Continuing Along the Resiliency Road: Weather-Proofing the Cities

Transcription:

Rich Saskal (00:07):

Morning everyone. Way back when I was in high school, they had this thing called Senior Skip Day, which I was one of the nerdy kids who stayed in school that day. Not that anybody in the audience is nerdy if they don't want to be, but thanks for sticking around. For the last panel of the conference, we're going to talk about resiliency, which in the last few years, Texas has quite a few things to be resilient from being at Epic rainfalls, droughts, wildfires, cold snaps. So with me today to talk about it, I'm going to start from my left. Frank Doyle, Vice President and Senior Client Officer in the Municipal Finance North America team at SNBC, Oscar Padilla of S&P Global Ratings, a Director in the Public Finance team's, US States and Transportation Group, and Marc Coudert, the Climate Resilience & Adaptation Manager for the city of Austin Office of Resilience. We'll start with Marc, since we're here in your city as Head of the City's Office of Resilience, can you get us started by giving us the bird's eye view of what resiliency means in the context of a city government?



Marc Coudert (01:30):

Yeah, thank you. Well, thank you for stinking around. I guess first question is, who was here in central Texas in 2011? Anybody? It seems like nobody over here. Everybody over there. What happened in 2011 that was different? Anybody remember? It was hot? Yeah. So in Austin, we'd typically get, in the 1970s, we would get about 12 days over a hundred. Now we get about 30 days over a hundred. In 2011, we had a hundred days over 11, over 190 days, over a hundred degrees. And what was crazy about that is that in February of that year, it snowed. It snowed a half inch, and I had just moved here from upstate New York and a half inch of snow in upstate New York. We call Thursday, right? And the city shut down, the snow melted in an hour and I was like, what's going on? This place is weird.



(02:20):

And then it just stopped raining for six months and we had a really bad drought. And at the time, departments were like, it's a fluke. It's unprecedented. It'll never happen again. And then we had a three year drought and our water started to get a little bit sketchy, and then we had a flood. In 2013, 600 homes got destroyed, five people lost their lives. A flood in 2015, Halloween, a flood in 2016, you're starting to get the picture. And then the winter storm happened and we were not prepared. We don't have plows, we don't have salt trucks, our electricity went down, our water went down. And then people started to really realize this is a new era. So at the city, I've been with the city since 2010 working on sort of looking at climate impacts to our assets and operations, but also our community members.



(03:10):

And we started to look at how does climate change impacts our assets and operations. It's a very deductive process. What are your most critical assets? You do exposure, sensitivity, depth of capacity, and then you get down to what threshold is the asset impacted by an extreme weather? And then we get climate projections. We say, looking forward, how much is going to happen in the future? This was all great when we had a very clear view of what climate projectors are going to be, but things are getting weird. So now we're trying to expect the unexpected, and I don't know if the next thing is going to be like a flock of locust or some weird tornado, but we have to start thinking about that, what the infrastructure we're going to use in 50 years we're building today, how do we ensure we're building that infrastructure so that it is prepared to last that long, but also not impacting our communities in a negative way, but actually helping our communities. So at the city of Austin, we look at assets and operations, and then more and more we're looking at how climate impacts our community members, particularly those with the least amount of resources.



Rich Saskal (04:16):

All right, Frank, several years ago now, hurricane Harvey was unique in scale among money, the disasters that have hit Texas, five feet of rain, that sounds even worse than 60 inches, but that's a lot. The Harris County Flood Control District also says that county experience is a major flood about every two years. Can you talk about how your clients in the Houston area approach the topic of flooding specifically and if that falls into resilience generally?



Frank Doyle (04:49):

Sure, yeah, no, happy to talk about that. I mean, you can actually put how they deal with floods. So like before Harvey, after Harvey, BHAH. So that was a wake up moment I think for Texas, not just that area, but also for Texas. And you've seen a lot of work now going into blood preparation. It's going to take a long time to come to fruition. We've heard over the course of this conference from several different speakers how these plans have a 20 year give or take gestation period. But what they're doing now is that their funding, I think Houston alone is in conjunction with its consent degree, is planning to spend about $2 billion in its capital improvement program over the next decade or so to improve among other things, it's a whole sewer system to handle these kind of intense floods. You see flood control maps are being updated or should be actually be updated by now that the Harris County is doing with FEMA.



