Proactive Planning for Resilience: Protocols for Community-Led Climate Adaptation in Virginia

Step 4: Funding Plan

Select and Seek Funding & Financing Sources

Actions:

  • Evaluate potential funding and financing sources for the community’s prioritized actions. Compare potential funding levels and timelines to the costs and timelines for specific prioritized strategies. Read the information below on funding challenges to understand possible barriers. 
  • Select funding sources to be sought, and the timeline for seeking them.
  • Secure funding on the needed timeline. Assign staff to manage the acquired funding and financing.

Table of Contents

Best Practices When Seeking Funding:

  1. Seek trusted partners for grant proposals – ones that can assist with proposal drafting and administration, such as adjacent localities, universities, and non-governmental organizations.
  2. Watch out for match requirements for federal grants, and grants requiring recipients to provide funds up front and be reimbursed by grant dollars. This can be a major challenge for under-resourced localities, requiring other grants and loans, state funding, or financing options to cover funding needs.
  3. To help promote equity for socially vulnerable populations, focus on expanding their choice sets. For example, expanding the degree of property ownership by low-income residents can help mitigate the negative displacement impacts of value-increasing adaptation and resilience projects. One possible method is to help residents gain access to Section 8 Housing funds and use them to build equity, or support the creation of community land trusts (see the affordable housing discussion in Step 2).
  4. When procuring funding for an entire project, it will often involve piecing together multiple funding sources for different stages of the project, such as engagement, planning, implementation, etc. This can be very cumbersome, so taking into account the estimated project timeline when planning for fund application and usage is critical. Known as ‘stacking’ funds, this strategy can be used to combine funding sources if a single source is insufficient, or to meet match requirements. When creating a stacking schedule, localities must plan out when they need certain capital on hand, how much is available for use, and when repayments are due on the various grants, loans, or bonds.
  5. Make sure to take staff capacity constraints into consideration. Not only do grant applications involve resources, but so does managing grant funds when an application is successful. Keep in mind the administrative burden of tracking repayment of loans and managing and reporting on multiple grants at one time. Each has different requirements and deadlines, and managing multiple ones at once can amplify the burden. Make sure to take into account staffing and administrative constraints and utilize avenues for efficiency whenever possible. Trying to coordinate between various agencies and reusing application materials where applicable can reduce administrative and planning burdens.
  6. Note that federal grant programs often do not fund untested, innovative solutions. The FEMA BRIC program can be used to assist with relocation of vulnerable communities, and to fund projects that will mitigate the impacts of future storms (i.e., hazard mitigation), but many grant programs are not designed for that.
  7. Public-Private Partnerships provide the opportunity for local governments to utilize private funding and resources to achieve climate resilience goals. These agreements alleviate the responsibility of funding and some of the administrative burden for local governments. They spread the risk between the government and private entities and reduce total costs to the government, but can be more difficult to navigate for locality implementation as the contracts are often complex and there may be additional limitations put in place by the private entity. The private grants and loans section of this Guide contains more information on working with private entities. For more information and resources when considering these partnerships, see the EPA’s Guide to Public-Private Partnerships for financing green infrastructure projects. Note that public private partnerships must fall under the Virginia Code definition of a “Qualifying Project,” which can be found here (VA Code § 56-575.1)
  8. Actively engage the community at all stages of planning and implementation to hear their concerns and to develop solutions that prevent the displacement of low-income residents. Equity-oriented efforts should be multidisciplinary in nature, involving and integrating plans for affordable housing, job training and creation, and small business support. There are several funding sources dedicated to supporting disadvantaged communities which can be used to help produce equitable outcomes. For example, see the EPA Environmental and Climate Justice Program, which provides funding for environmental and climate justice activities to benefit underserved and overburdened communities. To see eligibility, view the EPA IRA Disadvantaged Communities map. This funding comes from the Inflation Reduction Act Community Change Grants Program. For assistance, visit the Community Change Grants Technical Assistance page.

Funding Challenges:

The funding sources for mitigation and adaptation measures are extremely varied, decentralized, and numerous. They are often under the control of several different federal and state agencies, subject to different eligibility requirements (for example, cost/benefit ratios, executive disaster declarations, etc), and restrictive with regard to the activities that can be funded. Described below are some challenges often associated with climate resilience and adaptation-related funding.  

1. The FEMA National Flood Insurance Program (NFIP) can be insufficient to cover the full costs of flood loss, and payments often take a long time to process. Local governments therefore should help their residents to understand that policyholders should not expect FEMA to be able to do more than it can; and that homeowners need to take proactive steps to make vulnerable residences more resilient to flooding.

The NFIP offers federally-backed, low-cost flood insurance for at-risk property owners and renters in participating communities. It aims to increase access to affordable flood insurance.1 However, the NFIP is facing many challenges, most notably the following: 

  • It was intended to be funded entirely from premiums, but for decades, premiums have been held artificially low. This has left the program in extreme debt, and efforts to raise the premiums have been bi-partisianly denounced in Congress.2 Its long-term sustainability is thus in question, although the revised premiums offered through FEMA’s Risk Rating 2.0 pricing approach more realistically represent the level of risk.
  • Artificially reduced flood insurance premiums do not reflect the true individual and societal costs of developing and remaining on flood prone properties.
  • The NFIP’s policies have relatively low coverage limits that are often not enough to fully address disaster recovery costs. Moreover, funds are only made available post disaster and after specific conditions are met. This means that they are generally only used for rebuilding, rather than resilience and adaptation planning.

1 See Leonard Shabman, Carolyn Kousky, & Brett Lingle, “The mandatory purchase requirement: Origins and effectiveness in achieving NFIP goals,” In Resources for the Future, (2019), https://www.rff.org/publications/reports/mandatory-purchase-requirement-origins-and-effectiveness-achieving-nfip-goals/.
2 “The national flood insurance program: Critical issues and needed reforms,” EESI, https://www.eesi.org/briefings/view/050719nfip.

  • Private flood insurance – can offer more robust coverage with higher coverage limits and shorter waiting times.1 Private markets also can help ensure more of the cost of flood risk is captured in owning/developing a property. However, this does raise costs for property owners in vulnerable areas. 
  • Parametric insurance – provides funds after an objective threshold for a given disaster event (like flood level, wind speed, etc.) is met, and thus offers more rapidly deployable funds post-disaster. The amount of the payout is established ahead of time, so policy holders avoid an extended loss verification process. 

For general background information on the National Flood Insurance Program and climate change impacts, see Congressional Research Service report A Brief Introduction to the National Flood Insurance Program in the 118th Congress (updated Nov. 27, 2023) and the Congressional Budget Office’s report Flood Damage and Federally Backed Mortgages in a Changing Climate | Congressional Budget Office (cbo.gov) (Nov. 13, 2023).

1 Joseph Harrington, “Flooding: Everyone is Exposed, Few are Insured, But New Options Entice,” Adjusters International, (p. 4). https://www.adjustersinternational.com/pubs/adjusting-today/flooding-everyone-is-exposed/4/.

2. Funding may not be available to assist all vulnerable residents, due to the benefit/cost analyses used in federal grant programs. 

