Financial barriers include upfront costs and those associated with the maintenance of adaptation measures, as well as the availability and flexibility—or lack thereof—of funding sources. Drinking water, wastewater, and stormwater infrastructure are in urgent need of repair because many systems have outlived their intended lifespan. Therefore, it is hard for an adaptation project, which is likely not required for regulatory compliance and that has high up-front costs but the potential for long-term savings, to compete with a capital project addressing a near-term need. Priority must be given to projects and upgrades that keep a system functioning and in compliance; however, without the appropriate climate information and established resiliency standards, the opportunity is lost to make these assets resilient to sea level rise and other climate impacts. Improved and standardized cost-benefit-analysis formulas that include the cost of inaction (e.g., damages from an extreme storm) are needed to make the business case for adaptation investments.
Given the interconnected nature of drinking water, wastewater, and stormwater infrastructure and the fact that many assets are underground, changes to these systems can be extremely expensive. For example, it is generally seen as cost-prohibitive to dig up and raise a gravity-fed stormwater or wastewater system that is vulnerable to rising seas, which therefore limits the solutions available. Additionally, bond rating agencies, an important player in municipal utilities’ ability to borrow funds, are now considering downgrading bond ratings if the municipality is not actively preparing for climate change. While this development hopefully incentivizes climate adaptation planning, a city or utility behind in this work could have a limited ability to borrow the funds necessary for adaptation projects or building staff capacity.
An inherent flaw in the funding structure of most utilities further exacerbates the financial barriers outlined above. Unless the utility is a private for-profit company, generally all operational and capital funds are generated by a fee or rate based on usage; there is no profit. However, usage has been decreasing for several reasons. With climate change adding to water scarcity issues in many parts of the world, there has been a massive effort to conserve water. In addition to successful conservation campaigns, appliances like low-flow toilets and high-efficiency washing machines have meant that people use less water. Yet the price to treat and distribute drinking water or treat wastewater remains fixed—or in many cases has increased due to climate change and other external factors. Raising rates can be a hardship for socially vulnerable communities who are also disproportionately impacted by climate change, thereby bringing equity issues to the forefront of these challenges.
The following leading practices are in the action area of FINANCIAL and are described below:
- Develop a funding strategy that includes a menu of funding options.
- Consider the cost of inaction when making the business case for adaptation.
- Conduct cost-benefit and alternative analyses that consider climate change and equity or consider alternative frameworks to guide investments and capital planning.
- Factor maintenance costs of engineered solutions into strategic decision-making.
- Invest in a regional approach rather than individual projects.
- Leverage funds for purchasing land where ownership issues prevent action.
- Develop a dedicated funding source for adaptation and resilience projects.
- Become familiar with funding options available for adaptation and hazard mitigation projects. State and federal governments provide a range of grants and loans that can be used for project scoping or implementation.
The examples in this section include icons depicting when they represent stormwater, drinking water, or wastewater utilities.
Develop a funding strategy that includes a menu of funding options.
Funds for large projects are unlikely to come from one place. There needs to be multiple streams of revenue or options for funding (e.g., federal programs, state bond programs, parcel taxes, and grants). Being cognizant of the timeframe of receiving grants and when and how the funds are available once received is essential. The turn-around time and resources necessary to submit grant applications are important factors to integrate into a funding strategy and can be helpful when creating an implementation plan and expected timeline for a project.
San Francisco's Planning Department developed a funding strategy for its Islais Creek project, which addresses the impacts of sea level rise along San Francisco’s Islais Creek shoreline. Funding and financing strategies are organized into near-term and long-term categories; are accompanied by implementation details; and can be re-organized by project type, geography, and project cost.12 The Islais Creek funding strategy document also contains a number of key considerations and challenges for the implementation of adaptation strategies. With regards to funding considerations for future projects, the document recognizes that the financing landscape is variable, depending on politics and the economy, and is constantly changing. Some recommendations mentioned to address this challenge include (1) it would be "more efficient to wait to pursue specific funding and financing strategies for longer-term projects"; (2) "consider implementation mechanisms and revenue sources that provide flexibility to adapt over time to meet changing needs"; (3) leveraging an adaptation pathways framework; and (4) "prioritize opportunities to create long-term revenue streams" (AECOM 2021, pg. 13).
