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Analysis & News on the Future of Public Finance

CSG: The Continued Case for Resilience As a Credit Issue

The American Association for the Advancement of Science released a study of the San Francisco Bay Area which reflects the potential impacts of rising seas from climate change on the region. According to the study, major consequences of exacerbated inundation risk for coastal areas include saltwater contamination of surface and underground waters, accelerated coastal erosion, wetland losses, and increased flooding. The study estimates that by 2100, more than 480,000 people and $100 billion worth of property in the San Francisco Bay will be exposed to flood risk. It comes from a combination of rising sea levels but also from land subsidence. The study estimates that Portions of Treasure Island, San Francisco, San Francisco International Airport, and Foster City are subsiding as fast as 10 millimeters/year.

And it is not just these factors that are a concern. Storm intensity, associated rainfall, and storm surges affecting the coastal area are likely amplified by the elevated ocean temperature caused by ongoing global climate change. Higher volumes create greater amounts of water to be absorbed which results in higher water tables creating flooding. These create greater localized flood risk in those areas as well. An example is the flooding in sections of Miami due to a rising water table and reduced absorptive capacity.

The credit impact results from the need to install flood mitigation infrastructure, to raise roads or relocate them, and the potential need to relocate significant infrastructure such as airports – as well as the need to find additional revenue sources to support these additional facilities. Significant airport facilities located adjacent to or extended into the water include Logan in Boston, LaGuardia and JFK in New York, and San Francisco International, just to name a few.

Planning for these impacts at the state and local level will intensify more quickly and issuers will likely need to disclose potential credit implications when issuing new deals.

Matt Posner