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Archive for the ‘flooding’ Category

Author’s note: I just wrapped up a course on Coursera titled “Innovative Finance: Hacking finance to change the world.” Aunnie Patton Power and Tsakane Ngoepe from the University of Cape Town taught the course. They taught me a great deal. I very much enjoyed the content that they developed as well as solicited. Over the 5-week course, I completed weekly assignments. The text below is my submission for the final assignment in Week 5. In addition to this course, I’ve also found Blue Forest Conservation’s work very inspiring. While there are some differences in the forest resilience bond and the flood resilience bond, they are minor. (I’ve heard that imitation is the sincerest form of flattery.) In short, I’m very grateful for the work of others in helping me shape some ideas about finding alternative financing mechanisms to fund floodplain restoration work.

 

ISSUE AREA AND THE OUTCOMES IDENTIFIED

Inland flooding is a massive problem around the world. In the US, the Federal Emergency Management Agency (FEMA) has developed the National Flood Insurance Program (NFIP). Several large storms have put this agency severely in debt to an amount that exceeds $30 billion. This bankrupt program would benefit greatly from private capital working to reduce flood risk. In addition, many rivers have been cut off from their floodplains due to development, river incision due to poor upstream land management and levees. In these cases, several ecosystem services are degraded. Runoff tends to be flashier which leads to worsened flood conditions downstream and summer low flows tend to be lower. Other degraded ecosystem services can also include lower water quality, higher water temperatures, and degraded fish habitat.

A flood resilience bond seeks a win-win-win outcome. The first win is for the investor that gains a market rate return on their investment. The second winner are the multi-stakeholders who finance the bond with monthly cashflow payments. These entities are insurance agencies, water suppliers and hydropower operators who have been able to price out the benefit of the floodplain restoration project through various modeling exercises. Finally, the ecosystem benefits because a restored and intact river floodplain has been created.

CHALLENGES IDENTIFIED THAT THIS DESIGN ADDRESSES

Determining the value of the floodplain restoration will be extremely challenging. Stakeholders will be presented with a brand-new idea. The value of the restoration will need to exceed the cost of the monthly cash flow payments. The forest resilience bond that Blue Forest Conservation has developed is an innovative financing tool that really is a ground-breaking idea. The flood resilience bond is designed in many ways to mimic this bond.

This idea will only work if a significantly large enough area of floodplain can be restored. In other words, if the project only connects an extra acre or two of floodplain, then very little measurable benefits for the Phase 2 cash flow providing stakeholders will accrue. The GIS screening tool really is a cherry-picking exercise where sizable chunks of land can be set aside to flood when a flood does occur.

Landowners that are in the floodplain likely won’t be thrilled about hearing that their land will be flooded more often. They might need to be compensated.

Any investor that might invest in the bond will be doing due diligence. The bond must have rock solid numbers, risk assessment and contracted cash flow that make the deal even worth the time of the investor taking the time to look at the deal.

Ultimately, this design starts to address the disastrous debt that FEMA has accrued in its NFIP by lowering flood risk at no cost to FEMA and it provides private capital to fund river restoration.

RESOURCES I’VE IDENTIFIED THAT THIS DESIGN USESS

As an individual with an idea, I need foundation money to back this initial idea. A partner such as the Rockefeller Foundation would be ideal as they have backed Blue Forest Conservation and they have excellent contacts with banks and modelling firms. Given their understanding of the challenges and structure of the forest resilience bond, they would have valuable insight.

Phase 1 funding would also go to catastrophe modeling firms such as AIR Worldwide or RMS. They could look at flood scenarios before and after the floodplain restoration project and determine the savings in claims payment for insurance companies that have policy holders downstream of the project.

Phase 1 funding would also go to either a firm such as ESRI, or it could go to a university geography department. The purpose would be to develop a screening tool to identify potential floodplain restoration sites that are large enough for benefits to be accrued.

Phase 1 funding would also go to a bank capable of structuring the bond. The bank would provide the legal and financial expertise to vet the idea and identify potential funders.

Phase 1 could also involve a land trust or environmental NGO that might be interested in obtaining or managing the restored floodplain land.

Phase 2 would be to develop a flood resilience bond. Outside investors would put real money into the bond with expectation of a return on their investment. The stakeholders that are benefiting from the restoration project would be providing contracted cash flow into the special purpose vehicle. These stakeholders would include insurance companies selling flood insurance policies, hydropower operators benefiting from higher summer baseflows and water suppliers also benefiting from higher summer baseflows.

THE OPPORTUNITIES AROUND BUSINESS MODEL INNOVATION, MULTI-STAKEHOLDER PARTNERSHIPS AND FINANCING STRUCTURES THAT I’VE IDENTIFIED

The project would be outcome based. Measurable improvements in flood claim reduction and increased baseflow must be demonstrated.

