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Inactive Financial Institution Letters


[Federal Register: October 27, 1997 (Volume 62, Number 207)]
[Rules and Regulations]
[Page 55705-55720]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27oc97-18]

[[Page 55705]]

_______________________________________________________________________

Part V

Federal Emergency Management Agency

_______________________________________________________________________

44 CFR Part 59, et al.

National Flood Insurance Program: Insurance Coverage and Rates,
Criteria for Land Management, Use, Identification, and Mapping of Flood
Control Restoration Zones; Final Rule

[[Page 55706]]

FEDERAL EMERGENCY MANAGEMENT AGENCY

44 CFR Parts 59, 60, 64, 65, 70, and 75

RIN 3067-AC17


National Flood Insurance Program: Insurance Coverage and Rates,
Criteria for Land Management, Use, Identification, and Mapping of Flood
Control Restoration Zones

AGENCY: Federal Insurance Administration, FEMA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule establishes a new flood insurance rate zone,
known as the flood control restoration zone or Zone AR, to delineate
special flood hazard areas on National Flood Insurance Program (NFIP)
Flood Insurance Rate Maps (FIRMs). The rule's underlying statute
stipulates that flood insurance be made available at premium rates
appropriate to the temporary nature of flood hazards during the period
when a flood protection system is being restored. The Zone AR
designation is a means to recognize that a flood protection system is
being restored to provide protection during the base flood event, and
to reduce the flood insurance costs and elevation requirements for
properties that will be exposed to an increased risk of flooding during
the restoration period. In return for the availability of flood
insurance this rule also establishes minimum flood plain management
requirements and provides regulatory guidance for implementing
statutory requirements.

EFFECTIVE DATE: This rule is effective November 26, 1997.

FOR FURTHER INFORMATION CONTACT: Michael Buckley, Hazard Identification
and Risk Assessment Division, Mitigation Directorate, Federal Emergency
Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-
2756.

SUPPLEMENTARY INFORMATION:

Rulemaking Chronology

    Directed under Sec. 928 of Pub. L. 102-550 to publish regulations
on the newly authorized flood control restoration zone, FEMA published
a proposed rule on April 1, 1994, 59 FR 15351. Based on comments on the
proposed rule we made changes for the interim final rule. In order to
meet the statutory 2-year deadline for publishing regulations, yet to
give the public and interested parties another opportunity to comment
on the changes we made, we published an interim final rule on October
25, 1994, 59 FR 53592, with a 45-day comment period. We extended that
comment period 13 days to December 23, 1994 in order to permit
additional comments and to hold a public meeting to receive oral
comments to supplement the record. On December 19, 1994 we held a
public meeting at FEMA headquarters in Washington, DC to hear from
diverse interest groups, including several of whom participated by
teleconference.
    The interim final rule contains provisions to implement a new flood
insurance rate zone, Zone AR, for areas designated as a flood control
restoration zone on NFIP maps. It also establishes minimum flood plain
management requirements and provides regulatory guidance for
implementing statutory requirements of Sec. 928 of Public Law 102-550,
42 U.S.C. 4014(f), including procedures for delineating flood control
restoration zones on FIRMs.
    We sent copies of the interim final rule to members of Congress and
to chief executive officers of communities affected by the rule
concurrently with our submission of the rule to the Federal Register.
We met with House Banking Committee staff (Senate Banking Committee
staff members were invited but were unable to attend) to discuss the
provisions in the interim final rule.
    At the request of a Member of Congress representing several Los
Angeles County communities, FEMA and the U.S. Army Corps of Engineers
participated in an informational public meeting in Bellflower,
California on April 22, 1995 to discuss the restoration of the flood
protection system along the Rio Hondo and Los Angeles Rivers. No
substantive new issues or comments were raised at this meeting or
otherwise affected the substance of the rule published today.

Scope of Public Participation

    During the comment period provided for the interim final rule, we
received 47 letters, each containing multiple comments about various
issues in the interim final rule. Most of the letters represented the
local interests of the Los Angeles and Sacramento area communities.
Those submitting formal comments on the interim final rule included:
one U.S. Senator, two members of the U.S. House of Representatives,
community officials and representatives of local governments and
community agencies, representatives of the local business community,
and private citizens from the Los Angeles and Sacramento metropolitan
areas, and state and national representatives of environmental and
flood plain management associations.
    Twenty-five individuals participated in the December 19, 1994
public meeting, including a U.S. Representative, several Congressional
staff members, local government officials from Los Angeles, Sacramento,
and Stockton, representatives of national environmental and flood plain
management associations, staff of private lobbying firms representing
communities in the Los Angeles and Sacramento areas, one individual
representing a private citizen, and a private citizen/local activist.
Participation in the December 19, 1994, meeting was also available
through a telephone conferencing connection. Oral comments were
recorded and a written transcript was sent to each of the meeting
participants.

Overview of Comments

    Comments on the interim final rule expressed support for the AR
Zone as a means to accommodate community participation in the NFIP
during the period required to restore an existing flood protection
system. Several comments approved creation of uniform criteria
applicable nationwide to communities affected by decertification of an
existing flood protection system, and not limited to communities in the
Sacramento and Los Angeles, California areas. Another noted that the
interim final rule established a reasonable procedure for such
communities, but recognized the potential damages to property and
threat to life, particularly where flood depths are significant.
    A number of comments indicated some misunderstanding of the NFIP,
its statutory authority and how the Program is administered. Created by
Congress in the National Flood Insurance Act of 1968, 42 U.S.C. 4001 et
seq., the NFIP is a voluntary program that was designed to reduce the
loss of life and property and rising Federal disaster relief costs
caused by flooding. The NFIP makes federally backed flood insurance
available for property owners located in participating communities.
Before the Congress created the NFIP, flood insurance coverage was
generally not available through private insurers among other things
because of adverse selection and the high cost to identify flood risks.
Under the NFIP the cost of flood losses is transferred from the general
taxpayer to the flood plain occupant by requiring owners of flood plain
properties to purchase flood insurance coverage when obtaining Federal
or federally related financial assistance for construction or
acquisition purposes. Today property owners in over 18,500
participating

[[Page 55707]]

communities may purchase flood insurance.
    A number of comments asked that FEMA withhold issuance of revised
FIRMs identifying the increased flood hazard, or to issue maps showing
the community as non-floodprone. Some comments questioned FEMA's
mandate to identify flood hazards and questioned why FEMA needs to
identify flood hazard areas. Several comments asked that FEMA withhold
issuance of FIRMs for a community as long as progress is being made to
restore flood protection.
    The National Flood Insurance Act of 1968, as amended by Pub. L.
102-550, does not give FEMA authority to withhold publication of maps
outright, or to withhold maps as long as communities are making
progress toward restoration of the flood protection system. The
legislation reduces flood insurance costs and elevation requirements,
recognizes the added flood risk during the restoration period, and
leaves intact the mapping requirements that have existed since 1968.
The maps are required to identify and delineate the flood hazards, as
well as to identify where flood insurance is or is not required.
Withholding the maps would not be in the best interests of the
residents of the community who need to be aware of the flood risk so
that they can make informed decisions that will protect them and their
property.
    The 1968 Act requires that FEMA identify and map flood hazards
nationwide and disseminate the information to local communities so that
they and their residents can be aware of the flood risk and take steps
to protect against future flood losses. During the last 25 years, FEMA
has mapped over 165,000 square miles of floodprone areas nationwide.
    In return for making flood insurance available, the community must
commit to adopt and enforce NFIP flood plain management regulations to
reduce the potential for future flood damages in the identified special
flood hazard areas (SFHAs). Development in these areas is regulated by
local flood plain ordinances that are designed to reduce future flood
damages by requiring that new and substantially improved structures be
protected to the base flood level at a minimum. Experience has proven
these measures effective in reducing flood losses.
    The NFIP's flood insurance and flood plain management requirements
are based on flood insurance studies conducted under contract for FEMA
by other Federal agencies and by private engineering firms that have a
demonstrated expertise in hydrologic and hydraulic analyses of flood
plains. From these studies, FIRMs are prepared that identify the areas
of the community that will be inundated by the 1-percent annual chance
flood, that is, the flood that has a 1 percent chance of being equalled
or exceeded in any year. The 1-percent annual chance flood standard has
been widely adopted by Federal, State and local agencies for design and
regulatory purposes.
    The 1-percent annual chance flood is sometimes called the 100-year
flood or, as used in this rule, the ``base flood''. ``Base flood''
describes a flood of a particular magnitude, the 1-percent annual
chance or 100-year flood. There is a 26-percent chance that a flood of
this magnitude will occur at some point during the life of a 30-year
mortgage.
    A number of comments questioned the constitutionality of the flood
insurance purchase requirement, while other comments expressed that it
should be individual choice to buy flood insurance. Major flooding in
the early 1970s prompted the Congress in 1973 to enact certain
mandatory insurance purchase requirements that protect Federal
financial interests in the flood plain. The mandatory flood insurance
purchase requirements apply to mortgages and other financial assistance
obtained from a Federal or federally regulated lender where the
security for the loan is a building or manufactured housing located in
a designated SFHA. Flood insurance must also be purchased by recipients
of some types of flood-related disaster assistance under the Robert T.
Stafford Disaster Relief and Emergency Assistance Act.

