The Economic Impact of a The Economic Impact of a Terrorist Attack on the Twin Terrorist Attack on the Twin Ports of Los Angeles-Long Ports of Los Angeles-Long BeachBeach

Reducing the Risks and Consequences of TerrorismCREATE ConferenceNovember 18, 2004

Peter Gordon, James Moore, andPeter Gordon, James Moore, andHarry Richardson, USCHarry Richardson, USCQisheng Pan, Texas Southern UniversityQisheng Pan, Texas Southern University

Research ObjectivesResearch Objectives

We demonstrate approach to computing wide area economic impacts resulting from local events.

Our modeling area is economics. We are consumers of scenarios.

Our case study is the port complex.

IntroductionIntroduction

We have applied different versions We have applied different versions of SCPM (Southern California of SCPM (Southern California Planning Model) to estimate Planning Model) to estimate spatially disaggregated economic spatially disaggregated economic impacts of projects, policies and impacts of projects, policies and plans.plans.

In recent years, many applications In recent years, many applications related to earthquakes. This is our related to earthquakes. This is our first experiment with terrorist first experiment with terrorist attacks.attacks.

Introduction (cont.)Introduction (cont.)

SCPM started as a regional I-SCPM started as a regional I-O model --with the number of O model --with the number of geographical zones, usually geographical zones, usually political jurisdictions, ranging political jurisdictions, ranging from about 50 to 308. SCPM from about 50 to 308. SCPM is now also a transport is now also a transport network model -- with 1527 network model -- with 1527 Traffic Analysis Zones (TAZs).Traffic Analysis Zones (TAZs).

Example Impact Example Impact EstimatesEstimates

Table 1. Total Loss ($b.) of an Elysian Park 7.1 Table 1. Total Loss ($b.) of an Elysian Park 7.1 EarthquakeEarthquake

A. Structure LossA. Structure Loss $45.250 b.(48.326%)$45.250 b.(48.326%)B. Business Loss (Direct + Indirect + Induced)B. Business Loss (Direct + Indirect + Induced)

$46.737 b.(49.991%)$46.737 b.(49.991%)C. Network Loss = C. Network Loss = Network Costs Network Costs

Personal Travel CostPersonal Travel Cost $1.134 b.$1.134 b. Freight Cost Freight Cost $0.295 b.$0.295 b. Total Travel Cost Total Travel Cost $1.429 b.(1.526%)$1.429 b.(1.526%)

D. Bridge Repair Cost D. Bridge Repair Cost $0.219 b. (0.233%)$0.219 b. (0.233%)

Total = A + B + C +D = Total = A + B + C +D = $93.635 b. (100%) $93.635 b. (100%)

The table shows an earthquake impact The table shows an earthquake impact illustration. It estimates theillustration. It estimates the economic economic costs of the event more fully than most costs of the event more fully than most analyses.analyses.

It is not directly applicable to the It is not directly applicable to the terrorist attack example because terrorist attack example because (except for bridge damage) structure (except for bridge damage) structure losses would be minimal. The approach losses would be minimal. The approach could be used to estimate the impact of could be used to estimate the impact of other types of attacks, e.g., a building other types of attacks, e.g., a building (or buildings) in downtown LA(or buildings) in downtown LA..

Example Impact Example Impact Estimates (cont.)Estimates (cont.)

Example Impact Example Impact Estimates (cont.)Estimates (cont.) It disaggregates losses into four It disaggregates losses into four

categories -- structures, business categories -- structures, business interruption, network costs, and interruption, network costs, and infrastructure repair. In the infrastructure repair. In the earthquake case, the latter two are earthquake case, the latter two are quite modest (<2%) with the balance quite modest (<2%) with the balance evenly split between structure evenly split between structure damage and business interruption.damage and business interruption.

All results are available for each TAZ.All results are available for each TAZ.

Radiological Bomb Radiological Bomb AttackAttack We explore the implications We explore the implications

of a simultaneous of a simultaneous radiological bomb at the two radiological bomb at the two ports (LA and LB).ports (LA and LB).

High End Scenario: Port High End Scenario: Port complex shut down for 120 complex shut down for 120 days for decontamination.days for decontamination.

Radiological Bomb Radiological Bomb Attack (cont.)Attack (cont.) Low End ScenarioLow End Scenario

– 5 lbs of explosive. 5 lbs of explosive. – Small radius of intensive damage (about Small radius of intensive damage (about

50 yards).50 yards).– Area of low radioactivity will vary with Area of low radioactivity will vary with

wind and climatic conditions (probably wind and climatic conditions (probably several kmseveral km22).).

– Staying indoors for a period of time Staying indoors for a period of time desirable, but evacuation of sites desirable, but evacuation of sites outside the ports probably unnecessary.outside the ports probably unnecessary.

