Savita Goel, PE, LEED AP, Financial Strategist

Silvana V Croope, PhD, ENV SP,DelDOT

Herby Lissade, PE, CalTrans

October 29, 2014

SCOTSEM 2014

Financial and Economic Resilience for Transportation

Picture this:

• 3 storms, Dec. to Feb. 2009-10, 54.9” snow, Baltimore-Washington area

• 30 hours, twin winter storms, Jan-Feb

2014, Atlanta: $13.5 M • Feb. 11-17, 2014, American South and

East Coast U.S., 1.2 M homes and businesses without power

• 15 winter storms (snow event, squalls,

light snow event and Nor'easter), Dec.14, 2013 to Feb. 18, 2014 – NOAA • States over budget with snow

removal and salt shortage

SnowMagedon

Salt supply, finance

Salt supply, traffic

operations

Salt supply, future

planning

Salt supply, plow trucks

& staff

Salt supply, evacuation/

rescue

Salt supply, commercial

and community

impacts

…

Thomas Ewing Jeffrey Western Associate Division Director Infrastructure Analyst Nuclear Engineering Division Infrastructure Assurance Center

2013

Thomas Ewing Jeffrey Western Associate Division Director Infrastructure Analyst Nuclear Engineering Division Infrastructure Assurance Center

2013

Disaster Cost

National Academies summary on disaster resilience 2009 dollars: 1953 – cost/person: $0.13 for the total of disasters of $20.9 million

2009 – cost/person: $4.75 for total federal disaster of $1.4 billion (excludes “cost of disasters to cities, states, industry, companies, and

individuals, only part” covered by insurance)

Last decade two largest hurricanes - U.S. cost impact: 2012 U.S. GDP of 15,681.5 billion dollars

Dollars withdrawn - possible investment and growth Katrina damage costs US$ 148 billion - Insured losses $48,7 billion Sandy damage costs US$ 71 billion – Insured losses $22 billion

Increasing cost of disasters is a real challenge Including terrorism TRIA and the U.S. Federal Government???

6

1 Disaster… Many Disasters…

RSOE – Emergency and Disaster Information Service

Insights on interdependencies, vulnerabilities and risk on climate change, critical infrastructure, economy and resilience …

World Economic Forum 2013/2014

COOP ??? COG ???

Socio-Economic Resilience Index, Maplecroft 2013

Problem Scope scale, economic impact and timeframe - past natural disasters

financial/economic crisis - local and global level

scientific research advance need - findings easier for application

Critical civil infrastructure

systems (transportation)

Resilience

Climate change

Damage costs

Economic challenges (disasters)

Manage into

feasible adaptation practices

Critical Infrastructure Resilience

“The ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events” (summary on Disaster Resilience) – A National Imperative

“The capacity to mitigate against significant all-hazards risks and incidents and to expeditiously recover and reconstitute critical services with minimum damage to public safety and health, the economy, and national security” - ASCE

Resilience

Urban Resilience

Evolutionary Resilience

Sustainability

Henry Willis 7/21/2014

United States Global Change Research Program

– webinar 2014

Critical Infrastructure and Disasters Considerations

Critical infrastructure continuously challenged by disaster - service depends on safe and resilient conditions

Funding investments for regular construction and maintenance of infrastructure (acceptable levels of service) competing with impacted infrastructures resultant from more frequent and strong disasters bigger stress on the economy: number of infrastructure replacements,

repairs, and rehabilitations expected to continue to grow

Funds and budgets are limited, but the damage and failure possibilities from nature hazards cannot be dimensioned

Path forward: manage effectively existing resources using damage and impact

assessments monitor the environment real-time and infrastructure condition and

performance develop/adopt new and better technology question, critique, and improve existing processes

NIPP-2013

Resilience Engineering

& Resilience Network

NIPP – 2013 Economic and Financial Risk

???

