After the Fall

House rich, cash poor: the 3 cities with the longest
tenured home ownership have astronomic house prices.

We are in that fortunate group of Bay Area homeowners who bought their homes in the late 20th century. We stretched to make the purchase in the hundreds of thousands of dollars, and in 2025 our houses could well have a market value of $2 million or more. As I've heard many middle-class homeowners marvel, "I couldn't afford to buy my house today."

Some Pacific Palisades homeowners had similar good fortune but have seen it all disappear this past week:

The fires also wiped out the homes of Californians in the middle class who bought into affluent neighborhoods decades ago, when the properties were still within reach for teachers, plumbers, and nurses. After years of rising home values, many of them have the bulk of their wealth tied up in homes that are now ash...

Now, those middle-class homeowners face a crushing housing crunch. Los Angeles was already experiencing an acute shortage of homes. Its real-estate prices are more than double the national level. In the wake of the fire, thousands of people desperate for temporary housing are flooding a cutthroat rental market, where bidding wars are breaking out for leases. Some are considering leaving for good.

Then there is perhaps the most daunting prospect of all for those who have lost their homes: battling with their insurance companies to rebuild...

For those who lost their homes, much of the value of their properties is in the land they still own, but rebuilding on it will be a long and expensive process. It’s unclear how many homeowners in these areas lack insurance or are underinsured. A number of leading insurers have stopped selling new home-insurance policies in the state. State Farm said last year it would not renew 69% of its property policies in the Pacific Palisades.

From an objective standpoint these fire victims are not worse off than the poorest members of our society. However, their precipitous fall is frightening to those of us who identify with them. There but for the grace of God go I.

Tampa: A Cloud in Florida's Horizon

(Image from Google Maps)

Tampa was one of the most popular relocation destinations in the country. However, repeated flood damage in the last five years has prompted a wave of selling as homeowners want to get out.

In the Tampa Bay metropolitan area, which includes St. Petersburg, a real-estate boom nearly doubled median home values from 2018 to June of this year, according to Redfin data. Young people flocked to the region, looking for a coastal lifestyle at a relatively affordable price.

The Tampa Bay metro area was the fifth most popular relocation destination in the country, according to an analysis by Redfin last year. The population has soared to more than three million.

Hurricane Helene deposited more than 6 feet of storm surge in the Shore
Acres neighborhood of St. Petersburg, Fla. (Photo: Mike Carlson/AP)

But as Shore Acres’s young residents sorted through the storm’s wreckage, only one thing was on their minds: selling.

Ballooning home insurance costs and the perennial threat of violent storms are starting to undermine housing markets throughout much of the state. But in few places has the turnaround been more dramatic than in low-lying communities up and down the coast of Florida that frequently flood.

The Tampa Bay housing market had been softening even before Helene struck. While prices have been flat, the area experienced a 58% increase in supply in August compared with a year ago, and a 10% decrease in demand, according to Parcl Labs, a real-estate data and analytics firm.

About half the homes listed for sale in Tampa experienced price reductions as of Sept. 9, the third highest share of all U.S. major metropolitan areas.

...The area’s affordability, once a large part of its appeal, is also waning as insurance premiums soar. Jacob McFadden was paying $880 a year to insure his home when he bought it in 2020. That amount has since almost quadrupled, to $3,300.

Premiums will likely increase again now. Property damage from last week’s Category 4 storm could be as high as $26 billion, according to estimates from Moody’s Analytics.

Florida is the No. 2 favored relocation destination for Californians.

So where did Californians move to in 2023?

Texas is the top destination for departing Californians, with 13.71% of California moving interest toward the Lone Star State.

Florida is #2 destination for Californians with 7.49% of interest. This confirms other reports that Californians are flocking to The Sunshine State.

Generally speaking, California homeowners who move to Florida have cashed out with substantial equity and should be able to invest in flood protection measures, such as raising their homes on columns, piles, and piers. They can also afford to pay for the higher insurance premiums. However, the exodus of lower-income, typically working-class homeowners from Tampa is a troubling sign that Florida may be peaking,

A Financial Hit That Few Budget For

Christine Salhany spends about $240,000 a year
for 24-hour in-home care for her husband, Jimmy,
who has Alzheimer’s.(WSJ)

Everyone in my boomer circle of friends and relatives has been hit by the cost of caring for a loved one; it could be a parent, a spouse, or even themselves. It's a crushing financial burden: [bold added]

Americans want to grow old in their own homes. But pursuing that dream has gotten harder, and is putting huge financial and emotional strains on families.

