We’re returning to the northeast this week and, while school districts often bubble to the top of the climate risk/non-disclosure nexus, smaller cities are often just as resource-, data- and expertise-constrained when it comes to assessing, communicating and mitigating climate risk to their jurisdictional areas and revenue streams.
This week’s climate risk non-disclosure distinction goes to the City of Absecon, NJ the preliminary OS for which can be found here.
Across all cities nationally Absecon is at the 92nd percentile for property value at risk and 94th percentile for GDP impairment risk. Within the national cohort of cities with any coastal area (and therefore any coastal flooding risk) it is at the 65th percentile for coastal flooding which drives much of the overall risk for the city.
The City of Absecon is in Atlantic County and sits immediately northwest of Atlantic City, but still has substantial coastal area given the interstitial waterways along much of the east coast of the US. There are plenty of cases of contemporary flooding events to point to with even a cursory search. The only mention of “flood” or “hurricane” risk in the OS is on page 11 in language for exceptions to deferred expenses, but there is no discussion of the actual risk or past events indicative of said risk. Other key words one might hope to see – “climate”, “sea” (and derivatives thereof) – don’t get a look-in. Keep in mind, a 100 year coastal flood alone is projected to cause 16% property value damage on an equivalent loss basis for the city. That’s a material number for a series of bonds stretching to a 2045 maturity.
So with no mention of past events or current or planned risk mitigation in the OS we have to look for our own evidence of impacts already experienced and efforts to avoid the same in the future. In terms of population, there’s evidence of a decrease that clients know we’ve correlated to climate-driven damage. We have the City of Absecon at 8,369 in population which is slightly down on the OS’s 2010 population of 8,411. Even a slight decrease such as this is unusual for a coastal area. More broadly, across Atlantic County, the 2012 to 2018 period saw a 3.4% loss in population, placing the county on the bottom 20% nationally. In terms of property value, between 2012 and 2018 the market values in the county have dropped 4.7%, which is in the bottom 2% of counties nationally in terms of property value. The assessed value data in the OS itself indicates some level of loss when looking at data in Appendix B which goes back as far as 2014. Bringing this around to actual climate events and impacts, the NFIP per capita annual losses from flooding for Atlantic County are an astounding $58,901 which ranks 36th highest nationally across the more than 3000 counties (and that includes all those notorious counties in the south). This also correlates with our placement of Atlantic County in the 98th percentile of counties nationally in terms of climate risk. Again, we know that past climate events can be correlated to subsequent losses in population and property value. Easy to correlate them to future climate damage in the absence of mitigation as well.
So if the climate cracks are already starting to form can we find any evidence of awareness of mitigation (given the POS was silent on it)? Looking at the NFIP’s Community Rating System enrollment list, the City of Absecon is on there, and has been since 2014, but a score of 8 out of 10 (where a 10 is the lowest/least action taken) is not robust. Compare that to other close-by towns and cities – Atlantic City (1992 enrollment, 6 rating), Brigantine (1992, 5), Pleasantville (2014, 5), Egg Harbor (2017, 5) – and Absecon’s overt efforts are lagging. Keep in mind, the better the CRS rating the more of a discount on flood insurance a city’s residents can obtain. Also keep in mind that a lot of property in flood-prone locations is not insured at all and that gap is growing. Last bit of fuel to add to this fire shows is that the median year a house was built in Absecon is 1968 (see the residential demographics tab in the risQ UI) and this is in the bottom 1/3 nationally across all cities. Older housing stock is typically less updated to current (and future) risks.
As a quick aside, the workplace demographics are worth noting in the context of COVID risk to the city’s balance sheet. Of the almost 3,000 jobs in the city, 1/3 are in either retail trade or accommodation/food services (see the workplace demographics tab in the risQ UI), so there’s also some (potentially out-sized) near-term balance sheet impacts to manage for the city as well. The POS mentions the potential for risk but that its hard to predict. Fair to think about lead indicators such as the above though, along with the population’s proximity to Atlantic City and the likely employment it’s residents draw from that economy.
Again, smaller issuers 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. Presumably the advisors to these issuers would have some capability though.