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James Lee Witt, who knows a thing or two about preparing for disasters, says that he's seeing more cities address how they'll protect lives and property if catastrophe strikes. But he also sees that much more work needs to be done.

"The thing that concerns me is the fact that a lot of cities have worked hard in developing the plans and getting them in place, identifying those risks," says Witt, "but they're just not to the level that they need to be right now."

Laura Hagg, managing director of James Lee Witt Associates' state and local practice, says that Katrina "really hit home for folks," although the four hurricanes of 2004 and the attacks of Sept. 11, 2001, also keyed in cities on their need for such planning. From afar, city officials could watch in horror at news footage of New Orleans. They must have asked themselves, "Wow, could we receive 50,000 evacuees from a neighboring city," Hagg says, "could we take care of our own folks, particularly those who are most at risk?"

Yet most cities don't act to answer such questions until after the disaster hits. Hagg can only name one major city that underwent a substantial review of its emergency policies predisaster--Philadelphia. Mayor John Street issued a proclamation soon after Katrina calling for the formation of an Emergency Preparedness Review Committee, whose 42 members had their first meeting in November 2005.

"Frankly, as a result of what happened with Katrina, the mayor made a decision that we needed to review what we were doing," says Barry Scott, director of risk management for Philadelphia, "and created a committee to gather and review the city's emergency preparedness and response plan."

Witt Associates was called in to help the committee perform a "gap analysis"--to uncover weaknesses in the City of Brotherly Love's plan. The final report was finished on June 30 and can be found on the city government's homepage.

One of the main things that other cities can take out of it, says Hagg, who was project manager for Philadelphia, is that there was a strong commitment to the process from the city's leadership. But, importantly, it was also a community process. Each of the seven subcommittee heads, for instance, were members of the private or nonprofit sectors.

Witt says that cities need local businesses and nonprofits to participate.

"They have an awful lot of resources in the private sector that could be a valuable resource to every city," he says, "and it's really important that they develop that program because if the city's affected, the private sector's affected."

For emergency planning, communication within the city government is crucial too. Kelly McKinney, deputy commissioner for planning and preparedness in New York's Office of Emergency Management, points to the close relationships that his staff have with nearly every department in the city, as well as the major state and federal agencies.

"That's one of the things about New York that's good," he says, "is that there are a lot of these personal relationships built up, and you can pick up the phone and call a lot of different people and different agencies."

These connections help to ensure the success of frequent tabletop exercises such as the one for coastal hurricanes held with FEMA this summer, and field exercises such as Trifecta, a mock scenario of involving a passenger, a freight train and a massive chemical explosion. More than 1,500 firefighters, police and EMS participated in Trifecta, and it involved a dozen or so preplanning meetings.

McKinney admits that Katrina spurred New York to take fresh looks at its emergency plans and revise them into a new 900-page document.

"It's a real monster of a plan," he says.

"There were some really good after-action reports that described what went right and what went wrong with the Katrina response, and I think we've incorporated some of those lessons in our plan," McKinney adds.

AT RISK OF IGNOMINY

Besides the thousands of employees, millions of citizens, and billions of dollars in property and liability exposure, why should city leaders be worried about preparing for the next Katrina or the next Sept. 11? Sure, NYC and Philly are potential terror targets, but what about a midsize city in the middle of America? What can push them past the old "it won't happen here" risk management strategy?

If anything, it's the desire not to be "that city," the one whose post-disaster failures are laid bare on every news channel in the world. As McKinney says, "You could have a mayor that's done a tremendous job for years and years, and they have one event and it's poorly managed and that could be their legacy."

But besides these negative motivations, cities can also look at the positives of emergency preparedness. When broken into basics, it's not complicated stuff, and it can be applied to all risks, from terror to tornados.

Cities and municipalities of all sizes can handle such planning, says Hagg. Sure, the Philadelphia plan cost shy of $1 million. And McKinney employs about 120 people. But, Hagg says, "It doesn't have to be this crazy, expensive process."

Even small towns, for small disasters, can prepare by having a meeting of heads of political, society and business leaders, to focus on the community's particular risks, how to prepare for those risks, and how to keep the government and businesses running in such contingencies.

Plano, Texas, a town with a quarter-million citizens, has done just such a process, according to city risk manager Joey Page. A suburb in the Dallas-Fort Worth-Arlington Metroplex, Plano is setting up a new office for homeland security, has sent 60 to 70 people to federally sponsored training and carried out tabletop exercises, all while collaborating with other local communities.

"We've also partnered better with our neighboring cities and counties that are around us, because I think what we realize--Plano, Texas, is not going to be able to do this by themselves," Page says.

In terms of planning for terrorism, Page says he is more concerned with the indirect consequences upon Plano. He recalls how the city felt the aftershocks of Sept. 11.

"People weren't spending, people weren't buying, people weren't shopping, people weren't traveling, people weren't coming here," he says. "We weren't getting tax revenue in."

So Plano has come up with a contingency plan for a future aftershock, with a priority list of city services. At the bottom are those that the city can cut first in times of a catastrophic drop in revenue. At the top are those services--medical, fire, police, water and sewer--that they must try to maintain no matter what.

For his town and its neighbors to refine how they share security resources, communicate before and during crises, and devise methods of mass evacuations and transportation, emergency planning and training will have to be an ongoing thing, Page says.

