(Bloomberg) -- Naples, Florida, is turning to the municipal bond market to rebuild its famous pier ravaged by Hurricane Ian, marking its at least its fifth reconstruction because of extreme weather damage.
Tuesday’s deal comes just days after rain from Tropical Storm Debby inundated the city. About $11 million of proceeds raised from a $21 million bond issuance will be used to reconstruct the Naples Pier, which was destroyed by Hurricane Ian in 2022. The new pier — which will stretch an estimated 1,000 feet into the Gulf of Mexico — will be designed to be more resilient to future storms, the city told investors in preliminary bond documents.
The upcoming reconstruction will be at least the fifth time the iconic pier has been rebuilt. The city replaced it following hurricanes in 1910, 1926, 1944 and 1960. In 2015, it underwent a major $2.7 million renovation. Two years later, Hurricane Irma wrought about $244,000 in damages before Ian dealt a death blow of “catastrophic” damage, according to city officials.
The borrowing illustrates just how intertwined the $4 trillion municipal bond market is with extreme weather. States and local governments use the market to raise money to build infrastructure like schools, roads and bridges. And in the coming years, analysts expect issuance will surge as governments sell debt for climate-related projects.
The new pier in Naples will stand three feet higher, have wider pilings driven deeper into the ocean floor and use concrete joists instead of wood — all with a total cost of about $28 million, Gary Young, deputy city manager and chief financial officer, said in a statement.
Naples, home to some of Florida’s wealthiest retirees, is known for shopping, dining and its pier. The Naples Pier dates back to 1888 and is one of the most visited tourist attractions in southwest Florida with about 1.4 million annual visitors.
“The attraction of the Pier is a staple to the City of Naples experience for both residents and visitors alike,” said Young.
The bonds funding the reconstruction and a new parking garage will be backed by revenues appropriated by the city, including sales taxes, licenses, permits and other fees. Beach parking, which has reaped a record nearly $2.4 million so far this fiscal year, is also pledged, according to Young.
S&P Global Ratings assigned the bonds its top rating, citing the city’s strong income and reserves. Though, ICE Climate Data, which applies climate, economic and demographic data to US municipalities and related securities, assigned the bonds a risk score of 4.9, with 5 indicating the highest risk level. Naples is among the most exposed cities in the US to hurricane and coastal flood risks, according to an ICE report.
Young said the city hasn’t heard concerns from investors regarding its exposure to climate-related risks.
“The beach parking revenue alone will be utilized to repay the principal and interest related to pier portion of this issuance and yet the city pledged all non-ad valorem revenues to assure repayment,” he said. “These facts should reassure investors.”
--With assistance from Andrew Harrer.
(Updates story with amount of bond proceeds for pier in second paragraph.)
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