200127 Commission Retreat ICF Business Case FINAL ocrnd1
J a n u a r y 2 7 , 2 0 2 0
Business Case Analysis
for the City of Miami Beach
Stormwater Resiliency Program
Today’s Outline
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Project Overview
Project Process
Conclusions & Next Steps
Big Picture Results
Project Overview
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Topline Conclusion
This pilot study has demonstrated that benefits of the City’s targeted
investments in stormwater and infrastructure improvements
significantly outweigh their costs, and provide substantial benefits to
the residents, businesses, visitors, and government of Miami Beach.
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Understand and communicate the business case for stormwater
resilience investments in Miami Beach through robust data analysis
and state-of-the-art modeling.
Overall Goal
▪What is the effectiveness of the city’s planned
infrastructure improvements (e.g., raising roads,
increasing drainage capacity) at reducing flood risk?
▪How much would additional private sector
investments in flood mitigation reduce flood risk?
▪What is the effect of these investments on property
values?
▪What are the other benefits of reduced flooding?
▪Overall, what is the business case for public and
private sector stormwater resilience investments?
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Business case
components
▪Expected losses/property
damage
▪Property values
▪Insurance premiums
▪Property tax revenues
▪Tourism revenues
▪Operational/response
costs
▪Traffic disruptions
▪Business closures
Key Questions to Answer
▪Technical analysis products, model results
–Detailed flood reduction modeling for proposed First Street investments and hypothetical
private home
–Catastrophe risk modeling of the entire city
–Property value models to estimate benefits of resilience investments to homeowners
▪Modeling framework
–Scalable, repeatable process to explore alternate investment and risk scenarios
–Expandable to entire city
▪Business case summary materials
–For example: 4-pager; presentation materials
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Ultimate Outcomes
Our Interdisciplinary Team
Internationally recognized consultants in climate adaptation and economics.
•Project lead
•Led property value modeling and other economic analyses
World leaders in catastrophe modeling and risk assessment.
•Performed citywide risk modeling, including expected damages/losses
•Provided expertise on flood risk effect on insurance premiums
Communication experts and engineering consultants in resilience and adaptation.
•Developed adaptation strategies for individual homeowners
•Coordinated and led communication efforts of the project
Experienced stormwater and infrastructure modelers, designers, and engineers.
•Performed integrated flood modeling of detailed stormwater investments
Center for Environmental Solutions focused on community resilience.
•Supported property value analysis and provided other advisory services
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Project Process
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Neighborhood-level
Business Case
(ICF –Task 6)
Individual Property
Business Case
(Brizaga -Task 5)
City-wide Business Case
(ICF –Task 7)
Catastrophic Risk Model
(AIR –Task 2)
Hedonic/Property Value Model
(ICF -Task 4)
Project Process
Data Collection
Communicate the Business Case
Integrated Flood Model
(Kimley-Horn –Task 3)
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▪This study evaluated the business case for the City’s 2013
stormwater improvement program policies and plans
–This includes an assumption of 1 foot of sea level rise from 2013 (nominally a 30-year
planning horizon)
▪We evaluated proposed investments against the following scenarios (with
and without sea level rise):
–King Tides
–5-year, 24-hour rainstorm (occurring at King Tide)
–10-year, 24-hour rainstorm (occurring at King Tide)
–Moderate Hurricane (~25-year storm surge and rainfall)
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Key Assumptions & Scenarios Evaluated
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*Not to scale.
Raised
Road
(1 foot)
Increased
Stormwater
Capacity
groundwater
Key Assumptions & Scenarios Evaluated
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Approach:
▪AIR ran its Tropical Cyclone model to estimate
expected losses from storm surge with and
without sea level rise.
▪Developed an algorithm to model effect of
increased sea levels on surge across the city.
Results:
▪Average annual loss nearly doubles in the
sea level rise scenario.
▪Dramatic increases at frequent return periods
due to the introduction of new events that
previously would not have caused loss (due
to sea level rise).
▪25-30% increase in expected loss from sea
level rise for most severe events.