– Reopening the ports would be a political Reopening the ports would be a political decision, but could occur within 15 days.decision, but could occur within 15 days.

SCPM2 Dataflow and SCPM2 Dataflow and CalculationsCalculations

Updated MatricesJHW, JSH, F

Terrorist Attack Scenario 1

Terrorist Attack Scenario 2

Port Dirty Bomb + Bridge Scenario

Terrorist Attack Scenario n-1

Terrorist Attack Scenario n

Facility Losses

Loss of Bridges Port Closure Loss of Trading

Capacity Link

Capacities

Network Equilibrium Model (Damaged)

Generalized Cost of Travel, Link

Flows

Demand for Destinations

(Interzonal Flows)

Calibrated Spatial Interaction Models

Origins and Destinations

Origins and Destinations

Baseline Link Costs

Parameterized Distance Decay Functions

Network Equilibrium Model (Baseline)

Generalized Cost of Travel, Link

Flows

Demand for Destinations

(Interzonal Flows)

Spatial Interaction Models

Network Bridge Inventory

Land Use

Regional Input-Output Table

Person Trip Ends

Freight Trip Ends

Household Con-sumption Functions

Closed Regional Input-Output Model

Open Regional Input-Output Model

Total Output

(Closed)

Induced Output(Loss)

Indirect Output(Loss)

Direct Output(Loss)

Total Output(Open)

Southern California Planning Model version 1.1

Spatial Allocations of Output (Loss)

Final Demand

Input-Output Identity: Direct Output = Final Demand

Direct Output by Zone

Baseline Activity andTransportation System

MPG IMPLAN I-O Model

Iteration

Sub-Iteration

Data

Computation

Numerical Iteration Cycles Used to Compute Simultaneous Economic Equilibria

Explanation of the ModelExplanation of the Model

Iterative approach that achieves consistency Iterative approach that achieves consistency between travel demand, spatial activities, and between travel demand, spatial activities, and network costs.network costs.

Baseline economic and network equilibria Baseline economic and network equilibria calculated.calculated.

Scenarios define changes in network capacity and Scenarios define changes in network capacity and economic activities.economic activities.

Direct, indirect and induced impacts allocated as Direct, indirect and induced impacts allocated as in SCPM1.in SCPM1.

Travel demand changes are combined with Travel demand changes are combined with baseline spatial economic behavior to update baseline spatial economic behavior to update shopping, commuting, and freight flow matrices.shopping, commuting, and freight flow matrices.

Spatial allocation of impacts re-estimated via Spatial allocation of impacts re-estimated via SCPM1.SCPM1.

Model RunsModel Runs

Local Impacts -- The ports close down as an Local Impacts -- The ports close down as an economic activity (sector).economic activity (sector).

Regional and National Impacts -- Interruption Regional and National Impacts -- Interruption of trade flows to and from the ports.of trade flows to and from the ports.

We ran the model many times -- both We ran the model many times -- both impacts, 15 and 120 days, each port impacts, 15 and 120 days, each port individually and combined, with and without individually and combined, with and without other elements of a potential attack.other elements of a potential attack.

Here we report on just one or two examples.Here we report on just one or two examples.

Freight Performance Freight Performance Sub-ModelSub-Model An important computability issue An important computability issue

is how quickly the numerical is how quickly the numerical results for a new scenario results for a new scenario converge to a new set of converge to a new set of equilibria.equilibria.

As shown in the illustrative As shown in the illustrative example for one port -- the answer example for one port -- the answer is “very fast.”is “very fast.”

Convergence rateConvergence rateObjective Function Value of Assignment

(LB Port With Bridge Damage)

050100150200250300350400450500

1 2 3 4 5 6 7 8 9 10

Iterations

Ob

jec

tiv

e (

Mill

ion

s

Min

*PC

E)

Total

Freight

Person

ResultsResults

A radiological bomb attack on both ports A radiological bomb attack on both ports alone would have more of a psychological alone would have more of a psychological and symbolic than an economic impact.and symbolic than an economic impact.

Alone, it might close the ports for only 15 Alone, it might close the ports for only 15 days.days.

If the bombs were relatively small, e.g., 5 If the bombs were relatively small, e.g., 5 lbs, the human toll in deaths and radiation lbs, the human toll in deaths and radiation illness would probably be modest.illness would probably be modest.

Higher end radiological bomb attacks Higher end radiological bomb attacks requiring longer periods for requiring longer periods for decontamination result in major economic decontamination result in major economic impacts. impacts.

Results (cont.)Results (cont.)

The “local” impact of a lower end attack, The “local” impact of a lower end attack, i.e., job and output losses associated with i.e., job and output losses associated with the cessation of port activities, amounts the cessation of port activities, amounts to $138.5 m. of output and 1,258 PYEs to $138.5 m. of output and 1,258 PYEs (person-years of employ-ment) over 15 (person-years of employ-ment) over 15 days.days.

