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Weekly Preliminary OS Climate Risk Review (3/3/22)

By March 10, 2022 No Comments

This week we’re looking at Florida Government Utility Authority (FGUA). The Authority owns and operates water and wastewater systems in 14 counties and this issuance is specifically for their Consolidated Utility System in Pasco County. Below we discuss the natural disaster risQs they face, as well as a major issue that often goes undiscussed by Florida’s coastal water utilities — saltwater intrusion, which can (and has) contaminated local groundwater supplies. 

Florida Governmental Utility Authority, Pasco County Consolidated Utility System, Utility Refunding Revenue Bonds ($15,220,000)

The Authority and the Bonds

This series is being issued to refund the outstanding 2012A Bonds which were used by the Authority to finance the acquisition of water and wastewater facilities in Pasco County. This bond series is secured by the Trust Estate, which consists of the Utility System’s Net Revenues, Connection Fees, and investments earnings from various funds. Florida Governmental Utility Authority (FGUA) owns and operates over 98 water and wastewater utility systems across 14 counties in Florida and serves approximately 120,000 water and wastewater customers. FGUA’s Pasco County Consolidated Utility System serves ~10,000 customers in ten small neighborhoods which occupy just over 20 square miles (Anclote Village, Angus Valley, Colonial Manor, Dixie Groves, Virginia City, Westwood, Mad Hatter East, Mad Hatter West, Linda Lakes and Paradise Lakes); the majority of customers served by the Consolidated Utility System are single family residential homes. 

Saltwater Intrusion 

A major issue in Florida, and other coastal areas in the U.S., is the threat of saltwater intrusion which refers to salt water penetrating further into freshwater sources. Florida’s freshwater aquifers and the saltwater of the Gulf of Mexico meet to form a transition zone of brackish water called the saltwater interface. As sea level rises, the increased water pressure pushes the saltwater interface further inland; when groundwater is withdrawn, it reduces the water pressure exerted by the aquifer and allows saltwater to creep further inland, thus exacerbating the problem. Between 2009-2019 the saltwater interface underneath Fort Lauderdale advanced inland 1 mile; similarly Miami-Dade County is experiencing saltwater intrusion at a rate of ~100 meters a year. If the brackish water proceeds too far into the freshwater supply, the water becomes more expensive to treat, can corrode pipes and infrastructure, and potentially make the water source unusable. 

Unfortunately for the Pasco County Consolidated Utility System, some of the neighborhoods it serves are already seeing the effects of this. “Five of the six water systems within the Existing System are located near the western coast of the County, along the Gulf of Mexico. The water supply from shallow wells in this area has been prone to chloride intrusion from the salt water in the gulf. For this reason, two of the systems, Colonial Manor and Anclote Village, have discontinued use of their wells and are purchasing all water from the County and the City of Tarpon Springs, respectively.” (pg. 48) When traditional sources of water become contaminated by saltwater, the solutions are few and far between. One option is to connect with regional water supply sources and import water from elsewhere, as is the case with the two neighborhoods mentioned above. 

In addition to the threat of water contamination, FGUA Pasco County Consolidated Utility System (risQ Score 3.0) faces other hazards that come along with its coastal location. Its risQ profile is a blend of hurricane perils, as well as inland and coastal flooding. Annually there’s a 1.9% probability of a hurricane event; if a hurricane were to reach the area, precipitation-induced flooding could put ~6% of property value at risk and impair nearly 17% of GDP within the communities served by this system. All hazards combined put this Utility System at the 82nd percentile nationally for property value-at-risk and 85th percentile for GDP impairment. Beyond that, saltwater intrusion has the potential to drastically alter the status-quo in these communities and make water procurement more expensive. 

Conclusion 

Florida Gulf Utility Authority is certainly light on its risQ disclosure. All the disclosure related to natural disasters and the impacts of climate change can be found in a boilerplate paragraph about how the “State of Florida is naturally susceptible to the effects of extreme weather events and natural disasters” on page 98.  Beside the handwavey acknowledgement of threats, the Authority omits any mention of the threat saltwater intrusion poses to the water supplies of coastal communities (despite the fact that two communities it serves already lost their water supply to saltwater intrusion!). Given that FGUA operates water and wastewater facilities around the state, it’d be wise of them to be more forthcoming about the threats they face and develop plans to mitigate those risks.

Honorable Mentions

Nova Southeastern University, FL (risQ Score 3.9, Flood risQ Score 3.7) $150,000,000

Nova Southeastern University (NSU) is located in South Florida, with its main campus in Davie. These bonds will partially fund various capital improvement projects (pg. 5), including the expansion of the University’s Health Professions Division—NSU’s largest revenue generating center (pg. A-8). Davie’s coastal location and sponge-like limestone foundation makes it a prime target for flooding and hurricanes. Nova Southeastern University’s (NSU) main campus ranks in the 96th percentile nationally for property VaR from combined risks. Drought and heat stress are also on the horizon; by 2050 under RCP 8.5 the percent of months with severe drought is in the 98th percentile while the number of days with a max temperature  above 90°F is expected to increase by 100 – 150 days. The POS does concede that natural disasters exacerbated by climate change could adversely affect the University (pg. 27), though NSU’s—and Davie’s—adaptation planning is presently sparse. The University’s building standards do include flood and sustainable design specifications, but with a risQ Score of 3.9 (20 minute drive time) we’d hope for something more substantial. Broward County—where NSU is located—developed a Climate Action Plan and participates in the Southeast Florida Regional Climate Change Compact. The former addresses emission reductions and adaptation planning (though many goals appear to still be in the development stage). Additionally, per capita emissions originating from electricity production put the University in the 92nd percentile nationally. On this front, the University has pursued various sustainability initiatives (installing solar technology, improving energy efficiency). 

