Over the past decade, we’ve watched cybersecurity steadily climb the ranks in municipal risk planning. It’s no longer just about preventing downtime or protecting sensitive data. It’s increasingly about financial health—specifically, the ability of a city, town, or state to fund its own future. That’s a new frontier, and one worth paying attention to.
In recent months, I’ve had several conversations with journalists about the rise in cyberattacks targeting municipalities. That part isn’t surprising. Most public sector leaders are already managing that reality. What is new, and what has sparked deeper interest, is that these attacks are beginning to affect how municipalities raise funds through bonds for critical projects.
Understanding the problem
If you're not living in the world of municipal finance every day, here’s the quick version. Large civic initiatives—schools, broadband expansion, infrastructure upgrades—often rely on municipal bonds for funding. These bonds are attractive to investors because they’re backed by what’s generally seen as a low-risk institution: your city or town.
That perception of stability is key. When it’s disrupted, especially by something unexpected like a cyberattack, confidence takes a hit. And when confidence drops, borrowing costs can rise.
We’re seeing two primary ways this is playing out.
First, there’s the direct financial disruption. A ransomware attack or similar incident often brings significant, unplanned costs: recovery expenses, extended downtime, legal work, and regulatory reporting. That kind of impact can delay bond offerings or force them to be restructured. In some cases, the municipality moves forward, but ends up paying more to borrow the same amount.
Second, we’re seeing a more troubling trend—fraud through credential abuse. In one case involving White Lake Township in Michigan, attackers used stolen credentials to reroute the actual proceeds of a municipal loan. That’s not just disruption. That’s loss of funds before they even reach the community.
Both examples show how cybersecurity issues are now affecting more than just operations. They’re touching a municipality’s financial standing.
Measuring the impact
At the 2024 Brookings Municipal Finance Conference, researchers from the University of Illinois and the Federal Reserve presented new data on this trend:
- Municipalities that experienced a cyberattack saw a 15 to 22 basis point drop in the price of their outstanding bonds.
- When those municipalities later issued new bonds, they had to offer 10 to 13 basis points higher yields to attract buyers.
To put that in context: if you’re issuing $100 million in bonds, that added interest could cost over $1 million across the life of the loan. And for most municipalities, that’s money already stretched across aging infrastructure, staffing gaps, or community upgrades.
This impact is real, measurable, and gaining attention.
A quick scenario: Grand Fenwick
Let’s take a simplified example.
The fictional municipality of Grand Fenwick plans to issue $100 million in 10-year bonds at a 3% interest rate. That would typically mean $30 million in interest over the life of the bonds.
Now imagine a ransomware attack hits just before the bonds go to market. It’s public, and confidence takes a hit. Investors grow cautious. Existing bonds from the town—already traded in the secondary market—see a price dip. Using the Brookings data, that dip could amount to a net market loss of around $200,000, spread across bondholders.
Then, when Grand Fenwick proceeds with its new bond issuance, the town has to offer a higher yield—let’s say 3.13% instead of 3%—to attract buyers. That increase adds another $1.3 million in long-term borrowing costs over the life of the bonds.
One event. A $200,000 market impact. And $1.3 million in new costs.
Why cybersecurity leaders should care
This isn’t just a finance department issue. It’s a broader concern that touches every part of a municipality.
If you’re a CISO, CIO, or tech leader, this expands the context of your work. You’re not just protecting systems or preventing disruption. You’re helping to protect your community’s ability to invest in itself.
That perspective can help:
- Reframe cybersecurity as a form of financial risk management
- Build stronger alignment with finance and executive leadership
- Show how early investment in security can reduce long-term costs and increase institutional resilience
This isn’t about creating urgency through fear. It’s about offering a new, practical way to connect your cybersecurity program to outcomes your stakeholders already care about.
What you can do
You don’t need to overhaul your entire strategy. But a few steps can help reduce this kind of risk:
- Focus on the fundamentals. Patch management, multifactor authentication, asset inventories, and secure backups continue to be among the most effective and cost-efficient protections.
- Run incident response tabletop exercises that include finance. Everyone should understand how a cyber event could affect their part of the operation and what steps to take.
- Connect cybersecurity to financial and operational goals. The more you can talk about cyber in the context of budgets, timelines, or public trust, the more traction your ideas will get.
A broader view of risk
A major insurer CEO recently noted that some cybersecurity events are becoming so costly they may eventually be uninsurable. That isn’t fearmongering. It’s a sign that we’re entering a phase where cyber incidents have ripple effects far beyond the IT environment.
As always, I go back to the classic risk equation from Judge Learned Hand. If the cost of prevention is less than the probability of harm multiplied by the cost of that harm, then failing to act is negligent.
And we’re clearly approaching the point where prevention is not just sensible—it’s economically necessary.
Final thought
If you’re responsible for cybersecurity in a state, city, or county organization, this is an opportunity to lead with strategy. To help others in your organization connect the dots between technical risk and financial resilience.
Your work is already protecting essential services. But now, it’s also helping preserve your ability to fund those services in the first place.
And that’s a conversation worth having.
If you’re thinking through how to approach this in your own organization, we’re always happy to talk it through. Whether it’s advice, guidance, or simply helping you ask the right questions, our team at NuHarbor is here to help.
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