SANDY | NJ Payout–Slow and Opaque

Governor of NJ comforts Sandy victim.

During my half-year stint as Chief Economist at the New Jersey Institute for Social Justice in Newark, I wrote a report tracking the payout of the public and private funds set aside for victims of Sandy.

Sandy caused damage equal to 5.8 percent of the NJ economy (gross product), more than twice its 2.8 percent share of the New York economy.

The report showed, overall, that the hardest-hit were the poor and near-poor, who were under-insured and under-prepared for the storm. If they had assets, they lost a major part of them. If they did not have assets, they died or suffered trying to stay alive.

In my report I compared New Jersey's response to that of New York. Most of the comparisons were not favorable to New Jersey, which was slower to pay out money to victims and was less transparent about how donations and Federal aid was being spent. In June I moved on to serve as chief economist to the Warrior Family Foundation.

This morning I read in The New York Times a story by Kate Zernike that reports: "Most U.S. Hurricane Aid Still Undistributed in New Jersey" (p. 28):

[Last month New Jersey] had distributed only about a quarter of the $1.2 billion that the federal government had awarded to help New Jersey homeowners and renters recover from the storm. [In addition, there were] complaints about heavy bureaucracy and a lack of transparency.
State officials responded that] the federal housing department  required several layers of additional approval... to prevent the kind of fraud that followed Hurricane Katrina.

Two Possible NYC Responses to Rising Water Levels

Subway stop after Sandy, October 29, 2013.

Robert Trentlyon has been keeping his friends informed about rising water levels and what they might mean for New York City. Here are two responses to the problem that have appeared recently. My thanks to him for sending them to me.

Response #1. A NYC Plan to Allow Flooding (by Douglas Hill)

New York City plans to be flooded. Unlike people living in several cities in Europe and New England who are protected from coastal flooding with storm surge barriers, New Yorkers are promised only “resilience,” the ability to withstand and recover. Because New Yorkers are tough. So says Mayor Bloomberg’s new plan for the city, A Stronger, More Resilient New York.

Storm surge, a gradual rise in sea level over a few hours or days, is identified in the Mayor’s plan as the most severe threat from climate change, worsening by the 1950s as sea level rises and hurricanes become more severe. Two or three storm surge barriers that would be closed to block the entrances to New York Harbor when a storm surge approached would protect the entire inner city as well as nearby New Jersey and the Hudson Valley, places that are blank areas on the City’s flood maps.

Instead, the Mayor’s plan calls for a patchwork of local measures to protect the most vulnerable areas in the inner city, including Red Hook in Brooklyn, Southern Manhattan, the lower East Side, East Harlem and Hunts Point in the Bronx. These would be guarded not with conventional seawalls or levees but with a novel “integrated flood protection system.” Exactly what that means would be determined by a global design competition.

What the planners seem not to have noticed is the findings of the Interagency Performance Evaluation Task Force (IPET), a monumental study of the lessons of Hurricane Katrina in New Orleans in 2005. Where the floodwalls failed in New Orleans was at their ends, either at the junction with another type of structure or adjacent land. Thus, these fragmented protection measures in the City may well be outflanked by flood waters, and they almost guarantee that nearby neighborhoods would suffer worse flooding.

Resilience would otherwise be provided by individual owners of buildings or homes who would be expected to move their utilities and furnaces out of the basement into upper floors, or in some cases to raise their entire houses above the expected flood level. Whatever the merits of some of these local plans for interim protection, the City needs long-term protection as the threat of coastal flooding worsens, a concept that seems missing from the Mayor’s plan.

Conceptual designs and cost estimates for barriers to protect New York City were presented by four major engineering firms in 2009 at a conference sponsored by the Metropolitan Section of the American Society of Civil Engineers. Similar barriers have been built during the past 50 years and have successfully protected London, Rotterdam, and St. Petersburg in Europe, and New Bedford, Providence, and Stamford in New England. At another ASCE conference in April, the five organizations that provide the metropolitan region with power, transportation and wastewater treatment detailed the myriad individual damages due to the storm surge from Superstorm Sandy, and agreed with the conclusion of the Port Authority that “an increased regional approach may be required to provide a better response.”

Why not storm surge barriers? One of the 445 pages of the Mayor’s plan is devoted to dismissing storm surge barriers for New York City.

