Texas Is Tip Of A Melting Muni Iceberg: Winkler

Summary

Matt Winkler argues that Texas municipal borrowing costs are elevated relative to California because of Texas's anti-ESG legislation and rising climate risk. He points to Corpus Christi as a concrete example of stressed municipal credit after a Moody's downgrade and a 2027 water shortage warning. Winkler contrasts Texas's anti-science climate policy with California's ESG-friendly stance, which supports demand for California munis.

• Texas SB 13 barred Net Zero Banking Alliance members from underwriting Texas state and local debt.
• Major banks later left the Net Zero Banking Alliance and stopped using ESG language, but the Texas-California muni spread remains wide.
• Texas muni yields average about 30 basis points above California, costing roughly $3 million annually per $1 billion borrowed.
• Corpus Christi, Texas was downgraded by Moody's and warned of a possible water shortage by 2027.
• Corpus Christi's borrowing costs are described as very expensive relative to Texas.
• Winkler says Texas's anti-science climate policy is hazardous for municipal investors.
• California's ESG stance and climate action support persistent demand for its municipal securities.