In Nebraska, Christine Salhany spends about $240,000 a year for 24-hour in-home care for her husband who has Alzheimer’s. In Illinois, Carolyn Brugioni’s dad exhausted his savings and took out a home-equity line-of-credit to pay for home healthcare.

Traci Lamb closed her business to take care of her mom in Florida. And in California, Cheryl Orr delayed retirement to help pay for care and home modifications for her wife, who has dementia.

Soaring costs of in-home care, medical advances that extend lives but require ongoing help, and the growing ranks of older baby boomers are creating new pressures. Spouses, adult children and siblings are putting their lives on hold to care for relatives, wrestling with sleep deprivation and constant worry. Families are draining savings to hire help, pay for medical care, and modify homes...

The cost of paid in-home care has soared in recent years. The 2023 national median cost of a home health aide, hired through an agency, stood at $33 an hour, up from $20 an hour in 2015, according to Genworth, a long-term-care insurance company. Those needing round-the-clock in-home care can expect a median cost of about $290,000, which is more than double the annual median cost of a private room in a nursing home facility and four times the annual median cost of a private room in assisted living, according to Genworth.

Very few elderly have the nearly $1,000,000 in retirement savings to pay for long-term at-home care for, say, four years. Borrowing against, then selling the family home is an option if the patient is willing to move to assisted living.

I know three families that have tapped the value of their house; they were fortunate to have lived in the Bay Area, where suburban tract homes have appreciated by over a million dollars if held for at least 20 years. They have had to move away but consider themselves lucky to possess such a valuable asset.

If any politician can come up with a credible solution, he or she would win in a landslide.

Gains and Losses

The view of the Hayward-San Mateo Bridge from the Foster City levee.

I went for a walk along the new $90 million Foster City levee. The path is wider and better engineered than the narrow strip it replaced. There are separate marked lanes for pedestrians and bikers, reducing the chances of injury.

The big change was the height of the levee. It was built to protect Foster City from floods, which means that one can no longer see the Bay from ground level. Walking along the top is nice enough, but one can no longer go up to the Bay and touch the water. No big deal you say? It's the difference between a cliff and a beach. Both have good views of the ocean, but the latter is more popular.

Below is how the Bay and the San Mateo Bridge appeared along the old path in 2018. I used to sit on a bench a few feet from the water and ruminate on various and sundry. Then there was a little sand, now there are only rocks.

There But for the Grace of God Go I

Everyone I know has had a family member--sometimes it's my acquaintances themselves--who's had cancer. Whether or not the patient survives, it's a grueling experience for everyone. Years of tests, chemotheraphy, surgery, and/or radiation, plus the financial strain of paying for everything, await.

Fortunately--I realize that's not the appropriate word--most of the cancer victims I'm familiar with were retired or close to retirement, which means that they had Medicare or other health insurance to absorb most of the costs, and they probably didn't need to work to make up money shortfalls.

There is a growing cohort of Americans who are diagnosed long before retirement age, and, even if they survive the cancer, experience financial ruin. [bold added]

The economic burden of a cancer diagnosis is getting strikingly worse in the U.S., as drug and medical costs soar and more patients live longer with the disease. About 55% of cancer drugs introduced between 2019 and 2023 cost at least $200,000 a year, according to Iqvia’s Institute for Human Data Science. And an increasing number of patients are working-age, a group more likely to report financial hardship after diagnosis compared with older adults.

Nearly 60% of working-age cancer survivors report facing some financial difficulty. Many patients struggle to afford care and end up taking on debt, with some getting payday loans or running up credit cards. Cancer alone accounts for some 40% of medical campaigns seeking financial help on GoFundMe, research shows...

Among common diseases, cancer creates a uniquely difficult financial strain known as financial toxicity. Treatments with expensive medicines start immediately and come with a string of nonmedical costs. Chemotherapy and other treatments can leave patients too weak to work for weeks or months. This can result in a twofold blow, with patients losing income and their employer-sponsored health insurance. The financial fallout can last for years...

Many patients have to take time off—or actually stop working—after a cancer diagnosis. Patients who get chemotherapy are more likely to stop working within four years than those who don’t.

