HLTH 6200 Week 9 Mitigation Benefit-Cost Brief Example

Benefit-Cost Brief: Floodproofing the Wastewater Plant Versus Elevating Forty Homes, With Every Input Shown

Student Name

Walden University

HLTH 6200: Risk Assessment, Preparedness, and Disaster Mitigation

Instructor Name

Month Day, Year

Benefit-Cost Brief: Floodproofing the Wastewater Plant Versus Elevating Forty Homes, With Every Input Shown

Question and Method

This brief compares two measures from the mitigation menu: floodproofing the wastewater treatment plant and elevating 40 repetitive-loss homes. For each, it estimates the expected annual loss the measure would avoid, converts that stream of avoided losses to present value over a 50-year project life and divides by cost. Federal mitigation grants require projects to be cost-effective (44 C.F.R. § 206.434), and studies of federal mitigation spending have found average returns well above cost (Multihazard Mitigation Council, 2019; Rose et al., 2007). All figures are illustrative values for the composite county, and every input is shown so a reader can change it.

Inputs

Table 1 lists the avoided loss each measure would produce at four flood levels, defined by their annual chance of being exceeded.

Table 1

Avoided Loss by Flood Level for Each Measure (Illustrative Inputs)

Plant figures include equipment repair and the cost of one to two weeks of lost wastewater service; home figures include building and contents damage only.

Expected Annual Avoided Loss

Expected annual avoided loss was approximated by averaging the avoided losses at each pair of adjacent flood levels and multiplying by the difference in their annual chances, then adding the 0.2% loss times 0.002 for rarer floods. For plant floodproofing: $5.25 million times 0.03, plus $12.5 million times 0.008, plus $16 million times 0.002, which comes to about $290,000 a year. For elevation: $1.1 million times 0.11, plus $2.4 million times 0.03, plus $3.6 million times 0.008, plus $4 million times 0.002, which comes to about $230,000 a year.

Present Value and Ratios

Over 50 years, each dollar of annual avoided loss is worth about $13.80 today at a 7% discount rate and about $25.73 at 3%. Federal guidance has long used 7% for such analyses, and lower rates have been adopted more recently, so both are shown. Table 2 gives the results.

Table 2

Benefit-Cost Results at Two Discount Rates (Illustrative)

Which Measure Buys More Protection

Plant floodproofing buys more protection for what it consumes. It passes at either discount rate, and its benefit reaches roughly 52,000 people connected to the sewer system. Elevation fails at both rates on property benefits alone. Two cautions apply. First, the elevation figures count only building and contents damage; they omit avoided displacement, temporary housing, health effects and life safety benefits, which could be substantial for households that flood repeatedly. Second, the result for elevation depends heavily on the frequent-flood input, since repetitive-loss homes take water often; if those homes flood more often than 15% a year, the ratio rises. A reader who thinks either omission matters can add a value and rerun the arithmetic. As shown, the brief recommends the plant measure for the next grant cycle and recommends reconsidering elevation alongside a buyout offer for the same homes.

References

Eligibility, 44 C.F.R. § 206.434 (2024).

Multihazard Mitigation Council. (2019). Natural hazard mitigation saves: 2019 report. National Institute of Building Sciences.

Rose, A., Porter, K., Dash, N., Bouabid, J., Huyck, C., Whitehead, J., Shaw, D., Eguchi, R., Taylor, C., McLane, T., Tobin, L. T., Ganderton, P. T., Godschalk, D., Kiremidjian, A. S., Tierney, K., & West, C. T. (2007). Benefit-cost analysis of FEMA hazard mitigation grants. Natural Hazards Review, 8(4), 97-111. https://doi.org/10.1061/(ASCE)1527-6988(2007)8:4(97)