Who is looking at Economic and Financial Impacts?

http://riskybusiness.org/

http://nas-sites.org/resilience/resilience-events/

http://www.acclimatise.uk.com/network/transport-and-communications?respage=2&blogpage=7

“By the end of the century, Oregon, Washington, and Idaho

could well have more days above 95°F each year than there are

currently in Texas; babies being born right now in the Southwest could see nearly four additional months of days over 95°F within

their lifetimes.”

Risky Business, June 2014

“Back to Normal”

- Taxes - Trust-Fund - Donations

- Productivity/

Gov. Bonds

Understanding the Economic/Finance Resilience Gap and Opportunity

Issue: too much money left over/saved maybe represent too much taxes??? Alternative: contracting with an Insurance Industry Underwritter to have the additional contingency budget???

INFRASTRUCTURE PROJECTS

Global infrastructure investment estimated to $57tr to 2030 (OECD)

Global infrastructure equity market estimated at $1.5tr (Mercer Oliver Wyman)

For emerging economies, infra investments associate to 1 to 1% increase in GDP

Even developed economies like US depend on functional infrastructure for its growth

INFRASTRUCTURE PROJECT FINANCING EXAMPLE

Chicago Skyway 7.8-mile toll road from Chicago downtown to

northwestern Indiana and connects to Indiana Toll Road, a 157-mile highway

Macquarie-Cintra partnership, known as the Skyway Concession Company (an independent company)

Chicago signed 99 years lease with SCC SCC paid $1.8 billion cash upfront to Chicago The lease terms permitted toll increases every few

years, capped at $5 in 2017 (from $2 before privatization)

INFRASTRUCTURE PROJECT FINANCING

Characteristics Investment in a single

capital intensive asset

Organization in a legally independent company

Financing on limited or non-recourse basis

Benefits

Risk Spreading / Joint Venture

Borrowing Capacity High leverage Long term financing Tax benefits

Off-balance sheet financing

Overall cost of funds

FINANCIAL RISK MITIGATION AND ECONOMIC RISK MANAGEMENT - GOVERNMENT

Self Insurance No/Minor Loss Event –

Cost Savings

Major Event - Risk is not diversified

Catastrophe Bonds Parametric Insurance Is a risk management

instrument Could be structured for any

variety of risk exposures Requirements: Specific parameter-dependent loss

event Size or expected loss amount Sources to verify trigger event

CATASTROPHE BONDS

Parameters defined based on risk Hurricane: wind speed, pressure, location

Earthquake: magnitude, location of epicenter

Trigger is based on parameters defined in contract

Trigger verification is relatively simplified based on pre-defined credible data sources

Eliminates insurance claim settlement process

Timely payout in case the cat bond is triggered

Can your DOT buy Insurance??? How economic/financial resilient is your DOT?

DelDOT RESEARCH “Abandon, Repair or Improve Roads

in the Face of Climate Change”

“DelDOT Summer Interns Estimate Costs for Future Flooding Repairs” - $1.45 billion with NOTE: validation of cost is currently

being assessed

(publication Transearch – Delaware

Center for Transportation – Summer/Fall 2013 Vol.13, No. 2)

STATUS Delaware cannot – depends on

Commission of Insurance approval

CalTrans PUBLICATION Plowing snow is expensive, plowing

a lot of snow is very expensive (www.vortexinsuranceagency.com/Pr

oducts/SnowInsuranceForMunicipalities.aspx ).

2 Towns Say, ‘Let it Snow. We’re Insured’ – Woodbridge and Dunellen /NJ (www.nytimes.com/1996/12/01/nyregi

on/2-towns-say-let-it-snow-we-re-insured.html ).

STATUS Nothing prohibits CalTrans from

buying insurance

Thank You!

John Laws, DHS

Nancy Pomerleau, DHS

Ralph Reeb, DelDOT

Silvana V Croope, DelDOT

Sam Higuchi, NASA

Marie Venner, Yuko Nakanishi, Jeffrey Western, Henry Willis