Those unfortunate enough to have attended California Gov. Leland Stanford’s 1862 inauguration likely had to commute to the Capitol Building as he did – by boat.

Sacramento is, if not the most likely to flood, at the very least, one of the most flood-prone cities in the Natomas_MapUnited States. It sits at the confluence of two large rivers that empty into a massive lowland waterway known as the delta. Since time immemorial, those rivers and the delta have flooded predictably. As weather patterns continue to change, and as climate models predict winter storms of greater intensity and duration, they will do so again. In fact, an eventual flood capable of submerging the capital city is virtually inevitable.

Still, a quixotic drive for growth has taken hold in the Sacramento area. Now, a new spurt of development threatens to place more people at risk.

The site of Sacramento’s newest round of development is just north of downtown in a floodplain named Natomas. The area saw fast growth in the early 2000s but has been under an insurance moratorium since 2006. Construction in that area was halted, as FEMA rezoned the floodplain when crucial levees were found deficient.

In an alarming development, that moratorium is set to be lifted. This month, President Barack Obama signed into law the Water Resources Reform and Development Act. The act, among other things, will enable the levees protecting the Natomas floodplain to be overhauled to withstand a 100-year-flood. Doing so will end the insurance moratorium by obviating homeowners from having to purchase flood insurance at all.

Sacramento Mayor Kevin Johnson is excited by this prospect, declaring:

Natomas has been percolating and there’s a lot of pent-up energy, and that community is going to boom in a responsible way.

His enthusiasm is misplaced. While overhauling the levees is an excellent development vis-à-vis the existing residents, it should not provide the basis for further development.

To grasp just how risky moving to Natomas is, consider this data collected by The Water Institute: on a quote for a policy with $200,000 in building coverage and $80,000 in content coverage, with a $1,000 deductible, the estimated actuarially accurate premium would be $20,967 annually. Of course, through the magic of the National Flood Insurance Program (NFIP), the actual premium charged for that policy is $353 annually.

Clearly, the NFIP maintains rates that are well below what the private market could charge. By doing so, the program provides incentive to develop areas that otherwise would remain untouched. The environmental and human costs of such development are high, if not immediately realized in the form of dramatic rescue scenes. What is realized immediately is a massive transfer of risk from a small percentage of homeowners onto the backs of all U.S. taxpayers.

Nationally, it would be a great service to Americans everywhere for policymakers to phase out flood insurance subsidies. Private markets, while not prepared to take on all of the risk, could play a role in bringing flood insurance rates into conformity with actual levels of risk.

In the case of Natomas, there may be time yet to forestall the construction of thousands of new homes. It will be a few years before the Army Corps of Engineers is able to certify the relevant levees as capable of 100-year-flood protection. Until that day, city and county officials should be inundated with information concerning the risks posed to their constituents by a major flood. If those officials will not listen, they should be presented with proposals for boat subsidies.

Featured Publications