Background on the Enactment of Zone AR Provisions

    Several of those commenting indicated that they were not aware of
the background that led Congress to authorize flood insurance
availability for flood control restoration zones. FEMA contracts with
other Federal agencies and private contractors periodically to restudy
flood risks and revise flood maps when there is sufficient change in
the flooding conditions to warrant such action. When the U.S. Army
Corps of Engineers, for example, determines that a previously certified
flood protection system, such as a levee, no longer provides protection
during the base flood, under the National Flood Insurance Act FEMA must
identify and map the resulting floodprone areas. Within these
decertified areas, NFIP regulations require participating communities
to enforce local flood plain management ordinances for elevating new
construction and substantial improvements of existing buildings to the
level of the base flood at a minimum in order to reduce or eliminate
flood damages. These mandates are without regard to any actions being
taken to restore a flood protection system.
    Flood insurance premiums are calculated on the actual flood risk to
the building or manufactured housing so that the cost of flood
insurance for new construction placed below the base flood level will
reflect the increased risk. In some cases, however, the community may
be taking specific actions to restore protection to the base flood
level so that the increased flood risk is considered to be a temporary
situation that will be remedied when the system is fully restored.
    In the 1980s the U.S. Army Corps of Engineers determined that the
levee systems protecting certain parts of the Sacramento and Los
Angeles areas no longer provided protection from the base flood, and
decertified those systems. Under the National Flood Insurance Act FEMA
remapped the areas no longer protected to the base flood level. The
remapping showed large areas that would be subject to flooding from the
base flood, with depths from 1-15 feet in the Los Angeles area, and as
deep as 26 feet in parts of the Natomas area near Sacramento. Concern
for the costs of new construction or substantial improvements to
existing buildings, and concern for the cost of flood insurance
required by law in these areas, caused communities and various interest
groups to petition the Congress for relief while the levee systems were
being restored.
    To bolster the position of affected communities in the Los Angeles
area, an economic study prepared at the University of Southern
California (USC) in 1992 predicted major adverse economic impacts in
the Los Angeles area if the NFIP flood insurance and flood plain
management requirements were enforced after decertification of the
levee systems on the Rio Hondo and Los Angeles Rivers. The findings of
the USC study apparently were important influences in persuading the
Congress to amend the National Flood Insurance Act of 1968 to assist
communities, such as those in the Los Angeles and Sacramento areas,
where an existing flood protection system no longer provides base flood
protection but is being restored.
    In October 1992 Congress enacted the Housing and Community
Development Act of 1992, Public Law 102-550. Section 928 of Pub. L.
102-550, 42 U.S.C. 4014(f), created a Flood Control Restoration Zone
(Zone AR) designation to meet the communities' concerns. The

[[Page 55708]]

Zone AR designation is a carefully crafted and balanced mechanism to
recognize that a flood protection system is being restored to provide
protection during the base flood event, and to reduce the flood
insurance costs and elevation requirements while still providing some
level of protection for properties that will be exposed to an increased
risk of flooding during the restoration period. Within Zone AR,
Congress reduced elevation requirements for new construction,
eliminated elevation requirements for substantial improvements to
existing structures, and capped the flood insurance rate for insuring
such structures during the interim period when the flood protection
system is being restored. By enacting Sec. 928, Congress anticipated
that the Federal government would accept some additional costs in the
form of increased flood insurance liability and disaster assistance,
and that communities would accept and enforce reduced flood plain
management requirements in order to provide a minimal level of flood
protection for new structures built while the flood protection system
is being restored. In creating the Zone AR designation the Congress
fully and significantly addressed the economic concerns addressed in
the USC study, balancing those concerns against the national need to
reduce the cost of Federal disaster assistance and to have those whose
properties are at risk in the nation's flood plains bear a portion of
that risk.

Issues Raised

    Major issues were raised in the public comments about the
definition of developed areas, the requirement to elevate or floodproof
structures outside of the ``developed'' area to the base flood
elevation, the federal funding requirement for the restoration project,
the requirement that construction in ``developed'' areas be elevated to
3 feet above the highest adjacent grade, adherence to a maximum
restoration period and the absence of a ``hold harmless'' provision for
delays in achieving restoration within that time frame, and the
requirement to submit information about the legal status of the project
as part of the application and submittal requirements for AR Zone
designation. These and other comments are addressed in the sections
that follow.

Definition of ``Developed Area''

    Several comments were received in support of the definition of
``developed area'' in the interim final rule. There were also several
comments that expressed concerns about how the definition is to be
applied to vacant land and infill sites and on issues related to how
``basic infrastructure'' is defined and what public property and
facilities can be included in a ``developed area''. Comments also
recommended that the regulations be modified to include multiple
parcels, tracts, or lots of less than 20 acres in ``developed areas''
under subsection (b) of the definition rather than a single parcel,
tract, or lot.
    Specific comments concerning the definition stated that the
``developed area'' is too restrictive if all vacant land and infill
sites had to have been previously developed and that redevelopment of
these sites has to be supported by the infrastructure in place. Related
comments stated that the supplementary information in the interim final
rule pertaining to the concepts of ``infill'' and ``redevelopment'' is
inconsistent with Pub. L. 102-550 and industry-recognized definitions
and practices related to ``infill'' and ``redevelopment''.
    Concern was expressed that the terms, ``infill'' and
``redevelopment'', which are unrelated, are being used interchangeably
and that both terms require the site to have been previously developed
in order to qualify a property for inclusion in a ``developed area''.
The comment noted that the Real Estate Glossary, published by Kenneth
Leventhal & Company, Certified Public Accountants, defines ``infill
development'' as ``development of vacant, scattered sites in a
developed section of a city''. According to this definition, the
comment stated, ``infill'' should not presume the existence of prior
structural improvements to qualify the property to be included in a
``developed area''. It was recommended that the definition be clarified
to allow all vacant sites of a city to be included in the ``developed
area'', including sites in a natural and undisturbed state. It was also
recommended that the ``developed area'' include vacant land that has
been improperly subdivided and vacant land that consists of parcels and
lots of inadequate size and irregular form.
    For simplification and ease of administration at the local level,
FEMA established a definition for ``developed area'' rather than
require communities to identify individually single parcels or lots
that meet a definition for ``infill sites'', ``rehabilitation of
existing structures'', or ``redevelopment of previously developed
areas'', terms used in Pub. L. 102-550. ``Developed area'', as defined
in the final rule at 44 CFR 59.1 (a)-(c) encompasses the larger
urbanized area as well as isolated developed subdivisions beyond the
urban area. ``Developed area'' further encompasses ``vested rights''
interests by recognizing land that is planned, permitted, and where
construction is underway. A community must adopt a map or legal
description designating the ``developed area'' and submit this
information as part of the Zone AR application process.
    FEMA agrees that clarification is needed regarding the distinction
between ``infill sites'' and ``redevelopment'', and with regard to
whether vacant, undeveloped sites can be included in ``developed
areas'' as set forth in the supplementary information to the interim
final rule. We do not intend to imply that ``infill sites'' and
``redevelopment'' are synonymous nor that an ``infill site'' presumes
the existence of prior structural improvements or previous development.
``Infill sites'' can include: (1) land that is undeveloped (either in a
natural state or in agricultural production); (2) land that contains
buildings that are underused, unused, or dilapidated; or (3) land that
had been previously developed and is now in a nonbuilding use (e.g., a
parking lot). Redevelopment is generally associated with rebuilding a
site where a building or buildings are dilapidated or have been
previously torn down.
    Infill sites, including vacant, undeveloped land, can be included
in a ``developed area'' as long as the site meets the criteria
established under paragraph (b) of the definition of ``developed
area''. The ``infill site'' must be contiguous on at least 3 or more
sides by a ``developed area'' meeting the criteria of paragraph (a) of
the definition. This is consistent with the supplementary information
contained in the proposed rule that states that subsection (b) of the
definition of the ``developed area'' addresses those urban fringe areas
that, because of their relationship to surrounding developed areas,
should be considered ``infill site'' areas. FEMA believes that with
this clarification it is unnecessary to alter the regulations.
    Older subdivisions that remain undeveloped because they contain
lots that are considered nonconforming under local zoning, subdivision,
or planning regulations are considered ``infill sites'' and would
qualify for inclusion in a ``developed area'' in accordance with
paragraph (b) of the definition. This type of subdivision may also
qualify under paragraph (c) for ``vested rights'' if the subdivision
has been replatted and development is underway in accordance with this
paragraph.

[[Page 55709]]

    A comment was made that the term ``basic infrastructure'' is not
sufficiently defined. Another comment asked FEMA to clarify whether
areas that require substantial upgrading of infrastructure are still
considered ``developed areas'' if all other conditions are met. In
order to sustain a primarily urbanized, built-up area in accordance
with paragraph (a) of the definition of ``developed area'', a certain
level of infrastructure would have to be in place. The term, ``basic
infrastructure'', is used because the level of infrastructure needed to
sustain any combination of industrial, residential, and commercial
activities will vary from community to community.
    Subsection (a)(1) of the definition of ``developed area'' is
designed to have the community designate an area that is generally
recognized as ``urbanized'' as opposed to a land use pattern that is
undeveloped or is in agriculture. Subsections (a)(2) and (a)(3) address
those isolated areas beyond the urban core that are considered
urbanized or developed because the land is primarily built-up in
commercial, industrial, or residential uses. FEMA recognizes that
infrastructure in older, urbanized areas that is in substandard or poor
condition may need to be substantially upgraded in areas that are being
redeveloped. As long as an area meets one of the three criteria under
paragraph (a) it can be included in a ``developed area''.
    Infrastructure would not have to be substantially in place within
the site under paragraph (b) of the definition of ``developed area''
since the land may be undeveloped or in agriculture, but public
utilities must be in place near the edge of the site and can be
extended into the site. For example, the community should be able to
extend sewer lines readily that are near the edge of the site. The
infrastructure would have to be substantially in place under paragraph
(c) of the definition in order to sustain the structures that are built
already or the construction that is underway under the criteria
established in this paragraph. FEMA believes that it is unnecessary to
alter the regulations to clarify this point.
    In addition, a comment recommended that the regulations clarify
that all public property and facilities, existing and planned,
including publicly-owned open space, are included in ``developed
areas''.
    Public facilities are included in the category of infrastructure
per paragraph (a) of the definition of ``developed area'' since public
facilities are needed to support and sustain a primarily urbanized,
built-up area and provide public services related to the health,
safety, and welfare of the population. As stated in the supplementary
information to the interim final rule, the term ``public facilities''
in paragraph (a) encompasses buildings and facilities, such as
municipal buildings (e.g., court houses, city halls), schools,
hospitals, and publicly-owned open space, such as public parks and
recreational facilities, and historic sites. The term ``public
facilities'' also encompasses quasi-public facilities and services,
such as museums, churches, and sports facilities. Public facilities can
include existing as well as planned facilities as long as the site for
the public facility meets one of the criteria established under the
definition of ``developed area''. FEMA believes that it is unnecessary
to alter the regulations to clarify this point further.
    A comment said that it was unclear why the exception under
subsection (b) of the definition of ``developed area'' pertains to only
a single parcel, tract or lot and does not apply to multiple parcels,
tracts, or lots of less than 20 acres. FEMA agrees that it is not
necessary to require that subsection (b) of the definition of
``developed area'' be tied to a single parcel, tract or lot. We
modified subsection (b) of the definition of ``developed area'' to
apply to multiple parcels, tracts or lots, as long as the combined
parcels, tracts, or lots are less than 20 acres and are contiguous on
at least three sides to areas meeting the criteria of paragraph (a) of
the definition of ``developed area'' at the time the designation is
adopted.
    Comments recommended that FEMA revise the regulations to recognize
areas as developed when they have final zoning land use approvals from
local government agencies; when they are entirely non-residential; when
funding for the restoration project is provided (local or shared with
the Federal Government); and when construction of the restoration
project is underway, and completion is imminent.
    FEMA established criteria to address concerns for development that
has been planned, permitted, and construction is underway. The
definition of ``developed area'' addresses ``vested rights'' by
establishing criteria for determining a ``developed area'' that is
planned, permitted, and where construction is underway and
infrastructure and structures are being built. Paragraph (c) of the
definition of ``developed area'' would recognize areas as ``developed''
where the investment in the land and infrastructure is substantial and
development, residential or non-residential, is underway. FEMA believes
it is unnecessary to tie the criteria under subparagraph (c) of the
definition for addressing ``vested rights'' to the status of the
restoration of the flood protection system since the community is only
required to adopt the definition of ``developed area'' when it
qualifies for the Zone AR designation.
    In order for FEMA to designate a flood control restoration zone,
Pub.L. 102-550 requires that the flood protection system must be deemed
restorable by a Federal agency, a minimum level of protection is
provided, and the restoration is scheduled to be completed within a
designated time period. FEMA believes that it is unnecessary to alter
the regulations to clarify this point further.

