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9-2 Negotiations when submergence is imminent
9.3 Financial Assistance for Relocation
Termination payments could range anywhere from no compensation to something close to full compensation. Providing full compensation would largely defeat the purpose of the rolling easement: Even without the rolling easement, a local government could purchase the land at market value through eminent domain; providing full compensation would take away the incentive to avoid excess investment. Similarly, if one expects flood insurance to pay for the eventual loss of the home, much of the rolling easement's incentive to avoid unwise investments will be lost—unless the expected insurance payments are fully covered by insurance premiums (which is not the case today[600]).
Under the Texas rolling easement policy, the state generally offers landowners approximately $50,000 for home relocation costs.[601] State law allows the Texas General Land Office to remove some homes encroaching seaward of the dune vegetation line, but the state usually allows continued occupation until either a storm destroys the house or the house is seaward of the mean high tide line, which is the boundary between public and private property.[602] If the home is occupied until it is destroyed by a storm, flood insurance may pay the entire value of the structure (though not the land). Thus, the state's enforcement flexibility substantially increases the likely financial compensation—and enables most owners to enjoy the property several more years.
Some researchers have taken this approach one step farther: Professor Joe Sax proposed creating a surety bond or “sinking fund” for compensating landowners by requiring annual payments well in advance of the submerge date. The proceeds could be invested and provided to the owner when the land is abandoned.[603] With the blessing of the Federal Emergency Management Agency, The Heinz Center proposed a modification to the flood insurance program based on erosion-hazard mapping, in which higher flood insurance payments would accrue over 50 years sufficient to pay for the eventual loss of the structure.[604] Under the Heinz Center approach, the government would continue to assume the risk of sea level rise; the owner would receive fair market value of the structure[605] (though not the land) regardless of whether the higher premiums were sufficient to cover the payment. But assuming an accurate estimate of the submerge date,[606] this approach would force owners of vulnerable property to pay for the expected cost of sea level rise. Under FEMA's current procedures, rates on a given property neither anticipate nor respond to increasing vulnerability; so the premiums paid by other policy holders must cover those increased costs. [607]
If the Sax proposal is implemented as a bond, in which the property owner is provided the proceeds upon abandonment, then the landowner, not the government, will assume the risk of sea level rise. If the property lasts longer than expected, then the owner will get a payment worth more than the property. But if sea level rises more rapidly and/or the owner continues making upgrades as the submerge date approaches, then the bond will be less than the property value (though it still will tend to mitigate the apparently harsh effect of an owner having to give up property without a payment). The logic of such a fund is that, like insurance, it converts the risk or eventuality of the loss of one's home into a relatively modest annual payment. For example, if a rolling easement requires a payment equal to 1.3 percent of a home's value and the payment increases 3 percent per year, then it will be sufficient to cover the cost of the property in 40 years at a 3 percent rate of return. Given the various programs that benefit coastal landowners, a required annual payment into a buyout fund may be less politically difficult than uncompensated enforcement of the rolling easement.
If a land trust or landowner thinks that an eventual financial payment would help facilitate the endgame, provisions for such a fund can be included in the terms of the rolling easement. The landowner may be concerned that if his heirs still own the land when it is submerged, they might not have the money to buy a similar property inland. In such a case, he could ask that, instead of paying him for the rolling easement, the land trust invest the same amount in a trust fund, which can be transferred to the owner upon abandonment. Or the transferring owner could even provide those proceeds himself. If the easement holder (especially a government agency) is more concerned than the landowner about a bond being available, the easement could specify that the owner must start to make annual payments some number of years before the estimated submergence, based on (for example) a percentage of the assessed market value.
A variant of this approach would be a payment from the landowner to the easement holder in lieu of having to remove the home when it first becomes seaward of the rolling design boundary. Such an option could be included either in the original easement conveyance[608] or negotiated as the submerge date approaches. For example, a shoreline migration easement could prohibit shore protection and require immediate relocation of the house once it is seaward of the upper edge of tidal wetlands. The easement could also specify, or the parties may negotiate, an arrangement under which the owner can retain the home for a certain number of years after marsh takes over the land on which it stands, provided that the owner makes an annual payment into a fund, with some or all of those proceeds refunded when he abandons the parcel.
