Sandy as an external shock
Estimates for the economic damage resulting from Superstorm Sandy are circulating from $15 to $50 billion in damage. No formal assessments have been completed yet, and it’s likely that these are “repair” estimates that reflect the cost of cleaning up and repairing infrastructure back to its former state. A repair bill is likely to be much lower than the cost of hardening and improving vital transport, energy and communication systems to withstand more storms like Sandy or worse. After Hurricane Katrina, architect Frederic Schwartz wrote:
The planning of cities in the face of disaster (natural and political) must reach beyond the band-aid of short-term recovery. Disaster offers a unique opportunity to rethink the planning and politics of our metro-regional areas…
I’m not advocating centralized economic planning, but instead the concept of having a clean slate to rethink a region’s needs and weaknesses. Much of New York’s infrastructure is over 50 years old and some parts of the subway system are over 100 years old. On top of these old and heavily worn systems have been laid new systems that support the regions modern economy.
A 2008 Critical National Infrastructure Report, performed by the Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack references the effects of an enormous external shock to the system:
The U.S. has developed more than most other nations as a modern society heavily dependent on electronics, telecommunications, energy, information networks, and a rich set of financial and transportation systems that leverage modern technology. This asymmetry is a source of substantial economic, industrial and societal advantages, but it creates vulnerabilities and critical interdependencies that are potentially disastrous to the United States.
You can almost think of a large electromagnetic pulse attack as similar to a large hurricane or earthquake. Note the line: “vulnerabilities and critical interdependencies that are potentially disastrous to the United States.”
All the credit rating agencies have weighed in, on a preliminary basis, and say outside of a few weak local governments, muniland will be able to manage the cleanup and restoration costs of Sandy. Standard & Poor’s said on Friday:
Given generally sufficient levels of reserves, available credit, insurance proceeds, state aid, and Federal Emergency Management Agency (FEMA) eligible reimbursements, Standard & Poor’s does not expect to see immediate nor widespread credit deterioration for the affected communities it rates. However, should events in the aftermath of the storm cause a fundamental change in credit quality, we could revise ratings on a case- by-case basis as we obtain better information.
When I wrote last week that the MTA and New York and New Jersey Port Authority might need to assess non-typical borrowing channels such as the Federal Reserve for their bonds I was not referring to the “repair bill” expenses. I was referring to the far greater expense of, over time, rebuilding and strengthening the infrastructure of New York City. The federal government, given its extreme fiscal stress, may or may not have the resources to fund this work. The states
of New York and New Jersey would also be hard pressed to fund an effort of this size. This issue needs further study, and Congress as well as the legislatures of New York, New Jersey and Connecticut need to work together to begin examining the regions’ long term needs.
Sandy was an enormous shock to the region. We must expect more shocks to come and plan accordingly. We need something much bigger than a repair plan.
NYC.gov – Identify and pursue strategies to increase the city’s resilience to climate change and sea level rise.