Flood Plain Management and Land Use Requirements in a Flood Control
Restoration Zone

    We received comments concerning the elevation requirements in the
interim final rule. Comments supporting the elevation requirements
noted that those requirements comply with the statutory provisions and
strike a balance between development interests and the public interest
in protecting new development that will be exposed to increased flood
damage until the restoration is complete. Comments objecting to the
elevation requirements expressed concern that the increased costs
associated with elevating new construction would adversely affect
development in communities. Several of these comments recommended that
FEMA amend Sec. 60.3(f) to allow for elevations of less than 3 feet in
developed areas when circumstances warrant a lower elevation.
    Several comments stated that according to the legislative history
and the requirements in Pub.L. 102-550, FEMA has the flexibility to
allow for less than the 3-foot elevation. The comments also stated the
opinion that the interim final rule ignores a Senate Committee report
that directed FEMA to establish flexible elevation requirements where
it is not practical or feasible to elevate above 2 feet citing several
examples when a lower elevation might be appropriate. These examples
involved considerations such as lot size, access, incremental cost
relative to flood risk exposure, and length of the restoration period.
Several comments recommended that the elevation requirement be lowered
to 2 feet because seismic design requirements that would apply when
elevating to 3 feet would increase costs significantly.
    Comments were also made that the interim final rule effectively
precludes development in areas outside of the ``developed area'' due to
the practical limitations of elevating or floodproofing when flood
depths exceed 5 feet. These

[[Page 55710]]

comments recommended that FEMA amend the regulations to reduce the
elevation requirement for non-residential structures in areas outside
of ``developed areas'' because these structures are not subject to the
same risks as residential structures and can be designed to avoid
collapse or movement due to flooding. That recommendation also
suggested that a standard notice and waiver agreement could be executed
by the owner of a commercial building and flood insurance could be
required at appropriately higher rates.
    The comments that cited the legislative history for flexible
elevation requirements of less than 3 feet refer to the report by the
Committee on Banking, Housing, and Urban Affairs United States Senate,
Report 102-332, for the National Affordable Housing Act Amendments of
1992, dated July 23, 1992. This report was for an earlier legislative
proposal to establish Zone AR. Subsequent to this earlier proposal, the
legislation underwent a considerable change to address Congressional
concern over increased risk within deep flood plains that are currently
less developed or undeveloped. The concern for deep flood plains was
expressed in the Congressional Record, dated October 8, 1992 (144 Cong.
Rec. S17910), on the final version of Pub.L. 102-550. Furthermore, the
October 8, 1992 record indicated that ``FEMA shall establish flood
plain management requirements for new construction and substantial
improvements for less developed areas of Los Angeles and Sacramento and
for other communities that may be eligible for the Zone AR''. There
were no comments in the Congressional Record of the Senate or the House
(144 Cong. Rec. H11471, dated October 5, 1992) on the final version of
the Pub.L. 102-550 that refer to flexible elevation requirements of
less than 3 feet.
    In establishing the flood plain management requirements for
communities eligible for Zone AR designation, FEMA is consistent with
Pub.L. 102-550. Pub.L. 102-550 stipulates that the NFIP minimum
elevation requirements for new construction shall not exceed 3 feet in
Zone AR for ``in-fill sites'' and ``redevelopment of previously
developed areas'' no matter what the flood depth. Whether base flood
depths behind a decertified flood protection system are 5 feet, 15
feet, or 25 feet in a ``developed area'' of a community, the final rule
only requires that structures be elevated to 3 feet.
    If base flood depths are less than 3 feet in either the ``developed
area'' or areas outside the ``developed area'', the property owner need
only elevate the structure to the base flood depth, (i.e., elevate the
structure only to 1 or 2 feet).
    Congress did not intend the flood plain management requirements in
Zone AR to deter property improvements. Consistent with Pub.L. 102-550,
there are no elevation requirements for ``rehabilitations to existing
structures'', including substantial improvements.
    FEMA believes Pub.L. 102-550 is clear in establishing flood plain
management criteria for areas outside of the ``developed area''. Pub.L.
102-550 establishes that ``flood plain management criteria shall not
exceed 3 feet above existing grade for new construction, provided the
base flood elevation based on the disaccredited flood control system
does not exceed 5 feet above existing grade, or the remaining new
construction is limited to in-fill sites, rehabilitation of existing
structures, or redevelopment of previously developed areas''. The final
rule is consistent with Pub.L. 102-550.
    Pub.L. 102-550 and the final rule do not preclude development in
areas outside of the ``developed area'' as claimed in several comments.
Residential and non-residential structures can be built in areas
outside of the ``developed area'' as long as they are built in
accordance with the minimum NFIP flood plain management criteria. These
criteria address Congressional concern for deep flood plains. While the
NFIP flood plain management criteria require the elevation of
residential structures, nonresidential structures may be either
elevated or floodproofed. The floodproofing criteria in the NFIP
Regulations [44 CFR 60.3(c)(3) and (4)] require that walls below the
base flood elevation be substantially impermeable to the passage of
water and with the structural components capable of resisting
hydrostatic and hydrodynamic loads and effects of buoyancy. If
floodproofing is used in ``developed areas'' and in other areas where
flood depths are less than 5 feet, non-residential structures need only
be floodproofed to 3 feet.
    The argument by respondents that non-residential structures in
flood plains do not pose the same risks to life-safety and to property
as residential structures understates the true impacts of flooding and
property loss. The flooding of non-residential structures does pose
life-safety risks when flood fighting takes place. When the flooding
has receded, damaged commercial or industrial areas have severe
economic impacts on the community not only due to damages to insured
and uninsured structures and their contents but also due to the
temporary or permanent loss of jobs. This economic impact can often go
beyond the community with flood losses being passed on to the taxpayer
in general through a variety of programs and mechanisms, such as
disaster assistance and reduction in Federal, State, and local tax
revenues, including casualty loss deductions on income taxes and
reductions in real property tax assessments. In addition to these
impacts, exposure of the NFIP will also be extensive considering that
FEMA provides insurance coverage of $500,000 for non-residential
structures and $500,000 for contents for a total coverage of up to $1
million per structure.
    Pub.L. 102-550 accommodates the needs of communities within
``developed areas'' through reduced elevation requirements for new
construction while the flood protection system is being restored yet
recognizes that properties will be exposed to an increased flood risk
during the restoration period. Before this law was passed, all new
construction and substantial improvements in areas protected by a flood
protection system which no longer provides base flood protection were
required to be elevated to the base flood elevation. Therefore, in
``developed areas'' that have deep flood plains with flood depths of,
for example, 10, 15, or 20 feet, 3 feet represents a substantial
reduction in elevation over what would otherwise be required.
    Given the increased flood risk to which properties will be exposed
during the restoration period, the 3-foot elevation requirement in
``developed areas'' and in other areas where flood depths are less than
5 feet will reduce damages to structures that would otherwise result if
there were no protection. If the flood protection system is not
restored, the 3-foot elevation offers protection to structures built
during the time the Zone AR was in effect. The 3-foot elevation may
only provide minimal protection in a total failure of the flood
protection system. However, 3 feet of elevation would afford protection
from flood events that may exceed the capacity of the decertified flood
protection system, which at a minimum must provide protection from a 3-
percent annual chance flood event. The 3-percent annual chance flood
has a 60 percent probability of occurring during the life of a 30-year
mortgage, and 26 percent probability in a 10-year period.
    For example, where overtopping of the flood protection system
results in sheet flow, surface water runoff, and localized ponding
rather than deep flooding, the 3-foot elevation will