The flood resilience bond involves multi-stakeholders in Phase 1 and Phase 2.

Floodplain restoration has typically been publicly funded. Private financing of restoration is a new and exciting idea. Private capital could change FEMA policy through the value creation in floodplain restoration.

NEXT STEPS TO PILOT MY DESIGN

I’m an individual with an idea and a love of rivers. I could approach the Rockefeller Foundation or the Hewlett Foundation and pitch them the idea. I could have conversations with ESRI or geography departments to develop a screening tool. Foundation backing with money in hand will allow me to approach modeling firms to spend time on their analysis.

 




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Simon Dixon writes an excellent piece (admittedly published January 2014) that summarizes some of his PhD efforts in England that looked at how adding woody debris to a river in smaller catchments might effect flood conditions downstream in a more urbanized setting.  The results seem to suggest that the answer is a classic ‘it depends’.  On the encouraging side, it appears as though allowing floodwaters to innundate floodplain forests can help.   To quote “the real take home message is the restoration of floodplain forests to entire “subcatchments” of the main catchment always decreases flood peak height after 25 years of growth, and can have dramatic effects.”  Three cheers for forested floodplain restoration and connectivity!

The piece is an excellent read as are the other posts in The River Management Blog.

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Well, it’s September and it appears as though this update was released in back in March.  In any event, the latest version of PeakFQ is now 7.1 and it is available for download here:

http://water.usgs.gov/software/PeakFQ/

Be sure to read the version history which will discuss the new functionality in the program.

You might also want to read about what the Subcommittee on Hydrology, Hydrologic Frequency Analysis Work Group’s piece on Determining Flood Frequency using Expected Moments Algorithm here:

http://acwi.gov/hydrology/Frequency/b17_swfaq/EMAFAQ.html

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I live in Massachusetts and really am not terribly knowledgeable about Florida surface water hydrology. I do know that it is a flat state, it has karst geology and that groundwater plays an important role.  I lived in Northern California for a number of years and spent a good bit of time reviewing USGS gage data. The coastal terrain tended to be steep and storms off the Pacific were capable of dropping significant amounts of rain.  The first time I saw a gage’s stage reading increase by over 15 feet in less than a day I was rather surprised, but over time I became more comfortable seeing such rapid stage increases.

Florida recently experienced some staggering amounts of rainfall. I heard reports indicating 22 to 26 inches of rain falling. As such, I had to go to the USGS NWIS Florida site to get a handle on how the rivers were responding.  As of this writing (May 1st, 2014) a number of gages are currently coded in black which the USGS labels as ‘High’). The Shoal River response caught my eye as it reminds me of responses that look like a Humboldt County California gage might look after a Pacific storm hits.

The Shoal River near Mossy Head (drainage area 123 mi2) was running at 348 cfs (2.8 csm) the morning of April 29 and peaked during the late afternoon on April 30 at 7580 cfs (61.6 csm) .  You can also see that the USGS sent hydrographers to the gage during just prior to the peak. Well done USGS and I hope that life and limb were not risked to obtain these data.

348 cfs to 7580 cfs in a little over a day and a half

348 cfs to 7580 cfs in a little over a day and a half

The stage change in 39 hours was just shy of 14 feet!

Nearly 14 feet of stage change in a day and  half

Average stage increase on the rising limb on April 30 was 8.4 in/hour

As impressive as this storm was, the historic data at this site indicate five events that were larger than 8,000 cfs. Even though roughly two feet of rain fell, other storms and antecedent conditions in past have led to even greater storm runoff.

April 30th flood will be the new flood of record

The data indicate five previous floods that were larger

As fascinating as I find these data, this is the classic case of what I refer to as the “hydrologist’s dilemma”.  We find these rare events exciting and interesting, yet at the same time, many people are suffering and are experiencing a life changing natural disaster.  It goes without saying that my thoughts and prayers are going out to the people in Florida who are now facing the challenge of a post flood situation.  May your fellow neighbors, place of worship, elected officials, local businesses and insurance companies all be a source of inspiration and may you be a more flood resilient community in the end.

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AIR Worldwide has just released a special edition of it’s newsletter  that highlights some of the challenges to the private flood insurance market in the US.  Here they are:

“The first challenge is the market itself. Because of the U.S. Government’s heavy involvement, the private flood insurance market has not been attractive to insurance innovators and pioneers. The market still has to fully embrace flood as a peril that can be insured in a profitable way—an opportunity that AIR’s new flood model can help realize.

A second challenge is the very size of the U.S. AIR has overcome this challenge with a state-of-the-art precipitation model that couples a global circulation model with a regional numerical weather prediction model to produce realistic precipitation patterns.”