Could one straightforward way of relieving the financial burden be to buy up medical debts--for cents on the dollar because they've been sent to collections--then forgive them?

Undue Medical Debt (aka RIP Medical Debt) does exactly that--it's rated four stars by Charity Navigator--and is a 501(c)(3) organization that my church has donated to. RIP Medical Debt opened its books to economic researchers to find out whether paying off medical debt made a difference in people's lives. The results were disappointing:

[Stanford Prof. Neale] Mahoney and his collaborators find no evidence that buying and then forgiving medical debts that are in collections improved on average beneficiaries’ finances, access to credit, or their physical or mental health. People were even less likely to pay existing medical bills after their debt was eliminated.

Prof. Mahoney and other researchers, as well as RIP Medical Debt, are studying if earlier interventions might be more helpful.

Meanwhile, we're just lucky that we were able to enjoy good health during our working years. If either of us had been diagnosed with cancer in our 40's and 50's, when we didn't have much savings and had mortgages and tuitions to pay, then our lives would be immeasurably more difficult.

Lucky to Have It

Once upon a time, kids, I highly valued a
CSAA membership because of its maps.

After reading about all the difficulties that California homeowners have had in obtaining insurance, I breathed a sigh of relief when I opened the renewal invoice from CSAA for July 1, 2024 to June 30, 2025. I was doubly relieved that the total premium was under $2,000, less than double what it was ten years ago. Other California homeowners covered by CSAA aren't as lucky as I am, but so far they're being renewed. [bold added]

Over a million California policyholders insured through AAA are seeing their home insurance rates rise — sometimes by substantial amounts.

CSAA, the Northern California insurance affiliate for AAA, was approved last Friday to raise its average home insurance rate by 6.9%. Some homeowners may see their rates go up as much as 23.3%, though a small number of others may see their rates decline as much as 11.3%, according to filings with the California Department of Insurance.

The approximately 448,000 customers affected by the rate change can expect to see their new price at their next renewal date on or after August 1, according to the company’s filings.

And in Southern California, 865,579 policyholders with the Interinsurance Exchange of the Automobile Club — another AAA-affiliated insurer, sometimes known as the Auto Club of Southern California — are seeing home insurance average rates rise by an average of 20% when they renew, in a rate rise that went into effect in March.

Part of the reason the premium didn't go up much for us was due to the calendar: the approved increase affected policy periods beginning in August. Also, the Northern California territory (average 6.9% increase) is perceived to be less risky by the insurer than the Southern California territory (average 20% hike).

Like a sleepy stock that suddenly becomes an investment darling, Foster City is now taking off as a high-benefit, low-risk place to be.

FAIR to No One

Riverside County fire in October, 2023 (CNBC)

It's old news that California's property insurers are withdrawing from the state; this week State Farm announced that it would not be renewing 72,000 policies (it had already stopped writing new ones last year).

Thousands of homeowners in risky wildfire areas can only be covered by California's insurer of last resort, the Fair Access to Insurance Requirements (FAIR) plan. However, the FAIR plan's financial condition has become precarious: [bold added]

The number of homes and commercial properties in high-risk wildfire areas covered by the California FAIR Plan has more than doubled, from 154,000 in 2019 to 375,000, and liability exposure has ballooned from $50 billion in 2018 to $336 billion in February, its president told lawmakers at an insurance committee hearing last week...

The state created the California FAIR Plan in the 1960s in response to insurers refusing to cover inner-city businesses following riots in Los Angeles’ Watts neighborhood. It’s a nonprofit association of all the state’s authorized property insurance providers, chartered to provide temporary basic insurance for properties deemed so high risk that companies refused coverage.

The FAIR plan isn’t tax supported, and its bare-bones coverage — just fire and smoke damage — is paid from policy premiums that can be much more expensive than regular insurance because the risk pool is much higher.

The plan also isn’t subject to the insurance regulation under Proposition 103, the check on rates voters approved in 1988. But it is regulated by the state legislature and its rates approved by the elected insurance commissioner, though not under the review of consumer groups, which can intervene on regular policies.

[FAIR Plan President Victoria] Roach said that the FAIR Plan has encountered the same problems as regular insurance providers in getting policy rate increases approved to provide enough revenue to cover its risk exposure. Approvals take too long and don’t allow the plan to include the cost of reinsurance — which helps insurers absorb losses — or to factor in catastrophe risk models.

