Monetary Damages from Coastal Flooding: Toms River Case Study Background Objective Flood Risk and Damages in Toms River During Hurricane Sandy

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1 Monetary Damages from Coastal Flooding: Toms River Case Study Will Irving, Joseph J. Seneca, Jennifer Rovito Contact: June 2014 Background Storm surges and sea level rise can pose a threat to life and property, as well as natural coastal environments such as beaches and wetlands. Decisions on flood mitigation, adaptation and preparation require careful evaluation of flood risk. Key questions when considering the vulnerability of New Jersey s coastal areas to flooding caused by sea level rise and severe storms are: What is vulnerable? What is at risk? A comprehensive inventory of vulnerable assets would include real property, natural ecosystems such as beaches and wetlands, populations, key infrastructure and other important at-risk coastal assets. Such an inventory, evaluated in terms of its monetary value, can assist in assessing the financial and fiscal implications of flood risk, and in making efficient and effective decisions on the allocation of resources for mitigation and adaptation in a benefit-cost framework. Objective As part of a broader project examining various aspects of coastal vulnerability in New Jersey, we conducted a pilot study examining the vulnerability of residential property in Toms River, Ocean County. The objective was to map and assess the number and value of residential properties exposed to flooding under a variety of sea level rise scenarios and, using data from Hurricane Sandy, to identify the relationship between flood exposure, physical damages to property, and property value. Flood Risk and Damages in Toms River During Hurricane Sandy Toms River is located on Barnegat Bay in Ocean County, and includes developed areas on both the mainland coast and the barrier island. Using data from the MOD-IV property tax database for New Jersey and mapping of the storm surge from the FEMA Modelling Task Force, the Rutgers Center for Remote Sensing and Spatial Analysis mapped residential properties in Toms River according to the extent to which they were exposed to the floodwaters from Hurricane Sandy. 1

2 Figure 1 Figure 1 shows the extent to which Sandy s floodwaters reached inland in the township s coastal areas. Areas shown in red indicate residential parcels that were fully exposed to the surge, meaning that the floodwaters stretched inland far enough to cover the property. 1 Areas shown in yellow indicate properties that were partially exposed to the surge i.e., where only part of the property area was reached by the water. Figure 2 Together, these fully and partially exposed residential properties had a total assessed value of approximately $5.8 billion in 2012 (land and structure inclusive), prior to the storm. This is approximately 44% of the total value of residential property shown on the map and can be considered the value of residential property at risk of damage from the storm. Figure 2 shows the spatial distribution of these property values in the township. Note the concentration of high-value properties on the mainland coast and barrier island. In these coastal areas, building value in 2012 accounted for approximately 27% of the total property value (land and building), or $1.6 billion of the estimated $5.8 1 This does not indicate the depth of the flooding at each property. 2

3 billion in total assessed value. These structures also accounted for approximately 28% of the total 2012 assessed value of residential structures (building only) in the township. To date, payouts in Toms River from the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA) have totaled approximately $500 million equivalent to nearly one third of the 2012 assessed value of the residential buildings affected by the surge and about 8.6% of the total assessed value (including land). Figure 3 shows the distribution of these payouts by Census block in Toms River. 2 Figure 3 As expected, the heaviest damages are seen primarily in the areas fully exposed to the surge (shown in purple, red, orange and yellow), with somewhat lower damages in areas partially in the surge or out of the surge area. 2 The map accounts for approximately $489 million of the $501 million in payouts made as of March A Census block is A statistical area bounded by visible features, such as streets, roads, streams, and railroad tracks, and by nonvisible boundaries, such as selected property lines and city, township, school district, and county boundaries. A block is the smallest geographic unit for which the Census Bureau tabulates decennial census data. U.S. Census Bureau. 3

4 These damages are also reflected in the changes in property value in Toms River following the storm. At the time Hurricane Sandy struck, Toms River was already engaged in a town-wide reassessment of all property in the municipality. The reassessment was intended to reflect the significant changes in market value since the previous town-wide reassessment undertaken prior to the onset of the recession. As a result, it is not possible to fully ascribe reductions reflected in the change in property values from 2012 to 2013 to the effects of Hurricane Sandy. However, it is worth noting that while properties outside the surge area had an aggregate reduction in their building value of approximately 7% from 2012 to 2013, the analogous reduction for properties partially or fully within the surge areas was 47%, or approximately seven times greater. The distribution of these reductions is shown in Figure 4. The most significant reductions are concentrated on the barrier island, with somewhat smaller, but significant reductions on the mainland areas nearest to the coast. These significant reductions in building value, along with temporary reductions in land value that can result from disruptions to infrastructure, utilities and use and access, can have significant fiscal implications for a city s property tax base depending on the pace of rebuilding and restoration of services and the time needed to return to full access and use. Figure 4 4

