Presented by Nick Charnas, III, PE, CFM, MBA

Matthew Goolsby, PE, CFM

June 13, 2018 | 1:40-2:10 p.m. Florida Stormwater Association Annual Conference

Apples to Apples: An Objective Approach to

Comparing Your Flood Reduction Projects

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• Structural Flooding

• Roadway Flooding

• Frequent Maintenance

• Level of Service

•Water Quality

• Resiliency Components

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Typical Prioritization Criteria – Which projects are cost-effective?

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COSTS BENEFITS

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COSTS BENEFITS • Land/ROW acquisitions

• Construction and materials

• Design

• Testing

• Permits

• Project management

• Equipment

• Future maintenance

• Future losses prevented/reduced

• Sum of the expected annual benefits (EABs)

• Project components: • Useful life

• Probabilities

• Time value of money

EAB = EADBefore Mitigation – EADAfter Mitigation

EAB = Expected annual benefit

EADBefore Mitigation = Expected annual damages before mitigation

EADAfter Mitigation = Expected annual damages after mitigation

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Calculating the Expected Annual Benefit

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Economics 101: Annualizing Expected Benefits

“Net present value (NPV) is a method of determining the current value of all future cash flows generated by a project after accounting for the initial capital investment.” – Investopedia.com

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Project Benefits Formula

Benefits = EAB 1− 1+𝑟 −𝑇

𝑟

Variables

EAB = Total expected annual net benefit

r = Annual discount rate*

T = Project Useful Life

*CIRCULAR A-94 GUIDELINES AND DISCOUNT RATES FOR BENEFIT-COST ANALYSIS OF FEDERAL PROGRAMS RE: Base-Case Analysis Real Discount Rate "This rate approximates the marginal pretax rate of return on an average investment in the private sector in recent years."

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The Benefit-Cost Ratio (BCR)

Σ(COSTS)

Σ(BENEFITS) BCR =

• FEMA Benefit-Cost Analysis (BCA) Toolkit

• SWFWMD Modified BCA Tool

• Local Mitigation Strategy (LMS) Ranking Process

• USDA NRCS (Restoration and Conservation Projects)

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Use these Resources to help in Project Prioritization

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FEMA Benefit-Cost Analysis Toolkit

• Developed to standardized the cost-effectiveness

element of Federal Grant Application process:

Hazard Mitigation Grant Program (HMGP)

Pre-Disaster Mitigation (PDM)

Flood Mitigation Assistance (FMA)

• Suite of tools to analyze natural hazards:

• Floods (Coastal and Riverine)

• Eathquakes

• Fires

• Hurricane Wind

• Tornado

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Basic Information Required to Initiate BCA

• Quantifiable Damage

• Mitigation Approach

• Level of Protection

• Project Useful Life

• Detailed Cost Estimate

• Future Maintenance Costs

• Roads and Bridges • Building, Contents, and Displacement • Utilities (Electrical, Water, Wastewater Services) • Emergency (Police, Fire, and Hospital Services) • Mental Stress Treatment Costs • Loss of Business • Volunteer Costs • Ecosystem • Value of Life and Injury

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FEMA’s BCA Tool Provides Standard Economic Values

Values are incorporated into FEMA’s benefit cost analysis toolkit, available at https://www.fema.gov/benefit-cost‐analysis

• Observed/Historical Damages Based on records from actual past disaster events Approximate frequency of event utilizing monitoring

stations (stream flow, precipitation, tidal) FEMA can apply an unknown frequency approach

using three or more events

• Expected Damages Based on damages predicted from a theoretical

model or engineering analysis

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Two Damage Approaches

Values are incorporated into FEMA’s benefit cost analysis toolkit, available at https://www.fema.gov/benefit-cost‐analysis

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Expected Damages Approach for Structures

Source: FEMA 259. Appendix B: Understanding the FEMA benefit-cost analysis process

• Depth-Damage Function (DDF) approach estimates direct damage based on a depth of flooding in terms of percent damage to structure