To address its coastal flood risk, which will increase with sea level rise, the City of Punta Gorda, Florida, relocated its public works facility inland to a less flood-prone area, installed living shorelines, is building a new emergency center at a higher elevation with storm-resistant features, and upgraded its stormwater management system by installing tidal flex valves to reduce tidal flooding (Taylor Engineering, Inc. 2019). Despite the success of these implemented resilience projects, securing funds for the design, implementation, and maintenance emerged as a persistent challenge. The City continues to face challenges in obtaining adequate funding to support efforts and implement future projects. Much of the funding available to them for coastal adaptation is for planning grants or is time-sensitive (e.g., state or federal funding that must be spent down in a year). There is a need for multi-year funding for permitting and engineering design. As part of its Adaptation Plan update in 2019, the City created a summary of external funding alternatives.13
Consider the cost of inaction when making the business case for adaptation.
How much would it cost if adaptation strategies were not implemented? What would this mean for local economic activity and how can this impact be quantified? At a utility, what is the cost of inaction as an asset or system becomes more vulnerable to sea level rise over the course of its useful service life?
In 2012, the Cedar Key Water and Sewer District (CKWSD) experienced first-hand the cost of inaction to implement adaptation strategies. This small groundwater-dependent coastal water utility in Florida experienced a saltwater intrusion event that led to the utility imposing a residential drinking water ban. The treatment plant’s existing units at the time were unable to desalinate the incoming groundwater. The utility considered importing water from 22 miles away but deemed this plan unfeasible given the time and costs required. Recurring costs associated with renting reverse osmosis (RO) units persuaded the CKWSD to take action and retrofit the treatment plant to support desalination and purchase two RO units for the plant. For CKWSD, the cost of inaction would have been greater in the long-run than the cost of implementing adaptation strategies now (i.e., purchasing its own RO units and implementing retrofits). Capital costs were covered through federal and state grants, and user rates were raised to support operational costs (Saetta et al. 2015).
Conduct cost-benefit and alternative analyses that consider climate change and equity or consider alternative frameworks to guide investments and capital planning.
Cost-benefit analyses and alternatives analysis are intended to help align priorities, understand what is feasible, and better guide investments. However, traditional cost-benefit analysis scoring measures usually do not consider equity concerns or incorporate the value of other social and/or environmental resources. Instead, they focus primarily on financial metrics, leading to a bias for areas with high property values and excluding under-resourced or underfunded communities. Revised scoring measures that expand the definition of "benefit," (e.g., Triple-bottom Line Cost Benefit Analysis) and assessments that consider costs against a changing risk profile due to climate change can help address the limitation of traditional analyses and prioritize equitable solutions.
New York City, New York, is addressing sea level rise through Climate Resiliency Design Guidelines, retrofitting, and resiliency plans. New York City's Climate Resiliency Design Guidelines provide instructions on how to make assets more resilient to future climate risks, depending on the asset type, location, useful life, and climate hazard. While the cost of implementing design guideline requirements is often absorbed in the overall costs for new projects, retrofitting existing infrastructure can be costly and difficult to prioritize.
To address this challenge, the City conducts cost-benefit analyses to make informed decisions about which adaptation strategies will have the highest impact. The New York City Department of Environmental Protection's NYC Wastewater Resiliency Plan lays out details to harden wastewater treatment plants against storm surge by evaluating the risk of each asset, future climate projections, and the adaptation options available.
The plan has been highly successful in upgrading the wastewater infrastructure most at risk from storm surge. In addition, the City is increasing public outreach to better communicate the risks from flooding and developed stormwater resiliency maps that identify areas vulnerable to flooding from heavy rain events compounded by sea level rise.14
New York City, New York is using the Envision framework, which helps decision-makers consider specific criteria (e.g., "expected useful life")15 and prioritize cost-effective, long-term infrastructure investments. The framework uses a rating system with 64 indicator credits in 5 broad categories (e.g., quality of life, leadership, resource allocation, the natural world, and climate and resilience) to assess and ultimately improve the sustainability, resilience, and equity of infrastructure projects in the city (Institute for Sustainable Infrastructure 2018).
Factor maintenance costs of engineered solutions into strategic decision-making.