Cost? The Mayor’s plan estimates the cost of barriers as $20 to $30 billion. By comparison, the City’s proposed Phase 1 is estimated at $20 billion, with more to come. The cost of Sandy to New York City alone is estimated at $19 billion. By the 2050s, a Sandy would cost the city $50 billion, according to the Mayor.

Social justice? The barriers would create an “insiders/outsiders dynamic,” according to the Mayor’s plan, where those behind the barriers would receive maximum protection, and others would be left out.

But apparently the Mayor ‘s fragmented plan , where neighborhoods judged to be vulnerable are given local protection at the expense of nearby neighborhoods, would not.

Hydrodynamic and environmental impacts? Well, they haven’t prevented other cities from being protected, but all the more reason to begin to evaluate what these impacts may be and how they may be ameliorated.

Safety? Although none of the several other barriers elsewhere has ever failed, in some cases for half a century, it is feared that their failure in New York would lead to catastrophic flooding. But no surprises. Better, it would seem, for New York City just to plan to be flooded.

Douglas Hill, EngScD, P.E., F.ASCE is a consulting engineer and adjunct lecturer at the School of Marine and Atmospheric Sciences at Stony Brook University.  Address: 15 Anthony Court, Huntington, NY 11743. 631-421-5544 dhill19@optonline.net or Douglas.Hill@StonyBrook.edu.

Response #2. Layered Strategy. The following was posted by Joe Trezza on the Staten Island Advance site, July 27, 2013:

Political and scientific leaders recently made their own waves as they debated plans for post-Sandy protection aboard a luxury yacht touring New York Harbor. Professional opinions differed between a representative of the mayor's office and a leading engineer who took the floor on the top deck of the Zephyr, which left South Street Seaport in Manhattan on a two-hour trip sponsored by the Working Harbor Committee that included much of Staten Island's North and West shores.

The tour was called "Beyond Sandy," and for paying customers, it brought together top minds to debate the best ways the city can brace itself for future storms.

William Haas, senior policy advisor to Mayor Bloomberg's Special Initiative for Rebuilding and Resiliency (SIRR), outlined a "layered strategy" that includes Staten Island-specific projects to add sand dunes and to raise and armor the South Beach boardwalk with sturdy structures in preparation for future storms. He said:

Integrating that into the boardwalk would provide protection for a large portion of the East Shore of Staten Island. The Army Corps has actually been looking at that project since the 1990s. That project needs to be moved forward. When the Army Corps is involved, there is a lot of process involved, and sometimes that can delay projects that, even if people think there is a lot of sense behind it, there may be a lot of issues that will stall it.

Not Sufficient? But those improvements won't be sufficient, according to Mike Abrahams, technical director for structures at the engineering firm Parsons Brinckerhoff:

That would improve conditions and it would help improve the vulnerability to smaller storms.But my thesis is that those types of measures, while they are helpful, don't really address the long term problems that we are facing.

Abrahams said not only will the effects of global warming and rising water levels make Sandy-sized storms more frequent, they will also allow smaller storms to inflict similar damage:

The 100-year storm now has to be considered a much more frequent storm. The 10-year storm becomes the three-year storm, and so on.

Abrahams introduced to the audience on the Zephyr his plan to install three floodgates in major city waterways. The gates would be similar to those constructed in London and those proposed for cities like Saint Petersburg, Russia, and Venice, Italy, designed to protect coastal cities from surges and wave action caused by storms Sandy-sized and above.

Located in the East River, the Kill van Kull and either the Arthur Kill or the waters off Sandy Hook, N.J., the gates would protect New York City in ways the mayor's plan could not, Abrahams said. Buts the project's projected price tag of around $20 billion that makes its completion improbable.

Dr. Philip Orton, a research oceanographer at Stevens Institute of Technology in Hoboken, N.J said:

It is definitely not something to forget about. The city decided to forget about it, right?

Abrahams believes there are multiple reasons why this is. For one, there is environmental concern that the massive water gates -- which would need to protrude more than 20 feet out of the water -- would negatively affect water flow and marine life. There is also the ignorance that stems from the uninformed belief that New York cannot suffer from another Sandy, he said.

Hit Again?

"It is really hard for people to grab onto the idea that we can get hit again," he said.

Finally there is the cost. Abrahams says:

In fact $20 billion is not a large amount of money for this. We've already spent that much on Hurricane Sandy. If you look worldwide and see what other major cities are doing, then maybe a different solution will appear more acceptable.

Haas said the gate option will be further investigated, but advocates the mayor's plan for its wide-ranging intentions.

