National Flood Policy—ASFPM 2015 Recommendations
P. Economic Methods and Policies
Recommendation
P-1 COST SHARING FOR FLOOD PROJECTS
a) Create financial incentives for communities
that are taking additional flood-risk and
floodplain management measures through
more favorable cost-sharing for disaster
assistance and all federal grants.
b) Modify the Army Corps of Engineers’ costsharing formula for all nonstructural flood
damage reduction to provide a 75/25
federal/non-federal cost-share ratio, similar to
FEMA hazard mitigation programs.
See: H-19, H-20, E-8, O-2, O-4
[Congress, Administration, FEMA, HUD,
USACE, DOT, EPA, others]
P-2 FULLY IMPLEMENT P, R & G
a) Revise and implement federal agency
Guidelines to reflect the new Principles and
Requirements for Federal Investments in
Water Resources and the Federal Flood Risk Management
Standard (FFRMS) to foster resilience and
sustainability; account for all benefits; provide
greater
emphasis
on
nonstructural
approaches; and to balance economic, social
and environmental concerns.
b) In developing Implementation Guidance for
the P&R, require a full accounting of long-term
operations,
maintenance,
repair,
rehabilitation and replacement costs be
included in benefit-cost analyses for all
structural and non-structural projects, and
identify which costs are a federal responsibility
or the responsibility of non-federal sponsors
or other interests.
c) Develop and transition federal planning
principles to a National Economic Resilience
and Sustainability standard instead of the
current National Economic Development
(NED) standard to explicitly incorporate the
values of multiple ecosystem services,
including the non-market public values,
provided by the nation’s floodplains.
Explanation/rationale
Federal grant programs should be structured to reward
those communities that go beyond the minimum
requirements to reduce risks and costs of disasters. This
would also serve to incentivize communities to take greater
responsibility for flood hazard mitigation. This will reduce
taxpayer funding for disasters.
This will provide a modest financial (cost-share) incentive to
encourage communities to use more non-structural
approaches for flood damage reduction projects, which will
not encourage future increased at-risk development and
catastrophic damages from structural project overtopping
or failures.
In WRDA 2007 (Sec. 2031), Congress directed a substantial
revision and modernization of the federal planning
procedures for water resources development projects. The
revision process needs to be completed and implemented.
Congress must eliminate annual rider from Energy and
Water Development appropriations bills that restricts
participation by USACE in finalizing and implementing an
updated P, R & G.
A major weakness of past benefit-cost analysis for water
resources projects has been failure of project planners to
realistically account for their full life-cycle costs over their
project lifetimes, resulting in a bias for structural projects
that require long term O&M and rehabilitation, whereas
non-structural designs often have little or no maintenance.
The 1983 Principles and Standards required selection of
water resources projects that maximized the NED,
regardless of total costs to taxpayers or the social or
environmental impacts.
Floodplain management, public safety, and long-term
environmental quality and sustainability would, in many
instances,
improve
by
expanding
to
a
resilience/sustainability standard approach.
See: O-6, K-4, H-4, H-7, E-7
[CEQ, Council on Economic Advisors, federal
water resources agencies]
NFPPR policy rec and explanations
Page 1 of 2
Section P Economic Methods & Policies
draft 1-28-15
National Flood Policy—ASFPM 2015 Recommendations
P-3 UPDATE ECONOMIC ANALYSIS METHODS
a) Convene a task force of national economic
experts to review and make recommendations
for possible changes regarding economic
planning and evaluation for flood-related
projects; including application of discount
rates, treatment of residual risks, land
valuation, lost opportunity costs, valuation of
green infrastructure and ecosystem services
and functions, and other considerations
regarding structural and non-structural
approaches in evaluating flood risk reduction
and flood hazard mitigation projects. [OMB,
CEA; Congress; working with CEQ, FEMA,
USACE, NRCS]
b) Incorporate the value($) of ecosystem services
in all federal B/C analyses and require use in all
flood risk and water resource management
decisions by all agencies. [CEQ, FIFM-TF,
USACE, NRCS, USFWS, NOAA, EPA]
c) Fully evaluate all alternatives for reducing
flood risk and prioritize use of natural
floodplain focused projects over structural
measures whenever possible.
d) Consider and broaden benefits guidance in
benefit-cost analysis for hazard mitigation
projects to include all benefits, including nonmarket societal and environmental benefits.
[FEMA]
e) Conduct a study to identify differences in
methodologies and the potential advantage of
establishing a unified, flood-risk managementrelated benefit-cost methodology for FEMA
and the Army Corps of Engineers programs.
[Congress, GAO, NAS/NRC, USACE, FEMA]
f) Annually compare FEMA benefit-cost
methodology and procedures with emerging
BCA best practices and studies of risk
reduction, and evaluate and make
recommendations to the Administrator for
BCA improvements.
Current federal rules for evaluating water resources and
hazard mitigation projects vary widely among federal
agencies and offices and may be distorting the true benefits
(and costs) of risk reduction projects. A stark difference in
discount rates alone establishes a large, highly questionable
economic bias toward structural flood control projects over
non-structural acquisitions/relocations or building
elevations.
Current BCA procedures often do not adequately account
for foregone benefits and the full life cycle costs of projects.
While this is currently implied for follow-on Agency Specific
Guidance in the approved, but not yet implemented,
Principles ,Requirements and Guidance, federal agencies
should focus greater attention on developing protocols and
values for ecosystem services that are acceptable for use by
all federal agencies.
Nonstructural and nature based mitigation alternatives
tend to have lower long term costs and fewer impacts on
social and environment factors.
In June 2013, FEMA took a historic step to allow inclusion of
environmental benefits in Benefit-Cost analysis for
acquisition-demolition project grants for HMA programs.
Building on this experience, FEMA should broaden benefits
guidance to include all benefits, including non-market
societal and environmental benefits in its HMA BCA’s.
Such a study should include methods for considering longterm OMRRR costs, green infrastructure alternatives,
environmental and social benefits, residual risk and future
conditions accounting, and economic discounting. A GAO or
NAS/NRC study should be a first step. This would build off
recent progress and keep the process up to date.
See: K-13, K-14, K-15, H-7, H-12, H-13, H-14
NFPPR policy rec and explanations
Page 2 of 2
Section P Economic Methods & Policies
draft 1-28-15