Extreme Weather—Striking a Blow to Government Budgets
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The Fiscal Times
January 31, 2011

It was the wrong kind of post-holiday windfall: 20-plus inches of snow blanketing the East Coast, shutting down airports, roads, businesses and travel plans, and creating a nasty economic ripple effect. Towns across the region are still counting the financial damage.

The East Coast blizzard was the latest in a series of drastic weather events that seem to be arriving at ever shorter intervals, and with ever more intensity. It came on the heels of a weeklong onslaught of severe rain and flooding on the West Coast, overwhelming cities like San Diego. And a few days after the blizzard, unseasonal tornadoes ripped through several Midwestern states, killing eight people and causing states of emergencies in Missouri and Arkansas. Across the country, snowfall has been more persistent and intense than the historical precedent – the East Coast presently finds itself digging out of yet another 19-inch deluge.

If the weather keeps getting more severe, as is widely expected, the economic and fiscal impact will take a toll. Businesses and governments at the local, state and federal level alike are likely to find themselves redeploying scarce funds to keep the roads clear and repair critical crossways.

Post-Holiday Blues
Any number of industries feel the pinch when the weather strikes back. Take the airlines: A total of roughly 10,000 flights were canceled during the three days after Christmas, costing the airlines an estimated $150 million. Delta Airlines alone stomached $45 million in lost revenue, while JetBlue took a $30 million hit.

The storm also came at a crucial time for retailers. ShopperTrak, a leading analyst of retail industry data, estimated that the blizzard cost retailers $1 billion in sales (the post-Christmas week can account for over 15 percent of total holiday sales, according to the National Retail Federation). That number is likely high, given the increase in online sales today, along with the percentage of lost in-store sales which are likely to be made up when the snow melts. Nevertheless, retailers will feel a sting, and for small businesses it can be a particularly rough blow.

“Because of the snow, I was not able to open until the 28th,” says Zoe Van de Wiele, owner of the clothing boutique Cloth, in Brooklyn, NY. Her babysitter was stuck in Buffalo, and she couldn’t find a replacement. When she did finally reopen she had no customers for two days. “I do believe it was because the streets were so impassable,” she says.

Bad weather is also bad business for taxi drivers, salons, restaurants and movie theaters. Add to that mix the insurance industry, which can pay out billions in the aftermath of an extreme weather event.

The Toll on Government Budgets
But it’s local governments that bear most of the responsibility for cleaning up after severe weather – expenditures that are eating into already fragile budgets. Kail Padgitt, a staff economist at the Tax Foundation, says, “This of course comes at a bad time, as local revenues are hurting due to drops in property tax revenue and state level aid.”

On the East Coast, there was the obvious cost of digging out of the snow. The Bloomberg administration estimated this week that the final tally for December’s storm alone will easily surpass New York City’s annual snow budget of $38.8 million. In addition, the Metropolitan Transportation Authority, which runs New York City subways and buses, some bridges and tunnels, the Long Island Railroad and the Metro-North Railroad, had to absorb $30 million in overtime expenses and lost revenues because of the storm – unwelcome news for an organization that has recently eliminated service and increased fares, yet will still find itself $207 million in the hole at the end of 2012.

The large swath of smaller municipalities that were hit by the storm might feel the burden even more acutely. Their funds are already stretched dangerously thin; Mark Boughton, the mayor of Danbury Conn., called the blizzard “a budget buster.” His chief of staff, Wayne Shepperd, says that the city generally incurs $10,000 in cleanup costs for every inch of snow that falls. With almost 80 inches of snow already accumulated this season, the city has more than exhausted its $775,000 snow removal budget, with almost two more months of winter still ahead.