California wildfire disaster could bring local fiscal pain for years

Years of drought conditions inside the state have left dry brush along with dead trees in which have helped fuel the fires. The drought ended in most areas of the state This kind of year after heavy rains inside the winter along with spring, although in which also produced abundant grass adding to the fire risk.

Timber production is usually significant in some of the wildfire areas, particularly Mendocino County. along with some of in which wood could end up going to rebuild homes lost to the fires.

“While we anticipate rebuilding to take place within two to four years, supplies of workers along with different resources can affect rebuilding, as resources can become scarce given the magnitude of the fires along with different recent natural disasters,” said S&P.

Despite short-term challenges inside the rebuilding process, there could be positive impacts longer term on property tax revenues for impacted communities. California cities along with counties rely on property taxes for revenue as well as sales along with different taxes.

Historically, major fires inside the state have had a favorable impact on assessed value trends since rebuilt parcels end up having “equal or higher value than the structures lost,” according to S&P.

Meantime, the ratings firm said the item is usually “currently identifying issuers with the highest risk of immediate credit deterioration, which primarily include those in which have relatively low liquidity or a weaker financial position, or those where the fire has had an acute impact on the ability to collect revenues. We are also examining past fire along with disaster scenarios to estimate the disasters’ long-term economic effect.”

the item singled out the city of Santa Rosa, saying the item is usually “one of the most damaged cities within the active fire area; the item has lost thousands of homes, several commercial properties, along with two hotels.”

Finally, the ratings agency didn’t provide an estimate on the economic damages statewide through the current California fires although pointed out the 1991 Oakland fire produced damages as high as $3.4 billion, based on 2017 dollars. The Oakland fire destroyed more than 3,000 structures along with also caused at least 25 fatalities.

“Given the current damage along with low levels of containment, we expect the current fires to exact at least similar levels of economic damage, along with likely significantly more,” S&P said.