Weekly Preliminary OS Climate Risk Review (12/16/21)

By January 6, 2022 January 18th, 2022 No Comments

This week we’re looking at the Elizabeth River Toll System, a project designed to provide travel routes between Norfolk and Portsmouth, Virginia via tunnels under the Elizabeth River. The Toll System is utilized by local residents and by regional commuters in the Hampton Roads area, which comprises 16 surrounding communities. Elizabeth River has a mixed report card — receiving passing marks for acknowledging flood perils and for developing resilient infrastructure, but demerits for not adequately discussing how climate change and flooding risks could affect the region in the future. 

Fuel up and grab your E-Z toll pass, this week we’re traveling to:

Virginia Small Business Finance Authority Senior Lien Revenue Refunding Bonds (Elizabeth River Crossing Toll System) $583,545,000

Purpose of Bonds

These bonds are being issued to refinance an outstanding 2012 bond series which was issued for designing and constructing a portion of the Toll System. The System is located in the cities of Portsmouth and Norfolk, VA and serves the Hampton Roads region, which is the second largest metropolitan area in the Commonwealth and includes one of the busiest ports on the East Coast. The Toll System serves as a main artery for local residents, commuters (local and transient), and freight. In 2020, the System had over 32 million travelers and in 2019 saw over 37 million. 

Infrastructure Considerations

The Project is located in the Mid-Atlantic region of the east coast of the United States. The region is susceptible to damaging storms, storm surge, and flooding. Hurricanes or other major weather events affecting the region surrounding the Project could negatively affect the regional economy and revenues available through the Project. Furthermore, storm and flooding-related risks are likely to intensify over time if scientific projections about climate change and sea-level rise are correct (pg. 96).

The Hampton Roads area is known for its flooding concerns stemming from precipitation, high tides, and storm surge. To mitigate some of these risks, the Toll System has flood gates at some of the tunnel access points (see Technical Advisor Report pg. I-55). The flood gates were deployed in 2012 during Hurricane Sandy and more recently in 2019 during Hurricane Dorian. The gates did their job against Sandy’s 13’ tides, whereas mechanical failures in 2003 left the tunnel open during Hurricane Isabel’s storm surge and left Midtown Tunnel flooded for weeks. Aside from the physical infrastructure of the toll system, frequent flooding on surrounding roads is also a concern, so much so that sensors were installed to monitor when roads become flooded. Professor Tal Ezer at Old Dominion University says that the City of Norfolk sees 200-300 hours of nuisance flooding a year, compared to less than 100 in the 1980s, and that the rate will continue to increase due to the region’s rate of sea level rise. This is problematic because this type of flooding leads to road closures, property damage, and corrodes stormwater infrastructure.

The increase in nuisance flooding, also known as sunny day flooding, could be particularly burdensome for those who use the Elizabeth River Toll System. risQ analyzes the profile of toll systems using a 10-mile buffer around tollway on-ramps. In the Elizabeth River commuter service area, we estimate that only 5% of the population works from home, 46% of the population have a commute to work that is between 20-40 minutes, and that 89% commute using a car, truck, or van. 

risQ Profile and Mitigation Efforts

The Elizabeth River Toll System service area has an overall risQ Score of 1.8 and a Flood risQ Score of 3.8. The most prominent hazard is coastal flooding. The projected GDP impairment over the next 10 year from coastal flooding is equivalent to 5% of annual GDP, and a less likely 100-year coastal flood event engenders 6.8% GDP loss and ~5% property value loss. The National Oceanic and Atmospheric Association (NOAA) projects that by 2030 Hampton Roads could have twice the number of sunny day floods a year. Sea levels have risen 18” in the Hampton Roads area in the last 100 years, and according to the Virginia Institute of Marine Science, sea levels in the region are expected to rise by an additional 18” by 2050

Fortunately, this year Virginia announced $7.8 million in grant investments for flood mitigation projects which seek to head-off some of these risks. Of the 19 grant-funded projects, 10 are in the Hampton Road region. Hampton Roads communities are engaged with regional stakeholders and are implementing Climate Action Plans to analyze the effects of sea level rise on various economic sectors. A 2010 Assessment found that the region’s roadways and railways, including a major interstate highway (Highway 64), were at risk of flooding or structural damage from storm surges and sea-level rise. And the 2016 report developed frameworks for local governments to incorporate sea level rise planning into their existing plans and policies. 


