Tuesday, August 19, 2014

Miami-Dade's Master Plan

From Flickr: Veronique Lee

Miami has a Comprehensive Development Master Plan that is the holy scripture for all that is Miami-Dade County land management.  It is an immensely powerful document.

Its creation and management is generally guided by Florida Statutes Chapter 163.  But specific goals for the Master Plan are set out by County Ordinance Chapter 2, Article XV, Sec. 2-113.  The purpose of the Master Plan is mandated as  follows:      
It is the purpose and intent of this plan to assure for all people of Miami-Dade County safe, healthful, productive and aesthetically and culturally pleasing surroundings; to attain the widest range of beneficial uses of the environment without unreasonable degradation, risk to the health or safety, or other undesirable and unintended consequences; to preserve important historic, cultural and natural aspects of our national heritage; to maintain, wherever possible, environment which supports diversity and variety of individual choice; to achieve a balance between population and natural and man-made resources which will permit the high standards of living and a wide sharing of life's amenities, and to enhance the quality of renewal resources and approach the maximum attainable recycling of depletable resources. 
Obviously land management in the County is intended to meet a smorgasbord of goals.  Policies like these can be difficult to hold decisions makers accountable too because the goals are varied, perhaps conflicting and vague.  It is easy for a decision maker to point to any part of this legislation to argue the morality of their decision.

 Digging deeper into the Master Plan, one comes across naturally conflicting statements and double-speak.  For instance, the Master Plan's section on Land Use sets out the objective of development that encourages
"contiguous urban expansion when warranted, rather than sprawl."
Sprawl however, is generally synonymous with expansion of urban areas.   Galster et al (2001) define sprawl as,
a pattern of land use in a UA [urbanized area] that exhibits low levels of some combination of eight distinct dimensions: density, continuity, concentration, clustering, centrality, nuclearity, mixed uses, and proximity.  
 Despite the double-speak in the Master Plan objective, it is clear that the concept of sprawl or urban expansion is seen as in conflict with higher order goals developed by the County for the creation of the Master Plan.

Further, there is reason to believe that Miami land management planning is failing miserably at meeting those goals set out in by the Land use objective and the County mandate.  For one, Miami is seen to have one of the greatest degree of sprawl in the country (Galster et al. 2001).    As well, it is seen as one of the most stressful places to live.  It also, is notorious for its risk.

Can Miami-Dade County decision makers be held accountable to the public policies they are intended to uphold?

Update, later today:
Other scientific work by Lopez and Hynes (2006) indicates that Miami has very low sprawl.  Lopez and Hynes use a different process of defining and measuring sprawl.  Both Galster et al and Lopez and Hynes offer lengthy discussions about the difficulty of defining sprawl.

Without a clear definition offered as a policy goal, it is difficult to evaluate if a policy has produced sprawl or not.  This is akin to affordability issues in Florida insurance.  Without a quantitative definition of affordability, evaluation depends on the mood of the public.  

Public discontent about the environment, risk, sprawl, blight etc.  perhaps, has less to do with any of these specific ill defined goals than with discontent about land management practices.

Friday, August 15, 2014

Flood Risk and the Miami-Dade Urban Development Line

Several days ago I wrote about how Miami's climate change flood risk is the latest rational for development.  Much akin to the 1970's urban blight.   I'd like to follow up on the assignment of Commissioner Rebeca Sosa to the Sea Level Rise Task Force.

In 2013, Sosa voted to move the Miami-Dade's contentious Urban Development Line westward.

The switch from Ruvin to Sosa for chair of the Task Force is telling of Miami-Dade County's politics.   Ruvin has long been a proponent of environmental protection and specifically to that pertaining to the Everglades.  His Task Force report advocated for protecting the Everglades.  Sosa, clearly does not feel quite the same about the importance of leaving the Everglades undeveloped.


As shown in the satellite image above, the region is wetlands.  To build on it requires draining the land.  More recent residential development shows the land drained to create "waterfront" properties.  These are high flood risk properties.

The image below (taken from this report) shows regions of Miami-Dade and the era of which they were developed.  The red shows progressive movement into the Everglades.


Florida's entire economy is rests on the assumption that population will continue to grow.  Population is assumed to drive real estate development and jobs.  The below image is frequently reproduced by the Florida Legislature's Office of Economic and Demographic Research.  
However, the wetlands are prone to flooding and impacts from sea level rise.  So, while Florida grows its population and Miami puts them in flood prone areas, the state's flood risk grows.

