What should we cover first: Broward County’s greenhouse gas reduction initiatives, or its seawall policy, or perhaps its forward-thinking building codes for floodplains? It’s like Christmas morning and we don’t know what to unwrap first. Since 2008, Broward County has been a proven leader in the realm of climate change resilience planning, seeking to better understand the potential impacts and incorporate risk assessments into its capital projects and policies. This week, Broward is coming to market to raise funds to renovate its Convention Center. The facility improvements will qualify for Leadership in Energy and Environmental Design (LEED) Gold Certification and is just one more example of the County’s environmental leadership.
Broward County, Florida Tourist Development Tax Revenue Bonds (Convention Center Expansion Project) $489,820,000
About the Bonds
The proceeds of these bonds will be used for renovations to the County’s Convention Center. Upon completion, the Convention Center aims to not only be a regional destination for trade shows, corporate meetings, and sports events, but also have the capacity to accommodate larger national and international conventions (pg. 3). In addition to the Convention Center improvements, the County plans to issue Hotel Revenue bonds in 2022 to build a new world-class, 800-room hotel that will be attached to the Convention Center (pg. 4).
The Bonds for this 2021 series are secured by Tourist Development Tax Revenues (TDTR), which is a 1-6% county-wide tax levied on transient housing rentals, such as hotels, motels, and resorts (pg. 22). Since TDTR are generated from transient rentals in the County, “the occurrence of any event that has a major negative on transient rentals within the County (including hurricanes and major tropical storms) could significantly reduce the Tourist Development Tax Revenues” (pg. 41-42). Between 2016-2021 the County collected $61- $88 million annually in TDT revenues; as of 2019 the total hotel room inventory in the County was more than 35,000 (pg. 29,36).
County’s risQ Profile and Adaptation Initiatives
Given that the County tourism industry is a significant generator of tax revenue, it’s wise that the County is (1) investing in infrastructure to draw in future tourism and (2) is researching the potential impacts of changing climate and aligning its policies to mitigate those risks.
Broward County ranks in the 90th percentile statewide for GDP impairment from combined perils including hurricane, coastal flooding, and inland flooding perils. There’s a 3.9% annual probability of a hurricane event and the combined impact of wind, precipitation-induced flooding, and storm surge from a Cat 1 event is projected to drive 8% property losses and >30% GDP impairment. The County’s two primary perils are hurricanes and coastal flood risk.
Fortunately, Broward County is a leading county in Florida when it comes to adapting to climate change. In 2019, Broward adopted the Southeast Florida Sea Level Rise Projections and directed staff to apply the projection — 3.3 feet of sea level rise by 2070 compared to the year 2000 — as the basis for adaptation planning (pg. 44). With these projections, the County has established Priority Planning Areas (PPA) which are areas that are at increased risk of flooding based on land elevation; all County capital projects that fall with the PPA are evaluated for climate resilience and incorporate the sea level rise projections into planning and design (pg. 45). The County’s Resilient Shoreline initiative preserves and replenishes dunes that are essential to shoreline defense in the face of storms. The County-wide resiliency plan builds on the current flood modeling and is expected to address flood risk on a 50-acre scale along with specific adaptation recommendation for county-owned assets, cost estimates, and quantified flood risk reductions (pg. 45).
The County is also part of the Southeast Florida Regional Climate Compact — a partnership between Broward, Miami-Dade, Monroe, and Palm Beach Counties — to proactively respond to the impacts for climate change and reduce the region’s greenhouse gas emissions. The Compact’s first Climate Action Plan (CAP) was released in 2012 followed by an update in 2017. The CAP serves as a framework for local communities, providing recommendations for best practices across a breadth of areas. The plan refrains from establishing measurable goals, but rather serves as a guide for participating municipalities to enact policy in-line with the regional plan. The plan addresses social equity, emergency management, and energy use.
Beyond this multi-county Compact effort, Broward has its own climate action plan. The plan uses 2070 projections to update flood maps and require new developments to build above the 2070 flood elevation, design drainage systems, and propose minimum seawalls elevations (pg. 44). The County looks at economic risk and identifies infrastructure improvements to mitigate future flood risks.
Overall, demographic data indicates that the County has a healthy economic profile. For one, Broward provides relatively high-potential employment opportunities, with 38% of the workforce earning more than $3,333 a month (Low Prestige Employment Score 16), ranking 91st percentile statewide. The County also has strong educational outcomes (Low Education Attainment Score 26). Broward’s demographic profile isn’t without some hair, however — only 84% of the population have health insurance coverage (ranking 14th percentile nationally) which is one factor driving its Persistent Health Obstacles Score to a moderate 72.
The County has many opportunities for economic growth stemming from its airport, port, and convention center. The County-owned and operated Fort Lauderdale-Hollywood International Airport is one of the nation’s fastest growing for passenger traffic: the airport ranked 6th in total passenger traffic in 2020 and is projected to experience the largest growth in the U.S. through 2045 (pg. 35). Furthermore, Port Everglades (also operated by the County) serves as the third largest passenger cruise port in the world (pg. 35). Both of these county-owned critical infrastructures are strongly correlated with hotel revenues and the success of the Convention Center as this project is aimed at drawing in additional guests for regional, national, and international events.
The County’s economic outlook appears bright, given the above, but especially so because it is so engaged with planning for and adapting to worsening climate impacts. Take your pick on what’s the County’s most impressive initiative: is it coordinating with other local governments to develop risk mitigation strategies, or is it directing its officials to implement sea level rise projections into capital project design plans, or is it one of Broward’s many other initiatives? On top of this is the fact that the County is investing in infrastructure that will continue to stimulate the local economy for decades to come. Overall, there are many positive ESG indicators that make this an attractive investment opportunity for those that want to support a County issuer with best-in-class climate action planning.