“Our rates are never actuarially sound because not all of our expenses are included in that ratemaking,” Roach told lawmakers. The plan must file for rate adjustments every two years, and she said its last increase requested in 2021 should have been “around 70%” but the plan asked for 48.8%. The insurance department approved only a 15.7% increase, she testified.

At the same time, the huge increase in properties needing last-resort coverage has greatly inflated the plan’s risk liability...

Roach said the FAIR Plan has cash on hand “somewhere in the neighborhood of $700 million.”

Your humble blogger does agree that insurance needs regulation--insurers could collect premiums and flee without having to make good on claims--but as usual California, in the name of protecting the consumer, has made it impossible to supply the product, even by the non-profit entity it created.

San Francisco Doesn't Look So Bad

...compared to Oakland. Headline:

Oakland crime surge: This major employer is telling workers to eat lunch on site [bold added]

Kaiser Permanente, the city’s largest employer, sent out a memo last month asking employees to stay in their buildings for lunch and throughout the workday, according to a report from KTVU. The memo also directed workers from out of town not to hold meetings in downtown Oakland...

The new precautions come as Oakland residents reel from a 21% increase in violent crime last year over 2022. Robberies climbed 38%, and burglaries increased 23%. For the second consecutive year, the city logged 120 homicides.

Kaiser Center, where I spent many an evening safely 1975-78.

During the mid-1970's I worked more than half the time in Oakland as a junior auditor for a CPA firm. One of its major clients was the Kaiser family of companies, the most notable at the time being Kaiser Permanente, Kaiser Steel, Kaiser Industries, and Kaiser Engineers. All were headquartered in Oakland.

(Digression: it's impossible to overstate the importance of Henry J. Kaiser to the post-war development of Hawaii, to the shaping of health care in California, and even to the nation's history, when his mass production of Liberty ships helped win the War.)

Because of its large Oakland footprint, not to mention its origins in the East Bay, Kaiser is unlikely to depart that benighted city. Nevertheless, if employee safety continues to be a major concern, Kaiser has to be looking at alternatives.

One wonders if Blue Shield is having regrets about its move to Oakland:

A representative of Blue Shield, the health insurance provider that moved its corporate headquarters from San Francisco to Oakland in 2019, said Friday that the company would offer “various options” to keep employees safe when they come to the office. Among them: ride-hail services, secure parking and security guards.

Blue Shield asks most employees to come to the office at least twice a month, and for executives to show up once a week.

Within the past decade the Raiders, Warriors, and Athletics have abandoned Oakland. As businesses and workers flee, Gertrude Stein's famous 1937 quote is truer than ever.

The Foster City Levee

The levee (under construction in 2021) obscures the Bay from the ground level.

The view of the Bay is nice from the top (Chron)

The $90 million Foster City levee is complete. The Chronicle encourages Bay Area residents to see it, because something like our levee is in their future:

Welcome to Foster City’s new improved levee, fortified by plates of corrugated steel and roughly 6 feet taller than the prior edition. It’s also a rock-solid reminder that as the Bay Area prepares for the likelihood of sea level rise along its shorelines in coming decades, the result often won’t be pretty.

That’s why the $90 million, 6.2-mile project is worth a visit for anyone wondering what the future might hold — in this case, a glum wall with great public access. The original premise of Foster City, proximity to the water, has disappeared from sight where it should pull you close...

There’s a bleak simplicity to the levee, and its intent is clear — protection from whatever the bay and natural forces might dish out in decades to come. As an element in the landscape, though, the impression it leaves is multilayered.

Down on Beach Park Boulevard, what you see is what you get, a long ridge hiding any sense that water lies beyond.

The experience on top? Totally different.

The views of the bridge and bay are alluring, even if the tall thick concrete thwarts any visceral connection to the shoreline.

You can't walk from the path to the water any more

We've written before about the levee project to protect Foster City against "100-year floods." To recap, FEMA designated Foster City as a flood zone in 2014, meaning most homeowners would have to buy flood insurance costing $2,000-$3,000 per year or spend $279 per year to pay for the levee.

We won't know whether the levee was necessary until long after we're gone, but I can't complain. $90 million is a bargain compared to what San Francisco may have to spend.

