Iowa's legislature is considering two bills to expand disaster assistance to local communities, including a revolving loan fund that may be funded with bonds.
The move follows above-average losses from natural disasters in recent years and mounting evidence that climate change is creating
"We have experienced, last year, severe flooding up in northwest Iowa and then also, we've had a number of tornadoes that hit last year, as well, down in southwest Iowa," Jamie Cashman, government relations manager for the Iowa State Association of Counties, told The Bond Buyer. "So any additional tools that we can have to mitigate that, we're all for it."
According to risk consulting firm Aon's Oct. 2024
Aon predicted that losses from Hurricane Milton and other extreme weather events would drive the year's total annual insured losses to above $125 billion, the 2023 total.
As of October, the U.S. had seen 19 billion-dollar loss events in 2024, approaching 2023's record of 21.
The firm noted "incredibly active" severe convective storm activity, especially in the Midwest, where the largest of the SCS events took place. In July, a derecho gave rise to 100-plus-mph wind speeds and a tornado outbreak in the Chicago area.
Iowa endured strong tornadoes and floods last year, Gov. Kim Reynolds said i
"In just two months, Iowa was granted three presidential disaster declarations," Reynolds said. "Now, we must follow through in our commitment to continue to provide support for those who desperately need it, to protect Iowans working with insurance to repair or rebuild their homes, and [to] improve our systems to respond even faster the next time disaster strikes."
Iowa is rated triple-A with a stable outlook by Fitch Ratings, Moody's Ratings and S&P Global Ratings.
Build America Mutual Chief Credit Officer Suzanne Finnegan said flooding and tornadoes are the top threats across the Midwest, and the bond insurer's analysis involves quantitative measures derived from third-party risk data.
"Tornadoes are somewhat harder to predict, but we're looking to understand the probability of an event and the range of outcomes in terms of property damage," she said. "Then you bore down and look specifically at the individual debt structure: what are the pledged revenues, and how are they expected to perform."
Finnegan advised paying particular attention to utility and lease-backed debt, because localized damage to a specific facility — such as a water treatment plant or school — could interrupt payments.
"BAM insurance guarantees those timely payments, and that [stability-focused] mentality also drives our approach to analyzing and monitoring extreme weather events," she said.
Finnegan added that most Midwest issuers have strong credit quality and that insulates them somewhat from the impact of extreme weather events.
The program includes a revolving loan fund, a separate, dedicated fund administered by the Department of Homeland Security and Emergency Management in consultation with the Iowa Finance Authority.
The IFA supports HSB 246, Iowa Economic Development Authority communications lead Kanan Kappelman said. The IFA's previous disaster relief experience includes administering the Disaster Recovery Housing Assistance program after the 2024 floods, Kappelman said.
Mason Mauro, Reynolds' deputy communications director, said the revolving loan fund would be primarily funded with $17.4 million awarded to Iowa by the Federal Emergency Management Agency through the Safeguarding Tomorrow Revolving Loan Fund Program, or STORM.
The bill says the IFA may issue tax-exempt bonds and notes to support the revolving loan fund and to provide the state matching funds required under the federal Robert T. Stafford Disaster Relief and Emergency Assistance Act.
The bonds would be payable from and secured by income derived from projects financed by the bonds; income derived from other designated projects; amounts on deposit in the fund; amounts payable to the authority by loan recipients; and any other accounts established by the authority in connection with the program.
The revolving loan fund would include money appropriated by the Iowa General Assembly, money received from FEMA through the STORM program, and money received as repayment of loan principal and interest from loans through the fund. Money on deposit in the fund will be invested by the state treasurer, with the income from investments then deposited in the fund.
Cashman said that if either the House or Senate bill were to pass, the legislation "would provide some really solid additional tools to counties." He said ISAC has lobbied in favor of the legislation but said they are not seeking any changes to it.
There is a
FEMA Region 7 spokespeople referred questions to FEMA headquarters, which did not respond by press time.
Reynolds is a Republican as are two-thirds of Iowa state lawmakers.
"We won't speculate on any future changes to funding through FEMA," Mauro said. He noted that $17.4 million in funding from FEMA has already been awarded to the state and added, "This legislation authorizes state agencies to stand up the revolving loan program using awarded funds to issue loans to government jurisdictions."
Finnegan of BAM said many municipal balance sheets have come through disasters strengthened due to federal assistance.
"You can't necessarily rely that FEMA or other grants will continue to be as generous going forward — knowing the community's underlying economic drivers is key," she said.
Cashman questioned whether Trump's review would result in changes to FEMA that mean "resources taken away" from states.
"Certainly, additional resources are needed on the federal level," he said. "So to get rid of FEMA I think would be a very big mistake. Can FEMA be updated or made more efficient? Yes, I think there's room for improvement. But to get rid of it… would be a mistake."
The legislation gives local and state governments more tools for disaster preparedness and emergency response, said Colleen Fowle, water program manager for the nonprofit Iowa Environmental Council.
"As an organization, we are encouraged by the policy set forth in this bill that aims to assist taxpayers in recovering from losses due to natural hazards," she said. "We appreciate that this bill provides a program to support homeowners and renters who may have otherwise fallen through the cracks of other assistance programs."
Fowle noted that research has shown average annual precipitation in Iowa rising over the past few decades, with the amount of rainfall per event up substantially. More dramatic fluctuations in weather, with dry stretches followed by intense rain, are more likely to lead to flooding events.
The University of Iowa's Iowa Flood Center, the Environmental Protection Agency and other organizations have published peer-reviewed work that predicts an increase in flood frequency in Iowa, she said.
"In fact, 70 of the 99 counties in Iowa have been subject to disaster declarations related to flooding in the past 5 years, and 40 of the counties experienced more than one disaster," she said.
The IEC advocates incorporating green infrastructure across the state to brace for the increasing frequency of natural disasters, Fowle said. It's important to pair such infrastructure with disaster preparedness and emergency response plans "rather than waiting for another disaster to occur," she said.
Mauro, Reynolds' spokesman, said last year was exceptional, with 2024 setting a single-year record for the most tornadoes ever recorded in Iowa. The "devastating" floods last June "were considered a 1,000-year rainfall event with new record crests on 22 separate river gauges across Northwest Iowa," he said.
Asked whether ISAC's members have seen natural disaster costs increase throughout recent years, Cashman said, "Without a doubt. Unfortunately, it's every year."
The state is sandwiched between the Missouri River and the Mississippi River. Iowans have also seen historic flooding in the Cedar River valley. Cashman said "we are catching the brunt of a lot of natural disasters" and it's not just a matter of one bad year.
"It seems like we're having 500-year floods every five years," he said.
