NEPPC report: Climate change likely to be costly for Mass. cities and towns

Rising temperatures related to climate change could increase average annual per capita municipal expenditures in Massachusetts by as much as 30% by the end of this century as compared to what they were over the past 30 years.

This is according to a new report by Bo Zhao, a senior economist with the New England Public Policy Center in the Federal Reserve Bank of Boston Research Department.

“These large increases could have a significant impact on the fiscal health of local governments and may be difficult or impossible to accommodate without significant increases in taxes and fees,” Zhao writes in “The Effects of Weather on Massachusetts Municipal Expenditures: Implications of Climate Change for Local Governments in New England.”

Zhao finds that a 1-degree Fahrenheit increase in average temperature results in a 3.2% increase in per capita municipal general-fund expenditures in Massachusetts on average. Among other effects, he writes, hotter or stormier weather can increase the costs of snow removal, road maintenance, and the heating and cooling of schools and other public buildings.

Zhao uses the relationship between weather and local spending in Massachusetts from the last three decades, along with average-temperature projections from the National Oceanic and Atmospheric Administration, as a basis for estimating the state’s municipal expenditures for future decades.

According to the NOAA, if global emissions continue to grow at their current rate, the average temperature in Massachusetts is expected to rise from about 50 degrees Fahrenheit in 2020 to nearly 54 degrees Fahrenheit for 2050-2059 and to almost 58 degrees Fahrenheit for 2090-2099.

Based on those temperature increases and assuming the relationship between average temperatures and municipal expenditures remains the same as it was from 1990 through 2019, per capita local spending in Massachusetts could grow as much as 15% for 2050-2059 and as much as 30% for 2090-2099 relative to the level of the past three decades. In terms of dollar amounts, the per capita increases could be as great as $456 and $924 (in 2019 dollars), respectively.

In a scenario where emissions are lower in the future, the NOAA projects that the average temperature in Massachusetts would reach about 54 degrees Fahrenheit for 2090-2099. Zhao finds that even in this scenario, municipal expenditures could increase by as much as 15% by the end of this century.

Account for climate change in planning
“This report recommends that municipalities account for climate change in their long-term municipal financial planning, since early policy actions are often more cost effective than later ones,” Zhao writes. “Investing in improvements to the climate resilience of public infrastructure is important, and it is particularly urgent for New England, given how dated the region’s infrastructure systems are.”

Zhao notes that the report’s findings are applicable to the other five New England states as well, because the climate is generally the same across the region, and each state is projected to see similarly higher temperatures and more extreme storms in future decades. Also, each state has very limited county governments, if any, so municipal governments provide nearly all local public services.

Zhao does present a caveat to his findings. He notes that the regression analysis is based on historical data, and that using that information to make projections assumes that the relationship between weather and local spending will remain the same over time. His research for the report’s accompanying working paper, however, finds evidence that Massachusetts municipal spending has become less sensitive to temperature changes over the past 30 years. This could be because states and cities and towns in New England have been adapting to climate change by, for example, improving the heating and cooling systems of public buildings.

“Thus,” he writes, “the fiscal projections based on the regression results should be treated as directional guidance rather than as precise forecasts.”

The new report uses research and analysis from a Boston Fed working paper by Zhao titled “The Impact of Weather on Local Government Spending.”