Yet Another Trillion-Dollar Unfunded Liability, California Wildfires Edition

On Friday, an entire California town burned down. Paridise, CA has (had) 27,000 residents and over 1,000 buildings, and now it’s pretty much destroyed.

That fire and several others are still expanding across the state, threatening tens of thousands of homes. The sets of the TV show WestWorld are gone. Malibu has been evacuated. And dry, windy conditions persist, so the story is nowhere near over.

If this sounds familiar, it’s because massive, sometimes uncontrollable California wildfires are now an annual occurrence, due in part to gradual warming and persistent drought which combine to suck the moisture out of vegetation and turn the landscape into a tinderbox. Here’s a chart showing the recent take-off in the number of fires reported in the state (2013 was most recent year I could find, but the trend is clear – and since then the number of fires has apparently soared).

California wildfires

The reason this rates coverage in a financial blog is population. We’ve been moving millions of people into a place that has always had and always will have wildfires. California’s population is now about four times what it was in 1950, and the influx continues.

California population California wildfires

Fire is a crucial part of that and many other ecosystems, clearing out dead plants to make room for living. But add 40 million humans along with their buildings and vehicles, and a healthy, resilient semi-desert becomes a hellscape.

A very expensive hellscape. What does it cost to rebuild a town of 27,000 people from scratch? A back-of-the-envelope calculation (1,000 buildings at $100,000 a pop, 15,000 cars at $25,000 per, $10,000 per person for roads, sewers, landscaping, etc) yields several hundred million dollars. For one little town.

Is California budgeting for this? Are the insurance companies? Is Washington? All probably say they are, but only the insurance companies actually are – and even they are probably under-reserved for the past few years’ natural disasters.

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James Hunter 3 months ago Member's comment

These wildfires are horrible, and the economic toll is unimaginable. But I'm ashamed to say that what struck me most from your article was that the #Westworld sets were destroyed! Oh no, say it ain't so!

Gary Anderson 3 months ago Contributor's comment

At least the author acknowledges that California fires are nothing compared to a hurricane like Katrina and multiple hurricanes.

Bill Johnson 3 months ago Member's comment

Gary, I don't follow your point. What do you mean "at least?" Yes, the economic cost of major storms can be far worse. But a fire can still be catastrophic (not to mentioned deadly). Especially to someone living at ground zero.

Gary Anderson 3 months ago Contributor's comment

Of course, Bill. Fires are also terrifying. I have been on the edge of two major fires. My point is that the financial cost of hurricanes is greater. Trump was saying fires could be managed. Well, where is the wall in front of Miami to stop hurricanes? Trump talks about prevention. If he wants walls, build them for hurricanes.