New South Florida Climate Change Financial Report: Spend Billions Or Lose Much, Much More
It’s going to cost billions to protect South Florida from climate change, that much has been clear for awhile. But a new study suggests that sticking our heads in the sand will cost far, far more.
A new report commissioned by the South Florida Climate Compact found that if the region doesn’t adapt to climate change, the damage could exceed $38 billion by 2070.
It also found that climate projects make financial sense for Broward, Palm Beach and especially Miami-Dade counties. That is, for every dollar invested in building a higher sea wall or floodproofing a building, the county would lose fewer jobs and protect more property from damage. However, the math doesn’t line up for highly vulnerable Monroe County, a fact that analysts and leaders chalked up to the smaller population.
The estimated costs of adapting are high. Elevating and floodproofing buildings alone could cost the four counties $4.4 billion by 2070. Other coastal protections, like adding sand to beaches and building berms, could cost $18.2 billion by 2070.
But the price of not doing anything is much steeper. Raising and floodproofing buildings could avoid $18 billion in losses. Armoring the coast could avoid $38 billion in losses. Either batch of solutions could also create tens of thousands of jobs throughout the region.
And those loss projections are an underestimate by any measure. The report doesn’t factor in rising temperatures, property value declines or health impacts. It also, notably, doesn’t consider the role of groundwater, which makes sea level rise an inland issue for the region. The real costs (and benefits) would likely be higher.
Even with these limitations, the findings are eyebrow-raising and meant to sway the business community into getting on board with the policies and projects South Florida cities and counties have in the works to protect the region.
“Real estate development is almost a constant for South Florida, and so is climate change,” said Jenni Morejon, president of the Fort Lauderdale Downtown Development Authority. “These two are converging to the point that it can’t be ignored from the financing perspective, from the investment perspective.”
The $264,000 Urban Land Institute report, paid for by a grant from the state, the four counties and local businesses, was released Tuesday during the annual Southeast Florida Regional Climate Change Compact summit.
A Positive ROI For Resilience
One of the standout findings of the report is that paying for resilience makes economic sense. In Miami-Dade, the return on investment is 9 to 1 for community-wide adaptations. That’s the case for Broward (2 to 1) and Palm Beach County (1.3 to 1), too. But not Monroe.
The analysis did not find that building resilience infrastructure in the Florida Keys made financial sense for either community-wide or building-level adaptations, a finding that analysts and Monroe County were quick to explain.
For one thing, the smaller, more rural population of the Keys could never offer the same ratio of benefits and cost as a packed, urban place like Miami Beach. Rhonda Haag, chief resilience officer for Monroe County, said there are “a million” economic models to choose from, and each would give slightly different results.
“We are probably going to have to spend more per resident for resilience and that’s OK,” Haag said. “Just because we have a lower rate of return on that investment, that doesn’t mean the Keys should not make the investment. We should and we are.”
She also noted that the solutions modeled in the report aren’t going to work the same in the Keys as they do in places like Palm Beach. Haag pointed to the Army Corps of Engineers, which has presented multi-billion-dollar engineering solutions for both Miami-Dade and Monroe to protect against sea-rise heightened storm surge.
In Miami-Dade, the Corps suggested a tall sea wall along the county’s coast to defend against high waves. In Monroe, they’re talking about elevating thousands of individual homes and adding rock revetments along the parts of U.S. 1 exposed to the ocean.
“The ultimate outcome is the same, to make the community more resilient so we can continue to live here in a meaningful fashion,” Haag said.
Bringing Developers To The Table
The point of the study was to make the business case for climate adaptation — both to Tallahassee in hopes of bringing home much-needed state money and to the business community, which has often been reluctant to join the climate conversation.
“My experience so far, with climate change, sea level rise, resilience, has been like a lot of other developers. It almost feels so overwhelming you don’t know where to start,” said Scott MacLaren, the Urban land Institute’s district council chair for the Southeast and Caribbean and president of Fort Lauderdale-based commercial real estate company Stiles. “I will readily admit that we are very much in the education phase and very interested. We’re not ignoring the issues.”