(05:56):

They're going from what the old a hundred year old maps to now 500 year old maps, but actually 500 to be updated in conjunction with new technology and new theories about what will be in the future. Realizing, like Mark said, that we're in a new paradigm. We're in a new paradigm. I mean, we're lucky at SNBC. Just to give a little background, we provide letter of credits throughout the nation, so to a large issuer. So we get to see a lot. And this paradigm approach is not just unique. I know we're down here in Texas, but not just unique to Texas, whether it's California, New York, other parts of the country, even the inland. I mean, they have worries about floods too with the Mississippi for the sheer violence of these rainstorms that are coming out.



(06:42):

And I think that's it. We talk about intensity and I think the real word that we should use is violence. When you get five feet of rain in that sort of period, that's violent. When you're in New York City like I was when Sandy came ashore and you're watching the harbor just seemingly displace into lower Manhattan and lower Brooklyn, which we could see from my home, it was violent. These are violent occasions and it behooves state and local federal officials too, to take that into account. You didn't have this kind of violence before and we humans were very good at projecting the past into the future, but now the future is different than what the pass had, and that's something that we have to take. But yeah, no, they're doing a lot of good work in Houston and Harris County area. You can debate whether they are doing enough fast enough, but I know how government works and how the funding works.



(07:45):

But I think that in the bare minimum, even though they won't have all the answers in the next few years, they'll be able to mitigate a lot of the risks by just telling people if there is another Harvey that's coming down the pike so to speak, it's time to evacuate. And who's going to resist? Who's going to resist? It's almost ashamed to say that, but I think that until all these preparations are done, that's probably going to be the answer in case you have another violent storm just by the sheer length of time it takes to get everything ready.



Rich Saskal (08:25):

So sometimes there's too much water in a short time elsewhere in Texas, not enough water for too long a time. Oscar, can you talk about how S&P looks at the state's water supply challenges?



Oscar Padilla (08:38):

Yeah, absolutely. And I think if you joined the water panel yesterday, it was clear that it's not lost on anyone that there's water stress here. There's periods of extreme drought, there's periods of extreme rain, violent rainstorms. And from the credit perspective, Texas has really been a leader. In 1917, we codified it in the constitution that conservation was important and we had to be good stewards, particularly of water. And TWB was created in 1957, so it's a pretty long track record that the state has and being aware of the situation that we experienced here. And that's step one for us, having awareness, being adaptable. To Marc's point, things have certainly changed from when it went into the Constitution in 1917, here in the state to where we are now and the types of events that we're dealing with. But along with that is also the planning and the execution of that planning.



(09:32):

And so you heard that from the TWB, you heard that from the gentleman from Corpus Christi, the city of El Paso was mentioned. I'm from El Paso. Paso is a pretty remarkable story in terms of their water consumption. When they started putting conservation efforts in the 1990s, we've effectively, they've effectively kept consumption flat despite the fact that the population has doubled in size. And the desal plant was also mentioned, and the actual catalyst for the desal plant was during the last base realignment enclosure. The army was concerned that Fort Bliss didn't have sufficient water if they were going to expand, and so it was a full court press from the post the city involved.



(10:14):

Everyone was involved. Congressional delegation to convince the army we have sufficient water, and they built the desal plant to ensure that if the base were to expand, which now has about 25,000 new soldiers since the expansion, that there would be long-term water solutions there. And it has a very strong economic impact. The comptrollers biannual report, last biannual report estimates that the economic impact of Fort Bliss on the state of Texas about almost 23 billion annually. So it's hard to underestimate what that means, not just for the state, but what it also means to local communities and how important planning execution, being aware of the situation and being able to respond in a timely manner is important. A bigger picture as we look at not just Munis, extends to corporates as well s and p sustainable one, it's a separate group from ratings and we're actually firewalls from them.



