Expedia cuts 3,000 jobs, including 500 at new Seattle HQ — read the internal email to employees

BY TAYLOR SOPER on February 24, 2020 

Expedia Chairman Barry Diller. (Expedia Photo)

Expedia Group is laying off 12 percent of its workforce, about 3,000 employees, in an effort to “streamline and focus” the Seattle-based online travel giant under chairman Barry Diller following the ouster of its CEO and CFO late last year.

In an email sent to staff Monday, unnamed executives from Expedia Group’s “Travel Leadership Team” said the company had been “pursuing growth in an unhealthy and undisciplined way,” echoing comments made by Diller earlier this month following its fourth quarter earnings report.

Expedia said at the time that it was targeting $300 to $500 million of annual cost savings, but hadn’t previously announced explicit plans for job cuts.

The layoffs come across the company and globe. About 500 people will be let go in Seattle, where Expedia recently moved to a new 40-acre waterfront campus and employs more than 4,000 people. Expedia said it will eliminate certain projects and activities, and reduce the use of vendors and contractors. It will provide impacted workers with severance packages that include extended healthcare.

“Moving forward, we will exert more discipline in setting priorities and allocating resources, simplify our business processes and inter-dependencies, raise the bar on performance standards, and demonstrate and demand accountability for results,” Expedia leaders wrote in the internal email, which you can read in full below.

A view of a skybridge — with windows that actually slide open — that looks west toward Puget Sound at Expedia’s new headquarters in Seattle. (GeekWire Photo / Kurt Schlosser)

Expedia employed 25,400 people as of Dec. 31, up from 24,500 employees at the end of 2018. The company posted $12 billion in revenue in 2019, up 8 percent, and profits of $565 million. It has 351 job openings on its careers page.

The cuts were not connected to the coronavirus outbreak, though Expedia said earlier it expects a $30 to $40 million loss in the current quarter due to the disease.

Expedia expects to record $135 million to $185 million in total pre-tax charges this year related to the layoffs, according to a SEC filing.

Diller and vice chairman Peter Kern took over day-to-day operations at Expedia after the abrupt resignation of former CEO Mark Okerstrom and CFO Alan Pickerill on Dec. 4.
Barry’s back: Expedia chairman Barry Diller opens up on hour-long earnings call — here’s what he said

At the time, Diller cited a strategy disagreement between the former top executives and the board over efforts to unify the company’s brands and technology. Expedia Group includes brands and sites such as Vrbo, Travelocity, Orbitz, HomeAway and many others, in addition to the flagship Expedia.com. The reorganization effort led by Okerstrom aimed to unify the company’s brands and technology, and help Expedia take better advantage of the larger company’s scale.

The executive shakeup came a little more than two years after Okerstrom was promoted to the CEO role, succeeding Dara Khosrowshahi after he left to become Uber’s top leader.

“My passion and outlook for the future of Expedia Group are as great today as they were two decades ago when we made our first investment in online Travel,” Diller said in a statement Monday. “I am confident that simplifying our business and clarifying our focus by making these difficult changes, our teams can get back to working on the projects and priorities that make the most sense for us, our customers, and our partners.”

Diller was more blunt on Expedia’s earnings call last month, describing the company as a “bloated organization.”

“We’d somewhat become a kind of consultant-led and wildly complex business,” he said.

Diller, the former Paramount Pictures chairman, started the Fox television network and USA Broadcasting. He oversees a wide range of online brands as chairman of the IAC media and internet company. Diller made his first investment in Expedia in 2001 and remains its chairman.

He’s spent the past two months “on the ground” with Expedia leadership, learning the ins and outs of the business, and figuring out what needs to change.

The 78-year-old said he recently heard that for employees at Amazon in Seattle the work-life balance mantra was “all work and no life,” whereas at Expedia it was “all life and no work.”

“Now that’s an enormous exaggeration. We’ve got wonderful people in the business and this is not damning our employees,” Diller said on the call. “But for several years we really lost clarity and discipline. So we’re changing a great deal. We’re stopping this too large complexity. We’re simplifying our strategy. We’re stopping doing dumb things and starting to do what we think are good things.” 

Expedia Vice Chairman Peter Kern; Expedia Chairman Barry Diller; and Ariane Gorin, president of Expedia Business Services, chat on stage at a company Town Hall meeting in December. (Expedia Photo)

Kern, who was also on the call, added that “we’ve seen a fair bit of wasted energy and calories going into things that may not have promise, and may not get us to the promised land.”

Some of the planned changes include getting all of the company’s data on one platform and aggressively growing its direct-to-consumer business.

“We have historically taken a brand-by-brand approach and now we are taking a market-by-market approach,” said Kern.

Diller said Expedia is not doing a CEO search but indicated that the current leadership structure is temporary. “It’s not going to last beyond 2020,” he said on the earnings call.

Expedia employees began moving into the company’s new $900 million headquarters this past October, relocating from its old office in Bellevue, Wash. The company will not sublease space at the sprawling new complex and the layoffs won’t affect remaining construction at the former home of biotech giant Amgen.

Expedia stock sank after the company missed earnings expectations in November. Shares have risen since the executive swap in December and rose again after the fourth quarter earnings report.

But shares were down nearly 7 percent Monday amid a stock market drop on coronavirus fears. Expedia expects that the disease will impact the company beyond the current quarter. United Airlines today withdrew its 2020 profit forecast due to uncertainty with coronavirus.

Read the full email sent to staff below.


Team Expedia Group –

Following our disappointing 2019 business performance and our change in senior-most management, the Travel Leadership Team has spent the last few months determining a better way forward. A major reason for our management change was the deep belief from Barry, Peter, and the Board that while travel remains rich with opportunity, our Company needed a fresh and forward look at clarifying our strategy and simplifying our operations.

After consulting with leaders around the globe, we recognize that we have been pursuing growth in an unhealthy and undisciplined way. The accountability for our results lies with the Travel Leadership Team, and we are committed to fundamental changes in our approach to improve success. Moving forward, we will exert more discipline in setting priorities and allocating resources, simplify our business processes and inter-dependencies, raise the bar on performance standards, and demonstrate and demand accountability for results.

Today, we are announcing our intent to reduce and eliminate certain projects, activities, teams, and roles to streamline and focus our organization. In geographies where we have clarity, we will start implementing these intended changes this week by notifying individuals. In others, we will be initiating consultations with employees and their representatives to discuss our proposals.

Transitions like this are difficult as the impact is felt by teammates, colleagues, and friends we have known and partnered with through ups and downs. For those who will be leaving, we thank you for your many contributions to Expedia Group and wish you safe travels as you find your next opportunity. For the many who are continuing forward, travel is intensely competitive and demands our very best leadership, innovation, collaboration, and execution to win. This is what we are asking of you and demanding of ourselves, along with the day-to-day discipline that will make us a more nimble and thriving company for years to come.

Great tech companies have walked this same path in order to come back stronger and more competitive than ever. We have restarted the journey and bringing the world within reach is in our hands. Let’s redouble our efforts for our customers, our partners, our investors, and ourselves to make Expedia Group the successful, growing, and winning company we can all be proud of.

The Travel Leadership Team

Taylor Soper is GeekWire's managing editor, responsible for coordinating the newsroom, planning coverage, and editing stories. A native of Portland, Ore., and graduate of the University of Washington, he was previously a GeekWire staff reporter, covering beats including startups and sports technology. Follow him @taylor_soper and email taylor@geekwire.com.

UPDATED

This is the math that made Katherine Johnson — one of NASA’s “Hidden Figures” — a legend

Johnson, who died Monday at age 101, did groundbreaking work in helping return astronauts safely to Earth.

