July 29, 2020
Topic
COVID-19 has effectively caused a prolonged pause in many economic sectors, leading to great financial uncertainty. As local governments watch revenue streams – from such sources as hotel and sales taxes – evaporate many cities must reevaluate spending priorities to balance budgets. Some jurisdictions are pursuing sustainability initiatives to reduce costs – from downsizing, furloughing or reallocating staff to suspending entire departments. Yet, the long-term repercussion of such decisions could put local governments, communities and businesses at greater risk.
Evidence shows sustainability investments provide important economic benefits and build much-needed community resilience in the face of unprecedented public health threats and worsening climate-change impacts.
When faced with significant budget shortfalls, sustainability efforts may seem alluring when compared to other government functions that may be considered more “essential.” However, without continued progress on addressing climate change, even through times of severe budget constraints, climate-induced shocks and disasters can exacerbate economic hardships.
Sustainability measures may appear expensive in the short-term, but the long-term climate impacts will be drastically costlier. California’s 4th Climate Change Assessment report notes that costs associated with climate impacts – attributable to deaths, damages and the potential for droughts and mega-floods – will be in the tens of billions of dollars. Considering the long-term economic impacts of inaction, we should value adaptation and mitigation efforts as cost-effective, preventative measures.
Absent early action and investment in resiliency, the economic impacts of climate change will be incredibly costly:
- Energy bills are expected to rise by $200 million annually due to the extra cost of keeping homes cooled.
- Effects of a long-term drought will cost California $3 billion.
- It could cost $18 billion to replace buildings affected by sea-level rise.
To minimize future climate-change costs, early investments in mitigation have significant returns over the long-term. A 2017 Study by the National Institute of Building Sciences found federal mitigation grants save $6 for every $1 spent.
COVID-19 has highlighted concerning vulnerabilities, and climate-change impacts will only continue to exacerbate these vulnerabilities in the years to come. A sustainable and equitable recovery will be crucial to ensuring prosperity and local resiliency. Local governments with sustainability projects ready will be advantageously positioned for eventual state and federal funding (as seen with the American Recovery and Reinvestment Act of 2009), and could pursue initiatives that offer numerous long-term economic benefits.
Economic Benefits of Sustainability Programs
Energy Efficiency for Long-Term Savings
Energy efficiency improvements to public systems can produce long-term economic savings that significantly outweigh initial upfront costs and maintenance.
LA’s LED Street Lighting Retrofit Project converted more than 140,000 lights to LED bulbs. Even after repaying the project loan, the initiative saved LA more than $7 million annually while also reducing energy usage by 63%. It also created 11 new positions at the Bureau of Street Lighting and about 300 manufacturing jobs.
Value-added Green Infrastructure
Green infrastructure is a cost-effective solution to numerous challenges that provides economic, social and environmental benefits while increasing resiliency.
The City of Chicago introduced Sustainable Urban Infrastructure Guidelines that integrate environmental initiatives into infrastructure design. Its transportation department conducted numerous pilot projects that demonstrated sustainable-infrastructure costs could be lower than costs for conventional infrastructure, and achieve innumerable economic benefits. Furthermore, the additional costs accrued from the new projects – staff time to review projects, design improvements and construction – were justified by the total value of the new improvements. Cost-savings were realized across departments through new jobs in products (like permeable pavements), contracting, recycling, and innovative design.
Urban Forestry: Money Grows on Trees
Urban trees also provide numerous economic, social and environmental benefits. From a city’s perspective, trees provide significant savings in stormwater management and energy use.
A study from 2017 found that California’s 173 million urban trees intercept 196 million cubic meters of rainfall annually, reducing stormwater-management costs by $324.6 million. For every $1 spent on planting and maintaining their urban forest, a city can expect to receive a return of $2.50. Urban forests also provide employment for more than 62,000 Californians and add over $3.9 billion to the State’s economy.
Information and Communication Technology: Fewer Resources, More Resiliency
Improvements to information and communication technology infrastructure, such as smart grids, are essential to addressing redundancies and ensuring integral systems remain operational in the face of local climate disruptions.
