COMPREHENSIVE FLOODPLAIN MANAGEMENT : Promoting Wise Uses of Floodplains CA Department of Water...

COMPREHENSIVE COMPREHENSIVE FLOODPLAIN FLOODPLAIN

MANAGEMENTMANAGEMENT: : Promoting Wise Uses of Promoting Wise Uses of

FloodplainsFloodplains

CA Department of Water Resources/

CIFMCG Workshop

July July 20062006

Comprehensive Comprehensive Floodplain Floodplain

Management Management WorkshopWorkshop

Flood Management Flood Management Economic AnalysisEconomic Analysis

Workshop ModulesWorkshop Modules

Comprehensive FPMComprehensive FPM NFIP OverviewNFIP Overview FPM No Adverse Impact StrategiesFPM No Adverse Impact Strategies Natural Floodplain Functions and Natural Floodplain Functions and

Societal ValuesSocietal Values Flood Management Economic Flood Management Economic

Analysis Analysis Ecosystem Evaluation Ecosystem Evaluation MethodsMethods

Case StudyCase Study Technical and Financial AssistanceTechnical and Financial Assistance


Role of economic analysis in water Role of economic analysis in water resources planningresources planning

Federal water resources planning Federal water resources planning guidanceguidance

Flood damage analysisFlood damage analysis Flood damage analysis modelsFlood damage analysis models Multi-objective analysisMulti-objective analysis

Role of Economic Role of Economic AnalysisAnalysis

Objective of an economic analysis--Objective of an economic analysis--determine if a project represents the best determine if a project represents the best use of resources over its life expectancyuse of resources over its life expectancy

Economic justification--total benefits > Economic justification--total benefits > total costs based upon comparison of total costs based upon comparison of without and with project conditionswithout and with project conditions

Key element of planning process:Key element of planning process: Plan formulationPlan formulation Evaluate feasibility of plansEvaluate feasibility of plans Assist in decision-makingAssist in decision-making


Economic analysis answers these Economic analysis answers these questions:questions: Should the project be built at all?Should the project be built at all? Should it be built now?Should it be built now? Should it be built to a different Should it be built to a different

configuration or size?configuration or size? Will it have a net positive social value?Will it have a net positive social value?


Financial analysis answers questionsFinancial analysis answers questions Who should pay?Who should pay? Do they have the ability to pay?Do they have the ability to pay?

It’s possible to have a project that is It’s possible to have a project that is economically feasible and financially economically feasible and financially infeasible or vice versainfeasible or vice versa


Economic analysis methods:Economic analysis methods: Benefit-cost analysis: benefits and costs Benefit-cost analysis: benefits and costs

of proposed projects are measured over of proposed projects are measured over the life of the projectthe life of the project

Cost-effectiveness analysis: determines Cost-effectiveness analysis: determines the most cost-effective approach of the most cost-effective approach of achieving a given objective ($/unit)achieving a given objective ($/unit)

Socioeconomic impact analysis: Socioeconomic impact analysis: measures changes in regional measures changes in regional population and economic activitypopulation and economic activity

Federal Water Resources Federal Water Resources

Planning GuidancePlanning Guidance Federal agencies involved in water Federal agencies involved in water resources planning must followresources planning must follow Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies (US Water Resources Council, March 1983) US Army Corps of EngineersUS Army Corps of Engineers US Bureau of ReclamationUS Bureau of Reclamation Natural Resources and Conservation Natural Resources and Conservation

ServiceService Tennessee Valley AuthorityTennessee Valley Authority


Planning GuidancePlanning Guidance Federal objective: Federal objective: ““..to contribute to national economic ..to contribute to national economic

development (NED) consistent with development (NED) consistent with protecting the nation’s environment, protecting the nation’s environment, pursuant to national environmental pursuant to national environmental statues, applicable executive orders, and statues, applicable executive orders, and other federal planning requirements.”other federal planning requirements.”