By Brian Resnick@B_resnickbrian@vox.com Updated Feb 24, 2020

NASA mathematician Katherine Johnson received the Presidential Medal of Freedom from President Barack Obama in 2015. Nicholas Kamm/AFP via Getty Images

Katherine Johnson, who died Monday at age 101, was a pioneer in many ways: She was an early employee of NASA (and even worked at the agency that predated it), and an African American woman working in a field hugely dominated by white men. She was also a pioneer in that her work helped put humans in space, and returned them safely home to Earth.

Before rising to pop-culture fame with the book and movie Hidden Figures, before being awarded the Presidential Medal of Freedom, Johnson created and calculated some extremely important equations to make America’s adventures in spaceflight successful. As Bill Barry, NASA’s chief historian, told the Washington Post in an obituary: “If we go back to the moon, or to Mars, we’ll be using her math.”

Here’s what she did, and why she’ll be remembered for a long time.
NASA gave Johnson landing zones. She figured out how to get spacecraft there.

In the 1960s, NASA had figured out how to launch a human being aboard a rocket into space. That was an extremely impressive feat. But equally hard was getting that human to land safely back on Earth.

One of the trickiest bits: the spacecraft couldn’t just land anywhere. Were an astronaut to touch down in a desolate corner of the ocean, without any land in sight, it could presumably take days to be rescued (if rescued at all).

This means that Johnson needed to calculate the entire trajectory of the flight — where it started, how fast it went, and where it would land. The missions to send humans to space and back had to be precise and choreographed. Johnson’s math enabled that choreography.

She best explained her job in her own words: “Early on, when they said they wanted the capsule to come down at a certain place, they were trying to compute when it should start,” Johnson said in a 2008 NASA interview. “I said, ‘Let me do it. You tell me when you want it and where you want it to land, and I’ll do it backwards and tell you when to take off.’ That was my forte.”

And so, she calculated the trajectory for Alan Shepard’s historic 1961 flight that put the first American in space, and landed him in the Atlantic Ocean.

But greater challenges were to come. Shepard visited space, but he was not put into orbit around the Earth. He went up, and came down. Flying, essentially, in a simple parabolic arc.

Orbit — having the spacecraft encircle the Earth — is harder.

Katherine Johnson at NASA’s Langley Research Center in 1980. NASA/Donaldson Collection/Getty Images

In orbit, not only is the spacecraft moving at 17,000 mph, the Earth below is also moving, rotating on its axis.

Here, Johnson’s challenge was the same. She had to take a landing zone for an orbiting spacecraft, and calculate backwards: figuring out the math for how the spacecraft would arrive there.

She did this work to prepare for Astronaut John Glenn’s historic 1962 mission when he became the first American to orbit the globe.

This work meant juggling a lot of different variables: where the rocket took off, where it entered obit, how quickly it was moving in orbit, the rotation of the Earth beneath it, the angle at which it ought to reenter the Earth, and the location of the splashdown.

In figuring it out, she became the first woman to ever co-author a research paper at NASA. Entitled “Determination of Azimuth Angle at Burnout for Placing a Satellite Over a Selected Earth Position,” the paper — with co-author Ted Skopinski — basically explains where an orbiting spacecraft should fire its reentry rockets to land on a particular portion of the Earth.

Famously, before Glenn took off on his first orbital spaceflight, he requested Johnson double-check all the orbital math of the mission by hand — being slightly distrustful of the new-fangled electronic computers that NASA had installed to do the work.

Glenn’s flight, and the math making it happen, was the subject of the 2016 film Hidden Figures, in which Johnson, as well as other African American women working at NASA, are given the spotlight amid a workforce that’s largely white and male.

But Johnson’s work didn’t stop there. She worked on the Apollo program, which brought humans to the moon for the first time: Her calculations were critical in getting the lunar lander to meet back up with the command module in orbit around the moon. She later worked on the space shuttle program, as well as satellites, before retiring in 1986. Today, there’s a computational research facility at NASA’s Langley campus named after her.
Johnson’s celebrity came late in life, but it’s also important

Her mathematics is an important legacy. But so is the legacy of her recent celebrity. For too long, Johnson’s contributions to the space program were unknown by the public. The story of America’s success in the space race has largely been told through the stories of the men at NASA. But Johnson was there, too. And it’s important to remember that.

The public needs more diverse role models in science. “When you think about what a scientist means, you probably think of an Einstein figure — a man in a lab or at a chalkboard with fuzzy, unkempt hair,” as my Vox colleague Julia Belluz has written. “When you think of a scientist’s voice, you might conjure Neil deGrasse Tyson or Carl Sagan. With these voices and images so pervasive in our culture, it’s easier to associate ‘scientist’ with ‘man’ — and in particular, ‘white man.’”

Women scientists like Vera Rubin, Nettie Stevens, Henrietta Leavitt, Rosalind Franklin, Johnson and so many others ought to be just as famous. Today, too many women — and minorities — still feel unwelcome in many corners of science. Johnson’s legacy shows them they have every right to be there.

Katherine Johnson, ‘hidden figure’ at NASA during 1960s space race, dies at 101

When Katherine Johnson began working at the National Advisory Committee for Aeronautics in 1953, she was classified as “subprofessional,” not far outranking a secretary or janitor.

© Provided by Thomson Reuters, LLC 2.

THE WOMEN BEHIND THE MISSION: NASA research mathematician Katherine Johnson wrote the calculations for the Apollo 11 trajectory to the moon. She was one of just a few African-American women hired to work as "human computers" to check and verify engineer calculations at the National Advisory Committee for Aeronautics (NACA), the agency that preceded NASA. Johnson was a key contributor to several space milestones. She wrote the trajectory for Alan Shepherd's flight in 1961, the first by an American in space, and the verification of calculations for John Glenn's 1962 orbit, the first by an American. She was awarded the Presidential Medal of Freedom in 2015 and her life story was turned into the 2016 film "Hidden Figures." NASA/Handout via REUTERS

Hers was a labor not of scheduling or cleaning but rather of mathematics: using a slide rule or mechanical calculator in complex calculations to check the work of her superiors — engineers who, unlike her, were white and male.

Her title, poached by the technology that would soon make the services of many of her colleagues obsolete, was “computer.”

Mrs. Johnson, who died Feb. 24 at 101, went on to develop equations that helped the NACA and its successor, NASA, send astronauts into orbit and, later, to the moon. In 26 signed reports for the space agency, and in many more papers that bore others’ signatures on her work, she codified mathematical principles that remain at the core of human space travel.

She was not the first black woman to work as a NASA mathematician, nor the first to write a research report for the agency, but Mrs. Johnson was eventually recognized as a pathbreaker for women and African Americans in the newly created field of spaceflight.

Like most backstage members of the space program, Mrs. Johnson was overshadowed in the popular imagination by the life-risking astronauts whose flights she calculated, and to a lesser extent by the department heads under whom she served.

She did not command mainstream attention until President Barack Obama awarded her the Presidential Medal of Freedom — the country’s highest civilian honor — in 2015. The next year, her research was celebrated in the best-selling book “Hidden Figures” by Margot Lee Shetterly and the Oscar-nominated film adaptation starring Taraji P. Henson, Octavia Spencer and Janelle Monáe.


NASA mathematician portrayed in 'Hidden Figures' breaks down how she helped astronauts


Mrs. Johnson was “critical to the success of the early U.S. space programs,” Bill Barry, NASA’s chief historian, said in a 2017 interview for this obituary. “She had a singular intellect, curiosity and skill set in mathematics that allowed her to make many contributions, each of which might be considered worthy of a single lifetime.”

A math prodigy from West Virginia who said she “counted everything” as a child — “the steps to the road, the steps up to church, the number of dishes and silverware I washed” — Mrs. Johnson worked as a schoolteacher before being hired as a computer at the NACA’s flight research division, based at Langley Research Center in Hampton, Va.