Picking Up Their Marbles

2018 rubble of the city once known as Paradise.The old
advice to stand under a doorway during an earthquake
seems to have some basis in fact. (Chron photo)

Insurance companies are walking away from California's home and auto business, and the Chronicle editorial board--stop the presses!--sympathizes with the companies: [bold added]

Seven of the state’s top 12 insurers have paused or restricted new business since 2022, and consumer options seem to shrink every day. The latest examples: Farmers Direct Property and Casualty Insurance Co. recently announced plans to end coverage in California and shift most policyholders to its parent company, Farmers — which has itself already limited coverage in the state. Last month, four small insurers said they would stop renewing California policies in 2024...

California is among the states with the nation’s highest cost of living but comparatively low insurance rates. This is partly due to Proposition 103, which established a robust regulatory process that, among other things, requires the insurance commissioner to review and approve any rate changes.

Prop. 103 had the admirable intent of protecting consumers and increasing transparency. But in practice, it has discouraged insurers from raising rates above a 7% threshold that triggers a more extensive and often costly review process. In 2022, it took the California Insurance Department an average of 349 days to approve rate filings, according to an S&P Global Market Intelligence analysis.

This has hindered California’s insurance market from nimbly adjusting rates to match conditions on the ground...

It’s one thing to be wary of “unchecked corporate interests,” as the congressional delegation put it. It’s another to deny that a business needs to make money in order to stay afloat. Over the past 10 years, insurance companies’ direct profit on insurance transactions in California was -6.1%, compared to 4.2% nationwide.

Economics teaches that, if prices are held below the level at which demand meets supply, shortages of the product or service will result. And so it is that California has a shortage of policies and the companies that write them.

(Note that I am not advocating a total elimination of government oversight. Without regulation a business could collect premiums and flee without having to make good on claims.)

San Mateo County Fair: Senior Showcase

The Senior Showcase was one of the busiest exhibits at the San Mateo County Fair. Businesses and government agencies answered questions about assisted living, Medicare and senior health insurance, reverse mortgages, medical equipment, and veterans benefits.

The themes of disability and decrepitude were covered thoroughly, as was the Big "D" by the presence of cemeteries and funeral homes.

I've never noticed an exhibit like this at a fair, probably because I wasn't looking for it. The merry-go-round and Ferris wheel period of my life went by too quickly.

Now It’s Insurance’s Turn

Ever since we became homeowners over 40 years ago we've bought earthquake insurance. Lately the premium on our 4BR house has approached $3,000, and that's with a deductible of around $200,000. In all those years we've never made a claim.

The earthquake premium is 50% higher than a regular homeowners policy, and one would think that insurance companies would be happy to write the business. One would be wrong.

Last month we received notice (right) that our provider won't renew the earthquake policy, so we'll have to start looking.

We should count ourselves lucky that we do have homeowners coverage through July, 2024. Insurance giants Allstate and State Farm have stopped taking new customers.

It was not immediately clear what prompted Allstate’s pullback on new policies. But State Farm, the largest provider of property and casualty insurance in California, made waves in late May by announcing it would stop issuing new homeowner policies in the state due to inflation, wildfires and rising reinsurance costs.

The WSJ blames California regulators for the dwindling number of suppliers:

The nation’s top property and casualty insurer on Friday said it won’t accept new applications for homeowners insurance, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”

In other words, State Farm can’t accurately price risk and increase its rates to cover ballooning liabilities. Other property and casualty insurers, including AIG and Chubb, have also been shrinking their California footprint after years of catastrophic wildfires, which are becoming more common owing to drought and decades of poor forest management.

Wildfires in 2017 and 2018 wiped out two times the underwriting profits that insurers had accrued over the prior 26 years. Yet state Insurance Commissioner Ricardo Lara won’t let insurers raise premiums to account for increasing wildfire risks.

Only California can make insurance companies sympathetic.

Inconvenient Encounter

She said that all her damage was new. I was
skeptical, but it was irrelevant to our case.

Yesterday I got into a very minor fender bender. A 72-year-old lady backed into my car as I was driving by her Toyota sedan in a parking lot. No one was hurt.

She seemed more rattled than I, so I hid my disgust (not at her, but at the situation), and described what we should do. We took pictures of each other’s driver’s licenses, insurance cards, and damage and exchanged phone numbers. Her car (top) fared worse than mine (bottom).

