Build Back Better a Green New Orleans
Historically, New Orleans has suffered from natural catastrophic events during hurricane season. Geographical constraints require a comprehensive approach for the City and State to pursue in a strategic plan to moderate the impact future hurricanes and tropical storms may have on the region.
The Resilient New Orleans Finance Plan seeks to engage a wide and inclusive array of stakeholders from the public and private sectors to help put the city on a sustainable development path. The Plan is ambitious and challenging because of the wide breadth of shareholders required for the plan to be successful.
Net Zero Emissions by 2050
Climate change has been a key attribute to the higher intensity levels of recent major storms that have plagued the Caribbeans and channeled to the US Gulf coast, resulting in major storms that have affected Louisiana and Texas.
Under the Resilient New Orleans Plan, the City of New Orleans and the State of Louisiana are each aiming to reduce emissions to net-zero by 2050. According to the 2017 greenhouse gas (GHG) inventory conducted by the City of New Orleans, total current emissions are equivalent to 3.5 million metric tons of carbon dioxide equivalent (tCO2e). The City's transition pathway to net-zero by 2050 includes an intermediary milestone aiming for a 50% reduction by 2035.
Transportation and Energy are two major contributors to the current level of emission and the City has proposed multiple undertakings to achieve lower emissions and meet its carbon goals. New Orleans seeks to electrify the City's public transportation system and ensure 50% of all trips are made using non-fossil fuel-powered vehicles, scale local solar from 40 MW to 255 MW, and move to 100% low carbon power. New Orleans aims to increase recycling rates and divert 50% of its waste from landfills. Presently, the city diverts about 5% of waste from the landfill. The landfill captures most of the methane which is converted to renewable natural gas.
The housing crisis has been a chronic issue that has plagued New Orleans ever since the devastating impact of Hurricane Katrina.
In recent years, the median housing value has remained steady in the range of $197,000 to $184,000 from 2014-2017, according to the Census Bureau, which recently released its 2013-2017 American Community Survey five-year estimates. The national median home value was only $217,600 in 2017. This would suggest that the New Orleans housing market is underperforming the national market. But, home values are a function of wealth levels. As such, income must be considered in the context of the modest median family income levels of New Orleans. The median family income in the New Orleans SMSA, was only $37,488 in 2017. A form of stimulus may be an essential ingredient to jumpstart the affordable housing market. Low-Income Housing Tax Credits is another key source of capital that can stimulate the local multifamily housing market. Other FHA housing programs can also provide additional resources to the housing market. Payments-in-lieu of taxes (PILOTS) will need to be set and established to allow for an equitable sharing of property taxes.
The Green initiative combined with specific federal programs around affordable housing could provide the impetus to spur growth in the local housing market. The Green Mortgage Program was designed to provide homeowners with the opportunity to upgrade new or existing homes with green features and minor renovations. Eligible improvements include energy efficiency measures, fortified roofing, solar panels, permeable pavement, rain barrels, and other improvements that can make homes more resilient. Other aspects of the Green Finance Program include the acquisition and rehab of 1–4-unit homes. Quality rental housing is essential to maintaining New Orleans’s economic vitality.
Climate resiliency is the optimal goal and given the region’s susceptibility to adverse weather, must remain as the key feature of the housing program moving forward. According to City estimates, after Hurricane Katrina, the number of tourists declined by 63%. The local economy remains closely correlated with tourist activity. One of the expected benefits of the Resiliency Program is to create job opportunities in recycling and construction trades that will diversify the local employment base.
The City of New Orleans has adopted a 100% low-carbon standard to reduce the city’s reliance on carbon fuels. To accomplish this goal a two-stage strategy will need to be implemented by the city. The first stage of the carbon reduction program would be accomplished by a 2% reduction of the city’s utility annual power sales. The second is to upscale local solar from 40MW to 255 MW as the replacement source for carbon-based power generation.
The Capital Stack
The size and scope of such an undertaking will require a combination of participation and support from the public and private sectors. Projected sources of capital include the City of New Orleans, The National Green Bank/Clean Energy Accelerator, Commercial Lines & Credit Enhancements, Grants & Program Related Investments. Green, Impact and Sustainability Bonds (ESG) from the taxable municipal bond space could be selectively accessed to fund the capital stack and attract capital from the private sector.
Single-family Mortgage-Backed Securities will also have a major impact on the Green Initiative as new homes are constructed in city neighborhoods that will be fuel-efficient, storm resilient, and provide solar power off the City’s utility power grid. Mortgage origination for the new construction of housing stock will be produced by the private sector and originated mortgages could be securitized into mortgage-backed securities. Attracting the support of the private sector will be an essential component of the Resiliency Strategy. Home Equity loans will also be a source of private capital that would allow improvements to be made for renewable energy and energy efficiency projects. The city had a portfolio of only $17 million in single-family mortgage-backed securities at the close of Fiscal Year 2016. The city projects a portfolio of $140 million by the end of the coming fiscal year.
The Resiliency Program is laudable and is a step in the right direction for a region of the country that has a long history of being vulnerable to the adverse effects of major storm systems. Each major storm requires a major rebuilding effort that is a perpetual process that has constrained the city’s sustainable growth. The concept of resiliency is likely to gain momentum in the region and could be adopted by other coastal cities that have similar climate vulnerabilities as New Orleans. Such programs should be a vital component of any national infrastructure program.