Many federal funding sources, like FEMA and HUD, currently rely on various benefit-cost analysis (BCA) metrics for decisions about funding allocations. These agencies conceptualize climate risk primarily in terms of property damage and economic costs, ignoring long-term social costs such as unemployment, homelessness, chronic health issues, and displacement, which more acutely affect low- and middle income (LMI) communities. By allotting grant and loan funds to these LMI communities, federal agencies can better maximize overall welfare; but because those welfare benefits do not have a market value, recovery, mitigation, and resilience funds are disproportionately allotted to wealthier communities.1 This has exacerbated location-based inequality in the United States and is something that must be taken into consideration in any municipality’s climate resilience planning. 

In order to address this challenge, municipalities can consider leveraging financing options, which can give them more control over the projects they choose to fund. By not focusing their efforts solely on federal grant funding opportunities, they can fund projects that protect vulnerable communities, not just the communities with higher property values that pass government benefit/cost analyses.

This is discussed further in the section on the  seawall projects of Charleston and Norfolk.

For a specific resource to address this see:

  • The State of Maryland and The Nature Conservancy hosted a series of workshops in a project called SEAFARE (Supporting Equitable Access to Funding for Adaptation Resources). The resulting report discusses barriers to equitable access to funding and includes Recommendations for Decision-Makers to help overcome those barriers. See SEAFARE Report_TNC Maryland_May 2024.pdf | Powered by Box.

1 Kelly McGee, “A place worth protecting: Rethinking cost-benefit analysis under FEMA’s flood-mitigation programs,” The University of Chicago Law Review, (2022), https://lawreview.uchicago.edu/print-archive/place-worth-protecting-rethinking-cost-benefit-analysis-under-femas-flood-mitigation. See also Kelsey McNeill and Alyssa Glass, “Federal Funding Programs: Benefit-Cost Analyses and Low to Moderate Income Communities,” Va. Coastal Policy Center (Nov. 2019), https://scholarship.law.wm.edu/vcpclini/62.

Harris County, Texas
  • In the aftermath of the destruction wrought by Hurricane Harvey in 2017, Harris County implemented a new framework for flood risk reduction project prioritization. Instead of prioritizing the projects that affected the County’s highest-value property, they scored projects across several criteria, including existing conditions, expected risk reduction, cost, availability of funding, and environmental and recreational benefits. Critically, they also evaluated project proposals based on the Center for Disease Control’s Social Vulnerability Index, weighing it at 20% of the overall project score. Their project prioritization framework can be found here. 
  • The County applied this framework on projects funded with a $2.5 billion bond measure that was intended to finance flood damage reduction projects.1 This enabled them to break away from federal benefit-cost requirements by limiting the extent that they were reliant on grant dollars. Leveraging financing options can be a good way for municipalities to gain more flexibility in the projects they choose to implement. 
  • Harris County chose to adopt this framework in order to promote more equitable recovery post-Harvey and ensure that historically vulnerable and ignored communities had more of their climate resilience and adaptation needs addressed. For more information on the equity focus of recovery efforts, see this article in the New York Times.
  • Harris County’s prioritization framework can serve as a model for evaluating potential flood risk reduction projects in a more equitable manner. 
Buchanan County, Virginia
  • In August 2021, the remains of a hurricane hit the Guesses Fork area of the Town of Hurley in Buchanan County, Virginia. The storm resulted in major flooding, the destruction or damage of dozens of homes, and the death of a woman. Almost a year later, in July 2022, dozens of homes in Buchanan and western Tazewell counties were damaged or destroyed when 5-6” of rain fell in just a few hours. Roads and bridges washed out, houses were pushed off of their foundations, and there were power and water outages, but no reported deaths due to the flooding. The storm was reported as less severe than the 2021 flood, but more widespread.
  • Following both storms, the Federal Emergency Management Agency (FEMA) denied Virginia’s request for individual assistance for homeowners – most of whom did not carry flood insurance – because it said the destruction was not great enough to warrant it (the agency did provide financial assistance to rebuild public infrastructure). FEMA based its decision on its eligibility criteria, which do not set a dollar amount threshold for eligibility for individual assistance; instead, eligibility is based on a combination of factors that include the total value of property loss and the state’s financial resources that are available to help individuals.2 This approach can disadvantage residents of low-income, rural communities where the property values are not high. FEMA’s response to the Hurley disaster prompted state Del. Will Morefield to propose a statewide flood recovery fund to pay for property losses that were not covered by insurance or federal aid. There was a budget earmark of $11.4 million for Hurley relief, but due to budget negotiations, it took 16 months for residents to receive the funding. The General Assembly again appropriated $18 million in funds after the July 2022 storm to help residents rebuild damaged or destroyed homes. Private donations also are helping to fund the recovery.3
  • In 2022, Buchanan County received a grant from the inaugural round of the Virginia Department of Conservation and Recreation’s Community Flood Preparedness Fund (CFPF) grants, to build capacity and develop an actionable resilience plan. In 2023, the County developed its Flood Resilience Plan. In addition, the counties of Buchanan and Dickenson are using U.S. Army Corps of Engineers funding to increase their flooding resilience. See the Virginia Chapter of the American Planning Association’s 2023 webinar, Your Hour With APA VA | Funding Options for Increasing Community Resilience | CM #9265699 (youtube.com), which features the use of the Corps’ Section 202 grants by the two counties to address flooding in southwest Virginia.
  • To see the CFPF grants awarded to Buchanan County, see the 2021 Plans and Capacity Building with Consultant Services application, the 2022 floodplain and staff resilience plan grant (application, scoring sheet), and 2024 funding for resilience staffing (application, scoring sheet).

1 Harris County Flood Control District, “Bond Program: Executive Summary” (p. 2), (2018), https://www.hcfcd.org/Portals/62/Resilience/Bond-Program/Community-Engagement-Meetings/FINAL-Executive-Summary-Cutsheet-081318.pdf.
2 See generally https://www.washingtonpost.com/dc-md-va/2023/07/30/recovering-twin-southwest- virginia-floods-rough-rough-ride/; https://cardinalnews.org/category/projects/southwest-virginia-flooding/.
3 See https://cardinalnews.org/2022/07/18/33-properties-destroyed-in-buchanan-county-flooding/, https://www.wunderground.com/article/news/news/2022-07-13-flooding-damage-buchanan-virginia- search-and-rescue; https://www.foxweather.com/extreme-weather/virginia-flooding-destroys-33-homes- damages-nearly-100-buildings.

3. It can be challenging to apply for targeted grant funds to assist vulnerable communities that are not legal entities and that may cross multiple jurisdictional boundaries.

The definition of a vulnerable “community” or a “community-scale” project can be problematic when seeking funding. Shared cultural, socioeconomic, and historical ties do not necessarily align with existing geographic and jurisdictional boundaries as outlined and defined in the authorizing legislation for grants and loans. And community scale projects may encompass both low income and wealthy residents if the funding is not tied to income levels, which presents challenges to equitable distribution of funds. While it is desirable to seek funding or direct efforts to building climate adaptation projects for a vulnerable community, in practice, this may entail multiple adjacent municipalities partnering together and/or assisting residents in applying for individually-targeted grants and loans in order for the entire ‘community’ to be encompassed and their needs addressed. And some grant programs do not allow individuals to apply for funds; the funding must be distributed to local governments or other entities.