(11:07):

But nevertheless, a great research recently put out looking at the S&P 1200, so a cross section of corporations across the globe looking at their adaptability, what are they doing to address climate risk? And amongst the primary climate risks is water stress. And this crosses a cross section of corporations, whether it's pharma, chemicals, metals, and mining agribusiness. These are big businesses in Texas. And so we're also looking at it from the corporate sense of what are they doing to become adaptable to this rapidly changing environment because it is costly to not do anything about it. In the face of what we just described here, it's whether it was Sandy, whether it was Harvey and the investments that have to be made after these events occur, it's about how you're adapting and being preventative or mitigating the efforts to ensure that longer term is sustainable solutions.



Rich Saskal (12:05):

Mark, I believe you mentioned both drought and floods and kind of your introductory, can you talk about what the city is doing specifically or the resilience department is doing specifically to manage those challenges?



Marc Coudert (12:20):

Yeah, I mean, I don't want to end the last session of this conference. On a sour note, this could get pretty depressing pretty fast. So we are working diligently with other departments to look at heat, drought, flood, wildfire, cold weather, and also air quality. So these all sort of connect together. I think the positive message though is that there's an opportunity here to really be innovative and think about new ways to work together. We're all independent on each other. Austin Water is dependent on clean water coming off roads, coming off land, but if the land just had a wildfire, it's going to get turbulent and then it's going to be harder to clean. So Austin Water is looking at purchasing land to think about how do we start to maintain that land to be able to keep clean water similar like they do in New York in the Catskills, but also around heat.



(13:12):

It's another one is heat kills more people per year in the United States than any other extreme weather event combined. So we are taking that very seriously. We're looking at new ways to look at surfaces. 70% of our funding for public works, transportation, public works goes into maintenance. So if we can color the streets a little bit lighter, it'll actually last longer, but actually overnight temperatures won't be as hot and it doesn't, don't worry. It's not going to be super reflective and you'll be able to drive on it. But we're looking at ways to think about what are those opportunities that are co-benefits that provide a little bit of relief for people, but also provide a little bit of energy and financial savings for us as well. So you mentioned heat. We're doing a lot of work with community members to understand how heat impacts them at home.



(14:03):

For drought, we're having a big meeting tomorrow about how much water's going to cost as we get more drought, a hundred percent of our water is surface water, which means it comes through our lakes. So we're looking at ways to think about long-term storage of water in the ground, essentially local aquifers. Our Austin water has a hundred year water plan, which a hundred years seems too long, but we need to be thinking that big, right? They're looking at a space the size of South Carolina in Texas to be able to ensure that we have clean water going forward. And then wildfires, there are big wildfires recently. We are in a wildfire adaptive ecosystem. We have the potential for a very large wildfire in West Austin like we did in 2011, Steiner Ranch fires and the Bastrop fires, but we get daily grass fires on the east side and they don't make the news, but they're in neighborhoods that suffer from asthma and COPD, which is a lung disease. So how do we start think about managing land that reduces the amount of grass fires, but also maybe does something great for water quality and green infrastructure. So we're always constantly looking for co-benefits.



Rich Saskal (15:11):

Yeah. Frank, maybe you can talk about how wildfire risk factors into your client's planning here or elsewhere. For instance, are there lessons to take from other places that have wildfire risk?



Frank Doyle (15:25):

So we have a lot of exposure in California and they have a lot of exposure to wildfires. And it was interesting to watch California's experience and then compare it to other parts of not only this country but also the world. And California they had in 20, everybody knows California also suffers through long periods now of droughts. They've been actually in droughts for most of the last 40, 45 years. And in a large part of the states, they know how to do droughts. Well, wildfires are relatively recent for them. When you look at their history of their wildfires, up until around 2015, 2016, it wasn't much of a concern then it solely billed. And then all of a sudden you had these huge wildfires that last year, after year after year, and this should not have come as a surprise to the state of California. There had been ongoing concerns that through their own long droughts that the ground was becoming very tried out that with a lack of clearing due to environmental regulations, you were creating essentially a Tinder box.



(16:34):

And then on top of that, their budget didn't take into account anything above normal fire weather. So they didn't have the firefighting equipment, the firefighting personnel, et cetera. And then all of a sudden you had boom, year after year of explosive fires, and then the state reacted to it. It reacted by hiring more firefighters, getting more equipment, starting to include the planes that just dropped the water on the fires, et cetera, clearing out bush. And then the remarkable thing is that one of the worst fire years ever was 2021. Then they went into another drought in 2022, they had plenty of fires, but now that they were prepped and ready to go, they were all pretty well contained, and it was really a lesson in contingency planning. And in a prior career, I used to be, as a young man, I used to be a army officer, and they drummed it to in our heads that, what was that phrase?



