Climate Resilience and Benefit–Cost Analysis: A Handbook for Airports (2019)

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40 5.1 Identifying and Targeting Potential Responses Once the relevant assets have been identified and screened for both vulnerability and criticality, the next step is to identify potential adaptation options for climate resilience and then to prioritize those options that are available to the airport. Setting these priorities may involve both qualitative and quantitative evaluations. Once again, the ACROS software from ACRP Report 147 (Dewberry et al. 2015) may be of use here. For any selected airport, a report can be produced that ties climate stressors to specific airport assets along with user-supplied vulnerability and criticality scores and then lists a number of potential adaptation options. By necessity, these adaptations are generic in nature and not necessarily feasible or relevant for the selected airport. Nevertheless, the report can be a useful starting point from which the resilience team can assess what sorts of potential adaptations should be considered. An example for LaGuardia Airport (LGA) is shown in Exhibit 5-1. Another potential resource is ACRP Synthesis 33, which provides a case example review of the likely effects of climate change on airports and the adaptation responses available to them (Baglin 2012). It uses a series of eight case examples at airports from Alaska to the Gulf Coast to illustrate the increases in risk from coastal flooding/sea level rise, increased winter storm activity/intensity, increased drought frequency/severity, and increased tornado frequency. Each case example describes the airport’s process of identifying the increased risk and its approach C H A P T E R 5 Responses and Adaptations About This Chapter Chapter 5 describes how to identify and classify potential airport responses and adap- tations that may be available to address climate change impacts. Key topics discussed include: • Identifying feasible responses, • Considering potential responses not involving infrastructure, and • Financial constraints affecting potential adaptations. About the Next Chapter Chapter 6 discusses various topics that may be of interest to airports addressing climate change.

Responses and Adaptations 41 to increasing resiliency. What is of particular value is a matrix that combines specific climate measures, affected airport assets, airport impacts, and illustrative responses into a single table. This table is reprinted in Appendix I. In addition, airports may want to support efforts to combat climate change—for example, by reducing their own carbon emissions. FAA has supported some of these efforts through its Sustainable Master Plan Pilot Program, which provided funding for airports to develop their own sustainability plans. ACRP Synthesis 66: Lessons Learned from Airport Sustainability Plans provides a review focused on smaller airports, showing that many airports undertook initiatives geared toward reducing carbon emissions (both at the airport and for passengers accessing the airport), encouraging recycling, planting trees, and moving toward increased use of renewable fuel (Martin-Nagle and Klauber 2016). Airports may also elect to participate in the Voluntary Airport Low Emissions (VALE) pro- gram, which encourages sponsors to implement clean technology projects that improve air qual- ity. VALE projects can be funded using passenger facility charges (PFCs) or AIP grants and are available to commercial service airports located in areas that are in nonattainment of National Ambient Air Quality Standards. Ultimately, decision makers will want to identify adaptations that are physically and opera- tionally feasible. In other words, some adaptations may be prohibitively expensive or beyond the potential scope of the airport itself. For example, an airport by itself may not be able to create barriers to sea level rise unless nearby communities also participate. Based on best practices in the transportation industry (see, for example, Wall and Meyer 2013), it is often recommended that alternative adaptation approaches be evaluated from the perspective of phased investments that maintain a desired level of resilience as the climate changes and as more information is obtained about those changes. This is intended to avoid planning adaptation measures in a single set of actions taken at one time. Instead, a sequence of planning actions should each be evaluated before the next action is taken; this can also inform the design of the next planning action. Note: Red indicates high risk; blue indicates low risk. Source: ACRP Report 147 (Dewberry et al. 2015). Exhibit 5-1. ACROS adaptation options for terminal facilities at LGA.

42 Climate Resilience and Benefit–Cost Analysis: A Handbook for Airports A critical element of this approach is quantitative estimation of particular climate risks through time for specific types of assets. This approach can reduce the difficulty of selecting among different adaptation approaches for the following reasons: • It is specific to particular types of risks of damage or loss; • It enables ranking of these damages or losses by their magnitude, timing, probability, and level of uncertainty; • It reduces the complexity of the planning process by making use of this ranking and by short- ening the time horizon to be considered by individual phases of sequential planning; and • It allocates resources more effectively since specific damages and losses can be more easily linked to elements of adaptation plans. To the extent that adaptation to climate change may include changes in operations (including emergency operations), it will be important that the suggested adaptations be accurately incor- porated into safety management systems, emergency preparedness documents, and processes (including snow desks and other airport operations systems) so that the benefits of these sug- gested changes can be realized. 5.2 Considering Adaptations Not Involving Infrastructure Investment The list of potential adaptations may include not just infrastructure investments or opera- tional changes but also the following types of options: • Pursue early preparatory action to mitigate the risk, • Engage in partnerships with other entities to mitigate the risk, and • Purchase insurance against the risk. While the focus of this handbook is on quantitative analyses that will typically involve an infrastructure investment, a brief discussion of these alternative adaptation options is presented in the following. Preparatory Action Early preparation and integrating risk management into infrastructure planning can be effec- tive risk management practices. Examples include integrating flood mapping into infrastructure planning, creating building codes based on the specific climate risks to a given region, and under- taking information campaigns to inform the public about climate risks (Atreya and Kunreuther 2016). Such practices can be much less costly than damage control after an event, and it has been suggested that entities consider not only physical infrastructure but also safety concerns and financial preparedness in their planning processes (Collier 2015). Analysts also have recom- mended that planners consider not only the short-term response time immediately after an event but also the longer-term recovery time once physical systems are back in order (Czajkowski 2016). Partnerships Community partnerships may also have a role in mitigating risk, and networks between dif- ferent entities within a community can allow for information sharing, collective risk mitigation, and collaborative rebuilding after an event. Collaboration within an institution is also important: stakeholders interacting with different aspects of a given firm often have insight into the impacts of extreme weather events on their element that may not be obvious from the top (Chang et al. 2014). Public–private partnerships, in which institutions work with local governments, can create disaster procedures and risk-mitigation strategies that are effective for the specific risks facing a