On one hand, the Elizabeth River Toll System is proactive in 1) acknowledging the regional flooding risks and 2) installing flood gates to protect their Toll System — making their System more resilient in the face of extreme weather. On the other hand, sea levels will continue to rise and the region is expected to see an increased frequency in high-tide flooding. 

Under current climate conditions, the region already experiences road closures driven by precipitation flooding, high-tides, and storm surge — all of which are expected to worsen as climate change continues. The Issuer is forthcoming with some of the risks to the System, but lacks a thorough disclosure about the current flood-related disruptions and the likely perils they will face in the future as climate changes continue to worsen these threats.

Honorable Mentions

South Central Connecticut Regional Water System, CT (risQ Score 1.9, Flood risQ Score 3.7) $62,155,000

In September, heavy rains from Hurricane Ida dropped close to 10 inches of rain on parts of the service area like New Haven (Flood risQ Score 3.2) which resulted in the first ever flash flood emergency issued in Connecticut. This led to several closed roads, flooded infrastructure, and tens of thousands of power outages. With $62 million in bond proceeds that mature in 2041 for treatment plant upgrades, it’s good to know that the issuer is willing to acknowledge climate change in their 230-page POS. Acknowledgement, however, is ineffective at combating physical hazards without concrete strategies in place. 

The issuer lists strategies and tools; a mixture of table-top exercises, renovations, and land acquisitions to mitigate climate-driven change (p. 33). While the list looks good and displays forethought, it is hard to assess whether these plans have actually been put into practice and/or benefitted the community (Social Impact Score 27) during September’s storms. Fortunately, all Connecticut towns are required to have local-level emergency operating plans including the south central region. One thing absent from the POS—and the regional website to our knowledge—is Carbon Transition Risk. The service area is ranked 92nd percentile for per capita CO2 emissions from electricity production. 

Rhode Island Health and Educational Building Corporation (City of Pawtucket), RI (risQ Score 0.5, Hurricane risQ Score 1.3) $30,385,000

The City of Pawtucket sits on the border of Rhode Island and Connecticut, just north of Providence. The City is spliced by the Blackstone and Seekonk Rivers, yet maintains fairly low Hurricane (1.3) and Flood risQ Scores (0.7) and thanks to its relatively high elevation, rising sea levels do not pose a significant risk (p. A-4). However, the POS notes that climate change and extreme weather events are still of concern to Pawtucket (p. A-4). The City has purchased additional equipment and added new personnel to help maintain catch basins (p. A-4). The City is also working with the Narragansett Bay Commission (NBC) on the Restored Waters RI Project. The sewers in Pawtucket are combined sewers (p. A-2) which means they transport waste material and stormwater. Under heavy rain, sewers can overflow and contaminate water in the rivers and Narragansett Bay. The Restored Waters RI Project aims to eliminate discharge of sewer into the Blackstone River (p. A-4). The City’s initiatives are in no doubt encouraged by the State’s leadership; Rhode Island has released a comprehensive adaptation plan—Resilient Rhody—and established an infrastructure bank. One blind spot appears to be GHG emissions, which is not addressed in the POS. The City’s per capita emissions from residential and commercial real estate and electricity production rank in the 98th and 84th percentile respectively. Nevertheless, Pawtucket’s approach to climate resilience is particularly encouraging given the City’s high Social Impact Score (81).

Solaris Apartments, FL (risQ Score 4.2,Flood risQ Score 4.1) $16,500,000

Solaris Apartments (risQ Score 4.2) and the $17 million in proceeds could be in a tough spot despite the security of Fannie Mae. Located slightly north of Miami Beach, this affordable housing project ranks 98th percentile nationally within a 20-minute radius for losses from combined physical hazards, with GDP impairment at 99th percentile. Seeing that Miami Beach flooded enough to stand travelers just last month, it seems a bit negligent of the issuer not to mention climate or flood in their 140-page POS. They could do a better job considering how much is at stake for both taxpayers and investors.

Climate risk also means community risk. The property is backed by Fannie Mae, but the lives of the tenants are not. Within a 20-minute drive time radius, the area has a Social Impact Score of 88. The community’s majority is nonwhite (Nonwhite/Minority Population Score 89) and poor (Poverty Concentration Score 76). Naturally, this leads to a host of other socioeconomic stressors, one being adverse health (Persistent Health Obstacles 93). Climate disasters exponentially raise these indexes enough to cripple a population of people already struggling with everyday life.