Report: Counties with Levees Are Among the Nation’s Most Economically Sound

Flooding Costs Are Outweighed by Regional Economic Benefits

There are hundreds of levees around the United States that protect vulnerable areas and tens of millions of people from potentially devastating floods each year. Yet hardly anyone gives them a second thought until one is breached. The most glaring example, obviously, is the unimaginable wreckage that occurred in the New Orleans area in 2005 when flooding from Hurricane Katrina wiped out entire neighborhoods.

The preponderance of levees throughout the country raises the question: The high cost to human lives notwithstanding, do the economic benefits provided to communities protected by flood protection systems outweigh the costs of potential flood losses in those areas? In the flood-prone Midwest the question is particularly appropriate.

One researcher from Louisiana State University who undertook to study the economic impact of flood control systems has found the answer to be: yes. Ezra Boyd, a graduate student and geographer, describes how he came to the conclusion that the economic gains that come from development near bodies of water are ultimately greater than the losses associated with flood risks in “Assessing the Benefits of Levees: An Economic Assessment of U.S. Counties with Levees,” a report commissioned by a nonprofit group with an interest in the nation’s levees, Levees.org.

Data provided by the Federal Emergency Management Agency indicates there are 881 counties — or 28 percent of all counties in the United States — that contain levees or other kinds of flood control and protection systems. They account for only 37 percent of the total land area of the United States but as of 2004, 55 percent of the U.S. population, or more than 156 million people, resided in those 881 counties.

Boyd asserts that it’s not the levees themselves that make protected areas attractive for development. Instead, it’s the bodies of water and the flood plains they create — and that require flood protection measures — that provide the economic and geographic incentives for development.

“Rivers, lakes, and seas — along with their associated flood plains have long been an engine of economic development. These diverse and productive ecosystems provide a number of services crucial to maintaining populations and improving their wellbeing. Such services include maritime trade, municipal and industrial water supply, irrigation for farming, sustainable seafood harvests, and recreation,” according to Boyd.

“While flood losses are unfortunate and should be minimized, the economic benefits — including increased income and decreased poverty — of direct access to the most productive types of ecosystem may still outweigh the risk of flood losses,” the report suggests.

Data from 2000 Census

Relying 2000 Census data, which reflects 1999 employment and income, Boyd compared two groups of communities — those with levees and those without — in regards to total productivity levels, personal income and poverty rates. The study recognized that while a county may contain a levee, its entire population may not necessarily reside in a levee protected area. However, the entire county generally benefits from the direct and secondary advantages of being located near a body of water. Those advantages include access to jobs and sources of water for the communities within the county, among other things. As such, the report analyzed data from entire counties, not just those areas that are protected by levees.

It also was recognized that while the 2000 Census information is not current, it was judged the most complete source of employment and income data available until the 2010 Census is completed.

Using a statistical procedure that compared and assessed observed levels of the established criteria — productivity levels, personal income and poverty rates — between the two groups based on the Census data, Boyd found that for each of the three measures, counties with levees fared better economically than those without levees.

The findings revealed that:

1. The average county with levees produces nearly 3.3 times (or $2.6 billion) more in annual goods and services.
2. The average resident in a county with levees earns $1,500 more per year.
3. The poverty rate averages 2 percent less in counties with levees.

The levees report noted that data from the 2000 Census indicates that total personal income for all U.S. counties was $6.1 trillion in 1999. Personal income in counties with levees amounted to $3.4 trillion, or 55 percent of the total. In counties without levees personal income was $2.7 trillion, or 45 percent.

In addition, Boyd says, the total number of housing units in counties with levees was 56,604,148, or 53 percent of the total in all counties, compared with a total of 50,188,708 housing units in counties without levees.

The total aggregate value of owner occupied housing in counties with levees came to $6.1 trillion. The total value of all residential real estate in counties with levees was roughly $11.1 trillion. It was estimated that 55 percent of residential units were owner occupied based on a the rule of thumb: 55 percent homeowners, 45 percent renters.

“Total productivity for counties with levees is $700 billion greater than for counties without levees. Based on the simple formula that 10 percent is paid as personal income taxes, it is estimated that counties with levees contributed $70 billion more to the Federal treasury than counties without levees. Of note, this estimate includes just revenue from personal income taxes. It does not include corporate taxes, port fees, or other sources of government revenue,” the report states.

The estimated $75 billion excess Federal tax contribution of counties with levees far exceeds the cost of losses associated with floods in the United States, the report asserts. In 1999, according to the study, flood losses in the United States totaled $5.3 billion, and $191 million in U.S. government aid was paid to flood victims.

From its inception in 1978 until 2008, the National Flood Insurance Program paid nearly $36 billion in total claims, “less than half of the one year excess tax revenue contributed by counties with levees. In other words, the public costs associated with flood disasters are considerably less than the excess tax contributions of flood prone counties,” according to Boyd’s report.

The full report, “Assessing the Benefits of Levees: An Economic Assessment of U.S. Counties with
Levees,” is available online at www.levees.org.

Topics USA Profit Loss Flood