(17:42):

Effective contingency planning is the hallmark of superior leadership. And that is something that sometimes I wish was more propagated around the country for a variety of causes. But that's true. And they didn't have it. But now they did. Unfortunately, other states and other places like Canada didn't look at the United States at California's experience and try to learn from it. I mean, California, part of their fires were caused by transmission lines and utility workers, et cetera. That's the same thing that helped contribute to that awful fire in Maui that helped contribute to the fire in Texas that helped contributed fires in other parts. So it's almost like if it doesn't happen here, it's not a concern. And until it happens, it seems like most people are only react when it starts staring them in the face, but now it is staring them in the face and they're reacting.



(18:49):

I mean, I agree with the comments of my colleagues. I think Texas is very well organized for prevention of a lot of these risks and much more so than a lot of other states. I think that there's still more needs to be done. For instance, I think the coordination between the Texas Railroad Commission and the PUC needs to be much more tighter than it is, but personal call on my part. But I think that's one area where that could be improved. But overall, I think Texas in terms of its learning from its lessons is much more effective at learning those lessons than other parts of the country or other parts of the world. I mean, we just got noticed up in the northeast that Canada is probably going to expect another big fire year, and so I'm expecting a lot of orange come the summer and fall in the sky, but what can you say? Yeah.



Rich Saskal (19:46):

Oscar, can you talk about how the changing wildfire risk profile impacts the way s and p looks at ratings?



Oscar Padilla (19:55):

Yeah, no, absolutely. And I think it's been discussed. We're certainly looking at preparedness and what can be done and mitigate when these things happen. And the Smokehouse Creek fire most recently in Chairman Todd, hundred out of Corpus Christi, part of the committee investigating it, and they were just up in the panhandle, and one of the questions he asked was, can we bury some of these power lines? It may seem really expensive to do it now, but the cost of recovery efforts in the future is probably going to be much higher. So he wants to spark the conversation. I think the state is doing well to really ask and unturn any rock to figure out what we can do to help mitigate and again, prevent these things from happening in the future and has a clear link to credit. We actually downgraded Xcel Energy recently after they acknowledged that it was one of their power poles that might've been responsible for the actual fire.



(20:45):

And despite the fact that they have insurance policies that help cover the costs, those costs can actually be far greater if indeed they're found to be liable. So again, it's not just the Munis that we're looking at. We're certainly looking at everyone who's involved in the process, whether it's the corporates and certainly the Munis, and what type of leadership you can find from organizations. Again, from our perspective, it's what are the best management teams doing? What is the state doing? What are cities like the city of Austin doing? There's a clear link between their credit quality and what it means for them in the future, which ultimately benefits bond holders that own your bonds, right? You want the questions that we receive are how sustainable is this for the future? Does it merit a rating change? And clearly, we have certainly seen rating changes when these things do happen, and it does help, or it exposes the weak points or the weak links that exist, and it'd be ashamed if folks don't learn from it. To Frank's point about the best practices and Chairman Hunter's Committee is really looking at that, and that's one of the key focuses of what can we really do not just in the panhandle, but really look across the state to see what's going to be best or the best solution for them, even if it has an expensive price tag, let's figure out how to pay for it today so that we don't have to deal with this in the future, which a far greater price tag.



Frank Doyle (22:15):

Okay, I interrupted you. Oh, please do. Yeah, so I have to say something about that too. And it is costly, and Marc probably knows how costly it is, much better for Austin than I do to try and prep for these occasions. But again, I'll use the California experience before their big firestorms, they were spending maybe half a billion dollars on fire preparedness in one form or another. Then they had to ramp it up to around 2 billion on an annual basis for several years as they bought the equipment, did the clearing, trained the firefighters put on standby lists, other firefighters and other equipment's for companies that provide that. But now that it's all done, it's like a billion dollars a year. So essentially they had to double their budget. And just to give you a scale of this, in California, the budget is around. I want to go off the top of my head.



