aquacultureReal Estate

Cumulative effects of coastal flooding

How I concluded that my township would go bankrupt and what I’m doing about it

This blog post is written on the eve of hurricane Harvey’s expected strike on the lowlands of the Texas gulf coast. It is written in response to a peer CPA’s inquiry yesterday on how I concluded that the combined effect of minor coastal flooding would eventually bankrupt our small rural township here in New Jersey.

More than a decade ago I was shocked to see so many of my neighbors’ houses wash away and their lots permanently flooded. We didn’t know it at the time but we had more than seven inches of water level rise (actually a combination of sea level rise and land sinking) on this particular part of New Jersey’s Delaware Bay shoreline since I first arrived here in the 1980s. New Jersey government officially denied the existence of sea level rise under most of the reign of Republican Governor Christie so I became involved in community-bases sea level rise response groups based in Maryland and Delaware. Delaware had an active and engaged community responding collaboratively to sea level rise at least a decade before New Jersey. My education was supplemented by readings like Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed” and articles that preceded this 2014 special report by Reuters titled “Waters Edge: The Crisis of Rising Sea Levels” with the subheading “As the seas rise, a slow-motion disaster gnaws at America’s shores”. (That subheading pretty much summarizes all of my observations). I’ve had opportunities to visit dozens of aquaculture facilities on America’s east coast from Maine to Florida and it is clear that we are all in the same boat figuratively speaking.

In 2005 and 2006 I first looked at our township’s financial report. Like most ordinary citizens, I had no reason to look at government financial reports earlier. In the following months I spoke with the auditor to ask some informal questions about “going concern”. The basic demographics and observations were clear:

  • Our population is declining. (Our township is the smallest and most rural in NJ with about 400 households).
  • The number of recreational visitors is declining. (Our township motto is “a nature lover’s paradise” but it is clear that the number of nature lovers out actually loving nature is on the decline).
  • There is no significant influx of business.
  • A higher than normal number of businesses were closing.
  • Property values are declining. In one case the appraised value of a property I owned dropped by more than 96% from 2006 to 2017 even after expenditures of more than $30,000 to combat the flooding.
  • Unused properties sat on the market unsold for years.
  • Flooding is more frequent.
  • Infrastructure is deteriorating including roads and bridges.
  • Even when private funds are available for infrastructure repairs the required government permits are not available.
  • Municipal expenses were escalating, especially for storm and water management issues.
  • We had a lower than average per capita income and the gap was widening over time.
  • We had an older than average population and the gap was widening over time
  • We had a lower than average level of education and that gap was widening over time.
  • We had few municipal services in my neighborhood: no internet, no phone line, no public wastewater systems, no trash services, etc.
  • It was increasingly difficult to get a mortgage or a building permit.
  • We paid the one of the highest rates of real estate tax in the country when calculated as a percentage of property value
  • Taxes were increasing at a higher than average rate and appeared to be entering a period of exponential increase.
  • The total amount of payments required by government for various purposes (permits, inspections, licenses and taxes) was more than the private residents or businesses are able to sustain.

Then the real economic  bombshell hit: State government said that we had none of the required land use permits that normally would have been issued in our neighborhood over the past century as our community developed: no waterfront construction permits, no riparian rights (or paperwork was missing) no tidelands leases, no building permits, no septic permits, no certificates of occupancy, etc. Local government scrambled to try to catch up but without much result.

I also discovered many errors in public records. For example, it is not uncommon to find that houses are not constructed on the land owner by the homeowner but rather on the adjacent municipal roadway because nobody bothered to do a survey at the time of  construction. Government records were spotty at best. In one case I am battling a situation where the same mortgage was recorded as owned by two separate people who are trying to collect double the amount. Also, unfortunately, there is evidence that government corruption played a role in the mess.

In 2005-2006 I was engaged by a potential investor to estimate the real estate value of my small working waterfront island community. I was shocked to learn that the cost of addressing government concerns was more than the market value of the real estate. In short, the entire community was bankrupt. Waterfront lots that were once appraised at more than $100,000 are now appraised at under $5,000. Separately, the unresolved liabilities associated with each property could easily exceed $100,000. Since then I’ve talked with other developers who confirm that environmentally suitable reconstruction is possible but not without the support of local and state government.