Return
Period
Annual
Probability of
Equal or
Greater Loss
Current
Sea Level
Scenario
Mid-Century
Projected
Sea Level
Scenario Percent
Change
Modeled Loss Modeled Loss
(USD Millions)(USD Millions)
Average Annual Loss 37.8 74.2 96%
10 10%--8.6 n/a
25 4.0%404.7 790.4 95%
50 2.0%748.5 1,128.3 51%
100 1.0%993.7 1,424.3 43%
250 0.4%1,270.1 1,752.2 38%
500 0.2%1,479.5 1,978.3 34%
1,000 0.1%1,687.5 2,192.1 30%
5,000 0.02%2,151.6 2,768.8 29%
100,000 0.001%3,144.6 3,951.5 26%
Catastrophic Risk Modeling
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Approach:
▪Used the Interconnected Pond Routing version 4 (ICPR4), an integrated 2-dimensional surface
and groundwater modeling software.
–Captures combined effects of precipitation, tide levels, and groundwater levels
▪Used ICPR4 to estimate flood depths for a King Tide, 5-year, and 10-year precipitation events,
and a 25-year moderate hurricane (precipitation and storm surge), with and without public
investment, and with and without sea level rise.
Results:
▪The modeled improvements reduce flooding, with some areas of the First Street neighborhood
seeing a 1’ reduction in water depth during the 5-year rainstorm.
▪These improvements draw down the water enough to eliminate flooding of the Finished Floor
Elevations of many of the properties in the First Street neighborhood during the 5-year and
10-year rainstorms.
Integrated Flood Modeling
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Current Conditions
(No Investment, No SLR)
Ki
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Max Depth
Baseline
(No Investment, 1’ of SLR)
Public Investment
(Investment, 1’ of SLR)
1 2 3
4 5 6
ICF
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Building ID
Finished Floor
Elevation
(ft NAVD 88)
Baseline (with sea level rise, no investment)Public Investment
Maximum Water Elevation
(ft NAVD 88)
Maximum Water Elevation
(ft NAVD 88)
King Tide
5-year
Heavy
Rainfall
10-year
Heavy
Rainfall
Moderate
Hurricane King Tide
5-year
Heavy
Rainfall
10-year
Heavy
Rainfall
Moderate
Hurricane
1 6.48 2.7 2.8 2.8 6.4 2.7 2.8 2.8 6.2
2 6.48 2.7 3 3.1 6.4 2.7 3.1 3.1 6.1
3 6.48 2.7 3 2.9 6.2 2.7 2.7 2.7 6.2
4 2.79 2.7 3 3.1 6.3 1.6 1.9 2.2 6.4
5 2.79 2.7 3 3.1 6.4 2.3 2.6 2.6 6.1
6 2.79 2.7 3 3.1 6.3 2.3 2.9 2.9 6.1
7 2.5 2.7 3 3.1 6.5 0 2.8 2.8 6
8 3.05 2.7 3.1 3.1 6.3 0 2.1 2.7 6.2
9 2.7 2.7 3.1 3.2 6.3 0 2.1 2.7 6.2
10 2.96 2.7 3.1 3.1 6.3 0 2.1 2.7 6.2
11 3.3 2.7 3.1 3.2 6.2 0 2.4 3 6.1
12 4.49 2.7 3 3.1 6.4 2.4 2.5 2.6 6.2
13 3.59 2.7 3 3.1 6.3 2.6 2.6 2.6 6.2
14 2.85 2.7 3 3.1 6.3 2.6 2.5 2.5 6.2
15 3.37 2.7 3 3.1 6.3 2.6 2.5 2.5 6.2
16 2.85 2.7 3 3 6.4 2.1 2.4 2.7 6.2
17 2.85 2.7 2.8 2.9 6.4 2.6 2.1 2.7 6.1
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0-6” of flooding
Example:
King Tide Flooding on Sept. 30, 2019 (2.1’ Tide)
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*Not to scale.
Dry
road
Reduced
flooding on
property
Water does not
flood home
groundwater
3.1’2.7’
Home is at 2.9’
Example:
10-year, 24-hour storm (with sea level rise)
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Approach:
▪Developed a hedonic pricing model to estimate effects of flood risk and infrastructure
investments on residential property values in Miami Beach specifically.
▪Developed models for: all homes, condos-only, standalone-homes only.
▪Included independent peer-review.
What is a
Hedonic Model?
Statistical analysis technique
to isolate how much people
are willing to pay
for a particular characteristic.