This puts Miami in an interesting situation.  On one hand it advocate for a perspective of growing flood risk due to climate change.  On the other they seek to develop high flood risk areas while the state attempts to develop an "affordable" private flood insurance market.  These goals are incompatible.

It will be interesting to see how this continues to develop.

Tuesday, August 12, 2014

Are catastrophe bonds worth it?


Earlier this year, the Wall Street Journal had an article on catastrophe bonds.  At the end of the article, they mention that over the lifetime of the market (since 1996) the cumulative total risk is $51 billion.  At Artemis, they estimate the total risk at about $61billion.

The WSJ reports that total losses from natural hazard events is $682 million.  Assuming that some losses came from somewhere else too the total loss over the last 15 years is likely somewhere between $682 and $1B.  The latter is a nice round number so I will use it.

Over the last 10 years, the average yield on catastrophe bonds has been about 8% (dat from same WSJ article).  That is the money paid to investors in the bond.

So, estimated total paid out to investors since 1996 is somewhere around $3B (taking into consideration the $1B loss).

Since 1996, for every dollar an insurer pays the investors to make the risk worthwhile, they have seen a return of about 25 cents (all unadjusted dollars).

Obviously, this seems a good deal for investors.  It is a nice trickle of money from policyholders, to insurers, to the capital markets.  But what are the opportunity costs policyholders?

In recent years, CPIC has offered the largest catastrophe bonds ever.  This year, the bond is $1.5 billion.

With the assumed average 8% yield, if CPIC doesn't end up needing the bond, then it pays investors somewhere around $120 million.  If they do need the bond, they get $1.5 billion.

With at least some possibility that CPIC will exhaust their total claims paying capacity (bonds and all), is there something more productive that can be done with $120 million of policyholder money (aka taxpayers)?

Where resources are limited, such is the case with policyholder pocketbooks, and public policy is to manage risk for the public welfare, policy makers ought to consider if this scenario is an effective use of public funds.

Especially considering that capital markets are fickle- what is relatively cheap and available now can become scant and pricey in a matter of moments.

Would $120 million invested elsewhere have an improved return, reduce the total risk in Florida and thereby contribute to social stability over a longer term?

Perhaps...

Mitigation, infrastructure and education come to mind.  I have no doubt there are innovative ideas that could arise if the question was critically examined.

Wednesday, August 6, 2014

Miami, Sea Level Rise and the Resurrection of "Urban Blight"

Harvey Ruvin, the long serving Miami-Dade County Clerk of Courts, has been active in Miami-Dade County politics and environmentalism since at least the 1970’s.  As a county commissioner, early in his career, he sought to restrict building on Fisher Island to preserve the natural environment and create a public park.

At that time, there was a great deal of political controversy over how to develop Miami Beach. The fight was over how best to overcome "urban blight" on South Beach. One side wanted parks and community centered rejuvenation.  The other side wanted high-rise condominiums and tourist centered rejuvenation.

In his memoirs of sleazy South Florida politics, Miami Beach ex-Mayor Alex Daoud, reported what most Miami residents already know: real estate and tourism won the battle.

Perhaps, Mr. Ruvin had the foresight to understand the public costs of basing the area's economy on developing luxury private real estate.  Just a couple of years ago, the county approved $77 million of public funds to replace the water and sewer lines running out to the very private and populated Fisher Island.  

Currently, Miami-Dade County is actively replacing many of its water and sewer lines.  Since their original installment over 50 years ago, population in Miami-Dade has doubled.

Updating infrastructure is part of community living.  The built environment only lasts for so long and needs repair and replacement.  Some argue that nearly all of nation needs infrastructure updates because much of it dates back to around 1950- give or take a decade.

But where public financial resources are in limited supply, as they always are, questions arise about what should get fixed, when it should get fixed and who has responsibility for fixing it.

Today, Miami Beach is again facing tough decisions about its future development.  Current debate uses public concern over sea level rise in much of the same way debate in the 1970’s used urban blight.

Mr. Ruvin is again at center stage of the development debate as chairperson of the Miami-Dade Sea Level Rise Task Force.

The Task Force recently released a report using sea level rise predictions to support the need "not just to update, but in a sense, to reinvent our urban infrastructure."  

Like the Rorschach inkblot tests used by psychologists to understand a patient's motivations and thought processes, interpreting necessary actions from predictions of future sea level rise indicate the underlying interests of those using the predictions to advocate for public policy change. 

The Task Force is not the first to use estimates of coastal risk to encourage specific financial investment and land management practices.  But developing a land management plan that incorporates public concerns about the environment and community well-being is significant enough to warrant its own discussion regardless of concerns about changing flood risk. 