The regional (and national) impact -- the The regional (and national) impact -- the consequences of the interruption in consequences of the interruption in exports and imports from a higher end exports and imports from a higher end attack -- would close the ports for at least attack -- would close the ports for at least 120 days, resulting in $34 billion of lost 120 days, resulting in $34 billion of lost output -- 212,165 PYEs and $648 million output -- 212,165 PYEs and $648 million of travel cost delays.of travel cost delays.

Spatial Distribution of Job Losses: 120-Day Port Closure, Spatial Distribution of Job Losses: 120-Day Port Closure,

Ports of Long Beach-Los Angeles (Scenario 6a)Ports of Long Beach-Los Angeles (Scenario 6a)

Spatial Distribution of Spatial Distribution of Job LossesJob Losses The map shows that job losses The map shows that job losses

are quite dispersed and are not are quite dispersed and are not clustered close to the ports.clustered close to the ports.

The explanation is that so many The explanation is that so many firms and jobs throughout the firms and jobs throughout the region are directly --and region are directly --and indirectly -- linked to the ports indirectly -- linked to the ports via imports and/or exports.via imports and/or exports.

Out-of-Region ImpactsOut-of-Region Impacts

Our model permits an aggregate estimate Our model permits an aggregate estimate of impacts outside Southern California.of impacts outside Southern California.

In the “local effects” cases, most of the In the “local effects” cases, most of the impacts (about 2/3) occur within the impacts (about 2/3) occur within the region -- and >50% within LA County.region -- and >50% within LA County.

In the trade flows interruption cases, In the trade flows interruption cases, about 2/3 of the impacts are felt outside about 2/3 of the impacts are felt outside Southern California.Southern California.

QualificationsQualifications

Transportation analysis is limited to the Transportation analysis is limited to the highway network. We will incorporate the highway network. We will incorporate the new grade-separated rail (Alameda new grade-separated rail (Alameda Corridor) and other non-highway facilities.Corridor) and other non-highway facilities.

The 120-day period may be too short.The 120-day period may be too short. There are other ways to isolate the port There are other ways to isolate the port

by attacking the transportation network.by attacking the transportation network. The research is not a “full cost” analysis.The research is not a “full cost” analysis. We have not analyzed mitigation, either We have not analyzed mitigation, either

w.r.t. traffic or port substitutions.w.r.t. traffic or port substitutions.

ConclusionsConclusions

The “local” impacts of this type of The “local” impacts of this type of attack are modest because of the attack are modest because of the minimal damage to port minimal damage to port infrastructure.infrastructure.

High priority has been given to High priority has been given to protecting the ports, but this goal protecting the ports, but this goal needs to be interpreted more needs to be interpreted more broadly.broadly.

It is relatively easy to disrupt port It is relatively easy to disrupt port access, and the costs of trade flow access, and the costs of trade flow interruption are very high. interruption are very high.

Conclusions (cont.)Conclusions (cont.)

This research models only economic This research models only economic impacts -- business interruption and impacts -- business interruption and impaired transport network impaired transport network performance. Other costs, e.g., performance. Other costs, e.g., mortality and illness, prevention mortality and illness, prevention and mitigation, are not yet and mitigation, are not yet estimated.estimated.

The high economic impact costs The high economic impact costs justify considerable resource justify considerable resource expenditures on prevention.expenditures on prevention.

Conclusions (cont.)Conclusions (cont.)

The methodology used in this study The methodology used in this study is adaptable to almost any kind of is adaptable to almost any kind of terrorist attack in Southern terrorist attack in Southern California -- LAX, Disneyland, the California -- LAX, Disneyland, the Alameda Corridor, downtown, etc.Alameda Corridor, downtown, etc.

The methodology is also The methodology is also transferable to other large transferable to other large metropolitan areas -- New York, metropolitan areas -- New York, Washington D.C., San Francisco -- if Washington D.C., San Francisco -- if a similar model to SCPM is for a similar model to SCPM is for these areas.these areas.

Conclusions (cont.)Conclusions (cont.)

The input-output model is sometimes The input-output model is sometimes criticized for its linearity and non-criticized for its linearity and non-substitutability, but in other research we substitutability, but in other research we have accommodated some price and have accommodated some price and substitution effects.substitution effects.

A limitation of the current model is that A limitation of the current model is that out-of-region impacts are estimated only in out-of-region impacts are estimated only in the aggregate. We are currently working on the aggregate. We are currently working on an integrated regional-national model an integrated regional-national model (SCPM2004-NIEMO) that specifies these (SCPM2004-NIEMO) that specifies these out-of-region impacts, state-by-state.out-of-region impacts, state-by-state.