The agency was established in 1915 and began enlisting white women to work as computers 20 years later. Black computers, assigned mainly to segregated facilities, were first hired during the labor shortage of World War II. Mrs. Johnson was one of about 100 computers, roughly one-third of whom were black, when she joined the NACA.

The movie “Hidden Figures” took occasional liberties with fact to emphasize the indignities of segregation. Mrs. Johnson, played by Henson, is forced to run half a mile to reach the “colored” bathroom. In reality, Mrs. Johnson said, she used the bathroom closest to her desk.

“I did not feel much discrimination, but then that’s me,” she recalled in a 1992 NASA oral history. When she detected hints of racism, such as when a white colleague stood up to leave as soon as she sat down, she said, she tried not to respond. “I don’t wear my feelings on my shoulder. So I got along fine.”

Mrs. Johnson had a bachelor’s degree in mathematics and spent her early career studying data from plane crashes, helping devise air safety standards at a time when the agency’s central concern was aviation. Then, in October 1957, the launch of the Soviet satellite Sputnik thrust the space race into full tilt.

Mrs. Johnson and dozens of colleagues wrote a 600-page technical report titled “Notes on Space Technology” outlining the mathematical underpinnings of spaceflight, from rocket propulsion to orbital mechanics and heat protection.

One of rocket science’s most vexing challenges, they soon realized, was calculating flight trajectories to ensure that astronauts returned safely to Earth, splashing down in the ocean reasonably close to a Navy vessel waiting to pluck them from the water.

For astronauts such as Alan B. Shepard Jr., who became the first American in space when Freedom 7 launched on May 5, 1961, the math was relatively straightforward. Shepard’s craft rose and fell, like a champagne cork, without entering orbit.

Calculating the trajectory for an orbital flight, such as the one to be undertaken by Marine pilot John Glenn in 1962, was “orders of magnitude more complicated,” said Shetterly, the “Hidden Figures” author.

“I said, ‘Let me do it,’ ” Mrs. Johnson recalled in a 2008 NASA interview. “You tell me when you want it and where you want it to land, and I’ll do it backwards and tell you when to take off.”

Mrs. Johnson’s findings, outlined in a 1960 paper she wrote with engineer Ted Skopinski, enabled engineers to determine exactly when to launch a spacecraft and when to begin its reentry. The paper, “Determination of Azimuth Angle at Burnout for Placing a Satellite Over a Selected Earth Position,” marked the first time a woman wrote a technical report in NASA’s elite flight research division.

“You could work your teeth out, but you didn’t get your name on the report,” she said in the 1992 oral history, crediting her breakthrough to what she described as an assertive personality. When a superior said that she could not accompany male colleagues to a briefing related to her work, Mrs. Johnson asked, “Is there a law that says I can’t go?” Her boss relented.

Mrs. Johnson’s handwritten calculations were said to have been more trusted than those performed by mainframe computers. A short time before Glenn launched into space, he asked engineers to “get the girl to check the numbers.”

“All the women were called ‘the girls,’ ” said Barry, “and everyone knew exactly which girl he was talking about.” Mrs. Johnson, who was then 43, spent a day and a half checking the trajectory calculations made by the IBM computer before giving the go-ahead to Glenn, who became the first American astronaut to orbit the Earth.

In a subsequent report, Mrs. Johnson took her calculations one step further, working with several colleagues to determine how a spacecraft could move in and out of a planetary body’s orbit. Her formulas were crucial to the success of the Apollo lunar program and are still in use today, Barry said. “If we go back to the moon, or to Mars, we’ll be using her math.”
Modest beginnings

Katherine Coleman was born in White Sulphur Springs, W.Va., then a town of about 800, on Aug. 26, 1918. Her mother was a former teacher. She credited her proclivity for mathematics to her father, a farmer who had worked in the lumber industry and could quickly calculate the number of boards a tree could produce.

By 10, Katherine had finished all the coursework offered at her town’s two-room schoolhouse. Joined by her mother and her three older siblings, she moved to Institute, a suburb of the state capital, to attend the laboratory school of West Virginia State College while her father remained at home to support the family.

Mrs. Johnson went on to study at West Virginia State, a historically black college, with plans to major in French and English and become a teacher. A mathematics professor — W.W. Schiefflin Claytor, widely reported to be the third African American to receive a doctorate in math — persuaded her to change fields.

Mrs. Johnson later recalled his saying: “You’d make a good research mathematician, and I’m going to see that you’re prepared.” She had never heard of the position before. “I said, ‘Where will I get a job?’ And he said, ‘That will be your problem.’ ”



© NASA NASA research mathematician Katherine Johnson is photographed at her desk at NASA Langley Research Center with a globe, or "Celestial Training Device," in 1962.After graduating in 1937, at 18, she taught at a segregated elementary school in Marion, Va., a town near the North Carolina border.

Three years later, she was one of three black students selected to integrate West Virginia University’s graduate programs. She dropped out of her master’s in mathematics program after one semester to start a family with her husband, James Goble, a chemistry teacher. She later returned to teaching, in West Virginia, before a brother-in-law suggested she apply for a computer position at Langley.

Goble died of cancer in 1956, and three years later Mrs. Johnson married James Johnson, an Army artillery officer. He died in 2019.

Mrs. Johnson’s death was confirmed by lawyer and family representative Donyale Y.H. Reavis, who said she died at home in Newport News, Va., but did not cite a specific cause.

Survivors include two daughters from her first marriage, Joylette Hylick of Mount Laurel, N.J., and Katherine Moore of Greensboro, N.C.; six grandchildren; and 11 great-grandchildren. Her daughter Constance Garcia died in 2010.

Mrs. Johnson was invited to move to Houston in the mid-1960s to help establish what is now the Lyndon B. Johnson Space Center, but she declined the offer to maintain her family’s ties to the Hampton community, Shetterly said.

At Langley, where she retired in 1986, she performed calculations that determined the precise moment at which the Apollo lunar lander could leave the moon’s surface to return to the command module, which remained in orbit high above. She also contributed to NASA’s space shuttle and Earth satellite programs.

After the release of “Hidden Figures,” Mrs. Johnson played down the importance of her role in the early years of the space program. “There’s nothing to it — I was just doing my job,” she told The Washington Post in 2017.

“They needed information, and I had it, and it didn’t matter that I found it,” she added. “At the time, it was just a question and an answer.”

harrison.smith@washpost.com

Read more:

‘Hidden’ no more: Katherine Johnson, a black NASA pioneer, finds acclaim at 98

The stars of ‘Hidden Figures’ are now immortalized on street sign

The ‘Hidden Figures’ stars on how working at NASA in the 1960s is a little like Hollywood
© NASA An undated photo of Mrs. Johnson at NASA.

‘Human computer’ Katherine Johnson dies at 101

She was the inspiration for the movie Hidden Figures and calculated the flight paths for NASA’s early missionsBy Justine Calma@justcalma Feb 24, 2020

Photo credit should read MARK RALSTON/AFP via Getty Images

NASA mathematician Katherine Johnson, whose calculations helped get the first Americans to space and back safely, died today at the age of 101. Among her many accomplishments, she completed the trajectory analysis for Alan Shepard’s 1961 suborbital flight, which was the first time the US sent a human into space.

HER WORK PROPELLED MANY OF AMERICA’S BREAKTHROUGHS IN SPACE EXPLORATION

Johnson’s work over 33 years propelled many of America’s breakthroughs in space exploration, including Neil Armstrong’s “giant leap for mankind” on the Moon. But the contributions she made weren’t recognized until decades later. Johnson was made to work in a segregated wing with other black women mathematicians when she started at NASA predecessor The National Advisory Committee for Aeronautics (NACA) in 1953. Yet, her work was so integral to NASA’s early missions that John Glenn asked her to double-check computer calculations for his flight before becoming the first US astronaut to orbit Earth in 1962.

