Hurricane Response Efforts are Most Effective When Decentralized

By Chad Thomas

According to the Federal Emergency Management Agency (FEMA), emergency responses to hurricanes aim to prevent further loss of life and  property damage. Effective emergency responses utilize local information and enable decentralized responses from within the disaster zone. Local information about necessary relief in affected areas aids response efforts. A decentralized response enables responders in the affected area to act as the disaster situation unfolds.

Residents, organizations, and governments have different responsibilities throughout emergency management phases. Before landfall, local officials near a hurricane’s projected path prepare supplies, initiate evacuations, and broadcast warnings and residents prepare for the hurricane. After disaster strikes, responders conduct rescue missions and provide relief, such as food, water, healthcare, and shelter.

In Florida, city and county emergency management directors and the governor can assume emergency management powers to direct resources within their jurisdictions after officials declare a state of emergency. The president can approve federal aid at the request of the governor. FEMA provides financial support and additional supplies to overwhelmed communities during the recovery phase.

Sparse information regarding the locations and needs of victims hinders disaster response efforts. Economists have studied how to overcome the problems of coordinating dispersed bits of localized knowledge such as those faced by responders to natural disasters—the so-called “knowledge problem—extensively.  Russell Sobel and Peter Leeson, for example, discuss Hayek’s information problem and state that an effective disaster response identifies the existence of a disaster, type of disaster, and proper allocation of resources in an attempt at addressing the knowledge problem. Economist Friedrich A. Hayek popularized the concept of the  information problem  in his essay, The Use of Knowledge in Society. Hayek wrote that a major economic challenge “is a problem of the utilization of knowledge which is not given to anyone in its totality.” Utilizing local information helps communities prepare for and manage the emergency on an as-needed basis within affected communities.

Ball State University economist Steven Horwitz credits decentralization  with enabling responders to make decisions about how best to manage supplies and overcome obstacles with local information. For example, decentralization in the Coast Guard and private organizations assisted effective responses following Hurricane Katrina. Responders from the Coast Guard did not have to constantly receive commands from higher officials to act in changing situations.  Before the storm hit New Orleans, Walmart and Home Depot stationed trucks filled with supplies in surrounding areas to quickly provide for those in need. The Coast Guard deployed rescuers around the Gulf of Mexico and rescued over 33,500 people from danger. When FEMA arrived in New Orleans, the agency prevented early responders, such as Walmart and the Red Cross, from bringing in some supplies. The Department of Homeland Security’s inspector general criticized FEMA for poor supply management and uncoordinated rescue missions.  

Disaster responses that utilize local information can  provide relief to victims, limit property damage, manage supplies, and rescue people.  Decentralization and coordination between private and public disaster relief efforts can further maximize the aforementioned benefits from local information.

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The Jones Act is Sinking the Growth of American Industries

By Giovanna DaSilva

The Merchant Marine Act of 1920, commonly referred to as the Jones Act, is a law enacted to protect the United States’ maritime industry, regulate commerce, and bolster national defense. While well-intentioned, the act fails to reflect the current needs of the United States. Repealing the Jones Act would prove beneficial to economic growth.

The Jones Act is a modern iteration of regulations imposed on maritime trade, going as far back as 1790. The act’s sponsor, Wesley Jones, wrote of the importance of facilitating the growth and development of a merchant marine in order to strengthen national defense and the shipping industry.

Today, proponents still argue the Jones Act is essential for maintaining jobs, fostering economic growth, and preserving the United States’ maritime industry. They posit that the act allows the American maritime industry to remain competitive in an era of globalization.

One of the main provisions of the act requires vessels that carry goods between American ports are: “owned by U.S. companies that are controlled by U.S. citizens with at least 75 percent U.S. percent ownership; at least 75 percent crewed by U.S. citizens; built (or rebuilt) in the United States; and registered in the United States.”

This requirement restricts market competition within the shipping industry, thus increasing the cost of shipping. The act negatively impacts Puerto Rico in particular. Instead of receiving shipments from neighboring islands at a substantially cheaper price, the island must pay for overpriced US shipments.

