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August 2009

by Mark Wangrin

Winds of Change

Front page of The Galveston County Daily News, September 14, 2008, Total Devastation

Republished with permission of The Galveston County Daily News

Financing a comeback
for Galveston

Hurricane Ike, the third-costliest Atlantic hurricane in American history, caused $24 billion in damage and claimed 192 lives, 112 of them in the U.S.

The storm nearly wiped out Galveston, both physically and financially, and devastated surrounding areas as well. Beaches and buildings were washed away and the region’s tourism industry all but shut down.

The 2009 Texas Legislature responded with more than $347 million in appropriations to assist disaster recovery along the Gulf Coast, as well as $2.5 billion in bonds to fund the Texas Windstorm Insurance Association (TWIA), the storm-damage insurer of last resort for many coastal property owners.

Fixing UTMB

The University of Texas Medical Branch (UTMB), which pumps about $3 billion into the area’s economy each year, was devastated. The institution cut 2,000 jobs in the immediate aftermath of the storm.

But palm trees were still swaying from Ike’s winds when other storm clouds began brewing. Critics began urging that UTMB’s highly regarded hospital be moved permanently out of harm’s way.

UTMB supporters, meanwhile, pleaded that the 550-bed facility, one of only three Level One trauma centers in Southeast Texas, stay where it is – rebuilt, made stronger and more hurricane-resistant. In their view, it was worth the investment in time, faith and money.

Ben Raimer, UTMB Vice President for Health Policy and Legislative Affairs.

The Legislature listened to both sides – and voted to rebuild.

UTMB reports that the Legislature appropriated $566.5 million in general revenue for the institution for fiscal 2010 and 2011, nearly $109 million more than in the previous biennium. A supplemental appropriations bill provided an additional $150 million for Ike-related mitigation and repairs. The Legislature also approved $150 million in tuition revenue bonds to build a new hospital building at the nationally recognized medical school and trauma center.

UTMB also will receive $450 million from the Federal Emergency Management Administration (FEMA), $50 million in federal Social Service Block Grant funds, $130 million in insurance payments and a $200 million contribution from the nonprofit Sealy & Smith Foundation. In all, the institution expects to have about $1.4 billion available for recovery and expansion.

Meanwhile, UTMB reopened a full-service emergency room on Aug. 1 and expects to complete the new hospital as soon as 2011.

According to Dr. Ben Raimer, UTMB senior vice president of health policy and legislative affairs, the new building will be designed along the lines of the recently opened $180 million Galveston National Laboratory research facility, which sustained minimal damage in the storm.

Now comes the chance to prove to the Legislature that the state’s money is being well spent.

“We want to make them happy, to show them they have a demonstrable return on their investment,” Raimer says. “There’s a saying that pigs get fat, hogs get slaughtered. We don’t want to be a hog. The Legislature’s been very kind to us.”

Backing Galveston’s Schools

Galveston Independent School District (GISD) lost three of its 13 campuses, with damage estimated at $65 million. Forty of its 45 school buses were inoperable.

“There’s a saying that pigs get fat, hogs get slaughtered. We don’t want to be a hog. The Legislature’s been very kind to us.”

– Ben Raimer, UTMB Vice President for Health Policy and Legislative Affairs.

Yet its students missed only 18 days of school, as officials scrambled to set up makeshift facilities.

Initial rebuilding efforts were set back because GISD’s campuses were insured more for wind than water damage, yet flooding proved to be the main cause of destruction. A $12 million legislative appropriation will help make up the funding shortfall.

GISD – and other districts affected by the storm – also got a break in the calculation of their normal state funding. A district’s average daily attendance (ADA) is used to determine how much money it receives. For the 2009-10 school year, Galveston will be allowed to use its pre-Ike enrollment figure of 7,800 instead of its current ADA of about 5,900.

Federal sources helped as well. FEMA reimburses local institutions for 75 percent of documented losses after insurance claims are paid, with certain conditions. “We’re now required by FEMA to take all measures to mitigate a future event,” says Arnold Proctor, GISD’s assistant superintendent.

Some complications have emerged in the rebuilding effort. The city’s Central Middle School, which had up to eight feet of water, is eligible for recognition as a historic site, making rebuilding requirements more restrictive.

“We need to treat it as a historic site instead of a building we can bulldoze and start over,” Proctor says, noting that the district is considering putting floodgates around the campus.

“We won’t be back to ‘normal’ ever,” Proctor says. “But we’ll open school in August 2010 with everything we need, and go from there.”

Insuring Insurance

Other funding for Galveston included $10.7 million for Texas A&M–Galveston and $39 million for beach restoration that, with matching federal funds, will grow to $104 million.

One key piece of legislation, however, is aimed at future disasters – and preventing them from gutting the state’s insurance reserves and placing stifling financial burdens on policyholders.

Before Ike, the TWIA relied primarily on a $470 million trust to make settlements. Ike wiped it out.

The 2009 Legislature, however, has authorized TWIA to sell $2.5 billion in bonds to fund its operations. This will relieve the funding crunch – for the moment, at any rate.

“This avoided much higher premiums for policyholders,” says Jim Oliver, TWIA general manager. “But if there’s more substantial storm activity similar to Ike, the Legislature may have to act again.”

Oliver says the new legislation also limits any increase in premiums to 2.8 percent.

The Storm Next Time

Galveston is still filled with the sounds of power saws and hammers. But the thought of what may lurk beyond the horizon in the Gulf of Mexico is never too far away.

It’s impossible to predict where or with what force storms will hit until they form, says Dennis Feltgen, public affairs officer and meteorologist for the National Oceanic and Atmospheric Administration. He adds that the fact that three of the top four costliest hurricanes in U.S. history have occurred since 2005 can be attributed to increased population and construction along the coast, not more powerful storms. FN

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