Hurricane Report

Region buoyed by federal hurricane dollars

By Angelle Bergeron

Hurricane Ike was the costliest of the eight hurricanes to hit the United States during the 2008 hurricane season. Photo by Sam Barnes

Despite the human suffering and loss wreaked by hurricanes, the influx of funds to rebuild can create an economic boon for affected states.

“Based on a generic mix of residential, commercial and industrial construction, our economic impact system suggests that every $1 billion that goes into construction will generate about $3.5 billion in overall spending, $1.6 billion in gross domestic product and about 21,000 person years of work,” says Ray Perryman, an economist who heads The Perryman Group of Waco, Texas.

“Since the funds primarily come from elsewhere, these amounts are largely net gains to the areas.”

Hurricane Ike was the costliest of the eight hurricanes to hit the United States in 2008. According to the Insurance Information Institute, preliminary estimates for insured losses in Texas and eight other affected states were $10.7 billion in November.

In December, the Federal Emergency Management Agency estimated $1.4 billion had already been approved for Texas communities that suffered loss or damage from Ike. Although the deadline to register for assistance was extended, by December 51 Texas counties and one tribal nation were eligible for FEMA assistance. The 33 hardest-hit counties qualify for both individual and public assistance.

Additionally, about $39 million has been obligated to Texas as an advance on reimbursements for repairs to the University of Texas Medical Branch on Galveston Island. Of the 80 percent of the eligible and documented debris, totaling 18.7 million cu yds, FEMA has agreed to pay the total cost for clean up until April 26. By December, FEMA had already obligated nearly $219 million for debris removal and other public needs.

The amount of coverage provided by the FEMA-administered National Flood Insurance Program totals $58.1 billion.

Overall, the 2008 hurricane season was costly for the insurance industry, which paid out $525 million in insured losses for Hurricane Dolly, an estimated $2.1 billion for Gustav and $80 million for Tropical Storm Hannah. And that’s after paying an estimated $41 billion for Hurricane Katrina claims related to damage to homes, businesses and vehicles in six states.

advertisement

FEMA estimates it has provided more than $50 billion to the Gulf Coast States for recovery since Katrina and Rita hit in 2005.

Construction continues at a feverish pace in the New Orleans area, where the U.S. Army Corps of Engineers was tasked by Congress to bring the Greater New Orleans Hurricane and Storm Damage Risk Reduction System to 100 year levels of protection by 2011.

The work is fully funded through special Congressional appropriations totaling $14.3 billion, with the federal share being $12.8 billion and the non-federal cost share of $1.5 billion to be repaid over 30 years.

The local economy will no doubt reap a huge multiplier effect of the estimated 344 construction contracts to be complete under the program, and contractors from across the nation are performing work in New Orleans.

As the federal funds continue to flow into hurricane-affected areas, the outlook for 2009 promises to get brighter for the affected states.

In 2007, a total of 220,000 jobs were supported by direct and indirect outlays associated with Louisiana’s non-residential construction spending, which totaled $9.4 billion, says Ken Simonson, chief economist of the Associated General Contractors of America. That direct construction spending contributed a total of $20.4 billion to the state’s GDP of $216.1 billion.

In Texas, the 2007 numbers were higher, with a total of 1,299,000 jobs supported by the state’s non-residential construction spending, which totaled $54.3 billion.

The recent economic stimulus package also contains a number of special provisions for parts of the Midwest that suffered flooding last summer, Perryman adds.

“To the extent that such programs could be expanded to areas affected by Ike, it would bring additional benefits and help to stimulate private activity.”