Increased domestic shipping costs incentivize states to import commercial goods from abroad instead of shipping goods from other states, to the detriment of domestic industries. Shipping Texas oil to Boston, Massachusetts costs three times more than importing similar oil from Europe.

Researchers Russ Kashian, Ike Brannon, and Jeff Pagel argue the Jones Act impedes the growth of several American industries. They cite estimates from transportation economists Joseph Francois and his colleagues, in the article, “Commercial Policy and the Domestic Carrying Trade,” who found that repealing the act would increase revenues in the water transportation sector  by $1.5 billion.The chemical, plastics and lumber sectors would also prosper. Alaska, Hawaii and Puerto Rico would realize around $5-15 billion more in annual revenue.

Florida, on the other hand, ranks second among the states in maritime jobs, and might see a decline in related employment and revenue. However, repeal of the Jones Act could increase economic growth by bolstering other sectors of the economy responsible for a large portion of the state’s GDP. Francois and his coauthors speculate that any jobs lost in the maritime industry could be replaced by growth in industries such as the  domestic water sector, agriculture, trade, and manufacturing.

Jones Act protectionism shields the shipping industry from market competition at the expense of increased costs to the American consumer and US industries. While politicians and interest groups champion the act as an “America first” policy, it is ultimately in America’s economic best interest to repeal the act entirely even if states such as Florida find themselves at a temporary disadvantage until they adjust to a more competitive global economy.

 

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A Brief History of Frenchtown

Jordan Greer

With Frenchtown development becoming one of the spotlight issues in the city of Tallahassee’s future economic redevelopment plans, a look at the social and economic context for this marginalized area of the city might be useful.

 On July 4th 1825, the federal government granted $200,000 worth of northern Florida territory to Marquis De Lafayette, a wealthy French military officer and veteran of the American revolutionary war.  He decided to establish a town in which slavery was outlawed. This attracted many French and and free black settlers to the area, which was named Frenchtown. Some dispute exists over whether the name comes from its French residents or from the black population’s connections to the abolitionist town of Frenchtown, New Jersey, which served as a temporary haven for free black persons prior to the U.S. Civil War.

From the 1920’s into the early 1970’s, despite sustained segregation and economic oppression under Jim Crow, Frenchtown went through a period of considerable economic growth. In 1929, Lincoln High School completed its fourth reconstruction, cementing the school as a foundation of employment and education for the neighborhood.  Frenchtown was made up of mostly high school and college-educated black professionals. The community grew to be a self-sustaining and thriving economy with local grocery stores, drug stores, and other small businesses.

The national civil rights movements of the time inspired community members and leaders in Tallahassee to partake in political activism. Organizations such as the NAACP, the Urban League, and the Southern Christian Leadership Conference began to spring up in the area. This activism was accompanied by the increasing mobilization of local churches. With the help of these organizations, Tallahassee saw several successful civil rights protests throughout the ’50s and ’60s.

The end of segregation in Tallahassee, as in other cities across the nation, led to unintended consequences for some minority neighborhoods, including Frenchtown. Unfortunately, at the end of Jim Crow-era policies of segregation, removal of the neighborhood’s institutions such as local hospitals and schools in favor of shifting funding to resources outside the neighborhood halted and eventually reversed Frenchtown’s growth.

In an interview for this article, Patrick Mason, FSU economics professor, lays out an economic picture of the devolution of Frenchtown:

“Frenchtown used to be a [primarily] middle income neighborhood … But the neighborhood experienced a period of wage stagnation and economic decline from about 74’ to 95’. Local businesses found it hard to compete with national chains in the grocery and the fast-food industries.”

Desegregation of schools led to the closure of Lincoln High-School in 1970 and its subsequent relocation to the southeast area of the city in 1975.  Mason remarks, “That was major. That’s removing a key institution from a community.”  Many residents left to be closer to the schools where their children were enrolled or where they worked.