It is critical to consider both upfront costs for design and construction and long-term maintenance costs of infrastructure/engineered solutions. In general, significant capital investment is required for the maintenance of water infrastructure adaptation solutions (Azevedo de Almeida & Mostafavi 2016). Hard infrastructure (i.e., seawalls) requires particularly high maintenance costs and may also exacerbate erosion problems, thereby requiring continual reinvestment (Donner & Webber 2014).
Invest in a regional approach rather than individual projects.
Creating a holistic suite of projects in which to invest helps to spread risk and cost across a wider geographic area and set of resources (e.g., funding, time, materials). This will also help to ensure that investments reflect how a singular project promotes or detracts from regional sea level rise resilience efforts.
The Florida Water and Climate Alliance (FloridaWCA) is a conglomeration of stakeholders from municipalities, water management districts, public utilities, and academia in Florida. While this partnership of science stakeholders formed on a voluntary basis without a budget, they were able to make a value case for regional coordination and secured funding from multiple sources to advance the co-production of research and planning. Between 2010 – 2020, FloridaWCA received funding through the Sectoral Applications Research Program of the National Oceanic and Atmospheric Administration (NOAA) Climate Office, National Aeronautics and Space Administration (NASA), the Southeast Climate Adaptation Science Center, Tampa Bay Water, and Peace River Manasota Regional Water Supply Authority. Funds were used to enhance regional understanding of climate change impacts through various activities, including workshops, webinars, and research projects (FloridaWCA 2022). FloridaWCA has been instrumental in increasing coordination, decision support, and resource planning among the water sector in the region. FloridaWCA learned that "…the careful design of such engagement can strengthen the capacity of organizations…", particularly for operational and long-term water resource planning and management (Mirsa et al. 2021, pg. E379). FloridaWCA is an example of a successful regional partnership and plans to continue to grow as an organization, moving further toward the implementation of adaptation strategies.
Leverage funds for purchasing land where ownership issues prevent action.
Privately owned coastal properties are not only at extreme risk from storm surge but can prevent meaningful adaptation of the coastline to protect the wider community. One solution that both moves people out of harm’s way and allows for future coastline adaptation is for municipalities to buy coastal land at risk from sea level rise and storm surge so that it can serve as a buffer to upland communities. Buyouts for properties in a highly desirable and highly valued coastal neighborhood are often a challenging and politically charged endeavor. This strategy is not likely to be led by a water utility, but support for managed retreat strategies may be important because it may be the most viable option to protect human life and infrastructure investments in the long term.
The New Jersey Department of Environmental Protection's Blue Acres Program was initiated in 1995 as a way for the state to acquire land in flood-prone areas, particularly those that have been damaged by storms or have the potential to serve as a protective buffer to minimize flooding in nearby upland properties. The program expanded in 2012 after Superstorm Sandy severely damaged many homes and communities along New Jersey's coast and floodways. The state sought out properties that were damaged during Superstorm Sandy, as well as those that could increase the connectivity of previously acquired parcels. Once acquired through the program, the properties remain conserved as open green space into perpetuity, and the land is maintained by local municipalities and serves local communities by providing protection from flooding and space for recreation. Overall, the program has acquired over 700 properties in 20 municipalities through buyouts. These buyouts are made possible through a combination of funding from FEMA, the U.S. Department of Housing and Urban Development, and a portion of New Jersey’s state corporate business tax (NJDEP 2021).
Develop a dedicated funding source for adaptation and resilience projects.
Funding constraints are one of the most frequently cited reasons for inaction on climate change. While federal funds to support infrastructure resilience are becoming more available to municipalities through the Infrastructure Investment and Jobs Act, many grants or funding sources are restrictive in terms of sustained funding over time to maintain projects. Building a dedicated climate adaptation funding source within a water utility or city (through taxes and/or fees) can guarantee long-term adaptation funding stability for the utility over time but also garner more climate change awareness in the community at large.
