Vista Farms Disinformation Project is At it Again

I just ran across this gem on the official news website for the city of Cayce:

"TRUE: Future tax consequences for Cayce homeowners and residents will be huge. BUT, they will be positive.

· Annexing 3,000 acres into Cayce before it is developed will significantly expand the economic opportunity for Cayce as a part of an overall strategic plan to lower taxes to residents in Cayce. Planners will have the opportunity to devise agreements that are tax sensitive to the residents and community, and the tax revenues from the development and jobs and retail sales will benefit all Cayce residents."Source

I am interested to see this "overall strategic plan to lower taxes to residents in Cayce." I am further interested to see how developing a known flood plain that is "protected" by levees built ages ago by farmers that conform to no levee standards and have proven themselves susceptible to the rising waters of the Congaree River will function to lower taxes for Cayce residents.

True, an upscale residential/commercial district would serve to expand Cayce's tax base and increase revenues for the city, but I have yet to see any proposal to lower property taxes (or any other local taxes) based on the anticipated revenues from Vista Farms.

Meanwhile, the people of Cayce should note that the flood insurance that business and homeowners would be forced to purchase in order to finance their properties is only made affordable because of the federally subsidized rates that are neither actuarially sound nor sustainable (even Congress has admitted that the NFIP in its present state is unsustainable, see H.R. 3121). This means that the burden of flood risk brought about by developing Vista Farms is borne not by the property owners, but by the public at large, thus increasing the tax burden on the citizens of Cayce (and, for that matter, the citizens of the United States). So essentially, this "strategic plan to lower taxes to residents of Cayce simply functions to increase their federal tax burden while failing to propose any reciprocal relief at the local level.

Vista Farms Disinformation Project

Take a look at the Vista Farms propaganda site here. Both Avery Wilkerson, the mayor of Cayce, and the "new team," who moderates the site, seem to be pushing the tax advantages and control advantages incurred by the citizens of Cayce in annexing the Green Diamond/Vista Farms plot. The project is being touted as a haves (Richland County) versus have-nots (residents of Cayce) campaign.

I have not personally witnessed any animosity between residents of Cayce and those "across the river." However, I find some of the other claims made on the site to be dubious at best. For example, the proponents of the Vista Farms project say that the annexation will lower taxes for residents of Cayce. Yet they site no proposals pending before the City Council to such effect. Further, they say that Cayce will not have to foot the bill for extending public services to the Vista Farms area. Even if the agreement between the developers and the City Council/mayor that the developers will foot the bill for sewer and water line extension is real, there is no mention of the costs of maintenance of those lines, the costs of extending the capacities of the sewer and water systems, or of the cost of providing other essential services to the area such as fire, police, and education. The proponents mention that the costs of services such as education, fire, and policing are a non-issue if the land is never developed and that even if the land is developed that the tax revenue from the developments will cover the costs of the services. What they fail to mention is that residential development tax revenues rarely cover the costs of such services.

Furthermore, the fact that the developers and the mayor who insist that there is no development plan, have also announced a plan to use 2/3 of the property for agricultural and environmental purposes suggests the disingenuous nature of the whole deal. So who will finance the very unprofitable "constructed wetlands" that are so highly touted by the developers? My guess is Cayce taxpayers.

Another problem with the view of the "new team" lies in their conception of the control of the land. They repeatedly mention that the zoning process is a public one and that the citizens of Cayce will have a say in how the area is zoned. Anyone who has attempted to sway the result of a zoning ordinance without bringing a big bag of money to the table can tell you how that turned out.

Finally, the biggest problem associated with the project is the levees. The existing levees were privately constructed to divert water from farmlands. It is well documented that the maintenance of levees is an expensive and time-consuming venture. So who will foot the bill for the levees? Well, the developers want you to think that private landowners will. What they don't tell you is the exorbitant cost of maintaining the levees would most likely prove prohibitively expensive for private landowners. So what will happen? Let the levees decay and endanger the whole development, or appeal the to the civic authorities for help?

Ultimately, as I have said on other occasions, the development of flood plains is a risky and expensive business. As Professor Adam Scales of the Washington and Lee School of Law put it: "maintaining a sinking metropolis that sits several feet below sea level is perhaps the ultimate faith-based initiative; these failures are surprising only in their capacity to shock.” (Adam F. Scales. A Nation of Policyholders: Governmental and Market Failure in Flood Insurance. 26 MISS. C. L. REV. 3. (2006))

Green Diamond and the Moral Hazard

In 2005 Columbia Ventures, LLC, the Myrtle Beach-based developers pushing the Green Diamond (now called Vista Farms) development won a suit in federal district court to throw out the current FEMA flood map that placed the Green Diamond area within the 100-year flood plain. Columbia Ventures' beef with the map was that FEMA did not factor in the existence of levees in the area in making its determinations for the flood map. The Southern Environmental Law Center, on behalf of FEMA and a Cayce neighborhood association that opposes the project, argued that the existence of the levees were not, and should not have been taken into account by FEMA because they failed to meet the regulatory specifications that levees must meet in order to be effective enough to alter flood plains in such a way as to justify alteration of the map. Their argument can be found here Columbia Ventures won the case, but it has been appealed and is awaiting a hearing.