Ina Lee, president of TravelHost of Greater Fort Lauderdale magazine, said even three years back, when media headlines focused on the rating agency Moody’s recent decision to factor sea rise into municipal bonds, the forecasts for a drop in property value and Hurricane Irma’s impact in the Keys, South Florida’s business community didn’t talk much about climate change.
“Quite frankly, the business community was not at all involved. It wasn’t on their radar,” she said. “What wakes the business community up is when their bottom line is going to be impacted.”
Lee said the last year has been a “wake up call” for businesses. Now that they’re interested in climate change, they’ve asked for examples of solutions and proof that the investments are worth it. This report, she said, is the answer to those questions.
MacLaren said his firm started considering the role of climate change around four years ago and has built a few projects since that have accounted for sea level rise, like an office tower on Las Olas Boulevard in Fort Lauderdale with the Publix on the first floor elevated six feet above the road.
Of course, that change was mandated by city code. South Florida’s cities and counties have long led the charge in Florida (and the U.S.) to adapt to rising seas and have a variety of successful policy changes and projects to show for it.
“Developers, almost by nature, want to follow the best trend that’s profitable. As long as someone else tries it first. And the good news is we already have,” Morejon said. “This report validates that that investment is worth it.”
Developers need to see leadership, MacLaren said. They don’t want to invest the extra cash to make a building resilient if there’s no money in the city budget to raise the roads around the building, or if the electric utility isn’t paying to upgrade the power lines against stronger storms and higher tides.
“What if those other things don’t happen and I spent significant money for nothing?” he asked.
Preparing For 'The Grenade'
The bogeyman on the horizon for the public and private world alike is money. MacLaren calls the day a bank decides not to offer a mortgage to a flood-prone house “a grenade” to South Florida’s economy.
“If there’s some inflection point in the future where businesses or institutional investors say ‘I don’t want to invest here,’ then you’re in trouble. And you don’t know if that’s going to happen,” said Aaron McGregor, an analyst at AECOM who helped compile the report.
If it does, he said, then South Floridians may start asking why some communities that invested early are pulling in more investment than communities that didn’t.
“You want everyone to have as equal as a footing to be resilient and not just mitigate these risks but thrive,” he said.
Part of convincing the business community to talk about climate change is addressing their reticence toward “negativity.” For decades, the real estate and development industry hand-waved the issue of climate change — or lobbied against changes to code or policy that would address it — out of concerns that it would scare away investment.
MacLaren said all of the attention paid to the topic these days could be a double-edged sword.
“It’s going to be educational and help us prepare — and that’s obviously the most important part — but it’s also going to lend to the other end of the conversation. It may prevent someone from coming down from Massachusetts to spend $2 million on a house in Rio Vista. Their kids may say, ‘Are you crazy?’ ” he said. “But if we don’t start talking and doing, then the fear will become reality at some point.”
This new report argues that investing in solutions not only prepares for a future “grenade” day, it also works to slow another nefarious economic force brought on by climate change: declining property values.
Study after study has found that buyers are starting to worry about sea level rise, and they’re looking for higher elevation properties to keep their investment safe.
Proving to home buyers that there are solutions that will not only preserve their property but maybe even raise their property value, as a Miami Beach-commissioned study found for the neighborhood of Sunset Harbour, is crucial to local governments.
Unlike other studies that have attempted to quantify how much property values might fall as climate change worsens — and thus, the property tax revenue governments rely on — this report only removed a property off the tax roll once the parcel was completely flooded every day of the year.
By 2070, that’s $4.4 billion worth of cumulative property taxes for all four counties. In the next decade, it’s $145 million.
In Miami-Dade alone, property tax revenue generates about 70 cents for every dollar in the general revenue fund. Without that money, or the sales tax and tourism tax collected in a functioning economy, governments won’t have the money left to do things like install pumps or raise roads.
But if South Florida starts building the infrastructure now to stave off the worst of the flooding, this report suggests that the region can avoid billions in damages and keep the economy going for at least several more decades.
“It’s such a mammoth undertaking, but if we don’t take it on, the economic impacts will be dramatic for the future generations,” said Lee. “We really are becoming the epicenter of solutions. We’ve got a long way to go and we really are making some progress.”