined for certain until the number of units to be bought out is known. Once the specific number of units is known, the decrease in property tax revenue can be calculated by taking the number of units bought out multiplied by the annual property tax rate, multiplied by the residential rollback, times the City’s share of the total property tax bill.



18. Q: Will the fact that the City does not have an approved hazard mitigation plan impact access to the buyout program?

A: There are many flood-impacted communities in Iowa that have not completed approved hazard mitigation plans. No governmental entity in Johnson County has an approved hazard mitigation plan. We have received funding from the State for conducting our hazard mitigation planning process and will be conducting that process jointly with other entities in Johnson County. This process will take at least nine months. We anticipate that granting of buyout funds would be contingent on completing this plan within 12 months of receiving the grant.

19. Q: Between Parkview Terrace, Taft Speedway, and Idyllwild, how many properties are in the floodway, 100-year flood plain, and 500-year flood plain?

A: Floodway: 1
100-year flood plain: 122
500-year flood plain: 126


20. Q: What about the buyout of the Thatcher and Baculis Mobile Home Parks?

A: The Thatcher and Baculis Mobile Home Parks do not include individual building lots; they are single parcels of property including multiple rental spaces. We have not heard from the property owners of either mobile home park in terms of interest in a buyout. A buyout of the parks with federal funds would require relocation benefits to be paid to the tenants and owners of the mobile homes under the Uniform Relocation Act.


21. Q: What can property owners who wish to be bought out be doing at this time?

A: Getting damage estimates for their property. Homeowners will need to get building professionals for making damage estimates; Damage estimates should be provided in writing, if possible.


22. Q: What impact does conventional homeowner insurance or flood insurance have on a property requesting assistance from the FEMA buyout program?

A: Eligible insurance proceeds are used first before FEMA buyout funds are applied to any property. FEMA mitigation grant program funding is supplemental to other benefits and must be reduced by amounts reasonably available (even if not sought or received) to the property owner, including insurance payments and FEMA housing needs assistance. The purchase offer made to the owner must be reduced by the amount of any duplicating benefits Deductions are not taken, however, for amounts the owner can verify with receipts were expended to repair or cleanup the home.



23. Q: In evaluating properties for buyout, is there a distinction made as to whether or not a property is in the 100-year flood plain or a structure in the 100-year flood plain?

A: The City is currently evaluating flood-impacted structures according to federal guidelines for damage to structures in the 100-year flood plain. Structures in the 100-year flood plain damaged beyond 50% of their value must be reconstructed one foot above the 100-year flood plain. The State has informed us that this is not the same as FEMA’s criteria for buyouts. FEMA asks about whether or not properties, not structures, are in the 100-year flood plain. A property in the 100-year flood plain that includes a structure elevated above the 100-year flood plain is still considered by FEMA to have an obstruction to flood waters. Therefore, the appropriate distinction for the FEMA buyout program is whether or not a property is in the 100-year flood plain, not an individual structure.

PPDDIR\MEMOS\FEMABuyOutProgram.doc