The AdaptVA website has a social vulnerability index viewer that has data on socially vulnerable populations by census tract, which can assist localities in determining where overlaps and similarities in community vulnerability transcend political borders. However, in general, a lack of available data on the definitions, boundaries, and similarities or differences of various ‘communities’ makes addressing their specific needs more difficult and requires careful planning when localities are applying for funding.

4. It can be difficult to get the timing right for funding; localities need to take into account how quickly, or when, individuals need funds post-disaster.

Ensuring that funds can be obtained in a timely manner, when they are needed most, can be difficult. For longer-term project implementation, funding and financing timelines can be made to be more flexible, but when dealing with post-disaster recovery, funds are needed quickly. Federal grant money can take months, or even years, to reach households1 as they are often delayed by congressional debate and approval and application preparation and processing. Moreover, there are also significant timing gaps between the various organizations in charge of recovery fund rollouts. For example, most FEMA assistance (which extends more immediate aid to individuals) generally ends at a maximum of 18 months, but at that point, funding from the U.S. Department of Housing and Urban Development (HUD) Community Disaster Block Grant for Disaster Recovery program (which can be used to help fund neighborhood reconstruction and rehabilitation) generally has yet to be spent. This can be devastating for a family trying to pay rent on one property while attempting to rebuild another.2 Traditional indemnity insurance payouts are also plagued with these same issues, as the process of claims itemization and contest can delay funds for months. These delays can increase costs of recovery and worsen hardship in a community. 

Local governments should help educate their citizens on these timing gaps and some of the novel solutions for them, which are described below. There are also a few common factors that contribute to delays that localities should be aware of as they apply for funding, including limited staff capacity, grant administration difficulties, the time it takes to engage in recipient outreach, and case and data management.3 HUD has a report, Housing Recovery and CDBG-DR: A Review of the Timing and Factors Associated with Housing Activities in HUD’s Community Development Block Grant for Disaster Recovery Program | HUD USER, that addresses these challenges and has some examples of how certain localities have tried to mitigate them (page 7 of the report has a summary of innovative solutions for these challenges).

There are a few novel solutions and products being offered to address these timing delays: 

1 “Improving disaster recovery,” Wharton Environmental, Social and Governance (ESG) Initiative, October 2019, https://esg.wharton.upenn.edu/engagement/digital-dialogues/improving-disaster-recovery/.
2 Daniel Teles and Carlos Martín, “Why does disaster recovery take so long? Five facts about federal housing aid after disasters,” Urban Institute, January 25, 2021, https://www.urban.org/urban-wire/why-does-disaster-recovery-take-so-long-five-facts-about-federal-housing-aid-after-disasters.
3 Carlos Martín, et al., “Housing Recovery and CDBG-DR: A Review of the Timing and Factors Associated with Housing Activities in HUD’s Community Development Block Grant for Disaster Recovery Program,” In Office of Policy Development and Research, (2021), https://www.huduser.gov/portal/publications/HousingRecovery-CDBG-DR.html

5. Environmental gentrification can result from any resilience-driven value additions to property, which risks displacing vulnerable communities.

Environmental gentrification refers to the process where, by implementing and investing in environmental improvement projects in a community, property values rise and lower-income residents are priced out of their neighborhoods. This can further augment the inequities in access to environmental services (like urban cooling, greenspace, and stormwater management) that the projects attempt to address, while simultaneously displacing the very residents that they are attempting to benefit the most. Without taking into account negative displacement effects, there is potential to impose more harm than good on a vulnerable community when pursuing resilience projects.

The process of adding value to a neighborhood (via reduced climate-exposure risk and the addition of other environmental amenities), while simultaneously not pushing out the socially vulnerable individuals whose housing options were affordable due to the environmental disamenities, may seem daunting and contrary to many basic economic principles. However, local governments can refer to a few best practices and resources to mitigate this challenge.

Overview of Major Funding and Financing Categories:

Below is an overview of some major categories of funding and financing: Grants & Loans, Bonds, Taxes & Fees, and some innovative solutions for Virginia localities to consider. These categories are not all-encompassing, but include general information on the funding type and some examples for each.

The following list contains toolkits, databases, and other helpful resources for local governments to use when beginning to plan funding for a resilience program or project.

Grants & Loans

The list of potential federal and state grants and loans available for climate adaptation measures (and climate resilience at large) is extensive and well-documented (see the sample list above). While grants do not have to be paid back like loans, the process to attain them can sometimes be more work, to fulfill specific application requirements. And they often come with stringent reporting guidelines once the funding is used, which can place an administrative burden on the responsible office. Another limiting factor for grants is that they may be paid out on a reimbursement basis, requiring local governments to outlay funds up front, or they may require matching funds beyond the capabilities of some localities.

On the other hand, loans have to be paid back, with varying degrees of interest, and require some form of collateral, minimum assets proofing, or revenue. Therefore, they require a plan for how to repay the loan on time with accrued interest. Localities should create a plan and timeline for any loans in line with the best practices outlined above.

In the case of federal funds, some may be attached to specific funding bills which only offer one round of grant awards, requiring a locality to find additional funding sources in the future – including opportunities that may become available due to new legislation.

Description:
Private grants and loans can be a good alternative to their federal counterparts, as they often come with less stringent application processes, shorter timelines, and no matching-dollar requirement. Many of the resources linked at the beginning of this section also have information on private grants and loans. The Virginia DCR’s Coastal Resilience Web Explorer and US Climate Resilience Toolkit are two notable and comprehensive resources. There are also many private organizations that offer grant databases. Note that although they assist in reducing the time it takes to search applicable grants, many of them are locked behind paywalls. Finally, see the NOAA Grant Proposal Development Resource Page which, while geared for federal grant application aid, still offers many useful tips on general grant application preparation.

Benefits: 

  • Can help spread some project risk to the capital market and expand the pool of available capital by incentivizing private investment through the prospect of capital gains and/or philanthropic donations. This can reduce the burden to taxpayers. 
  • Private partnerships and financing options often do not require (as much) upfront match dollars and funds as public funding sources, which can help cash-strapped municipalities. 
  • Finally, private partnerships can also close the gap between the time when disaster first strikes and federal dollars can arrive.1 

Challenges:

  • Foundations and organizations all have different purposes, applications, funding and reporting timelines, and organizational structures to navigate. 
  • Private grant funding can be extremely competitive and the availability of private financing options are limited by / susceptible to economic downturns. The desire to chase sustained high revenue streams also limits the types of projects that private entities are willing to finance. 

1“Enterprise and Morgan Stanley launch disaster recovery accelerator fund,” Enterprise Community Partners, November 23, 2019. https://www.enterprisecommunity.org/news/enterprise-and-morgan-stanley-launch-disaster-recovery-accelerator-fund.

Bonds

Localities are limited in their bond choices by their bond rating and capacity, so this should be the first consideration when local governments are looking for bond opportunities. Bonds are debt securities typically backed by the full faith and credit/taxing authority of the issuing government. The Virginia Code § 15.2-2638 mandates that a county hold a referendum of voters before taking on any debt or issuing bonds. Oftentimes this is because localities will use property-tax increases to repay bonds.

