LTC 515-2019 Business Case Analysis of the Stormwater Program - Mid-Point UpdateMIAMI BEACH
OFFICE OF THE CITY MANAGER
NO. LTC# 515-2019
TO:
DATE: September 24, 2019
LETTER TO COMMISSION
SUBJECT: Business Case Analysis of the tormwater Program: Mid-Point Update
I am pleased to share that we are halfway through the business case analysis of the
stormwater program. This is a first-of-a kind study to understand and communicate the
value of stormwater resilience investments from both a public infrastructure and private
property perspective. While routine updates have been provided at the Sustainability
and Resiliency Committee , preliminary results of initial modeling tasks are in, and staff
has had the opportunity to learn about how this information will serve as inputs to the
final products. This is a timely opportunity to share our progress and next steps.
1. What is a Business Case Analysis of the Stormwater Program?
A business case analysis examines the economic costs and benefits of an investment
decision. This includes not only direct impacts such as reductions in risk, but also
indirect impacts such as the long-term effects on the community . In this case, the city is
assessing the stormwater program, including drainage systems, pump stations , and road
elevation. It is assessing the ability of targeted investments to reduce direct impacts from
flooding , as well as impacts of recurrent flooding on property values and insurance rates.
The purpose of the analysis is to inform the city's decision making in order to protect
residents, businesses and visitors while prudently using available resources .
HURRICANE
FLOODING:
THE ISLAND
PUBLIC INFRASTRUCTURE
EFFECTIVENESS:
PIPES+ PUMPS+ ROADS
TIDAL FLOODING+ RAINFALL
+GROU NDWATER
+
ECONOMICS:
INVESTMENTS+
PROPERTY VALUES+
DAMAGE AVOIDANCE
--MIAMI
BEACH
UNIQUE
FORMULA
PUBLIC AND PRIVATE
COSTS AND BENEFITS
• Cities have a responsibility to maintain public infrastructure and public safety .
Miami Beach is investing hundreds of millions of dollars in infrastructure
improvements to reduce flood risk. Doing fact-based analysis to understand and
communicate the benefits through a business case analysis is an important step.
• Miami Beach has been working with a team of experts led by a national climate
adaptation planning consultant, ICF, to gather data, create models, and combine
information to understand the economic impact of reducing flood risk.
• The models include risk modeling, drainage modeling, and a type of economic
modeling, called hedonic modeling , to estimate impacts on real estate value.
• These types of models are traditionally used in industry silos. However, the
business case analysis combines them to understand the relationships among
the models, the stormwater program, and the effect on property values and
insurance.
Type of Modeling
Risk models are used by insurance companies and emergency managers to understand
how buildings and communities may be affected by significant storm events. For the
purpose of this project, the consultant team analyzed storm surge risk both with and
without sea level rise .
Stormwater and drainage models are used by engineers to understand how to modify
existing and construct new infrastructure to effectively drain water resulting from
precipitation events.
Economic models are used to understand relationship between certain variables and
property values. For the purpose of this project, the modeling estimates how
infrastructure investments alter the impact of flood risk on home values.
2. What have we learned so far? What's the news?
The city of Miami Beach is halfway through the business case analysis . The modeling
tasks are complete , and the city has preliminary results to share.
Results
Risk model -Without investments, storm surge losses increase with the addition of
one foot of sea level rise. The reasons are that: (1) storm surge flood depth increases;
(2) the flooding has a larger geographic footprint and affects more structures; and (3) a
larger number of events impact Miami Beach.
Drainage model -Public infrastructure investments reduce flooding levels. This
means that individual homeowners will require less investments to protect their homes.
Economic model -An economic model using actual home sales data over a 15-year
period was created specifically for Miami Beach using well-established practices. This
new tool, which has been carefully reviewed by experts not involved in our project (peer
reviewed) was used to evaluate the potential benefits of increasing road elevations and
improving drainage infrastructure for Miami Beach homeowners and the property tax
base. The model shows that:
-Home prices are higher for parcels with higher elevations . The model found that
home prices have increased by 8.6% to 11.5% for each one-foot increase in average
parcel elevation .
-Home prices are also higher for parcels with more elevated surrounding roads.
In the model, home prices increased by 4 .9% to 14.1% for each one-foot increase in
nearby road elevation .
3. Sunset Harbour Case Study
As a case study, the economic model was applied to the Sunset Harbour neighborhood .
A bottom-line conclusion of that analysis is that the value of condominium units within
0.1 miles of Sunset Harbour increased in total value by approximately $41 million or 12%
from before the project (pre-2017) to after the project's completion (post-2017)
specifically due to the road raising project when holding all other variables constant. The
neighborhood has also avoided potential damage from tidal flooding due to road
elevation. Since 2017, the tide levels would have resulted in flooding 44 times , when
comparing the lowest elevation prior to construction with the minimum road elevation
after construction.
It is important to note that while the model is based on sound research, as noted above ,
it is not designed to reflect or predict real estate values at a parcel level. A good analogy
for this is the field of healthcare. Valid research can point to reducing risk factors for
health concerns for a population , to reduce the risk of a heart attack, for example . Each
person's individual characteristics, however, will influence their individual health
outcomes.
4. Next Steps
Among the study's next steps will be to identify individual adaptation actions a
homeowner can take to protect their property and the individual benefits the homeowner
may see . Another step will be to examine the benefits and costs of public investments to
the stormwater system across an illustrative neighborhood in the southern part of the
city. Finally , the study will provide a city-wide view of the benefits and costs of
stormwater investments , taking into account both direct effects such as reductions in
f lood damages , as well as more indi rect effects on the city 's economy (Att achment 1 ).
These three studies will develop throughout the remainder of the year. Staff anticipates
that the full report will be complete in early 2020 (Attachment 2). At that time, it is
recommended that the consultant team and the City Commission meet in a workshop
setting to fully discuss findings and how to best use the work product.
This is a one-of-a-kind analysis that has required much time and effort from the
resilience team and engineers . I want to recognize and thank Deputy Resilience Officer
Amy Knowles for her patience and dedication managing this important and informative
project and Assistant City Engineer Luis Soto for his engineering expertise. If you have
any questions, please contact Ms . Knowles (amyknowles@miamibeachfl.gov).
JLM/SMT/AK
Scope of Work
• Expected annual coastal flood losses
wl and without SLR
• Extent and depth of surge under
moderate hurricane scenario
;.--:-:;-.. -:--;-: ------~ • "'--4 --~-.. ~--.. ----
...... -· .... ·-·~ . . ' ".
• Calculate costs and benefits of
resilience investment options for an
illustrative homeowner
• Documentation of user needs
• Data inventory
• Inundation extents/depths under baseline ,
public I private investment scenarios
-------~ "' ~ -·---· -~ --1
'
• Calculate costs and benefits of public
and private res ilience investment
options for First Street neighborhood
• Hedonic pricing model linking
property values to flood risk to
property and nearby roads
• Estimate citywide cost of inaction
and benefits of investment in
resilience
TB -Communicate
Business Case
• Communication products (2 -pager,
presentation)
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Data Collection T2: Citywide 5LR &
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Modeling T3: Integrated Flood
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Business Case T6: Neighborhood-Level Business Cas
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T7: Citywide Busine
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