After Colorado firefighters began the year battling the most destructive fire in state history, lawmakers are weighing bills to lessen future fire destruction and aid affected homeowners and property owners.
The fire that started Dec. 30 in the region between Denver and Boulder burned 6,000 acres in less than 24 hours.
Colorado Gov. Jared Polis called for
“We learned that the words ‘fire season’ don’t apply when the most destructive fire in Colorado history happens on December 30th,” Polis said in his Jan. 13 speech. “And we were reminded, once more, that our lives, and everything we hold dear can go up in flames in an instant.”
The fast-moving grass fire fueled by record-warm temperatures and drought burned a path of destruction through suburban tracts in Louisville, Superior and unincorporated areas of Boulder County, destroying 1,084 homes and damaging 149 homes at a
Rating agencies, insurers and investors as well as lawmakers have spent the past decade
Despite $2 billion to $3 billion per year spent to support wildland fire suppression efforts, the number of homes lost in wildfires per year has
Polis included fire suppression and efforts to create cleaner air and mitigate climate change on his list of priorities in his annual State of the State address.
“Building safer, healthier communities also means improving our air quality and meeting the climate crisis head-on,” Polis said. “Only two weeks ago, our state watched in horror as the fire in Boulder County, fueled by extreme winds and drought conditions, swept through communities like yours and mine. These are our neighbors, our friends, and our family.”
The Legislature, which reconvened Jan. 11, will discuss aid to help home and business owners rebuild in the area devastated by the Marshall Fire using methods that are both more fire resilient and energy efficient.
House Bill 22-1011 introduced on Jan. 12 by four state lawmakers
“The legislative session just started last week. So far, nothing has been proposed to backfill property taxes for cities or counties,” said Michael Parker, an S&P Global Ratings associate director for U.S. Public Finance. “The state does cover individual property owner’s property taxes for structures destroyed, but residents are responsible for the taxes on the value of land.”
The cities and counties are backfilled for property taxes in that secondary way, Parker said.
“A lot of municipalities in Colorado are not largely reliant on property taxes; most depend more on revenue from sales and use taxes, but we are also looking at the impact of commercial damage and if businesses don’t reopen,” Parker said.
In Superior and Louisville sales and use tax provides over 40% of tax revenue, and that is not uncommon in Colorado, Parker said.
Unlike California and Utah, Colorado has no state
Efforts failed because building industry advocates wanted codes to be determined locally. Boulder and Colorado Springs do have building codes related to wildfire resilience, according to CPR News.
As Western states have been pummeled by monumental fire after fire over the past decade, experts in disciplines as broad as finance, insurance, forestry, environmental and the building industry have wrestled with how to prevent further destruction. And have questioned why the destruction has become so much worse.
Though the Western wilderness has gone through periods of burn and regrow, historically there weren’t houses and businesses located in what climate scientists call the wildland-urban interface, said Suzanne Finnegan, chief credit officer for bond insurer Build America Mutual.
“We have seen populations in both California and Colorado push into previously wild areas,” Finnegan said. “One of the things we are seeing is communities looking at ways to craft building codes to reduce the impact of wildfires in communities.”
Homeowners living in wildland-urban interface areas can have their homes
While policy makers have a long way to go to figure out how to prevent devastating forest fires, the financial industry has come a long way in figuring out how to weigh the risk for bondholders.
“We are seeing the tools becoming more refined and useful,” Finnegan said.
One of those tools is risQ, the first subscription service to map natural hazards and climate change risk to municipal issuers, Finnegan said. There is a lot of data from the federal government that is based on county or Zip code or census tract, but those don’t always line up with the boundaries of a school district or special district, she said.
The Federal Emergency Management Agency created a
“So, you could look at a county in Missouri vs. other counties nationally against a host of events like inland flooding, storm surge or wildfire,” she said. “It also gives you a projected average of annual loss estimates.”
BAM reviews the average annual loss estimates and incorporates it into its data. For instance, if the annual loss estimate is $1 million, that could equate to a $30 million loss over a 30-year maturity. BAM would then compare the potential for a $30 million loss to an issuer’s tax base, she said.
“We have incorporated those tools in how we determine if we are comfortable with the level of risk, because we perceive only a small part of the tax base is vulnerable. Or we might go forward and limit risk by insuring part of a bond sale. Or we might decide the risk is too great for us to understand.”
The assessed value for Boulder County is $85 billion, so the estimated $513 million in damage is not an overwhelming impact, Parker said.
The majority of the homes destroyed in the fires likely fall in Boulder Valley School District, Parker said, and the schools are backfilled by the state for property losses. Parker cited Weld County as an example of the state stepping in to help. In Weld County, Parker said, "they have a large oil and gas component and the state has regularly made them whole when significant swings in assessed value occur as a result of ups and downs in the industry."
S&P has not taken ratings actions on any of the credits it rates in the area affected by the fires, he said. Louisville, a city of 21,000, has a AA-plus rating on long-term debt and an A-minus on its open space sales and use tax revenue bonds with a stable outlook. Boulder County has an AAA long-term rating with a stable outlook.
While the rating agencies typically look out two years with their outlook, bond insurers could be weighing the risk on deal with a 30-year maturity.
“If the risks change, we can’t get out of the risk,” Finnegan said. “It’s so much different from property and casualty insurance, because they reevaluate the risk every year, and we don’t have that luxury.”
Among the considerations BAM weighs are efforts that the municipality or some level of government has done to lessen the impact of natural disasters.
“We have seen in California and the Sacramento area a lot of levees and dams put in place to help alleviate flooding risk,” Finnegan said.
