Disastrous spring costing Mo. billions of dollars

[June 06, 2011]  JEFFERSON CITY, Mo. (AP) -- First a tornado tore through the St. Louis airport. Then rising waters swamped small towns and flooded miles of fertile farmland along the Mississippi River. Then the nation's deadliest tornado in six decades ripped apart the city of Joplin.

Thirty days of destruction in Missouri. Billions of dollars of damage. And it may not be done, as communities along the Missouri River from St. Joseph to St. Louis brace for a new round of flooding.

The economic aftershocks of Missouri's spring of disasters may be felt for years, even by many who weren't personally affected by the storms. Insurance premiums are likely to increase for home and vehicle owners. Restaurants and retail shops are likely to see lower sales in southeast Missouri. Utility rates are likely to rise in the southwestern part of the state. And Missouri's budget -- already out of balance -- now is tens of millions of dollars deeper in the hole, which could lead to more cuts to government services and schools.

"It's not just the loss of lives, but this is a horrible economic blow to the state of Missouri," said state House Speaker Steven Tilley, a Republican whose home district is near the Mississippi River.

Missouri may be an extreme example. But it's far from alone in a spring of brutal weather.

Tornadoes have wreaked havoc from Alabama to Massachusetts, while floods have inundated states from Montana to Louisiana. The recent Joplin tornado and a series of twisters that ravaged the South in late April caused a combined insurance loss of up to $8 billion, according to preliminary estimates from Eqecat, a firm that analyzes the effect of catastrophes for insurers and government agencies.

Even before the recent flooding in the West and upper Midwest, the U.S. Army Corps of Engineers said about 6.8 million acres had been flooded this year -- an area equivalent to the entire state of Massachusetts.

One recent day, highway engineer Richard Wallace drove his four-wheel drive truck down the gravel of Mississippi County Road 310 in southeast Missouri to survey the damage from receding floodwaters. He was forced to stop.

"I'm looking at a section right now that looks like part of the Grand Canyon," said an amazed Wallace, staring at a gaping crevice in the road. "It's just unreal."

In Mississippi County, where the corps blew open the Birds Point levee to relieve flooding pressure on nearby Cairo, Ill., local officials estimated the water may have caused $75 million in damage to roads, bridges and public infrastructure. Flooding also wiped out about half of the county's farm acreage -- a particularly severe blow for an area that ranks among Missouri's leading wheat and soybean producers and whose economy depends on agriculture. Missouri Farm Bureau President Blake Hurst says 570,000 acres of cropland have been flooded, costing Missouri farmers anywhere from $150 million to $400 million.

Less money for farmers also means less money for retailers, restaurant owners and just about everyone else in the region. The flooding is projected to reduce sales revenues by $93 million in Mississippi County alone -- a decline of about 14 percent, said Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University.

"You'll think twice before you buy something for yourself, you'll think twice before you buy a wedding present, you'll think twice before you buy a steak," said Claudia Arington, director of the Charleston Chamber of Commerce.

In Joplin, a powerful tornado that killed at least 138 people also damaged about 18,000 vehicles, more than 8,000 homes and 500 commercial properties. Among the buildings damaged was a hospital that employed 1,700 people.

Ten days after the Joplin tornado, the state said major insurance companies already had received 17,000 claims, a figure that's likely to rise. Eqecat estimates there are up to $3 billion of insured losses in Joplin. Historically, insurance premiums often have risen in areas hit by catastrophic events as insurers update their risk models used to set rates.

Until the Joplin tornado, Missouri's single largest insurance catastrophe in the past decade was an April 2001 hail storm in the St. Louis area that caused about $700 million in damage, said Brent Butler, government affairs director for the Missouri Insurance Coalition. In the following two years, the average homeowners' insurance premium in Missouri shot up 29 percent, according to figures provided by the state insurance department.

The Joplin tornado "could have an effect on everybody's insurance rates eventually -- but it will be eventually, and I wouldn't call it dramatic," Butler said.

If tornadoes result in premium increases for hard-hit states such as Missouri and Alabama, "the good thing is, because everybody is going to pay more, maybe it's not much more," said Erwann Michel-Kerjan, managing director of the Risk Management and Decision Processes Center at the University of Pennsylvania.

Electricity rates also are likely to rise as a result of the tornado. The Empire Electric District Co, which serves about 150,000 people in southwest Missouri, figures the tornado caused $20 million to $30 million in damage to its infrastructure and wiped out 10 percent to 15 percent of customer demand for electricity.

Missouri Gov. Jay Nixon already has committed $50 million to help pay for the emergency response to the Joplin tornado and southeast Missouri floods, along with recovery efforts. But that will nearly double the state's projected budget gap for the fiscal year that starts July 1. And Nixon has said the state's disaster expenses will have to be offset by cuts to other areas. Those cuts will come on top of more than $1 billion in spending reductions already made by Nixon in the past two-and-a-half years.

There is a potential bright spot. The disasters could spur a revival for some dormant job sectors, such as construction, once people begin rebuilding.

"You're going to have actually a pretty good pickup in the local economy because of that," Domazlicky said. "That's not to downplay what happened, but it is going to provide a stimulus to that economy in terms of getting people to work."

[Associated Press; By DAVID A. LIEB]

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