Quincy, MA (risQ Score 1.7, Flood risQ Score 3.6) $475,000,000
Quincy is a coastal city located south of Boston. In terms of physical climate risk, the City sits in the 89th percentile nationally for property VaR from combined risks—which is mainly driven by coastal flood risk. Furthermore, the City’s per capita emissions from electricity production and residential and commercial real estate ranks in the 94th and 87th percentiles, respectively. Fortunately, Quincy is actively addressing climate risks. The City boasts an assortment of reports reviewing the effects of climate change, most notably its Multi-Hazard Mitigation Plan (pg. 18). In the past two years, Quincy has invested $10 million in seawall improvements (pg. 17) designed to fortify the most vulnerable areas of Quincy’s coast. Furthermore, the City has prioritized the rehabilitation of green infrastructure and drainage projects. An example of the latter includes the revitalization of Kincaide Park (pg. 17) which will improve infiltration (and thus reduce localized flooding) while also providing the community with green space. The City’s undergrounding of vital utilities (pg. 17) aims to reduce costs potentially incurred during extreme weather events. Quincy has a Nonwhite/Minority Population Score of 83. As we’ve discussed in previous weeks, communities of color are disproportionately impacted by climate change, so it is encouraging to see that Quincy is taking substantial steps to reduce climate threats.
It’s not surprising to see Quincy is crushing it given Massachusetts’ impressive record on addressing climate change. This past March, the State passed the 2050 Decarbonization Roadmap and Clean Energy and Climate Plan for 2030, a plan to achieve net zero emissions in Massachusetts. Additionally, the State’s Municipal Vulnerability Preparedness (MVP) program aids Massachusetts cities and towns in investing and implementing climate resilience projects. Massachusetts’ leadership on climate change continues to encourage local communities.
Myrtle Beach, SC (risQ Score 2.8, Flood risQ Score 3.7) $20,000,000
These bonds will fund a redevelopment project in Myrtle Beach, a prominent vacation destination, which includes a boardwalk that connects the downtown area and Grand Strand beaches. Myrtle Beach ranks in the 93rd percentile nationally for property VaR from combined risks; storm surge from a Cat 4 hurricane event is expected to drive 37% property losses. The POS offers a brief and broad discussion of the City’s hurricane risk (pg. 16); however, there is no mention of climate change in either the context of physical- or transition-risk (the City also ranks 83rd percentile nationally for per capita emissions from electricity production). Though the POS doesn’t explicitly address Myrtle Beach’s present and future flood risk, the City is planning on investing in flood mitigation strategies including stormwater and sewer system improvement projects (pg. A-17).
Despite the limited discussion of climate risk or adaptation in Myrtle Beach’s POS, there has indeed been increased focus on climate change within the area in recent years. Local news coverage highlights the growing threat of climate risks — including sea level rise, saltwater intrusion, and flooding. Business license fee revenues represent the largest funding source for the City’s General Fund — the economic downturn during the pandemic engendered a 5% decline in revenues from business license fees (pg. vii of Comprehensive Annual Financial Report). The compounded effects of climate change may ultimately drive equivalent adverse consequences.
Myrtle Beach has a Social Impact Score of 74, mainly driven by a high Persistent Health Obstacles (83), Percent of Income Spent on Housing (88), and Poverty Concentration (72) Scores. Unlike Quincy, Myrtle Beach has not adopted a leadership role in reducing climate related threats that face its populations.
Port Authority of New York and New Jersey (risQ Score 0.0-1.3) $1,092,480,000
Government agencies tasked with adopting adaptation and mitigation strategies are certainly in for a heavy lift. Maintaining airports, seaports, and other facilities of commerce requires substantial sums of money — a large portion of the $1 billion in proceeds across these two Port Authority NY NJ issuances are being directed to investments in facility improvements, construction, and acquisitions (pg. 2). During the hurricane season of 2012, Superstorm Sandy hit New York and New Jersey hard. In 48 hours, Sandy destroyed ~300 homes and over 69,000 residential units, leaving behind damages estimated at $19 billion. New Jersey incurred economic losses of over $30 billion, with ~350,000 homes damaged or destroyed. The damages to the Port Authority directly totaled $2.2 billion, with 25,000 shipping containers diverted, 900,000 canceled or delayed flights, and 125 million gallons of seawater into the One World Trade Center site.
The magnitude and scope of physical and economic losses previously driven by natural hazards in the area both justify as well as put into perspective the combined size of these Port Authority debt offerings.
As you’ve probably guessed, a majority of Port Authority facilities are located within designated flood zones. The risQ Scores are low — however, one extreme event can deadlock transportation and economic systems. For example, Hurricane Ida dropped enough rainfall to close Teterboro Airport (risQ Score 0.4, Flood risQ Score 0.8) for 32 hours due to flooding and an outpaced drainage system (pg. 28). Communities that depend on the cities’ transit system are more diverse and unfortunately more impoverished (Social Impact Score 45), meaning that they cannot withstand climate events without sustaining significant losses. Fortunately, these Port Authorities are taking serious steps towards adopting mitigation strategies. Since Superstorm Sandy, the Port Authority undertook several mitigation plans, including one at the One World Trade Center site (risQ Score 0.0) that features three rings of flood protection. It was completed in 2020 (pg. 29). In an effort to mitigate greenhouse gas emissions (GHG), the Port Authority adopted reduction goals which include an emissions reduction of 50% by 2030 (as compared to the 2006 baseline) and electrifying its entire light-duty vehicle fleet by 2030 (pg. 30). Their comprehensive roadmap out to 2050 (Port Master Plan 2050) could be a blueprint for other port authorities with higher risQ. This is proof that it can be done and the efforts from the Port Authority of New York and New Jersey are noteworthy.