“Ms. Johnson helped our nation enlarge the frontiers of space even as she made huge strides that also opened doors for women and people of color,” NASA administrator Jim Bridenstine said in a statement. “Her dedication and skill as a mathematician helped put humans on the Moon and before that made it possible for our astronauts to take the first steps in space that we now follow on a journey to Mars.”

Johnson’s groundbreaking contributions were recognized in 2015 when she received the Presidential Medal of Freedom, the highest honor bestowed on civilians, from President Barack Obama. The bestselling-book-turned-Oscar-nominated-movie Hidden Figures brought Johnson’s legacy to the big screen in 2016, in which she was portrayed by Taraji P. Henson. NASA also named a building in her honor in 2017.

In an interview, she was asked what she’d tell young engineers working in the building that bears her name. “Do your best, but like it,” Johnson said. “If you don’t like it, shame on you.”

“I like work. I like the stars and the stories we were telling and it was a joy to contribute to the literature that was going to be coming out. But little did I think it would go this far,” Johnson said in the 2017 interview.

“If you think your job is pressure-packed, [Johnson’s] meant that forgetting to carry the ‘1’ might send somebody floating off into the solar system,” Obama said when Johnson received the Presidential Medal of Freedom. “Katherine was a pioneer who broke the boundaries of race and gender, showing generations of young people that everyone can excel in math and science and reach for the stars,” he said.

The fight over whether religion is a license to discriminate is back before the Supreme Court

Fulton v. City of Philadelphia is likely to deal a severe blow to LGBTQ rights.

By Ian Millhiser Feb 25, 2020
 

Supreme Court Justices Neil Gorsuch (L) and Brett Kavanaugh attend the State of the Union address in the chamber of the US House of Representatives on February 4, 2020. Mario Tama/Getty Images


The Supreme Court announced on Monday that it will hear Fulton v. City of Philadelphia, a hugely consequential case that could fundamentally change the rules governing when people with religious objections to a law may ignore that law.

Fulton asks whether religious organizations that contract with Philadelphia to help place foster children in homes have a First Amendment right to discriminate against same-sex couples. It is also the first case the Supreme Court will hear where a religious group claims the right to violate a ban on discrimination since Justice Brett Kavanaugh’s confirmation gave reliably conservative Republicans a majority on the Supreme Court.

The plaintiffs in Fulton include Catholic Social Services (CSS), an organization that used to contract with the city to help find foster placements for children but that effectively lost that contract after it refused to comply with the ban on discrimination. CSS claims it has a First Amendment right to continue to do business with the city even if it refuses to comply with the city’s anti-discrimination rules.

Fulton is a significant escalation from most of the Supreme Court’s previous cases asking when religious people may seek an exemption from the law. In Masterpiece Cakeshop v. Colorado Civil Rights Commission (2018), for example, the Supreme Court considered whether the law could prevent a private business owner from discriminating against a same-sex couple (the Court ruled in favor of the business owner, but on narrow grounds).

Fulton, by contrast, is a case about government services. The city of Philadelphia decided to contract with private organizations to help it provide a public service — placement of children in foster homes. If the city chose to provide this service entirely in house, it could certainly refuse to discriminate against same-sex couples. The question in Fulton is whether the city loses much of its power to control its own public services when it contracts some of those services to religious entities.

A decision for the plaintiffs in Fulton, moreover, could have implications that stretch well beyond foster care. The Fulton case involves an especially sympathetic plaintiff: a Catholic organization that helps vulnerable children find homes. But if the Supreme Court rules in favor of that plaintiff, it could potentially establish that a wide range of government contractors, from social service providers to military contractors, may discriminate if the company’s owners claim a religious justification for that discrimination.


On top of all that, the Fulton plaintiffs ask the Supreme Court to reconsider a seminal 1990 decision limiting when religious objectors may refuse to follow the law. Fulton could also lead to a massive expansion of the Court’s decision in Burwell v. Hobby Lobby (2014), which held, for the first time, that religious objectors may sometimes use those objections to limit the rights of third parties.

In other words, Fulton could be the next big blow in the fight between religious conservatives who seek broad legal exemptions, and laws seeking to ban conduct such as anti-LGBTQ discrimination without exception.
A brief history of the First Amendment’s free exercise clause

The First Amendment prevents the government from “prohibiting the free exercise” of religion. In Sherbert v. Verner (1963), the Supreme Court established that this free exercise clause prohibits the government from enforcing laws that impose a “substantial infringement” on someone’s religious beliefs unless the government’s reasons for doing so are supported by a “compelling state interest.”

Those last three words — “compelling state interest” — will be familiar to anyone who has studied American constitutional law. The Supreme Court also requires laws that discriminate on the basis of race to overcome a “compelling interest” test. When the Court uses the words “compelling interest,” it typically signals that the Constitution applies the highest possible safeguards against a particular kind of government action. Most laws that are subjected to a “compelling interest” analysis are struck down.

Yet something odd happened after the Supreme Court decided Sherbert. While the courts claimed they were applying the same “compelling interest” test in cases involving race discrimination and in cases involving religious objectors, the numbers do not bear this out. A 1992 study by James E. Ryan, now the president of the University of Virginia, found that federal courts of appeals heard 97 free exercise cases applying the “compelling interest” test between 1980 and 1990, and those courts rejected 85 of these cases.

Subsequent research by UCLA law professor Adam Winkler showed that this pattern continued into the next decade. Between 1990 and 2003, Winkler found, federal courts applying the compelling interest test upheld only 22 percent of free speech restrictions and 27 percent of laws that engaged in discrimination — but they upheld 59 percent of “religious liberty burdens.” These data indicate that “religious liberty” plaintiffs are far less likely to prevail than other parties who challenge the government’s actions under a “compelling interest” test.

A likely explanation for this disparity is that courts found the notion that any religious person could be exempt from nearly any law unworkable, so they were reluctant to read the free exercise clause too expansively. By 1990, this sense, that applying a strong “compelling interest” standard to religion cases is unworkable, won a majority of the votes on the Supreme Court.

“To make an individual’s obligation to obey such a law contingent upon the law’s coincidence with his religious beliefs, except where the State’s interest is ‘compelling,’” Justice Antonin Scalia wrote for the Court in Employment Division v. Smith (1990), is “permitting him, by virtue of his beliefs, ‘to become a law unto himself.’” Such an outcome, according to Scalia, “contradicts both constitutional tradition and common sense.”

Instead, Scalia wrote, religious people have to follow the same “neutral law[s] of general applicability” that everyone else must follow. The law may not single out particular religious groups for inferior treatment. But so long as a law treats people of all religious beliefs exactly the same, the law is constitutional. Philadelphia may ban anti-LGBTQ discrimination so long as the ban applies equally to religious people and nonreligious people alike.

Smith, however, was not a beloved decision. In 1993, Congress enacted the Religious Freedom Restoration Act (RFRA) to “restore the compelling interest test as set forth in Sherbert” and in a similar Supreme Court decision. RFRA, it should be noted, applies only to federal laws that burden religious objectors. Smith remains good law when a state is accused of violating the free exercise clause.

Moreover, as Winkler’s research suggests, RFRA did not cause the courts to fundamentally rethink their religion decisions — at least not right away. Religious liberty plaintiffs were more likely to win their cases after RFRA than they were before it was enacted, but most of these plaintiffs still lost. Most notably, the courts typically hewed to the view that a religious objection may not be used to undercut the rights of a third party.

