Never before in the US have we experienced a natural disaster of the magnitude of Harvey. The damage is of such a degree that we find it nearly impossible to comprehend. Yet Harvey does not stand alone. Climate events that preceded it give us much-needed insight into how municipalities recover, and whether disasters precipitate credit defaults.

Like the people devastated by such storms, the affected municipalities are surprisingly resilient. In the case of municipalities, we’ve identified three factors that generally influence resilience: the underlying strength of the local economy, ample cash reserves at both state and local levels to meet immediate demands, and access to federal assistance.

THE LIFE CYCLE OF A DISASTER

At first, natural disasters disrupt economic activity through property damage and a decline in business activity. Soon after the event, however, economic activity typically spikes as rebuilding efforts lead to a surge in purchases and the hiring of temporary workers. As things return to normal, the local economy usually resumes its pre-disaster trajectory.

How do we know this? From analyses of Superstorm Sandy, which struck parts of coastal New Jersey, New York City and Long Island in 2012; the October 2015 North American Storm Complex, which caused 500-year flooding in parts of South Carolina; and the 2016 Louisiana Floods, which submerged Baton Rouge and 21 of its surrounding parishes.

New Orleans, on the other hand, has never properly recovered from Hurricane Katrina, in which the death toll exceeded a staggering 1,800. It’s a notable exception to the pattern described above, and one worth exploring.

New Orleans was heavily dependent on tourism, and it also had exposure to the petrochemical industry. It was already losing many jobs in petrochemicals leading up to 2005, when the storm hit. The flooding and devastation hit tourism hard and exacerbated an existing trend in the petrochemical industry. To make matters worse, many who were marginally attached to the city’s economy found better economic opportunities after being evacuated—mostly to Houston—and never returned. As a result, New Orleans’s population declined, shrinking the city’s tax base.

Yet even New Orleans never defaulted on its debt.