Cumberland Advisors is in the City of Sarasota. In preparation for the storm, which was initially expected to make landfall in the Tampa area, we sent some employees to our disaster recovery site in Vineland, NJ, where Cumberland’s headquarters was originally located. We closed our Sarasota office Monday night through Friday and encouraged employees to heed local evacuation orders. Our remote operations have been robust since our shift to fully remote work with the onset of Covid shutdowns. Thankfully, all our staff is accounted for and safe. Our thoughts and prayers go out to those who experienced the brunt of Ian and lost property and possibly life.
A massive and deadly surge of water and catastrophic winds that first hit land just west of Ft. Myers are poised to make Ian one of the costliest storms in US history.
Damages – $67 billion Thursday morning estimate. Katrina was over $100 billion.
People without power – at the height over 2.5 million, and more recently 1.9 million (Florida population is 21 million)
Death toll – unknown; could be in the hundreds based on 911 calls requesting help, or more as news unfolds.
Yesterday CNN reported the Coast Guard and National Guard were “pulling people off of roofs in Fort Myers” with aircraft Thursday morning, Coast Guard Rear Adm. Brendan McPherson told CNN, adding that air crews have rescued at least 13 people between Ft. Myers and St. Petersburg since Wednesday. Officials are also especially focused on getting search teams into hard-hit Lee County amid concerns that many still need rescuing there. Today, we see reports of intensified rescue efforts and increasing death toll.
President Biden approved Florida Gov. DeSantis’s request for a major disaster declaration. The declaration authorizes FEMA to provide individual assistance for survivors in nine counties: Charlotte, Collier, DeSoto, Hardee, Hillsborough, Lee, Manatee, Pinellas, and Sarasota. People who live in those counties can apply for federal assistance at https://www.disasterassistance.gov or by calling 800-621-FEMA (3362). FEMA will also provide 100% federal funding for debris removal and emergency, life-saving measures for 30 days in those counties.
The federal government coordinated and prepositioned supplies and more than 1,300 responders ahead of Ian’s landfall to ensure that resources could get where they need to be as quickly as possible. Federal responders are working alongside nearly 5,000 Florida National Guard members and other state response and emergency managers.
FEMA teams have already delivered 1.1 million meals and 1.5 million liters of water to areas of Florida as of midday Sept. 29. Other water and food supplies will be delivered pending safe conditions post-storm. FEMA is securing an additional 6 million liters of water and 5.5 million meals. The U.S. Coast Guard is using helicopters and fixed-wing aircraft for immediate search and rescue response. The Department of Defense has more than 1,200 highwater vehicles and 25 watercraft supporting search and rescue operations.
Thirty thousand out-of-state utility workers came to the area to help with recovery efforts.
The State of Florida has daily releases with similar information to the above few paragraphs, and more. https://www.flgov.com/2022/09/30/florida-response-to-hurricane-ian-continues/
Regarding municipal credit quality, although there is devastating damage to homes, utilities, businesses, and lives, the rebuilding efforts, with federal, insurance, individual, and company dollars, will boost economic activity and municipal revenues. Thus the immediate-to-midrange effect on the credit quality of bonds issued by the affected municipalities may be muted or even beneficial for larger and diverse municipalities. Smaller communities or those with less diverse financial resources may see credit weaknesses.
Hurricanes, with their violent winds and water, reveal the vulnerability of our communities. The trend of sea level rise and longer-lingering, stronger storms causing more devastating flooding are surely on the minds of municipalities and residents as they consider rebuilding, reinforcing, and preparing for the future — or leaving an area because of the increasing risks. As we have mentioned in our series of ESG commentaries, environmental factors can influence credit quality. Sea level rise and stronger storms may be a longer-term risk to credit quality if areas are not reinforced or potential residents are fearful. Here are links to our evolving ESG discussions: ESG-Part1, October 14 Conference Information and ESG-Part 2 Jackson, Mississippi.
Insurance companies also consider the size and scope of natural disasters and the damage they do as they price policies — or consider whether to even provide coverage to certain properties and communities. Already, the State of Florida has a state-funded reinsurance program that attracts insurers that would otherwise not provide coverage in the state. The Florida Hurricane Catastrophe Fund as well as the Citizens Property and Insurance Corporation, which provides residual insurance to property owners otherwise able to procure insurance, will be the topic of a future commentary.
At Cumberland we do own southwestern Florida bonds, most of which have AA ratings or are insured or are pre-refunded. Many municipalities have amassed healthy reserves, have insurance and will receive FEMA funds. Many muni revenue bonds, such as water and sewer bonds, are structured to have a debt service reserve equal to a full year of debt service. We will be evaluating developments and making buy and sell decisions based on our analysis.
Patricia Healy, CFA
Senior Vice President of Research & Portfolio Manager
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