The drought meant that Clyde sold millions of gallons less water, even as it imported more of it from neighboring Abilene, at about $1,200 per day. Worse, as the ground dried, it cracked, destroying a sewer main and bursting another quarter-million dollar hole in the town budget. Within days of Clyde missing its payments, rating agency Standard & Poor\u2019s slashed the city\u2019s bond ratings, which limited its ability to borrow more money. Within weeks, officials had hiked taxes and water rates to help staunch the financial bleeding.<\/p>\n
\u201cThere\u2019s more to a drought than just the cost of water,\u201d said Rodger Brown, who was mayor at the time and is now interim city manager. \u201cIt tanks your credibility.\u201d<\/p>\n
Drought, of course, isn\u2019t the only climate-driven disaster hitting places like Clyde. Hurricanes, floods, and fires are bankrupting cities across America<\/a>. After flames ripped through Paradise, California, in 2018, the town\u2019s redevelopment agency defaulted on some of its obligations<\/a>. Naples, Florida, resorted to selling $11 million in bonds to rebuild its pier<\/a> after Hurricane Ian in 2022. Earlier this year, the Los Angeles Department of Water and Power had a harder time raising money after massive fires<\/a> swept the city. Kerr County, Texas, is in the midst of raising taxes after devastating floods in July.\u00a0<\/p>\n Each episode underscores how climate shocks once seen as exceptional are now straining local budgets. But drought may be the most insidious of these threats. Compared to other types of disasters, it often hits everyone in a community, affects large areas, and can last months, if not years. There are also fewer defenses and relatively limited government assistance. Experts worry that drought could ultimately prove an enormous risk to the $4 trillion municipal bond market that underwrites everything from roads and schools to the water running through millions of taps.<\/p>\n \u201cI personally think this is a dark horse in the conversation right now,\u201d said Evan Kodra, the head of climate research for the financial data company Intercontinental Exchange, or ICE. \u201cIt should be a bigger deal.\u201d<\/p>\n This year alone has seen droughts in at least 43 states<\/a>, from Vermont to California, affecting 125 million people. And ICE projects that more of the currently outstanding municipal debt will be located in areas prone to drought by 2040 than hurricanes, floods, and wildfires combined. The financial effects of prolonged water woes can mount in ways not seen in one-off events, said Jeremy Porter, the chief economist at First Street Foundation, a nonprofit climate research firm.\u00a0\u00a0<\/p>\n \u201cDrought is one of those things, if there is an impact, there\u2019s a step-function impact,\u201d he said. \u201cYou just don\u2019t have the capacity to cover the risk.\u201d\u00a0<\/p>\n Projected severe drought in 2055<\/p>\n Average weeks per year in severe drought conditions<\/p>\n 30-year change in drought risk<\/p>\n Increase in severe drought weeks from current conditions to 2055<\/p>\n <\/p>\n Droughts are particularly difficult for cities to guard against. While building codes and insurance discounts can encourage homeowners to raise their houses, use wind-resistant shingles, or clear brush to slow fires, the options for making sure people have enough water are far more limited without curbing development<\/a>.\u00a0<\/p>\n Also unlike with its headline-grabbing cousins, drought has a much weaker federal safety net when something does go wrong. The Department of Agriculture offers some aid to farmers<\/a>, but there\u2019s little funding for individuals or municipalities. The Federal Emergency Management Agency hasn\u2019t issued a drought-related emergency or disaster declaration <\/a>in the United States since 1993, despite states requesting aid<\/a>. \u201cThere is no adapting to drought,\u201d said Porter. \u201cThe federal government is probably not going to come in.\u201d\u00a0<\/p>\n As the planet warms, the dry conditions that sent Clyde into the financial abyss are only set to become more frequent and more intense. Intercontinental Exchange researchers found that even in a \u201cbest-case\u201d climate scenario<\/a>, drought, heat stress, and water stress will place billions of dollars of municipal bonds at risk by 2040. Under a worst-case situation, that number could reach hundreds of billions. While Clyde\u2019s default was relatively tiny, municipal debt is the bedrock of everything from hedge funds to retirement accounts, making a string of such events potentially catastrophic for the economy.<\/p>\n But well before dramatic rolling defaults, the financial pressures of drought will likely alter daily life in many regions. That\u2019s already the reality for one community in Arizona, where the rush for water has turned into a years-long financial and political standoff.<\/p>\n Rio Verde Foothills lies on the outskirts of Scottsdale. Residents there have been trucking water<\/a> in from its larger neighbor ever since the unincorporated, \u201cwildcat\u201d development was founded in the early 2000s. The arrangement worked well until 2021, when a severe drought gripped the area, and Scottsdale decided it could no longer spare the dwindling resource. Cut-off residents of Rio Verde scrambled and eventually signed a $12 million contract<\/a> with the state\u2019s largest private water company, Epcor Utilities, to build a permanent supply line.