Description:
Municipal bonds are debt securities issued by governments to finance capital expenditures and projects. Traditionally, municipal bonds specifically intended for resilience and adaptation projects are called “green,” “social,” “climate”, or “sustainability” bonds. They provide funds for governments (and corporations) from investors who lend money in exchange for principal (the bond amount) + interest in return.1

Benefits: 

  • Can capitalize on market trends; investors are increasingly concerned about environmental and social issues and also want investments that protect portfolios against climate risks.
  • Sustainability bonds grew from $17.8 billion in 2018 to $141.6 billion in 2022, meaning funds from this funding source are becoming quickly available.2 
  • Bonds (and loans in general) have a more consistent payment schedule than grants.

Challenges: 

  • Bonds carry a credit risk for localities; defaulting on a bond can severely limit a community from obtaining loans and investments in the future.
  • There are no inherent protections against inequities in repayment. For example, repaying the bond with a regressive tax such as a sales tax disproportionately impacts LMI and other socially vulnerable communities. 

Case Study: 

  • Post Hurricane Sandy, New York’s Battery Park City Authority (BPCA) issued $349 million in sustainability bonds to raise funds to fortify the Hudson River area against future storms. As of 2023, they were preparing to sell $744 million more in debt, of which half would be used for resilience projects like helping waterfront communities protect against storm surges.  

1 “How Bonds Can Help Cities Manage Extreme Weather,” Morgan Stanley, September 13, 2023, https://www.morganstanley.com/ideas/sustainability-bonds-climate-change-cities-states.
2 Ibid.

Description:
Environmental impact bonds (EIBS) are “green” municipal bonds, targeted to a new generation of impact investors. They fund environmentally and socially beneficial projects AND commit to quantitative prediction of benefits, post-implementation evaluation, and high transparency and disclosure with investors and community members. For more general information, see this explainer by the Chesapeake Bay Foundation, which is partnering with outcomes-based capital firm Quantified Ventures and the City of Hampton, Virginia on an initiative to use EIBs to finance three stormwater runoff and flood reduction projects. 

EIBs work in the following manner:

  1. A company that deals in outcome-based capital development work matches investors with a municipality looking to construct an environmental resilience-building project. They also outline the terms of the bond.
  2. Bonds are sold and revenue used to finance projects. Principal and interest are paid out (as usual). 
  3. At the end of a set evaluation period, two possible things can happen: 
    • the municipal issuer either pays the investors an outcome-based payment if the project exceeds performance expectations, and the investors will pay the municipality a risk-sharing payment if the project does not meet performance expectations; OR
    • If it is a “disclosure only” EIB, the municipality merely informs investors about how the project performed.1

For more information, see this explanation from Quantified Ventures: What is an Environmental Impact Bond | Quantified Ventures.

Benefits: 

  • EIBs can overcome some issues associated with traditional funding sources, like limited funds, cumbersome application processes, and long wait times.
  • EIBS can expand the scope of projects that can obtain funding, as investors are often willing to take on more risk than the government in their project selection.
  • The outcome-based evaluation obligation incentivizes the issuer to use funds in an efficient manner.

Challenges:

  • They may not work for small towns and cities due to the performance and outcome metrics required and higher overhead costs (e.g., communication and facilitation costs). 
  • To be successful, they require extensive communication with outside partner leaders (who coordinate deals, align and coordinate stakeholders, etc.). 

For more information: 

1 “Environmental Impact Bonds,” Chesapeake Bay Foundation, https://www.cbf.org/how-we-save-the-bay/programs-initiatives/environmental-impact-bonds.html

Description:
A catastrophe bond, or “Cat Bond,” is a security that pays an issuer when a predefined disaster risk level is met. For example, a cat bond can be issued to protect a municipality against a hurricane causing a set amount of insured losses in damage. They allow catastrophe risk to be transferred to the capital market, where institutional investors can earn an attractive return that is uncorrelated with the returns of other financial market instruments. Investors get a fairly high interest rate over the duration of the bond (usually 3-5 years), but if a disaster reaches a predetermined threshold, the policy holder receives a payout and the investors lose at least part of their principal invested.1 Investors essentially bet against the incident happening. In recent years, there has been an effort to leverage the capital in the bonds to finance climate resilience strengthening infrastructure. These new securities have been deemed “Resilience Bonds.” Resilience bonds raise money to address climate-related disasters by internalizing the financial value of a resilience project (i.e., reduced risk), which decreases the coupon payment investors are willing to accept after the project is complete. The difference between the coupon payments with or without the resilience project is the “resilience rebate” and the rebate can be used to finance the actual risk reduction investments themselves. Investing in infrastructure that reduces the impacts of climate disasters increases the likelihood of a return on the Cat Bond itself.2

Benefits: 

  • They provide a more immediate source of funds than traditional disaster relief programs for communities after disasters strike. 
  • By transferring catastrophe risk to the capital market, these bonds can reduce the amount of risk that any individual asset owner (like government, or an  insurer or corporation) has to bear. 
  • In terms of project funding, resilience bonds have the benefit of being explicitly designed to incentivize the funding of proactive risk reduction projects. Projects with the most environmental benefits are also the ones with the most financial benefits (via the environmental risk reduction produced), and thus private, profit-chasing behavior will naturally select the most environmentally (and socially) beneficial projects. 
  • Unlike environmental impact bonds, the resilience bond approach enables benefits to be outlined, defined, and priced up-front, without obligations to continuously measure and defend benefit metrics.3

Challenges:

  • Extremely high-quality modeling and data on public buildings and infrastructure is needed to effectively validate baseline risk and quantify the potential risk reductions from the proposed infrastructure improvements. This can be expensive and time-consuming to obtain.
  • Some projects are more inherently incompatible with cat/resilience bond funding. These include projects that are too difficult to model in a cost-effective manner, ones with risk reductions that are too small to be quantifiable or meaningful, and capacity building programs or emergency preparedness projects that have high operational uncertainty which make benefits difficult to estimate. 
  • These bonds are also generally geared toward catastrophic events, not chronic stresses.4
  • The modeling, design, issuance, etc. of these bonds requires the collaboration of many different partners, which can slow down decisions and negotiations over project implementation. 

For more information:

  • The RE:bound initiative, in 2015, was the first to formally develop and launch the resilience bond as an offshoot of the catastrophe bond/model. Their whitepaper is extremely useful; it includes a detailed overview of how to leverage resilience bonds for resilient infrastructure investment, including facets of effective modelling, structuring, timing, triggers, rebate mechanisms and management, etc. 
  • For some examples of use, see: 

1 Andy Polacek, “Catastrophe Bonds: A Primer and Retrospective,” Chicago Fed Letter, 45, (2018) https://www.chicagofed.org/publications/chicago-fed-letter/2018/405.
2 See Maya Dhanjal, “Why climate resilience bonds can make a significant contribution to financing climate change adaptation initiatives,” In PreventionWeb, (2020), https://www.preventionweb.net/news/why-climate-resilience-bonds-can-make-significant-contribution-financing-climate-change.
3 Shalini Vaijhala, and James Rhodes, “Resilience Bonds: a business-model for resilient infrastructure,” The Journal of Field Actions, 18 (2018): 58–63.
4 Ibid.
5 Felipe Bascunan, Dominic Molloy, & Berend Sauer, “What are resilience bonds and how can they protect us against climate crises?” Global Center on Adaptation, July 24, 2020. https://gca.org/what-are-resilience-bonds-and-how-can-they-protect-us-against-climate-crises/.