This period of economic stagnation led to a migration of black residents away from Tallahassee. According to US Census data, in 1930 the population of Leon County was 65 percent black while today the number stands at a mere 35 percent.

Local businesses fostered economic growth, prosperity, and a sense of community among citizens during the height of Frenchtown’s history. While revitalization is no easy feat, city planners must be cognizant of the community’s vibrant history and the factors that facilitated its growth in order to create a new path forward.

 

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Challenges to Privatizing Flood Insurance

Giovanna Dasilva

The National Flood Insurance Program (NFIP), implemented in 1968 to address a market failure in the flood insurance sector, has been the subject of scrutiny following hurricanes Harvey and Irma. Increasing the scope of the private sector has often been cited as a potential solution to the NFIP’s pitfalls. However, there are challenges private companies must address for this to be a viable solution.

In Florida, 16 private insurance companies provide coverage for flooding, often at more competitive rates compared with the NFIP in lower-risk flood areas. Increasing private sector presence in these areas may benefit consumers by providing them with competitive pricing and different coverage options to choose from.

Private insurers must be capable of covering severe losses at the level the NFIP currently does, either by holding a large sum of capital in reserve or through reinsurance. Reinsurance, the “insurance for insurers,” allows private companies to take on more risk by assuming some of their costs in the event of a large-scale natural disaster. An expansion of the reinsurance market for flood insurance is necessary in resolving this issue.

The challenge of covering severe losses isn’t exclusive to the private market. Without loans from the US Treasury, the NFIP would not have been capable of covering the amount of damage incurred during Hurricane Katrina. The Government Accountability Office argues that it is unlikely the NFIP will be able to pay off its debt. A prerequisite to privatizing the flood insurance sector is forgiving the program’s accumulated debt.

Private insurers often complain that in order to accurately assess pricing for areas that are more prone to flooding, they must be able to access the NFIP’s flood map data. Unfortunately, sharing this information is unlawful due to federal privacy statutes. The declassification of NFIP flood map data is crucial to the success of the private sector.

Researchers Carolyn Kousky and Howard Kunreuther state that another issue with transferring public insurance policies to the private sector is that property owners in high-risk flood areas will experience sharp increases in insurance premiums.This is because private insurers price policies to account for risk, rather than offer artificially lower rates. Vouchers can assist lower-income families seeking affordable insurance in the private market.  

Depopulation, as seen in the case of Citizens Property Insurance, can be a vehicle to scaling back the NFIP. Depopulation refers to transferring a significant number of insurance policies to the private market. The Citizens Property Insurance Corporation was created by the State of Florida in 2002 to provide property insurance to those unable to afford policies from the private sector. It quickly became the most popular insurer in the state, in its height covering 1.5 million policies.  Depopulation allowed Citizens Insurance to gradually reduce the number of insurance policies they covered to the private market.

Privatizing the flood insurance industry could offer many benefits to consumers, including expanded choice and lower premiums for some. Although privatization is a promising solution, problems such as gaining access to flood maps and covering severe losses without government aid must first be resolved.

 

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Bethel Church: Visions of a Frenchtown Renaissance

N’namdi Green

Since its official inception in 1870, Bethel Missionary Church has been a staple within the greater downtown area of Tallahassee. Throughout the years, Bethel Church has created and maintained a strong presence in the Frenchtown area by serving not only as a religious hub, but also as an epicenter for social engagement within the community. Recently Bethel has taken the initiative to fund and manage economic development projects to help stimulate the economy of the surrounding Frenchtown community. In these efforts, Bethel is an important part of a national movement by faith-based organizations focused on revitalizing key parts of American cities.

The origins of Bethel Church can be traced back to the early 1830’s. Prior to the opening of their first church building, very few places in the Tallahassee area allowed slaves to worship. Slaves on Leon County plantations would meet secretly to worship on a weekly basis until they were given a physical location designated for worship after the Civil War. This was the origin of Bethel church and its congregation. As the years progressed, the church relocated to different places around Tallahassee and eventually the congregation moved to the Frenchtown neighborhood.