(23:06):

The all in budget is around 220 billion. So it is a lot of money, but it also is a lot of money in a big pot of money for the state of California. And it was a hell of a lot cheaper to get to Oscar's point to prepare for it than to actually go through it without the preparation and have to recover. It's doable. I really do think it's doable, but in an era where people are very conscious of the cost of government and the rising cost of government, I should say, it's something that the politicians have to first be sold on and then sell it to their constituents.



Marc Coudert (23:45):

I'll respond to that. I think that's a really good point. I get on a monthly timeline, a department will call me up and say, we have a $200 million project. Should we do it? Should we not do it? What should we do for climate change? And I can't answer that question because there's so many other pieces of that decision making process that don't involve climate, right? It's political. We need it for our systems, and I think it has to be something that we embed into our daily thinking when it comes to either CIP planning or infrastructure maintenance and all those things. It has to be part of our daily thinking. And the other thing is that we design going forward by looking backwards, right? There's this thing that Catherine, a professor at Texas, Texas, it's like we're driving down the road in west Texas. It's so straight that we can look in our rear mirror and drive, and we design our cities that way.



(24:37):

We look at past data to determine what to build in the future and never let a disaster go to waste. You mentioned Harvey. Harvey changed our flood maps. So before Harvey, we used flood maps that went up to 19, late eighties, I think, early nineties, no, actually maybe the seventies. And then when Harvey came in, they updated our flood maps, and now our flood maps weren't correct. We had 7,000 new buildings in the floodplain that weren't in the floodplain. So now 7,000 people, we got to call 'em and say, you need flood insurance even though when you bought your house, you didn't need flood insurance. So we have to be thinking creatively, but we have to be thinking about things are going to change. We have to take it seriously. We have to get the right data connected to the right decision making so that when we're going forward, we're not making the mistakes over and over again.



Rich Saskal (25:28):

Now, what we talked about a lot so far is resilience in the sense of managing the built environment. One thing that struck me as I looked into the Austin Resilience Office is that it has a real focus on people as much as things. Do you want to talk a little bit more about that, Marc?



Marc Coudert (25:45):

Yeah, sure. So as mentioned, we've been working a lot with city departments, and in 2018 we came out with a report with the worst acronym, the Climate Resilience Action Plan. And we had worked for five or six years. We felt pretty confident. We knew resilience we're experts, so we went out to the community because council was asking, have you talked to the community about this? And we knew from past experience that the community members with the least amount of resources, particularly East Austin, we're not able to sort of bounce back from big events. So we went out to these communities, and I don't speak Spanish, but I went out there like, hi, I'm here to talk to you about resilience. And they were like, you seem like a very nice person. Why are you coming to us to talk to us about resilience? We've lived through all these events.



(26:29):

We already are resilient. So we had to sort of shift our thinking. We approached the community as if they were infrastructure, but people are squishy, right? They're not easy to figure out. So we spent a lot of time, I'm on the ground in their houses, well, not creepy, talking to them, making sure that we understand what they're actually living through and not focus on the negative. We have a tendency of the city to be a deficit based thinking like, Hey, we're here to fix your problem. Instead we're like, what is actually working well? What are those community connections that are working? And how do we bolster that? And that got us into this conversation around resilience hubs. How do we ensure that we're working with the community so we're providing the right resources at the right time, at the right place when people actually need it? Because if not, we're going to be delivering food to a parking lot where nobody is expecting people to know what to do with it. So we've shifted our way of thinking, focusing a lot on community engagement and low-income communities.



Rich Saskal (27:31):

So the Resilience Hub Network, is that like a physical, a resilience hub to physical thing or that more of a plan?



Marc Coudert (27:41):

It's everything you want it to be? So after the Winter Storm Council passed a resolution directing staff to create these resilience hubs, and everybody we talked to had a totally different view of what that is. So we just went hyper focused on the community. We created this 40 person community organizers, community activists into a room and sort of walked through what should we focus on? And what we did is we identified areas in East Austin and we talked to people. We said, what are safe spaces in your community? And where would you go to if you have to leave your house? And that was it. Safe spaces were like schools, churches, rec centers, libraries, their friend's house. But where would you go to during an event? This is right after Uvalde. So they no longer want to go to schools. You can't just walk into a school.



