As officials in Vermont assess damage from recent floods on a scale not seen since Hurricane Irene battered the state in 2011, they're taking stock for the first time of the effect climate-mitigation efforts may have had.
Flooding in Vermont triggered by several days of heavy rainfall last week caused "catastrophic damage" to infrastructure statewide, Gov. Phil Scott said on Thursday as he signed an order that waived certain regulations and made available emergency funding for repairs that would allow state agencies to act "as quickly as this response requires."
It was the worst natural disaster since Irene's storm surges swept away buildings and damaged roads, bridges, dams, and other infrastructure statewide, causing around $750 million of damages. It also fomented changes in regulation and capital spending on climate mitigation with the hopes of curtailing damage in the future.
While local officials in hard-hit areas paint a picture of a wide array of infrastructure damage, including significant damages to roads, culverts and some bridges, initial reports from some state agencies, including the state's Agency of Transportation, cited lower levels of damage to some surveyed infrastructure this time around.
While it's still too early for a full assessment, Vermont made changes after Irene that may have helped protect its infrastructure as well as its finances against damage wrought by climate-related events, said Nora Wittstruck, S&P Global analyst.
For several years, the state has focused on climate adaptation and mitigation, including drafting a Climate Action Plan, providing incentives for communities, and changing standards for road and bridge construction, Wittstruck said.
"Those are the types of things that we would want them to be doing within their capital plan, but also within their financial forecasts as well," she said. "We definitely feel like credit quality can be stabilized when local governments are entering into these types of initiatives."
S&P on Monday said in a report "it does not expect an immediate negative credit impact" from the floods on the state' credit.
Vermont could lean on strong reserves and financial liquidity, as well as access to resources to help offset damage costs, including federal funds, which differed from other similar cases where climate-events did affect credit, Wittstruck said. She noted that after
Vermont has $613 million of outstanding general obligation debt and is rated Aa1 by Moody's, AA+ by S&P, and AA+ by Fitch, all with stable outlooks.
Michael D'Arcy, Fitch Ratings' Vermont analyst, echoed S&P's analysis, saying the floods wouldn't "move the needle much" on the state's credit due in part to strong reserves funded at the statutory maximum and unrestricted cash balance of more than $2.3 billion.
Following Pres. Joe Biden's approval of a declaration for the state, D'Arcy also said he expected upwards of 80% of damages to be covered by FEMA funds.
Joe Kane, a fellow at Brookings, said Vermont's floods are a call to action "similar to what we have seen in other places nationally over the last few years and months.
"The reality is that sudden fluctuations in our natural environment are heightening climate risks, while our built environment is exacerbating such risks," Kane said, adding that a more targeted, proactive investment strategy aimed at "forward-looking technologies and designs," funded both privately and publicly, would be a key component in the future.
Michael Gaughan, executive director of the Vermont Bond Bank, said it was still too early to get a full sense of the effects of climate mitigation efforts on damages, but that Vermont had been and would continue to be "focused" on capital planning around climate adaptation, including efforts to incorporating climate adaptation into scoring for capital projects, technical assistance for investors, and integrating related risks more accurately into portfolio management and risk assessment.
"Unfortunately, our work is in the early stages and we are finding out in real time those communities that are most vulnerable with the recent flooding," he said. "Going forward, we'll be looking at things like their hazard mitigation plans for those communities that have the most flooding risk after they recover from this current storm."
As future threats rise, bond banks will play an important role nationally going forward, Gaughan added, by offering "a real advantage versus a community that is out there on their own."
"When facing investors, you have the diversity of the state, you have the credit enhancement of the state, that all helped to lower the costs of borrowing for those communities that need to spend on capital to become more resilient and to accommodate better adaptation measures," he added.
