Natural Hazards Observer
| March 2006 | Volume XXX | Number 4 |
Invited Comment
Mitigation Generates Savings of
Four to One
and Enhances
Community Resilience
MMC Releases Study on
Savings from Mitigation
In December, the Multihazard Mitigation Council (MMC) of the National Institute of Building Sciences released to the Federal Emergency Management Agency (FEMA) Natural Hazard Mitigation Saves: An Independent Study to Assess the Future Savings from Mitigation Activities, the culmination of a three-year, congressionally mandated independent study. The MMC Board of Direction and oversight committee, a team of more than 30 researchers from academic institutions and private-sector organizations across the United States assembled by the Applied Technology Council, and many others contributed to the study, which represents the most comprehensive quantitative analysis of hazard mitigation activities to date.
The research findings provide independent evidence to support what nearly every member of the hazards community knows anecdotally—generally, FEMA mitigation grants are highly cost-effective. On average, across all grants, regions, and hazards studied, each dollar spent on mitigation saves society an average of $4 in avoided future losses. Results also indicate that, based on the eight communities studied in depth, FEMA mitigation grants, including those associated with Project Impact, play a significant role in a community’s mitigation history and often lead to additional loss reduction activities.
The study, which examined 10 years of FEMA mitigation grants (1993-2003), consisted of a statistical analysis and community analyses. The statistical analysis estimated the future savings from expenditures using a statistically representative national sample of FEMA-funded mitigation grants. The community analyses assessed the future savings from mitigation activities through quantitative and qualitative research in eight communities where FEMA-funded mitigation activities were conducted, including five Project Impact communties.
Statistical Analysis
The statistical analysis of individual grants focused on FEMA-funded mitigation activities in three broad hazard categories: flood (coastal and riverine), wind (hurricane, tornado, typhoon, and severe storms), and earthquake. The MMC chose these hazards because of both the number of FEMA grants and the size of FEMA expenditures dedicated to their mitigation.
The analysis distinguished between project and process mitigation activities. Project mitigation activities are akin to investments in physical capital and are frequently referred to as brick-and-mortar projects because they result in tangible physical change to the built or natural environment. Quantitative benefit-cost assessments are more easily conducted for grants funding these types of activity. Typical project mitigation activities funded by FEMA included drainage enhancement, acquisition and relocation of at-risk structures, structural and nonstructural improvements, lifeline improvements, and land improvement projects.
Process mitigation activities lead to policies, practices, and projects that reduce risk and are much like investments in human, social, or institutional capital. Outcomes of these activities, particularly over the short term, tend to be difficult to predict and quantify. Examples of process mitigation activities include vulnerability assessments, community priorities and action plans, education campaigns for decision makers and constituents, and development of codes and regulations. These activities stimulate the commitments needed to instigate and sustain mitigation over the long term and play a large role in building community resilience.
The research team obtained project cost data directly from FEMA’s National Emergency Management Information System database. They applied, and developed where necessary, state-of-the-art methods grounded in benefit-cost analysis to measure the benefits from mitigation. HAZUS-MH (FEMA’s software program for estimating potential losses from disaster) was used to estimate earthquake casualties as well as direct property damage and direct business interruption losses from earthquake and hurricane wind. Supplemental methods were used to assess direct property losses from floods and tornadoes; casualty losses from hurricanes, tornadoes, and floods; business interruption losses for utilities; environmental and historic preservation benefits; and process mitigation activities.
Using an innovative sampling strategy, the research team estimated mean benefits as losses avoided for each activity type and hazard (process and project mitigation activities for flood, wind, and earthquake hazards). The ratio of estimated benefits to costs produced the benefit-cost ratio that was then applied to each category in the population of FEMA grants from which the sample was taken. The sample estimates were then scaled up to the population of FEMA grants for wind, flood, and earthquake mitigation issued between 1993 and 2003.
The study estimated that societal benefits from FEMA mitigation grants during the period studied had a discounted present value of $14 billion compared to the $3.5 billion value of the resources employed for an overall benefit-cost ratio of 4:1. Sensitivity analyses showed that these results are robust to the assumptions made and to uncertainties of parameters and models.
Figure 1 provides a graphical representation of the avoided losses compared to program costs for each hazard. It shows the contribution to total savings from avoided losses to buildings and contents, business interruption (BI) and household displacement, the economic equivalent value of environmental and historical losses, and casualties. (Casualties are measured both in terms of the number of avoided future deaths and injuries as well as the dollar amount the federal government would deem a reasonable expense for life-safety measures with similar effectiveness).
Community Analyses
The community analyses component of the study featured in-depth examinations of eight communities to assess the influence of FEMA-funded mitigation activities in a holistic context. The study included all FEMA mitigation grants received by the communities since the grant programs began. It also explored how additional mitigation activities percolated throughout the communities in the form of synergistic activities, which accrued benefits ultimately attributable to FEMA grants.