[[Page 55711]]

reduce damages. The elevation protection will also reduce damages from
levee seepage and boil problems, and from pump failures and stormwater
and sewer backups. If flood depths are higher than 3 feet, the 3-foot
elevation requirement will minimize the number of structures that are
substantially damaged by lowering the flood depth within the structure.
    Furthermore, the impact of the 3-foot elevation on new construction
in Zone AR is not significant considering that this requirement may be
partially satisfied by building code requirements unrelated to the NFIP
that will result in new structures being built at least 6-28 inches
above grade.
    For crawl space construction, all three national building codes
(Uniform Building Code, National Building Code, and Standard Building
Code) require a minimum clearance of 18 inches between the ground and
untreated wood floor joists. Allowing for a joist height of 8 to 10
inches and an average subflooring/flooring thickness of 5/8 to 1 inch
for common crawl space construction, the top of the lowest floor can be
as high as 27 to 29 inches above the adjacent exterior grade. Thus, a
new residential structure on a crawl space foundation in Zone AR would
need to be elevated by an additional 7-9 inches, not a full 36 inches,
to meet the 3-foot requirement. Additional building code requirements
are not triggered by this increase even in areas subject to seismic
hazards.
    For slab-on-grade residential and non-residential structures, the
national building codes require the top of the slab to be at least 6
inches above adjacent exterior grade to provide protection from decay
due to moisture. Standard practice is to construct the slab so that its
top is at least 8 inches above the adjacent grade to provide protection
from insects. Therefore, a new slab-on-grade residential or
nonresidential structure would need to be elevated by a maximum of 28
to 30 inches to meet the 3-foot elevation requirement.
    For floodproofing a non-residential structure in accordance with
the NFIP criteria (as an alternative to elevating the structure), the
increased level of protection needed is again 28-30 inches.
    Local code requirements for site work for slab-on-grade
construction generally specify that positive drainage must be provided
away from residential and non-residential structures. These code
requirements, which are also unrelated to the NFIP requirements, can
result in the addition of several inches to the finished grade
elevation before the slab is constructed. As a result, the amount of
additional elevation required to meet the 3-foot requirement may be
further reduced.
    We also note that where Zone AR flood depths are less than 3 feet,
new crawl space and slab-on-grade structures, both residential and non-
residential, may require little or no additional elevation.
    The over 18,500 participating communities in the NFIP are required
under their flood plain management ordinances to regulate all flood
plain development. In doing so, these communities require that all new
construction of residential structures in flood plains be elevated to
or above the base flood elevation and that new non-residential
structures in flood plains be elevated or dry floodproofed to or above
the base flood elevation. The over 2 million structures built in flood
plains since 1975 and the over 800,000 post-FIRM flood insurance
policies for structures built following community adoption of NFIP
flood plain management requirements are evidence that development does
not halt when flood plains are designated and flood plain regulations
are adopted and enforced by communities. Much of this development has
occurred in flood plains that are subject to elevation requirements
higher than the 3-foot requirement in this Final Rule.
    Experience under the NFIP indicates that protecting structures to
the base flood is achievable by builders, developers, architects, and
engineers. Elevation on earth fill or standard foundation systems, such
as solid concrete foundation walls, are typical elevation techniques
that have been used since the NFIP's inception. Experience also
indicates that elevation is cost-effective when the benefits of reduced
flood losses are compared to the additional cost of elevating to the
base flood elevation. In fact, structures elevated to or above the base
flood elevation are 77 percent less likely to suffer damage than those
constructed prior to community participation in the NFIP.

Federal Funding Requirement

    A great number of those commenting objected to the certification
requirement in Sec. 65.14(e)(6) of the interim final rule that the
design and construction of the restoration project involve Federal
funds in order for the community to be eligible for the Zone AR
designation.
    Comments offered a number of reasons why the Federal funding
requirement should be removed from the regulations and suggested
various alternatives to the Federal funding requirement as a means to
insure timely completion of the restoration. These include: (1) the
statute does not require eligibility to be contingent on Federal
funding; (2) there are adequate safeguards in the interim final rule to
assure timely completion of restoration projects without the
requirement of Federal funding; (3) the Federal funding requirement is
unnecessary as long as the restoration project is certified by a
Federal agency; (4) regardless of the project's source of funding, FEMA
has the authority to replace the Zone AR designation with a Zone AE
designation if the community does not meet the restoration schedule;
(5) Federal funding should not be required, but design and construction
standards by competent (including Federal) authorities need to be
followed; (6) FEMA should promote restoration of the system by the
local community because communities may be in a position to complete
restoration in a timely fashion; (7) FEMA should devise criteria that
would satisfy the Agency that the source of local funds was reliable,
committed, and secure, such as providing for a performance bond; and
(8) Federal funds for restoration projects may not be available to
communities.
    FEMA has carefully considered the comments on the Federal funding
issue and finds merit in removing the requirement that the restoration
project involve Federal funding as a prerequisite for designating Zone
AR. Therefore, the final rule is revised at Sec. 65.14(b) to extend
Zone AR eligibility to communities where the restoration project does
not involve Federal funds. We remain concerned that failure to complete
the restoration for any reason will permanently expose structures to an
increased flood risk if built below the base flood elevation while the
Zone AR is in effect. However, we have balanced that concern with an
understanding that communities are increasingly committed to use local
funds to restore flood protection systems, particularly as Federal
funding sources are reduced.
    FEMA has devised criteria to ensure that the source of local
funding is reliable, committed, and secure. Specifically,
Sec. 65.14(e)(2)(vi) provides that if a community does not receive
Federal funds for constructing the restoration project, then the
community must submit evidence that 100 percent of the total financial
project cost of the completed flood protection system has been
appropriated from other sources. This measure will give FEMA adequate
assurance that financial resources have been committed to assure
completion of the restoration project.

[[Page 55712]]

    Note at Sec. 65.14(h)(3) that in the application requirements for
restoration projects not involving Federal funds the community must
submit a copy of a study, certified by a registered Professional
Engineer, that demonstrates that the restored system will meet all
applicable requirements of 44 CFR Part 65.
    The final rule further stipulates at Sec. 65.14(b)(2) that a
community that does not receive Federal funds for the purpose of
constructing the restoration project must complete restoration of the
system within 5 years from the date the community submits its
application for designation of a flood control restoration zone. In
FEMA's experience, a 5-year period is adequate time for planning,
preliminary and final design, construction, and all review processes of
locally initiated projects that do not involve Federal funds. A
typical, locally funded project often takes no more than 3 years to
complete from project inception through final construction. We further
expect that limiting the duration of the Zone AR designation would
limit the number of structures that would be built and exposed to
permanent increased flood risk if, for any reason, the restoration were
not completed.
    A community that does not receive Federal funds for restoration of
the flood protection system is not eligible for a finding of adequate
progress under 44 CFR Sec. 61.12, and is required to complete the
restoration project within the 5-year period.
    The final regulations provide that the Zone AR designation will
apply only to the restoration of existing Federal flood protection
systems. A comment was made that the NFIP is a national program and
should apply in all of the country, not just in areas that have flood
control systems that were built by the Federal government. We
determined, however, that this provision is in the best interest of the
NFIP, is consistent with the existing regulatory provisions of
Sec. 61.12 that pertain to flood protection systems involving Federal
funds, and is consistent with the intent of Sec. 928 of Pub. L. 102-
550.

Maximum Restoration Period

    Several comments expressed concern that the interim final rule
extended the maximum restoration period from 5 to 10 years. Other
comments objected to FEMA's inclusion of a specific maximum restoration
period such as the 10-year maximum restoration period incorporated in
the interim final rule. Others stated that a specific maximum
restoration period is contrary to the statutory language and the
legislative intent and that FEMA should permit the Zone AR designation
as long as progress is being made to restore protection.
    Since insurance rates are subsidized and structures can be built
below the base flood elevation during the restoration period, a longer
restoration period further increases the potential flood losses if
flooding occurs before the flood protection system is restored. Some
comments suggested that FEMA strictly enforce a maximum restoration
period and that it aggressively negotiate as short a restoration period
as possible with the Federal agency and community project sponsors. A
comment noted that while the 10-year restoration period provides a more
reasonable time frame for completing a federally funded project, it
also increases the time that existing structures and future
construction are exposed to potential damage. They suggested that to
balance the increase in the maximum restoration period, FEMA should
restrict the definition and designation of ``developed'' areas and
require strict adherence to the Zone AR elevation requirements, or
impose stricter requirements so as to limit the potential for flood
damage during the restoration period.
    FEMA is charged by the Congress to administer a sound and effective
flood insurance program within the bounds of the authority provided by
statute. Public Law 102-550 provides for the Zone AR designation when a
flood protection system can be restored in a ``designated'' period of
time. Since the Zone AR was intended as an interim or temporary flood
hazard designation, eligibility for the benefits that the designation
confers is contingent on completion of the project within a specific
time frame. We concluded that the statute authorizes FEMA to designate
a maximum restoration period. These regulations designate a 10-year
restoration period for federally funded projects and a 5-year
restoration period for non-federally funded projects.
    Because it is in the Program's best interest to promote timely
completion of the restoration, FEMA will negotiate as short a
restoration period as possible, recognizing that there may be
legitimate needs for adjusting the schedule as the work progresses.
Such adjustments may not exceed the maximum applicable restoration
period.

``Hold Harmless'' Provision for Delays in Complying With Restoration
Schedule

    Many comments urged FEMA to include a ``hold harmless'' provision
whereby the Zone AR designation would be removed only if the community
failed to perform its assigned responsibilities to restore flood
protection.
    The final rule does not incorporate a ``hold harmless'' provision
for delays that exceed the applicable restoration period. The final
rule retains the provision at Sec. 64.14(g) for minor adjustments in
the restoration schedule. Central to this position is FEMA's belief
that the flood control restoration zone was not meant to be a long-term
or permanent flood insurance zone designation. A provision to extend
the Zone AR designation or the inclusion of a ``hold harmless''
provision, in our opinion, would be contrary to the statute.