Responses and Adaptations 43 given region. Risk managers can look to public–private partnerships not just for help in creating risk-mitigation plans but also for innovative ideas in disaster risk financing (Golnaraghi et al. 2016). A report published by the United Nations goes further in suggesting partnerships between private institutions, public actors, and actors of the financial system in order to ensure risk sharing and social protection (United Nations 2015b). It points out that partnerships across a society also helps mitigate what it refers to as “downstream” costs: the way that one firm’s or organization’s inadequate preparation can negatively affect other aspects of a community, such as overall economic stability, social welfare, and environmental sustainability. The report also suggests ensuring that every actor related to a risk bears some share of the benefits and costs so that all stakeholders have an interest in risk mitigation. Finally as noted previously, adequately addressing climate risk may involve cooperation across jurisdictions and outside of airport boundaries. For example, the potential for increased flooding of nearby road systems may reduce the public’s access to an airport, making it infeasible for the airport to operate. Close coordination of stormwater projects across jurisdictions may mitigate some of this risk. Insurance Rather than undertake an expensive infrastructure investment, one alternative is to purchase insurance. This would most commonly take the form of some sort of catastrophic loss insurance to cover the cost of an extreme climate event such as a hurricane or flooding. ACRP Synthesis 30 reviews current practices by airports for predicting and managing risk (Rakich et al. 2011). It notes that medium- and large-hub airports often employ whole risk management teams and use robust risk analysis regularly, while smaller airports often have only a part-time risk manager and are less likely to include risk analysis in their operations. While the synthesis does not provide formal guidance on purchasing insurance specifically related to potential climate risks, it does provide a useful overview of the airport risk manager’s role, different types of insurance coverage used by airports, insurance buying practices, and options for choosing deductibles and limits. Extreme climate events present some unique concerns for insurance providers and policy- holders. As noted in Golnaraghi et al. (2016), there is generally a lack of historical data on extreme climate events, and such disasters are usually highly unpredictable; this results in dif- ficulty establishing appropriate prices. Insurance markets generally assume that losses are inde- pendent of one another, but climate-based risks are often correlated, further complicating the process (Golnaraghi et al. 2016). Thus, some have argued for public–private partnerships in the area of insurance (Kunreuther and Michel-Kerjan 2016). 5.3 Financial Constraints This section explores the impediments faced by airport authorities, in light of current guid- ance for funding capital improvement projects, in justifying operational strategies and infra- structure projects geared toward climate change. Such projects may face several challenges in making the case for implementation, including: • High up-front costs of strengthening the assets, • Uncertainty regarding the severity/magnitude of climate change, • Unknown frequency of climate change/extreme weather events, and • Uncertainty in the timing of climate change that could lead to relatively long payback periods compared to other investment projects.

