By Fred Palm, special to Charleston Currents   |  A major transition just began in public finance now that two bond rating agencies, Moody’s and Standard and Poor’s, the say they will add the risk of flooding to  flood risk to financial risk when they evaluate the total risk.  The addition is expected to have a major impact on associated bond interest rates that state and local governments will pay to borrow up front for their major building programs.

Why the change? The rating agencies are concerned lenders can lose all their investments should flooding impacts become extreme. To date, only financial risk was measured. This new metric can be expected to impact the state and local public finance decisions of lenders and borrowers.

When capital investment decision-makers start assessing longer-term risk, the risk inherent in the overall flood adaption plans themselves becomes a consideration of how effective a flood plan will be in addressing the potential flooding conditions —  not just the risk of failing to make the coupon payment associated with a project or general obligation bond.