But all of that changed with the Court’s 2014 decision in Hobby Lobby. Hobby Lobby held that certain companies, whose owners object to some forms of birth control on religious grounds, may refuse to obey a federal rule requiring them to provide birth control coverage to their employees. In effect, that meant that the “religious liberty” rights of the business owners trumped the right of the workers to have birth control coverage.

The Court’s decision in Hobby Lobby, moreover, suggests that courts should apply the same “compelling interest” test in RFRA cases that it applies in race cases. So courts must treat federal laws that substantially burden religious exercise with the same high amount of skepticism they give to laws about racial discrimination.

As Ryan and Winkler’s studies show, that’s not how courts have behaved in the past.
What the Fulton plaintiffs want

The Fulton plaintiffs make several legal claims, but one of their most aggressive claims is that the Supreme Court should reconsider Smith.

Recall that Hobby Lobby was an RFRA case, which means its expansion of “religious liberty” applies only to the federal government. If the Supreme Court overrules Smith, that would mean that state laws that trigger religious objections would also be subject to a strict compelling interest test. We would move closer to the world that Scalia warned of, where a religious individual might “become a law unto himself.”

Additionally, the Fulton plaintiffs claim that the city may not condition “benefits on the surrender of constitutional rights” — and thus the city may not screen its contractors to exclude businesses that want to discriminate on religious grounds. As noted above, a decision ruling in the plaintiffs’ favor on such grounds could have major implications for many government contracts.

It is very likely, moreover, that the Court will use Fulton to significantly expand the rights of religious objectors. Shortly after Scalia died in 2016, Justice Samuel Alito penned an opinion endorsing an expansion of religious objectors’ rights, and that opinion was joined by Chief Justice John Roberts and Justice Clarence Thomas.

Those three justices are now joined by two conservative Trump appointees, Kavanaugh and Justice Neil Gorsuch. While it is unclear just how far the Court will go in Fulton, it is now likely that there are five votes to hold that organizations like CSS may discriminate against same-sex couples.

THE ROBOTS ARE COMING
Amazon is opening a supermarket with no cashiers. Is Whole Foods next?

The new Amazon Go store concept debuts on Tuesday in Seattle’s Capitol Hill neighborhood.

By Jason Del Rey@DelRey Feb 25, 2020

The new Amazon Go Grocery store concept opened in February in Seattle. Amazon


Two years ago, Amazon introduced the idea of high-tech, cashierless shopping with a store that was a cross between a 7-Eleven and a Pret A Manger sandwich shop. Now, Amazon is bringing the same concept to a full-size supermarket.

On Tuesday, Amazon will open the doors to a 10,000-square-foot Amazon Go Grocery store in Seattle’s Capitol Hill neighborhood, less than a mile from the tech giant’s downtown Seattle headquarters. It’ll be stocked with 5,000 different products — from organic fruit to grass-fed beef — and outfitted with cameras, sensors, and computer vision that eliminate the need for shoppers to fork over cash or plastic before walking out the door with their groceries.

The new store, which is the first of its kind in the US, highlights Amazon’s unsated appetite for gobbling up market share in the $900 billion US grocery industry, even after spending nearly $14 billion in 2017 to acquire Whole Foods and making same-day grocery delivery a free perk for Prime members last year. At the same time, the expansion of the cashierless store concept raises the question of when — not if — the technology will be ready for installation in Whole Foods stores, and what might happen to the chain’s thousands of cashiers when it is.

“There’s no plans to put this in a Whole Foods, for now,” Amazon Go’s vice president Dilip Kumar told Recode on a tour of the new store Monday. “For now, what we are focused on is this concept and see what customers think of it — [and] go from there.”

“You would understand why that’s an obvious question,” I told him.

Kumar laughed. “You would understand why I can’t comment on that,” he responded.

Twenty-five years ago, Amazon was simply an online purveyor of books making a radical bet on what the future of consumerism might look like. Just over two decades later, Jeff Bezos’s company has grown into the largest online retailer in the US (it’s now eight times the size of the No. 2 competitor); it’s a mainstream provider of entertainment through its Prime Video offering; and it’s the largest cloud computing company in the world.


But in Amazon speak, “it’s always Day 1,” which means the company is just scratching the surface of what it might accomplish. In the case of the grocery industry, though, Amazon’s grocery delivery service languished in business purgatory for a decade, unable to crack the code on the right economic model that would both be affordable to a mass customer base but lucrative enough to sustain the business. Still, the food and beverage category is too large for a company with Amazon’s ambitions to ignore, so first came the Whole Foods purchase and then the launch of Amazon Go stores.

Since the opening of the first Amazon Go store on the ground floor of the company’s downtown Seattle headquarters in January 2018, Amazon has added more than 20 new locations, with eight in New York City, six in Chicago, and four each in San Francisco and Seattle. Those stores sell breakfast items, sandwiches, salads, and snacks, and they are aimed at enticing busy working professionals in corporate districts on their way to and from work, and on lunch breaks. Many feature both local and national food and beverage brands, including some of Amazon’s own labels, like Happy Belly and Whole Foods’ 365 Everyday Value brands. (The new Amazon Go Grocery store also sells a cross section of local, mainstream, and private-label brands.)

Over time, Amazon’s online dominance has solidified a virtuous cycle, where new merchants with new products attract new shopping, and Amazon reaps the benefits of sales as well as shopper and seller data to help hone its retail machine. In the case of the Amazon Go brick-and-mortar stores, Amazon gains insights into its customers’ shopping behavior that it can’t already glean from shopping data on its website. Customers scan an Amazon Go app at a turnstile upon entering and can simply exit without checking out when they are done. Shoppers who want to pay in cash can ask a store associate to swipe them in, an addition to the original idea that was implemented after some municipalities banned cashless stores.

The original Amazon Go stores have received high marks from shoppers in online reviews, but their technology infrastructure is expensive to build out. That fuels speculation from industry analysts that Amazon Go might need to expand into a format where each shopper is spending more per visit. In fact, the original prototype for Amazon Go back in 2015 was a 15,000-square-foot supermarket that Jeff Bezos reportedly vetoed after a visit, according to a Bloomberg News report. “There were specialty counters where Amazon employees posing as baristas, butchers, and cheesemongers took orders and added items to Bezos’ imaginary bill,” Bloomberg reported. But Bezos didn’t like that customers would have to wait for their meat or cheese to be weighed and added to their bill when the whole point of the store was to eliminate wasted time at checkout.

Five years later, the supermarket concept is finally launching, but at two-thirds of the prototype size and with a simple format more reminiscent of a Trader Joe’s than a Stop & Shop, Kroger, Walmart, or even Whole Foods. There’s no deli counter, butcher, or bakery, likely because of the additional friction they’d add to a shopping experience that Amazon and Bezos imagined would be quicker than that of competing stores.

Produce items are sold by the unit or bundle rather than by weight, so that the cameras and computer can handle the price computations. But building technology advanced enough to accurately identify and associate unpackaged items with a specific shopper still proved a substantial hurdle.

Shoppers typically spend more time picking up, placing down, and just handling produce than they do with packaged items, which adds complexity to the computer identification process. And that’s not even taking into account the physical differences from one pear to another. “So how do you take into account color and shape and other characteristics ... to just be able to associate that to the right customer account?” Amazon’s Kumar asked rhetorically.

The new store will employ workers who unpack inventory behind the scenes and restock shelves and produce bins. Other staff will greet shoppers at the entrance and check IDs in a section where beer, wine, and liquor is sold. Amazon wouldn’t disclose how many people work on any given shift, but the company said it hired “several dozen associates” to work at the store. Amazon argues that Amazon Go stores aren’t eliminating jobs, but instead are shifting worker roles to different kinds of labor.

