THE POLITICAL ECONOMY OF URBAN DISASTER ASSISTANCE

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1 / Stehr / URBAN DISASTER ASSISTANCE URBAN AFFAIRS REVIEW / March 2006 URBAN COLLOQUY THE POLITICAL ECONOMY OF URBAN DISASTER ASSISTANCE STEVEN D. STEHR Washington State University In the aftermath of Hurricane Katrina, policy makers are once again debating the manner in which we prepare for, respond to, and recover from extreme events in the United States. While much is known about how to make urban regions safer, political and economic calculations often overwhelm these considerations. The mix of competing priorities and incentives of federal, state, and local officials conspire to make urban hazard planning difficult if not impossible. The considerable challenge facing those charged with making cities less vulnerable is to strike an appropriate balance between these political and economic dynamics, and the creation of more disasterresilient communities. Keywords: resilient cities; disaster relief; disaster assistance; natural disasters; emergency management; Hurricane Katrina The devastation wrought in the cities of the Gulf Coast by Hurricanes Katrina and Rita has once again cast a spotlight on disaster policy and administration in the United States. Although presidential disaster declarations over the past decade have averaged approximately one per week, many go unnoticed except by those directly affected. But so-called megadisasters, characterized by significant loss of life, widespread physical and economic damage, and extensive media attention act as a catalyst for a reexamination of current policies and procedures. As the economic costs associated with AUTHOR S NOTE: Portions of the research reported here were supported by a grant from the National Science Foundation (CMS ). The opinions presented in this article are the author s and do not necessarily reflect those of the National Science Foundation. The author would like to thank the anonymous reviewers who provided useful comments on an earlier draft. URBAN AFFAIRS REVIEW, Vol. 41, No. 4, March DOI: / Sage Publications 492

2 Stehr / URBAN DISASTER ASSISTANCE 493 disasters have grown (Cutter and Emrich 2005), these debates have increasingly focused on disaster relief and assistance programs and how urbanized regions might mitigate damages before they occur (Mileti 1999; Platt 1999). This is not an issue that is likely to go away anytime soon. Many of the nation s most populous urban areas are situated in coastal areas that are at high risk from naturally occurring events such as earthquakes or hurricanes. According to the Census Bureau, more than half of the nation s 297 million people live in coastal areas most in major cities and seven of the top 10 fastest-growing states are coastal. Cities nationwide are subject to an array of natural hazards such as riverine flooding, wildfires, ice storms, tornados, drought, and volcanic eruptions. In the post September 11 environment, all cities are considered to be at some level of risk to terrorist attacks that have the potential of causing many of the same types of problems (e.g., large-scale evacuation of citizens; urban search and rescue; public health and environmental concerns; mass casualty management and victim identification; victim compensation; reconstruction of public infrastructure; business continuity) that are also associated with natural events. Despite the increasing vulnerability of urban areas to catastrophic events, relatively little attention has been explicitly paid to issues that would inform both the literatures concerning urban studies and those that focus on the social science aspects of disaster. 1 This article represents a modest attempt to begin a dialogue between those who study more traditional topics in urban governance and those who study how communities prepare for, respond to, and recover from disasters. My primary focus is on two related questions: First, is it possible to reconcile the competing forces of economic development decisions and political calculations with hazard mitigation policies? Under the current structure, local officials have very few incentives to mitigate hazards secure in the knowledge that federal aid will be forthcoming following an event. Recovery from large-scale urban disasters also lays bare local political dynamics that may have been obscured prior to the event (Kantor 2002). But they also expose longer-term national political trends and priorities as they relate to disaster preparedness and response capabilities. A second question relates to the possibility of incorporating the idea of community resilience into discussions of sustainable development. As Savitch points out, our collective understanding of the life of cities goes through recognizable paradigmatic shifts (Savitch 2003). It remains to be seen if some of the forces discussed in this article have reached a critical mass and will launch a new paradigm focused on safe cities. The history of disaster relief and assistance policy in the United States can be characterized as having brief periods of intense political activity typically following a major disaster or a series of disasters, followed by longer periods