Taxes & Fees 

A benefit of using taxes and fees is that they are more direct funding mechanisms that provide interest-free revenue to be used without some of the limitations of grants, loans, and bonds. It is important for localities to consider the impact of taxes and fees on taxpayers and other key stakeholders in the area. The use of taxes and fees to finance resilience projects may be unpopular or have inequitable impacts on low income communities. These concerns, especially if there are concerns among disadvantaged community members, can be addressed through engaging with the community and carefully designing the mechanism. 

Here are a few options available to leverage taxes and fees for climate resilience:

Description:
One option to fund climate resilience and adaptation measures is setting aside tax revenues, be they from real estate purchases, property taxes, commercial taxes, sales taxes, etc. Recurrent taxes like these are a promising source of increased revenue and are important in filling gaps where localities do not have the capacity to apply for and manage competitive federal and private grants and loans. 

Benefits: 

  • Using taxes to fund adaptation efforts provides a more stable revenue source and builds on localized expertise, as local governments are best suited to understand the needs of the community and applicability and impacts of various types of taxes. It also reduces the time spent navigating bureaucratic federal and state government funding applications.1
  • Certain types of taxes have equity and fairness arguments in their favor. For example, according to a publication on using fiscal instruments for climate finance published by the International Monetary Fund, recurrent property taxes appear to have limited effects on growth and seem to be borne mainly by the wealthy.2
  • Lessened reliance on stringent loan and grant programs allows municipalities more flexibility by not beholding them to often inequitable benefit-cost analysis metrics. For example, by building up a large buyout fund with tax revenues, Harris County, TX was able to provide greater subsidies to homeowners to promote a more complete and equitable buyout program3 and was also able to incorporate social vulnerability in its project decision criteria.4
  • This approach can potentially raise a substantial amount of money because the taxable base is very broad.5

Challenges:

  • Some forms of taxes are regressive, like sales taxes. This means that the effects can be disproportionately borne by poorer individuals. 
  • Because this is a locality-based source of funding, there is an issue with potential externalities and incentives. Climate change will often be an issue of high cost, low reward for a given municipality; adaptation measures will often be high cost but the direct, local benefits may be very low. Municipalities need to consider how to balance true social benefits with the cost of levying taxes or figure out a way to push forward politically unpopular fiscal policy changes like increased taxes. 

Case Study: 

  • Sandbridge, VA Beach. Residents approved the City issuing up to $567 million in flood mitigation bonds for an accelerated flood protection program, funded through an increase in real property taxes. The funds will be used to build 21 different flood protection projects, such as the construction of new pump stations and the planting of new marshlands. The City estimates that the repayment of the bonds would require an approximately 4.3 – 6.4 cent increase in real property tax per $100 of a home’s assessed value. 6

1 “Managed Retreat Toolkit Funding Overview,” Georgetown Climate Center, https://www.georgetownclimate.org/adaptation/toolkits/managed-retreat-toolkit/economic-funding.html.
2 Ruud de Mooij and Michael Keen, “Chapter 7. Fiscal Instruments for Climate Finance,” In Fiscal Policy to Mitigate Climate Change, USA: International Monetary Fund, (2012), https://www.elibrary.imf.org/display/book/9781616353933/ch07.xml
3 Jenna Lessans, “With new incentives, Harris County hopes to gain buy-in for buyouts,” Kinder Institute for Urban Research | Rice University, May 25, 2022, https://kinder.rice.edu/urbanedge/new-incentives-harris-county-hopes-gain-buy-buyouts.
4 Kelly McGee, “A place worth protecting: Rethinking cost-benefit analysis under FEMA’s flood-mitigation programs,” The University of Chicago Law Review, (2022), https://lawreview.uchicago.edu/print-archive/place-worth-protecting-rethinking-cost-benefit-analysis-under-femas-flood-mitigation.
5 Laura O’Connell and Kyle Connors, “Financing Climate Resilience: Funding and Financing Models for Building Green and Resilient Infrastructure in Florida,” Harvard Kennedy School, (2019): p. 27, https://ash.harvard.edu/wp-content/uploads/2024/02/financing_climate_resilience_final_report.pdf
6 Nathan Crawford, “VB flood mitigation bond referendum passes; city to borrow $567.5 million to fund 21 projects,” WAVY.com, November 3, 2021, https://www.wavy.com/news/local-news/virginia-beach/vb-flood-mitigation-bond-referendum-passes-city-to-borrow-567-5-million-to-fund-21-projects/.

Description:
Tax-increment financing (TIF) involves the designation of a geographic area – usually a blighted or otherwise economically disadvantaged area – to be redeveloped as a “TIF District.” Development and improvements occur there and as this happens, revenue from the increase in property tax (the tax increment) resulting from higher property values is used to finance the costs of redevelopment.1 Communities can use TIF revenue to fund smaller scale resilience projects, pay for maintenance/upkeep on existing structures, and service bond payments for larger-scale resilience infrastructure projects.2 Localities can help ensure the successful implementation of a potential TIF district by clearly outlining and demonstrating its eligibility in accordance with state authorizing statute, identifying the experience and financial history of any potential developer, and obtaining community support by identifying and engaging with key stakeholders.3

Benefits: 

  • Can stimulate economic growth and development by attracting private investment, creating jobs, and revitalizing previously disadvantaged areas. 
  • By increasing property values (and thus tax revenues), TIFs can create a source of steady, long-term funding, which can possibly lessen vulnerable communities’ reliance on uncertain government grants and loans. 
  • TIFs also have the advantage of being created with economically disadvantaged communities in mind, which can help fill in funding gaps left by inequitable benefit-cost analyses, lack of planning resources, etc. 

Challenges: 

  • TIFs have sometimes been used in an oblique fashion, which has made it hard for the public to holistically assess the true costs and benefits of redevelopment projects. Localities should ensure that there are processes in place to ensure transparent communication and engagement with the community. 
  • May promote (environmental) gentrification, displacing the residents they are supposed to benefit.
  • Somewhat limited in their use. Because they are based on a system of value capture, they generally are only used in areas where property values are expected to increase after the implementation of the project, which may not be the case with the places most vulnerable to climate change. Moreover, the anticipated constant revenue stream is subject to failure if property values end up falling despite infrastructure improvements.4 

For more information: 

1 “Tax increment financing (TIF),” Good Jobs First, February 14, 2022, https://goodjobsfirst.org/tax-increment-financing/.
2 “Equitable Adaptation Legal & Policy Toolkit: Tax Credits, Tax Increment Financing & Land Value Capture,” Georgetown Climate Center, https://www.georgetownclimate.org/adaptation/toolkits/equitable-adaptation-toolkit/tax-credits-tax-increment-financing-land-value-capture.html#ref-7.
3 Toby Rittner, “Tax Increment Finance: A Success-Driven Tool for Catalyzing Economic Development and Social Transformation,” Community Development Innovation Review , 9(1), (2013): 133.
4 Laura O’Connell and Kyle Connors, “Financing Climate Resilience: Funding and Financing Models for Building Green and Resilient Infrastructure in Florida,” Harvard Kennedy School, (2019): p. 27, https://ash.harvard.edu/wp-content/uploads/2024/02/financing_climate_resilience_final_report.pdf

Description:
The Virginia Code authorizes stormwater utility fees and impact fees to defray the costs of public facilities impacted by residential development. Once adopted by a locality, these fees must be paid by property owners or occupants and developers, respectively. 