(28:27):

So then we focused on rec centers and churches and trying to work with community members to make sure they're safe at home. And from that, we've been building up these locations to be able to do all these things and looking at solar and battery backup in addition to additional redundant power systems, looking at programming. The community is really interested in English classes, computer classes, and Zumba classes. So trying to figure out what they actually need, what can we do? It turns out we're already doing a lot of these things. They're just in the wrong place at the wrong time. So bringing in our health departments, our libraries, our emergency management folks to ensure that we're sort of working together with the community so that we're just not just this large the city, this big 14,000 employee thing, but actually people who work with them on a day-to-day basis.



Rich Saskal (29:16):

Thanks. One thing maybe we've taken for granted over the years is that if there is a major natural disaster, FEMA is usually on the scene pretty quickly. I'm going to paraphrase something S&P wrote recently is that as wildfires and other climate hazards become more damaging and more frequent, that could publicly pressure public sector disaster recovery arrangements such as FEMA. Can you expand on that a little bit, Oscar? Yeah.



Oscar Padilla (29:46):

And it goes back to look, when these events occur, it's expensive to recover. And let's not underscore the immeasurable costs when there's loss of life or livelihoods as the folks in the panhandle are not having to experience. But what we meant by that or what we're looking at is the expectation that FEMA's going to show up time and time again, yes. Is the relationship also going to change? And I think the answer to that is it has to change. And one recent example is that is what the folks in Lee County down in Florida and surrounding communities are dealing with now with the previous premium reductions they were receiving from their flood insurance has now gone away because FEMA is now saying that as part of the rebuilding efforts, that not all the required necessary steps were taken to ensure that if you're rebuilding in the flood zone, that is done in a manner that is consistent with what the highest community ranking score is under FEMA's criteria.



(30:45):

And so obviously folks are upset. Any premium reduction for your flood insurances is welcomed. But I think it's FEMA responding and saying, look, we can't just keep doing things in the same way that we have in the past. And if we're going to rebuild, if we're going to provide additional assistance, that there has to be ways in which we're rebuilding in a manner that is more resilient, that helps us not have to just keep repaying or fixing the issues when they occur. And I think that's going to be a central question that our folks in Congress are going to have to decide on whether there's a willingness to continue to just disperse every time there's a large scale event. And the number of billion dollar events has more than doubled in the last five years. A the state has dealing with this and also put its own dollars, particularly in the Houston, Harris County, Montgomery Fort Bend area, to ensure that these flooding events, even if there's no matching FEMA dollars, that they can still work with the Corps of Engineers to ensure that they're doing something right. And I think big picture, I think it's welcomed by everyone, but nevertheless, I do believe things or we do believe that the risks that things are going to change is higher than it certainly was before, and that the expectations also have to move in tandem with that.



Rich Saskal (32:07):

Yeah. Mark or Frank, do you have any thoughts on whether concerns about FEMA's ability or political or financial to respond in the future factors into or your client's planning?



Frank Doyle (32:23):

It does. We actually, it goes beyond FEMA, but I'll just FEMA first. The first. We do believe FEMA will change too. Our clients believe FEMA will change. You can debate whether you want the change or not, but from a purely practical point of view, they're going to tighten up on the restrictions like Oscar was saying, and they're going to move to their own new paradigm. And I think unless there's a remarkable change by a good chunk of Congress, I think that's just how it's going to be. But the other thing that some of our clients are telling us is on a bigger picture, yes, we have that infrastructure program from the Biden presidency that is now cb. Its way through to the people, to the various states, et cetera, local municipalities. But from a long-term perspective, some of our clients, I think they're correct about this, don't think they can count on the federal government being a large scale proponent of infrastructure assistance in the next 10, 15, 20 years.



(33:23):

And that's important for them because they have to think again about those projects that go out for two or three decades. Okay, well, is the federal government going to be a partner throughout that entire time? I understand that the Ike dike is may have some of those issues going into the future, and so this is going to put more pressure on state and local governments to fund their own infrastructure. And that's something that they're thinking about again in 20, not today, not tomorrow, but in 10, 15, 20, 30 years, are we going to have to dish out more money than we anticipate to complete these projects that are such importance to the state or the region or the locality instead of relying on a federal match as it was?