As a means to address the common issue of lack of dedicated funding for adaptation-related projects, the Town of Corte Madera, California, has a Measure F sales tax that provides unrestricted general revenue for purposes such as addressing flooding and sea level rise, roadway maintenance and upgrades, and disaster preparedness and has been used to improve flood control infrastructure in the town. The Measure F sales tax extended Corte Madera’s existing sales tax rate from 0.5 cent to 0.75 cent and repealed the Town’s existing storm drainage special tax (a $98 annual charge per residential unit or 1,000 commercial square feet). This means that residents and businesses decrease their annual bills by $98 and the Town will shift revenue generation from the storm drainage tax (~$600,000/year) to the new sales tax measure (0.75 cent rate) that could provide $3.5 million for general revenue purposes per year. Since the revenue generated from Measure F can be used for any capital improvement projects as unrestricted general revenue, local storm drainage systems will not suffer from the loss of the storm drainage special tax. In fact, the increase in revenue from Measure F opens up the possibility for more projects, repairs, and improvements. The implementation of this financial revenue stream has funded repairs to the Golden Hind Pump Station, Marina Village levee enhancement, and repair and installation improvements to storm drain pipelines. Future funds will go toward the implementation of the Shorebird Marsh Pump Station improvements, including replacing grates, grate frames, and a pump enclosure. The funds will also go toward the town’s Climate Adaptation Plan (Town of Corte Madera 2018).
Become familiar with funding options available for adaptation and hazard mitigation projects. State and federal governments provide a range of grants and loans that can be used for project scoping or implementation, such as the Clean Water State Revolving Fund, the NOAA Coastal Zone Management Program, or FEMA’s Building Resilient Infrastructure and Communities (BRIC) program. In addition to financial awards, some programs provide technical assistance to support future grant application development.
Many federal agencies offer grants and programs to fund resiliency and adaptation projects, and an influx of funding will be available to water utilities through the Infrastructure Investment and Jobs Act in the coming years (2022–2026). While it sometimes is difficult and resource-intensive to apply for federal grants, dedicated time and effort can pay off if the proper grant is identified and a strong case can be made for the value of the project. It is common for water utilities to rely on consultants to help navigate the grant funding process, from identification of funding opportunities, to grant application development, to submission. However, if soliciting help from consultants is not feasible, there are several federal technical assistance programs that can provide support for application needs. For example, FEMA’s BRIC program offers a Direct Technical Assistance that can support communities that may not have in-house capacity for applying for BRIC grants. Make sure that your adaptation project is included in your local hazard mitigation plan, because this is often a requirement for federal grants.
One of the largest barriers to adaptation action for the Hampton Roads Sanitary District (HRSD) in Hampton Roads, Virginia, is the limited resources available to conduct research on sea level rise impacts to wastewater utilities and the measures needed to address such impacts. These technical issues make it difficult to convince stakeholders that enacting sea level rise and flooding adaptation measures is urgent. HRSD’s work is restricted by data limitations, uncertainty of future impacts, and finding the proper downscaling of climate models. The HRSD SWIFT (Sustainable Water Initiative for Tomorrow) project is helping the District to address some of these barriers by facilitating a climate change vulnerability and future planning study. In addition, SWIFT was created to produce a sustainable source of groundwater while addressing challenges such as sea level rise and saltwater intrusion. HRSD is funding SWIFT through a $700 million loan provided by the U.S. Environmental Protection Agency (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) and up to $500 million in funds from the State Revolving Loan Program (EPA 2021).
SWIFT a program consisting of 25 individual projects, with multiple projects starting now and others being initiated through 2030. The WIFIA funding is flexible in that HRSD can draw on the funds as needed and do not have to start paying interest until they begin drawing from them. This allows HRSD to leverage their state clean water revolving fund and use WIFIA to fund projects in tandem. In this way, HRSD can use more short-term financing to save money down the line. The EPA loan will not only sustain the SWIFT project, but also will create over 1,400 new jobs in the region and save taxpayers about $300 million in financing. These funds will cover about 70 percent of the cost for the project’s initial phase. Without this federal funding, HRSD would likely have to depend on bond financing, raise rates, and scale back projects. The project's development was prompted by the consent decree that requires HRSD and Hampton Roads localities to eliminate all sanitary sewer overflows, prohibit unauthorized discharges from sewage treatment plants, and develop a Regional Wet Weather Management Plan (HRSD 2022). The SWIFT project will inject treated wastewater into the Potomac deep water aquifer, which can protect groundwater from saltwater intrusion and help to reduce the rate that the land is sinking in the area. The innovative SWIFT project has been a successful way to allocate existing funds toward resilience, thereby building technical actions in eastern Virginia.17 18
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