The city of Clyde sits about two hours west of Fort Worth on the plains of north Texas. It gets its water from a lake by the same name a few miles away. Starting in 2022, scorching weather caused its levels to drop further and further. Within a year, officials had declared a water conservation emergency and, on August 1 of last year, they raised the warning level again. That meant residents rationing their spigot use even more tightly, especially lawn irrigation. The restrictions weren’t, however, the worst news that day: The city also missed two debt payments.

Municipal bond defaults of any kind are extraordinarily rare, let alone those linked to a changing climate. But, with about 4,000 residents and an annual budget of under $10 million , Clyde has never had room to absorb surprises.

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