The layered approach really looks at protecting the coastal edges, while also looking at building level protections and infrastructure protections. In lieu of one large, mega-project, a number of interventions and improvements that protect neighborhood-wide, area-wide, can really improve conditions. It's nearly impossible to climate-proof New York City. Somehow, Mother Nature is going to bring something that is beyond what was anticipated.

Lessons from Sandy Regarding the Elderly, Heating

The New Jersey Institute for Social Justice prepared an in-depth report on the ways in which special groups of New Jersey residents were permanently hurt by the storm, more than the average resident. The report can be accessed here.

The report found that (1) Sandy deaths in New Jersey were concentrated among elderly people and (2) many of these deaths might have been prevented if the victims had been better informed about using generators and ovens for heating.

This post reviews the information. Relative to population, the incidence of deaths was greatest in New Jersey. As of November 17, 2012, Hurricane Sandy was blamed for the loss of 106 lives in the tri-state area – 64 in New York State (mostly in Queens and Staten Island), 37 in New Jersey, and five in Connecticut (http://nyti.ms/WlzwsI).

Most of Hurricane Sandy’s fatalities in New Jersey have been among the elderly: 21 of the victims, or 57 percent of those who died, were 65 or older; and 31, or 84 percent, were 50 or older. The numbers are similar for New York. (See Chart 1.) 

Chart 1. Hurricane Sandy Deaths, by Age, NJ and NY

Note: The total U.S. death count was 132 as of January 7, 2013, according to the New York Times, Jan. 7, 2013. Source: Chart computed by NJISJ from database posted by the New York Times, November 18, 2012.

Hurricane Sandy has exposed shortcomings in health care, especially for the elderly. The list of causes of death of the elderly shows repeated instances of preventable fatalities.

Some people killed by Hurricane Sandy were drowned by rising water or hit by a falling tree. These accidents could happen to anyone, although people who have restricted mobility are particularly vulnerable to them. The major remediable cause of death in New Jersey was asphyxiation, which includes carbon monoxide poisoning.  (See Chart 2.)

Chart 2. Hurricane Sandy Deaths by Cause, NJ & NYS

Note: “Was hit” generally means by a skidding vehicle on a street. “Asphyxiation” includes carbon monoxide inhalation from heating via a stove or running a generator in a closed space; such deaths are called “indirect” by the National Hurricane Center. “Tree/debris” as cause of death usually means a branch or tree falling of its own weight, or debris propelled by wind. Such deaths are described as “direct” consequences of the storm. Source: Chart computed by NJISJ based on database posted by The New York Times November 17, 2012 (http://nyti.ms/WlzwsI).

Asphyxiation is typically caused by residents’ attempts to alleviate the cold during a power outage.  Some may light a fire in the home that gets of control or sucks out the oxygen, while others run stoves or generators inside or near a living space, which can lead to carbon monoxide poisoning. Some in New Jersey also died of the cold itself – that is, of hypothermia due to loss of heat and lack warm clothing or blankets. The rate of asphyxiation and hypothermia continued to be much higher than normal for some weeks after Hurricane Sandy, as a cold spell hit and many displaced people lived in unheated conditions, leading to reliance on stove heat.

Another common problem during and after Hurricane Sandy hit was lack of backup power for medical equipment such as respirators. Special trips to replace run-down batteries on medical equipment were priced as high as $200. Service delayed for some meant service denied, and in some cases it meant death. Elderly people who were isolated and could not help themselves perished for lack of family, friends or a service to check on them.

The Dangers of Physical and Social Isolation

During the Chicago heat wave of 1995, the neighborhood of Englewood had 11 times as the neighborhood of Auburn Graham. The difference can be attributed to the strength of contacts among members of these communities (Eric Klinenberg in “Adaptation”, The New Yorker, January 7, 2013, p. 32, http://nyr.kr/111DjP7). People in Auburn Gresham communicate, and life expectancy is high. Compared with Englewood, says Harvard sociologist Robert J. Sampson, communication in Auburn Gresham is as effective in preventing heat-related deaths as having a working air conditioner in every room.

Communication among neighbors and centers of community activities is important for two reasons:

• It amplifies the transmission of useful information around the community, ensuring for example than no one is unaware of the risks of using a generator or how to mitigate those risks.
• It allows Good Samaritans to check to see who nearby needs help.

Main Conclusion

Most of the New Jersey residents who died as a result of the storm were 65 or older. The leading causes of death among this age group were asphyxiation, as respirators could not work without electricity, and carbon monoxide poisoning from fires or generators.