Two hours later she texted me that her insurance company judged that she was 100% at fault and that she would pay for everything. I reported the accident to my own company, which agreed with the assessment.

My car: paint came off.

Not long ago the two parties would have looked at the damage and likely settled off the books. She would have claimed responsibility, and if she gave me $200 cash that would have been the end of it. Neither of us would tell our insurance companies. I probably wouldn't even have bothered to take the car in, just buy some paint and touch up the black spots to prevent rust down the line. It would be up to her to take care of her own car.

In our hyper legalistic society we have a fear of deviating from procedures, and we were both stuck doing it the long way. It will be a hassle to take the car to a body shop, get an estimate, report back to her insurance company, then get the scratches repaired.

This is precisely the sort of incident that will upset my lizard brain for weeks. Rationally, this is just an inconvenience that should be dismissed as immaterial. Let's hope rationality wins.

The Other Dismal Science

(Image from the balance)

I never gave a thought to actuarial science until I went to business school. One of the smartest guys in the class had been an actuary, which I came to understand was too tough a career choice if I had to be as smart as he was and pass difficult, technical exams. (BTW, he's now CFO of a well-known company.)

Digression: so I became a CPA, which meant sitting for two days of exams and working for two years in the audit department of a CPA firm. The latter path was easier, and besides, I've never had to pay anybody to do my taxes.

Apparently, becoming an actuary is even tougher these days: [bold added]

Among people taking at least one exam from the Society of Actuaries—the field’s biggest U.S. credentialing body—15% eventually pass the multiple tests required to become an Associate, one of two designations allowing them to practice. Just 10% pass those and additional tests to become a Fellow, the group’s higher designation, which affords bigger responsibilities and salaries.

It’s such an arduous process that the number of test-takers has been declining in recent years, and the society is making changes to keep candidates from dropping out of the gantlet. It is also adding new “predictive analytics” tests to adjust to the massive amounts of data insurers now have...

There is no limit to how many times a candidate can take the tests. It took one man 50 years to become a Fellow, says Stuart Klugman, an official at the society. The society says a candidate typically takes seven to 10 years to become a Fellow. They must pass 10 exams plus other coursework and requirements.

Every profession is being inundated with oceans of data, and being familiar with data science has become essential to being an actuary. Knowing how to filter, analyze, and model the data is crucial to success. (We noted the importance of predictive analytics three years ago.)

If one is not thorough, knowledgeable about statistics, and honest, one can easily promulgate misinformation by biasing the data sets, selecting or not selecting variables to be analyzed, finding causation in correlation, and not "showing the work" so that results can be replicated.

Why must an actuary be honest? Because as the analyses become more complex, and as the demand for risk assessment (not only for insurance purposes) explodes, there are fewer people who are available to check the work; actuaries must be trusted not to force through results that please the powers that be.

I was glad that I didn't try to become an actuary.

Just for fun: the article presents a sample question involving rudimentary statistics and algebra. Without using a calculator, I could still solve it. (My high school self could have figured it out much more speedily but would also have snickered throughout at the phrase "blue balls.")

“An urn contains 10 balls: 4 red and 6 blue. A second urn contains 16 red balls and an unknown number of blue balls. A single ball is drawn from each urn. The probability that both balls are the same color is 0.44. Calculate the number of blue balls in the second urn.”

This Project is Not Underwater

Foster City levee construction (SF Chronicle image)

Whether or not we agreed with the premise that global warming will endanger coastal cities, we didn't really have a choice in voting for a $90 million levee to be built.

In 2014 FEMA warned that Foster City would be in a flood zone if it didn't build a new levee that would protect it from a 100-year flood. Prior to this Foster City was classified as not being in a flood zone.

Property owners faced a decision in 2017: vote for the levee and pay an additional $279 per year in property tax, or pay flood insurance premiums of at least $2,000 per year.

(Those who didn't have a mortgage would not have been forced to purchase coverage, but these owners were relatively few.)

Your humble blogger resented the obvious nudge--let's call it a shove--but voted for Measure P anyway.

So far the project criteria are being met:

The steel is thick enough to resist not only earthquakes and strong storms — and the pressure of the 100,000 cubic yards of new soil that will be packed in behind the interlocked plates — but to support an addition when and if there’s a need to go higher.