That should be the case for all cities, says Hagg of Witt Associates. Emergency preparedness has to become a regular part of life.

"It's stuff that needs to happen all the time. It needs to become almost like your daily work," she says.

"For any jurisdiction to call itself prepared, it needs to develop a good plan, it needs to train to be able to execute the plan, and it needs to exercise to verify that the plan is effective, and to correct holes that will pop up periodically," says Harrison Lobdell, director of the National Emergency Response & Rescue Training Center, which has provided disaster training sessions to more than 7,500 U.S. jurisdictions.

EVERYDAY REALITY

That adds disaster planning to an ever-lengthening list of responsibilities that have a finite supply of funding, some of which already goes to buying CAT insurance cover.

It doesn't help that cities generally have very large property exposures and very high concentrations of value in usually a small area that can all be exposed to fire, wind and other risks, says Rich Famigletti, leader of the city segment in the public entity and scholastic division of A.J. Gallagher.

Most major cities shell out the money for terrorism coverage under the Terrorism Risk Insurance Act, he says, while smaller cities and outlying suburbs tend not to.

Self-funding for catastrophe is also an option, albeit a rock-and-a-hard-spot alternative.

"If you say, "Well, we're worried about a terrorist event. We better set aside $200 million,'" says Victor Parker, director of risk management for Los Angeles. "And then when you set that money aside in your reserve fund, what does that mean to your day-to-day operations? Does that mean that you can't get as many police officers out on the street?"

Los Angeles also self-insures through a reserve fund for the specter of another catastrophe, the Big One. "There's a little uneasiness I think now, even, because we haven't had that major quake locally really since Northridge, and that was in '94," he says.

"Most of us self-insure for earthquake," he adds. "It's very, very expensive to get earthquake insurance."

Earthquake, terrorism and other catastrophes are also not the only risks cities have--by far.

"It's a very diverse exposure," says Tom O'Connell, senior vice president and director of the public sector alliance at Aon Risk Services. "They all face really dramatic budget issues. Because of those issues, it really impacts how they're going to direct their purchase of insurance, if they do purchase insurance, and where they're going to focus their resources."

"With public entities, it's so varied," Famigletti says. "They have to be concerned about construction projects, streets and roads. There are so many more things that they have to have on their radar screen that they have to be concerned about, and so much more risk that the municipality is exposed to."

Or as Ford Farris, assistant director, risk management division, in Dallas' human resources department, puts it: "We're in a number of different businesses, so to speak--I mean, we have street services, sanitation, water, police and fire."

And all of these "businesses" have significant people and property exposures, ranging from fleet risk to workers' comp, property to construction, transit operations to police pursuit. O'Connell and Famigletti say, along with nearly all risk managers interviewed for this piece, that cities self-fund for most coverages, getting excess where catastrophic risk rears its head.

Then each city has special risks that are near and dear to their budget. Philadelphia, as city and county, for instance, manages the risks of an overcrowded, underfunded prison system with a serious health-care issue, says risk manager Scott.

The city also must deal with whole neighborhoods of crumbling, derelict buildings.

"Being among that group of older northeastern industrial cities, we have sort of reached the end of the lifecycle for some of our housing stock, which was built during the city's more populous days," he says. "We sort of reached a crisis level after the 2000 year."

The city responded with the Neighborhood Transformation Initiative. Hundreds of buildings have been demolished for new development, and to cover the inherent risks for the city and its contractors, Philadelphia uses the "first demolition rolling wrap-up insurance program in the nation," Scott says.

Page in Plano says that his town's current crisis is drought--they're at stage 3 of the city's drought contingency plan. Even if they received regular rain from here on out, Page says, they could be at stage 3 through next summer.

"The city has done its part," he says. "We've cut back, we've restricted. We're not planting. We're not requiring people to plant when they build roads because what good does it do. It's just going to die anyway."

Local folks are only allowed to water their lawn once a week, and fines are in order for violations. "We have people turning in their neighbors," he says. "It's becoming nasty."

A city as large as Los Angeles has so many "businesses" in it that it responded by creating whole separate risk management departments for its utilities, airports and harbor, while the city risk management department, under Parker, oversees 40 other city departments.

The benefits of isolating certain departments is that it hones expertise. "They all have their unique risks," Parker says about the three independent departments, "and they all have the need to have a risk professional that understands that industry and understands those particular risks."

The issue, however, is that the three departments--and even some of the 40 others--buy their own insurance, says Parker, so the city loses some economy of scale.

No matter how they handle the diversity of their city's exposures, however, leaders and risk professionals must also answer to one more exposure--the democratic process. On one hand, says Dallas' Farris, city councils, school boards and elected officials can ask a lot of questions. "They want to know how much money they're saving," he says.

And on the other hand, while elected officials come and go, the public eye always is there, sometimes seated directly in front of the TV, bag of chips and newspaper in hand. "As government entities, we're used to being in the public eye," says Bill Kostner, risk manager of Lincoln, Neb., and board member of the Public Risk Management Association.

And the public eye can squint sometimes. Hagg recalls with a good-natured laugh that, even after what could be the successful completion of Philadelphia's emergency plan review, James Lee Witt Associates got the nickname from the local newspaper as the "million-dollar consultants."

MATTHEW BRODSKY is associate editor of Risk & Insurance®.

October 1, 2006

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