Many states, counties and towns across the US are increasingly realizing there’s a bill to pay with respect to climate risk. Just yesterday, this discussion of risk to property in South Kingston, RI caught our eye. In the discussion of flooding risk to a portion of the town’s property:
“the 53 properties on Prospect Road are worth more than $37 million, according to the town’s tax roles. And those are just a fraction of the 366 homes South Kingstown predicts will be isolated by flooding. Abandoning the road, at this point, could be more expensive than maintaining it.”
Assuming the same average property value across all 366 properties, that’s > $250 million in aggregate property value. This represents around 5% of the town’s taxable property value. By any definition, that’s material. It aligns with risQ’s assessment of the town’s overall climate risk, which is in the most at risk 15% of towns and cities nationally, substantially driven by such coastal flooding. So is there disclosure of any potential risk in official statements from the town?
The town issued bonds as recently as 2017, meaning the official statement is recent enough and there are securities with maturity dates as far out as 2037 (although many longer maturity CUSIPs have a 2027 call date option).
Curiously, a search for “flood”, “coastal”, “climate”, or any other such indicator of potential risk yields precisely zero hits across the robust 215 page document. At some point in the nexus of flood mitigation, managed retreat or loss of property value, something will have to give by the time the timeframe of this bond series plays out.
For the issuers, underwriters, insurers, and investors in the municipal bond market, its going to be increasingly important to know and discuss the risks.