3 494 URBAN AFFAIRS REVIEW / March 2006 where interest in the subject wanes (May 1985). This has resulted in a fragmented set of policies that, over time, have significantly increased the financial exposure of the federal government (Platt 1999). There are four primary means through which postdisaster assistance is administered: (1) government programs (primarily implemented through the federal government); (2) charities and philanthropic organizations; (3) private insurance; and, (4) the court system chiefly through tort claims and bankruptcy filings. 2 Federal disaster assistance is provided through approximately 30 separate programs that offer aid to individuals and families, businesses, states and municipalities, special districts, and not-for-profit organizations (Jordan 2005). A wide range of financial strategies is utilized including direct grants to stricken communities and individuals, low interest disaster loans, federal public works programs to remove debris and rebuild public infrastructures, disaster unemployment benefits, mental health and legal services, environmental cleanup, and federal income tax deductions for uninsured casualty losses. Federal aid is intended to be supplemental to funds dedicated by state and local governments. The Federal Disaster Assistance Act of 1988 (the Stafford Act) the primary federal law governing disasters specifies a 75/ 25 ratio of federal/nonfederal cost sharing of disaster assistance with state and local governments. However, recent presidents of both parties have raised the federal share or waived nonfederal contributions entirely (Platt 1999, p. 17). Although these waivers are no doubt motivated in part by compassion, presidents (and members of Congress) are also under intense political pressure to act quickly and generously, particularly in election years. Several recent studies have documented a connection between presidential elections, congressional politics, and level of disaster relief allocated to specific areas (Garrett and Sobel 2003; Reeves 2005). Postdisaster response and recovery assistance has historically made up the vast majority of federal spending on disasters. According to a report issued by the Bipartisan Task Force on Funding Disaster Relief, approximately three-quarters of all federal spending on disasters between 1977 and 1994 was expended to pay for postdisaster recovery (U.S. Senate 1995). This same report charged that the federal government discourages state, local, and individual self-reliance by offering federal disaster assistance too readily. It seems reasonable to conclude that in some instances disaster assistance has become a form of political pork barrel, particularly in cases where genuine need seems to be absent. 3 The implementation of disaster assistance in New York City following the terrorist attacks of September 11 illustrates the basic structure of relief policies. According to a report completed by researchers at RAND, the total

4 Stehr / URBAN DISASTER ASSISTANCE 495 amount of direct disaster assistance delivered to victims, businesses, and government entities was $38.1 billion (Dixon and Stern 2004). Of this amount, slightly more than half ($19.6 billion, or 51%) was paid out by insurance companies. Through 2004, government programs accounted for $15.8 billion (42%) of total relief payments but this figure will grow as monies allocated but not yet expended are spent. Despite an unprecedented mobilization, charitable distributions accounted for only 7% of total assistance. 4 Soon after the attacks, President George W. Bush promised $20 billion in federal money to help the New York City area recover from 9/11. Although some may have interpreted this pledge to mean that New York City would receive a lump sum payment, in reality the aid package was structured to provide for both immediate needs as well as long-term assistance. The flow of federal aid to New York City and its inhabitants is being tracked by the New York City Independent Budget Office (IBO). By its accounting, approximately 30% ($6.3 billion) of the money was expended on emergency response activities. The majority of this money (approximately 70%) was provided to New York City to pay for debris removal and overtime costs for the police and fire departments and to establish an insurance pool to protect the city and its contract workers against lawsuits resulting from work at the World Trade Center site (IBO 2004). Only a small portion of the response funds (about 10%) were provided as direct aid to individuals or as low interest loans to property owners. About 20% ($4.4 billion) of $20 billion appropriated by Congress was designed to spur economic recovery in Lower Manhattan and to help alleviate the budget crisis the city faced in the wake of the attack. Most of these funds were provided directly to New York City government (38% or $1.7 billion) or for business assistance grants (26% or $1.2 billion). The remaining $9.7 billion (most of which have not yet been spent), will go for long-term rebuilding projects primarily in the area of transportation improvements. Although care should be taken in generalizing from this admittedly unprecedented case, several lessons emerge nonetheless. First, insurance companies provided about 50% of the total compensation provided. These monies went to individuals (mostly through life insurance policies) and affected businesses. As it turns out, there is empirical evidence to suggest that the 50% figure is a reasonable assumption in many natural disasters as well (Pielke 2005). Second, most of the assistance provided through federal programs was administered to New York City with a smaller portion going to businesses that were damaged, destroyed, or disrupted. In fact, aside from the approximately $7 billion that was expended through the VCF, a relatively small amount of direct assistance was provided to individuals. Finally,