Benefits:

  • Provides a consistent source of revenue that is not dependent on general economic trends, investor outlook, etc.  

Challenges:

  • It can be challenging to determine what fees are appropriate (not too high to prevent successful implementation but high enough to be impactful).
  • Fees that are calculated based on impervious surface area on a property often come with additional overhead and administrative costs compared to flat fees.1

Case studies:
Newport News funds its Stormwater Management Program through a stormwater management utility fee, which is based on the amount of impervious surface area.

1 “Funding Strategies for Flood Mitigation,” Headwater Economics, (p. 1). https://toolkit.climate.gov/sites/default/files/HE_Funding-strategies-flood-mitigation-handout.pdf.

Description:
Localities can create Service Districts to provide additional or more complete services than are typically provided by a city or county government.1 The creation of a Service District enables residents to agree to the levy of taxes, fees, etc., on themselves in order to raise money for additional services in their neighborhood.2 Thus, the creation of Service Districts that focus on climate resilience and adaptation objectives can be a powerful source of recurring funding. Similarly, Watershed Improvement Districts can be formed wherever residents and officials both agree that soil and water conservation/management can be improved by projects that check erosion, provide drainage, collect sediment or stabilize the runoff of surface water. These districts can be created with the successful petition of any 25 landowners within a proposed district (or a simple majority if there are under 50 residents) and have the power of levying taxes or service charges for the purposes outlined in the petition. However, the approval of at least ⅔ of landowners (who own at least ⅔ of the land in the proposed district) is needed to impose such measures.3

Benefits:

  • The imposition of the additional tax is voluntary; there is therefore less opposition and required local government staff time, since it is community led.
  • The use of Special District revenue to fund projects in areas that can afford to self-impose fees frees up public dollars for use on projects in low and moderate income areas. 

Challenges:

  • Due to their voluntary nature, Service Districts will generally only be used by communities that can afford to levy additional taxes and fees on themselves (i.e., wealthier ones with higher densities of property owners), and are also only commissioned by the areas that are willing to bear such costs, not necessarily by the ones who need the additional services the most.

Case Studies: 

1 Va. Code § 15.2-2400, https://law.lis.virginia.gov/vacode/title15.2/chapter24/section15.2-2400/
2 “Norfolk Special Service District Policy for Flood Protection,” Georgetown Climate Center’s Adaptation Clearinghouse, June 11, 2019, https://www.adaptationclearinghouse.org/resources/norfolk-special-service-district-policy-for-flood-protection.html.
3 Va.Code §§ 10.1-614 – 635, https://law.lis.virginia.gov/vacodefull/title10.1/chapter6/article3/
4 City of Virginia Beach Public Works, “Neighborhood Dredging Special Service Districts,” https://pw.virginiabeach.gov/coastal-waterways/neighborhood-dredging-ssd.

Innovative or New Solutions in Virginia

Description:
Parametric Insurance is a novel type of insurance in Virginia. It covers the probability of a predefined event happening, instead of indemnifying the actual loss caused by an event. Payouts are triggered when a pre-set objective parameter or index threshold is reached or exceeded, regardless of the actual physical loss sustained. Parametric insurance solutions are designed to complement, rather than replace, traditional insurance programs,1 which have recently come under increasing threat and stress as individuals in climate-vulnerable areas are seeing increases in premiums and/or decreasing availability of coverage. Parametric insurance could be used to protect private property or public investments in infrastructure.

Benefits: 

  • Payments can be made in weeks after a disaster, versus the months or even years it can take with a standard indemnity contract payment. This means resources can be deployed more rapidly and flexibly.2 
  • In fact, one study from Moody’s RMS (Risk Management Solutions) found that payments from a parametric insurance policy can be 3.5 times as effective as delayed payments from traditional aid. The study also found additional benefits, including increased certainty of post-disaster finance, reduced financial burdens of catastrophic events, and lessened probabilities of losses escalating to critical levels.3 
  • There is also an incentive for the insured to minimize their losses since the amount of payment is fixed.4 

Challenges: 

  • Virginia does not yet have parametric insurance coverage due to the lack of an established database on flood risk metrics required by insurers. Data gaps increase uncertainty and also increase premiums. 
  • Successfully obtaining coverage requires sensors and monitoring devices that meet the insurance provider’s data requirements.5 
  • Funding is needed to address such data deficiencies and monitoring needs, and that can often take years to obtain.6
  • Basis risk: the economic loss for the insured could differ by any margin from the amount covered, or the insured could suffer losses without the payment trigger being met.7 

Case Studies: 

    • The Virginia Middle Peninsula Planning District Commission (MPPDC) has been trying to price out flood parametric insurance for the Middle Peninsula region for a few years, but has faced challenges due to a lack of both specific flood data required by the policy issuer, and funding options to secure the data.8 
    • The Caribbean Catastrophe Risk Insurance Facility provides parametric insurance coverage for cyclones and earthquakes to 16 Caribbean governments. In 2017, after Hurricanes Irma and Maria, the CCRIF made $62 million in payouts.
    • See this information from Professional Insurance Agents Northeast on the use of parametric insurance in Puerto Rico, Louisiana, Miami-Data County, and Alabama. 

1 “What is parametric insurance?” Swiss Re Corporate Solutions, June 7, 2023, https://corporatesolutions.swissre.com/insights/knowledge/what_is_parametric_insurance.html.
2 “Parametric disaster insurance,” National Association of Insurance Commissioners, 2023, https://content.naic.org/cipr-topics/parametric-disaster-insurance.
3 “Executive Summary,” Risk Management Models, Analytics, Software & Services, June 2017. https://forms2.rms.com/DFID-Executive-Summary.html.
4 “Parametric disaster insurance,” (See 2)
5 Virginia Department of Conservation and Recreation, “Virginia Coastal Resilience Master Plan,” December 2021, p. 235, https://www.dcr.virginia.gov/crmp/document/virginiacoastalresiliencemasterplan-print.pdf (noting, “None of the gauge systems mentioned … are complete, predictive, or able to communicate with one another. Further, the existing gauges do not fully meet the requirements for emerging parametric insurance offerors to develop opportunities to enter the Virginia market.”).
6 The Middle Peninsula Planning District Commission sought Virginia Community Flood Preparedness Fund (CFPF) dollars to purchase tide gauges for Mobjack Bay for this purpose, but the proposal was not selected for funding in light of numerous other applications. See the CFPF Round 4 Scoring Summary Sheet, GetFile.cfm (virginia.gov), available in the meeting agenda for the Dec. 2023 meeting of the Flood Funds Advisory Review Committee, https://www.google.com/url?q=https://townhall.virginia.gov/L/ViewMeeting.cfm?MeetingID%3D39191&sa=D&source=docs&ust=1722132950994568&usg=AOvVaw2HHWWRfQEsWOk3Uk9luEN5. See also Va. Department of Conservation and Recreation, “Virginia Coastal Resilience Technical Advisory Committee: Funding Quarterly Subcommittee Meeting,” November 2, 2023. p. 49, https://www.dcr.virginia.gov/crmp/meeting/document/20231102-funding-presentation-handout.pdf (raising questions related to proposed MPPDC parametric insurance feasibility study and pilot project).
7 “Parametric disaster insurance,” (See 2)
8 See Virginia Department of Conservation and Recreation, “Coastal Resilience Technical Advisory Committee Quarterly Meeting Slides,” March 13, 2024, p. 33 (giving the MPPDC application for tide gauges a lower urgency score than other applications), https://www.dcr.virginia.gov/crmp/meeting/document/2024q1-tac-meeting-materials-final.pdf.