<\/p>\n Three years later, though, the feud continues. Scottsdale agreed to keep providing water through the end of this year while Epcor Utilities built new infrastructure. But construction is months behind schedule and Scottsdale is sticking to its deadline \u2014 leaving the foothills once again facing a cutoff.<\/a> (Epcor remains confident this won\u2019t happen.)\u00a0<\/p>\n Even when the new line is connected, Rio Verde Foothills residents could see their water bills double or triple<\/a>. Hikes like that are going to be a far wider concern across the West than outright disconnection, says Sara Fletcher, an environmental engineer at Stanford University who works on water scarcity issues. \u201cWater prices are going up, and up, and up,\u201d she said. \u201cThey are going to go up much faster than inflation for the past decade.\u201d\u00a0<\/p>\n The irony of drought is that as people conserve water to combat it, there is less money for the utility, whose costs remain relatively fixed. That results in \u201cdrought surcharges,\u201d or other fees, for customers. It\u2019s a cycle that was on full display in Clyde.\u00a0<\/p>\n By August 2023, the wave of aridity that hit West Texas had stretched for months, and officials in Clyde declared a stage 2 water emergency, which targets a 20 percent decrease in demand. By the following year they raised it to stage 3, or a 30 percent decline \u2014 one step below mandatory rationing. The measures worked, but at a cost. \u201cWater sales are one of the main things that a city, almost any city, has,\u201d said Brown. \u201cThat\u2019s big for a city\u2019s revenue generation.\u201d<\/p>\n According to Clyde\u2019s financial statements<\/a>, it sold 7 million gallons less in 2023 than the year prior. It also had to import water from nearby Abilene at a premium of around $3 per thousand gallons. While Brown didn\u2019t know exactly how much Clyde bought, he said it wasn\u2019t as much as in some previous droughts but still significant. The bigger blow came when the parched ground split, shifted, and ruptured a major sewer line. The roughly $250,000 repair bill turned the cracks in the town\u2019s finances into crevasses.<\/p>\n \u201cYou can\u2019t have people out here without the services. So we had to fix it,\u201d he said. These new liabilities and dwindling income came on top of millions of dollars in debt that Clyde had amassed over the years, despite having kept taxes or utility prices relatively flat. It created what Brown called a \u201cperfect storm.\u201d<\/p>\n On August 1, 2024, the city missed two bond payments \u2014 one for $354,325, another for $308,400 \u2014 and filed a claim on its bond insurance to cover them. By the end of the year Clyde had failed to meet a total of $1.4 million in liabilities. Standard & Poor\u2019s slashed the ratings of the bonds with missed payments from A- to D, and the city\u2019s creditworthiness to B, moves that will raise future borrowing costs for the city.\u00a0<\/p>\n Current municipal bond debt by 2040 climate risk category, billions of dollars<\/p>\n <\/p>\n While drought wasn\u2019t the whole story, Brown called it a \u201csignificant reason\u201d for Clyde\u2019s woes. Whatever the cause, the fallout rippled quickly. The city council raised property taxes by 10 percent and tacked a $35 surcharge onto monthly utility bills. \u201cWe have people in this very room who have to decide already, do I buy medicine [or] do I buy groceries?\u201d pleaded one person at a city council hearing<\/a>. \u201cThis is reality in Clyde. You can\u2019t raise their typical water bills any further.\u201d<\/p>\n So far residents have absorbed the added costs, which has allowed the city to continue to operate. But the spiral from expensive, inaccessible, or nonexistent water could have been much worse. High bills can lead to compromises in daily life, whether that be letting parks wither or skipping showers. Over time, those inconveniences could make a town a less desirable place to live, which, in turn, might result in lower property values, a dwindling tax base, and, consequently, more financial troubles.<\/p>\n \u201cIf you don\u2019t have water, if you don\u2019t have a functioning city, there is a vicious cycle dynamic that could come into play,\u201d said Kodra at Intercontinental Exchange. \u201cOnce your property tax base is decently lower than it was, then it\u2019s harder to borrow money to dig out of that hole.\u201d<\/p>\n Read Next<\/p>\n <\/p>\n <\/a><\/p>\n Why it\u2019s more expensive for Black towns to borrow money<\/a><\/p>\n First Street Foundation estimates that 11.1 million<\/a> Americans are expected to move due to strained water resources by 2055. While it didn\u2019t isolate drought specifically, the analysis also found that property values are slated to drop by $1.47 trillion over that same time period due to climate risks.