Still, the lack of cashiers — of which there are more than 3.5 million in the US — is notable when you consider that Whole Foods has around 500 stores. Whole Foods stores are typically two to five times the size of the new Amazon Go Grocery store, which means that even if it is successful, there’s no guarantee that the technology is good or cheap enough to be transplanted into the organic grocery store chain anytime soon. But when the tech is further developed, it would be surprising if Amazon doesn’t bring it to Whole Foods, especially if customers’ behavior signals they’d want it. And then, the cashier question is one Amazon will face again.

Amazon tells Sanders and Warren that warehouse workers can pee whenever they want

In a response to 15 US senators, Amazon defended its warehouse working conditions.

By Jason Del Rey@DelRey Feb 24, 2020

A woman works at a giant Amazon warehouse in Staten Island, New York. JOHANNES EISELE/AFP via Getty Images

Amazon stayed on the defensive in a response to United States senators about its warehouse working conditions on Friday, disputing claims that its workers can’t take bathroom breaks when they need to and calling on politicians who haven’t visited an Amazon fulfillment center to take the company up on its offer of a tour.

Amazon also said it is “exploring the best way to make information about Amazon’s safety record public,” but argued that worker injury records submitted to the US Department of Labor contain “private and sensitive” details such as worker names and injury descriptions that are treated as confidential.

The eight-page response was sent on Friday to a group of 15 Democratic US senators, including Tammy Baldwin (WI) and Sherrod Brown (OH), as well as presidential candidates Bernie Sanders and Elizabeth Warren. Two weeks earlier, the senators warned Amazon CEO Jeff Bezos in a letter to overhaul an alleged “profit-at-all-costs culture” that they say manifests itself in a punishing work environment for the hundreds of thousands of workers responsible for sorting, packing, and shipping customer orders. But this response letter, signed by Amazon policy executive Brian Huseman, will likely do little to squelch protest from worker activists and some progressive politicians who say worker complaints and injury rates speak for themselves.

Chief among the allegations Amazon faces is that the pace of work inside Amazon warehouses is so intense that some workers relieve themselves in bottles so that their performance doesn’t suffer. To address the allegations, the senators had asked Amazon to “cease including bathroom breaks as a ‘time off task.’” In its response, Amazon said that workers “are allowed and encouraged to take breaks as needed, in addition to their traditional breaks during a shift ... including time spent using the restroom.”

“If there are instances where our leaders cannot account for the whereabouts of an associate for a significant amount of time (‘time off task’), managers speak with the associate to understand if there are any issues that can be addressed by the leadership team (such as defective equipment or process defects),” the letter went on. “If the reason behind the ‘time off task’ is related to bathroom breaks, it is excused.”

The company also continued to maintain that injury rates of its workers are higher than the industry average because the company is more aggressive than its peers in recording injuries on the job.

“In 2016,” the letter read, “we decided to change our approach to recordkeeping and design a system that reported all injuries — no matter the severity — to remove elements of subjectivity and provide the data needed to drive comprehensive safety improvements.”

No word yet on a response from the senators.

Climate change and soaring flood insurance premiums could trigger another mortgage crisis

Officials fear “a huge foreclosure crisis” from FEMA flood insurance reforms.


By Jie Jenny Zou Feb 25, 2020


This story is part of a partnership with the Center for Public Integrity and WNYC/Gothamist.

NEW YORK CITY — When Hurricane Sandy hit in 2012, Thalia Panton watched in disbelief as floodwaters careened down her quiet, tree-lined street in Canarsie, Brooklyn. Sparks flew from downed electrical lines as the rapids rose past her thighs.


The water receded as quickly as it appeared. But the damage was done. When the skies cleared, Panton was left with $60,000 in losses. The basement had flooded, damaging musical instruments her husband and son use for their gigs as well as electrical equipment that kept the house running. Panton and her neighbors didn’t get flood insurance until after Sandy because Canarsie wasn’t considered a major flood risk at the time of the storm.


Seven years later, as even more communities reckon with rising sea levels and catastrophic storms, the Federal Emergency Management Agency is encouraging homeowners and renters to “buy as much flood insurance as they can.” The agency provides more than 96 percent of all flood coverage through its National Flood Insurance Program, making it the sole option for most Americans.

Thalia Panton says flood waters from Superstorm Sandy reached the step she is standing on, resulting in $60,000 in losses. Jorge Garcia for Vox/CPI

Posters offering cash for houses are on nearly every street corner in Canarsie, an area that has long been a bastion of black homeownership. Jorge Garica for Vox/CPI

But FEMA is revamping the debt-ridden program to make it operate like a private insurer, raising concerns that coverage could become unaffordable for many higher-risk areas across the country. Agency officials have not said how many Americans could be affected. Private insurers champion the reforms as a way to modernize the NFIP, but the industry also stands to profit. Insurers are now competing directly with FEMA. Companies have also sold the agency on expensive deals with dubious benefits for taxpayers.

New York City officials warn that skyrocketing flood insurance premiums could trigger a foreclosure crisis in neighborhoods like Canarsie, which never recovered from the 2008 housing crash and was a hotbed of predatory loans that targeted black homeowners. Annual premiums in Canarsie — now an average of $600 — could jump to a range of $3,000 to $6,000 as soon as 2022 and become mandatory for more residents.

That expense could be out of reach for many in Canarsie already struggling to keep up with housing costs. “People are just going to be slowly picked off,” said Zachary Paganini, an urban geography researcher at the City University of New York. By forcing communities of color to shoulder the economic burden of escalating flood risk, the government is worsening inequality, he said.

While insurance is marketed as a way for households to bounce back, experts point out the policies do little to prevent disasters. Hundreds of thousands of homes could regularly face flooding from sea level rise by 2050, according to estimates. Heavier rains will threaten properties far from oceans. As the cost of flood protection soars, insurance could be what pushes people from their homes long before climate change does.
New flood reforms could mean less risk for the government, but also less protection for communities

Hurricane Sandy still haunts Ronald Temple’s home seven years later. A discolored line in his basement is a reminder of how floodwaters crept toward the ceiling, knocking out the heat for several grueling winters until he could afford to replace the equipment. On sunny days, unexplained puddles seep from the floor, a problem Temple says has only worsened since the storm. And in October, he discovered a rusted sewage pipe that will cost $10,000 to replace — a defect he blames on saltwater corrosion that isn’t covered by his flood or homeowners insurance.

“I’m really seriously thinking about moving,” said Temple, who immigrated from Sierra Leone in 1981 and has lived in Canarsie since 1997. His home borders a salt marsh that spills into Jamaica Bay, which divides Brooklyn from the southern edge of Queens. Canarsie wasn’t included in the city’s mandatory evacuation zone, but residences here were among an estimated 80 percent of homes on Brooklyn’s waterfront that were damaged during Sandy.

FEMA’s “advisory” flood map suggests far more risk in Canarsie than the “current” map, which would make flood insurance mandatory for more people and likely increase rates. FloodHelpNY.org

FEMA flood maps at the time of the storm, which were based on historical experience, classified fewer than 40 of Canarsie’s 12,000 buildings as high flood risk, which mortgage lenders typically require to carry flood insurance. Revised figures now suggest more than 5,000 buildings are at risk. The number of flood policies in Canarsie has increased since 2012, but the area remains underinsured.

“We’re not talking about people who have irresponsibly built a beach house because they want to have a second home on the shore — these are generational neighborhoods,” said Elizabeth Malone, a program director and insurance specialist at Neighborhood Housing Services of Brooklyn, a housing advocacy organization.

Roughly 85 percent of Canarsie’s residents are black, and the area is often seen as a bastion of black homeownership, which is on the decline in New York City. The neighborhood’s high number of single- and two-family homes gives it a sleepy, suburban feel. But just past the manicured lawns and paved driveways are signs of economic distress.

