Benefit-Cost Analysis FEMA Hazard Mitigation (Research Paper Sample)

CPP 520 – Program Evaluation & Policy Analysis for Emergency Management & Homeland Security Unit 6: Written Assignment #3 BCA Report Length and Grading: Approx 4-5 pages (use a cover page – not counted for length); 100- point scale, 23.4% of final course score Due date: Please see course schedule document for details BCA Report Assignment: Execute a Benefit Cost Analysis for a Proposed Property Acquisition Project in Support of a Local Flood Mitigation Grant Proposal This is the third of three written assignments for the course. As stated in the syllabus (Section III, part A): “The purpose of the assigned written work is also threefold: (1) the assignments and written exam afford students the opportunity to demonstrate substantive understanding of materials covered in course readings, lectures and online discussion, (2) the assignments and exam permit students to develop and demonstrate research, analytic and written communication skills, and (3) the written work permits the instructor to assess student knowledge, skills and ability within this subject domain.” The benefit cost analysis report students are asked to produce is related to the assigned content covered in Units 5 and 6 and is explicitly intended to meet the objectives stated above. BCA Assignment Requirements: This assignment asks you to provide a preliminary benefit-cost analysis report in support of a FEMA hazard mitigation grant proposal for Somewhere City in Anywhere County, AZ. The grant request is this: funds are being sought to acquire several privately-held properties in a flood prone area of Somewhere City and convert them to an integrated green space area with some minimal amenities for public recreational use (small parking area, several benches and trash receptacles, etc.). Doing so provides several benefits to the city and county: the proposed project will reduce emergency response costs, reduce flood insurance costs, reduce public health and public safety risks to area residents and to the first response community, reduce disaster recovery assistance costs, and the green space will provide additional recreational and aesthetic benefits to the area. In order to acquire the property and convert to a limited facility green space and recreation area, there are property acquisition costs and conversion costs (including building removal and some initial landscaping). Here is the context for the paper’s audience: A planner for the county is new to the job and has relatively little experience in writing grant proposals. Central to the proposal is the need to perform a preliminary benefit- cost analysis in support of the hazard mitigation grant proposal. Because of your prior experience in mitigation, you are asked by the Anywhere County Emergency Manager to write up a short explanatory report to assist the novice planner in understanding how the BCA process works; this background report/explanatory 1 overview will help guide that person in developing the overall hazard mitigation grant proposal. (I.E. you can treat this as equivalent to a short white paper on BCA methods relevant to a hazard mitigation problem.) Given the paper is written in the format of a white paper, the report you will write should cover these topics: it should provide a short explanation of what CBA is and how it is relevant to writing a grant proposal such as this one. You should outline the basic logic of estimating costs and benefits, provide your own assessment of the merits of the cost and benefit measures that have been included in the summary outlined below (including whether you think items have been missed, or questions you might have about the efficacy of measuring benefits items such as recreational/aesthetic benefits), explain how to interpret the benefit-cost ratio and the NPV criterion result, and provide an explanation of a recommended course of action (i.e. whether the green space project as a flood mitigation tool) can be justified in a funding request. Finally, also provide an initial sensitivity analysis, which is to say: please use the Excel sheet provided and modify the discount rate from 7% down to 5%. By using a lower discount rate, please explain how that would change your ultimate recommendation on proceeding with the project—if at all—and what a lower discount rate means substantively. A few key points as you write this final assignment. First, make use of the course notes and lecture materials, assigned readings, and the guest lectures on hazard mitigation grants. Those guest lectures provide a great deal of context for this assignment. Second, this need not be lengthy, perhaps in the area of 5 pages or so. Please use a cover page and follow proper APA citation methods if you make specific references to articles or reports. Third, while the list of items requested to be included in the report is long, none of those individual items require lengthy explanations. Just be clear, concise, and precise. Finally, for the sensitivity analysis, all you will need to do to is to change the discount rate from .07 to .05 on the Excel sheet provided. Please consult the course lecture