Property Value Model
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Home Value
Square footage
No. of bedrooms
Nearby amenities
(waterfront, historical
districts, golf courses,
highways)
Neighborhood
Lot size
Building age
Grandfathering
status of flood
insuranceWalking and
transit
accessibility Nearby road
elevation
Elevation
Sale year
What is a Hedonic Model?
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Home Value
Square footage
No. of bedrooms
Nearby amenities
(waterfront, historical
districts, golf courses,
highways)
Neighborhood
Lot size
Building age
Grandfathering
status of flood
insuranceWalking and
transit
accessibility Nearby road
elevation
Elevation
Sale year
What is a Hedonic Model?
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Home Value
Square footage
No. of bedrooms
Nearby amenities
(waterfront, historical
districts, golf courses,
highways)
Neighborhood
Lot size
Building age
Grandfathering
status of flood
insuranceWalking and
transit
accessibility
Elevation
Sale year
What is a Hedonic Model?
Nearby road
elevation
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Less
Elevated
More
Elevated
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▪Both factors –parcel elevation
and road elevation –positively
affect property values
▪Home prices are higher for parcels
at higher average elevations
–8.5-11.5% increase per foot
▪Home prices are higher for parcels
with more elevated surrounding
roads
–4.9-14.1% increase per foot
▪Average parcel and road elevation
increases have greater price
effects when the initial average
parcel or road elevation is lower
Results
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▪Use the models to estimate
home value improvements
from infrastructure
investments
▪Sunset Harbour application:
–Using “Condos Only” model –nearby
homes primarily condos
–1,349 condos with a total assessed
value of $346.12 million
–Estimated effect of road elevation
project on assessed condo values:
11.9% increase, or $41.2 million
Sunset Harbour post-elevation (Source: Wade Trim)
Hedonic Model Application: Sunset Harbour
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without public
investment
No Action Scenario
Flood Risk and Investment Effects on Property Values
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with public
investment
Investment Scenario
Flood Risk and Investment Effects on Property Values
Big Picture Results
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Neighborhood-level
Business Case
(ICF –Task 6)
Individual Property
Business Case
(Brizaga -Task 5)
City-wide Business Case
(ICF –Task 7)
Catastrophic Risk Model
(AIR –Task 2)
Hedonic/Property Value Model
(ICF -Task 4)
Project Process
Data Collection
Communicate the Business Case
Integrated Flood Model
(Kimley-Horn –Task 3)
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Applying the model results to the real-world using
the unique formula created for Miami Beach.
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(1)
What does this mean for
an individual homeowner?
*2018 median assessed value for single-family homes in Miami Beach with a square footage between 2,000 and 3,000
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▪One-story single-family slab-on-grade home
with no basement
▪2,500 square feet
▪Assessed at $493,695*
▪Finished Floor Elevation of 2.9 feet NAVD88
(First Street median)
▪Property elevation is 7” (one step) below the
Finished Floor Elevation: 2.3 feet NAVD88
▪Flood elevations based on First Street median
–Public investments remove flooding to the first-floor
elevation of home from the 5-year and 10-year event
Insurance Coverage
•Pre-FIRM in AE Zone
•$250,000 Coverage
•$50,000 Contents Coverage
•25% CRS Discount
Analysis Assumptions
Complete Reconstruction
(with Elevation)
ElevatingFlood Protection
(Dry Flood Proofing)No Action
Adaptation Options Evaluated
▪Evaluated three different adaptation types: flood protection, elevating the
home, and complete reconstruction with elevation.
▪Examined cost and benefit of adaptation measures for the four storm types
relative to:
–Reduction in property damage –How much will the personal adaptation reduce flooding
(beyond the public investments) and how does that relate to reduced property damage?
–Home value increase –How much will the value of the home increase from reduced flood risk?
–Reduction in annual flood insurance premium –How much
will the annual flood insurance premium change based on
adaptation measures?
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3.6%
increase in
home value for each
foot of elevation for
single-family homes.
▪The City’s improvements reduce the flood risk to an individual
property but do not remove the need for individual adaptation actions.
▪City investments in the right-of-way increase property values by 4.9-
14.1% for each foot of additional road elevation. Lower elevation
properties see the greatest increase from elevation.