Public funds spent on reinventing infrastructure cannot be spent elsewhere such as, improving county schools, public parks or whatever the public would like to see in their community. 

Still, the sea level rise predictions bring up many important issues, moral and economic, that the South Florida public needs to discuss.  For instance,
·      Given the report’s use of a predicted two-foot sea level rise by 2060, is it reasonable to invest the public's limited financial resources into infrastructure for a city that is effectively (and rapidly) sinking?  
·      If the public is footing the bill for keeping the sea at a safe distance, who should benefit from the investment and what should that benefit look like?
·      What does adopting a larger view of flood risk mean for the equitable distribution of that risk in accordance with National Flood Insurance Program goals?

These tradeoffs are central for political debate.  Yet, they have been easily masked in discussions about flood science as issues of zoning, preservation and community were once hidden behind quick declarations of ill-defined urban blight.

Recently, Ruvin announced that Miami-Dade Commissioner Rebeca Sosa will be taking over his position as Task Force Chair.  Sosa has been active in Miami-Dade County politics since at least the mid-90's and served on several committees responsible for county planning and "revitalization."  Figures as much.

Monday, July 7, 2014

The non-problem of Citizens’ executives and their questionable ethics


Citizens Property Insurance Corporation has built itself a notable history of questionable ethics.  Most recently, South Florida newspapers have brought attention to the revolving door between Citizens’ executives and the private industry. 

A revolving door between public service and private interests is not unique to Citizens.  It is a common concern in nearly all aspects of US politics.  For example, personnel often move between journalism (the job of informing the public) and advocacy (the job of influencing the public). 

Former Vice President Dick Cheney served as Halliburton CEO in between many years of holding high-level public offices.  This revolving door caused great speculation over motivations behind US military action in Iraq. 

Let us not forget Florida’s own Governor, Rick Scott, who seamlessly moved between the private insurance industry and Florida public office.  Last year, his tie to Heritage Insurance Company was a much-discussed public controversy.

Citizens manages the largest hurricane risk in the world.  The job of running Citizens is demanding and its executives are powerfully influential in the global insurance and risk transfer industry. 

Public policy makers face very real challenges in finding executives with the skill and expertise required to run Citizens, but little interest in realizing their own full earning potential after working there.  Indeed, it is hard to imagine that such a person exists.

Given no obvious solution to the political revolving door so prevalent in our political system, why does Citizens’ CEO Barry Gilway seek to investigate the career paths of Citizens’ previous executives?

One possibility is that Governor Scott is up for reelection.  The governor is responsible for appointing two members of Citizens’ Board of Governors.  So, if Scott loses the election, the new governor could replace Gilway.   

Investigating Citizens is a timely show of symbolic politics.  While policymakers can do little to solve Citizens’ revolving door problem, Gilway can take credit for making ethical behavior a legacy of his management.  Perhaps this will discourage his potential successor from critically examining Gilway’s own career path after Citizens.   

Another possible explanation is that Scott, Gilway and/or others seek to establish a precedent that questions Citizens’ legitimacy and perhaps, builds a case for its eventual termination. 

Consider a hypothetical scenario where upon thoroughly investigating Citizens’ executives, the corporation’s inspector general, Bruce Meeks, finds that by, its very nature, the corporation cannot function by established conflict of interest regulations.  Such a finding sets the stage for political attack on the establishment of Citizens in the first place.

Whatever the reason, a spectacle about specific Citizens’ executives and their career history draws the energy and attentiveness of the public away from two far more fruitful underlying issues in Florida.

First, Florida’s democratic governing process is fragile.  Many South Florida residents will recall the election of 2012: the poorly managed waiting lines, unreasonably long ballot and shameful efforts to restrict voting rights, which received international attention.  There was the 2000 election debacle where Florida demonstrated all sorts of trouble counting ballots.  Also, last year, several Florida mayor arrests boosted the state’s reputation as a “hothouse for corruption.”

A struggling democratic process has impacts on managing public programs like Citizens.  When the process ensuring democratic accountability of elected officials is challenged, the public has difficulty managing the responsible behavior of the executives that elected officials appoint.   

Second, Florida’s economic goal of real estate development conflicts with the public goal of affordable property insurance.  This conflict underlies all debate regarding Citizens, its pricing, its management and its existence.  

These two problems are far more amendable to policy solution than attempts to socialize decision making about the career paths of insurance executives.  Paramount to resolving these problems is a renewed focus on the democratic accountability of elected officials and debate involving the public’s moral values regarding Florida’s economic policies. 


