The Threat of a Financial Distress Avalanche Grows

Anyone who knows me knows about the connection I’ve developed to the San Bernardino Mountains, located northeast of Los Angeles, these past few years. My partner moved up there from LA at the start of the pandemic, and we’ve spent a good part of each year living and working remotely from his rented cabin and various short-term rentals in the mountain communities of Crestline, Lake Arrowhead and Big Bear ever since.

After a six-week stay in the desert this winter, we planned to move into a Lake Arrowhead rental – one that we previously stayed in for several months in 2021 and were excited to return to – the first weekend of March. However, the last week of February, a rare blizzard hit the mountains, dumping about eight feet of snow onto its communities and trapping many people in their homes. We postponed the move by one week to allow some time for roads to get plowed and essential services to resume.

We’re now safe and sound in the Lake Arrowhead rental, listening to the trickle of water as the snow begins to melt off the roof and stream down the driveway. But the experience has been a real eye-opener in terms of realizing how quickly a natural disaster can lead to a logistical and financial disaster for many people. When we learned we had to postpone our move to the mountain by a week, we had to find housing for that week, as we were required to move out of our original desert rental on a specific date. We found a place right down the road, and while we received a refund for the week we subtracted from our Lake Arrowhead rental, our new desert rental cost about $500 more than that refund. Covering the difference wasn’t a big problem for us, but it would be for many – and the unexpected expenses for those directly impacted by the blizzard have been adding up fast.

Mountain residents who evacuated ahead of the storm and had no one to stay with “down the hill,” as locals call it, were forced to burn into their savings by staying at hotels or Airbnbs. Several hundred dollars’ worth of food spoiled for residents who went down the hill to stock up on groceries but were blocked from returning due to worsening road conditions. There were reports of snow-removal businesses taking advantage of residents desperate to dig out of their homes by price-gouging their services.

What’s more, the roof of the flagship grocery store in the hard-hit community of Crestline, Goodwin & Sons Market, collapsed due to the weight of snow a few days into the blizzard, leaving its employees out of work and Crestline residents without their usual food-and-supplies lifeline. Another local grocery chain then closed due to a compromised roof, leaving more people out of work and just one full-service grocery store remaining to service the community.

Then there were the damages sustained to residents’ homes. Numerous decks collapsed, and some homes with flat roof designs met the same fate as Goodwin & Sons (most A-frame homes were spared due to the sloped nature of their roofs – a fun fact I learned about home design during this emergency), while others caught fire or exploded as a result of gas leaks that occurred after snow buried exterior gas meters. I can’t begin to imagine the financial, not to mention emotional, stress that those whose homes were demolished in the storm must be experiencing.

For many Americans, this is not a good time for surprise expenses to pop up. According to Bankrate’s 2023 annual emergency savings report, four in 10 consumers’ savings accounts have dwindled in the past year, with inflation and unemployment mostly being to blame, and 43% said they would not be able to cover an unexpected $1,000 emergency expense.

And according to the CFPB’s “Making Ends Meet in 2022” survey, which scores Americans’ financial well-being on a scale of 1-100, the country’s financial well-being score declined from 52.4 in February 2021 to 51.1 in February 2022, and 53% of respondents said they would not be able to cover their expenses for more than three months if they lost their main source of income.

The blizzard not only exposed Americans’ existing financial vulnerabilities, but because it was tied to climate change, it also represented how the increasing frequency of extreme weather events is wreaking havoc on the economy. Earlier this month during her first meeting with the Financial Stability Oversight Council’s Climate-related Financial Risk Advisory Committee, Treasury Secretary Janet Yellen addressed how climate change is impacting the economy on a large scale: “As climate change intensifies, natural disasters and warming temperatures can lead to declines in asset values that could cascade through the financial system. A delayed and disorderly transition to a net-zero economy can lead to shocks to the financial system as well. These impacts are not hypothetical. They are already playing out,” she said, adding that some property insurers have already begun raising their rates or exiting high-risk regions. “This has potentially devastating consequences for homeowners and their property values. Developments like these can spill over to other parts of our interconnected financial system.” The catastrophic blizzard that hit the San Bernardino Mountains added one more drop to the bucket of “potentially devastating consequences” Yellen referred to, with property values having surely fallen there post-blizzard.

It’s easy to ignore or forget about natural disasters, especially if you have no connection to the areas where they occur. If I had never visited those mountains, I probably would have just commented on how pretty they looked from a distance covered in snow like most people in LA did, unaware of the fact that some even died up there in their homes while waiting for help.

Climate change-induced shocks to the financial system are already happening all around us, as Yellen noted, and they cannot be ignored by credit unions, which have a responsibility to facilitate financial wellness in their communities, or by any person in a position of authority in a community for that matter.

It’s worth nothing that the crisis that unfolded in the mountains in recent weeks brought out a lot of good. Residents organized impromptu food drives, went door to door to check on neighbors, shoveled snow from roofs, and helped knock down driveway-blocking berms (another fun fact I learned during this emergency – roadside walls of snow discarded by plowing machines are called berms).

It also brought out a lot of rage toward county and state officials, who mountain residents claimed were not prepared to mitigate a storm of this magnitude. If those residents were correct, then it’s time for their officials to get their act together, because this blizzard surely won’t be the last.

Natasha Chilingerian Executive Editor nchilingerian@cutimes.com