It's been decided, so we may as well look on the bright side: property values may be boosted because buyers will believe that living in Foster City is marginally safer than elsewhere along the Bay; also, construction projects like these never get cheaper; and if sea levels do rise (I give it no more than a 10% chance in my lifetime) then it will have been worth the expense.

California Insurance Mandate: Another Reason to Leave

Tomorrow is a deadline that's largely escaped notice, but to those who are affected the financial penalties are significant. [bold added]

Californians who do not receive health insurance through their jobs or public insurance programs have until Friday to sign up for health coverage for 2020 — or face a tax penalty....California for the first time is requiring all residents to buy insurance or pay a tax penalty of $695 per adult and $347.50 per child under 18, or 2.5% of one’s annual income, whichever is higher.

It's been widely reported that Congress repealed, effective 2019, the individual mandate in the Affordable Care Act (ACA). However, that's technically not what happened; the language for the ACA's mandate was left in place while the penalties for not buying insurance were reduced to zero.

The California penalties are the same as Obamacare's (graphic from visitorscoverage.com)

The elimination of penalties at the Federal level will result in some healthy, uncovered people to choose to remain uninsured. California has reinstated the penalty at the State level and will provide subsidies to push uninsured Californians on to the rolls.

The ACA was a hoped-for step on the way to the progressive dream of universal coverage under a single-payer system. The election of Donald Trump and Republican control of Congress in 2017-2018 not only halted that effort but partially reversed it.

California Democrats, which hold the governorship and super-majorities in the state legislature, tried to pass universal health insurance in 2017. But that effort died in committee in 2017 primarily due to cost estimates in the hundreds of $billions, and no serious attempt has been made to resurrect the bill.

But back to the California version of the ACA mandates and penalties: we'll see if the populace views the benefits as being worth the costs, or whether some productive individuals will just have another reason to leave the formerly Golden State.

My betting is on the latter.

An Impossible Task

A bankruptcy judge has ruled that PG&E must compensate the fire victims for damages caused by its equipment. The judge's ruling seems clear-cut to us non-lawyers, but an unfamiliar legal term slowed down this reader. [bold added]

Judge Dennis Montali said Wednesday the principle of inverse condemnation applies to PG&E, rejecting an argument that the utility was attempting to invoke to limit the amount it owes for homes and businesses destroyed by the fires...

The idea behind the doctrine of inverse condemnation is that operators of public utilities should have to pay for damage done to private property, whether the utilities are public or owned by investors, as PG&E is.

PG&E argued that the doctrine is unfair because it won’t be able to raise electric rates to cover the cost of wildfire damages. Judge Montali said the utility is speculating and doesn’t know what state regulators would say if it asked for a rate increase and proved its operations were safe.

What is "inverse condemnation? Wikipedia [bold added]

Inverse condemnation is a term used in the law to describe a situation in which the government takes private property but fails to pay the compensation required by the 5th Amendment of the Constitution, so the property's owner has to sue to obtain the required just compensation. In some states the term also includes damaging of property as well as its taking. In inverse condemnation cases the owner is the plaintiff and that is why the action is called inverse – the order of parties is reversed, as compared to the usual procedure in direct condemnation where the government is the plaintiff who sues a defendant-owner to take his or her property.

Bloomberg explains PG&E's legal argument:

Inverse condemnation usually applies to government agencies that damage private property while providing a public service. But courts in the Golden State have ruled that the doctrine also can be used against utilities, since they’re authorized by the state to provide a vital public service.

That’s why California utilities can be held liable for damages from fires sparked by their equipment, even if they followed all of the state’s stringent safety rules. They can try to pass on those costs to ratepayers, but there’s no guarantee such efforts will get approved by the state’s California Public Utilities Commission.

The arcane becomes a little clearer. PG&E followed the safety rules dictated by the Public Utilities Commission, yet inverse condemnation makes it liable for damages as if it were a public agency. However, PG&E is not the government and so can't raise taxes to pay for its debts. It must apply for a rate increase to be approved by the PUC. Just try getting that through when everyone seems to want the utility's blood, if not its dismemberment.

As we've said before, under the current constraints running PG&E is an impossible task.

Related--given that PG&E is held liable for wildfires but not power shutdowns, its behavior is perfectly understandable: PG&E Refuses to Get Burned--Under the utility’s incentive structure, blackouts make sense.