Some of these deaths might have been prevented by means of greater communication among and with vulnerable groups. A plan for achieving this goal should be developed before the next storm season.

Recommendations to Agency Planners: Prepare for the Next Storm with the Elderly in Mind

• Organize  buddy systems for the elderly, pairing those with phones with those who do not have them. Encouraging able-bodied and socially connected neighbors to keep tabs on the elderly in their community who would otherwise lack social support in a crisis. The cost of such a program would be minimal if volunteers could be recruited from churches, senior centers and other socially involved community meeting places.
• Special efforts should be made in a storm to identify and communicate storm warnings and advice to elderly or disabled people.
• An educational campaign is needed to explain the shortcomings of ovens and generators as heating sources in a blackout. Public utilities could be enlisted to circulate information on avoiding death from this cause.                      
• When medical equipment is installed in the homes of elderly people, the length of time that backup batteries work should be communicated to the families and professionals who look after the elderly in case of a disaster, and a follow-up system needs to be in place. Governments’ and utilities’ storm warnings should alert people to check and recharge batteries. Similarly, the medical profession and pharmacies should alert patients to the need to have several weeks’ worth of life-sustaining prescriptions available in an emergency because it may not be possible in a blackout to dispense prescriptions.

PSE&G is prepared to assist families reliant on medical equipment if they pre-register with PSE&G to receive priority attention in the event of an outage. To request the service, call 1-800-436-7734.                 

Recommendations to Households: Make Sure All Adults Know How to Operate a Home Generator Safely

Home generators are handy for backup electricity in case of a power outage, but must only be used in accordance with the manufacturer's guidelines.

• A back-up generator may only be connected to your home's electrical system through an approved transfer panel and switch that has been installed by a qualified electrician. Never connect the generator to your home's main wiring circuit.
• Never plug a generator into a wall outlet, as serious injury can result when the current produced by the home generator is fed back into the electrical lines, and transformed to a higher voltage. Disconnect your home from the power system before hooking up a generator. Feeding electricity back to the grid can endanger the lives of utility employees working to restore power.
• Plug lights and appliances directly into the generator. Use extension cords if necessary, but do not exceed the recommended wattage noted on the generator and use properly rated, UL or CSA-approved  cords.
• To operate a generator safely, follow the manufacturer's instructions and operate the generator outdoors in well-ventilated conditions, well away from doors or windows, to prevent exhaust gases from entering the house. Gasoline powered generators can produce carbon monoxide, which can be deadly.

NYC | Landfill Idea a Mistake?

I have heard it several places - the map of part of Manhattan that was not flooded by Sandy looks a lot like the Manhattan Island that Peter Stuyvesant et al. colonized.

The implication is that the landfill approach was a mistake. So the World Trade Center was taken down from above by terrorists and its landfill has been overrun by Sandy's surge. The two disasters are often linked but not quite in this way.

Now the implication has been posted as a comment on an article on Dutch responses to flooding in Crain's. The article is behind a subscription wall but the comment is not:

 Elliott wrote on 12/13/12 at 4:45 PMThe Dutch are already building houses that float and are attached to the ground (the seabed-to-be) by anchors. We have a LOT more land here, and can afford to let large amounts of it revert to its natural state.  We'd better start building reefs for oyster beds and planting marsh plants in low-lying areas of New York now rather than waiting for another Sandy, because there will be, not one, but many.  Like it or not, New York is going to return to the boundaries it had in the 1600s, pre-landfill, no point in spending a lot of money and labor trying to deny it. Read more: http://bit.ly/1Or8kCV (limited access).

One reason that the Dutch were over here in the first place is that floods had been taking place in Holland and Belgium and they were looking for places to relocate their people.

SANDY | Compared with Katrina

New York Governor Andrew Cuomo has "raised eyebrows" with his claim that Superstorm Sandy suffered worse property damage than Katrina. The New York Times today sorta debunked this claim with a side-by-side comparison of the two storms, although on electrical outages Sandy wins hands down.

No question that Katrina was a worse storm by meteorological standards, and the deaths were much greater, which Governor Cuomo concedes. What he argued (based on my having seen the replay of his remarks on MSNBC) is that the scope of the damage was greater. He didn't actually say that the  dollar value of the damage in New York, New Jersey and the other states that have been hit by Sandy is greater. Let's look at an updated chart of the top 20 storms in the U.S. since 1900 in current dollars.