As I wrote previously, the National Academies Press released its book Mapping the Zone, a key recommendation was the acquiring high resolution  elevation data (e.g. LIDAR).  AIR Worldwide is adding to the conversation by taking a forward looking approach and doing it’s best to predict likely precipitation regimes.

The dynamic here is rather interesting.  FEMA has changed its flood insurance premium policy in 2012 due to the Biggert-Waters act.  In some case, flood insurance premiums are skyrocketing, such as in some coastal areas that were hit by Hurricane Sandy.  Properties located within floodplains are also affected by this policy.  Obviously, no one has a crystal ball, but I am interested in hearing what people think some trends could be with respect to existing home and new homes being built within floodplains.  Historically, I would completely agree that FEMA has been heavily involved in the private insurance market.  With Biggert-Waters now in affect, subsidies being eliminated and premiums going up, it’s not clear to me how large FEMA’s involvement with distorting price will be with respect to influencing flood insurance premiums.  Not only will Biggert-Waters have a large effect on the private insurance market, but it seems as though there will have to be some real on the ground changes in land use.  I suspect many homeowners and businesses located within a floodplain will now be motivated to take a harder look at various flood proofing measures.  FEMA’s list of retrofitting measures includes raising a property’s elevation, wet and dry floodproofing, relocation, constructing levees and floodwalls and demolition.   Now that premiums are increasing substantially, I’m curious to know if demolition or abandonment might become more prevalent.

The property casualty insurance market isn’t an area I’ve covered too much on this blog, but given the damage that floods induce on people and fluvial and riparian ecosystems, it seems like a topic worth some review.  Currently, the Property Casualty Insurance Association of America is having their annual meeting in Boston.  For Twitter followers, the #PCIAM20123 hashtag might be of some interest.

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This looks like a great resource for water resource managers, urban planners and hydrologists:
http://hydrology.rice.edu/index.html
T
hank you to the authors Dr.  Bedient, Dr. Huber, and Dr. Vieux

 

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Two water related organizations are planning conferences in Hartford, CT in June 2013.

The Association of State Floodplain Managers has scheduled its annual conference for June 9-14.  My former employer, Milone & MacBroom, will be participating in the conference has terrific and knowledgeable staff that will be engaged in the following events:
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Monday, June 10

WORKSHOP: Recovering From Large Floods, 8:00 AM to Noon

James MacBroom, P.E., and Roy Schiff, P.E., Ph.D., will lead a dynamic workshop focusing on post-flood assessment, design, and construction using specific examples from our work in Vermont and New York during the 2011 and 2012 hurricane seasons. In addition to short lectures, interactive activities will be conducted to help attendees gain experience in identifying risks and strategizing flood recovery efforts.

FIELD TOUR: Coastal Connecticut, 8:00 AM to 1:00 PM

Join David Murphy, P.E., CFM, for a tour of neighborhoods in Guilford facing problems relating to sea level rise and recent storm surges that are each pursuing different methods of adaptation. The tour will continue to Madison with a stop at the state’s premier Hammonasset Beach.

Tuesday, June 11

CONCURRENT SESSION: Building a Community Coastal Resilience Plan in Guilford, Connecticut, 1:45 PM

David Murphy, P.E., CFM, will assist the Town of Guilford in discussing the town’s community coastal resilience planning efforts and the results, including adaptation strategies that are already being implemented.

Wednesday, June 12

FIELD TOUR: Coastal Connecticut, 8:00 AM to 1:00 PM

The coastal tour from June 10 repeats on June 12.

CONCURRENT SESSION: Soliciting, Screening and Selecting Mitigation Projects Part II: When the Process is Repeated After a Disaster, 1:30 PM

David Murphy, P.E., CFM, will share his experience in evaluating and prioritizing competing hazard mitigation projects that were developed in Western Massachusetts following the floods of Hurricane Irene.

Thursday, June 13

CONCURRENT SESSION: Two Floodplain Restoration Case Studies, 10:30 AM

Roy Schiff, P.E., Ph.D., will discuss two floodplain restoration projects he completed in Vermont.

CONCURRENT SESSION: Flood Mitigation and Economic Development: Meriden’s Journey to the 21st Century, 4:00 PM

Nicolle Burnham, P.E., CFM, and the City of Meriden will present the Harbor Brook Flood Control and Mitigation project, which includes three miles of channel improvements and daylighting 1,700 feet of culverted channel through the city’s downtown.
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The other conference being held in Hartford is sponsored by the American Water Resources Association which is organizing a specialty conference on environmental flows.

I won’t be able to attend either event. I have taken the approach of directly contacting presenters. It’s usually pretty easy to obtain a presenter’s email address, I then ask them for their PowerPoint poster or slides, sometimes there is an associated paper, and almost without exception, I have been able to receive the information I requested. Generally speaking, presenters seem to be happy when someone shows interest in their work and are asking for follow up information.

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