Planning GuidancePlanning Guidance P&G establish four accounts:P&G establish four accounts:

National Economic Development (NED)National Economic Development (NED) Environmental Quality (EQ)Environmental Quality (EQ) Regional Economic Development (RED)Regional Economic Development (RED) Other Social Effects (OSE)Other Social Effects (OSE)


Planning GuidancePlanning Guidance National Economic Development National Economic Development (NED)--economic value of the (NED)--economic value of the national output of goods and national output of goods and servicesservices Water supplyWater supply Flood damage reductionFlood damage reduction NavigationNavigation HydropowerHydropower RecreationRecreation Commercial fishingCommercial fishing


Planning GuidancePlanning Guidance Environmental Quality (EQ)-- effects Environmental Quality (EQ)-- effects

on significant natural and cultural on significant natural and cultural resourcesresources Ecosystem restorationEcosystem restoration Preservation of historical resourcesPreservation of historical resources Preservation of aesthetic resourcesPreservation of aesthetic resources


Planning GuidancePlanning Guidance Regional Economic Development Regional Economic Development

(RED)--effects on regional economic (RED)--effects on regional economic activityactivity IncomeIncome EmploymentEmployment PopulationPopulation


Planning GuidancePlanning Guidance Other Social Effects (OSE)—all other Other Social Effects (OSE)—all other

“relevant” effects“relevant” effects Urban and community impactsUrban and community impacts Life, health and safetyLife, health and safety DisplacementDisplacement Long-term productivityLong-term productivity Energy requirementsEnergy requirements

Federal Water ResourcesFederal Water Resources Planning Guidance Planning Guidance

NED account is requiredNED account is required Other information that is required by law Other information that is required by law

or which will have a “material bearing on or which will have a “material bearing on decision-making” should be included in decision-making” should be included in the other accountsthe other accounts

Agencies can establish their own specific Agencies can establish their own specific guidance based on guidance based on P&GP&G


Planning GuidancePlanning Guidance Benefit-cost analysis is required for Benefit-cost analysis is required for

formal economic analysis of federal formal economic analysis of federal programs or projectsprograms or projects

Criteria:Criteria: Maximum net benefits—Maximize the Maximum net benefits—Maximize the

present value of benefits minus the present value of benefits minus the present value of costspresent value of costs

B/C Ratio—the ratio of the present value B/C Ratio—the ratio of the present value of benefits to the present value of costs; of benefits to the present value of costs; must be greater than 1.00must be greater than 1.00


Corps planning criteria:Corps planning criteria: Completeness—an alternative must not rely on Completeness—an alternative must not rely on

other activities to functionother activities to function Effectiveness—an alternative must contribute to Effectiveness—an alternative must contribute to

at least one of the project’s planning objectivesat least one of the project’s planning objectives Efficiency—an alternative must be cost-effectiveEfficiency—an alternative must be cost-effective Acceptability—an alternative must be Acceptability—an alternative must be

considered by the general public to be a considered by the general public to be a satisfactory way of addressing identified satisfactory way of addressing identified problemsproblems


Corps plans:Corps plans: National Economic Development—single National Economic Development—single

purpose plan such as flood damage purpose plan such as flood damage reduction, water supply, navigation, etc.reduction, water supply, navigation, etc.

Ecosystem Restoration—single purpose Ecosystem Restoration—single purpose ecosystem restoration planecosystem restoration plan

Combined Plan—combines NED and ER Combined Plan—combines NED and ER purposespurposes

Locally Preferred Plan—recommended by Locally Preferred Plan—recommended by local agencies; may require additional local agencies; may require additional funds from local agencyfunds from local agency

Flood Damage Reduction Flood Damage Reduction AnalysisAnalysis

Types of flood damageTypes of flood damage:: Physical damage (structures, utilities, Physical damage (structures, utilities,

autos, crops, etc.)autos, crops, etc.) Income lossIncome loss Emergency costsEmergency costs Lost value of public agency services Lost value of public agency services

(police & fire protection, hospitals, etc.)(police & fire protection, hospitals, etc.) Lost taxes (property and sales)Lost taxes (property and sales) Injuries and loss of lifeInjuries and loss of life Social disruptionSocial disruption


Flood damage can be expressedFlood damage can be expressed Event damage: the damage expected to Event damage: the damage expected to

occur from specific flood events occur from specific flood events (examples: 10-, 50-, 100-year events); (examples: 10-, 50-, 100-year events); used for emergency planningused for emergency planning

Expected annual damage: the “average Expected annual damage: the “average annual” damage for all events that annual” damage for all events that could be expected to occur in any given could be expected to occur in any given year; used for project B/C analysesyear; used for project B/C analyses


Example: Event and Expected Annual Example: Event and Expected Annual DamageDamage

EventEvent FrequencyFrequency Estimated Estimated W/O Project W/O Project

Damage Damage ($Mill)($Mill)