The researchers selected communities with diverse characteristics to obtain a variability of contexts in which to observe mitigation outcomes. Researchers ensured that the eight communities were diverse in size, the kinds of hazards present, the number and type of grants received, and geographic distribution. Each community had received at least $500,000 in funds from as many as 15 FEMA grants. The communities were Freeport, New York; Hayward, California; Horry County, South Carolina; Jamestown, North Dakota; Jefferson County, Alabama; Multnomah County, Oregon; City of Orange, California; and Tuscola County, Michigan.
The community studies were designed to identify the impact of FEMA-funded mitigation activities in situations where multiple FEMA and non-FEMA funded projects and processes may have coexisted and interacted. Data on mitigation activities were collected and reviewed, key people were interviewed by telephone, field visits were conducted to gather more data and to followup with those interviewed, and extensive postvisit analyses were undertaken.
During the community studies, the researchers noted activities and effects that reduced risks (or increased benefits of risk-reduction activities) that were not funded by FEMA. Qualitative analysis of these activities found that mitigation efforts funded by FEMA often led to additional, nonfederal mitigation efforts. Termed synergistic activities, they were divided into three categories:
- Spin-off activities—activities that resulted from FEMA hazard mitigation grant support
- Collateral activities—activities that did not result from FEMA hazard mitigation grant support
- Spillover effects—effects that enhanced the value of community assets because of FEMA hazard mitigation grant support.
Five of the eight communities had spin-off activities, three had collateral activities, and three had spillover effects.
In the communities studied, FEMA mitigation grants were a significant part of the community’s mitigation history. The researchers found that the FEMA-funded mitigation activities brought about the most nonfederally funded mitigation benefits if the grant was of the sort that helped to institutionalize mitigation. Interviewees reported that the grants were important in reducing community risks, preventing future damages, and increasing a community’s capability to reduce losses from natural hazards. Most interviewees believed that the grants permitted their communities to attain mitigation goals that might not otherwise have been reached and that the mitigation benefits of the activities funded by the grants went beyond what could actually be measured quantitatively (e.g., increased community awareness, esprit de corps, and peace of mind).
Savings from Mitigation
The detailed analysis of communities provides evidence to support the statistical analysis finding of positive net benefits from hazard mitigation. And, it goes even further to show that important additional benefits exist within communities across individual mitigation programs that are not reflected in the calculation of grant-level net benefits.
The overall study’s main findings can be stated simply:
- The net benefits of FEMA’s hazard mitigation program to society as a whole are positive with an average overall benefit-cost ratio of 4:1.
- The average benefit-cost ratio for all FEMA flood-related grants is 5:1.
- The average benefit-cost ratio for all FEMA wind-related grants is 3.9:1.
- The average benefit-cost ratio for all FEMA earthquake-related grants is 1.5:1.
- Synergistic activities occur in communities that have institutionalized their hazard mitigation programs.
In addition to the analytical results discussed above, the MMC report includes three basic recommendations derived from the study:
- Mitigation is sufficiently cost-effective to warrant federal funding on an ongoing basis both before disasters and during postdisaster recovery. The nation will always be vulnerable to natural hazards; therefore, it is only prudent to invest in mitigation. In this context, mitigation should be considered in the broadest possible sense to encompass projects and processes that relate to enforcing strong building codes and land use and zoning measures as well as developing comprehensive plans that limit disaster-caused damage and promote reduced losses.
- Mitigation is most effective when carried out on a comprehensive, communitywide, and long-term basis. Single grants or activities can help, but carrying out a slate of coordinated mitigation activities over time is the best way to ensure that communities will be physically, socially, and economically resilient to future hazard impacts.
- Continuing analysis of the effectiveness of mitigation activities is essential for building resilient communities. The need to integrate social science research into traditional hazard mitigation evaluation is strongly encouraged, especially when benefits are difficult to isolate and measure as in the case of process activities. The study highlighted the need for more systematic data collection and assessment of various mitigation approaches to ensure that hard-won lessons are incorporated into disaster public policy. In this context, postdisaster field observations are important, and statistically based postdisaster data collection is needed for use in validating mitigation measures that are either costly, numerous, of uncertain efficacy, or that may produce high benefit-cost ratios.
Philip T. Ganderton, University of New Mexico
Linda Bourque, University of California, Los Angeles
Nicole Dash, University of North Texas
Ron Eguchi, ImageCat, Inc.
David Godschalk, University of North Carolina at Chapel Hill
Claret Heider, National Institute of Building Sciences
Elliott Mittler, Consultant
Keith Porter, Consultant
Adam Rose, Pennsylvania State University
L. Thomas Tobin, Tobin and Associates
Craig Taylor, Natural Hazards Management, Inc.
The two-volume study report is available for free download at http://www.nibs.org/MMC/mmchome.html.