5 496 URBAN AFFAIRS REVIEW / March 2006, disaster recovery and reconstruction even when the physical damage is relatively concentrated as it was in New York City does not take place overnight. It is estimated that it will take approximately 10 years to fully expend the entire $20 billion authorized by Congress (IBO 2004). Although disaster assistance is commonly thought to include only those activities that occur following an extreme event, a more comprehensive approach also includes pre-event mitigation and preparedness activities designed to eliminate or reduce event impacts. As Lindell and Prater (2003) point out, there are strong and important linkages between hazard mitigation and preparedness practices, and community recovery and reconstruction outcomes. An inherent problem in the structure of disaster assistance is the fact that the mitigation and preparedness are largely the responsibility of local governments while the economic costs of recovery and reconstruction are borne elsewhere. Subnational governments and individuals owning property in hazardous areas to a large extent control decisions that determine the ultimate effectiveness of mitigation and preparedness measures adopted at the local level; in most cases, these parties have few incentives to make these policies a high priority because federal programs will provide assistance should a disaster occur (May 1985; Stehr 1999). Adding to the problem is that wellintentioned government programs sometimes undermine each other. Rutherford Platt argues that a vast array of federal spending and economic development programs such as highway construction, housing, urban renewal, shoreline stabilization, water pollution abatement, and river control projects may undercut the goals of hazard mitigation by indirectly sponsoring development and redevelopment in areas of recurrent hazard (Platt 1999). It remains to be seen if a paradigm shift from a political-economic logic of urban development to one based in public security and protection will inform decisions regarding the rebuilding of New Orleans (Savitch 2003). Going beyond the pressures associated with local economic development decisions and the problems it creates in creating workable response and assistance policies, disaster policy is also a by-product of other, seemingly unconnected policy decisions. For instance, decisions made in the arenas of national security policy, urban policy, and social policy have traceable impacts on current disaster policy. Following September 11, planning to detect and prevent terrorist attacks all but eliminated federal interest in preparedness and response activities and funding for natural disaster mitigation projects (Holdeman 2005; Tierney 2005). Significantly, the Federal Emergency Management Agency (FEMA), the agency established to coordinate hazard mitigation, and disaster response and recovery policies, was stripped of its cabinet-level status when it was placed within the newly created

6 Stehr / URBAN DISASTER ASSISTANCE 497 Department of Homeland Security. Project Impact, a hazard mitigation program started during the Clinton administration to provide grants to cities, was eliminated in 2001 although it was costing only about $20 million per year. This devolution of responsibility can be seen as merely one part of a new urban policy whereby cities are expected to take on additional responsibilities for protecting their citizens (Eisinger 2004). This is also part of a larger trend. As William Barnes recently reported, federal funds as a percentage of municipal revenues reached a high in 1978 at about 17% and have declined steadily since then to less than 5% (Barnes 2005). Some observers have interpreted the events in New Orleans as resulting from decades of federal urban disinvestment, exurbanization, and white flight, which have left the central cores of many cities abandoned (Graham 2005), or as exposing the unacknowledged inequalities that are the result of years of failed social policies (Frymer, Strolovitch, and Warren 2005). CAN WE CREATE RESILIENT CITIES? For at least the past decade, community resilience has been a prominent topic among academic urban planners and natural disaster researchers. Dennis Mileti defines the concept this way: Local resiliency with regard to disasters means that a locale is able to withstand an extreme natural event without suffering devastating losses, damage, diminished productivity, or quality of life and without a large amount of assistance from outside the community (Mileti 1999, pp ). One aspect of community resilience focuses on hazard mitigation that is, activities designed to reduce or eliminate long-term risk to people and property and break the cycle of damage, reconstruction, and repeated damage from disasters. These efforts include such actions as stricter building codes, engineering retrofits, land use planning, and property acquisition (Hardenbrook 2005; Godschalk et al. 1999; Burby 1998). How successful are these efforts likely to be? Certainly there will be localized success stories. However, as this article points out, there are strong political and economic forces at work that will make widespread urban hazard mitigation difficult to achieve. One promising avenue to pursue is the concept of comprehensive emergency management. This idea is rooted in the notion that loss-reduction efforts should be oriented toward integrating mitigation, preparedness, response, and recovery activities suitable for a variety of localized hazards whether natural, technological, or human caused. But implementing this concept costs time and money and requires local political and administrative leadership. In the absence of

7 498 URBAN AFFAIRS REVIEW / March 2006 national incentives to create resilient communities, the provision of public protection will continue to fall largely on urban governance structures. In their recent book, The Resilient City, Vale and Campanella raise a number of important questions that could help inform a more robust dialogue between urbanists and those who study the social science aspects of disaster (Vale and Campanella 2005, pp ). For example, they pose the question: what does it mean for a city to recover? As regional hubs of economic, social, and cultural activities, cities recover to the extent that they return to some semblance of predisaster normalcy in human and economic relationships. But large-scale disasters also raise value-laden questions such as who will set the priorities for recovering communities? How will shortterm recovery forces be balanced with long-range planning? Will predisaster inequities be replicated as part of the recovery process? Who will be displaced (and at what cost) as neighborhoods are rebuilt? What are the proper roles of local, state, and federal officials in an intergovernmental disaster assistance system? What dominant narratives will emerge to help us interpret what transpired and inform future hazard policies? By addressing these and many other important questions, a richer and more complete understanding of the vulnerability of cities to hazards could emerge that would serve to inform research from a variety of professional perspectives. NOTES 1. In the aftermath of the attacks of September 11, some urban scholars have turned their attention to issues related to homeland security (Gerber et al. 2005) and urban terrorism (Eisinger 2004; Kantor 2002). 2.This article will focus primarily on the governmental component of disaster assistance. 3. Reporters at the South Florida Sun-Sentinel examined 20 of the 313 disasters declared by the Federal Emergency Management Agency from 1999 to They concluded that 27% of the $1.2 billion paid out went to areas where official reports showed minor damage or none at all (Kestin 2005). 4. In exchange for establishing the September 11 th Victim Compensation Fund (VCF) to provide compensation to families of those who were killed and to the seriously injured, Congress limited the role of the tort system in part to protect the airlines involved in the attacks and the owners of the World Trade Center. REFERENCES Barnes, W Beyond federal urban policy. Urban Affairs Review 40(5): Burby, R., ed Cooperating with nature: Confronting natural hazards with land-use planning for sustainable communities. Washington, D.C.: Joseph Henry Press.