The University is a Hispanic-serving Institution, with around ⅓ of its student body identifying as Hispanic (Nonwhite/Minority Population Score of 84). The percent of the Hispanic population with a bachelor’s degree is less than half of the non-Hispanic white population. Continued investment in the University will help narrow the racial achievement gap.

Fort Bend County, TX (risQ Score 2.9, Flood risQ Score 3.0) $76,335,000

Fort Bend County faces a laundry list of hazards. The County, located not too far from the Gulf Coast, is in a hotbed of hurricane risk. 2017’s Hurricane Harvey had a profound impact on the County. The County incurred costs related to debris removal ($10.4 million), deployment of personnel and equipment ($4.1 million), roads and bridge damage ($1.6 million) and drainage system damage ($51.4 million) (pg. 7). The Hurricane caused >$1 billion in property damage, with 6,800 homes impacted (pg. 7).  The assessed values of the properties were reduced by ~$320 million (excluding 54 properties eligible for buyout or elevation) (pg. 7). The County ranks in the 95th and 96th percentile nationally for property VaR from hurricane flood and wind respectively. Increased frequency or intensity of hurricanes could similarly damage property and dampen property tax revenues—which secure these bonds. In addition to flood and hurricane risk, the County faces Drought and heat stress. The number of days with a max temperature above 90°F (RCP8.5) by 2050 ranks in the 87th percentile nationally while the percent of months with severe drought ranks in the 95th percentile. The story doesn’t end there. Fort Bend’s total per capita emissions are in the 86th percentile nationally, with emissions originating from electricity production ranking in the 96th percentile. The County is home to the ninth-largest CO2-emitting coal plant in the US and five of its top ten largest taxpayers are engaged in fossil fuel industries (pg. 16). This combination suggests the County will face Carbon Transition Risk.

Unfortunately, the County’s resiliency plans are lacking. Fort Bend County maintains a Hazard Mitigation Plan which assesses physical risks and identifies mitigation actions for the County and its communities, but the document fails to address climate change in any capacity. In 2019, the County issued a bond to fund flood mitigation projects (pg. 19). However, as of late 2021 40% of the projects included in the bond have been paused or left unfunded due to challenges securing federal flood mitigation grants. The POS notes that in 2020, the County invested $12.6 million in flood mitigation projects (pg. 11). The County’s emission reduction plans are equally grim—with no GHG or energy related goals. One of the County’s largest taxpayers—NRG Energy—invested $1 billion in a carbon capture project, but the project was shut down due to low oil prices during the pandemic, frequent outages, and missed sequestration targets.

St. Charles Parish, LA (risQ Score 3.1, Flood risQ Score 4.5) $12,455,000

When adapting to the effects of climate change, different strategies are put in place to channel funds into mitigation efforts. The proposed solutions, however, can drift away from protecting the most vulnerable in the interest of keeping with similar patterns of business. In this instance, $12.5 million in proceeds are being secured by GOMESA payments to St. Charles Parish for upgrading, improving, and repairing sub-surface drainage and pump stations (pg. 4). Unfortunately, the POS fails to disclose any details on the severity of flooding within St. Charles Parish. 

St. Charles Parish (Flood risQ Score 4.5) ranks 97th percentile nationally for property losses from combined perils, and 98th percentile for GDP impairment, mainly caused by inland flood. A 500-year event drives 48% property losses within the Parish. The 150+ page POS doesn’t mention flood once. Last year, Hurricane Ida battered St. Charles for more than five hours with 100-mph winds and torrential rainfall. Residents went several weeks without power and virtually every structure received damage. Outside of physical risk, St. Charles Parish has significant Carbon Transition Risk; 98th percentile nationally for total Scope 1 per capita emissions. The only mention of hurricanes in the POS appears in a brief sentence about environmental factors in which a hurricane or tropical storm could cause Pledged Revenues to be less than anticipated if drilling activity is affected (pg. 39). The counterintuitive nature of these funds make it hard to imagine that climate mitigation plans for underserved  communities (Nonwhite/Minority Population Score 77) in St. Charles is top priority.

The Gulf of Mexico Energy Security Act (GOMESA) provides revenue received from oil and gas production and leasing in the Gulf of Mexico by the United States government with Louisiana, Mississippi, Alabama, and Texas. The Act stipulates that this shared revenue must be used for coastal protection, mitigation of damage to natural habitats, conservation, and the mitigation of Outer Continental Shelf activities (pg. 9). Considering the oil and gas industry generates hundreds of billions in revenue annually, how can small GOMESA payments–which can ironically decrease due to climate change– become viable when offshore drilling accounts for over 19 billion tons of GHG emissions and over $720 billion in damages to frontline communities?

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