Report: Economic Benefits of Levees Outweigh Flooding Costs

Despite the massive flooding resulting from levee breaches and storm surge during Hurricane Katrina in 2005, the economic benefits provided by flood control measures in Southeast Louisiana far outweigh the costs of widespread damage from flooding, according to one researcher.

In “Assessing the Benefits of Levees: An Economic Assessment of U.S. Counties with Levees,” a report commissioned by the nonprofit group Levees.org, Ezra Boyd, a graduate student at Louisiana State University, found that the public’s cost associated with Katrina flooding “is greatly outweighed by the benefits provided by the area’s numerous large and small ports, access to offshore oil and gas, and bountiful seafood harvests.”

Boyd examined the population and economy of the state as well as “the costs associated with levee failures and storm surge flooding during Hurricane Katrina in the context of the economic benefits provided by the affected people and industries.”

According to Boyd, while in Louisiana as a whole income levels are generally low, Southeast Louisiana enjoys personal income levels close to the national average.

The study found that even with the “unprecedented flooding” that occurred in 2005 as a result of Hurricane Katrina, which caused an estimated $100 billion in losses, Louisiana and the entire nation benefit greatly from the region’s assets.

He cited the $149 billion in royalties from Federal OCS oil and gas leases in the area as just one example of how the nation benefits economically from the Mississippi Delta region.

In addition to Southeast Louisiana, Boyd studied the economic impact of the hundreds of levees around the United States that protect vulnerable areas and tens of millions of people from potentially devastating floods each year.

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.

Relying 2000 Census data, which reflects 1999 employment and income, Boyd compared two groups of communities — those with levees and those without — in regard 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.

The 2000 Census information is not current, the report acknowledges, but it was judged the most comprehensive 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.

In addition to being economically more productive, counties with levees contribute an estimated $70 billion more in taxes to the Federal treasury than do counties without levees. The greater 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, the researcher said, 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.