\u00a0<\/p>\n \u201cWe haven\u2019t hit the point yet where people can\u2019t get access to water,\u201d said Porter. But there are inklings of that future, especially in the West<\/a>. In Arizona, for example, water supply requirements for new developments are already beginning to halt some new construction.<\/a>. According to Fletcher, \u201cthe fraction of the population that will face unaffordable water in the future is likely to increase unless we do something major.\u201d<\/p>\n First Street also provided Grist with county-level data showing how the risk of prolonged water scarcity will change over the next 30 years. Of the 10 counties with the largest jump over that timeframe, seven are in Texas and three are in Florida. By 2055, more than 20 counties across the West will have a one in five chance of being in severe drought for at least 11 months out of the year. Over 500 counties could see six or more months. According to Fletcher, \u201cthe fraction of the population that will face unaffordable water in the future is likely to increase unless we do something major.\u201d<\/p>\n Solutions won\u2019t be easy to come by, and certainly won\u2019t be painless. One logical conclusion might be that municipalities that are at risk of climate impacts \u2014 like Clyde with drought or Tampa Bay with hurricanes \u2014 should simply pay more for their debt. In most sectors, risk and interest rates traditionally correspond but, according to multiple studies, that\u2019s not the case with municipal bonds.\u00a0<\/p>\n \u201cClimate poses a systemic credit risk to the municipal industry, of which it has never experienced,\u201d said Thomas Doe, founder of Municipal Market Analytics. \u201c[But] the marketplace is not pricing climate risk into bonds.\u201d<\/p>\n The conundrum arises from the fact that people primarily buy municipal bonds to receive tax-exempt dividends. Demand, therefore, isn\u2019t particularly sensitive to the price of the bond, but rather the risk of default, which remains extremely low. Another major bulwark against climate pricing has been the federal government, which pumps billions of disaster aid into communities across the country \u2014 money that would have otherwise come out of state or municipal budgets.\u00a0<\/p>\n \u201cBonds initially dip in price on the news of the event. Then they end up recovering because the federal government essentially rebuilds,\u201d explained Doe. That support is in jeopardy with President Donald Trump\u2019s deep cuts to government spending, and that could eventually trickle into the municipal market. In the absence of aid, Doe says, bonds could start being priced in accordance with the risk.<\/p>\n Not all climate debt, however, is bad.\u00a0<\/p>\n This fall Norfolk, Virginia, is planning to break ground on a $2.6 billion flood protection system, featuring a nearly 9-mile long seawall. The city is responsible for roughly $1 billion of that cost and is expected to issue new debt to help cover it. But Doe says that this type of climate-adaptation debt is generally considered good and should be encouraged, explaining that \u201cif it\u2019s proactive, credit ratings look favorably.\u201d\u00a0<\/p>\n While you can\u2019t build a wall against drought, the same principle applies for the admittedly limited tools that are available. Cities could, for instance, spend money making their water system more efficient, or building gray water recycling projects. Green infrastructure can also help keep rain from running off. More drastic steps might involve<\/a> relocating people or repurposing especially dry land for other uses, such as clean energy.<\/p>\n Although Clyde isn\u2019t yet at a point where it\u2019s climate-proofing its infrastructure, Lake Clyde is spilling over this year. That has provided the city a respite during which it can financially heal. Brown says the city has repaid its bond insurer, is back on track with debt payments, and is slowly rebuilding its emergency funds. The hope is that higher prices making the city\u2019s recovery possible will mean less pain the next time the water runs low.<\/p>\n \u201cWe haven\u2019t dug completely out,\u201d said Brown. \u201cBut we\u2019re still digging.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The city of Clyde sits about two hours west of Fort Worth on the plains of north Texas.…\n","protected":false},"author":2,"featured_media":267145,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[192,79],"class_list":{"0":"post-267144","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-environment","8":"tag-environment","9":"tag-science"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/267144","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=267144"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/267144\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/267145"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=267144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=267144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=267144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"U.S.](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/11\/drought-weeks-map.png\")
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City of Clyde, Texas<\/p>\n![\"Collage](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/11\/0818_Bonds.jpg\")
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