Fire-decimated Oregon town is on Moody's review for downgrade
Talent, Oregon, a small town decimated by one of a dozen fires that have burned close to 1 million acres in the state, had its rating placed on review for downgrade by Moody’s Investors Service.
The review for downgrade applies to $2.7 million in 2013B certificates of participation that Moody’s rates. Talent, which has about 6,500 residents, holds an A2 issuer rating and an A2 rating from Moody's on the COPs, which are backed by the city’s full faith and credit and are not subject to appropriation.
The Almeda Fire burned a path of destruction in southern Oregon from Ashland to Medford destroying nearly 3,000 homes. The towns of Talent and Phoenix in Jackson County between the two larger cities sustained the most damage. The fire destroyed 800 structures in Talent and caused two deaths.
Moody’s, which classified the event as a natural and man-made hazard under its ESG framework, cited damage to Talent's neighborhoods and infrastructure for the downgrade review.
The fire began on Sept. 8 and was contained 10 days later.
Fire officials believe the Almeda Fire had two points of origin, one in Ashland and the other in Phoenix. Both are being investigated as arson.
Michael Jarrod Bakkela has been indicted on charges alleging that he started the Phoenix origin point.
He was indicted Sept. 15 on two counts of arson in the first degree, 15 counts of criminal mischief in the first degree, 14 counts of recklessly endangering another person, and a single count of unlawful possession of methamphetamine, according to a Sept. 15 release from Jackson County District Attorney Beth Heckert. He is being held on $5 million bail.
“As of this date, damage assessments are ongoing, however the city reports several hundred residential and commercial structures were damaged, including up to 800 dwelling units,” Moody’s wrote. “The fires also appeared to substantially damage commercial areas of the town.”
Power and water services were shut off for several days, but Moody’s said that most of the undamaged portions of the city “can be occupied at this point and utility services are primarily restored, with some spots still under evacuation orders.”
The downgrade review "will assess the potential impact to the city's credit profile, including to the city's tax base, finances and leverage,” Moody’s analysts wrote. “While emergency funding and insurance typically provide support for local governments affected by disasters, there may be additional risk in the city's credit profile due to the small size of operations, the extensive damage to commercial areas, and revenue sourced from somewhat more volatile sources than is typical for Oregon cities.”
While most Oregon cities are primarily funded through property taxes, Talent receives less than one-third of recurring revenue from this source, said Moody's analyst Sam Feldman-Crough.
"Most of the city’s remaining funding comes from charges for services, a public safety surcharge on utility bills, and taxes on utilities, all of which are driven to some extent by local economic activity," Feldman-Crough said.
The city services are primarily public safety, streets, parks, community development and administration, Moody’s wrote. The city also provides water services to the city through a self-supporting enterprise.
Oregon Gov. Kate Brown toured the areas damaged by the Almeda fire Monday with Rep. Pam Marsh, D-Jackson County, and Adjutant General Michael Stencel and Oregon Officer of Emergency Management Director Andrew Phelp.
Brown and the other state leaders met with Jackson County firefighters and police officers, as well as families at an evacuation site and school officials, Brown said.
“From seeing it firsthand and talking with evacuees, the losses in Medford, Ashland, Phoenix, and Talent are hard to comprehend,” Brown said. “My priority is to secure the resources necessary to help rebuild an even stronger southern Oregon.”
On Sunday, Brown vetoed several line-item appropriations in order to preserve funding for the state’s ongoing emergency and maintain a balanced budget. Combined, the vetoes will preserve over $65 million, improving the state’s ending balance to total $164.3 million in general funds and $16.7 million in lottery funds. The governor also requested that legislators reserve at least $150 million in the state’s emergency fund for upcoming requests relating to the fires.
She had notified the Legislature several days before that she would be taking that step as prescribed in the Oregon constitution.
"Until we understand the total impacts and costs, we must help Oregonians while being judicious with our funds," Brown said. "In light of the current wildfires state of emergency, which occurred after the adjournment of the Second Special Session, I am exercising my veto authority to ensure that state agencies fighting wildfires have necessary resources for responding to this emergency."
S&P Global placed Phoenix and Phoenix-Talent School District No. 1 on CreditWatch with negative implications Wednesday.