Climate Risk (non-)Disclosure of the Week: 6/29-7/3

By July 14, 2020 No Comments

Our clients are by now aware of how critical is it do be geospatially specific when identifying and analyzing the risks associated with a specific municipal bond issuer. While school districts in selected states around the country are coterminous with the counties, there are many more states where that is not the case and opens up vast differences in climate risk across the school districts within a given county.

This week’s climate risk non-disclosure distinction goes to Buffalo Island Central School District, AR the OS for which can be found here.

Across all school districts nationally Buffalo Island CSD is at the 97th percentile for property value at risk, and in the 99th percentile with respect to inland flooding risk. If anything, these numbers only climb higher when residential property alone is taken into account.

Buffalo Island CSD sits at the eastern extreme of Craighead County which has seen its share of the various federal disasters in recent times, and where flooding inundation is not uncommon, and sometimes fatal. Curious to note, therefore, that there is no reference to climate risk – “flood”, “climate”, “natural”, “disaster”, “tornado” all absent – within the OS or the Preliminary OS for a strip of securities with maturities in the 2030’s and even into the 2040’s.

Craighead County as a whole has 25% of the overall climate risk of Buffalo Island CSD and is at the 44th percentile for property value at risk across all counties nationally. This relative lack of risk plays through into the county’s population and property value which have both grown to some degree over the last decade. Noticeably, the City of Jonesboro, the major center of population for the county has been part of the NFIP’s Community Ratings System since 1992, although still only at an 8 rating in that system. The same can not be said for the county as a whole in terms of NFIP registration, not for other areas within the county. Property value in terms of market value lags as a result (although assessed values have climbed over the last 5 years) for Buffalo Island CSD, but there is underlying weakness in the population and the OS itself notes a 6% decline in enrollment for the district overall. Much as for Palo Verde USD and its high risk in the context of Riverside County in CA which we discussed a few weeks ago, getting more specific about Buffalo Island CSD versus looking at Craighead County as a whole is critical for getting a full picture of the specific issuer.

This also raises the contributing problem that smaller issuers and entire national cohorts thereof are often less resourced than states, counties and major metros and don’t have the time, expertise or budget to understand and disclose their risk. In an ideal world, the deeper pocketed jurisdictions or the advisors these issuer rely on and pay good money to would provide the appropriate information and support for climate risk assessment, disclosure and action.

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