	Top 20 U.S. Storms Since 1900, 2012 $
		DAMAGE
RANK	STORM NAME	Bil. 2012 $	YEAR
1	Great Miami	$180.22	1926
2	Galveston	$105.57	1900
3	Galveston	$84.91	1915
4	Katrina	$84.62	2005
5	Andrew	$64.41	1992
6	Storm 11, SW FL	$53.94	1944
7	Donna	$49.81	1960
8	New England	$46.84	1938
9	Lake Okeechobee	$44.89	1928
10	Wilma	$25.96	2005
11	Hazel	$24.26	1954
12	Diane	$24.11	1955
13	Camille	$23.04	1969
14	Charley	$20.38	2004
15	Ike	$20.37	2008
16	Hugo	$20.02	1989
17	Carol	$19.29	1954
18	Agnes	$19.01	1972
19	Ivan	$18.59	2004
20	Storm 2	$18.51	1949

Source: Roger Pielke Jr.'s blogsite

In my recent posts I attempted to update a 2010 table of the top storms. Through a  comment on my last post I was sent to this table, for which I am grateful. It is updated by the person who prepared the original table, Roger Pielke, Jr. The method he uses is described in a 2008 paper cited in the footnote to the table in last post. I cited this work frequently in examining the Hurricane Irene damage data. The numbers above are easy to use. Just plug in a number for the estimated damage in current dollars and you have the ranking of Superstorm Sandy in fair historical terms.

If you add together the $32.8 billion New York damage and the $29.4 New Jersey damage, the $62.2 billion total takes you to the #6 spot. Definitely, the NY $9.1 billion aid request for flood surge prevention (and the New Jersey equivalent) should be excluded from the total.

Pielke argues that to be consistent, one should also exclude from damage numbers any business interruption costs, because storm damage estimates historically only included the value of destroyed assets. If business interruption is excluded, much of  the $62.2 billion will be excluded. But there are other states affected by Sandy (the Connecticut shoreline was badly hit in some places), and adding in their damage will top up the final number.

Where I come out is this:
1. There is a bias against long-ago storm-damage numbers, but there is also the bias of ignorance that governments operated under 112 years ago. They knew less about weather patterns and were less prepared. So in comparing the viciousness of the storms, they seem less terrible today for the same level of severity because we know how to prepare. If no one was ready for Superstorm Sandy, can anyone doubt that the death rates would have been much higher along the shore - more than 200 miles of shoreline from Cape May through to Montauk?

2. Adjusting for inflation is a no-brainer. But Pielke has adjusted for more than that, for the value of property because of rising density. Someone could argue he has over-adjusted.

3. Katrina was recent, so the business-interruption problem doesn't apply. Recent practice is for business-interruption and loss-of-use to be insurable and to be a legitimate damage. Think of it this way: When your house collapses in a storm, you have two problems. One is you need to rebuild. The second is that you need a place to stay. Insurance companies tend to pay for both. The same applies to business. If my store is flooded, I lose inventory and I have to spend money repairing electrical wiring and walls etc. Meanwhile I also lose business while I am fussing about these problems. Insurance policies tend to pay for both of these problems. I think that business-interruption is  reasonable damage cost to include in these estimates.

4. But Governor Cuomo's request for $9.1 billion relates to a different kind of problem. The storm reveals inadequacy in the infrastructure and makes it imperative to address it. Think of the homeowner whose house is destroyed. The town decides not to let the beach-dwellers rebuild, or to require higher standards of construction. The town may offer the homeowner some compensation for what amounts to a taking way of a right to use of property. But an insurance company could refuse to reinsure, which might amount to the same thing if a homeowner needed to borrow to rebuild (banks typically want their mortgaged properties to be insured). The point is that remediation of adverse conditions is not a new piece of damage - the damage merely exposed a problem that was there all along. That's why I don't think it should be included in damage estimates.

Bottom line, I think that the damage caused by Katrina was similar to that caused by Sandy, apart from loss of life where there is no comparison. The reason is that Sandy affected a larger area and it hit two of the five biggest business central business districts in the nation - downtown and much of midtown.

It may not be social justice, but economics uses the yardstick of dollars rather than windspeed or pain and suffering. Governor Cuomo may have a case that the dollar value of the cost of damage to property was greater for Sandy. A counterargument is that the levees were broken around New Orleans and that will take a huge amount to replace. But isn't the additional cost similar to the problem with flood prevention in New York? To rebuild the levees, they will have to be higher and stronger. It's not just the damage we are talking about, it's the revelation that prior defenses were inadequate. The whole issue of infrastructure "needs" is hugely important, but it is separate from the assessment of damage as traditionally computed.