Requirement To Disclose Information About Litigation or
Administrative Actions

    Several comments concerned the requirement at Sec. 65.14(e)(1) that
the community's application include a statement whether the flood
protection system is the subject of pending litigation or
administrative actions. Other comments suggested that if FEMA retained
the disclosure requirement then the final rule should include an
affirmative statement that such litigation would have no bearing on
FEMA's decision to approve a community's application for Zone AR
designation. Similar comments expressed the opinion that FEMA cannot
anticipate the outcome of litigation or evaluate the validity of legal
challenges. Some comments expressed concern that the section is
ambiguous with respect to FEMA's obligation when litigation exists and
the community would have no knowledge of the plaintiff's litigation
plan.
    One environmental organization's comment supported FEMA's position
on the litigation issue. Another comment noted that the 10-year limit
on the Zone AR designation is sufficient to revoke the Zone AR
designation without adding the litigation issue as a decision-making
clause. The 10-year restoration period limits the duration of the Zone
AR designation after it has been granted, whereas the litigation issue
relates to FEMA's decision-making prior to granting the designation.
    We continue to maintain that FEMA needs to be fully apprised of any
and all potential obstacles to the timely restoration of the flood
protection system prior to granting the Zone AR designation.
    The Zone AR designation permits new construction and substantial
improvements to existing structures to be built below the base flood
elevation

[[Page 55713]]

despite knowledge that those structures will be exposed to an increased
risk of flood damage. FEMA must insure such structures at a subsidized
rate that does not reflect the actual flood risk to which the structure
is exposed.
    In contrast, new structures and substantial improvements to
existing structures in SFHAs that are not designated as Zone AR are
required to be elevated to the base flood level. Flood insurance for
any structures that might be built below the level of the base flood
would be insured at actuarial rates that reflect the actual flood risk.
    The Zone AR elevation and insurance provisions are justified only
if there is a clear expectation that the increased flood risk is of
short duration and that full protection will be restored in a timely
fashion. Protracted litigation could significantly impede a community's
progress in completing the restoration according to schedule and could
even cause the restoration never to be completed. As a result, those
structures built below the base flood level while the Zone AR was in
effect would be exposed permanently to a greater risk of flooding, with
the NFIP assuming a considerable potential liability when insuring
those structures.
    The Zone AR designation increases the risk that the NFIP assumes by
insuring buildings and manufactured housing built or installed below
the base flood level. FEMA must carefully assess the projected
viability of the restoration project and weigh any obstacles to that
completion before granting a flood control restoration zone
designation. Notice of the litigation or administrative action would
alert FEMA to be cautious in evaluating the community's application.
    The community may not be able to predict with full accuracy the
litigation or administrative action plan or their outcomes. Given that
the Zone AR designation is applicable for a fixed maximum time and can
be applied only once for a given restoration, community officials
should carefully consider litigation and administrative action times
before applying for the Zone AR designation.
    The existence of litigation would not necessarily result in the
denial of the community's application. However, we are not prepared to
include within the regulation an affirmative statement that the
existence of litigation will have no bearing on FEMA's decision with
regard to a community's application. We do not consider the rule to be
ambiguous as to FEMA's obligation when it is determined that the
restoration project is the subject of litigation or administrative
action because there is no specific action mandated by such a finding.
The existence of litigation is one of several elements that FEMA will
consider in making the decision whether to grant Zone AR designation.
The final rule retains the litigation disclosure provision at
Sec. 65.14(e)(1)(i) as one of the several application requirements.

Limitations on Zone AR Designation

    We received a number of comments that FEMA include regulatory
language to specify that communities will be eligible for the Zone AR
designation should the restored flood protection system be decertified
again. Although we clarified our position in the supplementary
information to the interim final rule, the comments expressed concern
that we did not change the regulatory text. Those commenting believed
that the regulatory text could be interpreted to exclude subsequent
Zone AR designations in the event that a fully restored system were to
be decertified again and that the clarification contained in the
supplementary text would not be binding upon the agency.
    We made minor revisions to the rule at Sec. 65.14(b) to accommodate
the concerns. Communities will be eligible for the Zone AR designation
should the restored flood protection system be decertified again.

Issuance of FIRMs Delineating Zone AE Before Community Eligibility
for Zone AR Designation

    We received comments objecting to FEMA's statement that communities
may be mapped as an AE Zone before becoming eligible for Zone AR
designation as being contrary to the intent of the legislation. The
interim final rule simply provided one scenario for potential Zone AR
eligibility. Some communities may require an extended period of time to
meet eligibility criteria. We anticipate that such communities will
receive maps delineating AE, A1-30, AO, AH and A Zones, which will be
revised when the statutory conditions for Zone AR eligibility are met.
Other communities, particularly those who are active in obtaining
federal financial support or in raising local funds for a restoration
project, may make sufficient progress to be designated Zone AR before
issuance of revised FIRMs that reflect the increased flood hazard.
    One of these comments encouraged FEMA to develop a parallel process
in mapping communities where an existing flood protection system has
been decertified so that the community is going through the Federal
planning process for restoring protection while the revised FIRM is
being prepared. In response, we anticipate that most communities will
be aware of the potential decertification of an existing flood
protection system at some time during the restudy process. In fact, the
restudy may have been triggered by a flood event nearly causing a
failure or overtopping of the system. Therefore, the community may
begin to investigate a restoration project so that they can meet the
Zone AR eligibility requirements before or concurrent with the
preparation of revised flood hazard maps. In such cases, the revised
FIRM would show the increased flood hazard areas as a Zone AR rather
than another flood hazard zone.
    Another comment proposed that the regulations incorporate a
provision that gives communities a reasonable period of time to meet
the Zone AR requirements, suggesting that FEMA withhold maps for
potentially eligible communities until the community is eligible for a
Zone AR designation. FEMA is statutorily required to identify and map
flood hazard areas. Therefore, if the community does not meet the
eligibility criteria when FEMA has completed the remapping process,
including the statutory appeal period and resolution of appeals, FEMA
will be required to delineate those areas as AE, A1-30, AO, AH and A
Zones on the revised FIRM. FEMA does not have the statutory authority
to withhold issuance of maps whether they delineate Zone AR or other
flood hazard zones. Furthermore, communities and their residents have
the right to be informed of the increased risk and such information
should not be withheld. A FEMA policy of withholding the issuance of
FIRMs would jeopardize individuals' ability to make informed decisions
about the flood hazard to which they are exposed.

Use of Terms

    One comment stated that there is no definition of the term
``adequate progress'' as used in the regulation. The term refers
specifically to the provision in Sec. 61.12 that permits a federal
flood protection system to be certified as complete when it satisfies
certain specific ``adequate progress'' criteria that are set out in
that section of the regulations at Sec. 61.12(b). There is no need for
further definition.
    Another comment stated that the regulation should define the terms
``satisfactory progress'' and ``reasonable certainty'' at 44 CFR
65.14(i). This section of the interim final rule describes the
conditions under which FEMA would take action to remove the

[[Page 55714]]

Zone AR designation for noncompliance with the restoration schedule.
    FEMA disagrees because the terms or words used in this rule do not
have a specific meaning separate from the meaning they would have if
used in general discourse. Any attempt to define the terms used in the
law and the rule would merely expand the rule unnecessarily, fail to
accommodate all conditions that would be encountered, and limit
discretion under the NFIP in administering the law and the rule.
    Another comment objected to the use of the term ``shall'' in 44 CFR
Sec. 64.14(i) when referring to revising maps and removing the Zone AR
designation for reasons of noncompliance. In response, FEMA states that
the use of the term ``shall'' directly relates to the agency's mandate
to identify and map flood hazards and to employ the statutory appeals
process, provided for in Sec. 110 of the Flood Disaster Protection Act
of 1973, 42 U.S.C. 4104(c); see also 44 CFR Part 67. The term ``shall''
is accurate.

Insurance Rating Procedures

    Some comments expressed concern that flood insurance premiums are
too expensive. The NFIP applies actuarial rates to all new
construction. These rates are determined by the zone on the FIRM, and
by national loss experience and loss probabilities. The rates for
existing construction in SFHAs are subsidized. The basis for this
subsidy is the fact that the buildings were constructed in these areas
without full knowledge of the hazard. In deep flooding areas, the
actuarial rate would be greater than the subsidized rate that will be
charged under Zone AR. Congress has extended the benefit of this
subsidy to risks in Zone AR, even though the full extent of the hazard
is known. In the law that established Zone AR, Congress limited the
rate that could be charged to the equivalent of the pre-FIRM Zone A
rate that is subsidized, and placed limits on elevation requirements.
The NFIP pre-FIRM rate is subject to change. Any change will affect the
Zone AR rate.

Role of Insurance Companies

    Several comments expressed the opinion that the NFIP's mandatory
purchase requirements were set up to benefit insurance companies and
were not being applied elsewhere in the country. Mandatory purchase
requirements were established by the Congress in 1973 in response to
escalating Federal costs of flooding disasters and low voluntary
participation by property owners in the NFIP. The NFIP mandatory
purchase requirements are enforced on a national basis, and apply to
all Federal and federally regulated lenders.
    The National Flood Insurance Act, as amended, authorizes qualified
insurance companies to sell flood insurance under an arrangement with
FEMA. The companies are paid a fee to cover their costs for issuing and
servicing policies and for adjusting claims. The net premiums collected
from the sale of flood insurance are turned over to the Federal
government and are placed in the National Flood Insurance Fund in the
United States Treasury. This fund is used to pay future flood losses
and other NFIP related expenses.

Homeowner Protection

    A comment stated that the NFIP mandatory purchase requirements were
not intended to protect the homeowner, but rather the mortgagee, and
this is why contents coverage is not available. We disagree for at
least two reasons. First, contents coverage is available; it can be
purchased as separate coverage or together with building coverage, and
may be required if the contents are part of the security for the loan.
Second, when a mortgaged home is destroyed by an uninsured peril, the
obligation to repay the mortgage still exists. Consequently, any
insurance that covers this peril benefits the policyholder and the
mortgagee.

Relation to Earthquake Insurance

    Some comments stated that while mandatory purchase requirements
exist for flood insurance, there are none for earthquake insurance.
Congress mandated the flood insurance purchase requirements under the
provisions of the Flood Disaster Protection Act of 1973. As yet,
Congress has not enacted Federal legislation on earthquake insurance.
Several bills on the subject were introduced in the 103d Congress, in
the 104th Congress, and again in the first session of the 105th
Congress, but none have passed.

Community-Wide Flood Insurance Coverage

    A comment suggested that we develop a flood insurance policy that
would cover an entire community, and be paid for by the community. This
suggestion is not workable under the National Flood Insurance Act. The
NFIP has a statutory limit on the amount of insurance that can be
written on an individual building and its contents. Consequently, the
specific risk information required to rate a flood insurance policy is
gathered on an individual basis, and separate policies are issued.
However, there is nothing to prevent a community from arranging with
one or more insurance agents or companies to write the required
policies for its citizens, and list the community as the payor.

