Senate Committee on Small Business and Entrepreneurship – December 13, 2012
Prepared Testimony Presented by Hoboken Mayor Dawn Zimmer
"Good morning Chairwoman Landrieu and Committee members. It’s a privilege to be here today.
My name is Dawn Zimmer and I am the Mayor of Hoboken, New Jersey. Hoboken is located just across the Hudson River from New York City. We are proud to be the birthplace of baseball and Frank Sinatra and home of the Cake Boss. More than 50,000 residents and hundreds of businesses call our square mile city their home, which is why we are one of the most densely populated cities in America – more than New York City. We are proud to be one of the most walkable communities in the country, and we rank number one in per capita use of public transportation for commuting. We’re a vibrant urban community filled with hundreds of boutiques, restaurants, and outdoor cafes.
But Hurricane Sandy was devastating for Hoboken, our businesses and our residents. For the first time in history, the Hudson River spilled into Hoboken from the north and south, flooding more than half our city. Our community center, public works garage, three of our four fire houses, and more than 1700 homes flooded. We estimate the total damage to our community at well over $100 million.
Thankfully our main street, Washington Street, did not flood, and is again open for business. But hundreds of businesses located off of our main street were severely flooded.
Even the businesses that did not flood have been severely impacted because one of our principal means of transportation to New York, the PATH train, was flooded and still has not been restored. Many businesses report up to a 60 percent reduction in business due to the difficulty of getting to and from Hoboken.
Some businesses that flooded remain closed or are forced to operate at an alternate location as they try to navigate the insurance gauntlet.
I call it an insurance gauntlet because the National Flood Insurance Program is not designed to meet the needs of the built urban environment.
I believe there is a fundamental unfairness in the system that I respectfully ask Congress to address.
When businesses located in a flood zone buy their properties, they are forced to purchase flood insurance by their mortgage companies. But the Flood Insurance Program treats garden style businesses as if they were “basements.” And under FEMA’s definition of a “basement,” the coverage is greatly limited to only include things like the boiler, hot water tanks, and electrical control panels.
These rules do not reflect the reality that in places like Hoboken, New York City, and other urban areas, the premises characterized as basements house vibrant businesses and principal residences which are critical elements to the vibrancy of our cities.
A store or apartment that requires you to walk down one or two steps is plain and simply not a basement. The business owners and residents who work and live in these stores and homes are required to buy flood insurance, are required to pay premiums into the flood insurance system, yet they receive virtually no coverage.
After having paid flood insurance premiums for years, many discover for the first time that their claims are denied because the flood insurance they were required to purchase does not actually insure them.
What we have is unfortunately not a rule that protects against moral hazard, but a trap that victimizes people at their time of greatest need.
For many businesses, their only option is a loan from the Small Business Administration. But almost all business owners I’ve spoken with tell me they can’t afford more debt. But they do need help, and we are at risk of losing the small businesses that make our communities special, so I respectfully ask that this committee and the Congress consider other options for providing direct relief to our small business owners.
Unfortunately, those businesses without flood insurance who do seek assistance from the SBA will be the next victims caught in the flood insurance trap. If they are able to receive an SBA loan, they will be required to get flood insurance and pay into a program that offers virtually no assistance for their urban garden style business. Their insurance costs will go up excessively, but unless Congress takes action to address the definition of a “basement” – or the coverage provided to those units – then the garden style business or home owner will be forever caught funding a flood insurance system that fails to benefit them in any meaningful way.
The inequity of the system is apparent when we see homeowners receiving $250,000 in coverage for vacation homes on the shore while primary homes and businesses fall through the cracks of the flood insurance program.
In the immediate term, I strongly urge Congress to provide direct assistance for businesses and residents caught in the flood insurance trap. Specifically, I ask you to take action to address the unfair basement issue for the future.
I suggest that rather than denying people coverage, businesses and residents should be given incentives to invest in taking the necessary steps to reduce the impact of flooding.
For example, there could be a system of encouraging the installation of energy efficient waterless tanks on higher floors that can be installed in closets.
But the current system does not provide incentives – it just inflicts pain on innocent victims at a time when they are most vulnerable.
I thank you so much for your willingness to listen to our concerns and for the opportunity to speak with you today." ◦