Political efforts that focus public energies on difficulties having no solution rather than underlying policy problems performs a disservice to society and further underscore Florida’s shaky democratic process.  This is where the unethical behavior lies.

Thursday, July 3, 2014

Florida Sea Level Rise Politics


While North Carolina seeks to manage the perception of sea level risk placed upon itself, Florida is all about their sea level rise.  Undoubtably, economic and political dynamics influence the different approaches the two states have taken to this particular coastal risk.

The image above shows a prediction of sea level rise for South Florida taken from a recently released report by the Miami-Dade Sea Level Rise Task Force.  

Notice the difference between the predicted sea level rise based on historic measurements and that based on all sorts of other stuff.  The difference in planning for 4 inches of sea level rise is likely different from planning on 2 feet of rise.  

Watching how North Carolina and Florida manage the debate about flood risk will certainly be interesting.  How they proceed will offer lessons of good ideas and bad ideas for other states and nations.  

Wednesday, June 25, 2014

North Carolina Sea Level Rise legislation


A couple of year's ago, North Carolina passed the HB 819 discussing the topic of sea level rise in the state.  However, note that North Carolina refers to the phenomena as "sea level change."

My understanding is the controversial bill amended somewhat the controversial existing legislation.  This caused quite the stir amongst climate change policy advocates and scientists involved in studying sea level rise.

Some excerpts of the legislation:
SECTION 2.(a)
§ 113A-107.1. Sea-level policy. 
(e) The Commission shall be the only State agency authorized to define rates of sea-level change for regulatory purposes. If the Commission defines rates of sea-level change for regulatory purposes, it shall do so in conjunction with the Division of Coastal Management of the Department. The Commission and Division may collaborate with other State agencies, boards, and commissions; other public entities; and other institutions when defining rates of sea-level change.
SECTION 2.(c) 
...The Commission shall direct the Science Panel to include in its five-year updated assessment a comprehensive review and summary of peer-reviewed scientific literature that address the full range of global, regional, and North Carolina-specific sea-level change data and hypotheses, including sea-level fall, no movement in sea level, deceleration of sea-level rise, and acceleration of sea-level rise. When summarizing research dealing with sea level, the Commission and the Science Panel shall define the assumptions and limitations of predictive modeling used to predict future sea-level scenarios. ... The Commission shall also compare the determination of sea level based on historical calculations versus predictive models. The Commission shall also address the consideration of oceanfront and estuarine shorelines for dealing with sea-level assessment and not use one single sea-level rate for the entire coast. ...
The legislation directs the Coastal Resources Commission to direct its science panel to write up an update to the  2010 report, "North Carolina Sea Level Rise Assessment Report." The science panel is made up of North Carolina scientists- mostly from government and universities.  The Coastal Resources Commission is made up mainly of business owners in the coastal region (and I think there are a couple of mayors).

The graph below is from the original 2010 report and provides estimates of future sea level rise in North Carolina based on historical measures.

     
The controversy comes from disagreement about what role North Carolina political interests should play in determining measurements of sea level risk.

Of particularly dispute, the Science Panel was instructed to use historic measurements of sea level rise to estimate future rise (though, it is unclear to me who exactly instructed them to do so).  Therefore, many estimates of sea level rise based on various assumptions about climate change, future earth and social conditions, etc. cannot be used.  

North Carolina's management of risk measurements is by no means unique.  

Florida does something similar regarding hurricane risk.  Standards set by the FCHLPM require that models approved for use base hurricane risk predictions on the historic HURDAT record and so, "near term" sorts of predictions cannot be used (despite their use on the international risk transfer market).  

Nor should we forget outright rejections of flood risk estimates by Florida, Alabama and Mississippi and hurricane risk estimates by Massachusetts.

What is most intriguing about North Carolina's method for controlling the idea of risk imposed upon itself is the political arrangement of doing so.

The expert science panel does not appear to have authority or autonomy to determine the best means of going about measuring risk.  It appears as somewhat of a capture of local business interests through its oversight by the Coastal Resources Commission.

Specifically, the legislation requires that the Commission and the Science Panel must work together and negotiate acceptable scientific reasoning and conclusions (See section 2c above).

Certainly, this ruffles feathers in the scientific community and those in society that value autonomy of the scientific process... or at least a guise of autonomy since is never truly "unfettered."

A better idea may be to have elected officials appoint an independent research panel of scientists with relevant expertise.   The reports this independent panel produces can then be used to help guide public debate about how much risk we wish to plan for given other public policy objectives.  

Pros/Cons, Costs/Benefits, and moral values to be maximized (e.g. public safety) are good tools for this debate.