National Environmental Policy Act

    FEMA has determined, based on an Environmental Assessment, that
this final rule will not have a significant impact upon the quality of
the human environment. An Environmental Impact Statement will not be
prepared. A Finding Of No Significant Impact is included in the formal
docket file and is available for public inspection and copying at the
Rules Docket Clerk, Office of the General Counsel, Federal Emergency
Management Agency, 500 C Street, SW., Washington, DC 20472.
    Comments received on the interim final rule urged FEMA to revise
the Environmental Assessment to reflect the changes that had been made
in the interim final rule and to address the regulatory impact on
minority and low-income populations in accordance with Executive Order
12898, Federal Actions to Address Environmental Justice in Minority
Populations and Low-Income Populations. Comments also disagreed with
FEMA's finding that the regulations would have no significant impact on
the environment. These issues are addressed in supplemental information
prepared and appended to the Environmental Assessment for this rule.
These revisions do not alter FEMA's Finding of No Significant Impact.

Regulatory Flexibility Act

    The Director certifies that this final rule is exempt from the
requirements of the Regulatory Flexibility Act because the proposed
flood control restoration zone is required by statute, 42 U.S.C.
4014(f), and is required to enhance and maintain community eligibility
in the NFIP during the period needed to restore flood protection
systems to provide a minimum protection from the base flood required
for accreditation on FIRMs. A regulatory flexibility analysis has not
been prepared.

Paperwork Reduction Act

    This final rule contains collections of information as described
the Paperwork Reduction Act that are covered by the following OMB
Control Numbers: 3067-0020; 3067-0022; 3067-0127; and 3067-0147.

Executive Order 12612, Federalism

    This final rule involves no policies that have federalism
implications under Executive Order 12612, Federalism, dated October 26,
1987.

[[Page 55715]]

Executive Order 12778, Civil Justice Reform

    This final rule meets the applicable standards of section 2(b)(2)
of Executive Order 12778.

Executive Order 12866, Regulatory Planning and Review

    Promulgation of this final rule is required by statute, 42 U.S.C.
4014(f), which also specifies the regulatory approach taken in the
proposed rule. To the extent possible under the statutory requirements
of 42 U.S.C. 4014(f), this rule adheres to the principles of regulation
set forth in Executive Order 12866. This rule was reviewed by the
Office of Management and Budget in accordance with Executive Order
12866.

Congressional Review of Agency Rulemaking

    This final rule has been submitted to the Congress and to the
General Accounting Office under the Congressional Review of Agency
Rulemaking Act, Pub. L. 104-121. The rule is not a ``major rule''
within the meaning of that Act. It does not result in nor is it likely
to result in an annual effect on the economy of $100,000,000 or more;
it will not result in a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions; and it will not have ``significant
adverse effects'' on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises.
    This final rule is exempt (1) from the requirements of the
Regulatory Flexibility Act, as certified previously, and (2) from the
Paperwork Reduction Act.
    This rule is not an unfunded Federal mandate within the meaning of
the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4. It does not
meet the $100,000,000 threshold of that Act, and any enforceable duties
are imposed as a condition of Federal assistance or a duty arising from
participation in a voluntary Federal program.

List of Subjects in 44 CFR Parts 59, 60, 64, 65, 70, and 75

    Administrative practice and procedure, Flood insurance, Flood
plains, Reporting and recordkeeping requirements.

    Accordingly, 44 CFR Parts 59, 60, 64, 65, 70, and 75 are amended as
follows:

PART 59--GENERAL PROVISIONS

    1. The authority citation for Part 59 is revised to read as
follows:

    Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

    2. Section 59.1 is amended as follows: The definitions of Area of
shallow flooding, Area of special flood hazard, Developed area, and
Special hazard area are revised to read as follows:

Sec. 59.1  Definitions.

* * * * *
    Area of shallow flooding means a designated AO, AH, AR/AO, AR/AH,
or VO zone on a community's Flood Insurance Rate Map (FIRM) with a 1
percent or greater annual chance of flooding to an average depth of 1
to 3 feet where a clearly defined channel does not exist, where the
path of flooding is unpredictable, and where velocity flow may be
evident. Such flooding is characterized by ponding or sheet flow.
* * * * *
    Area of special flood hazard is the land in the flood plain within
a community subject to a 1 percent or greater chance of flooding in any
given year. The area may be designated as Zone A on the FHBM. After
detailed ratemaking has been completed in preparation for publication
of the flood insurance rate map, Zone A usually is refined into Zones
A, AO, AH, A1-30, AE, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO,
or V1-30, VE, or V. For purposes of these regulations, the term
``special flood hazard area'' is synonymous in meaning with the phrase
``area of special flood hazard''.
* * * * *
    Developed area means an area of a community that is:
    (a) A primarily urbanized, built-up area that is a minimum of 20
contiguous acres, has basic urban infrastructure, including roads,
utilities, communications, and public facilities, to sustain
industrial, residential, and commercial activities, and
    (1) Within which 75 percent or more of the parcels, tracts, or lots
contain commercial, industrial, or residential structures or uses; or
    (2) Is a single parcel, tract, or lot in which 75 percent of the
area contains existing commercial or industrial structures or uses; or
    (3) Is a subdivision developed at a density of at least two
residential structures per acre within which 75 percent or more of the
lots contain existing residential structures at the time the
designation is adopted.
    (b) Undeveloped parcels, tracts, or lots, the combination of which
is less than 20 acres and contiguous on at least 3 sides to areas
meeting the criteria of paragraph (a) at the time the designation is
adopted.
    (c) A subdivision that is a minimum of 20 contiguous acres that has
obtained all necessary government approvals, provided that the actual
``start of construction'' of structures has occurred on at least 10
percent of the lots or remaining lots of a subdivision or 10 percent of
the maximum building coverage or remaining building coverage allowed
for a single lot subdivision at the time the designation is adopted and
construction of structures is underway. Residential subdivisions must
meet the density criteria in paragraph (a)(3).
* * * * *
    Special hazard area means an area having special flood, mudslide
(i.e., mudflow), or flood-related erosion hazards, and shown on an FHBM
or FIRM as Zone A, AO, A1-30, AE, AR, AR/A1-30, AR/AE, AR/AO, AR/AH,
AR/A, A99, AH, VO, V1-30, VE, V, M, or E.
    3. Section 59.24(a) is revised to read as follows:

Sec. 59.24  Suspension of community eligibility.

    (a) A community eligible for the sale of flood insurance shall be
subject to suspension from the Program for failing to submit copies of
adequate flood plain management regulations meeting the minimum
requirements of paragraphs (b), (c), (d), (e) or (f) of Sec. 60.3 or
paragraph (b) of Sec. 60.4 or Sec. 60.5, within six months from the
date the Administrator provides the data upon which the flood plain
regulations for the applicable paragraph shall be based. Where there
has not been any submission by the community, the Administrator shall
notify the community that 90 days remain in the six month period in
order to submit adequate flood plain management regulations. Where
there has been an inadequate submission, the Administrator shall notify
the community of the specific deficiencies in its submitted flood plain
management regulations and inform the community of the amount of time
remaining within the six month period. If, subsequently, copies of
adequate flood plain management regulations are not received by the
Administrator, no later than 30 days before the expiration of the
original six month period the Administrator shall provide written
notice to the community and to the state

[[Page 55716]]

and assure publication in the Federal Register under part 64 of this
subchapter of the community's loss of eligibility for the sale of flood
insurance, such suspension to become effective upon the expiration of
the six month period. Should the community remedy the defect and the
Administrator receive copies of adequate flood plain management
regulations within the notice period, the suspension notice shall be
rescinded by the Administrator. If the Administrator receives notice
from the State that it has enacted adequate flood plain management
regulations for the community within the notice period, the suspension
notice shall be rescinded by the Administrator. The community's
eligibility shall remain terminated after suspension until copies of
adequate flood plain management regulations have been received and
approved by the Administrator.
* * * * *

PART 60--CRITERIA FOR LAND MANAGEMENT AND USE

    4. The authority citation for Part 60 is revised to read as
follows:

    Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

    5. Section 60.2(a) is revised to read as follows:

Sec. 60.2  Minimum compliance with flood plain management criteria.

    (a) A flood-prone community applying for flood insurance
eligibility shall meet the standards of Sec. 60.3(a) in order to become
eligible if a FHBM has not been issued for the community at the time of
application. Thereafter, the community will be given a period of six
months from the date the Administrator provides the data set forth in
Sec. 60.3(b), (c), (d), (e) or (f), in which to meet the requirements
of the applicable paragraph. If a community has received a FHBM, but
has not yet applied for Program eligibility, the community shall apply
for eligibility directly under the standards set forth in Sec. 60.3(b).
Thereafter, the community will be given a period of six months from the
date the Administrator provides the data set forth in Sec. 60.3(c),
(d), (e) or (f) in which to meet the requirements of the applicable
paragraph.
* * * * *
    6. Section 60.3(f) is revised to read as follows:

Sec. 60.3  Flood plain management criteria for flood-prone areas.

