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Analysis & News on the Future of Public Finance

CSG: Climate Disasters Cost the U.S. $300 Billion Last Year, More Than Ever Before

Evidence for the idea that resiliency is a more and more important credit factor continues to accumulate. The latest piece comes from the National Oceanic and Atmospheric Administration's National Centers for and Climate Disasters Review for 2017. Last year, there were 16 weather and climate disaster events with losses exceeding $1 billion each across the United States. These included 1 drought event, 2 flooding events, 1 freeze event, 8 severe storm events, 3 tropical cyclone events, and 1 wildfire event. Overall, these events resulted in the deaths of 362 people and had significant economic effects on the areas impacted.

The cumulative damage of these 16 events is $306.2 billion, which shatters the previous U.S. annual record cost of $214.8 billion (CPI-adjusted), established in 2005 due to the impacts of Hurricanes Dennis, Katrina, Rita and Wilma.

NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2018). https://

www.ncdc.noaa.gov/billions/

The scale and nature of the weather and climate disasters clearly expanded in 2017. The recent wildfires in California were record setters as was the fire season in Montana, and the impact of Hurricane Harvey was the largest recorded. While disaster aid often enables the restoration of physical assets, the damage created by lost near-term revenues as well as the long-term impact on revenues is not easily mitigated. The ability of municipalities to manage and prevent, where possible, the impacts of these events clearly is a more important issue for them.

Previously, we cited Moody's for their comments about the increasing importance of resilience as a credit factor. In fairness, we note that Standard & Poor’s also has commented in the fourth quarter of 2017 on environmental and climate risk as a factor in credit analysis. We think that the NOAA data furthers supports these efforts and we are glad to see them.

The winter storm in the Northeast has revived calls for the City of Boston to evaluate the feasibility of constructing a sea barrier to protect the City from the type of flooding experienced during the “bomb cyclone.” As usual, funding for such a project, which has an estimated cost of $10 billion, is the greatest obstacle to its construction. Such a barrier would run from the tip of Logan International Airport to South Boston. A more ambitious wall being eyed would encompass the Harbor Islands or stretch as far out as the coast of Hull. It would almost certainly require federal funds, but as we have continually noted, the Administration's ambiguous messaging about infrastructure and development muddies the outlook significantly.