It is notable that the levees in controversy existed in 1976, the last time a major flood event inundated the area and failures in both their structure, construction, and placement were cited as root causes of over $4 million dollars worth of damage (and the property was not even developed at the time). At that time, and in every flood map since, the Green Diamond tract has been included in the Congaree River's 100-year flood plain. Many people interpret the "100-year" flood plain to mean that a flood can be expected in the area about once every 100 years. That is wrong. Actually the 100-year flood plain experiences about a 1% chance of flooding each year. Thus it is possible to have a 100-year flood each year for any number of years until we give up on developing the place and just call it a lake.

This brings me to the point of this post. That the NFIP exists, and that courts are willing to toss out flood maps and essentially green light the development of proven flood plains leads companies such as Columbia Ventures into what the risk-assessment industry refers to as "moral hazard"- the phenomenon that occurs when people are insured from a risk and because of that fact fail to take measures to mitigate any damage that might arise from the risk. Thus, as the moral hazard occurs in the pool of insureds, the overall cost of insurance goes up. So then, when someone like Columbia Ventures decides to develop such a risky property, the cost of insurance for all who need flood insurance rises. The problem is that flood insurance is subsidized by the federal government and any losses that are incurred by the NFIP are passed on to taxpayers. Furthermore, the problem is exacerbated by the fact that subsidized rates, by definition, are not actuarially sound- that is, they do not reflect the actual risk they insure, thus compounding the moral hazard for developers of flood-prone lands.

The Green Diamond Should Stay in the Rough

Recently, the City of Cayce decided to annex the Green Diamond flood plain, located in lower Richland County for development. The timing, and hurried nature, of the decision is related to a window of time in which the area will be legally amenable to development. As part of an effort to modernize and make sustainable the National Flood Insurance Program (NFIP), FEMA, who is in charge of administering the NFIP, has been updating flood maps. The most recent map of the Green Diamond area has been thrown out by a federal court, not due to inaccuracy, but rather to administrative miscues in creating the map (imagine that, administrative miscues from FEMA).

The result of the court's decision to throw out the recent flood map is a window of opportunity for developers who have been salivating over the Green Diamond tract for some time now. They now have a limbo period in which development of the Green Diamond flood plain is not restricted by its flood map status. As FEMA works to put out a new flood map of the area, which will undoubtedly render the Green Diamond flood plain uninsurable, the developers, apparently in conjunction with Cayce's mayor and city council, are working to build on the flood plain.

One major facet of the project will be flood "protection" afforded the area by a levee system. One might think that only 2 years after the devastation caused by the breech of New Orleans' levees, that our collective memory might dissuade the development of flood-prone areas. But no, the technological hubris that has characterized our great nation for so long still prevails. Development of the flood plain moves forward.

The aforementioned "window of opportunity" for the development has little to do with federal property controls (at least overtly) and everything to do with insurance. Long ago the NFIP was created by the federal government because private insurers would not insure properties in flood prone areas. The private insurers cited essentially market-based concerns as to why they would not insure the properties. In order for the insurance companies to retain the ability to deal financially with a catastrophic flood event, the actuarially sound rate that would be passed to the homeowner would be unaffordable.

Enter the NFIP, the insurer of the uninsurable. The effect of providing flood insurance to low-lying, flood prone areas has been marked. Development of coastal areas and river flood plains has increased exponentially. In the process populations in those areas have grown rapidly. The result is an unsustainable insurance time bomb on nearly every beach that is susceptible to hurricane events and riverbanks around the country. Because of the federal policy of encouraging development of flood prone areas the NFIP has become a money pit. Congress has expressly admitted (see H.R. 3121, pending legislation entitled "The National Flood Insurance Program Reform and Modernization Act") that the NFIP, in its current form, is completely unsustainable and unable to deal with catastrophic events such as the 2004 and 2005 hurricane seasons. The pending legislation proposes to phase-in actuarially sound rates for some (mostly commercial properties and second homes) properties in flood plains and to add wind damage to the federally subsidized insurance coverage. The list of criticisms of the NFIP and the proposed reform is too long and complicated to post here, but I have an extensively researched academic paper for any who are interested.

The point of this post is to expose the true nature of Cayce's hurried annexation of the Green Diamond flood plain. If the development occurs between flood maps, then all of those properties will be insurable at the discount NFIP rates. The problem for those of us who will not benefit from the Green Diamond development is that when the area eventually floods, an event that would be severely exacerbated by a levee system and subsequent breech thereof, the cost of insuring the losses incurred will be passed directly to the taxpayer. In the meantime, the cost of bearing the risk of flood for the Green Diamond area will be borne by the insured (those people with property interests in the development) and the insurer (the federal government and, by extension, the taxpayer).

There are more criticisms of the Green Diamond development, which I plan to post when I have the time, but the biggest issue by far, as evinced by the rush to annex and develop the area, is insurance.