Flood Fund future uncertain as Youngkin pushes for carbon market withdrawal

In January, strong winds led to high tides drowning parts of Hampton. Some roads were impassable, with water levels rising to near the top tread of the tires. Almost two years prior, stormwater had led to flooding severe enough to sweep parked cars down the roadways.

With climate change driving sea levels up and altering rainfall patterns, Hampton is certain to continue to be hit by flooding. What’s less certain is where it will get funding to combat it.

Over the past two years, Virginia has accumulated over $200 million for flood protection from the state’s participation in the Regional Greenhouse Gas Initiative. But the future of that funding pool is in doubt as Republican Gov. Glenn Youngkin has made it clear he wants to leave the initiative.

Gov. Glenn Youngkin. (Ned Oliver / Virginia Mercury)

“RGGI is a bad deal for Virginia,” said Travis Voyles, acting secretary of natural and historic resources, when he outlined the administration’s plans for withdrawing Virginia from RGGI at the end of last month.

RGGI is the 11-state cap-and-invest program in which energy producers must buy allowances at auction for the carbon they emit, and a cap is placed on overall carbon emissions.

The proceeds of those auctions are returned to the state. In Virginia, half is directed to low-income energy efficiency programs, while 45% goes toward the Community Flood Preparedness Fund, a pool of money that provides flood assistance to communities and local governments.

Including the latest sale of allowances on Sept. 7, Virginia has received some $452 million from RGGI, meaning $203 million will go toward flood resiliency efforts.

Local flood protection

Whether flooding occurs on Virginia’s coast from sea level rise or in its inland areas from rainfall increases, the impacts are real, said Skip Stiles, executive director of Wetlands Watch, a Norfolk-based nonprofit working to address sea level rise adaptation, floodplain management, and other waterway impacts.

Before Virginia joined RGGI in 2020 — a Democratic priority during the party’s brief period in power — flood protection was left up to local and regional planning bodies, with no central pool of funds governments could draw from. Since the state joined, the Department of Conservation and Recreation, which administers the Flood Fund, has begun paying out grants from the revenues.

“Before Virginia joined RGGI, there were ZERO state dollars going toward these resilience efforts,” said Stiles in an email.

Any state spending on these efforts through the Virginia Coastal Zone Management Program, Virginia Sea Grant or the Virginia Department of Emergency Management used money derived from federal agencies, he said.

“We have to assume that if we leave RGGI, we will return to that low-priority status for this work,” Stiles said.

The Flood Fund has proved to be “absolutely helpful” to combat problems linked to climate change, particularly stormwater issues and sea level rise, said City of Hampton Resiliency Officer Carolyn Heaps-Pecaro.

“We have a lot of projects lined up,” she said. “We have a lot of ideas for how to fix the town. We need that money to actually make them a reality.”

Hampton was the largest recipient of the second round of grants announced in December from the proceeds, receiving about a third of the $24.5 million the Flood Fund paid out. The projects that were funded included plans for elevating a roadway, improving drainage canals, and reducing nutrient pollution.

Millions in local funding is needed to complete the projects, but the state funds help cover design and engineering costs to begin them, Heaps-Pecaro said.

“Several of these projects probably would not have moved forward nearly as quickly as they did had we not received the grant funding,” she said.

Flood Fund dollars also go toward projects outside of coastal areas. In the first round of grants, announced in October 2021, $400,000 was awarded to Buchanan County. 

The Southwestern Virginia locality had been slammed with devastating floods the prior August. The region also suffered severe flooding this July and, according to a Thursday morning update from the National Hurricane Center and Central Pacific Hurricane Center, could lie in the pathway of Hurricane Ian.

The Buchanan funding is intended to go toward an engineering analysis that would lead to a local flood resilience plan and training for a staff member to become a certified floodplain manager.

A quarter of Flood Fund dollars need to go to low-income communities, a designation Buchanan qualifies for, with a median income that in 2019 was less than half of the state’s average.

“Buchanan County and our neighbors in Southwest Virginia have experienced devastating recurrent flooding that has increased in recent years,” the county’s application stated. “Flooding is often thought of as a coastal problem, but we are pleased to see that DCR seeks to direct some of this fund to mountainous and disadvantaged communities such as ours.”

An unclear future

While Youngkin has been adamant that he believes Virginia should withdraw from RGGI, the administration’s plans for how the state will help local governments pay for the massive flood protection costs are less clear.

Youngkin has argued for months that RGGI proceeds are being generated from an unfair “tax” on electric utility ratepayers. Virginia utilities responsible for about three-quarters of the carbon emissions subject to RGGI are allowed to pass on the cost of buying allowances to their customers, an approach Youngkin says is flawed.

“RGGI was sold to Commonwealth residents as a deal that returned the ‘proceeds’ to the ratepayers to offset the costs of the program, but that is not what is happening,” a statement from the governor’s office to the Mercury said. “We can provide funding for flood resiliency in a transparent way without using an RGGI tax on Virginians.”

Youngkin’s office said the administration intends to develop a plan to provide direct funding for flood resiliency with the General Assembly. That would require buy-in from Senate Democrats.

But when pressed for specifics of the plan, such as whether it will be crafted through legislation or the budget process, which can involve fluctuating revenues and regular competition among different interests competing for a piece of the pie, the governor’s office didn’t clarify beyond saying it will “provide direct funding and coordination for flood resiliency.”

“We can do this in a way that is transparent and not a hidden tax that was misrepresented to Virginians,” the governor’s office stated. “This will ensure we have a long-term comprehensive strategy to sustain flood resilience efforts in Virginia.”

Millions of dollars remain uncommitted

Even while the future of the Flood Fund remains uncertain, millions of dollars remain on its books.

Before leaving office, Gov. Ralph Northam’s administration awarded two rounds of grants in the last three months of 2021 equal to $32.3 million.

The third round of $13.6 million was announced Wednesday, nine months into Youngkin’s term.

Flood Fund oversight to remain with executive branch 

Round 3 was initially advertised to award $40 million, but with applications requesting nearly $93 million, DCR said it has been authorized to release an additional $30 million. The agency allows 32 applicants to revise and resubmit their proposals and plans to decide on them by the end of the year.

If DCR awards all $70 million it’s been authorized to grant during the third round, Virginia will have spent about 50% of its Flood Fund revenues to date, with just over $100 million left to be designated.

A DCR spokesperson said plans for that unused funding include “future grant rounds as well as loan opportunities going forward.” A fourth application round is expected to be opened in early 2023, along with the first round of the newly created Resilient Virginia Revolving Loan Fund, which will provide loans or grants for resilience to local governments and residents.

Increasing climate impacts

Stiles pointed to data from Carnegie Mellon University, the Northeast Regional Climate Center at Cornell University, and the RAND Corporation showing that rainfall intensity has increased an average of 18% since 2006.

Increased rainfall in the state has been documented for years, and the Virginia Coastal Resilience Master Plan projects that between 2020 and 2080, the number of residents living in homes exposed to major coastal flooding will grow from approximately 360,000 to 943,000, an increase of 160%. The report also found that more residential, public, and commercial buildings will be exposed to extreme coastal flooding, while annualized flood damages will increase from $0.4 to $5.1 billion.

Moreover, a recent Climate Central study found that rising water levels on land reduce the amount of property local governments can tax.

“Climate change isn’t going away,” Heaps-Pecaro stated. “We have to accelerate” the fight against it.

by Charlie Paullin, Virginia Mercury

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