When snow falls, retail, employment and tax revenues fall with it
In February, when Washington practically shut down for four days because of unprecedented, back-to-back snowstorms, taxpayers paid for approximately $400 million worth of work that more than 230,000 sidelined federal employees did not do, according to the U.S. Office of Personnel Management. In addition to the costs of a non-functioning government, the region's private-sector economy also took a hit, with hotels and restaurants reporting cancelled reservations, and stores sitting empty with shoppers stuck at home.
Although figures for the total economic effect of this year's storm are not yet available, a study of Washington's last record-breaking snowstorm in January 1996 offers insight: In that month, sales of nondurable goods fell $152 million and rebounded by only $85 million the next month, according to the Center for Regional Analysis at George Mason University. So, the February sales did not compensate for lost revenue in January. Durable goods, such as refrigerators and cars, dropped by $42 million in January but increased by $177 million in February, compensating for January losses. "When you close down a community because the Salt Institute, which has released two studies of the economic effects of snow and ice over the past several years.are closed due to snow and ice, economic activity slows almost to a standstill," says Richard Hanneman, president of the Alexandria, Va.-based
This year's blizzards in Washington are just one example of the extreme economic impact of snow and ice control. Every winter in communities across the country, snow and ice derail local economies for hours, days or sometimes longer. However, with budgets in crisis in almost every state and community, many snow and ice control programs are in danger of losing funding. "States and counties are under incredible budgetary pressure at this time, and nearly every county and municipality is searching for projects and programs to cut," says Greg Cohen, CEO of the Washington-based American Highway Users Alliance (AHUA), which released on March 30 the latest study on the economic impact of snow and ice. "Unfortunately, many politicians do not think [through] the impact of cutting snow and ice control programs fully because when we aren't able to get to work or to shop, we end up further reducing tax revenue to these states and counties."
For city and county department heads responsible for clearing roads and bridges, understanding the economic effects of such storms can go a long way in helping them get the funding and equipment to do the job well.
Uncovering dollars and cents
AHUA's newly released study about the economic impact of snow and ice storms revealed staggering results. For instance, a one-day shutdown because of snow and ice in New York costs $700 million; in Illinois, $400 million; in Ohio, $300 million; and in Virginia, $260 million.
The study analyzed the impact on 16 states and two Canadian provinces of a snowstorm that would make roads impassable for one business day. (See all state/province results.) Assuming the closure of most businesses, it measured the effects in lost wages for hourly workers and lost retail business. The study allows for subsequent recovery of some lost economic activity, but it estimates the total economic impact, including indirect effects, according to James Gillula, managing director of Lexington, Mass.-based IHS Global Insight and lead researcher for the study.
Lost wages of hourly workers account for about two-thirds of the direct economic impact of a major snowstorm, Gillula says. Other important factors include lost tax revenue and lost retail trade. While those losses can be economically debilitating, AHUA's study shows that those are not the only costs. "The analysis shows that the ripple effect, or derived costs, more than doubles the economic impact of lost wages, lost tax revenue and lost retail trade," Cohen says. "This takes into account factors such as taxable spending that cannot occur after the snow storm because of the cut to a person's wages during the snow storm."
The study tracks retail sales that are not going to occur because of snow and ice, such as business lunches and shopping. "But, there are far more impacts than what is tracked here, such as wage income, non-recurring retail sales, and tax revenues because of the slowed economy," Hanneman says. "It also doesn't touch the impacts on people's health, such as injuries caused by car crashes."
Using the data
Many city and county governments are in a budget tailspin, and snow and ice programs are feeling the crunch. "Everyperson I talk to will say that their snow control budget has been flat over the past five years, and some have even been cut," Hanneman says. "We are cutting back on all sorts of services because [government] budgets are tight."
For cities and counties with snow and ice budgets in jeopardy, the data derived from studies, such as the recent one from AHUA, can be an effective tool for educating constituents and local decision makers about the importance of snow and ice control, and for justifying snow and ice budgets, according to industry officials. "We are hoping the data will benefit city and county governments so they have a scientific basis to compare the amount they spend on snow fighting with the societal costs of each day of a paralyzing snow storm," Cohen says.
In Iowa, for instance, officials have used data from similar studies to improve snow and ice operations and maintain funding, says Dennis Burkheimer, former winter operations administrator for the Iowa Department of Transportation. "We took this information to the legislature as an awareness tool, to give them an example of what we'd be dealing with if we didn't do [the level of snow and ice maintenance] we do," Burkheimer says. "The numbers are surprising. A number of decision makers had to swallow and say, 'Hmm.' Some [economic losses] can be recovered, but much is lost."
In McHenry County, Ill., economic impact studies "help us to reinforce the importance of what we do," says Mark DeVries, maintenance superintendent and superintendent of operations for the county's Division of Transportation. "If we close a major thoroughfare in McHenry County, the economic impact could be three times what we spend [on snow and ice control] in an entire season."
Most transportation departments must get an entire annual budget approved, rather than an individual snow and ice budget, DeVries says. "But, if you're in a winter state, snow and ice is a big part of that budget," he says. In McHenry County, implementing new technology and innovative methods has been important for staying ahead of the ice and snow. For instance, DeVries' department recently implemented a new computer-based training tool developed by the Washington-based American Association of State Highway and Transportation Officials. McHenry County also has implemented rigorous anti-icing programs to prevent roads from becoming icy in the first place, which involves a big up-front investment that can have large benefits in the long term, DeVries says.
To stay on top of all the latest technologies and innovations, DeVries' department has regularly shared information with the county council about the economic impact of snow and ice storms, as well as current successes. "We've found that by showing how well we've done with what we have, we can be more successful," DeVries says. "So many times, people want to see dollars, and it's a hard sell because you've got to spend money to make money. Sometimes visuals help. Show them you can have this road, or you can have this road. The more data you can share, the better chance you'll have of being understood and appreciated."
Because the AHUA study looks at statewide economic impact, Cohen encourages city and county officials to approximate the data for their communities based on the relative amount of economic activity in the area as compared to the state as a whole. "In an era of extremely tight budgets, good data is essential for coming up with a justifiable program that serves the public interest as well as possible," Cohen says. "The information from this study should be helpful [for local governments] in making better decisions about how they approach snow fighting in terms of funding, technology and salt inventories."
- View the "Economic impact of a one-day shutdown due to a snowstorm" table to learn more.
Nancy Mann Jackson is a Florence, Ala.-based freelance writer.
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Economic impact of a one-day shutdown due to a snowstorm
|State/Province||Economic Impact |
|Source: "The Economic Costs of Disruption from a Snowstorm," |
prepared for the American Highway Users Alliance
by IHS Global Insight.