Weekly Preliminary OS Climate Risk Review (2/24/22)

By March 3, 2022 No Comments

This week we’re looking at Warwick City which is issuing debt through the Rhode Island Health and Educational Building Corporation for public school improvements. The City is exposed to a combination of inland and coastal flood risQ — below we discuss how a major flood in 2010 was a catalyst for citywide flood mitigation investment. 

Rhode Island Health and Educational Building Corporation, Public Schools Revenue Bonds, City of Warwick ($26,960,000)

The City and the Bonds

Warwick is Rhode Island’s 3rd largest city, situated on the Narragansett Bay with its northern border defined by the Pawtuxet River (more on the effects of that soon). The City’s school system consists of 13 elementary schools, two junior high schools, two senior high schools, one early childhood center and a career technical center. In 2020, approximately 85% of all high school graduates continued their education by attending some form of post-secondary education; 85% of all city residents 25 years and older have completed high school with 24.6% having completed college. The City’s schools are performing well in the sense that they are preparing students for continued education beyond high school.

The proceeds of the bonds will be used to finance the construction, renovation and equipping of schools and school facilities throughout Warwick and to fund the City’s capital improvement program through 2023. The bonds are in turn secured by the City’s tax base, as well as state aid received in connection with the projects. 

The City’s Response to Historic Flooding

Warwick has a Flood risQ Score of 3.7 and overall it ranks in the 81st percentile nationally for GDP impairment and 90th percentile for property value-at-risk; most of its risQ is driven by inland and coastal flooding. When March 2010 brought 16” of rainfall, the Pawtuxet River on the City’s northern border became the epicenter for major flooding, inundating nearby roads, neighborhoods, and businesses — including the City’s mall which remained closed for months after the river filled its lots and buildings with 2 feet of water. The flooding also overwhelmed sewage plants, including the West Warwick Regional Wastewater Treatment Facility. The overflow spilled contaminated water into nearby neighborhoods and submerged dozens of homes.

The City struggled for months to recover from the major disaster that left homes and businesses ruined, but in the end it emerged with strategies to be better prepared for future flooding events. In November 2010, Warwick was awarded a Community Development Block Grant (CDBG). In their CDBG Disaster Recovery Plan, Warwick outlines various recovery and resilience measures, including debris cleanup, financial incentives to buy-out residential properties in flood-prone areas, and long-term restructuring of building codes to prevent development in risky areas. The City’s vision focused on debris removal and property repairs (private and public) to restore the community and in the long-term, “recovery efforts focus[ed] on mitigation and prevention of damage due to future flooding events…namely critical public facilities (water/waste water treatment) that were damaged or destroyed during the flood.” 

It’s all well and good to come out after a major disaster with a plan, but what ultimately were the actions? Their July 2021 CDBG Performance Report shows that of the $2.8M awarded through the grant, $2.2M has been spent on public facilities and infrastructure projects, such as the Buckeye Brook/Warwick Pond restoration project – designed to reduce the flooding of private property and infrastructure adjacent to the pond. Additionally, the City’s work on the Warwick Wastewater Treatment Facility (the same one damaged during the 2010 flood) resulted in a $3.6M investment in levees which protects the facility from a 500-year flood event (pg. A-5). The City also maintains a Hazard Mitigation Plan which it updates every 5 years. FEMA doesn’t require that Hazard Mitigation Plans factor in climate change, so the fact that Warwick discusses and accounts for climate change (and sea level rise) in their mitigation planning at all is a big plus (many do not). 

“The City continually evaluates its climate resilience and continues to implement measures to reduce the impact of climate change, protect its assets, and mitigate any potential future fiscal impacts.” (POS pg. A-5)


Warwick’s catastrophic floods have been a catalyst to drive a response to flooding concerns. The City is taking a multifaceted approach when it comes to mitigating risk, including “upgrading and protecting critical infrastructure; removing infrastructure in areas prone to routine flooding; short- and long-term planning and working with homeowners to elevate or remove residential properties which have experienced severe repetitive losses under flood insurance.” (pg. A-5). 

This bond series aims to provide for the future needs of the City’s school systems. To this end the City is performing well; they are successfully preparing students for post-secondary education. At the same time it is good to see that the City is taking steps to ensure that investments in their schools and community are matched by actions that make their community more resilient to impacts posed by climate change.

Honorable Mentions

Department of Water and Power of the City of Los Angeles, CA (risQ Score 1.6, Wildfire risQ Score 2.2) $3,000,000

We covered Los Angeles’ Department of Water and Power (LADWP) this past January, for an issuance that sought to fund capital improvements to the Department’s power system. This issuance, however, pertains to improvements in its water system, which is particularly vulnerable to drought (in addition to wildfire risk). The percent months in a 30 year period with extreme drought by 2050 ranks in the 96th percentile under RCP 8.5. Between late 2011 and late 2016, the State suffered one of the worst droughts in recorded State history (pg. 56) due to elevated temperatures and reduced snowpack (pg. 62). In 2021, the State had its driest water year on record and prompted California to enter into a state of drought emergency (pg. 56). Despite a series of storms at the end of 2021, 66% of the State was considered to be experiencing severe drought in January 2022 (pg. 62). In response to drought emergencies and conservation measures, customers reduced their water use. Reduced demand results in reduced water system revenues—which secure this bond (pg. 63). 

