President Obama’s decision this month to make Massachusetts eligible for far less snow cleanup aid than state officials wanted will put significant pressure on city and town budgets, according to a leading bond-rating agency.
Municipalities spent vastly more money this winter than they had budgeted for snow and ice removal. Fall River budgeted about $530,000 but spent more than $3 million. Braintree planned for $400,000 but spent more than $2.6 million. Boston budgeted about $18.5 million and spent about $40 million.
A recent report from Moody’s Investors Service, one of the three big credit rating agencies, said the limited reimbursement from the Federal Emergency Management Agency is “credit negative” — an early warning of an event that could hurt bond ratings — “for local governments facing pressure to address snow and ice budget deficits in the current year.” But it isn’t prompting an immediate change in any bond ratings. Such a change, if one does come, could make it more expensive for municipalities to borrow money.
Winter weather costs are “small” compared with the total budgets of most cities and towns — generally 1 to 2 percent — said Nicholas Lehman, a Moody’s analyst who specializes in municipal finances. But the deficits they are incurring this year will mean most Massachusetts municipalities will need to cut other items in their budgets, find additional revenue, or “dip into their reserves,” he said in a phone interview.
Obama this month declared the massive Jan. 26-28 blizzard was a major disaster, making the state and municipalities eligible for federal reimbursements of some cleanup costs during that period.
Governor Charlie Baker and members of Congress had sought a 28-day emergency declaration, from Jan. 26 to Feb. 22.
Baker, who made an appeal to Obama in a letter earlier this year, estimated that the total cost to state and local governments from this year’s severe winter weather in that period was “near $400 million.”
Officials hoped for reimbursement of about three-quarters of those costs, about $300 million.
Instead, the federal government is poised to reimburse about 75 percent of costs for just the first big blizzard — an infusion projected to be less than $100 million. (The Baker administration is weighing whether it will appeal the narrower declaration.)
Municipal officials across the state say they were not relying on being eligible for more money from Uncle Sam, but it would have been nice.
The majority of Massachusetts cities and towns, including those in strong financial shape such as Boston and Cambridge, should be able to deal with the costs in the current year, the Moody’s report found.
But it warned the costs could place more of a squeeze on “fiscally constrained communities,” such as Fall River.
That’s accurate, said that city’s mayor, Sam Sutter, who added that the prospect of a bond downgrade has been the biggest challenge he has faced since taking office at the end of last year. And, he said, the winter costs have made his city’s budget challenges much more difficult.
Braintree ended up spending more than $2.2 million than it had budgeted for winter cleanup, according to Mayor Joseph C. Sullivan.
The town has already pulled $750,000 from its reserve fund to help pay for those costs and is expecting about $250,000 in reimbursements from the federal government for the first big storm.
But the town was yearning for a larger reimbursement.
“We hoped,” Sullivan said. “We were saying our prayers, which were not answered, despite the governor’s efforts.”
Still, he said, the snow and ice costs would be paid this year and there would be no cuts to services to do so.
Moody’s noted that the state has taken several actions to help local governments. Those include a Winter Recovery Assistance Program — $30 million to help with municipal road and bridge repair. Also, a law change initiated by the Baker administration allows cities and towns, while still paying actual winter costs this fiscal year, to recognize this year’s massive snow and ice costs in their budgets over multiple fiscal years.
Municipal tax rates are set, in part, based on prior year spending, so the law change could help cities and towns avoid hitting residents with tax increases related to the 2015 costs of removing the snow.
Geoff Beckwith, executive director of the Massachusetts Municipal Association, said his group applauds the governor for an “outstanding effort” trying to get cities and towns more federal dollars. But, “of course, it would have been preferable for FEMA to agree with Massachusetts.”
He said communities across the state cumulatively spent more than $140 million more than they had budgeted for snow and ice removal this fiscal year.
Adam Chapdelaine, Arlington’s town manager, said the community spent $2.2 million on snow and ice costs during the winter, more than double the average winter costs.
While he did not expect any cuts to services, Chapdelaine said “we’re definitely sharpening the pencil as we get toward the end of this fiscal year.”
Michael Hale, Gloucester’s director of public works, said in an average year the city spends about $1.7 million on snow costs. This year, it spent more than $3.3 million.
But when it comes to federal money, “we’ve been burnt before,” he said. “We did not rely on the idea that there would be some Obama-bucks coming our way.”