Description:
The Virginia Security Corridor, designated in 2023 by the Department of Defense (DoD), is a product of the Sentinel Landscapes Partnership, which is a coalition of federal agencies, state and local governments, and non-governmental organizations. They work with landowners and managers to create landscapes where conservation, working land, and natural defense interests converge. Landscapes are anchored by at least one high-value military installation and contain high priority lands for the U.S. Department of Agriculture, DoD, and Department of the Interior.1 The Virginia Security Corridor consists of the Potomac and Tidewater Sentinel Landscapes; the Potomac Sentinel Landscape is anchored by Marine Corps Base Quantico, and the Tidewater Sentinel Landscape is anchored by Joint Base Langley Eustis. The corridor supports 10 military installations and involves the collaboration of over 9 federal agencies. Encompassing over 2.9 million acres of land and water, the intended purpose of the Corridor is to 1) prevent encroachment on military testing and training while supporting working lands, 2) build resilience against climate-induced hazards, and 3) conserve and restore key habitats to improve water quality and assist protected species.2

Benefits:

  • The designation of land as a part of a Sentinel Landscape can connect affected landowners with an expansive network of private, state and federal assistance programs that can provide tax reductions, agricultural loans, disaster relief, educational opportunities, technical aid, and funding for conservation easements.3 
  • The opportunities for funding are especially notable; through fiscal year 2022, $1.1 billion in conservation funds have been committed to projects in Sentinel Landscapes, and this figure is quickly growing. 
  • This alignment of programs and partners can help local governments utilize funding dollars in a more efficient manner, as they can draw upon a more extensive expanse of collective knowledge, technical assistance and resources. Partnering with federal efforts to conserve lands around military installations can extend local governments’ natural resource investments.

Challenges:

  • With such a large number of stakeholders and government agencies at play, decision times could be inflated and progress stymied. Navigating red tape and difficult negotiations must be accounted for. 

For More Information:

1 “The Sentinel Landscapes Partnership,” Sentinel Landscapes, https://sentinellandscapes.org/
2 “Virginia Security Corridor Sentinel Landscapes,” Sentinel Landscapes, https://sentinellandscapes.org/landscapes/virginia-security-corridor/.
3. “Sentinel Landscapes,” Readiness and Environmental Protection Integration, https://www.repi.mil/Landscape-Partnerships/Sentinel-Landscapes-Partnership/.

While the federal Community Reinvestment Act (CRA) has been in existence since 1977  – when it was enacted in response to urban decay and “redlining” practices by mortgage lenders – discourse on its applicability for climate resilience and adaptation planning and funding has only recently started to emerge. The CRA requires the federal financial institution regulators (the Federal Reserve Board, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency) to encourage financial institutions to “help meet the credit needs of the communities in which they do business, including low-and moderate-income (LMI) neighborhoods.”1 These federal agencies oversee and assess banks’ CRA compliance. Pursuant to the Community Reinvestment Act and Interstate Deposit Production Regulations, 12 CFR Part 25, banks must engage in a certain amount of “qualifying activities” to earn CRA credit from these agencies, and their performance in this regard is then taken into account when considering applications for mergers, branch openings, acquisitions, deposit facilities, etc.2 To help meet the credit needs of LMI communities, banks engage in activities such as loans to individuals and businesses, direct investment in communities, and grants to organizations already established in the area. Low-income communities have historically been, and still are, the most at risk in weather-related disasters; so it is prudent to recognize the potential that the CRA has in making resilience project funding more available to these vulnerable populations. 

Federal bank regulators seem increasingly interested in expanding the role of banks in disaster mitigation and recovery. The regulators have stated that banks may receive credit consideration for activities “consistent with a bona fide government revitalization or stabilization plan or disaster recovery plan.”3 Amendments to the CRA regulations effective April 1, 2024 added a new category of qualifying activities that “assist individuals and communities to prepare for, adapt to and withstand natural disasters or weather-related risks or disasters.”4 Now, to qualify under the CRA, weather resiliency activities must “benefit or serve targeted census tracts and: are undertaken in conjunction with a plan, program, or initiative of a Federal, State, local, or tribal government or a mission-driven nonprofit organization, where the plan, program, or initiative includes a focus on benefiting or serving targeted census tracts; benefit or serve residents, including low- or moderate-income individuals, of targeted census tracts; and do not directly result in the forced or involuntary relocation of low- or moderate-income individuals residing in targeted census tracts.”5  Examples of applicable projects, as specified in the new ruling, include the construction of flood control systems, green spaces that mitigate the effects of extreme heat, and community solar, microgrid, and battery projects to expand power access security, among others.6 Local governments can involve nongovernmental organizations (NGOs) that are active in low-income areas in community resilience planning, and those NGOs can then play a role in partnering with community banks to help address resilience needs raised during the locality’s adaptation planning process, and encouraging investments in a range of activities that promote disaster preparedness and weather resilience.

Benefits: 

  • LMI communities are especially prone to reductions in credit scores post-disaster; the CRA can help ensure that their credit needs stay at least partially addressed and remove barriers for long-term recovery.7
  • The CRA regulations’ broad language makes them more flexible. For example, in addition to directly financing climate resilience projects, CRA qualifying activities can also include investing in broader community resilience projects, like affordable housing.8 
  • The CRA is also market-agreeable; in a survey carried out by the Federal Reserve Board of Governors, 81% of CRA-covered retail lending institutions reported that CRA-qualifying home purchase and refinancing loans were profitable.9  

Challenges:

  • As with any resilience-building project, there is a risk of environmental gentrification, which can lead to involuntary displacement when the planning processes fail to consider the perspectives and needs of the vulnerable communities that they affect.
  • This is why it is critical to ensure open lines of communication and collaboration with community members, to ensure that increasing property values (and attendant rents, taxes, etc.) do not further displace and harm vulnerable populations.10

For more information: 

  • Weather resilience-specific applications of the CRA became effective in April 2024, so few formal resources for it exist yet. However, the Federal Reserve Bank of Philadelphia has a useful presentation which discusses how to create a Community Development Project that Aligns with the CRA. It includes information on project applicability, documentation requirements, and best practices for aligning expectations. (Pages 33-49). 