▪If you are reconstructing a home, elevating the home is a good
investment and the home would see a 3.6% increase in property
value for each foot of increase in elevation –outweighing marginal
cost to elevate.
▪Dry flood-proofing can be a cost-effective strategy for homeowners.
▪If insurance rates increase, individual property adaptation becomes
even more cost effective.
▪Personal adaptation is a vital component of Miami Beach’s resilience.
Key Findings
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(2)
What does this mean
for a neighborhood?
Costs:
▪Capital Costs: $8,200,000
▪Operations & Maintenance Costs: $205,000 per year
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Benefits:
▪Reduced property damage (per event): $1,300 -$204,000
▪Increased residential property value: $10,740,000
–Associated property tax revenue: $48,000 per year
▪Reduced insurance premiums: 7%
▪Reduced traffic-related disruptions: Relatively minimal in
this case
▪Reduced business closures: Relatively minimal in this case
Overall
Benefit/Cost
Ratio
1.28-1.31
Most benefits
accrue to private
sector
Evaluation of Proposed First Street Improvements
Costs:
▪Capital Costs: $960,000
▪Operations & Maintenance Costs: $70,000 per year
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Benefits:
▪Reduced property damage (per event): $2.8 M (hurricane)
▪Reduced insurance premiums: 17%
Evaluation of Private Property Investments in First Street
Overall
Benefit/Cost
Ratio
2.79
Higher than public
investments
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▪The City’s investments reduce flooding on the roadways, keeping them
drier and passable during King Tides, 5-year and 10-year rainstorms,
and reduce flooding on neighboring properties by over 1’in some
areas.
▪Resilience investments are beneficial from a societal perspective in all
cases. The largest benefits come from protecting property values and
the City’s tax base. Most benefits accrue to private property owners.
▪The analysis made conservative assumptions, and we believe the
benefits are underestimated. Despite this, the investments are cost-
effective.
Key Findings
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(3)
What does this mean for
the City of Miami Beach?
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▪If the City does not invest in the stormwater program, the damages
associated with sea level rise are significant.
▪Investments of at least $1 billion over the next 30 years would be cost-
beneficial to prevent surge-related flood damages.
▪In addition, raising roads to 3.7’ NAVD across the city could
$2B
for road elevation
and storm
protection would be
cost-beneficial
City-wide Business Case Summarized
conservatively increase property values citywide by
over $1 billion in assessed value.
–This is a $6.6 million annual increase in tax revenue to the city.
▪Therefore, city-wide public and private investments of
at least $2 billion would be cost-beneficial.
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▪Currently, flood insurance premiums are
established by FEMA and are subsidized, not
reflecting the actual cost of risk.
▪Insurance rates are expected to increase as
FEMA sets rates that are closer to actual flood
risk costs.
▪Insurers work with firms like AIR to understand
their expected Average Annual Losses (AAL)
and set rates accordingly.
▪AIR modeling shows that with one foot of sea
level rise from 2013, the average annual losses
from flooding will increase 96%.
▪Without adaptation this could mean a near
doubling in flood insurance costs.
▪In First Street neighborhood, public and private
investments would decrease AAL by 7% and
17%, respectively.
No action
With
resilience
investments
Insurance Impacts
Conclusions & Next Steps
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NeighborhoodIndividual Property Miami Beach
▪Less flooding
▪Fewer flood disturbances
▪Higher property values
▪More desirable
▪Increased home value
▪Reduced likelihood of flood
damage
▪Lower insurance rates
▪Stronger property value base
▪Well-protected citizenry
▪Better qualify of life
What Do These Investments Mean For You?
This pilot study has demonstrated that benefits of the City’s
targeted investments in stormwater and infrastructure
improvements significantly outweigh their costs, and
provide substantial benefits to the residents, businesses,
visitors, and government of Miami Beach.
Topline Conclusion
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Underway:
▪Develop 4-pager and share results
▪Publish hedonic analysis in peer-reviewed journal
Potential next steps:
▪Evaluate business case for additional adaptation scenarios
▪Create guide for homeowners with adaptation options, costs, and benefits
▪Apply integrated flood modeling City-wide to evaluate the effectiveness of
additional proposed infrastructure improvements
▪Develop a decision-support calculator to evaluate and compare investment
options
Potential Next Steps
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Thank you
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