Wednesday, May 1, 2013

Strategically Placing Green Infrastructure: Cost-Effective Land Conservation in the Floodplain

Green infrastructure approaches have attracted increased attention from local governments as a way to lower flood risk and provide an array of other environmental services.  The peer-reviewed literature, however, offers few estimates of the economic impacts of such approaches at the watershed scale. Carolyn Kousky, Sheila M. Olmstead, Margaret A. Walls and Molly Macauley; all of Reesources for the Future estimate the avoided flood damages and the costs of preventing development of floodplain parcels in the East River Watershed of Wisconsin’s Lower Fox River Basin. Results suggest that the costs of preventing conversion of all projected floodplain development would exceed the flood damage mitigation benefits by a substantial margin. However, targeting of investments to high-benefit, low-cost parcels can reverse this equation, generating net benefits. The analysis demonstrates how any flood-prone community can use a geographic-information-based model to estimate the flood damage reduction benefits of green infrastructure, compare them to the costs, and target investments to design cost-effective nonstructural flood damage mitigation policies.
Estimates of the avoided flood damage from floodplain conservation...  include total building, content, and inventory loss; business interruption loss; the number of at least moderately damaged buildings; and the truckloads of debris generated. Estimating agricultural losses using Hazus would have required many assumptions, including the timing of floods during crop cycles, and changes in crop yields....

As expected, losses increase with flood event severity (all estimates are in 2010 dollars). The estimated building, content, and inventory loss for a 100-year flood event in the ERW is approximately $84 million (for residential properties, Hazus estimates an average of $132,600 of building and contents losses per damaged household). A 10-year flood generates losses about half this size, while a 200-year flood generates losses of $95million. These expected losses vary across the watershed, with depth of flooding and the density of affected structures. The Brown County Planning Department forecasts an additional 54,819 residents in the county by 2025, creating demand for about 21,000 acres of new residential development and 2,447 acres of commercial development. These forecasts, made available to the author in GIS so that they could identify the particular parcels expected to convert, are the basis for their future development scenario. We identify all parcels that were in natural areas or agriculture in the 2010 tax assessor maps, but are projected to be in some developed use by 2025 in Brown County’s forecasts. Table 2 summarizes the estimated flood damages for this future development scenario. Building losses increase, relative to 2010, by roughly $3−15 million, depending  on the event. For the 100-year flood, for example, building losses increase from $84 million to $96 million with the additional acres of development.
The 2010 AAL, the expected economic damage from flooding in any given year in the ERW with 2010 land use and development patterns, is $19.43 million. The AAL for the future (2025) scenario is $22.06 million. The difference, $2.63 million, is the increase in expected annual flood damages from the additional  development projected to occur by 2025. Correspondingly, this is an estimate of the annual benefits of avoided flood damages if the planned floodplain development does not occur.
The authors estimate the costs of both fee-simple purchase and easement purchase, and compare these with the “avoided AAL” benefit estimates ...  They begin by assuming that government would want to prevent development of all 833 parcels that would receive any floodwater in a 100-year flood. Preventing development on these parcelswould preserve 7403 acres of open space in the 100-year floodplain, at a  one-time purchase cost of $101.1 million. Annualized over 100 years at a 5% discount rate, our estimated cost for preservation of this land is just over $5 million per year. If easements were purchased instead, the annualized cost would be approximately $3 million per year. To provide some perspective, the 2012 Brown County budget includes revenues of about $201 million and expenses of about $285 million; property tax revenue for 2012 is expected to be about $81 million. The cost of even the cheaper easement purchase, $3 million, exceeds their estimated avoided flood damages of $2.63 million; this expenditure would not be economically justifiable.
Flood damages across these 833 parcels are not distributed equally. The authors analyze three scenarios that target floodplain preservation investments based on the extent of flood damages and (in the third scenario) on costs. As expected, the costs of all three scenarios are lower than the base case, since fewer parcels are purchased. In Scenario 1, we purchase only those parcels that receive more than one foot of water in a 100-year flood, at an annual cost of $3.7 million for feesimple purchase and $2.2 million for easement purchase. Scenario 1 purchases 69% of all parcels slated for development that receive water in a 100-year flood (575 of the 833 base-case parcels), comprising 63% of acreage projected to convert to developed uses.

In Scenario 2, which targets based on both flood depth and acreage, far fewer parcels (328 of 833) are purchased. However, more acreage is protected - 6385 acres, or 86% of all acreage that lies in the 100-year floodplain and is projected to be developed by 2025. The annual cost of Scenario 2 is much less at $1.15 million for a fee simple purchase. Scenario 3, which extends Scenario 2 to also target based on the cost of parcels, has the lowest costs of all, less than $500,000 in annual terms for a fee simple purchase and even less for easement purchase. This estimate is less than half the cost of Scenario 2, even though 27% more parcels are purchased than in Scenario 2. The acreage of land protected from development is virtually the same as in Scenario 2, but Scenario 3 acquires relatively more inexpensive and small properties. This scenario essentially takes a “bang for the buck” approach, obtaining as much flood protection as possible with preservation dollars.
The costs of all three scenarios are much lower than the cost of preserving all floodplain land slated for future development. But do the benefits of each scenario exceed the costs? We expect that they do; costs in Scenarios 2 and 3 are far lower - only 23% and 10%, respectively, of costs in the baseline case - and a large percentage of the total acreage is still protected. But precisely estimating avoided damages under these scenarios becomes more speculative than the baseline case as it requires us to say which types of buildings with what values are constructed over the 2010−2025 period on each parcel .... Still, to provide a rough estimate of avoided damages for the scenarios, the authors use the mean values for each property class as above and then select a single, conservative depth−damage function for each class ...

For Scenario 1, they find avoided future flood damages to buildings of roughly $2.2 million. For Scenario 2, they estimate avoided damages at roughly $1.2 million, and for Scenario 3 ...  $1.5 million. They stress the huge uncertainty in these numbers, given that they are for unknown future development and rely on uncertain depth−damage relationships. Still, they suggest that Scenarios 2 and 3 may generate benefits in excess of costs for both fee simple purchase and easement purchase. Careful targeting can thus produce cost-effective investments in floodplain conservation.
To economically justify fee-simple purchase of all properties in the ERW’s 100-year floodplain, given their results, cobenefits would need to amount to a little over $1 million annually, or about $4 per Brown County resident.

by Carolyn Kousky, Sheila M. Olmstead, Margaret A. Walls and Molly Macauley; all of Reesources for the Future, 1616 P Street, NW, Washington, D.C. 20036, United States
Environmental Science & Technology
Volume 47, Issue 8;  2013; pages 3563–3570 
Publication Date (Web): April 1, 2013

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