SANDY | Official Costs Imply #5 Ranking among Hurricanes

Source: CityEconomist insertion of Sandy into the list, with $62.4 billion being the inflation-adjusted 2010 value of 24 states' costs. Original table from NOAA, National Weather Service, National Hurricane Center, Pielke et al. (R. A. Pielke, Jr., J. Gratz, C.W. Landsea, D. Collins, M. Saunders, and R. Musulin, 2008: "Normalized Hurricane Damages in the U.S.: 1900-2005." Natural Hazards Review, 9, 29-42, cited in Blake and Gibney, 2011). Pielke et al. adjust historical data for inflation to 2010, wealth per capita and population.

Where does $62.2 billion for NY and NJ put Sandy's rank among U.S. hurricanes? 

Governor  Christie of New Jersey late yesterday afternoon announced $29.4 billion as the cost of Sandy to New Jersey's 127 miles of coast. With Governor Cuomo's previous announcement of $32.8 billion, the total for these two hardest-hit states is $62.2 billion.

The NY-NJ estimate of $62.2 billion in 2010 equates to $66 billion in 2012 dollars according to the BLS cost-of-living converter. So for the total impact to be equal to $62.2 billion in 2010, the other 22 states affected by Sandy will need to come up with impact numbers that add up to $3.8 billion, which is a highly probable average of $170 million per state.

If the NY or NJ estimates rise, or other states have much higher costs that bring the total above $75.7 billion, Sandy could rank #4. But it was just a  tropical storm by the time it hit landfall in New Jersey, so Sandy is unlikely to get close to the Galveston Hurricane of 1915. 

Note that century-earlier estimates are generally based on physical damage only, whereas later economic impact numbers, after WWII, include impacts such as business-interruption costs because these became widely insured events. In addition, dollar-value rankings must be adjusted for inflation, as is done in the table above. There is no sense in using unadjusted dollar numbers that go back to 1900. The most costly U.S. hurricane ever was the 1926 Great Miami Hurricane, which cost $164.8 billion in 2010 dollars according to the National Hurricane Center.

Last year Hurricane Irene has been widely quoted as having had an economic impact of $15 billion and has been improperly ranked #5 highest in damage. Their numbers were not adjusted for inflation. Irene did not rank even in the top 10 after adjustment for inflation. (See my comments last year http://www.huffingtonpost.com/john-tepper-marlin/measuring-irenes-damage_b_940033.html).

PCS Says $11 Billion Sandy Claims So Far, Below Expectations

PCS reports that insurance claims for Sandy are only $11 billion. This is good news for casualty insurance companies and holders of catastrophe bonds (which don't pay off as much if a catastrophe happens). More broadly, the lower-than-expected number (Eqecat said it expected $20 billion in insured losses) could mean a number of things: - Huge losses are uninsured, which is quite possible because so much of the hit was taken by individual homeowners near water. Those properties are difficult and expensive to insure, which means many homeowners self-insure. - The Federal flood insurance program (FIMA, part of the FEMA system) may be getting many claims. - States and localities will be filling in to repair damage and take care of people made homeless and the costs will be filed with FEMA. - Homeowners may be slow to file claims. Or the Eqecat original estimate was too high. It was the basis for an economic-loss estimate of $50 billion that has been widely reported. NY Governor Andrew Cuomo has estimated $33 billion cost for New York State. NY City Council Speaker Christine Quinn used an estimate of $26 billion losses for New York City, after Gov. Cuomo released his estimate; her figure presumably is scaled to fit inside the statewide number. Still no estimates for New Jersey. Governor Chris Christie said he expected to release them by Wednesday, November 21. No sign yet in Googledom of these numbers. FEMA has been releasing data on the number of homes that have been damaged in any way.

SANDY | Damage to NJ Homes, by County

Source: Chart by CityEconomist based on FEMA data. Permission
granted to use this chart with attribution to CityEconomist.

Using aerial surveys, FEMA reports that 71,770 homes were damaged in New Jersey. The damage is classified as "Affected", "Minor", "Major" and "Destroyed".

Of the New Jersey homes that were "Affected" or worse, 40,001 homes – or 55.7 percent of them statewide – were in Ocean County, which above Atlantic County and below Monmouth County on New Jersey's Atlantic coast.

