Property Taxes Cannot Fund Climate Adaptation in Florida

An estimated 80 percent of Florida's $4 trillion real estate market is in coastal counties. About a quarter of the state's gross domestic product comes from construction, finance, insurance, real estate, and rental income.

Florida shows how climate change physically threatens buildings and financially undermines urban land governance. Local governments rely on development to fund climate adaptation. What happens when sea levels rise and property taxes fall?

In "Can Florida's Coast Survive Its Reliance on Development?: Fiscal Vulnerability and Funding Woes Under Sea Level Rise" (Journal of the American Planning Association, Vol. 90, No. 2) Linda Shi, William Butler, Tisha Holmes, Ryan Thomas, Anthony Milordis, Jonathan Ignatowski, Yousuf Mahid, and Austin M. Aldag conducted a statewide assessment of how sea level rise will affect Florida's municipal revenues, paired with a survey of coastal planners and managers, reveals a troubling picture of coastal adaptation.

Climate Adaptation Catch-22

The authors created a data set combining fiscal and survey data to assess local responses to fiscal risk in 65 municipalities. They evaluated the budgetary impact of sea level rise (SLR) on municipal revenues and calculated the proportion of property taxes at risk for each city.

Their analysis showed fiscal vulnerability concentrated in geographically and demographically smaller, denser, wealthier, and whiter municipalities. Lower-risk municipalities (less than 50 percent at risk) tended to be more populous, more diverse, and larger in land area.

While wealthier municipalities may be better able to invest in near-term adaptations, long-term sea level rise could erode their fiscal capacity to maintain infrastructure and protect local tax bases. Wealthier residents also have greater mobility to relocate to relatively safer places, potentially displacing lower-income residents from their existing homes on higher ground.

The proximity of more fiscally affected municipalities to large metropolitan regions also increases the potential for developers and residents to move toward nearby housing markets in larger cities that are more affordable, less built-out, and on higher ground.

The survey of coastal planners and managers revealed the primary challenges they face and the resources they have or want to adapt to sea level rise. Bringing together these two datasets, the authors observed that the biggest barrier to sea level rise planning and implementation was funding.

Cities are funding local adaptation from local resources like property taxes, which are uniquely vulnerable to climate impacts. This sets the stage for a self-reinforcing cycle in which adaptation planning and implementation lag due to insufficient revenues, and climate impacts continue to erode primary sources of revenue for adaptation.

Figure 4. Florida's municipal fiscal vulnerability to 6.6 ft of sea level rise.

Escaping the Cycle

Local and state governments continue to engage in fiscally unsustainable practices by attempting to address climate risks through infrastructure upgrades funded by municipal debt and expanded taxation.

It remains unclear how emerging funding will affect local long-term fiscal health under climate change. Federal and state funding for adaptation does not assess which localities are fiscally stressed by climate change, most fiscally in need of investments, or are likely to repay or default on loans given projected climate change.

Will these projects enable additional development within floodplains, thereby increasing overall fiscal exposure to future, bigger floods? How do the long-term maintenance costs of new flood risk reduction infrastructure affect municipal budgets? What are the implications for state fiscal stress?

Coastal local governments need alternative revenue sources beyond property taxes and growth-based fees. States can foster innovative climate finance strategies, but their impact on property taxes and racial disparities requires further study.

Local climate adaptation necessitates a shift from perpetual competitive growth to a more strategic, cooperative, and fiscally resilient model. Wealthier coastal communities persist in prioritizing conventional development and hard infrastructure, but this approach is unsustainable.

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