Natural Disasters:
Can The Economy Weather the Storm?

By Laurie Thompson, Director of Programs, NADO Research Foundation
and Melissa Levy, Contributing Writer

In early June 2002, Agriculture Secretary Ann Veneman declared 32 counties in Nebraska agricultural disasters. Because of high winds, frost, hail, drought and unseasonably cold spring temperatures over the past year, farmers in these counties are eligible for emergency loans. State officials have expressed concern that this drought may be as severe as the drought of 2000, which had a $1.1 billion negative impact on the state’s economy.

In June 2002, Indiana Governor George Ryan announced that his request to add five counties to the Federal Emergency Management Agency’s (FEMA) list of counties eligible for disaster assistance was approved. Storms, tornadoes and floods that began in mid-April caused 38 of the state’s counties to be eligible for assistance.

The common denominator in these situations was the weather. Weather can wreak havoc on the lives of individuals, and can also drastically affect the nation’s economy. The National Farmers Union reported that drought, floods and other natural disasters devastated 1,500 counties in 2001. In that same year, $1.5 billion was paid in claims to flood victims, with more than $1 billion for over 30,000 claims related to Tropical Storm Allison alone.

The economic impacts of weather are often far-reaching and long lasting. The National Oceanic and Atmospheric Administration (NOAA) reports that 10 percent of industries that contribute to the nation’s Gross Domestic Product (GDP) are “weather and climate sensitive,” including outdoor sports and recreation, construction, energy distribution and agriculture. The percentage nearly triples when industries that are indirectly affected by climate and weather are considered. NOAA estimates that almost 25 percent of the GDP totaling $2.7 trillion, is impacted by weather and climate.

Existing Federal and State Initiatives

Three western state governors, Jane Dee Hull of Arizona, Gary Johnson of New Mexico and Judy Martz of Montana, wrote in the May 28, 2002 National Drought Monitor that “40 percent of the mainland United States is in a ‘moderate’ or worse drought. Portions of 25 states (13 in the West and 12 in the East) are in a ‘severe’ to ‘extreme’ drought. And parts of Arizona, Colorado, Montana, New Mexico and Utah are now in an ‘exceptional’ drought, which is as bad as it gets.” On average, about 18 percent of the country experiences drought conditions.

The Federal Emergency Management Agency (FEMA) has been instrumental in working with communities to help their citizens after natural disaster strikes. In addition, the Economic Development Administration’s (EDA) Economic Adjustment Program has helped businesses get back on their feet after natural disasters. In September 2001, US Commerce Secretary Don Evans announced a $1.855 million EDA grant to the city of Granite Falls, Minnesota to help the community recover from the economic impact of a July 2000 tornado and resulting plant closures. “The tornado and plant closures have had a devastating impact on the local economy. The project will help the community diversify its economy, attract public investment, and create new jobs for local citizens,” said Evans.

While systems are in place at the national level, solutions to weather-related difficulties are not as well-organized for local communities. Despite the Farm Bureau’s availability to deal with weather-related agricultural losses in rural areas, they are predominantly aimed at animals and crops. (The Farm Bureau, the nation’s leading general farm organization, is an affiliate of the American Farm Bureau Federation.) Yet, rural economies are far more than agriculture. In addition, most weather-related assistance is provided in order to save lives, not money or economies. In terms of mitigating damage and loss, the programs are there, whether they are administered by FEMA or EDA or other non-profit or private organizations.

According to Jim Giraytys, Certified Consulting Meteorologist, “The issues of weather impact on local economies have not yet been systemically addressed in a way that local communities can cope or plan. In fact, some of the most serious problems are drought and heat.” He explained that despite the high level of technology that exists, there is no organized way for rural communities to deal with most weather impacts. “It is also a matter of (1) believing that one can and must do some strategic planning for natural disasters and (2) education,” explained Giraytys.

Mitigation Planning a Challenge

John Galusha, Regional Planner at the Southern Colorado Economic Development District (SCEDD), an EDA funded district, explained what has happened in southeastern Colorado as a result of the current drought, “The economic effects of the drought have rippled throughout the state, including a drop in tourism of at least 10 percent and a “hard hit” to the agricultural industry. Even if the physical effects of this drought are limited to 2002, the impacts will be felt for at least two more years.” Galusha added that they are asking the state legislature to deal with loss prevention for the tourism industry; the agricultural industry is eligible for weather-related assistance but the tourism industry is ineligible.

Tourism operators are suffering heavy losses, according to Galusha, because there is no concerted effort to organize as a network with other tourism-related industries. Galusha commented, “What encompasses the tourism industry? There is no defined line. We know the need is there, but we do not know who to help or how.” Meanwhile, SCEDD, in concert with Action 22 -- an organization of the 22 counties in southeastern Colorado to promote tourism and coordinate lobbying efforts at the state level -- received a grant from the state office of economic development to host the Familiarization Tour, in an effort to bring travel writers to Colorado to “write articles so that we can look good in somebody’s eyes,” said Galusha.

Hurricanes Hinder Local Economies

In southern Florida, hurricanes impact not only the communities, but also the local economies. According to John Hulsey, Senior Planner at the South Florida Regional Planning Council (RPC), an EDA designated economic development district, the economic impacts of 1992’s Hurricane Andrew were tremendous. The total property damages were $22.6 billion and insured property damages were $15.4 billion. The hurricane also impacted more than 40,000 jobs, due to recovery/reconstruction jobs offsetting failed/relocated businesses. Almost 235,000 single-family homes, 173,000 multi-family homes, 20,000 mobile homes, 146,000 automobiles, and 60,000 boats were damaged. More than 20,000 nonfarm businesses suffered damage, and the costs to governments soared. Costs to the state of Florida totaled $960 million. This included $1.5 billion to local governments and $2.4 billion to Homestead Air Force Base. Other costs to the federal government were $144 million, farm losses were $455 million, and federal government recovery costs were $5.7 billion.

The South Florida RPC continues to concentrate on hazard mitigation as a strategy to enhance and protect the regional economy prior to disasters. In December 2000, the council distributed more than 2,500 copies of its recently published Hurricane Survival Guide for Small Businesses. Published in English, Spanish and Haitian Creole, the guide is an instruction booklet for small business owners and managers to use for developing their own emergency plans and preparations. Prior to hurricane season in 2001, the council distributed another 1,500 copies to business owners attending the South Florida Regional Hurricane Conference in Fort Lauderdale. The guide is also available in all three languages on the council’s website, www.sfrpc.com.

In FY 2000-2001, South Florida RPC staff prepared a model Post-Disaster Redevelopment Plan for communities in South Florida. The plan offers alternative strategies to local governments to improve the odds of economic and psychological recovery from disasters and will help to retain jobs that are often lost as a result of disasters. The model plan was completed in Fall of 2001 and distributed to the 70 local governments in the South Florida region, as well as the ten other regions in Florida.

For More Information, Contact: Jim Giraytys at 540/722-4633; John Galusha of SCEDD at 719/545-8680; and John Hulsey of South Florida RPC at 800/985-4416.

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