Although the eye of Sandy made landfall in Atlantic County below Atlantic City, it is not surprising that the brunt of the impact was felt in Ocean County. Hurricane Sandy was spinning counter-clockwise when it hit land.  

The damage to the two counties adjacent to Ocean County, Atlantic and Monmouth, was the same percentage of New Jersey homes - 14.1 percent. 

Cape May, to the south of Atlantic County, accounts for 10 percent of the damaged homes. These four counties account for 94 percent of the damaged homes.

(John Tepper Marlin is Chief Economist for the New Jersey Institute for Social Justice. This blog is personal and does not reflect the views of the NJISJ.)

Eqecat Forecast Rises to More Reasonable $50 Billion

The forecasting firm Eqecat has upped its forecast. Previously on October 30 it had estimated total losses of $20 billion and insurance losses of $10 billion.

In my CityEconomist post the same day, October 30 (scroll down), I argued that the forecast was too low for  two reasons:

1. The rule of thumb that insured losses are half of total losses only applies to private losses. Therefore even if insured losses were only $10 billion, total losses including government losses should be more like $25 billion. What was missing from the Eqecat equation was (a) Federal losses from flood insurance payouts and FEMA costs, and (b) state and local costs from damage losses and cost of police, fire, sanitation and transportation.

2. The insured losses at $10 billion are too low. Loss of life and damage from wind were relatively low. But damage from flood and fire was high and business-interruption losses were likely to be costly.

Today, two days later, an AP story reports that Eqecat has raised its forecast of losses to a possible $20 billion in insured losses and a possible $50 billion in total losses. Now I think the numbers and proportions are more reasonable.

How to Measure Hurricane Sandy's Damage

Indian Wells Beach, East Hampton, NY, 10-29-12.
Photo by JT Marlin.

What is the cost of Hurricane Sandy compared with Hurricane Irene? A number of estimates are already appearing and the dollar amounts are already very large. My concern is that erroneous statements were made about Hurricane Irene that should not be repeated, for example that it was the fifth-costliest hurricane on record. A ranking based on dollars that does not adjust for inflation is just not useful.

The suggestion has already been made that this will be the costliest East Coast hurricane ever. The Wall Street Journal has compared satellite photos of Sandy and Irene and shows that Sandy is much larger.  The WSJ concludes that Sandy will cost more than its estimate of a $15 billion cost for Irene. On the other hand, television interviews with officials in Westchester indicate that Hurricane Irene was more severe.

Advance Measures of Danger

At the moment two main measures of the significance of a storm are provided by meteorologists. They are interrelated and both point to likely wind speeds. The public needs at least one more  measure that shows the likely economic impact of flooding, and I suggest under the third heading below what the measure might look like.

1. Wind-Speed Category. A Category 1 hurricane means wind speeds of 74-95 mph on the Saffir/Simpson Hurricane Scale. Hurricane Irene petered out on its way north. Hurricane Sandy on its way north has been affected by two other independently originating storms, as well as by tidal factors.

2. Barometric Pressure. The Christian Science Monitor has posted a lucid summary of the importance of this measure of hurricane severity. (It also repeats the error cited above about the cost of Hurricane Irene - I will return to this.) Ordinarily, the barometric pressure is related to wind speed. The normal sea-level barometric pressure is 1013.5. During a hurricane the eye of the storm shows the lowest barometric pressure. The lower the pressure, the higher the winds. During the afternoon today, the barometric pressure at the eye of Hurricane Sandy fell from 943 to 940, which is a level associated with Category 3 or Category 4 winds. The lowest barometric pressure that has been measured in a U.S.hurricane is 882 for Hurricane Wilma. Hurricane Carla was the tenth-lowest, 931. The National Hurricane Center list of the most intense hurricanes does not follow the Millibars ranking exactly, since Katrina and Wilma are not in the order one would expect.

                                        Ten Most Intense Hurricanes

Name (After 1953) or Location	Year	Category	Millibars
1.Florida Keys	1935	5	892
2.Camille	1969	5	909
3.Katrina	2005	3	920
4.Andrew	1992	5	922
5.Indianola, TX	1886	4	925
6.Keys, FL	1919	4	927
7.Lake Okeechobee, FL	1928	4	929
8.Donna	1960	4	930
8.Miami, FL	1926	4	931
10.Carla	1961	4	931

Notes: Wind Category is at Landfall. Category 5 on the Saffir/Simpson scale means >155 mph winds for at least one minute. Category 4 means 131-154 mph for at least one minute. Category 3 means 111-130 mph for at least one minute.  Millibars are mercury readings of barometric pressure.
Source: Based on NOAA, National Weather Service, National Hurricane Center, Blake and Gibney, 2011.