Meanwhile, minor flooding caused increasingly larger amounts of damage. You actually have to be on site and see this in person; it is difficult to describe. It wasn’t the major storms but the constant and increasing level of energy in tidal action – small constant forces that change direction very six hours – that caused the most damage. I was forced to become obsessed with controlling the effects of shoreline erosion and tidal flooding. My organization Baysave has partnered with organizations like The Nature Conservancy, Natural Lands Trust, Partnership for the Delaware Estuary, Rutgers and others in these conservation projects. Yesterday I spoke with a manager of American Littoral Society who said they are pleased with the observed effects of local conservation projects. Yet this is too little, too late to save the community. All of the nonprofit partners agree by now that this is not a place suitable for homes (although some point out that this is a self-serving belief for these organizations).

Our rateable tax continues to decline as people moved away, abandoned lots or sold them to the government or nonprofit land banks. The large majority of our township’s land was already nontaxable. When taxes were unpaid the local government was unable to sell the tax liens. Investors were simply unwilling to bet on the outcome of this mess. The last land purchase in my neighborhood was 14 acres of wetland for about $1,200, The property was abandoned.

Eventually I contracted to buy about 25 acres for aquaculture use. I say contracted because most of the deals are unsettled even years later due to complications mentioned above. Of the 20+ lots that I own or operate, every one has some land use deficiency that precedes my involvement. I am tackling the permitting issues as quickly as time and budget allow. I find it necessary to remind government that current property owners did not create these problems. The problems built up over decades and will take some time to resolve.

Based on all of this, I published a blog post in early 2006 forecasting that our township would likely be unable to survive as an independent entity. My comments were based purely on a superficial look at the financial reports and cash flow data. I predicted that either the state or neighboring townships would take over. That was a decade ago. This month two officials privately stated to me that they were now involved in the reorganization of the township but apparently are unwilling to say this publicly .

My natural reaction over the past decade was to ‘sound the alarm’. I published information on several web sites. I’ve heard that some of my articles and photos wound up on the desks of people in high offices. This information was not welcome by some in the local community. I received verbal threats, even a death threat from an elected official, that I reported to police. Some months later I was assaulted by a drunk local redneck who claimed to be avenging a politician but the case was never clear. True to form for local government, they misplaced the file and failed to prosecute the case. It was clear to me that government was complicit, either intentionally or through incompetence, in the decline of our community.

Over the past year almost all of my neighbors have decided to move away and sell their houses to the state. In many cases the state is the only willing buyer. I am surprised that this abandonment happened so quickly. Even with almost all of my neighbors gone, I plan to stay and continue development of an aquaculture business at Money Island.

There’s been plenty of press coverage of this saga. I’ve given interviews for newspapers, television, a video producer and now even the author of a book contracted  by a major publisher. Now more than half of the vehicle traffic on our community’s only road is what we call “disaster gawkers”.

Our troubles aren’t over yet. This week I decided to take down my web sites because more coverage of the disaster does not help anyone at this point.  Selected information will be republished here in the future or another publisher might purchase the rights. I continue to receive ‘hate mail’ and social media attacks from sea level rise deniers. A few people in state government have reportedly admitted to a plan to “close us down” whatever that means. (Thankfully most are far more supportive). The local mayor  advocates against the current plan to convert our formerly successful recreational bayfront community to an aquaculture facility. As surprising as it may seem to outsiders, the mayor even publicly admits to colluding on a scheme with his friend, an attorney, to take our land through a legal process outside of the eminent domain process to try to preserve the tax base and former use of our properties. All of this stems from the long term effects of sea level rise.

It’s not just about my local community. Let’s be clear that if the Texas gulf coast is badly smashed today that is it not just the result of hurricane Harvey. The cumulative effect of sea level rise has a far greater impact on the destructive process.  Even though none of this should be considered news at this late date, I’m probably not the only messenger who will be shot along the way for talking about these sensitive issues.

Dramatic change in coastal community management forced by sea level rise is inevitable. We must abandon traditional land management and land-based tax methods and embrace environmentally sustainable approach toward resource management. But it’s not all bad. Aquaculture will play a large positive role in the transition of use of some communities. All we really need to to get government on board with the idea that change can be a good thing for our shoreline communities.

The take home messages or sound bites that I try to leave when discussing this topic are:

  1. We have the financial and technology ability to physically handle sea level rise but government’s actions could sink us
  2. In the aquaculture business, water is our friend.
  3. Aquaculture has large potential for growth in the U.S. and, if allowed to expand, can offset the negative effects of tax loss by local governments on the shoreline.

 

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