Once settled, the church began to solidify itself as a religious mainstay for blacks in the community. But Bethel also sought to act as more than just a religious institution. In the late 19th-century, the church provided educational and social services to freedmen and freedwomen. Bethel utilized its church building as a school in order to give blacks an opportunity to obtain an education and provided a meeting place for empowering black organizations. In addition, it hosted weddings, graduations, and other social gatherings for blacks in the community that they would not otherwise have been able to celebrate due to exclusion from white-owned venues.

Today, the church continues to play a major role in the Frenchtown community, spiritually, socially, and economically. One of Bethel’s first development initiatives in recent years included the Carolina Oaks affordable housing subdivision in 1989. The church purchased the land for the subdivision and led in the oversight of construction for the project from start to finish.

Since the Carolina Oaks project, the Bethel Church has contributed to numerous other development initiatives. Some of these include the construction of Bethel Towers which is an affordable retirement home for the elderly, the opening and construction of the Frenchtown Credit Union, and the Bethel Family Life Center which serves as a recreation center. The main objective for each project is to provide the Frenchtown community with services and infrastructure to promote economic growth and stability.

The church is currently proposing to redevelop a block of land on the 400 block of West Tennessee Street. As a majority owner of this parcel,  Bethel intends to construct a mixed-use housing complex ranging from 16 to 150 units, including apartment spaces, townhomes, a local grocery store, an urgent care facility, and a community bank. In conjunction with the Frenchtown Redevelopment Partners LLC, a limited liability company consisting of Bethel and other businesses owners within Frenchtown, Bethel has lofty goals for the Frenchtown community economically.

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After this Hurricane Season, We Need to Rethink Flood Insurance

Giovanna Dasilva

With the national spotlight on flooding caused by hurricanes Harvey and Irma, the National Flood Insurance Program (NFIP) has come under scrutiny. The federal program primarily focuses on offering flood insurance coverage and reducing the impact of flood damage.  

The NFIP was established in 1968 to counteract a market failure on the part of private companies, which failed to provide coverage because of the high costs. The program utilizes flood maps for over 20,000 communities to assess risk areas and to establish insurance rates. The NFIP provides the most amount of coverage to Florida with 1.8 million active insurance policies.

According to the Heritage Foundation, the NFIP is currently $25 billion in debt to the U.S. Treasury. The program also charges higher premiums to those in lower-risk flooding areas, leaving many questioning the efficiency of the NFIP as a whole. In the case of Hurricane Irma, the total cost of damage to Florida is expected to range from $20 to $50 billion.

Jennifer Wriggins, professor of law at the University of Maine, notes that one of the fundamental flaws in the NFIP approach to insurance coverage is that:

“In providing deeply discounted rates on the oldest and riskiest properties, Congress discouraged replacing and mitigating these properties. In fact, Congress’s policies unfortunately encouraged homeowners to retain these properties. After floods, flood insurance benefits were often used to repair existing homes rather than replace them with new, more flood-resistant homes. Thus, the number of older, risky homes remained higher than it would be if people actually had to pay the full cost of flood insurance on those homes.”

These subsidies in turn encourage further infrastructure development in high-risk areas, which increases liability. This development is a classic example of moral hazard, which describes the counter-intuitive nature of incentivizing negative behavior on the behalf of consumers via well-meaning policy.

The NFIP fails to accurately price insurance premiums for the properties they insure. Cato Institute policy analysts Ike Brannon and Ari Blask, however, argue that private flood insurers are able to price premiums in order to reflect flood risk instead of subsidizing high-risk areas. In fact, homeowners who that receive subsidies are often affluent citizens owning who own property in coastal areas. Brannon and Blask found that 12 percent of subsidized properties along the coast were worth more than $1 million and 40 percent worth over $500,000.  

Yet, according to the Federal Energy Management Agency (FEMA) one of NFIP’s goals is to provide affordable flood insurance. However, homeowners in low-risk flood areas do not receive this benefit. This is due to the fact that by artificially lowering the price of high-risk properties, low-risk property holders are left subsidizing the cost of flood insurance for higher-risk flood zones.

