Report on the Feasibility of a Wind Resistive Device Grant Program In Accordance with Act 153 Enacted by the Twentieth Legislature of the State of Hawaii Regular Session of 2000 Prepared by the HAWAII HURRICANE RELIEF FUND’S TECHNICAL ADVISORY COMMITTEE ON HAZARD MITIGATION STATE OF HAWAII December 2001 Members of the Technical Advisory Committee on Hazard Mitigation Gary Y.K. Chock Douglas M. Goto Michael P. Hamnett Carolee C. Kubo Ronald K. Migita Lorna A. Nishimitsu Martin M. Simons Gerald H. Takeuchi James Weyman Table of Contents Page No. Executive Summary 1 I. Introduction 2 II. Findings and Recommendations 2 III. Summary of the Results of the Feasibility Study 7 IV. Summary of the Results of the Marketing Study 8 V. Summary of the Results of the Legal Analysis 9 VI. Answers to Additional Questions Raised by Act 153, SLH 2002, and the Related Conference Committee Report No. 138 10 Exhibit A: Proposed Legislation Exhibit B: Report of Applied Research Associates, Inc. Exhibit C: Market Survey Report of QMark Research and Polling** Exhibit D: Marketing Plan of Starr Seigle Communications, Inc.** **The report contained in this Exhibit was prepared prior to the completion of the final report of Applied Research Associates, Inc. dated December 7, 2001 (the “ARA Report”). As a result, certain information contained therein may be superseded by updated information contained in the ARA Report. Report to the Legislature On the Feasibility of a Wind Resistive Device Grant Program Executive Summary Act 153, SLH 2000, requested that the Hawaii Hurricane Relief Fund’s Technical Advisory Committee on Hazard Mitigation study the issue of hazard mitigation and the feasibility of a matching grant program to provide incentives for homeowners to install wind resistive devices to reduce future hurricane losses. The study was also to determine whether additional statutory authority is needed to allow HHRF to establish a hazard mitigation grant program. The Committee recommends that the Legislature authorize the establishment of a hazard mitigation matching grant program for certain wind resistive devices. The total amount of funding should be $10 million dollars per year including estimated administrative and marketing costs. The Committee recommends that four types of wind resistive devices be included: (a) uplift restraint ties at roof ridges and roof framing members to wall or beam supports, (hurricane clips), (b) additional fastening of roof sheathing and roof decking for high wind uplift, (c) impact and pressure-resistant exterior opening protection devices (hurricane or storm shutters), and (d) wall to foundation uplift restraints for post-on-block construction. Grants should be awarded on a 50% of total cost basis up to a maximum grant amount of $2,100 per residential dwelling. Grants should be awarded on a first come, first served basis. The grants should reimburse homeowners for costs already paid for the installation and inspection of the wind resistive devices. Finally, because it appears that additional statutory authority will be needed to establish the grant program, the Committee has included proposed legislation. Report to the Legislature On the Feasibility of a Wind Resistive Device Grant Program December 13, 2001 I. Introduction. Act 153, SLH 2000, requested that the Hawaii Hurricane Relief Fund’s (“Fund”) Technical Advisory on Hazard Mitigation (“TAC”) study the issue of hazard mitigation, including the feasibility of establishing a matching grant program for “wind resistive devices.”1 The study also was to include a determination whether the Fund could develop and implement a hazard mitigation grant program without additional statutory authority. The TAC, at the Fund’s expense, enlisted the services of Applied Research Associates, Inc. (“ARA”) to conduct the hazard mitigation study and feasibility analysis. HHRF also contracted the marketing firm of Starr Siegle Communications, Inc. (“SSC”) to conduct marketing research and develop a marketing plan. The Department of the Attorney General reviewed the statute that established the HHRF, the State Constitution and other statutes to determine if additional statutory authority would be necessary to establish a matching grant program. The findings and recommendations in this Report are based on these underlying analyses and the opinions contained therein. 2 II. Findings and Recommendations. There is moderate to strong demand for a matching grant program to support the installation of wind resistive devices. Moreover, a matching grant program similar to that suggested in the legislation mandating this study is both feasible and cost effective for mitigation measures recommended in this report. 