Can Your City Afford a Natural Disaster?
Taylor Schenker is an analyst at Urban3, a partner organization of Strong Towns. Learn more here about how Urban3 can help your community unlock its financial potential to build a more sustainable future.
Flooding from Hurricane Ian in September 2022. If a natural disaster on this scale hit your city, would your tax revenue pay for the damage? (Source: Flickr.)
Towns and cities all along the United States’ coasts are struggling to maintain spread-out infrastructure—at the same time, rising sea levels and increasingly intense storms are shortening that infrastructure’s lifecycle. Every year, communities are devastated, taxable properties are damaged, and residents are left deciding whether or not to stay. Meanwhile, municipalities struggle to recover with lower tax revenue than last year. It's understandably overwhelming…unless you have a plan.
Let’s begin with what we know. A 2021 report released by the U.S. Government Accountability Office (GAO) revealed that although the Federal Emergency Management Agency (FEMA) has been collecting information about flood risks across America, it has not used that knowledge to ensure more Americans buy flood insurance. As a result, “less than 4% of homeowners in the United States have flood insurance coverage, so unsuspecting home buyers could likely lack awareness of their increased risk.” When fewer homeowners are insured, the cost burden of disaster relief assistance falls to state and federal agencies. As the frequency and intensity of disasters increase, our limited recovery resources will provide little in the way of actual relief.
At the same time, local governments are relying on a federal agency whose floodplain maps have not kept up with increasing risks. After Hurricane Harvey made landfall in Dickinson, Texas, in the fall of 2017, 50% of parcels filed an insurance claim. Of those parcels that filed insurance claims, 27.2% were located outside FEMA’s floodplain. Even worse, despite legislation in 2012 that instructed FEMA to factor the changing climate into their maps and projections, Rob Moore (director of the Water and Climate team with the Natural Resources Defense Council) shared that FEMA has only completed 8,000 flood maps since the legislation’s passing, and none of the maps include anything about climate projections.
In other words, relying on a federal agency to map every square foot of possible flooding in the United States is setting municipalities up for disaster.
(Click to enlarge. Source: Urban3 / Leah Handwerger.)
Many Americans have been conditioned to believe that a presidential disaster declaration will unlock resources to rebuild their community after a catastrophic weather event. While it is certainly true that homeowners whose primary residence is damaged during a disaster may get some financial assistance, FEMA support is limited to $35,000 per household and does not cover second homes or rental properties. Alicia Puente Cackley, director of financial markets and community investment for GAO, stated in a 2021 article for Inside Climate News that the assistance homeowners would get through a disaster declaration isn’t as much as what they would get by having insurance.
Even with insurance, protection is not guaranteed. After Hurricanes Katrina, Sandy, and Harvey, hundreds of homeowners took legal action against insurance companies who used policy loopholes to avoid paying. In the words of one trial litigation firm that sought relief for Texas homeowners, “State Farm, one of the insurance companies sued by policyholders after Katrina, only covered wind damage in a hurricane—and thus refused to offer relief for damages that seemed to be caused by storm surges or floods.”
Limited federal relief dollars may become available, but the likelihood of a protracted and costly legal battle with insurance companies remains high. For some residents, the cost of those battles, both financially and emotionally, may be too high to justify moving back. This suffocates a local government’s ability to fund its own operations and basic services through property tax revenues—a vicious circle that municipalities may not be able to reverse.
Instead of hoping that gridlocked federal bureaucracies and self-interested insurance companies will come to the rescue, citizens, businesses, and local leaders need to act while they still can. This begins by understanding how much taxable value, and thereby property tax revenue, exists in high-risk areas. Local governments in coastal areas can start planning for citizen migration from riskier areas close to the coast. Take into account planning and zoning changes that may be needed to absorb large numbers of people in unexpected areas.
Remember that gentrification and other second-order effects may occur once localized climate migration begins. If displacement is already a problem for some disadvantaged populations in your city, changes in local development patterns in response to climate change will likely make the problem much worse. Use this as an opportunity to consider how to remake the safest parts of your community to be more compact, walkable, and financially productive in a way that allows citizens to get back to “normal” faster.
For city leaders, financial continuity is critically important. If you’re like Dickinson, Texas, a small city in Galveston County just outside of Houston, you’re faced with rising costs of maintenance and recovery from increasing weather events—and that money has to come from somewhere. Urban3’s climate analysis showed that 96.2% of taxable acres in Galveston County or 90.6% of the city’s taxable value is located within FEMA’s 1% annual chance of flood zone. We were not surprised to hear that Dickinson City Council had already voted 5–1 in 2019 to increase the tax rate from 40.88 to 44.38 center per $100 in home valuation in the hopes that it would be able to bring in the same amount of revenue as the following year.
The 3.5-cent increase comes from “a formula that calculates the rate needed for the city to bring in roughly the same amount of property tax revenue as the year before.” While Dickinson has struggled with other financial challenges, it’s important to note that the taxable value of property in the city has significantly changed following Hurricane Harvey in August 2017.
(Click to enlarge. Source: Urban3 / Leah Handwerger.)
We know the funds in your municipality may not be readily available for any number of reasons: a tax base that has already begun to diminish, low reserves, or most commonly, a weak political appetite for a tax increase. If that’s the case, you should consider alternate funding sources. For Dickinson’s City Administrator Chris Heard, boosting tax revenue was important to put the city in a position to provide matching funds when and if federal drainage money is available to be allocated to the city.
“There’s billions of dollars available for flood mitigation [projects], and we need to make sure we have enough operating dollars to leverage federal funds that might come our way that require matching funds,” Heard told the Houston Chronicle. A tax increase in Dickinson now will hopefully lead to fewer tax increases for future residents—and makes it more likely that Dickinson will have future residents. Leaders like Heard already understand the magnitude of the choices they’ll have to make, financially and operationally, to restore essential services when disaster strikes them.
Does your community know what you need to do to afford essential services in the event of a flood, hurricane, or tornado? What else do you need to leverage potential disaster dollars? Our advice: Do the math. Figure out now how much your municipality stands to lose if your most productive parcels slip under water. Prepare your community for hard choices so that you can withstand a climate stress test on your balance sheet and raising taxes can remain a last resort. Learn how to adapt land use and zoning requirements so that future city revenue is protected by designing and developing taxable real estate in low-risk areas.
The U.S. Government estimates that in 2021, climate-related disasters “cost the nation an estimated $145 billion and killed nearly 700 people.” These numbers are daunting and difficult to fathom. In this case, however, as with most of Urban3’s work, knowledge is power. Allowing that knowledge to empower residents and leaders, not scare them, gives everyone a fighting chance to make their communities stronger and can be more financially resilient as disasters get more and more common.
Taylor Schenker is an analyst at Urban3, a land use economics and data analysis firm based in Asheville, NC. Academically trained as both an economist and urban designer at Clemson University, her work focuses on financial assessment through climate and social lenses, and data visualization. Schenker is also a professor of the Urban Foundations course in the Master of Resilient Urban Design program at the Clemson Design Center in Charleston, SC.
Prior to joining Urban3, Schenker worked as a landscape and urban designer focusing on resiliency issues in Charleston, SC. Past projects include Dutch Dialogues, the City of Charleston Land Use and Water Impact Assessment, and the Church Creek Flood Storage and Resiliency Project.