Rich Saskal (34:14):

Do you have any thoughts on how that kind of thing affects Austin



Marc Coudert (34:17):

Specifically? Yeah, FEMA, I mean, FEMA is an emergency management organization. They focused on reacting to events. When I first showed up at the city of Austin in 2010, so 14 years ago, our emergency management department was just a few people and they were activated and they would bring in people for very acute events like a tornado or a very hyperlocal flood. Everybody would show up, they would really focus on that, and then they would go away and then wait a year or two before the next big event. Well, things have changed. And I think the winter storm uri, so the big snowstorm sort of really elevated that when it's statewide, you're not going to get the red crosses, the state's not going to show up, people are not going to show up to help you and FEMA's not going to be there. So you really have to focus on how do we ensure that we are doing the right thing for ourselves and not assume that somebody's going to come in and save the day.



(35:11):

So we tend to think about things in shocks and stressors or as frank would say, violence and stressors. And I do want to focus a lot on stressors like day-to-day impacts to community members or day-to-day impacts our assets so that when we do get a shock, it's not a huge change that we're actually be able to mitigate that shock through the work, through the stressors. So FEMA is good, but they're not going to be the savior. But I think they're starting to shift, right? We're seeing the brick CCRA come out of FEMA that building resilience in communities, they're starting to think a little bit broader than just the emergency. And I think that's a good trend for FEMA going forward.



Rich Saskal (35:53):

Before I go on, I would like to just invite anybody who has a question for the panel. We have mike set up in all three aisles, and I'll recognize you if you want to come up. I don't want to wait until the very end, but property insurance as it relates to the increasing tempo of claims and natural disasters as been front and center in where I live in California and Florida as well, for example, many insurers are reconsidering whether they should be exposed to the markets there at all. Is this something that's on the radar in Texas? Any of you have any insights there?



Oscar Padilla (36:40):

I'll just speak broadly. I mean premiums are going up everywhere. It's just not Florida, it's just not California, it's Arizona, it's Utah, it's Colorado, it's Louisiana. And are we seeing it in Texas yet or are we going to see some big players leave the state? We haven't seen that, at least on the rating side. I mean, Florida is a unique example. Most of the big insurance companies left after Andrew, so you have very few small insurance companies and they've been dealing with multiple challenges. A lot of insolvencies of insurance companies and the state having to step in and issue debt or at least entities of the state, like the Florida Insurance Guarantee Association issued debt last year to pay claims for insolvent insurance. Likewise, in citizens is a big player in the insurance market in Florida as well. So the state insurer of last resort for PNC, do we anticipate seeing that in Texas?



(37:34):

I don't think yet. And it's just a different structure of the insurance market here more than anything. But it doesn't mean things can change. I mean if the experience in California, which I also cover as well as Florida insurers, just no longer writing policies or premiums are really now lining up with the risk associated with being in a certain location. I think that's what we've seen across estates and what we hear from our insurance ratings analysts, colleagues, that when they speak to the insurance companies is that premiums to the extent they can. And there were certain caps in California which prevented the risk premium to appropriately reflect the risk associated with where someone was. As these premiums start ratcheting up and caps come off, I think it's just something we're just going to have to deal with. And how do you solve that solution? Certainly what the city of Austin is doing to help mitigate against these things definitely helps if building codes change that have requirements that ensure that should a wildfire come and your shingles don't light on fire, then your premium should go down.



(38:42):

So those are the types of things that we're hearing anecdotally, but they certainly make a difference. Other anecdotal story in Florida using drones now insurance companies are using drones to inspect roofs to say that if you say your roof is five years old, it better be five years old. Or if you said that you rebuilt your roof with hurricane level standards withstand certain standards that indeed you actually did because insurance companies, just like any other business, they're not in the business of losing money and with elevated risk, all these extreme events, I mean things have changed and at least what we hear is those premiums are now certainly reflecting the elevated level of risk



Frank Doyle (39:27):

By that itself. It's not so much a factor when we have discussions or in the disclosure with our clients, but it is wrapped up in the overall cost of governance of payment by our customers population. So it's sort of like your cost for utilities is going up because of flood preparedness and resiliency. Your insurance is going up for this and you have to add more people to do inspections, so your property tax is going up for that. And sooner or later it just reaches a level where there's a great deal of concern over the cost, especially for the lower income. But middle class people too. And that's something that our customers and no doubt all non SMBC customers are wrestling with as they go forward in each municipality has to come up, each state has to come up with its own answers. Some of 'em will be wrong, some will be right, and then they'll just adjust and go on. I mean, that's a hallmark of American democracy is the adjustment phrase. But yeah, it's something that they're wrestling with as part of a cumulative whole.



