Surging seas, rising fiscal stress: Exploring municipal fiscal vulnerability to climate change

Abstract

Recent disasters and growing concerns about climate change have spurred calls for cities to retreat from and avoid developing in coastal areas. Instead, cities have doubled down on waterfront development. We ask why and with what implications, using the U.S. state of Massachusetts as a case study. By overlaying data on sea level rise, land use, and property taxes, we find a few coastal cities may lose significant levels of municipal revenues to long-term sea level rise, while others face negligible impacts. Coastal municipalities are cognizant of their risks yet continue to site redevelopment projects in flood-vulnerable areas to meet present-day budgetary needs. Moreover, they resist efforts to align property values and insurance premiums with climate risks, as reforms only hasten lost taxes. Left unchanged, existing land use and fiscal policies incentivize municipalities to make short-term decisions with accelerating climate risks over time. This creates new dynamics of fiscal stress that can increase regional inequality and vulnerability to climate change. The study highlights the need for dialogue among researchers and policymakers in the U.S. and internationally on the nexus between land use planning, government administration, and climate change as these tensions likely exist wherever local governments rely on land-based finance.

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