1 The terms “wind resistive devices” as used in this report generally means a device or technique that is applied to a structure and which thereby increases the structure’s resistance to damage from wind forces. More specifically, the terms refer to the particular wind resistive devices enumerated in this report. 2 Results may vary depending on the model, methodology and/or assumptions used. Different modelers and researchers may arrive at different conclusions. Actual results may vary from those projected. 2 Hawaii Hurricane Relief Fund Technical Advisory Committee Report December 13, 2001 Two types of wind resistive devices are anticipated to be the most cost effective: (a) uplift restraint ties at roof ridges and roof framing to wall or beam supports (sometimes known as hurricane clips or ties); and (b) additional fastening of roof sheathing and decking for high wind uplift. The grant program should also include (c) impact and pressure resistant opening protection devises such as storm shutters for doors, windows, skylights and other material openings, and (d) wall to foundation uplift restraint connections for wood foundation post-on-block construction. The cost benefit analysis conducted by the consultants found that (a) uplift restraint ties at roof ridges and roof framing to wall or beam supports and (b) additional fastening of roof sheathing and decking for high wind uplift were the most cost effective retrofit options available. These retrofit options are needed in Hawaii because past building codes lacked adequate standards for hurricane resistance. The TAC also believes that both opening protection and foundation connection strengthening have been demonstrated to reduce the risk of losses, and including these choices will encourage homeowners to install more comprehensive protection of their residences to reduce damage to structures and contents. In addition, the TAC finds that these additional measures are cost effective when all of the cost saving impacts are considered and are certainly cost effective investment of public funds. The TAC believes that installation of the wind resistive devices identified above will reduce the risk of property loss due to hurricanes, tropical storms, and strong winds. The TAC also believes that over a period of years, the cost of these wind resistive devices will be outweighed by the reduction in expected future losses.3 Property loss reduction will benefit both homeowners and property insurance companies. We express no opinion on the sufficiency of these wind resistive devices for assuring life and personal safety protection. However, the TAC believes there will be further reductions in disaster response costs in addition to the direct property loss reductions. A properly retrofitted home is less likely to cause damage to surrounding homes as collateral damage. It will 3 If private property insurers were to implement premiu m discounts for wind resistive devices, it would further increase the economic benefit to the homeowner resulting from installation of these devices. 3 Hawaii Hurricane Relief Fund Technical Advisory Committee Report December 13, 2001 also benefit county, state, and federal governments by also reducing disaster response and relief costs and the loss of property taxes following a major hurricane. These last two public sector benefits provide additional justification for the expenditure of investment income from the HHRF trust fund. The analysis conducted by ARA for the TAC concluded that investing in a grant program would provide a better rate of return than investing in bonds. Based on an annuity analysis of the reduction in average annual losses, ARA estimated that total investment (state plus homeowner) in uplift restraint ties at roof ridges and roof framing members to wall or beam supports, and additional fastening of roof sheathing and roof decking for high wind uplift would yield a real internal rate of return of 6-7% over a 30 year period. This compares favorably to the real rate of return of 2-3% that could be expected from investing in bonds. If one considers only the State’s investment the real rate of return doubles to 12-14%. As a result, the TAC believes that a grant program can be more than justified on purely financial terms. The additional collateral savings, including reductions in emergency shelter requirements, potential lives saved and injuries prevented, clean-up costs, and lost productivity strongly indicate that the benefits cited in this report are in fact understated. The TAC recommends the following parameters and standards for the grant program: 1. Maximum grant amount. Should the Legislature authorize a pilot mitigation grant program, the TAC believes that grants should be awarded on 50% of total cost basis up to a maximum of $2,100 per residence. Although the TAC is aware that the Legislature,