““Non-Typical” Economic, Non-Typical” Economic, Environmental, and Other Environmental, and Other

Flood Risk Management Flood Risk Management BenefitsBenefits

What are non-typical FRM benefits?What are non-typical FRM benefits?

Evacuation-Transition-ReoccupationEvacuation-Transition-Reoccupation Increased Living ExpensesIncreased Living Expenses Health Costs Health Costs Traffic DiversionsTraffic Diversions Emergency ResponseEmergency Response Public AssistancePublic Assistance Environmental DamageEnvironmental Damage

What are underutilized FRM What are underutilized FRM benefits?benefits?

Emergency Response (Search and Rescue)Emergency Response (Search and Rescue) Clean Up (Debris Removal)Clean Up (Debris Removal) Administrative (SBA Loans, Other Agencies)Administrative (SBA Loans, Other Agencies) Damages to Roads and Public WorksDamages to Roads and Public Works Damages to UtilitiesDamages to Utilities

What are the potential value of and What are the potential value of and underutilized non-typical FRM underutilized non-typical FRM

benefits?benefits?

THESE BENEFITS CAN REPRESENT AS THESE BENEFITS CAN REPRESENT AS MUCH AS 25% TO 35% OF THE BENEFIT MUCH AS 25% TO 35% OF THE BENEFIT BASE ON A TYPICAL FRM PROJECTBASE ON A TYPICAL FRM PROJECT

But they can be very difficult to quantify, But they can be very difficult to quantify, difficult to model and differentiate between difficult to model and differentiate between alternativesalternatives

Hard to make site specific without recent Hard to make site specific without recent verified data from historical eventsverified data from historical events

Expert Elicitation – Non-Expert Elicitation – Non-Typical Damage CategoriesTypical Damage Categories

In instances where it may be too time consuming In instances where it may be too time consuming or expensive to collect essential historical data, or expensive to collect essential historical data, EE can be used as a substituteEE can be used as a substitute

Specific pre-determined Questions are directed to Specific pre-determined Questions are directed to subject matter experts for various damage subject matter experts for various damage scenariosscenarios

Their responses are used to populate algorithm to Their responses are used to populate algorithm to estimate damagesestimate damages

ARCF Non-typical NED Categories for EE

Preliminary EE ResultsPreliminary EE Results

Environmental BenefitsEnvironmental 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 USACE Environmental Operating Principles Operating Principles (condensed version)(condensed version)

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 guidanceSee ER 200-1-5 for implementation policy guidance

Three Reasons for PrinciplesThree 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

Environmental Restoration

has been a successional process

Flood Risk Management

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

Flood Damage Reduction Mission without Environmental Concern

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

butyou must show significant

Flood Damage Reduction and

Ecosystem Improvement

Dual Purpose Projects may be justified using a combination

of traditional economics

andnon-traditional ecosystem

values

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

Average Annual Benefits 1,930 Non-monetary 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

Remaining Benefits 280 280 560

Percent of Total 50% 50% 100%

Joint Costs - - 280

Allocated joint cost 140 140 -

Total allocation 7,0001,790 5,210

Other Social EffectsOther Social Effects(from IPET Report)(from IPET Report)

DrowningDrowning InfectionInfection HomicideHomicide SuicideSuicide AccidentsAccidents InjuryInjury IllnessIllness FraudFraud

Other Social Effects (OSE) AccountOther Social Effects (OSE) Account

Community’s Resiliency & Social VulnerabilityCommunity’s Resiliency & Social Vulnerability Environmental JusticeEnvironmental Justice Quality of Life IndicatorsQuality of Life Indicators

Solid academic literatureSolid academic literature Widely usedWidely used Recommended by GAORecommended by GAO

ModelsModels Hedonic ModelsHedonic Models Loss of Life Estimation Loss of Life Estimation

Regional Economic Development (RED)Regional Economic Development (RED)

Typically regional economic impacts of a project can be Typically regional economic impacts of a project can be classified into one of three categories:classified into one of three categories:

Direct effectsDirect effects which represent the initial change of the new which represent the initial change of the new expenditure stream on industries in direct support of the new expenditure stream on industries in direct support of the new project. These ‘direct’ industries will require support.project. These ‘direct’ industries will require support.

Indirect effectsIndirect effects are changes in inter-industry transactions as are changes in inter-industry transactions as supplying industries respond to new demands placed on supplying industries respond to new demands placed on them by ‘direct’ industries. them by ‘direct’ industries.

Induced effectsInduced effects are changes in consumer spending patterns are changes in consumer spending patterns caused by increases in employment and income as ‘direct’ caused by increases in employment and income as ‘direct’ and ‘indirect’ industries increase their employment.and ‘indirect’ industries increase their employment.

Evaluating REDEvaluating RED

Construction impacts in project area Construction impacts in project area – Creates direct, indirect and induced – Creates direct, indirect and induced jobs for local economy (why not NED jobs for local economy (why not NED – Transfers)– Transfers)

Non-NED Flood damage reduction- Non-NED Flood damage reduction- interruption of activities due to floodinterruption of activities due to flood

Portfolio ManagementPortfolio Management

““Why is this an important project?”Why is this an important project?” ““Why is this project more important than Why is this project more important than

other projects?” other projects?” In addition to whether a project delivers In addition to whether a project delivers

high priority outputs & successfully high priority outputs & successfully meets established budget criteria meets established budget criteria

RED and OSE accounts could help answer RED and OSE accounts could help answer “why important?”“why important?” Ex: saves “x” lives, keeps local Ex: saves “x” lives, keeps local

economy viable economy viable

Measurement challenges – Measurement challenges – that we will need to think that we will need to think

throughthrough Can OSE and RED be qualitative or Can OSE and RED be qualitative or

quantitative?quantitative? Technical challenges in measuring themTechnical challenges in measuring them Need to measure for existing Need to measure for existing

conditions, future w/ and w/o project conditions, future w/ and w/o project conditions conditions

In addition to the difference between w/ In addition to the difference between w/ and w/o project conditions, can we and w/o project conditions, can we distinguish between alternatives?distinguish between alternatives?

Significance of effect influences need to Significance of effect influences need to measure quantitativelymeasure quantitatively