Moody's - Rising sea level signals need for US state and local governments to address growing climate risks

By 2040, rising sea levels and greater risk of frequent flooding will affect most states' coastal counties, including more than 110 cities with a population greater than 50,000

Economic weakening, higher maintenance costs and lost tax revenue are particular credit risks for state and local governments over the next several decades
Rising sea levels pose increasing credit risks for many US coastal state and local governments, with more frequent and severe flooding from high tides and storm surges from major weather events threatening economies, property values and critical infrastructure, Moody's Investors Service says in a report published today. While the federal government and many state and local governments have already taken steps to address these challenges, further investment in adaption and coordinated responses likely will be needed over the next several decades.

"More frequent coastal flooding as a result of climate change poses risks for localities, states and the federal government due to large and growing populations and vulnerable infrastructure in coastal locations," said Moody's analyst, Blake Cullimore. "Economic weakening, higher maintenance costs and lost tax revenue are particular credit risks for state and local governments over a multi-decade horizon."

Locations on the Atlantic and Gulf coasts saw 100% to 150% increases in annual days of high-tide flooding between 2000 and 2019, National Oceanic and Atmospheric Administration data shows. And Moody's climate affiliate Four Twenty Seven estimates that by 2040 rising sea levels and possible flooding will affect all states' coastal counties, including more than 110 cities with a population greater than 50,000. North Carolina has five high-exposure counties, followed by New Jersey and Florida with three, Virginia with two and Maryland and Washington with one each.

Sea level rise adaption efforts such as installing storm surge walls are credit positive, but also capital intensive and likely to increase state and local government debt loads. Governments' ability to manage their debt while investing in efforts to protect developed coastal areas will become an increasingly important component of their credit quality, Moody's says. Governments will have to balance investments made to meet environmental threats with funding to address needs such as pension and retiree healthcare liabilities.

State and local governments that are part of coordinated, regional initiatives that include cost-sharing will be better positioned to manage threats from coastal flooding. Likewise, robust regulations at the state level provide a framework for local governments to follow, according to Moody's. In addition, federal support and leadership via FEMA, Army Corps of Engineers or other agencies will be critical to states' efforts, while a lack of federal assistance is credit negative.

Subscribers can access this report, "State and Local Government – US: Sea level rise increases credit risk for coastal states and local governments," at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1233702.

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