8 Stehr / URBAN DISASTER ASSISTANCE 499 Cutter, S., and C. Emrich Are natural disaster losses in the U.S. increasing? EOS: Transactions, American Geophysical Union 86(41): Dixon, L., and R. Stern Compensation for losses from the 9/11 attacks. Santa Monica, CA: RAND. Eisinger, P The American city in the age of terror: A preliminary assessment of the effects of September 11. Urban Affairs Review 40(1): Frymer, P., D. Strolovitch, and D. Warren Katrina s political roots and divisions: Race, class, and federalism in American politics. Understanding Katrina: Perspectives from the social sciences. Web site created by the Social Science Research Center, University of Maryland, (accessed September 19, 2005). Garrett, T., and R. Sobel The Political Economy of FEMA Disaster Payments. Economic Inquiry 41(3): Gerber, B., D. Cohen, B. Cannon, D. Patterson, and K. Stewart On the front line: American cities and the challenge of homeland security preparedness. Urban Affairs Review 41(2): Godschalk, D., T. Beatley, P. Berke, D. Brower, and E. Kaiser Natural hazard mitigation: Recasting disaster policy and planning. Washington, D.C.: Island. Graham, S Cities under siege: Katrina and the politics of metropolitan America. Understanding Katrina: Perspectives from the social sciences. Web site created by the Social Science Research Center, University of Maryland, (accessed September 19, 2005). Hardenbrook, B The need for a policy framework to develop disaster resilient regions. Journal of Homeland Security and Emergency Management 2(3): Article 2. Holdeman, E Destroying FEMA. Washington Post, August 30, Jordan, M Federal disaster recovery programs: Brief summaries. CRS Report for Congress, Congressional Research Service. August 29, Kantor, P Terrorism and governability in New York City: Old problem, new dilemma. Urban Affairs Review 38(1): Kestin, S FEMA battered by waste, fraud. South Florida Sun-Sentinel, September 18, A1. Lindell, M. K. and C. Prater Assessing community impacts of natural disasters. Natural Hazards Review 3(2): May, P Recovering from catastrophes: Federal disaster relief policy and politics. Westport, CT: Greenwood. Mileti, D Disasters by design: A reassessment of natural hazards in the United States. Washington, D.C.: Joseph Henry. New York City Independent Budget Office Three years after: Where is the $20 billion in federal WTC aid? Inside the budget. August 11, Pielke, R Historical economic losses from hurricanes: Where does Katrina fit in? Center For Science and Technology Policy Research, University of Colorado, (accessed September 19, 2005). Platt, R Disasters and democracy: The politics of extreme natural events. Washington, D.C.: Island. Reeves, A Political disaster? Presidential disaster declarations and electoral politics. Department of Government, Harvard University (unpublished manuscript). Savitch, H Does 9-11 portend a new paradigm for cities? Urban Affairs Review 38(1): Stehr, S Community recovery and reconstruction following disasters. In The handbook of crisis and emergency management, edited by A. Farazmand, New York: Marcel Dekker.

9 500 URBAN AFFAIRS REVIEW / March 2006 Tierney, K The red pill. Understanding Katrina: Perspectives from the social sciences. Social Science Research Center, University of Maryland, (accessed September 19, 2005). U.S. Congress. Senate. Bipartisan Task Force on Funding Disaster Relief. Report of Senate task force on funding disaster relief. 104 th Congress. Document No Vale, L., and T. Campanella, eds The resilient city: How modern cities recover from disaster. Oxford: Oxford Univ. Press. Steven D. Stehr is an associate professor and chair of the Department of Political Science and Criminal Justice Program at Washington State University. His research on disasters and homeland security has been supported by the National Science Foundation, the National Research Council, the National Academy of Sciences, the Natural Hazards Center at the University of Colorado Boulder, and the Century Foundation.