President Trump temporarily reauthorized the NFIP to address the massive flooding experienced after Hurricane Harvey and anticipated damage from Irma. In three months, Congress will convene to discuss the fate of the NFIP. Its decision will surely impact the everyday lives of Florida homeowners.

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Government Consolidation Rarely Lives Up to Promises

By Matt Kelly

Government consolidation is an often-touted solution to economic and social problems in American cities. Several initiatives to combine local governments  have resulted in conjoined regional governments, including Indianapolis-Marion County (IN), Athens-Clarke County (GA), and Jacksonville-Duval County (FL). Tallahassee and Leon County have seen six campaigns for consolidation over 50 years, all of which failed. Despite the sustained interest , little evidence in the economic or public policy research literature suggests local government consolidation improves economic development or governance.

Tallahassee’s history of consolidation attempts is lengthy but follows a national pattern of failure at the ballot box. Initial political pressure arose in the 1950s. A 1968 proposal was defeated by voter referendum, as were others in 1973, 1976, and 1992. A more recent campaign in 2004 never got a vote. This pattern is fairly common. Since 1815, only 39 of 166 attempted consolidations in the U.S. nationwide have succeeded. However, like Indianapolis-Marion County (IN), the City of Tallahassee and Leon county have consolidated specific services such as emergency medical services and fire protection. The city and county have also established special districts like Blueprint 2000 and the Tallahassee Community Redevelopment Agency to pursue joint projects.

Proponents of consolidation contend that combining city and county governments will increase efficiency by eliminating service duplication and capturing economies of scale. Having larger tax bases and populations could allow governments to launch ambitious infrastructure projects and attract funding from federal or state programs. Larger governments might better handle regional issues, like persistent out-migration, racial inequality, growth management, and economic development.

How has consolidation worked in practice? A 2005 literature review by DeVoe Moore Center Director Sam Staley and coauthors Dagney Faulk, Suzanne Leland, and D. Eric Schansberg for the Marion County Consolidation Study Commission concluded that “significant gains in efficiency are unlikely.” Most studies estimating economies of scale in police and fire departments found that larger regional departments aren’t more cost-efficient. Complicating matters, morale problems among public employees plague the transition to consolidated governments. Outcomes also depend on political leadership and context-specific motivations for reform.

Economic development has improved modestly in some locales after consolidation, but typically no more than in comparable unconsolidated jurisdictions or statewide averages. In a 1999 analysis of nine consolidated governments, political scientists Jered Carr and Richard Feiock found no link between consolidation and economic development. More recently, economists from the University of West Virginia analyzed several city-county consolidations using a somewhat more sophisticated statistical technique called synthetic control method to determine whether areas experienced greater growth post-consolidation, but still found no link.

Proponents may be driven most by political motivations. Richard Feiock, the Augustus B. Turnbull Professor in the Askew School of Public Administration and Policy at Florida State University, has researched government consolidation for decades. A 2006 paper coauthored with Jered Carr and Linda Johnson notes that consolidation campaign efforts are “fundamentally about political losers trying to be winners.” Economic development, racial tensions, or the operational efficiency of law enforcement are all secondary to the selective gains that politicians, government officials, local business elites, and even academics hope to win from consolidation. Whatever reason is most politically palatable at the time takes center stage. These campaigns don’t always appeal to the better angels of human nature. The authors continue: “Success of consolidation efforts during the 1960s was likely the result of proponents successfully exploiting racial tensions in the community by suggesting that consolidation would be an effective mechanism to stunt growing African American political power or to prevent African Americans from ever gaining significant power. Today, proponents are more likely to suggest that economic development will be enhanced.”

Efforts to consolidate continue. In 2016, a government task force in Illinois revived interest in consolidation as a panacea for the state’s budgetary problems. As recently as May 2017, Tallahassee city officials attending a conference in Nashville discussed the prospects of consolidation. Some ideas die hard.

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