• Compiled from a variety of sources, including FEMA and the U.S. Army Corps of Engineers (USACE)

• DDFs vary based on the building type, foundation, and occupancy

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Example Project #1: Roadway and Structure Flood Reduction

Project: Floodplain storage and conveyance improvements to protect roadway flooding at the 10-year rainfall event and structure flooding at the 25-year event

Component Value Source

• Project Useful Life: 50 years FEMA Standard Value

• Project Cost $2,500,000 Local Design Engineer

• Annual Maintenance $12,500 Local Design Engineer

• Properties Impacted 35 Expected Damages

• One-way Trips per day 5,000 Traffic Study

• Level of Protection: Local Design Engineer • Roads 50-year • Structures 100-year

• Social Benefits: $500,000

Project Benefits: $4,235,676 Project Costs: $2,707,011 Benefit-Cost Ratio: 1.56

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Example Project #2: Utility Floodproofing

Project: Elevating and floodproofing measures to protect equipment and instrumentation and controls against repeated flooding beginning at the 10-year rainfall event

Component Value Source

• Project Useful Life: 40 years Utility company design engineer

• Project Cost $1,500,000 Local building contractor

• Annual O&M $60,000 Local building contractor

• Customer Population 40,000 Utility company

• Level of Protection 500-year Utility company design engineer

• Damages (Direct/ LOS days): 10-year: $20,000; 0.25 days 25-year: $200,000; 1 day 100-year: $1,500,000; 5 days

Project Benefits: $3,694,350 Project Costs: $2,299,903 Benefit-Cost Ratio: 1.61

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Water Quality and Environmental Considerations

• FEMA Ecosystem Benefits (See Table)

• SWFWMD The estimated cost per pound of pollutant removed, as compared to historical averages. Also, cost per acre treated as compared to historical averages.

• NRCS Typically consider $ per acre restored

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Incorporating Sea Level Rise

• Utilize locally adopted planning level projections

• Consider project useful life when selecting value

• Applied to existing and proposed damage assessments

• Direct adjustment to stillwater elevation (Coastal/Tidal) or Boundary Condition (Riverine/Stormwater)

https://www.fema.gov/media-library-data/1387903260455-e6faefb55a3f69d866994fb036625527/HMA_Sea_Level_Rise_FAQ_12-23-2013.pdf

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SWFWMD Modified BCA Approach

• Direct Flood Damages: Damages that result from the actions of floodwaters; it can be further categorized into Physical Damages: Damages that occur to residential and non-residential

properties; examples include structures, contents, vehicles, and roadways.

Non-physical Damages: Damages that cannot be touched but directly related to the flood; examples include displacement, emergency and clean-up costs.

• Indirect Flood Damages: Damages that arise from the disruptions caused by flooding; examples include loss of income as a result of flood.

Utilizes well-accepted FEMA or USACE practices to estimate tangible damages:

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SWFWMD Modified BCA Approach

• Direct Damages • Structure

• Contents

• Vehicles

• Roadway ($/lane/ft)

• Indirect Damages Displacement ($/sq. ft/mo.)

Vehicle Delay/Detour ($/vehicle/hour)

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Local Mitigation Strategy Prioritization Process

• Focus on prioritizing projects that: Have Technical merit

Are Cost Beneficial, and

Are environmental sound and publicly accepted

• Three Major Components: Suitability

Risk Reduction

Cost and Schedule

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Evaluate Overall Project Suitability

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Consideration Towards Risk Reduction Components

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Consideration Towards Cost and Schedule

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What are the Takeaways?

• Developing a BCA is critical towards demonstrating project cost-effectiveness and quantifying expected return on investment

• The BCA can be applied as a project prioritization resource for CIP in addition to meeting grants and other cooperative funding requirements

• The results of BCA can also be applied as a weighted component of a larger prioritization process that considers other critical project elements

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Nick Charnas, III, PE, CFM, MBA

Email: ncharnas@appliedfl.com

Matthew Goolsby, PE, CFM

Email: mgoolsby@appliedfl.com

Questions?