A final version of this approach is shown in Figure 6. In that case the rolling easement prohibits shore protection but does not require the home to be removed when it is in the wetlands. Eventually, however, the public/private boundary will move inland of the house. At that point, the state will own the land by operation of the public trust doctrine, and neither the landowner nor the easement holder will have any property interest in the portion of the parcel on which the home rests. The state will have both a property interest and an environmental interest in removing the structure, but also face political pressure to allow the home to stay. One option would be to for the state to charge an escalating rent for continued occupation,[609] possibly with the intention of refunding some or all of the proceeds upon abandonment.
Managing some sort of trust account would increase the administrative costs of the rolling easement. An account management fee similar to what custodians of retirement funds charge could defray those costs. Sometimes the funds might have undesirable tax consequences.[610] Whether the additional administrative burden is worthwhile is a judgment that the land trust would have to make.
Instead of a
cash payment, providing a new parcel of land may be feasible in some
circumstances. In the case of an oceanside lot on a barrier island, a newly
created lot on the bay side may sometimes be a reasonable solution.[611] Some owners would willingly move a home to the safety of the bay
side rather than insist on occupying a house seaward of the dune line, with both
the ocean and the easement holder threatening to enforce the rolling
easement.
[600] See CCSP, supra note 3, at 151–154 (showing that under grandfathering policy, flood insurance rates do not increase when sea level rise makes a given property more hazardous).
[601] Texas Department of Public Safety. State of Texas Hazard Mitigation Plan 2010–2013, 194 (2010) (discussing relocation under the Coastal Erosion Planning and Response Act). See also Severance v. Patterson, 566 F. 3d 490, 494 (2009) (plaintiff was offered relocation assistance of $40,000 for two structures in 2006).
[602] See § 3.1.2 (discussing the Texas Open Beaches Act). As this report went to press, the state had not yet made any changes in its relocation assistance policy in light of the Texas Supreme Court's opinion in Severance v Patterson, No. 09-0387 (Tex. 2010).
[603] Joseph L. Sax, The Fate of Wetlands in the Face of Rising Sea Levels: A Strategic Proposal, 9 UCLA J. Envtl.. L. & Pol'y 143, 148 (1991).
[604] The Heinz Center, Evaluation of Erosion Hazards with forward by James Lee Witt, Director, Federal Emergency Management Agency (2000), 156–172, 178.
[605] Here we are assuming that the value of the structure is less than the maximum coverage per structure. The maximum coverage is $250,000, 44 CFR § 61.1, but there have been several proposals to raise it.
[606] The Heinz Center proposal did not explicitly address accelerated sea level rise, but revising the basic approach to do so would be relatively straightforward. With or without accelerated sea level rise, however, shoreline retreat over a 50-year period is uncertain. Transferring a 50-year risk from property owners to the flood insurance program based on a forecast is not necessarily the most efficient way to discourage unwise investments, but it would incorporate risks into decisions more than the current approach. See CCSP, supra note 3, at 151–154.
[607] See supra note 600.
[608] Such a provision is essentially an option for
continued habitation in return for a payment. If included as part of the
original easement, such a provision could be attacked as a
violation of the Rule Against Perpetuities. But a land trust that
wanted to stay on good terms with the property owner may be reluctant to attack
a provision that it originally negotiated with the property owner. Cf. supra notes 259,
260,
and 387.
[609] Several states rent public trust tidelands for a variety of water-related purposes. New Jersey requires those wanting to build a dock to lease the wetlands and shallow waters over which the dock will be built. See, e.g., New Jersey Department of Environmental Protection, PUBLIC ACCESS IN NEW JERSEY: The Public Trust Doctrine and Practical Steps to Enhance Public Access 23–25, 41 (undated) . Several states lease tidelands for aquaculture or mineral extraction. Slade et al, supra note 34, at 249–255. In Mississippi, the Secretary of State has the discretion to award or deny a tidelands lease for a gaming casino. Columbia Land Dev., LLC v. Secretary of State, 868 So.2d 1006, 1011–1016 (Miss.2004).
[610] For example, if a cash refund is expected eventually, then a “donation” of a rolling easement would really be a “bargain sale.”
[611] See supra § 2.5.
This page contains a section from: James G. Titus, Rolling Easements, U.S. Environmental Protection Agency. EPA‑430‑R‑11‑001 (2011). The report was originally published by EPA's Climate Ready Estuary Program in June 2011. The full report (PDF, 176 pp., 7 MB) is also available from the EPA web site.
For additional reports focused on the implications of rising sea level, go to Sea Level Rise Reports.