Bright yellow posters offering cash for houses can be found on nearly every street corner. Many residents — including a large share of immigrants and retirees — settled in Canarsie during the 1990s and 2000s at the height of subprime lending, receiving risky, high-interest loans. The area still has a large number of foreclosures compared to the rest of the city. Sandy likely played into that problem, experts say, causing some homeowners to default on their mortgages because they were unable to rent out flooded basements.

Many of Malone’s clients in Canarsie are choosing to forgo flood insurance because of the cost, she explained, not because they don’t believe the risk is real. Escalating flood risk could also cause home values to plummet, leaving families owing more on their properties than what they’re worth. “We will be underwater financially,” she said, “long before we are underwater physically.”

Annual flood premiums in Canarsie — now an average of $600 — could jump anywhere from $3,000 to $6,000 as soon as 2022. Jorge Garcia for Vox/CPI

Canarsie has a high number of single- and two-family homes and is 85 percent black, with many residents longtime homeowners. Jorge Garcia for Vox/CPI

Complicating matters is the NFIP’s hazy fate. The program began in 1968 primarily because private companies were unwilling to insure floods. Since then, the NFIP has been America’s primary flood insurer, backing more than 5 million homes and businesses. Policies provide limited coverage for structural and equipment damages as well as loss of contents. But the program requires periodic congressional approval, putting it at the mercy of partisan politics. As a result, policy rules and conditions have continually shifted.

“They’ve been kicking the can for almost two years now,” Jainey Bavishi, director of the New York City Mayor’s Office of Resiliency, said of the standstill over flood insurance. Congress has been unable to reach consensus on the direction of the program, which some see as a lifeline and others as a liability. The NFIP has been temporarily extended 15 times since 2017, most recently in December, in lieu of a bill spelling out the program’s future. Previous attempts have been jarring: Congress tried to reform the NFIP in 2012, only to renege on most of those changes just two years later.

Right now, what NFIP customers pay is impacted by their location on a FEMA flood map and whether their property is eligible for subsidies. In most cases, mortgage borrowers in higher-risk zones must carry insurance and pay higher premiums. But structures built before the NFIP program designated an area as high risk often receive subsidized rates, a congressional compromise not to penalize owners for construction that complied with existing standards.

“WE WILL BE UNDERWATER FINANCIALLY, LONG BEFORE WE ARE UNDERWATER PHYSICALLY.”

In 2015, New York City officials appealed new FEMA flood maps that would drastically expand high-risk areas, making flood insurance mandatory and more expensive for thousands of New Yorkers. FEMA is working with the city to finalize new maps, but it’s unclear what they will look like and how long the process will take.

Risk Rating 2.0, an initiative that FEMA began working on in 2017 and plans to implement in October 2021, could have further effects on costs here and in other higher-risk parts of the country. Under the initiative, premiums will be priced to fully reflect flood risk, a move FEMA says would make the NFIP more financially sound but experts worry could make coverage less accessible. The revamp is part of a long-simmering effort to transform the program so it operates more like a private insurance company.

The NFIP is also relying on private consultants and proprietary computer models used by top insurance companies — a first in the program’s 50-year history. The overhaul marks a radical departure from the current pricing structure. FEMA has divulged little about the initiative, worrying lawmakers and housing advocates who say the agency is keeping the public in the dark.

FEMA has yet to provide specifics about premium changes. But New York City and outside experts say the agency’s decision to set prices based on risk signals big increases for higher-risk communities — the places that need flood insurance most.

In an interview, FEMA Deputy Associate Administrator David Maurstad said the goal of Risk Rating 2.0 is to deliver “rates that are fair, easy to understand and better reflect a property’s unique flood risk,” which can also help the public figure out whether an area is safe to live in.

The initiative will reduce premiums for policyholders of “lower-value homes” who are “paying more than they should be paying,” he said, and those who take measures to flood-proof their properties like elevating homes on stilts.

But Maurstad was less clear about the fate of high-risk, coastal areas like Canarsie, where property values are high but rising premiums could easily upend fragile households. “There comes a time when you have to evaluate the program and make these types of hard changes because they’re important for the sustainability of the program,” he said. Only Congress has the authority to make NFIP policies affordable, he added.
New York City officials fear a “huge foreclosure crisis” from flood reforms

What worries New York City officials is that communities like Canarsie could be left on their own to shoulder rising costs. “If we transition to risk-based pricing immediately, it would lead to a huge foreclosure crisis, and that’s exactly what we do not want to do,” Bavishi said. “We feel very strongly that this is at its core about environmental justice.”

City officials are lobbying Congress to provide vouchers or some other discount on NFIP premiums for those who cannot afford them. FEMA itself has acknowledged how cash-strapped Americans are — a 2018 agency survey found many US households would not be able to cover a $500 emergency expense.

Under the current NFIP, retrofitting a building is one of the few ways to qualify for premium reductions. A city study estimated a typical Canarsie homeowner would have to shell out up to $100,000 to modify a home, which would entail making the basement uninhabitable. The expense is out of reach for nearly everyone but real estate developers, who are increasingly building in the city’s most flood-prone areas.

Scholars like Paganini point out NFIP’s “one size fits all” approach means “working-class people increasingly can’t afford the cost of living by the coast, but wealthier populations can.” The program also ignores the impact of discriminatory mortgage lending on communities of color.

Instances of “environmental gentrification,” where luxury development displaces low-income residents following a natural disaster, have played out in post-Hurricane Katrina New Orleans and storm-prone Miami-Dade County in Florida.

In New Orleans, many low-income housing developments with higher population densities have been replaced by two-story, townhouse-style buildings, leaving many residents impacted by Hurricane Katrina unable to return. Bottom: B.W. Cooper housing project. Top: The Marrero Commons housing development, which replaced B.W. Cooper. Mario Tama/Getty Images

The Natural Resources Defense Council, an environmental group, supports FEMA’s pricing shift as a way to communicate risk to the public, but only if premiums are made affordable through some kind of program and the agency ramps up investment in flood prevention.

“You can have as much insurance as you want — the water doesn’t care,” said Anna Weber, a policy analyst for the group. NFIP shouldn’t punish vulnerable communities for living in risky areas, especially when racist real estate practices like redlining have long steered people of color into undesirable neighborhoods, Weber said. “Flood insurance has the potential to be the linchpin in our climate policy. Right now, it’s a liability.”

FEMA often cites a study showing every $1 spent on disaster mitigation returns $6 in benefits. But the agency spent $8.3 billion on such efforts from 2007 to 2016, a small portion of its total budget over the same period. Agency pamphlets outlining “low-cost” do-it-yourself projects to minimize flood risk tell property owners to “consult local architects, engineers, contractors, landscapers, or other experts in design and construction,” as well as secure “permits or other regulatory approvals” before making any changes.

Such an undertaking isn’t an option for Thalia Panton. Now retired, she lives on a fixed income — a chunk of which goes toward the $60,000 debt her family racked up from Sandy. Flood insurance has done little to alleviate the anxiety she feels when menacing clouds gather in the sky and start pelting the cement with rain.

Thalia Panton on her front porch. Jorge Garcia for Vox/CPI

“I haven’t been made whole, and I guess I’ll never be made whole,” Panton said. Her voice hardens when she’s asked whether she has considered leaving Canarsie. “I have no interest in selling my home, and I don’t want flood insurance to force me out. I don’t think that it can. I will find a way around it.”
Companies profit as flood insurance goes private

The NFIP was financially solvent for much of its history. But since Hurricane Katrina in 2005, it’s accumulated billions of dollars in debt, borrowing more and more from the US Treasury as disasters hit.

The insurance industry, whose abandonment of the flood market nearly a century ago was a major reason the NFIP was created, now see the program’s woes as an opportunity to make money.