narration for additional explanation. As with the policy memo dataset, these are entirely hypothetical—and quite simplified—measures of the project benefits and costs. While simplified, however, they are not unrealistic; these are the kinds of measures used in real BCAs. The value of the assignment is working through the basic concepts and becoming familiar with their use. More detailed measurement approaches are explained in more advanced treatments of the subject (as coved in the FEMA IS course referenced below; see “additional note”) – but the core concepts are the same. BCA Report – Grading Rubric: A grading rubric is provided for this written assignment; details are available in Canvas. The background material to support the assignment is provided below; an Excel file to permit you to do your work is also provided. ADDITIONAL NOTE: the matter covered in this assignment is a very brief overview of BCA concepts and basic techniques. For those of you interested in building further skill development in this area, one of FEMA’s online Independent Study courses provides a very good introduction that is more in-depth than our introduction to the subject here. You can look up the course titled “IS 277 Benefit-Cost Analysis (BCA): Entry Level” at the FEMA Emergency Management Institute website. 2 Case Materials for the BCA Project Description Somewhere City in Anywhere County, AZ is preparing a hazard mitigation grant proposal to be reviewed by the Arizona Department of Emergency and Military Affairs; the funding source is the Hazard Mitigation Grant Program administered by FEMA (for info, see: https://www.fema.gov/hazard-mitigation-grant- program ). The core of the mitigation proposal is this: funds are being sought to acquire several residential properties in a flood prone area of Somewhere City in order convert to a green space area with some minimal amenities (small parking area, several benches and trash receptacles, etc.) for public recreational use. Doing so provides several benefits to the city and county: the green space conversion in this flood-prone area reduces emergency response costs, reduces flood insurance costs, reduces public health and public safety risks to area residents and to the local first response community, disaster recovery assistance costs, and the green space will provide additional recreational and aesthetic benefits to the area. In order to acquire the property and convert to a limited facility green space area, there are property acquisition costs and conversion costs (building removal and some initial landscaping). City and county officials have received signed Notices of Voluntary Interest from the three property owners in the area and they have a general agreement on a plan for the property acquisition. Cost Estimate Information Administrators in Somewhere City, in working with the property owners, and in reviewing bids from several local construction and landscaping companies, have provide an initial cost estimate for property acquisition, demolition and abatement costs, landscaping and other ancillary costs. The annual maintenance costs are minimal; while the site will be maintained as green open space primarily, it will also be available for public use – though this is minimal use activities; the space is not intended as a formal park. Table 1 provides a list of all estimated project costs considered for the proposal. Table 1. Project Costs Item Description Amount ($) Project and Construction Coordination 4,700 Land and Building Acquisition 510,000 Structure Demolition and Utility Disconnections 68,000 Appraisal, Title Search and Closing Costs 12,800 Asbestos Abatement 4,500 Seeding, Grading, Landscaping 32,000 Annual maintenance costs 15,000 Total Project Costs (Initial and Maintenance) 647,000 Benefit Estimate Information Project benefits are provided mainly through an analysis by a planning unit at Somewhere City. The benefits are primarily estimates over a 10-year period of cost reductions realized from city and county expenditures. Further, analysts at the planning unit had to conduct a fairly simple willingness-to-pay assessment to produce the recreational/aesthetic benefit estimate provided below. Table 2 provides a list of all estimated project benefits considered for the proposal. 3 Table 2. Project Benefits Item Description Amount ($) Response costs reduced (average annual) 10,000 Public Assistance recovery costs reduced, local cost share expenditures removed (average annual) 30,000 Estimated public health benefits (estimated average annual benefits from risk reduction) 10,000 Reduced local flood insurance costs 40,000 Recreational and aesthetic community benefits (estimated average annual benefits) 4,500 Total Project Benefits over 10 years 945,000 [94,500 annual avg] Note: For B-C Ratio estimate, using a 7% discount rate (which is the standard project discount rate used by FEMA) and the similar Net Present Value Criterion calculation (also using the 7% discount rate) is displayed in the Excel sheet estimates. To adjust the calculation to a 5% discount rate, it is simply a matter of adjusting the rate number in the discount factor column on the sheet. source..