1. 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

2. 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

3. 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
…

4. Thomas Ewing Jeffrey Western Associate Division Director Infrastructure Analyst Nuclear Engineering Division Infrastructure Assurance Center
2013

5. Thomas Ewing Jeffrey Western
Associate Division Director Infrastructure Analyst
Nuclear Engineering Division Infrastructure Assurance Center
2013

6. 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Dollars withdrawn - possible investment and growth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

7. 1 Disaster… Many Disasters…
RSOE – Emergency and Disaster Information Service

8. Insights on interdependencies, vulnerabilities and risk on climate change, critical infrastructure, economy and resilience …
World Economic Forum 2013/2014
COOP ???
COG ???

9. Socio-Economic Resilience Index, Maplecroft 2013

10. 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

12. 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

13. Henry Willis 7/21/2014
United States Global Change Research Program – webinar 2014

14. 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

15. NIPP-2013
Resilience Engineering & Resilience Network
NIPP – 2013
Economic and Financial Risk ???

16. 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

17. “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

18. “Back to Normal”
- Taxes
- Trust-Fund
- Donations
- Productivity/
Gov. Bonds

19. 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???

20. 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

21. 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)

22. 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

23. 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

24. 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

25. 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/Products/SnowInsuranceForMunicipalities.aspx ).
2 Towns Say, ‘Let it Snow. We’re Insured’ – Woodbridge and Dunellen /NJ
(www.nytimes.com/1996/12/01/nyregion/2-towns-say-let-it-snow-we-re- insured.html ).
STATUS
Nothing prohibits CalTrans from buying insurance

26. 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