Austin’s Pecan Street Project (PSP) used smart metering for energy and water systems in 1,000 homes and 75 businesses. A 2015 review confirmed that the project achieved significant energy and water savings, and increased grid resiliency.
Funding Sustainability to Maintain Sustainability Initiatives
Tax-Increment Financing (TIF)
Cities can leverage tax-increment financing mechanisms, such as Enhanced Infrastructure Financing Districts (EIFD) or Community Revitalization and Investment Authorities (CRIAs), to finance redevelopment projects in anticipation of future revenue from the increased property values that those improvements generate. The increase in value from developed properties is considered city revenue, and, after the city fulfills obligations to investors and bondholders, can be used to support sustainability efforts.
Parcel Taxes
A parcel tax can fund land-conservation initiatives. Unlike a property tax, it levies a flat amount on the parcel without considering the size or value of the property. In June 2016, Bay Area voters approved a new $12-a-year parcel tax that will bring in $500 million over the next 20 years to support wetland restoration that reduces water pollution, expands wildlife habitat, and shields communities from flooding.
Municipal Green Bonds
Municipal green bonds can fund sustainability projects that have cascading benefits for job development and public health. These bonds are typically used to finance the administrative and implementation costs of renewable power, clean-water and energy-efficiency projects. In 2014, DC Water issued the first certified green bonds to finance the city’s Clean Rivers Project that improves water quality, flood mitigation and biodiversity.
California Infrastructure and Economic Development Bank (I-Bank)
I-Bank finances public infrastructure and supports economic development that promotes job growth, fosters economic resiliency, and improves the quality of life for residents. It operates two main programs to help fund sustainability projects and staff: The California Lending for Energy and Environmental Needs (CLEEN) Center and the Infrastructure State Revolving Fund (ISRF) Program. I-Bank also issues bonds for the Clean Water State Revolving Fund (CWSRF), a federal-state partnership that provides financing for water-quality infrastructure.
Public-Private Partnerships
Public-private partnerships provide opportunities for local municipalities to partner with private entities that finance sustainable infrastructure or community-development projects. A 2015 multi-sector partnership between the City of Sunnyvale, Apple, Cal-Water, the California Department of Water Resources and the Santa Clara Valley Water District created $17.5 million for improvements at the water-treatment station for recycled and reclaimed water. This 10-year project ensures that the water supply for Cupertino and surrounding areas will continue to meet the community’s freshwater needs.
Group Purchasing
Group purchasing can leverage collective purchasing power to reduce upfront administrative and installation costs for new sustainability projects. LO3 Energy, a New York start-up, leveraged group purchasing to fund the Brooklyn Microgrid network, which allows individuals to buy and sell renewable energy in a peer-to-peer network, which increases community resilience to frequent power outages and supports local economic development while reducing the community’s carbon footprint.
Local governments can also fund sustainability initiatives by creating new local funding sources, which may be established on a permanent or temporary basis.
Los Angeles County made a one-time decision to add a small percentage surcharge on departments’ energy bills to pay for staff and consultants tasked with lowering its energy costs. This financial mechanism helped his sustainability team weather previous economic downturns and does not require annual budget appropriation, as Howard Choy, former General Manager for the County Office of Sustainability, recently explained.
Sustainability Is Always an “Essential” Service
Local governments may be tempted to scale down their sustainability efforts during the pandemic, but it’s critical to maintain these efforts. It is the responsibility of local governments to embed sustainability and resilience priorities in all decision-making processes as these issues become more intertwined in the everyday realities of their communities even when money is tight. A sustainable approach to economic recovery is essential to ensure that local governments have the ability to weather the literal and figurative storms ahead.
Resources
- CivicSpark, CivicWell’s Governor’s Initiative AmeriCorps Program, enhances local capacity by providing a low-cost way to keep sustainability initiatives moving forward.
- The Institute for Local Government’s Sustainability Best Practices During the Covid-19 Crisis illustrates ways to address and balance economic development, climate action and equity with community health and safety .
- The National League of Cities’ Leadership in Community Resilience Program provides financial support, technical assistance and professional development for local climate and sustainability initiatives.
- California Climate Investments Technical Assistance Program, funded by the Strategic Growth Council and the Institute for Sustainable Communities’ Community Resiliency Program.