Transcript US Army Corps of Engineers Great Lakes and Ohio River Division

“Non-Typical” Economic,
Environmental, and Other
Flood Risk Management
Benefits
What are non-typical FRM benefits?
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Evacuation-Transition-Reoccupation
Increased Living Expenses
Health Costs
Traffic Diversions
Emergency Response
Public Assistance
Environmental Damage
What are underutilized FRM
benefits?
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Emergency Response (Search and Rescue)
Clean Up (Debris Removal)
Administrative (SBA Loans, Other Agencies)
Damages to Roads and Public Works
Damages to Utilities
What are the potential value of and
underutilized non-typical FRM
benefits?
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THESE BENEFITS CAN REPRESENT AS
MUCH AS 25% TO 35% OF THE BENEFIT
BASE ON A TYPICAL FRM PROJECT
But they can be very difficult to quantify,
difficult to model and differentiate between
alternatives
Hard to make site specific without recent
verified data from historical events
Expert Elicitation – Non-Typical
Damage Categories
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In instances where it may be too time consuming or
expensive to collect essential historical data, EE can be
used as a substitute
Specific pre-determined Questions are directed to
subject matter experts for various damage scenarios
Their responses are used to populate algorithm to
estimate damages
ARCF Non-typical NED Categories for EE
Preliminary EE Results
Environmental Benefits
Flooding is natural; flood damage reduction is not
Flood damage reduction measures can have environmental
consequences
Some are intended, some are not
Some are anticipated, some are not
Some are beneficial, some are adverse
Unanticipated, unintended consequences may be the worst
type
USACE Environmental
Operating Principles (condensed version)
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1. Strive to achieve Environmental Sustainability.
2. Recognize the interdependence of life and the physical
environment.
3. Seek balance and synergy among human development
activities and natural systems.
4. Continue to accept corporate responsibility and
accountability.
5. Seek ways and means to assess and mitigate cumulative
impacts.
6. Build and share an integrated scientific, economic & social
knowledge base.
7. Respect the views of individuals and groups interested in
Corps activities; listen to them actively and learn from their
perspective.
See ER 200-1-5 for implementation policy guidance
Three Reasons for Principles
1. To create unity of purpose within the Corps
when dealing with environmental issues
2. To reflect a new tone and direction for
dialogue on environmental matters
3. To ensure that conservation, environmental
preservation and restoration are considered
in all Corps activities at same level as
economic issues
Flood Risk
Management
Environmental
Restoration
has been a successional process
Flood Damage Reduction Mission
without Environmental Concern
Flood Damage Reduction with Increasing
Environmental Awareness, FWCA; CWA; NEPA; ESA
Ecosystem Restoration made a Stand Alone
Mission, WRDA 86 §1135; WRDA 90 §303; WRDA 96 §206
Integrated Flood Risk
Management and Ecosystem
Restoration Purposes, WRDA 99 §212
Finding
Environmental
Opportunities
is not a
New Concept
AKA:
1. Good Environmental Design
2. Impact Avoidance
3. Impact Minimization
4. Mitigation
5. The Environmental Alternative
We have delayed or walked away
from many good projects that were
economically marginal by not
claiming environmental
improvements as benefits for non-
structural and structural projects
Breakthrough !!
Recognition that Environment
has non-monetary value
Projects can be justified on
non-monetary values WRDA 86 §1135
Dual Purpose Projects may be
justified using a combination
of traditional economics
and
non-traditional ecosystem
values
but
you must show significant
Flood Damage Reduction
and
Ecosystem Improvement
SCRB Method
 Separable Cost-Remaining Benefits (SCRB)
 Adopted by interagency agreement March 1954
as preferred method
 ER 1105-2-100 reaffirmed its preferred status
SCRB Definitions
 Cost Allocation is the process of equitably
distributing project costs among project
purposes.
 Separable costs - costs incurred specifically to
add a purpose to a project
 Joint costs - the difference between the total
project costs and the sum of all separable costs
Formulation Requirements for SCRB
Allocation
Cost allocation requires formulation of specific
plans:
 Multipurpose plan
 Multipurpose plans less each purpose
 Most likely alternative single purpose plan
Allocation Equity
 Use of the SCRB method results in the following
maximum and minimum cost limits for each
purpose
 Maximum:
 Benefits to each purpose
 Cost of the least cost alternative for each purpose.
 Minimum: separable costs
 Most likely: proportional sharing of joint costs of
multipurpose added to minimum
Major Key Points
 You know all there is to know
 The allocation method is
relatively straight forward –
Those who benefit pay
 Problems relate to the inputs
that are required
Ecosystem Restoration Example
 To determine alternative project cost for
ecosystem restoration purposes:
Determine the cost of the next most efficient plan
producing the same ecosystem output and meeting
the planning objectives
 If the plan formulation is done correctly, the cost
of the ecosystem restoration portion of the
multipurpose plan represents a more efficient
investment. If not, reformulate.
SCRB Example
The Project – Flood Damage Reduction
and Ecosystem Restoration
 Total Cost Dual-purpose Project = $7,000
 Cost without Ecosystem Restoration = $2,930
 Cost without Flood Damage Reduction = $5,350
 Flood Damage Reduction Benefits = $1,930
 Ecosystem Benefits = Non-monetary
Flood Damage Reduction - Ecosystem
Restoration SCRB Example
Flood Damage
Reduction
Ecosystem
Restoration
Total
1,930 +
Average Annual Benefits
1,930
Non-monetary
Single Purpose Alternative Cost
2,930
5,350
8,280
Limited Benefits/Costs
1,930
5,350
7,280
Separable Costs
1,650
5,070
6,720
280
280
560
50%
50%
100%
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-
280
140
140
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1,790
5,210
7,000
Remaining Benefits
Percent of Total
Joint Costs
Allocated joint cost
Total allocation
Non-monetary
Other Social Effects
(from IPET Report)
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Drowning
Infection
Homicide
Suicide
Accidents
Injury
Illness
Fraud
Other Social Effects (OSE) Account
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Community’s Resiliency & Social
Vulnerability
Environmental Justice
Quality of Life Indicators
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Solid academic literature
Widely used
Recommended by GAO
Models
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Hedonic Models
Loss of Life Estimation
Regional Economic Development (RED)
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Typically regional economic impacts of a project can be
classified into one of three categories:
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Direct effects which represent the initial change of the new
expenditure stream on industries in direct support of the new
project. These ‘direct’ industries will require support.
Indirect effects are changes in inter-industry transactions as
supplying industries respond to new demands placed on
them by ‘direct’ industries.
Induced effects are changes in consumer spending patterns
caused by increases in employment and income as ‘direct’
and ‘indirect’ industries increase their employment.
Evaluating RED
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Construction impacts in project area –
Creates direct, indirect and induced jobs
for local economy (why not NED –
Transfers)
Non-NED Flood damage reductioninterruption of activities due to flood
Portfolio Management
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“Why is this an important project?”
“Why is this project more important than other
projects?”
In addition to whether a project delivers high
priority outputs & successfully meets
established budget criteria
RED and OSE accounts could help answer “why
important?”
 Ex: saves “x” lives, keeps local economy
viable
Measurement challenges – that
we will need to think through
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Can OSE and RED be qualitative or
quantitative?
Technical challenges in measuring them
Need to measure for existing conditions,
future w/ and w/o project conditions
In addition to the difference between
w/ and w/o project conditions, can we
distinguish between alternatives?
Significance of effect influences need to
measure quantitatively