* * * * *
    (f) When the Administrator has provided a notice of final base
flood elevations within Zones A1-30 or AE on the community's FIRM, and,
if appropriate, has designated AH zones, AO zones, A99 zones, and A
zones on the community's FIRM, and has identified flood protection
restoration areas by designating Zones AR, AR/A1-30, AR/AE, AR/AH, AR/
AO, or AR/A, the community shall:
    (1) Meet the requirements of paragraphs (c)(1) through (14) and
(d)(1) through (4) of this section.
    (2) Adopt the official map or legal description of those areas
within Zones AR, AR/A1-30, AR/AE, AR/AH, AR/A, or AR/AO that are
designated developed areas as defined in Sec. 59.1 in accordance with
the eligibility procedures under Sec. 65.14.
    (3) For all new construction of structures in areas within Zone AR
that are designated as developed areas and in other areas within Zone
AR where the AR flood depth is 5 feet or less:
    (i) Determine the lower of either the AR base flood elevation or
the elevation that is 3 feet above highest adjacent grade; and
    (ii) Using this elevation, require the standards of paragraphs
(c)(1) through (14) of this section.
    (4) For all new construction of structures in those areas within
Zone AR that are not designated as developed areas where the AR flood
depth is greater than 5 feet:
    (i) Determine the AR base flood elevation; and
    (ii) Using that elevation require the standards of paragraphs
(c)(1) through (14) of this section.
    (5) For all new construction of structures in areas within Zone AR/
A1-30, AR/AE, AR/AH, AR/AO, and AR/A:
    (i) Determine the applicable elevation for Zone AR from paragraphs
(a)(3) and (4) of this section;
    (ii) Determine the base flood elevation or flood depth for the
underlying A1-30, AE, AH, AO and A Zone; and
    (iii) Using the higher elevation from paragraphs (a)(5)(i) and (ii)
of this section require the standards of paragraphs (c)(1) through (14)
of this section.
    (6) For all substantial improvements to existing construction
within Zones AR/A1-30, AR/AE, AR/AH, AR/AO, and AR/A:
    (i) Determine the A1-30 or AE, AH, AO, or A Zone base flood
elevation; and
    (ii) Using this elevation apply the requirements of paragraphs
(c)(1) through (14) of this section.
    (7) Notify the permit applicant that the area has been designated
as an AR, AR/A1-30, AR/AE, AR/AH, AR/AO, or AR/A Zone and whether the
structure will be elevated or protected to or above the AR base flood
elevation.

PART 64--COMMUNITIES ELIGIBLE FOR THE SALE OF INSURANCE

    7. The authority citation for Part 64 is revised to read as
follows:

    Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

    8. Section 64.3 is amended by revising the ``AR'' entry in the
chart in paragraph (a)(1) and revising paragraph (b) to read as
follows:

Sec. 64.3  Flood insurance maps.

    (a) * * *
    (1) * * *

------------------------------------------------------------------------
         Zone symbol
------------------------------------------------------------------------

*                  *                  *                  *
                  *                  *                  *
AR...........................  Area of special flood hazard that results
                                from the decertification of a previously
                                accredited flood protection system that
                                is determined to be in the process of
                                being restored to provide base flood
                                protection.

*                  *                  *                  *
                  *                  *                  *
------------------------------------------------------------------------

* * * * *
    (b) Notice of the issuance of new or revised FHBMs or FIRMs is
given in Part 65 of this subchapter. The mandatory purchase of
insurance is required within designated Zones A, A1-30, AE, A99, AO,
AH, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, V1-30, VE, V, VO, M, and
E.
* * * * *

[[Page 55717]]

PART 65--IDENTIFICATION AND MAPPING OF SPECIAL HAZARD AREAS

    9. The authority citation for Part 65 is revised to read as
follows:

    Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

Sec. 65.14  [Redesignated as Sec. 65.15]

    10. Part 65 is amended by revising Sec. 65.14 to read as follows:

Sec. 65.14  Remapping of areas for which local flood protection systems
no longer provide base flood protection.

    (a) General. (1) This section describes the procedures to follow
and the types of information FEMA requires to designate flood control
restoration zones. A community may be eligible to apply for this zone
designation if the Administrator determines that it is engaged in the
process of restoring a flood protection system that was:
    (i) Constructed using Federal funds;
    (ii) Recognized as providing base flood protection on the
community's effective FIRM; and
    (iii) Decertified by a Federal agency responsible for flood
protection design or construction.
    (2) Where the Administrator determines that a community is in the
process of restoring its flood protection system to provide base flood
protection, a FIRM will be prepared that designates the temporary flood
hazard areas as a flood control restoration zone (Zone AR). Existing
special flood hazard areas shown on the community's effective FIRM that
are further inundated by Zone AR flooding shall be designated as a
``dual'' flood insurance rate zone, Zone AR/AE or AR/AH with Zone AR
base flood elevations, and AE or AH with base flood elevations and Zone
AR/AO with Zone AR base flood elevations and Zone AO with flood depths,
or Zone AR/A with Zone AR base flood elevations and Zone A without base
flood elevations.
    (b) Limitations. A community may have a flood control restoration
zone designation only once while restoring a flood protection system.
This limitation does not preclude future flood control restoration zone
designations should a fully restored, certified, and accredited system
become decertified for a second or subsequent time.
    (1) A community that receives Federal funds for the purpose of
designing or constructing, or both, the restoration project must
complete restoration or meet the requirements of 44 CFR 61.12 within a
specified period, not to exceed a maximum of 10 years from the date of
submittal of the community's application for designation of a flood
control restoration zone.
    (2) A community that does not receive Federal funds for the purpose
of constructing the restoration project must complete restoration
within a specified period, not to exceed a maximum of 5 years from the
date of submittal of the community's application for designation of a
flood control restoration zone. Such a community is not eligible for
the provisions of Sec. 61.12. The designated restoration period may not
be extended beyond the maximum allowable under this limitation.
    (c) Exclusions. The provisions of these regulations do not apply in
a coastal high hazard area as defined in 44 CFR 59.1, including areas
that would be subject to coastal high hazards as a result of the
decertification of a flood protection system shown on the community's
effective FIRM as providing base flood protection.
    (d) Effective date for risk premium rates. The effective date for
any risk premium rates established for Zone AR shall be the effective
date of the revised FIRM showing Zone AR designations.
    (e) Application and submittal requirements for designation of a
flood control restoration zone. A community must submit a written
request to the Administrator, signed by the community's Chief Executive
Officer, for a flood plain designation as a flood control restoration
zone. The request must include a legislative action by the community
requesting the designation. The Administrator will not initiate any
action to designate flood control restoration zones without receipt of
the formal request from the community that complies with all
requirements of this section. The Administrator reserves the right to
request additional information from the community to support or further
document the community's formal request for designation of a flood
control restoration zone, if deemed necessary.
    (1) At a minimum, the request from a community that receives
Federal funds for the purpose of designing, constructing, or both, the
restoration project must include:
    (i) A statement whether, to the best of the knowledge of the
community's Chief Executive Officer, the flood protection system is
currently the subject matter of litigation before any Federal, State or
local court or administrative agency, and if so, the purpose of that
litigation;
    (ii) A statement whether the community has previously requested a
determination with respect to the same subject matter from the
Administrator, and if so, a statement that details the disposition of
such previous request;
    (iii) A statement from the community and certification by a Federal
agency responsible for flood protection design or construction that the
existing flood control system shown on the effective FIRM was
originally built using Federal funds, that it no longer provides base
flood protection, but that it continues to provide protection from the
flood having at least a 3-percent chance of occurrence during any given
year;
    (iv) An official map of the community or legal description, with
supporting documentation, that the community will adopt as part of its
flood plain management measures, which designates developed areas as
defined in Sec. 59.1 and as further defined in Sec. 60.3(f).
    (v) A restoration plan to return the system to a level of base
flood protection. At a minimum, this plan must:
    (A) List all important project elements, such as acquisition of
permits, approvals, and contracts and construction schedules of planned
features;
    (B) Identify anticipated start and completion dates for each
element, as well as significant milestones and dates;
    (C) Identify the date on which ``as built'' drawings and
certification for the completed restoration project will be submitted.
This date must provide for a restoration period not to exceed the
maximum allowable restoration period for the flood protection system,
or;
    (D) Identify the date on which the community will submit a request
for a finding of adequate progress that meets all requirements of
Sec. 61.12. This date may not exceed the maximum allowable restoration
period for the flood protection system;
    (vi) A statement identifying the local project sponsor responsible
for restoration of the flood protection system;
    (vii) A copy of a study, performed by a Federal agency responsible
for flood protection design or construction in consultation with the
local project sponsor, which demonstrates a Federal interest in
restoration of the system and which deems that the flood protection
system is restorable to a level of base flood protection.
    (viii) A joint statement from the Federal agency responsible for
flood protection design or construction involved in restoration of the
flood protection system and the local project sponsor certifying that
the design and construction of the flood control system involves
Federal funds, and that the restoration of the flood protection

[[Page 55718]]