Much of what FEMA has been doing to recast its flood insurance program in recent years follows recommendations from the insurance industry. If the NFIP operated more like a private insurer, upping its rates, it would be easier for companies to compete for the less risky and more profitable policies they wanted. The NFIP would also pay for deals the industry has been trying to strike with the program for years.

Reinsurance, for instance. Every year, to avoid being overwhelmed by claims, private insurers like State Farm transfer some of their risk to reinsurers like Munich Re, handing over a cut of premiums in exchange.

The Reinsurance Association of America lobbied Congress in 2012 and 2014 to confirm FEMA’s authority to purchase reinsurance and to take out catastrophe bonds, a newer form of risk transfer. “Cat bonds” are high-stakes gambles that Wall Street players like hedge funds make on Mother Nature. If a storm devastates, investors could lose their cash, which goes toward paying claims. But if a storm underwhelms, investors keep their cash and take a hefty profit, leaving insurers to foot bills on their own.

Consumer advocates warned that a government agency entering into these deals amounted to easy Wall Street profits that would cost taxpayers money. Robert Hunter, a former NFIP risk manager and Texas insurance regulator, said reinsurance makes “no sense” for FEMA, which can borrow from the Treasury at low interest rates set by the federal government.

By comparison, reinsurance prices are set by private companies that need to turn a profit and tend to raise rates after major disasters. And countries that have relied on cat bonds have found the deals don’t always pay out as expected.

Nevertheless, Congress urged FEMA to see if reinsurance and cat bonds could work for the NFIP. For answers, the agency turned to Guy Carpenter, a company that brokers those very deals.

The resulting FEMA report in August 2015 found reinsurance would be more expensive than borrowing from the Treasury but could encourage private insurers to start competing with the NFIP, offering flood policies of their own. This could help the federal government reduce its share of flood risk over time as private insurers step up, the report found.

Months earlier, Guy Carpenter unveiled a new specialty practice to sell insurance products to big government clients to “relieve the burden on taxpayers” — meaning the company stood to profit if FEMA took its recommendation.

That’s exactly what happened.

Kenneth Davis shows a reporter the damage in his basement from flooding after Superstorm Sandy on November 3, 2012, in Canarsie. Davis said the flooding happened within 10 minutes, tossing heavy items, including an upright piano, from one side of the room to the other. Bebeto Matthews/AP

By September 2016, Guy Carpenter had its first deal with FEMA. It’s been involved in all the NFIP’s private sector deals since, helping the program secure nearly $6 billion in coverage for potential storm losses through reinsurance and cat bonds.

FEMA’s Maurstad said the deals have strengthened the NFIP’s finances and helped it avoid accumulating more debt. Guy Carpenter declined requests for an interview. Its parent company, Marsh & McLennan Companies, is now expanding its insurance offerings to include private flood policies that compete with the NFIP.

Consumer advocates wonder what FEMA expected other than a sales pitch. “Guy’s constantly involved in big deals for reinsurers,” said Hunter, now director of insurance at the Consumer Federation of America. “Of course they’re going to say, ‘Here’s a wonderful idea.’”

Frank Nutter, president of the Reinsurance Association of America, defended the new direction of flood insurance. Private insurers will provide consumers with more choice, he said, which could encourage greater adoption of flood coverage. Both reinsurance and cat bonds are reliable transactions that have helped the NFIP become more financially sound, he added.

But it’s not clear whether the benefits outweigh the costs. FEMA has paid roughly $886 million in premiums to the private insurance industry so far. This doesn’t include additional millions in commissions and fees FEMA has paid to a long list of contractors like Guy Carpenter to execute each deal, which the agency declined to fully disclose.

In the four years FEMA has purchased reinsurance, it has collected payment once. The agency recouped $1 billion in 2017 after hurricanes Harvey, Irma, and Maria. Neither of the agency’s two cat bonds to date has resulted in a payout.

David Birnbaum, executive director of the Center for Economic Justice, argued that FEMA’s deals are about political expediency, not taxpayers. “If I can operate the NFIP using reinsurance and not have to go to the Treasury to borrow more money, that’s accomplishing two things,” he said. “It means I don’t have to involve Congress, number one, and number two, I don’t have to publicize that we’re losing money.”
“There’s no incentive for insurers to encourage to build back better”

Pressure to privatize the NFIP has been mounting for years, but efforts have sped up under the Trump administration. In 2017, Congress canceled $16 billion of the program’s debt at the insistence of the White House, which claimed debt forgiveness was necessary to keep the NFIP running and “enable the private market for flood insurance to expand.”

The White House’s Office of Management and Budget provided a laundry list of NFIP reforms to help “stimulate development of private insurance markets,” many of which have now found life in Risk Rating 2.0.

More options for flood insurance could be good for some customers. But consumer advocates worry private insurers will “cherry-pick” the NFIP by insuring only low- to moderate-risk policies, which generate bigger profits. The NFIP could enter a “death spiral,” Birnbaum said, leaving it on the hook for the riskiest and least profitable policies.

That could further jeopardize the program’s stability and the availability of flood insurance for those most at risk — people living in places like Canarsie.

Houses on Avenue L in Canarsie, Brooklyn. Jorge Garcia for Vox/CPI 

The corner of Rockaway Parkway and Glenwood Road, near Canarsie’s subway station. Jorge Garcia for Vox/CPI

Cherry-picking appears to be happening in Florida, which has heavily promoted private flood policies. Data shows private insurers covered 8 percent of policies statewide but only paid 3.8 percent of flood claims from 2018’s Hurricane Michael, which suggests they are backing less risky properties. Guy Carpenter itself agreed cherry-picking was inevitable, noting in its 2015 FEMA report that private insurers as “profit-seeking entities” were mostly interested in “lower risk, high net worth property owners.”

To gain an advantage, some insurers are hiring the same firm FEMA is using to revamp the NFIP. KatRisk produces catastrophe models, proprietary programs that price and assess risk. The firm’s models are being used by FEMA to develop Risk Rating 2.0 as well as private insurers in North Carolina looking to offer flood coverage for the first time. KatRisk co-founder Dag Lohmann said his firm aims to be “impartial and independent” and provides all users with “the same scientific input.”

Operating the NFIP like a private insurer comes with downsides that FEMA itself has outlined. A 2011 report by the agency found privatization scored poorly on affordability and ranked as the worst option for reducing public exposure to floods. That’s because, experts believed, the private sector could undermine efforts to make properties less flood-prone.

Adaptation efforts have already suffered as a result of insurance, according to research by Paul O’Hare, a researcher at Manchester Metropolitan University in the UK focused on climate resilience. He found homes in the UK that repeatedly flooded were often reconstructed the same way each time and insurers routinely denied requests by homeowners to rebuild to a higher standard.

“There’s no incentive for insurers to encourage to build back better,” O’Hare said. Similar issues plague NFIP policyholders in the US.

The mismatch speaks to a larger issue of who is responsible for protecting communities from future disasters. By recommending that property owners buy as much insurance as they can, FEMA puts the onus on individuals. But that distracts from what experts say is really needed to reduce flood risk: large-scale government action.

Sitting in her neighbor’s living room one autumn night, Thalia Panton and other Canarsie homeowners commiserated about their uncertain futures and the little government support they’ve received. Federal officials recently greenlit construction of a six-mile-long sea barrier along the eastern shore of Staten Island, another area in New York City hit hard during Sandy. But discussions about a far less extensive barrier to protect communities like Canarsie are in their infancy.

“It’s been seven long years,” Panton said, “and not a lot has happened.”

Jie Jenny Zou is a reporter with the Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, DC.

Jorge Garcia is an independent photographer based in Brooklyn, New York. In 2015, he founded the NYC Street Photography Collective.

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