As a response to the many updates to the CRA, the regulations were challenged in court and an injunction was issued to stay their implementation. However, many amendments were not covered by the injunction and became effective April 1, 2024, including the weather-resiliency section of amendment 13. The final rule of amendment 13 can be found here.

1 The Federal Reserve. Community Reinvestment Act (CRA). Community Reinvestment Act (CRA). https://www.federalreserve.gov/consumerscommunities/cra_about.htm.
2 Ibid.
3 Getter, D., & Lawhorn, J. “Community Resilience: Climate Adaptation and the Community Reinvestment Act (CRA)”, Congressional Research Service, p. 2 (2021).
4 Community Reinvestment Act and Interstate Deposit Production Regulations, Final Rule (effective April 1, 2024), page 252. frn-cra-20231024.pdf (federalreserve.gov).
5 Ibid. (p. 257).
6 Hill, K. “NCRC’s guide to the 2023 community reinvestment act final rule, ” NCRC. December 7, 2023. https://ncrc.org/ncrcs-guide-to-the-2023-community-reinvestment-act-final-rule/.
7 Natural Resources Defense Council. Re: Community Reinvestment Act Proposed Rule [Letter to Anne E. Misback, Chief Counsel’s Office, Office of the Comptroller of the Currency, & James P. Sheesley].
8 Ibid.
9 Ludwig, E. A., Kamihachi, J., & Toh, L. “The Community Reinvestment Act: Past successes and future opportunities.” In San Francisco Fed (p. 92). Federal Reserve Bank of San Francisco. (2009). https://www.frbsf.org/research-and-insights/publications/community-development-investment-review/2009/02/cra-community-reinvestment-act-success-opportunities/.
10 Natural Resources Defense Council. Re: Community Reinvestment Act Proposed Rule.

The Resilient Virginia Revolving Fund (RVRF) was established in 2022, and is thus not yet included in the Virginia Department of Conservation and Recreation’s Coastal Resilience Web Explorer. It is self-sustaining and offers up to $12.5 million in loans for localities to advance projects that will improve flood resilience in two categories. Up to $5 million can be loaned for localities to meet non-federal flood mitigation grant cost-share requirements, and up to $7.5 million can be loaned to localities to fund hazard mitigation for buildings.1 Money from the fund can also be used, at the discretion of the Department of Conservation and Recreation, to both fund grants directly and help localities start their own grant or loan programs for individuals.2 

Applications are restricted to local governments, municipal corporations, authorities, districts, commissions, or any other political subdivision recognized by the Commonwealth. This fund was initially capitalized with $25 million from the Community Flood Preparedness Fund (CFPF), and can be funded by future appropriations from the General Assembly. It should be able to accept future funding from the federal STORM (Safeguarding Tomorrow through Ongoing Risk Mitigation) Act, which authorizes FEMA to provide federal grants to states to capitalize revolving loan funds like the RVRF.3 The RVRF can serve as Virginia’s repository for receiving federal STORM money. 

Benefits: 

  • The RVRF, like most revolving funds as a whole, is self-sustaining and provides more flexibility for communities to implement projects without stringent guidelines and cost-benefit thresholds.
  • Revolving funds also require lower interest rates than many traditional loans and allow cities and states to repay the loan with savings from mitigation projects.4
  • The RVRF can be used to fund home buyouts if they are located in floodplain hazard areas or if necessary for mitigation or resilience projects.

Challenges: 

  • As it stands, the RVRF is constrained by the lack of variety in its funding. With Virginia’s withdrawal from the Regional Greenhouse Gas Initiative (RGGI) in December 2023, and the loss of proceeds from RGGI credit auctions, the RVRF is dependent upon General Assembly appropriations for funding.
  • The loans require collateral, usually equity in the property being improved, which prohibits many LMI owners and indebted owners from applying.
  • Localities with high debt:equity ratios may not wish to not take on additional debt, so as to not lower their bond rating. Such localities would be limited to grant funding through the RVRF.

For more information: 

1 Virginia Department of Conservation and Recreation. “Resilient Virginia Revolving Loan Fund.” https://www.dcr.virginia.gov/dam-safety-and-floodplains/rvrf.
2 Va. Code § 10.1-603.34
3 Steinhilber, E. & Environmental Defense Fund. “Virginia’s Legislature made progress on flood resilience in 2022, but significant work remains.” Growing Returns. June 3, 2022. https://blogs.edf.org/growingreturns/2022/06/03/virginia-legislature-made-progress-on-flood-resilience-but-significant-work-remains/.
4 Mamerow, N. “ASCE legislative victory: STORM Act signed into law,” American Society of Civil Engineers. January 5, 2021. https://infrastructurereportcard.org/asce-legislative-victory-storm-act-signed-into-law/.

Also new in Virginia is the Coastal Resilience & Trees Fund administered by The Virginia Outdoors Foundation and the nonprofit organization Wetlands Watch. Funds are used to support small-scale resilience projects in Virginia’s coastal zone. For more information, see https://wetlandswatch.org/coastal-resilience-trees-fund.

Local governments could decide to set aside a portion of real estate tax revenue to help enable low income residents to move away when the flooding gets to be too much. The revenue could then be used as matching funds for federal relocation dollars. Or, a locality could create a special tax district at the waterfront, with a property value threshold, and use the resulting revenue to relocate residents from flood prone areas and convert their homes to green space. Such an expenditure of public funds could be justified as providing a flood buffer and public water/beach access, and protecting the public health, safety and welfare. In 2023 the Cape Hatteras National Seashore used a similar justification when it purchased two adjacent, threatened oceanfront properties in Rodanthe, N.C., noting among other reasons that it did so “to mitigate the ongoing impacts of having threatened oceanfront structures impact visitor safety, public health, and wildlife habitat at the Seashore.”1

Another innovative approach would be for the Commonwealth to provide state government- subsidized insurance in very flood prone parts of Virginia when private insurers refuse to issue policies any longer, with the understanding that the insurance will be phased out over a specific number of years. That would avoid the situation that some homeowners are seeing now in high wildfire risk areas, where their insurance policies are suddenly not renewed.2

A third innovative idea for addressing funding concerns, especially in disadvantaged areas where residents may be facing higher financial burdens than others, is the establishment of a Community Land Trust. For more information, see this section of Step 2.

1 “Cape Hatteras National Seashore buys two threatened oceanfront properties in Rodanthe,” Island Free Press, Oct. 11, 2023,
https://islandfreepress.org/outer-banks-news/cape-hatteras-national-seashore-buys-two-threatened-oceanfront-properties-in-rodanthe/https://islandfreepress.org/outer-banks-news/cape-hatteras-national-seashore-buys-two-threatened-oceanfront-properties-in-rodanthe/.
2 Lois Parshley, “In wildfire-prone areas, homeowners are learning they’re uninsurable,” Grist, October 12, 2023, https://grist.org/economics/in-wildfire-prone-areas-homeowners-are-learning-theyre-uninsurable/

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