44 Climate Resilience and Benefit–Cost Analysis: A Handbook for Airports These challenges (or aspects) are discussed in relation to current federal guidance, and suggestions are made on where these challenges may be overcome in the context of the guidance. Airport development can be financed from several sources, including federal and state grants- in-aids, private financing or third-party development, passenger facility charges, customer facil- ity charges, a variety of bonds, and local funds. These funding options may have an impact on the implementation feasibility of potential investment projects. In general, among the challenges in making the case for a financial return on investment assessment or a BCA is that the up-front costs of hardening the asset (mitigating, adapting, or adding extra surge capacity in the case of a new asset) may result in greater capacity or build- ing to a higher engineering standard than is needed for a typical day. This is because the airport incurs the capital and operating costs for capacity that is not fully used on a daily basis. In addition, the disruption cost to individual airlines or the broad network of air travelers will not likely directly affect the airport’s financial performance unless the disruption becomes so common that airlines begin to seek other airports. As different airports will be affected by climate change differently, the costs of making climate change investments will similarly vary, meaning that passing some or all of these costs on to users could alter the competitive landscape. In many cases, airports will be contemplating capital investments to avoid future operating costs. Moreover, securing funding post-event can remain challenging. Current federal disaster funding does not contemplate climate threats/impacts or steps for adaptation (except migrating out of a floodplain) as part of its eligibility criteria. Airport Improvement Program Requirements Of course, virtually all airports in the United States are aware of the FAA’s AIP. This pro- gram provides grants to public agencies for airport planning and development projects. The AIP Handbook provides detailed guidance from the FAA on policy and procedures used in the administration of the program (FAA 2014a). The handbook describes the differences between maintenance, rehabilitation, reconstruc- tion, and replacement projects and their eligibility criteria. In general, maintenance projects are not eligible, but rehabilitation, reconstruction, and replacement projects are, assuming they are also justified. Many climate resiliency projects are likely to fall under rehabilitation that restores functionality, as opposed to reconstruction that brings the asset back to its original functionality. Per Table 3-8 of the AIP Handbook, a rehabilitation project generally would require the assump- tion of a 10-year useful life, while a reconstruction project would use a 20-year useful life. So if climate resiliency projects are categorized under rehabilitation, then a useful life of 10 years may limit an airport’s ability to make the case for a resiliency investment. Even reconstruction’s 20-year useful life may limit the ability to show an adequate return on investment for many types of climate change projects. To be a justified project, there are three tests that a project must pass: whether the project advances an AIP policy, whether there is an actual need within the next 5 years, and whether the project scope is appropriate. In general, a climate resiliency project would be justified under at least two of the three tests—such projects advance the AIP policy of preserving airport infrastructure, and the scope of the project would only include necessary elements to achieve appropriate protection. For a climate resiliency project, the challenging aspect in this context may be demonstrating the actual need, given it can be difficult to justify need

Responses and Adaptations 45 within the next 5 years. While climate change is imminent and its effects are already being experienced, it could be asserted that an event warranting the project may not reasonably be expected to occur within 5 years. Another important point to understand is that in order to receive AIP funding, many projects may be required to undergo a formal BCA. Yet it is often the case that the BCA itself will occur before a project’s funding is planned in detail; in such cases, the airport sponsor and FAA must jointly agree on a reasonable amount of AIP funding given the information available. Interested readers may wish to review ACRP Synthesis 13, which describes effective practices for preparing BCAs for AIP applications (Landau and Weisbrod 2009). Certain other constraints and requirements documented in the AIP Handbook (FAA 2014a) may also be relevant. Table 3-11 of the handbook contains a specific list of eligible off-airport projects. While drainage and utilities projects may be legitimate adaptation responses to climate resiliency in many situations, the off-airport list only identifies as eligible for funding outfall drainage ditches and relocation of utilities that are airport obstructions. The FAA guidance document on BCA, discussed in Appendix G, includes an extensive list of project types that are not eligible for funding. This list includes some projects that may pertain to climate adaptation activities. For example, aircraft deicing buildings, which are not eligible, may become more necessary in colder climates that, in the future, could expect to experience more icy conditions. Another prohibited project currently listed is maintenance or service facilities and repeated obstruction removal, which may be critical in adapting to climate change. One takeaway here is that the lists of eligible or prohibited projects outlined in the current AIP Handbook may warrant revision in light of climate change resiliency projects that will be necessary in coming years. Finally, it should be noted that several of the advisory circulars (ACs) providing guidance for airport design have been updated in the past several years (FAA 2014b, FAA 2014c, FAA 2016a). In general, the use of these ACs is not mandatory; however, the use of the standards is manda- tory for all projects funded under AIP or with revenue from the PFC program. Since climate and weather affect the performance of building materials and the useful life of infrastructure, airports may need to rehabilitate their infrastructure to be more resilient following the newly updated guidance on design and construction. Other Financing Options ACRP Synthesis 1 provides a comprehensive review of financing options and revenue sources that may be available to airports (Nichol 2007). This synthesis is particularly relevant for finan- cial feasibility analyses and includes discussion of the following: • Proceeds from bonds and other debt: – General obligation and general airport revenue bonds, – Bonds backed by PFCs or customer facility charges, – Bonds back by future AIP or state grants, and – Special facility bonds. • Other financial instruments: – Bond or grant anticipation notes, – Pooled credit programs, and – Capital leases. • State and local grants and financial support. • Self-financing via retained airport revenues.

46 Climate Resilience and Benefit–Cost Analysis: A Handbook for Airports Exhibit 5-2 shows the typical sources of airport funds for new projects. Many projects will mix PFC and AIP funds with internally generated revenues and proceeds of bonds to pay for infrastructure projects. Each funding source may be affected by climate impacts at the critical junctures (shown in red). For example: • PFC collections would be interrupted if an airport were temporarily closed due to a climate event, • Some otherwise viable projects may be found to have a benefit–cost ratio of less than 1 once climate impacts are accounted for, which would render them ineligible for discretionary AIP funding, • Both aeronautical and non-aeronautical revenue streams could be interrupted by an adverse climate event, • Project costs may increase substantially to adapt to climate risk and uncertainty, and • The risk perceptions in the bond market for airport projects may change, which could affect the availability of bond funds or the terms and interest rate that would have to be paid. Exhibit 5-2. Effect of climate change on sources and uses of funds and airport project financing plans.