Buddy likes potholes. On our walks there are lots to examine.
Cities and towns are soon going to need extra money - lots - to cope with growing damage from climate change. A few looming costs:
Flooding will soon call for new sea walls, embankments, drainage systems, maybe a sewer treatment system. Lots of roads need repair after flooding.
Growing drought means new water sources must be found.
Heat can overload local health facilities. It buckles concrete and asphalt.
There are two factors in estimating our local risks. Many of us don’t think about the second one.
First, WHAT’S OUR TOWN’S PHYSICAL RISK?
Some towns are in the crosshairs of climate change; others have natural protections. We can find out if our town is at physical risk by checking the Natural Hazard Housing Risk Index calculated by ATTOM Data Solutions. Future ClimateDog posts will discuss more information sources.
The cost of protections ranges widely. Manitowok, WI had to find $1 million to rebuild the city pier after a storm. A sewer line in nearby Sheboygan will cost $10 million as the level of Lake Michigan rises. Voters in Virginia Beach will need more than half a billion dollars to elevate roads, convert a city golf course for stormwater storage, and build other forward-looking protections. The list goes on.
Second, and just as important, CAN OUR TOWN PROTECT US?
Most of us are oblivious to our hometown’s finances. Planners in our city departments may be wringing their hands over a looming crunch, but their fears don’t show up in our local paper until things are really bad.
If we don’t have the tax revenues or rainy-day fund to deal with damages or invest in protections, there are several unpleasant alternatives. We can raise municipal taxes and fees. We can take from the budgets of police, firefighters, and educators. We can postpone fixing the damage.
WE CAN BORROW . . . MAYBE.
Before taking those actions, however, our town might ask residents about another way to fill the gap, borrowing. Last month voters in Virginia Beach approved a $568 million bond issue to pay for those preventive actions.
Bond buyers naturally prefer to loan to financially strong towns with the ability to pay them back. Weaker towns pay high interest rates or are shut out of the market completely.
Do we live in a BB+ town or an AA- town? There’s a huge difference!
It takes work to assess the financial strength of a city, but it’s possible to find out what the investment community thinks. We can check the credit rating of our hometown’s recent bond issues. This is based on factors like budget surpluses, population growth, residents’ median income, dependence on a few employers, tax revenues, economic challenges on the horizon, and other factors. Not all municipalities have had bond issues, and not all bond issues have ratings, but it’s worth looking.
A good rating gives our town access to extra cash at an affordable interest rate. (Which is not to say we should use it; borrowing today just kicks the can to future residents, like our children.)
A bad rating? Well, if bond investors are reluctant to lend to us, we likely simply can’t borrow the cash we need. Plus our town’s poor finances also hurt the attractiveness of the town and eventually the values of our homes.
WHERE TO LOOK FOR OUR TOWN’S BOND RATING
1. Many cities disclose their bond rating somewhere on the city’s website. See below for a quick method of finding it.
2. If there’s nothing on the town’s website, the most straightforward way to understand our town’s financial strength is to walk into City Hall and ask. We need to find someone who both knows the data and how to explain them, since municipal finances are very unlike corporate finances.
3. Those bond ratings are issued by three rating agencies, Moody’s, S&P Global, and Fitch, who evaluate the city’s ability to repay municipal bonds. These companies don’t offer their information for free, but we can sometimes find a way into their ratings pages if we register for a trial subscription or use the identifying number (CUSIP) of the appropriate bond in our search instead of the town name.
4. If we have an account with a financial firm, like Fidelity, Schwab, Vanguard, we can probably sign in and look up bond ratings on their site.
5. Free public access to bond information, sometimes including the rating from at least one agency, can be seen at EMMA. Start with their map.
Many of us know whether we’re at risk from climate change. Few of us know whether our hometown can afford to protect us.
Know someone who’s thinking of relocating? Help them check their new hometown’s finances.
LEARN, THINK, ACT
Want to learn some municipal finance facts? Try this guide from Strong Towns. Or start with a brush-up on muni bonds in this summary sheet.
Finding and understanding recent ratings is a bit complex. It’s best to check with EMMA Help first. Make sure you look for bond ratings for the municipality itself, usually called General Obligation Bonds. Other issues - to fund a local hospital, a city housing development, or a water and sewer district - don’t tell you about the finances of the town itself.
On a city’s website, here’s the easiest way to see their bond rating:
1. Find the city’s official website (not the tourist office or chamber of commerce).
2. In a search engine, replace all the letters before the actual name (usually “http://www.”) with “site:”.
3. Then go to the end of the official name and add a space and the words “bond rating”. For instance
https://www.waco-texas.com
is now changed to
site:waco-texas.com bond rating
Click return to search for that string.
4. Forage around within the resulting web pages and pdfs to find the ratings. (Make sure they’re recent.)
PLEASE LET US HAVE YOUR SUGGESTIONS
How do you think your town is going to pay the growing costs of climate change?
How can we measure that ability?