Rich Saskal (40:42):

Marc, you briefly kind of touched on this earlier, but I wonder if you can go into a little more detail, talk about the city's heat resilience and heat mapping initiatives. What does it mean? What do you do with the information, for example, you get from a heat mapping initiative?



Marc Coudert (40:56):

Yeah, so as I said earlier, heat kills more people than any other extreme weather events. Most of that is not even tracked because of how emergency management or not how our hospitals track heat impacts. But we knew that heat impacted community members, particularly those in Eastern Crescent. So we started looking at heat maps and we had satellite data, which is really great at telling us where our airports is and where big parking lots are, but didn't really tell us what's happening on the ground. So we were able to get a NOA grant to essentially get heat data at the ground level. And what I said to UT faculty when they applied for it was like get some money to community organizers so that we can work with them. And what we did is we got community organizers, we got faculty, we got city staff to work together to drive around the city on August 7th, which is for people live in Austin, you typically the hottest day of the year.



(41:52):

And they drove a certain route in Eastern Crescent. So for those who don't know, Eastern Crescent is the eastern part of Austin to track heat and humidity at seven in the morning, at two o'clock in the afternoon and seven at night. And having the community there was really important because then we worked with community to say, well, how does heat impact you at home? And our first initiative, our first thought was like, the community's going to want trees. They're going to want pools and splash beds and cooling centers. And most of the conversation from the community members were like, my husband comes home from working outside, he's got headaches, he's nauseous, or my kids don't want to go outside because it's too hot. Or a lot of mental health and a lot of issues with being at home and being hot, or it doesn't get below 80 at night so they can't sleep. So the next day they're having a hard time. And we have to sort of shift our thinking from, we do need to do put in trees and put in sidewalks, but maybe we should also be focusing on weatherization and other ways for people to be safe at home because if they're not safe at home, they're definitely not going to be safe outside when the other events happen.



Rich Saskal (42:56):

You learn a lot by asking questions if no one else has a question. Do you have any kind of closing comments you want to say or



Frank Doyle (43:09):

Go ahead. Yeah, I'll just say that I'm actually very optimistic about Texas in the future when dealing with the resiliency. My wife is, Texas is roughly the size of France, my wife is French. And so we go to France and you would think that a country of that nature, socialists, et cetera, would be much better equipped to handle these kind of questions. And you walk around and you're thinking, oh my God. I mean her aunt lives in a nursing home where for like 200 people, there's no air conditioning in any of the homes. And this is a place about somewhere down close to the southern part of France and the only air conditioning they have in the building is in this one convention hall. So if it gets really hot a hundred degrees or more, their answer is to put everybody into the hall.



(44:06):

And some of the other mind blowing things, it just impressively sad to me. And that's why when they have a heat wave, they have thousands of people die over there and when they have floods, they have people die over there. It just much worse in many ways than us. We just don't read about it for the most part. So Texas, when I look at Texas, I'm not saying that Texas is perfect. I'm not saying that Texas governments at all levels aren't going to make mistakes. Obviously they're not perfect. Obviously mistakes are going to happen, but Texas is very proactive. It learns quickly. And yes, there are concerns going to the future, but I think that overall Texas seems to have, and when I say Texas, I mean also local officials like Mark and regional officials, et cetera, seem to have the ability to really want to control their destiny instead of having destiny control then.



Rich Saskal (45:04):

Alright, well on that note, I'd like to thank my panel.



Frank Doyle (45:08):

We still



Oscar Padilla (45:10):

Have a minute left. I think we're good.



Rich Saskal (45:12):

Yeah, I can release you all to your jobs, families and airline reservations. But thank you all for coming to the Bond Buyers Texas conference and this panel in particular.