5 Sea Level Rise and Property At Risk Understanding the value of property at risk and the level of physical damage and property value loss from Hurricane Sandy s storm surge can aid in assessing the risk of losses associated with estimates of projected sea level rise. Like storm surges and other flooding, sea level rise can threaten lives, property and natural coastal environments. However, the losses associated with this risk may be much more severe, as the damages from sea level rise may be persistent, and in some cases even permanent, and severe storms occurring on a higher sea level could result in significantly greater surges. Figure 5 maps the inundation expected under a 1-foot sea level rise scenario projected for The light blue areas indicate the rising sea, and the red and yellow areas indicate the properties affected by Hurricane Sandy s surge as in Figure 1. Figure 4 In this scenario, areas directly adjacent to the coast of the barrier island and mainland are affected, with about 10% of residential properties in the township (nearly 30% of those parcels exposed to Sandy s surge) exposed to flooding. As of 2013, these properties had an aggregate value (land and building) of approximately $1.2 billion, or about 14% of the residential tax base included in this analysis. NFIP payouts from Sandy were equal to approximately 8.6% of the total assessed value (and 32% of building value) of properties exposed to the surge. Using this percentage, a rough estimate of building damages from one foot of sea level rise would be approximately $101.4 million. Note that this is on the basis of lower property values following the effects of Sandy and the town-wide 5

6 reassessment in Note also that damages could be significantly greater if flooding from sea level rise, or a combination of sea level rise and storm effects, was persistent and rendered some properties unusable. Figure 6 shows the inundation for a 3-foot sea level rise scenario projected for In this scenario, about 21% of residential properties in the township (or about 63% of those exposed to Hurricane Sandy s floodwaters) are exposed to inundation. As of 2013, these properties had an aggregate assessed value of $1.9 billion. Using the NFIP payouts as a percentage of the total assessed value of exposed property to estimate potential damages results in a damage estimate of $167 million to buildings. It is worth noting again that these damages could be significantly greater and frequently repeated due to persistent or recurring flooding and inundation of land. Figure 5 Other Property Types This analysis focuses on residential property, as it is the most prevalent type of property in most municipalities and represents the highest aggregate value in the flood prone areas of Toms River. However, it is worth noting that other types of real property also should be included in an inventory of vulnerable coastal assets, including infrastructure and utilities, commercial and industrial properties, rental apartment complexes and public property. 6

7 Conclusion This pilot project was designed to assess the amount and value of residential property in Toms River that would be at risk of persistent flooding under future sea level rise scenarios, and to examine the financial and fiscal implications of those risks using the experience of Hurricane Sandy. This process of mapping and inventorying the location and value of properties in areas exposed to flooding, and examining the relationship between flood exposure and monetary damages for past flood events in those areas, can aid in efficient decision making in regard to allocation of resources for mitigation, adaptation and preparedness. The significant reductions in building value reviewed here, along with temporary reductions in land value that can result from disruptions to infrastructure and utilities, can have significant fiscal implications for a city s property tax base depending on the pace of rebuilding and restoration of services, access, and full use. State and/or federal assistance may close such fiscal gaps, but these are real costs that are still incurred, only at a different level of government, with different but real incidences with respect to who bears the burden of these costs. While this study did not attempt to specify the tax implications of the damages sustained by properties in Toms River, such an inventory of exposure and past damage can serve as a basis for such analysis by municipal and county tax and fiscal agencies. Such an analysis could also examine the incidence of the costs: both the damage and tax costs. Finally, it is worth noting once again that risk and damage to residential property is only one aspect of a comprehensive inventory of coastal assets. A full accounting should include a review of all property types, population concentrations, particularly vulnerable populations, significant natural assets and associated ecosystem services, and key infrastructure and utilities. Many of these assets and the associated risks can be quantified or monetized for analysis in a benefit-cost framework to inform allocation of resources. 7