3. Flood Surge Impact. However, most of the damage is caused by the delayed impact of the flooding surge (the hurricane equivalent of a post-earthquake tsunami). We need a new indicator of likely flood damage, which would have to take into account the economic value of property in the track of the hurricane, the sea level of the land, and the size of the expected surge.  The Flood Surge Impact index could take into account the tides (the full moon is adding to the surge) and the geography of the surge.

Retrospective Measures of Cost

There are seven basic ways to measure and adjust the cost of a hurricane. They overlap:

1. Loss of Life, or Injury.  On the simple measure of number of lives lost to a hurricane, Hurricane Irene did not even rank among the 100 most costly hurricanes. Preparedness is much better than it used to be and saving lives is a priority. Mayor Bloomberg has made clear that the overriding priority of the City of NY is to avoid loss of life. Hurricane Irene took one life and as far as Mayor Bloomberg is concerned that was one too many. The mayor has generated a scientific approach to evacuation based on flood probability maps. Also contributing to reduced fatalities is the steady improvement in U.S. Government warning systems via the National Weather Service and the National Hurricane Center,  and the FEMA network of state notification and assistance.  Loss of life can be converted to a dollar figure via life insurance losses or a value that economists impute to a person's remaining working life. Injuries also represent a cost either to the individual or to health insurance plans (private or governmental), and injuries that result in a disability have a working-life cost that can be attached.

2. Loss of Physical Property.  Property can be destroyed by wind or flooding or a combination. This means a loss of wealth of the property owner. If the loss is charged against revenue, it means a loss of revenue. (A building may be a depreciated asset; loss of inventory is likely to be expensed.) The first impact may be flying debris, the lifting off of roofs, the flattening of flimsily constructed buildings. The delayed effects include (a) loss of electricity from downed power lines, which means that many perishables have to be thrown out, and (b) flooding, which destroys or rends temporarily useless all kinds of property such as books and electronics, especially if the flooding is from salt water, which MTA Chairman Joe Lhota says is especially damaging to rail signal and power connections. It also includes business interruption, which is the next category.

3. Business Interruption. Increasingly, businesses insure not only against loss of property but the loss in profits that comes from an interrupted business. When a restaurant or a theater remains closed because of floods that prevent people from showing up, it is hard to make up the loss because the business space has a limited capacity. Figures on the cost of hurricanes increasingly include business-interruption losses, which bias upward the later numbers.

4. Insured vs. Uninsured Losses. Insurance companies are most interested in the total of insured losses. But from an economic perspective, losses to individuals (e.g., workers paid by the hour) are real. The money that would have been spent in the community by the individuals is missing. The National Hurricane Center uses a simple formula to estimate uninsured losses - it doubles the number for insured losses.

5. Private vs. Public Insurance. Flood insurance is provided by the National Flood Insirance Program as a last resort because private insurers have been reluctant to provide it. Individuals pay a premium for this insurance. After a hurricane, there will be payouts. FEMA programs also provide relief to individuals. The National Hurricane Center in its estimate of damage adds in a number for flood damage provided by the National Flood Insurance Program.

6. Federal, State and Local Assistance. Emergency assistance by FEMA, other Federal bodies (the Army Corps of Engineers, for example), states (emergency response teams) and localities (police, fire, sanitation, ambulance) must be factored in as costs.

7. Adjustments for Inflation, Business Activity. Two kinds of adjustments are typically made to comparisons among hurricanes. One is to adjust cost figures for inflation. The Christian Science Monitor story cited above incorrectly describes Hurricane Irene as the fifth mostly costly hurricane in U.S. history. As I explained last year, that label only works if we are under the delusion that a dollar 100 years ago should be valued the same as a dollar today. (Apart from the fact that business-interruption costs are increasingly included in hurricane losses, adding to the size of the numbers.)  There are widely available cost-of-living indicators to refer to, such as this one from the BLS. The business activity measure relates the hurricane to the value of the real estate through which the hurricane travels. This is a good predictor of cost and is also a factor to consider in comparing the impact of a hurricane traveling the same path in different years.

I have written on this topic last year on Huffington Post and my CityEconomist blogsite.