The Fire Next Time

California is inching its way toward a program for mitigating future damages by utility-caused wildfires. [bold added]

Paradise, 2018 (Chron photo)

[Gov. Gavin] Newsom has proposed extending a Department of Water Resources charge that was originally imposed because of the energy crisis in the early 2000s. The charge could be extended for more than a decade, netting as much as $10.5 billion.

Under the first financing option, known as a “liquidity fund,” the state would be able to provide a line of credit for utilities to pay wildfire claims. But the utilities would have to reimburse the fund.

The second option would work more like insurance, paying out claims directly. If all three utilities [Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric] participated, they would match the $10.5 billion charge by providing $7.5 billion up front and annual payments of $300 million to finance the rest, all with investor — as opposed to ratepayer — money. The insurance fund, which would be managed by the state, could take other steps — including buying reinsurance — to bring its total capacity up to about $40 billion, according to the governor’s office.

Ratepayers, taxpayers, existing bondholders, and stockholders will all have to contribute to the fund. In the 1980's PG&E stock was one of our first investments, using Peter Lynch's investment principles. We got out 15 years ago when the energy industry began to change, and it didn't look like PG&E had a handle on what was happening.

By the way, in the stampede toward solar energy the fire danger may be increasing due to higher geographic dispersion and more exposure to the atmosphere than a traditional power plant. Articles:

Fire Concerns with Roof-Mounted Solar Panels

(Photo from blfirerisk)

One of the many dangers to solar panels is how the panel and its mounting system impact the combustibility of the overall roof system. Some solar panels, for example, include a backing of highly combustible plastic.

In laboratory-based fire tests of roof assemblies, the maximum allowable fire spread is between approximately 20 and 40 ft2 (1.9 and 3.7 m2), depending on whether an A, B or C rating is desired. In actual roof fires with roof-mounted solar panels, fire damage has involved areas of between 1,000 and 183,000 ft2 (93 and 17,000 m2). In the most extreme case the fire spread to the inside and destroyed the entire building.

‘Avian Incident’ Knocks Out 84% of Massive California Solar Farm

An “avian incident” sparked a fire at one of California’s biggest solar farms, affecting 1,200 acres and knocking out 84% of the California Valley Solar Ranch’s [250 megawatt] generating capacity.

A Huge Solar Plant Caught on Fire, and That's the Least of its Problems

On Wednesday, May 25, [2016] Ivanpah's operator, NRG energy, confirmed the fire was indeed caused by mirrors that did not track the sun properly, which focused sunlight onto the wrong part of the tower [in San Bernardino County].

That Paradisiacal Day

New gene-based treatments for cancer show immense promise----and have immense costs:

Novartis AG listed its newly approved cell therapy for cancer at $475,000, while Gilead Sciences Inc. priced its rival drug at $373,000.

But the price of the drugs is just the beginning, hospitals and insurers say. Administering these therapies can add hundreds of thousands of dollars to the tab, including lengthy hospital stays and use of other services and medicines.

(WSJ graphic)

The Wall Street Journal estimates that the full cost of these state-of-the-art treatments ranges between $464,000 and $968,000. For rich people and their families there's little question that most, if not all, will opt for the treatment even if success is not guaranteed.

However, many cancer patients either won't have the money or will choose not to diminish their estate by up to a million dollars to extend their lives for an uncertain period.

Cancer newly afflicts over a million Americans each year:

In 2018, an estimated 1,735,350 new cases of cancer will be diagnosed in the United States and 609,640 people will die from the disease.

It will be years before the costs will have come down sufficiently to make a dent in the number of cancer deaths. Until then, dear reader, diet, exercise, and get regular check-ups so that you will make it to that paradisiacal day.

Knowing Myself

Insurers have a different marketing approach.

Companies like to say that their products make people feel good about themselves, but I actually spend a good chunk of personal money (and time) out of fear. Auto and fire insurance are legally required, and while medical insurance used to be mandatory one would be awfully risk-seeking to go without. And ever since we were in our 20's we've bought life and earthquake insurance.

Concerning time, I spend more hours than I care to admit on security for electronic devices and communications and pore through credit card and phone bills and bank statements to look for strange activity.

"The unexamined life is not worth living," said the philosopher. Yes, basically I quake (!) in fear; unfortunately Socrates had no recommendations for that.