system will provide base flood protection;
    (2) At a minimum, the request from a community that receives no
Federal funds for the purpose of constructing the restoration project
must:
    (i) Meet the requirements of Sec. 65.14(e)(1)(i) through (iv);
    (ii) Include a restoration plan to return the system to a level of
base flood protection. At a minimum, this plan must:
    (A) List all important project elements, such as acquisition of
permits, approvals, and contracts and construction schedules of planned
features;
    (B) Identify anticipated start and completion dates for each
element, as well as significant milestones and dates; and
    (C) Identify the date on which ``as built'' drawings and
certification for the completed restoration project will be submitted.
This date must provide for a restoration period not to exceed the
maximum allowable restoration period for the flood protection system;
    (iii) Include a statement identifying the local agency responsible
for restoration of the flood protection system;
    (iv) Include a copy of a study, certified by registered
Professional Engineer, that demonstrates that the flood protection
system is restorable to provide protection from the base flood;
    (v) Include a statement from the local agency responsible for
restoration of the flood protection system certifying that the restored
flood protection system will meet the applicable requirements of Part
65; and
    (vi) Include a statement from the local agency responsible for
restoration of the flood protection system that identifies the source
of funds for the purpose of constructing the restoration project and a
percentage of the total funds contributed by each source. The statement
must demonstrate, at a minimum, that 100 percent of the total financial
project cost of the completed flood protection system has been
appropriated.
    (f) Review and response by the Administrator. The review and
response by the Administrator shall be in accordance with procedures
specified in Sec. 65.9.
    (g) Requirements for maintaining designation of a flood control
restoration zone. During the restoration period, the community and the
cost-sharing Federal agency, if any, must certify annually to the FEMA
Regional Office having jurisdiction that the restoration will be
completed in accordance with the restoration plan within the time
period specified by the plan. In addition, the community and the cost-
sharing Federal agency, if any, will update the restoration plan and
will identify any permitting or construction problems that will delay
the project completion from the restoration plan previously submitted
to the Administrator. The FEMA Regional Office having jurisdiction will
make an annual assessment and recommendation to the Administrator as to
the viability of the restoration plan and will conduct periodic on-site
inspections of the flood protection system under restoration.
    (h) Procedures for removing flood control restoration zone
designation due to adequate progress or complete restoration of the
flood protection system. At any time during the restoration period:
    (1) A community that receives Federal funds for the purpose of
designing, constructing, or both, the restoration project shall provide
written evidence of certification from a Federal agency having flood
protection design or construction responsibility that the necessary
improvements have been completed and that the system has been restored
to provide protection from the base flood, or submit a request for a
finding of adequate progress that meets all requirements of Sec. 61.12.
If the Administrator determines that adequate progress has been made,
FEMA will revise the zone designation from a flood control restoration
zone designation to Zone A99.
    (2) After the improvements have been completed, certified by a
Federal agency as providing base flood protection, and reviewed by
FEMA, FEMA will revise the FIRM to reflect the completed flood control
system.
    (3) A community that receives no Federal funds for the purpose of
constructing the restoration project must provide written evidence that
the restored flood protection system meets the requirements of Part 65.
A community that receives no Federal funds for the purpose of
constructing the restoration project is not eligible for a finding of
adequate progress under Sec. 61.12.
    (4) After the improvements have been completed and reviewed by
FEMA, FEMA will revise the FIRM to reflect the completed flood
protection system.
    (i) Procedures for removing flood control restoration zone
designation due to non-compliance with the restoration schedule or as a
result of a finding that satisfactory progress is not being made to
complete the restoration. At any time during the restoration period,
should the Administrator determine that the restoration will not be
completed in accordance with the time frame specified in the
restoration plan, or that satisfactory progress is not being made to
restore the flood protection system to provide complete flood
protection in accordance with the restoration plan, the Administrator
shall notify the community and the responsible Federal agency, in
writing, of the determination, the reasons for that determination, and
that the FIRM will be revised to remove the flood control restoration
zone designation. Within thirty (30) days of such notice, the community
may submit written information that provides assurance that the
restoration will be completed in accordance with the time frame
specified in the restoration plan, or that satisfactory progress is
being made to restore complete protection in accordance with the
restoration plan, or that, with reasonable certainty, the restoration
will be completed within the maximum allowable restoration period. On
the basis of this information the Administrator may suspend the
decision to revise the FIRM to remove the flood control restoration
zone designation. If the community does not submit any information, or
if, based on a review of the information submitted, there is sufficient
cause to find that the restoration will not be completed as provided
for in the restoration plan, the Administrator shall revise the FIRM,
in accordance with 44 CFR Part 67, and shall remove the flood control
restoration zone designations and shall redesignate those areas as Zone
A1-30, AE, AH, AO, or A.

PART 70--PROCEDURE FOR MAP CORRECTION

    11. The authority citation for Part 70 is revised to read as
follows:

    Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

    12. Section 70.1 is revised to read as follows:

Sec. 70.1  Purpose of part.

    The purpose of this part is to provide an administrative procedure
whereby the Administrator will review the scientific or technical
submissions of an owner or lessee of property who believes his property
has been inadvertently included in designated A, AO, A1-30, AE, AH,
A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE, and V
Zones, as a result of the transposition of the curvilinear line to
either street or to other readily identifiable features. The necessity
for this part is due in part to the technical

[[Page 55719]]

difficulty of accurately delineating the curvilinear line on either an
FHBM or FIRM. These procedures shall not apply when there has been any
alteration of topography since the effective date of the first NFIP map
(i.e., FHBM or FIRM) showing the property within an area of special
flood hazard. Appeals in such circumstances are subject to the
provisions of part 65 of this subchapter.
    13. Section 70.3(a) is revised to read as follows:

Sec. 70.3  Right to submit technical information.

    (a) Any owner or lessee of property (applicant) who believes his
property has been inadvertently included in a designated A, AO, A1-30,
AE, AH, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE,
and V Zones on a FHBM or a FIRM, may submit scientific or technical
information to the Administrator for the Administrator's review.
* * * * *
    14. Paragraphs (a) and (b) of Sec. 70.4 are revised to read as
follows:

Sec. 70.4  Review by the Administrator.

* * * * *
    (a) The property is within a designated A, AO, A1-30, AE, AH, A99,
AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30, VE, or V Zone, and
shall set forth the basis of such determination; or
    (b) The property should not be included within a designated A, AO,
A1-30, AE, AH, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, VO, V1-30,
VE, or V Zone and that the FHBM or FIRM will be modified accordingly;
or
* * * * *
    15. Paragraph (c) of section 70.5 is revised to read as follows:

Sec. 70.5  Letter of map amendment.

* * * * *
    (c) The identification of the property to be excluded from a
designated A, AO, A1-30, AE, AH, A99, AR, AR/A1-30, AR/AE, AR/AO, AR/
AH, AR/A, VO, V1-30, VE, or V Zone.

PART 75--EXEMPTION OF STATE-OWNED PROPERTIES UNDER SELF-INSURANCE
PLAN

    16. The authority citation for Part 75 is revised to read as
follows:

    Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.

    17. Section 75.1 is revised to read as follows:

Sec. 75.1  Purpose of part.

    The purpose of this part is to establish standards with respect to
the Administrator's determinations that a State's plan of self-
insurance is adequate and satisfactory for the purposes of exempting
such State, under the provisions of section 102(c) of the Act, from the
requirement of purchasing flood insurance coverage for State-owned
structures and their contents in areas identified by the Administrator
as A, AO, AH, A1-30, AE, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, A99,
M, V, VO, V1-30, VE, and E Zones, in which the sale of insurance has
been made available, and to establish the procedures by which a State
may request exemption under section 102(c).
    18. Section 75.10 is revised to read as follows:

Sec. 75.10  Applicability.

    A State shall be exempt from the requirement to purchase flood
insurance in respect to State-owned structures and, where applicable,
their contents located or to be located in areas identified by the
Administrator as A, AO, AH, A1-30, AE, AR, AR/A1-30, AR/AE, AR/AO, AR/
AH, AR/A, A99, M, V, VO, V1-30, VE, and E Zones, and in which the sale
of flood insurance has been made available under the National Flood
Insurance Act of 1968, as amended, provided that the State has
established a plan of self-insurance determined by the Administrator to
equal or exceed the standards set forth in this subpart.
    19. Paragraphs (a)(4), (a)(5), and (a)(7) of Sec. 75.11 are revised
to read as follows:

Sec. 75.11  Standards.

    (a) * * *
    (4) Consist of a self-insurance fund, or a commercial policy of
insurance or reinsurance, for which provision is made in statute or
regulation and that is funded by periodic premiums or charges allocated
for state-owned structures and their contents in areas identified by
the Administrator as A, AO, AH, A1-30, AE, AR, AR/A1-30, AR/AE, AR/AO,
AR/AH, AR/A, A99, M, V, VO, V1-30, VE, and E Zones. The person or
persons responsible for such self-insurance fund shall report on its
status to the chief executive authority of the State, or to the
legislature, or both, not less frequently than annually. The loss
experience shall be shown for each calendar or fiscal year from
inception to current date based upon loss and loss adjustment expense
incurred during each separate calendar or fiscal year compared to the
premiums or charges for each of the respective calendar or fiscal
years. Such incurred losses shall be reported in aggregate by cause of
loss under a loss coding system adequate, as a minimum, to identify and
isolate loss caused by flood, mudslide (i.e., mudflow) or flood-related
erosion. The Administrator may, subject to the requirements of
paragraph (a)(5) of this section, accept and approve in lieu of, and as
the reasonable equivalent of the self-insurance fund, an enforceable
commitment of funds by the State, the enforceability of which shall be
certified to by the State's Attorney General, or other principal legal
officer. Such funds, or enforceable commitment of funds in amounts not
less than the limits of coverage that would be applicable under
Standard Flood Insurance Policies, shall be used by the State for the
repair or restoration of State-owned structures and their contents
damaged as a result of flood-related losses occurring in areas
identified by the Administrator as A, AO, AH, A1-30, AE, AR, AR/A1-30,
AR/AE, AR/AO, AR/AH, AR/A, A99, M, V, VO, V1-30, VE, and E Zones.
    (5) Provide for the maintaining and updating by a designated State
official or agency not less frequently than annually of an inventory of
all State-owned structures and their contents within A, AO, AH, A1-30,
AE, AR, AR/A1-30, AR/AE, AR/AO, AR/AH, AR/A, A99, M, V, VO, V1-30, VE,
and E zones. The inventory shall:
    (i) Include the location of individual structures;
    (ii) Include an estimate of the current replacement costs of such
structures and their contents, or of their current economic value; and
    (iii) Include an estimate of the anticipated annual loss due to
flood damage.
* * * * *
    (7) Include, pursuant to Sec. 60.12 of this subchapter, a certified
copy of the flood plain management regulations setting forth standards
for State-owned properties within A, AO, AH, A1-30, AE, AR, AR/A1-30,
AR/AE, AR/AO, AR/AH, AR/A, A99, M, V, VO, V1-30, VE, and E Zones.
* * * * *
    20. Paragraph (c) of Sec. 75.13 is revised to read as follows:

Sec. 75.13  Review by the Administrator.

* * * * *
    (c) Upon determining that the State's plan of self-insurance equals
or exceeds the standards set forth in Sec. 75.11 of this subpart, the
Administrator shall certify that the State is exempt from the
requirement for the purchase of flood insurance for State-owned
structures and their contents located or to be located in areas
identified by the

[[Page 55720]]

Administrator as A, AO, AH, A1-30, AE, AR, AR/A1-30, AR/AE, AR/AO, AR/
AH, AR/A, A99, M, V, VO, V1-30, VE, and E Zones. Such exemption,
however, is in all cases provisional. The Administrator shall review
the plan for continued compliance with the criteria set forth in this
part and may request updated documentation for the purpose of such
review. If the plan is found to be inadequate and is not corrected
within ninety days from the date that such inadequacies were
identified, the Administrator may revoke his certification.
* * * * *
    Dated: October 22, 1997.
James L. Witt,
Director.
[FR Doc. 97-28385 Filed 10-24-97; 8:45 am]
BILLING CODE 6718-03-P

Last Updated 07/17/1999 communications@fdic.gov