National headlines and sticker-shock have likely clued most people in this country into the problems that climate change creates for property insurance. The contrast of sky-rocketing insurance costs and the migration trends of people into states more prone to natural disasters is at its clearest in the state of Florida. What many miss is that this is being propped up by the issuance of municipal bonds. Without access to the public finance marketplace, living in some parts of Florida would not be possible for most.
The intent of municipal bonds, as offered by the IRS, is that they serve a public purpose. The exemption from taxes is extremely powerful and as such, the legal definition of public purpose has been stretched in many different ways over the decades by those looking to wield it.
In Florida, the public property insurance system has lately come to rely the municipal bond market to sustain itself. This approach subsidizes living costs for residents but fails to address underlying structural issues. The viability of property insurance is most definitely a public purpose but at what point does the issuance of bonds to shore up this schematic become bad policy?
A recent report from the Environmental Defense Fund, the Florida Policy Project and Appalachian State University put a well placed magnifying glass onto the problems at hand and prompted a follow-up from our Brief six weeks ago.