50 YR50 YR 0.020.02 $259$259

100 YR100 YR 0.010.01 $313$313

200 YR200 YR 0.0050.005 $325$325

500 YR500 YR 0.0020.002 $327$327

Expected Expected Annual Annual

---------------------- $12$12

Source: USACE, Lower Cache Creek Feasibility Study, 2003


Damage ($)

Frequency

1.00

0.005

0.002

0.01

0.02

Expected Annual Damage

Flood Damage Reduction Flood Damage Reduction

Analysis ModelsAnalysis Models Corps HEC-FDACorps HEC-FDA

Expected annual damage used in Expected annual damage used in benefit-cost analysisbenefit-cost analysis

Project performance statistics used in Project performance statistics used in risk analysis and levee certificationrisk analysis and levee certification

Incorporates uncertainty using “Monte Incorporates uncertainty using “Monte Carlo” proceduresCarlo” procedures

www.hec.usace.army.mil/software/hec-fda/hecfda-hecfda.html

Flood Damage ReductionFlood Damage Reduction Analysis Models Analysis Models

HEC–FDA Project Performance HEC–FDA Project Performance StatisticsStatistics Expected annual exceedanceExpected annual exceedance Long-term riskLong-term risk Conditional non-exceedanceConditional non-exceedance


Expected annual exceedanceExpected annual exceedance The annual probability of flooding The annual probability of flooding

taking into account all different types of taking into account all different types of eventsevents

Example: 0.10 or 10% chance of Example: 0.10 or 10% chance of flooding in any given yearflooding in any given year


Long-term riskLong-term risk The probability of flooding over a long The probability of flooding over a long

period of time period of time Example: 0.30 or 30% over a 25 year Example: 0.30 or 30% over a 25 year

periodperiod


Conditional non-exceedanceConditional non-exceedance The probability of passing a specified The probability of passing a specified

flood event flood event Example: 90% probability of passing a Example: 90% probability of passing a

100 year event100 year event Used in certifying levees Used in certifying levees


FEMA HAZUSFEMA HAZUS GIS-based programGIS-based program Can be used to asses flooding, hurricane and Can be used to asses flooding, hurricane and

earthquake hazardsearthquake hazards Default hydraulic and structural inventories Default hydraulic and structural inventories

for communities included in its databasesfor communities included in its databases www.hazus.org

FEMA Riverine B/C SoftwareFEMA Riverine B/C Software Spreadsheet-based programSpreadsheet-based program Hazard Mitigation Grant ProgramsHazard Mitigation Grant Programs [email protected]

Multi-Objective AnalysisMulti-Objective Analysis Agencies, ASFPM are advocating MOM

projects Achieve multiple benefits at lower costs Greater support from diverse groups of

stakeholders More likely sources of financial support

Multi-Objective AnalysisMulti-Objective Analysis

Monetary values can be assigned to most water management benefits (water supply, flood damage reduction, hydropower, etc.)

Multi-objective projects often include ecosystem restoration

Problem—how do we evaluate ecosystem benefits?

Multi-Objective AnalysisMulti-Objective Analysis

Three approaches for including ecosystem benefits in economic analysis: Cost-effectiveness ($/unit) Tradeoff analyses (assign “points” to

unit and $ benefits) Benefit-cost analysis ($’s)

To Monetize or Not to To Monetize or Not to Monetize Monetize

Ecosystem Benefits?Ecosystem Benefits? Decision depends upon:

Agency guidance Available data (quantity/quality

environmental outputs) Identify/quantify environmental outputs

and link with human services (water supply, flood damage reduction, recreation, etc.)

Comfort level (what’s a bunny worth??) No approach is perfect!

To Summarize…To Summarize…

This module has discussedThis module has discussed Role of economic analysis in water resources Role of economic analysis in water resources

planningplanning Federal water resources planning guidanceFederal water resources planning guidance Flood damage analysis and modelsFlood damage analysis and models Intro to multi-objective analysis Intro to multi-objective analysis

More info on Federal and state (DWR) More info on Federal and state (DWR) economics guidance can be found at:economics guidance can be found at:

www.economics.water.ca.gov

What’s Next?What’s Next?

Ecosystem Valuation MethodsEcosystem Valuation Methods

COMPREHENSIVE FLOODPLAIN MANAGEMENT : Promoting Wise Uses of Floodplains CA Department of Water...

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