The latest report by the New York City Panel on Climate Change could resonate well beyond the five boroughs, according to a storm financing expert.
“I think Standard & Poor’s [and other rating agencies] will start downgrading cities, especially in the New York area, if they don’t do the necessary things,” said Alan Rubin, a managing director at public policy firm Mercury LLC.
Such changes, according to the report, would increase the frequency and intensity of coastal flooding, and under the high sea level rise estimated for the 2080s, the current 100-year flood with about a 1% annual chance of occurrence is projected to become about a once-in-eight-year event.
Beyond climate projections, the report published new coastal maps and enhanced dynamic flood inundation modeling.
“The report was truthful and I think things will actually happen faster than what the scientists indicated,” said Rubin, known by the moniker Hurricane Czar after his work in Miami-Dade County, Fla., after Hurricane Andrew caused more than $30 billion in damage in 1992.
While working in Lehman Brothers' investment banking division, Rubin helped design and underwrite the catastrophe fund for hurricane relief.
He urged municipal issuers to consider more environmental, or green bonds, and other forms of resiliency bonds, such as a special vehicle New York’s Metropolitan Transportation Authority issued nearly 18 months ago.
The MTA’s $200 million
S&P in its first surge-only rating assigned a BB-minus rating, reflecting the principal at-risk nature of the offering. MetroCat Re collateralized the reinsurance through a cat bond and had its own credit rating separate from mainstream MTA credits such as transportation revenue bonds and dedicated tax fund bonds.
Financing concerns at the local level range from liquidity to the role of the federal government — how much cities and towns will receive and what strings may come. They also include to relocating valuable assets such as police headquarters from vulnerable locations.
“You can start by doing inexpensive things that are appropriate and that people recognize,” said Rubin. “You have to get people and elected officials to understand the situation.”
Labeling bonds as resiliency rather than catastrophe could help sell the concept more effectively, Rubin added.
“Some individuals might say, look, we’re spending an awful lot that could be spent on health care or immigrant care? Why spend $335 million for flood protection on the Lower East Side? How about the homeless people in the cold the last three weeks?”
Rubin also warned forecasters against engaging in hysteria.
“You have to temper things when you’re talking about 2050 or 2030. Some of this is the sky is falling.’ Well, the earth’s been around for 5 billion years,” he said.
Concurrently with the report, New York Mayor Bill de Blasio announced the launch of scoping and preliminary design work on hardening the Lower East Side. The project, funded by the U.S. Department of Housing and Urban Development’s Rebuild by Design competition, runs from East 23rd Street to Montgomery Street as part of a push to provide coastal resiliency to all of Manhattan.
“NPCC’s findings underscore the urgency of not only mitigating our contributions to climate change,” said de Blasio.
Other initiatives include $100 million to protect vulnerable waterfront communities, including Coney Island Creek in Brooklyn and the south shore on Staten Island. Long-term measures include more than $450 million to construct armored levees and other infrastructure along Midland Beach and elsewhere along Staten Island’s east shore.
The city has already taken such short-term measures as $1 billion in resiliency investments by Consolidated Edison Inc. to harden substations and other critical distribution equipment.