LADWP receives water from four sources: the Los Angeles Aqueduct, the Metropolitan Water District of Southern California (MWD), groundwater, and recycled water (pg. 54)—none of which are immune to drought and environmental concerns. The Aqueduct is fed by surface runoff (snowmelt). Reduced precipitation and snowpack in the aforementioned droughts significantly reduced water delivered from the Aqueduct; the amount of water delivered via the Aqueduct more than halved from 2020 to 2021 (pg. 54). Reduced supply from the Aqueduct, forces the LADWP to purchase more water from the MWD—which comes at a higher cost (pg. 55). This additional cost is incurred by customers which already face high housing costs (Percent of Income Spent on Housing Score of 97). The POS notes that reductions in supply to the MWD (which faces similar drought concerns and supply issues as LADWP) would subsequently impact the LADWP (pg. 90). Furthermore, the LADWP’s largest groundwater supply (80%)—the San Fernando Basin—is an established EPA Superfund Cleanup Site (pg. 82). Without remediation, contamination of the groundwater supply would cost the Department $68 million per year to replace (pg. 82). Recycled water is currently the lowest supplier of water (pg. 54), but the City and Utility are heavily investing in infrastructure to recycle 100% of all wastewater by 2035

To meet future demand, the City and Department are betting big on self-sufficiency and efficiency. The Department’s Urban Water Management Plan (UWMP) along with the City’s Sustainable City pLAn seek to reduce potable water use by 25% by 2035 and reduce dependence on imported water. The Sustainable City pLAn strives to source 70% of LA’s water locally and capture 150,000 acre ft/yr of stormwater by 2035 (pg. 64). These bonds will fund LADWP’s Water System Infrastructure Program which includes water quality improvements, local water supply programs, and other infrastructure renovations (pg. 71-73).

Baltimore County, MD (risQ Score 0.1, Flood risQ Score 1.1) $775,000,000

The County is issuing three separate series: one is to provide funding for public works projects, another specifically for the water and sewer system, and the third to acquire equipment for government use. Despite being located on the Chesapeake Bay, Baltimore County boasts relatively low physical risk across the board. Nevertheless, the County has developed an adaptation-focused Climate Action Plan which identifies the range of future climate change, assesses potential impacts, and recommends adaptation options for planning horizons of 2050 and 2080. The County does face significant carbon transition risk, with per capita emissions from electricity production, industry, and residential and commercial real estate ranking in the 89th, 76th, and 88th percentiles, respectively. To that end, however, the County has completed a Greenhouse Gas Inventory and Climate Action Plan (pg. 23). The Plan ​​discusses the County’s current GHG emissions and projects future emissions through 2030 under a business-as-usual trajectory. The Plan then describes opportunities for further reducing GHG emissions within County operations through strategies in the energy, transportation and waste sectors. The County’s climate initiative on both the mitigation and adaptation front is especially encouraging given the County’s relatively high Social Impact Score (83). The County has its bases covered.

KIPP Texas Inc., TX (risQ Score 0.1, Flood risQ Score 1.1) $164,270,000

59 KIPP charter schools are located throughout the State of Texas, with a large concentration–34 schools—in the Houston Metropolitan Area. The $164 million in proceeds will be used for the acquisition, construction, and maintenance of charter school buildings operated by KIPP (pg. 3). With such an amount, you would expect a bit more than a couple boilerplate sentences on climate change, especially given some of the school’s precarious locations. Houston, notorious for climate events and inequality (Social Impact Score 60), is home to the majority of KIPP Texas charter schools yet there’s only a brief paragraph outlining that climate could potentially impact KIPP Texas facilities, but no damage has occurred within the last 5 years (pg. 16). This information does not inform anyone invested in the community beyond a simple Google search. A better job can, and arguably, must be done. 

The POS mentions that none of the facilities have been flooded in the last five years, however, charter schools are much more than buildings. They include entire communities carrying significant climate risk that should be disclosed. Let’s take a look at KIPP Mosaic Primary (Flood risQ Score 2.9) for example. Over $28 million in proceeds is being used for construction and land acquisition for this location in southwest Houston.  Within a 20-minute drive time radius, KIPP Mosaic ranks 92nd percentile nationally for GDP impairment and 91st percentile nationally for property losses from inland flood risk. In 2017, Hurricane Harvey hit Harris County and affected all 4.7 million residents, leaving $125 billion in damages. In addition to climate risk, KIPP Mosaic (Nonwhite/ Minority Population Score 85), along with much of Houston, deals with ongoing inequality. Socioeconomic issues should be highlighted because they are apparent even for KIPP locations without major climate risk. KIPP Poder Academy, located in San Antonio, has a risQ Score of 1.8, but the same Social Impact Score (60) as KIPP Mosaic. For those wondering, KIPP stands for “Knowledge Is Power Program.” A boilerplate paragraph on climate change that encompasses 59 schools is not empowering the sharing of knowledge.